Liontrust
Annual Report 2015

Plain-text annual report

PRIDE IN OUR PERFORMANCE LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2015 L I O N T R U S T A S S E T M A N A G E M E N T P L C A N N U A L R E P O R T & F I N A N C I A L S T A T E M E N T S 2 0 1 5 LIONTRUST ASSET MANAGEMENT PLC 2 Savoy Court, London WC2R 0EZ Telephone: +44 (0)20 7412 1700 Fax: +44 (0)20 7412 1779 Email: info@liontrust.co.uk Web: www.liontrust.co.uk About Liontrust Liontrust Asset Management PLC (the “Company” or “Liontrust”, or together with its subsidiary entities, the “Group”, as the context requires) is a specialist fund management business founded in 1994 and listed on the London Stock Exchange in 1999. We manage UK, European, Asian and Global equities, Global credit and Multi-Asset. We take pride in having a distinct culture and approach to fund management through the following factors: We are an independent business with no corporate parent. We are transparent and consistent in everything we do and operate with integrity. We specialise in those asset classes where we have particular expertise. Our fund managers are independent thinkers and have the courage of their convictions in making investment decisions. We have distinct and rigorous investment processes that ensure the way we manage money is predictable and repeatable. All fund managers have the freedom to manage their portfolios according to their own investment processes and market views without being distracted by other day-to-day aspects of running a fund management business. We aim to treat clients, investors, members, employees, suppliers and other stakeholders fairly and with respect. We are committed to the principles of Treating Customers Fairly (TCF) and they are central to how we conduct business across all our functions. Restated see note 25.After adding back expenses for share incentivisation, severance compensation, acquisitions related costs, restructuring (acquisition related and other), depreciation and intangible asset amortisation, and the Financial Services Compensation Scheme Interim Levy.Calculated as Adjusted Operating Profit dividend by Gross Profit.Calculated using adjusted profit before tax and a tax rate of 21% (2014:23%).Cash and Cash equivalents plus other current assets less current liabilities.Total dividend shown for the relevant financial year.1.*2.3.4.5.£3,613 million£381 million£28.4 million£3.2 million£8.4 million15.2 pence£11.7 million3.0 pence£4,494 million£667 million£36.8 million£7.3 million£12.1 million22.1 pence£17.4 million8.0 penceincreaseincreaseincreaseincreaseincreaseincreaseincreaseincrease24%75%30%125%45%46%55%167%Assets under managementNet flowsProfit before tax*Gross profitAdjusted profitbefore tax1Adjusted diluted earnings per share3Net cash4Total Dividend per share520152014Sustained growth of our assets under management from £3,613 million to £4,494 million demonstrates the substantial progress made in this year. To have recorded five consecutive years of net inflows shows the progress the business has made over the last five years.HighlightsRestated see note 25.After adding back expenses for share incentivisation, severance compensation, acquisitions related costs, restructuring (acquisition related and other), depreciation and intangible asset amortisation, and the Financial Services Compensation Scheme Interim Levy.Calculated using adjusted profit before tax and a tax rate of 21% (2014:23%).Cash and Cash equivalents plus other current assets less current liabilities.Total dividend shown for the relevant financial year.1.*2.3.4.£3,613 million£381 million£28.4 million£3.2 million£8.4 million13.9 pence£11.2 million3.0 pence£4,494 million£667 million£36.8 million£7.3 million£12.1 million20.9 pence£17.4 million8.0 penceincreaseincreaseincreaseincreaseincreaseincreaseincreaseincrease24%75%30%125%45%51%55%167%Assets under managementNet flowsProfit before tax*Gross profitAdjusted profitbefore tax1Adjusted diluted earnings per share2Net cash3Total Dividend per share420152014Sustained growth of our assets under management from £3,613 million to £4,494 million demonstrates the substantial progress made in this year. To have recorded five consecutive years of net inflows shows the progress the business has made over the last five years.Highlightscontents Introduction Highlights Chairman’s Statement Strategic Report Chief Executive’s report Vision and Strategic objectives Business model Key performance measures Fund Management review Distribution review Operations review Financial review Principal risks and mitigations Corporate and social responsibility Governance Board of Directors Directors’ report Directors’ responsibility statement Corporate Governance report Risk management and internal controls report Directors’ Board Attendance report Audit & Risk Committee report Nomination Committee report Remuneration report Financial Statements – Group and Company Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Notes to the Financial Statements Liontrust Asset Management Plc Financial Statements Liontrust Asset Management Plc Notes to the Financial Statements Independent Auditors’ Report 1 3 6 7 7 7 8 13 13 13 16 18 22 23 25 26 28 31 32 35 36 48 49 50 51 52 70 74 82 Other Information Forward Looking statements this report contains certain forward-looking statements with respect to the financial condition, results of operations and businesses and plans of the Group. these statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that have not yet occurred. there are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. nothing in this report should be construed as a profit forecast. 2 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Results Adjusted profit before tax was £12.102 million (2014: £8.352 million). Adjusted profit before tax is disclosed in order to give shareholders an indication of the profitability of the Group excluding non-cash (depreciation, intangible asset amortisation and share incentivisation related) expenses and non-recurring (professional fees relating to acquisition, cost reduction, restructuring, share incentivisation and severance compensation related) expenses (“Adjustments”), see note 7 for a reconciliation of adjusted profit (or loss) before tax. profit before tax of £7.265 million (2014: £3.225 million) includes a loss of £4.837 million (2014: £5.127 million) of Adjustments. Dividend the success in fund performance and distribution has resulted in an increase in revenues of 30% and a 45% increase in our adjusted profit before tax to £12.1 million. this has enabled the Board to declare a Second Interim dividend of 6.0 pence per share (2014: 2.0 pence) which will be payable on 23 July 2015 to shareholders who are on the register as at 26 June 2015, the shares going ex-dividend on 25 June 2015. the total dividend for the financial year ending 31 March 2015 is 8.0 pence per share (2014: 3.0 pence per share). Adrian Collins Chairman 17 June 2015 chairman’s statement Introduction I am delighted to report that our company has enjoyed a very successful year. We have delivered significant increases in revenues, profits, earnings and assets under management (“AuM”). this has enabled us to declare a Second Interim dividend per share of 6.0 pence, which brings the total dividend per share for the financial year ending 31 March 2015 to 8.0 pence. this represents 42% of adjusted earnings per share on a diluted basis (excluding performance fees). We have met our strategic objectives this year, including outperformance, effective distribution and being a profitable business in pursuit of realising our vision of becoming one of the leading fund management companies in the uK and internationally, renowned for consistently adding value to clients’ investment portfolios. this success has been achieved through the hard work of everyone at liontrust, the continued excellence of our fund management performance, further diversifying our client base in the uK and internationally and our burgeoning brand. this is not to deny that we have faced a number of challenges. Investors were nervous about the uK stock market in the run-up to the General election in May as politicians ratcheted up their populist rhetoric. We are now confronted with the prospect of up to two years of campaigning before the referendum to decide whether the uK stays in the eu. of course, such uncertainty produces winners as well as losers and we aim to help our investors navigate such periods. As ever, there are investors who are anxious about the future direction of investment markets, especially in regards to the liquidity of bond markets. this is an example of why we are continuing to diversify our fund management capability, particularly into alternative investments as we have done with the recent recruitment of a new Global equities team. this enables us to meet the different demands across our client base through the market cycle. there is also an increasing focus on short-term investment views, with the average length of time that investors hold on to an investment having decreased significantly over the years. We believe that investors should look beyond the short-term “noise” surrounding stock markets to make investment decisions based on companies’ fundamentals and with a long-term view. All our fund management teams have rigorous investment processes that ensure the way we manage money is predictable and repeatable and the track records of our funds show the benefit of this approach. this is a very exciting time for fund management as we believe the industry is set to benefit from long-term demographic support as the mid-40s to mid-60s age group is set to expand significantly in the coming years. this group has both the greatest capacity and greatest incentive of any age group to save and invest. the removal of the compulsion for retirees to purchase an annuity by the age of 75, for example, is creating a significant pool of assets that require investment solutions and advice. We are well placed to meet these needs given our equity income and multi-asset propositions. thank you for your investment in and support of liontrust Asset Management plc. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 3 Chief Executive’s report Vision and Strategic objectivesBusiness modelKey performance measuresFund Management reviewDistribution reviewOperations reviewFinancial reviewPrincipal risks and mitigationsCorporate and social responsibility677781313131618Strategic reportFund Flows liontrust has recorded net inflows of £667 million in the year (2014: £381 million). A reconciliation of fund flows and AuM over the year is as follows:- Total £m Institutional £m UK Retail £m Offshore Funds £m DPMS £m Opening AuM - 1 April 2014 3,613 net flows Market and Investment performance Closing AuM - 31 March 2015 667 214 657 2,752 402 236 114 32 102 104 10 4,494 1,161 3,092 156 90 (3) (2) 85 People A key strength of our business are our people. We strive to achieve a culture of excellence and best practice at liontrust, appreciating that creating a positive, open and dynamic working environment enables us to attract and retain the best people. I would like to thank everyone at liontrust for their hard work and contribution to the success of the business. Outlook I am excited about the future outlook for liontrust given the development of the business and the long-term savings market. the reforms to the post-retirement market are potentially very beneficial for the wealth and fund management industry beyond the opportunities produced by the changing demographics. My optimism also comes from the fact we now have seven talented fund management teams, we have been diversifying our fund management capability into alternatives, we have excellent long-term fund performance, we have built a strong distribution capability in the uK and internationally and have been broadening further our client base. John Ions Chief executive 17 June 2015 strategic report Chief Executive’s Report Introduction It has been another good year for liontrust. our Adjusted profit before tax has risen by 45% to £12.1 million, our AuM has increased by 24%, our Retail AuM now exceeds £3 billion and our Institutional AuM is more than £1.1 billion. our fund management teams have continued to deliver long-term outperformance for our investors. Seven out of our eight actively managed unit trusts are in the first quartile of their respective sectors since launch or the current fund managers were appointed. We are mindful of the ongoing debate about the level of charges levied by the fund management industry and the view that there will be continued downward pressure on margins over the next few years. We focus on offering high-quality active management that delivers what investors expect. We do this through each team having rigorous investment processes so that investors know how their investments will be managed and how these approaches will be impacted by different market environments. this has led to a high degree of loyalty from investors even during challenging periods that all processes and fund managers endure. there will always be a place for active management that is able to add value to investors’ portfolios over the long term. We have further diversified our fund management capability through the recruitment of Kristof Bulkai, patrick Cadell and Hugo Rogers. We are launching the dublin-based Global Strategic equity fund and then a global water and agriculture fund later this year. the enhancement of our alternative investments offering is important to meet clients’ changing asset allocation and diversification requirements. We are building a range of funds and solutions that meet investors’ needs throughout the market cycle. one of our key objectives is to build a brand with strong awareness, which investors trust and which is associated with excellent performance. Achieving this will go a long way to enabling us to capture a significant proportion of the growing savings market. Assets under Management on 31 March 2015, our assets under management (“AuM”) stood at £4,494 million and were broken down by type and process as follows:- Process Cashflow Solution economic Advantage Macro thematic Global Credit Asia Multi-Asset Indexed Total Total (£m) Institutional (£m) UK Retail (£m) DPMS* (£m) Offshore Funds (£m) 859 2,226 1,037 30 31 255 56 564 284 95 2,100 403 621 – – 99 – – 31 – 56 – – – – – 156 – 11 31 13 30 – – – 4,494 1,161 3,092 156 85 * discretionary portfolio Management Service (“dpMS”) 6 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Vision and Strategic Objectives Our Vision our vision is to become one of the leading fund management companies in the uK and internationally, renowned for consistently adding value to clients’ investment portfolios. Our Strategic Objectives Outperformance one of our key objectives is for all liontrust funds and portfolios to outperform relevant benchmarks and the average returns of their respective peer groups over the medium to long term. We achieve this by retaining and recruiting fund managers who have excellent track records, expertise in their respective asset classes and who use rigorous investment processes that are clearly documented. there is an acceptance that no process will work 100% of the time but there is also an understanding that processes which are robust and scalable have the potential to deliver excellent long-term returns. We provide an environment that enables fund managers to focus on managing funds according to their own investment processes and market views and not be distracted by taking on responsibilities associated with running the business. Effective distribution We distribute our funds to as broad a client base in the uK and internationally as possible, striving continually to raise awareness and knowledge of liontrust and our funds, widen the number of clients who invest with us, deepen our relationships with existing investors and increase our assets under management. Excellent customer service and support We pride ourselves on providing our investors with exceptional service and support and place treating customers fairly as one of our principles for business and at the cornerstone of our efforts to ensure customers get a fair deal. treating customers fairly is central to how we conduct business across all our departments and functions. Clear and regular communication We communicate clearly and frequently with our investors and shareholders, regularly updating them on the performance of each of our funds and portfolios, the effectiveness of the investment processes as applied to each of our funds and portfolios and the progress of the business as a whole. this is a key part of our objective of being as transparent as possible with all investors and stakeholders. Appropriate risk effective management of risk is essential for the Group’s success; liontrust has developed risk frameworks to ensure appropriate levels of risk across all areas of the Group including our funds and portfolios. A profitable business All stakeholders, including investors, members, employees and shareholders, benefit from a successful and stable business. We aim to increase profitability by growing our revenues faster than our costs through continued growth in assets under management and by increasing margins through the focused management and control of costs. Business model our business model operates in the manner to best serve our strategic objectives, comprising three interdependent divisions: Fund Management, distribution and operations. Fund Management We have a single fund management division of seven fund management teams who manage a range of funds, portfolios and segregated accounts using distinct investment processes and a centralised dealing team. Distribution our sales and marketing teams distribute our funds and portfolios in the uK and internationally. In the uK, we market to institutional investors, wealth managers, financial advisers and private investors. outside the uK, we are focused on family offices, private banks, wealth managers and multi-managers in a number countries including France, luxembourg, Malta, Germany, Italy and the nordic region. We maintain a consistent brand across all our marketing activities which reflects the values, culture and ethos of liontrust. We are an independent business with no corporate parent, we are transparent and consistent in everything we do and operate with integrity, our fund managers are independent thinkers and have the courage of their convictions in making investment decisions, we have distinct and rigorous investment processes and we specialise in those asset classes where we have particular expertise. We have distinctive branding across all our marketing and sales material that features images of lions. this ties in with our sponsorship of ZSl’s lions500 campaign to protect the last remaining Asiatic lions in the wild as well as building a new conservation breeding centre. the sponsorship has created strong awareness and attribution among wealth managers and advisers. Operations We have a single operations division, designed to support a fast growing business. Having a single operations function ensures the fund management and distribution divisions have the appropriate tools to be effective, provides executive management with the performance and risk monitoring information required to manage the business and supports the requirements of external stakeholders such as customers, shareholders and regulators. Key performance measures Fund management ability and investment performance the strength of liontrust’s fund managers is shown by the fact that over the period from launch or fund manager appointment to the end of each of the last three financial years, on an AuM weighted basis, we have consistently had over 80% of our AuM in first quartile funds (see Figure 1). Figure 1 – AuM weighted quartile ranking since launch or manager inception 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FY13 FY14 FY15 First Quartile Third Quartile Second Quartile Fourth Quartile Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 7   strategic report continued Distribution the effectiveness of liontrust’s distribution capability is shown by the fact that over the last year we have seen net flows increase by 75% (see Figure 2). our adjusted profit before tax increased by 221% from 31 March 2013 to 31 March 2015 and by 45% from 31 March 2014 to 31 March 2015 (see figure 4). Figure 2 – net flows £’million Figure 4 – Adjusted profit before tax £’000 800 700 600 500 400 300 200 100 0 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 FY13 FY14 FY15 FY13 FY14 FY15 Net flows Adjusted profit before tax A Profitable and Growing business our AuM has increased by nearly 50% from 31 March 2013 to 31 March 2015 and by nearly 25% from 31 March 2014 to 31 March 2015, reflecting market performance and net flows (see figure 3). Figure 3 – AuM by investor type £’million 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 FY13 FY14 FY15 UK Retail funds Offshore funds Institutional DPMS Company Awards We are proud to announce the following awards for liontrust in the financial year ended 31 March 2015: • liontrust was named runner up in the award for the progressive Group of the Year by Rayner Spencer Mills in november 2014; and • liontrust was named by the london Stock exchange Group as one of the 1,000 companies to inspire Britain in 2015. these are the “uK’s most exciting and dynamic small and medium-sized businesses”. Fund Management review Currently, liontrust has seven fund management teams each with distinct investment processes. Anthony Cross and Julian Fosh Anthony Cross and Julian Fosh, who manage the liontrust uK Growth, liontrust Special Situations, liontrust uK Smaller Companies funds and a segregated account using the economic Advantage investment process, have more than 50 years of combined investment experience. Anthony, who was previously at Schroders, has managed the liontrust Special Situations and uK Smaller Companies funds since launch with the two managers starting to work together in 2008. Julian has previously managed money at Scottish Amicable Investment Managers, Britannic Investment Managers, Scottish Friendly Assurance Society and Saracen Fund Managers. Anthony and Julian and the funds they manage have won numerous awards in recent years. these include Best uK equity Managers in March 2015 (Fe trustnet), uK Smaller Companies Fund of the Year in 2014 (Ft’s Investment Adviser), Best 2013 uK Small/Mid Cap Fund in 2013 (Money observer), Best uK equity Fund– Special Situations – in 2013 (portfolio Adviser) and Best uK All Companies Fund – Special Situations – in 2012 (Moneywise). 8 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015   Anthony and Julian believe the secret to successful investing is to identify companies with a durable competitive advantage (economic Advantage) that allows them to defy industry competition and sustain a higher than average level of profitability for longer than expected. this can surprise the market and can lead to strong share price appreciation. the liontrust economic Advantage process identifies companies which possess intangible assets that produce barriers to competition and are capable, in the opinion of the fund managers, of reaping a financial advantage in the form of cash flow returns in excess of the cost of capital. In the fund managers’ experience, the hardest characteristics for competitors to replicate are three classes of intangible asset: intellectual property, strong distribution channels and significant recurring business. All smaller companies in the funds must have a minimum 3% directors’ equity ownership. equity ownership motivates key employees, helps to secure a company’s competitive edge and leads to better corporate performance. buybacks. the aim of the fund managers is to find companies that generate significant free cash flows from their asset base and are lowly valued on their cash flows whilst being run by company managers who allocate their cash flows in an intelligent way. liontrust european Growth Fund, for example, was in the first quartile since launch on 10 november 2006. Mark Williams and Carolyn Chan Mark Williams and Carolyn Chan manage the liontrust Asia Income and liontrust GF Asia Income funds. Mark and Carolyn have more than 40 years of combined experience in analysing Asian companies, with Mark having managed funds at F&C and occam and Carolyn having previously been at Hampton Investment Management. While Mark was at F&C, he was awarded first place in the equity Asia pacific (ex-Japan) sector over five years (out of 52 funds) by the S&p european awards in 2007. liontrust Special Situations Fund, for example, is in the first quartile of its sector over five years to 31 March 2015 and since launch on 11 november 2005. Stephen Bailey and Jan Luthman Stephen Bailey and Jan luthman, who manage the liontrust Macro uK Growth, liontrust Macro equity Income funds and a number of segregated accounts using the Macro-thematic investment process, have more than 50 years of combined investment experience and started working together in 2000 when Jan joined Walker Crips. they are two of only 30 fund managers who have been named Fe Alpha managers every year since it was created in 2009, including 2015, and have also been named in Fe’s “Hall of Fame”. Fe’s head of research said on Fundweb on 30 January 2015: “the managers who are entering our Hall of Fame are a real testament to the power of conviction. these are managers who have tried and tested strategies and don’t get swayed by short-term events.” At the core of the investment philosophy of the Macro-thematic process lies the belief that macro-thematic analysis – the identification and interpretation of major economic, political and social developments affecting the uK and the rest of the world – offers scope to add long-term investment value. the fund managers actively seek sources of asymmetric information, views and opinions to support the identification and evaluation of potential investment themes. Identifying such themes, and assessing their implications for investment markets and individual industries, provides the framework for the construction of the portfolios. As a result, sector exposures may differ significantly from those of the market and many of the sectors’ peers. liontrust Macro equity Income Fund, for example, was in the first quartile of its sector since launch on 31 october 2003. James Inglis-Jones and Samantha Gleave James Inglis-Jones and Samantha Gleave, who manage the liontrust Global Income, liontrust european Growth and liontrust european Strategic equity funds and a number of segregated accounts using the Cashflow Solution investment process, have 37 years of combined investment experience and first worked together in 1998. James has previously managed money at Fleming Investment Management, Jp Morgan Fleming and polar Capital while Samantha formerly worked at Sutherlands limited, Fleming Investment Management, Credit Suisse First Boston and Bank of America Merrill lynch. Samantha was in a no 1 ranked equity research sector team (extel & Institutional Investor Surveys) at Credit Suisse and won awards for top Stock pick and earnings estimates at Bank of America Merrill lynch. the Cashflow Solution investment process is based on the belief that the most important determinant of shareholder return is company cash flows. Cash flows determine the ability of a business to grow in a self-sustaining way and to return money to shareholders through dividend yield and share the Asia investment process is based on the premise that any single investment style is unlikely to deliver consistent outperformance when investing in Asian equities. this is because the region is subject to business and economic cycles despite attempts to dampen them by both governments and central banks. the fund managers believe the secret to successful investing in Asia, therefore, is to choose the style of investment to suit the particular point in the cycle. there are four main stages to the investment process: (1) identifying the key drivers for Asian equities, (2) incorporating these into a framework to determine the likely beneficiaries and losers of these drivers and to identify appropriate valuation methods, (3) fundamental stock analysis to identify individual companies that will benefit the most from the drivers, and (4) portfolio construction. liontrust Asia Income Fund, for example, was in the first quartile since launch on 5 March 2014. Patrick Cadell, Hugo Rogers and Kristof Bulkai patrick Cadell was previously at BMo Global Asset Management (previously F&C Asset Management and thames River Capital llp), having joined them in 2011. prior to joining thames River, patrick was an investment analyst at nevsky Capital where he focused on Asian equities covering a diverse range of industries. Hugo Rogers was also previously at BMo Global Asset Management, having joined them in 2008. prior to joining thames River, Hugo was an analyst at Copenhagen Capital and odey asset Management. Kristof Bulkai moves to liontrust later in 2015 having joined thames River in September 2008. prior to thames River, Kristof was a european and emerging market portfolio manager at Griffin Capital and an analyst within the data research group at Goldman Sachs. In 2000, he played a significant part in planning and scripting the millennium infrastructure spending program by the Ministry of economics in Hungary. patrick Cadell, Hugo Rogers and Kristof Bulkai will manage the liontrust GF Global Strategic equity Fund using the Structural opportunities investment process. the fund managers seek to identify stocks, sectors and countries that are experiencing unpriced structural or fundamental change. Such change creates winners and losers and can lead to significant price movements. the investment process can potentially exploit opportunities from structural and fundamental change through taking long and short positions because investors are slow and reluctant to recognise fundamental turning points, markets struggle to price the returns that structural change drives and change leads to uncertainty which is mispriced due to risk aversion. Fundamental change is often driven by the same factors that can easily be monitored: politics, industry consolidation, disruptive technology, change in business models and earnings revisions. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 9 strategic report continued Michael Mabbutt and Felix Martin Michael Mabbutt and Felix Martin, who manage the liontrust GF Global Strategic Bond fund using the Global Credit investment process, have 34 years of combined investment experience and first started working together at thames River Capital in 2005. Michael has previously been Head of emerging Market debt at Baring Asset Management and was a founding member of thames River in 1998. Felix has also had a distinguished career as an economist including at the World Bank in Washington dC and was a key member of the joint european Commission, International Monetary Fund and World Bank team which led the final preparations for the independence of Kosovo. Felix has also written Money: The Unauthorised Biography, which has been published in 15 countries and 12 languages. the Global Credit investment process adopts a fundamental approach to investing in the bond, credit and currency markets. the fund managers use top-down analysis for making strategic decisions, bottom-up analysis to assess issuers’ creditworthiness and a security selection process. top-down analysis is used to assess the attraction of different areas of the global bond and credit markets as well as regions, countries and currencies. Bottom-up analysis is used to determine the creditworthiness of the issuers of debt securities of any credit quality with respect to both ability and willingness to pay commitments in a timely manner. the security selection stage involves the consideration of a number of factors such as: the expected total return relative to the assessed risk; the contribution from income and capital to the expected return; issue size and liquidity; currency of denomination; outstanding term to maturity; and duration. John Husselbee and Paul Kim John Husselbee and paul Kim, who manage the liontrust Wealth Solutions Service (WSS) and liontrust Managed portfolio Service (MpS) using the liontrust Multi-Asset investment process, have 53 years of combined experience in managing multi-manager and multi-asset portfolios. John, launched the portfolio management service at Rothschild Asset Management, was director of Multi-Manager Investment at Henderson Global Investors and founded north Investment partners. paul was instrumental in setting up Investment Manager Selection ltd (IMS), was Head of Fund Selection and Multi-Manager at liverpool Victoria Asset Management (lVAM) and has also managed portfolios at Capel Cure Myers, Sun life portfolio Counselling Services (AXA Sun life), Christie Group Investment Management and Spencer thornton Investment Management Services. the liontrust Multi-Asset investment process is designed to achieve two main objectives. the first is to target the outcome expected by investors in terms of the level of risk, as measured by volatility, of each portfolio. Volatility is a statistical measure of variation of returns over time, which is defined as the annualised “standard deviation” of monthly investment returns. this can enable investors to match the appropriate portfolio to their desired risk profile. the second objective is to maximise returns while still targeting the risk profile of each portfolio. these two objectives are pursued through a quantitative and qualitative approach. they use a scientific approach to target the risk outcome expected but consider the maximisation of returns to require an additional element of experience, knowledge and qualitative interpretation. there are four key stages to the investment process, starting with the strategic asset allocation, followed by tactical asset allocation, fund selection and portfolio construction. Risk management is central to each of these stages and the portfolios are designed to provide diversification across asset classes, geographical regions and investment styles to enhance the returns for the level of risk taken. each portfolio targets the appropriate volatility by combining fund selection with the strategic asset allocation, adjusted for the short-term tactical weightings. they then examine each portfolio from a top-down perspective to ensure that its characteristics are in line with our risk controls. Split of AuM By product type: 26% 3% 2% By investment process: 1% 1% 1% 6% 23% 69% UK retail DPMS Institutional Offshore funds 19% Economic Advantage Cashflow Solution Macro Thematic 49% Multi Asset Indexed Global Credit Asia 10 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015     Fund performance and Awards UK Retail fund performance the strength of liontrust’s fund management capability is shown by the fact that all bar one of its eight actively managed unit trust funds are in the first quartile of their respective sectors since launch or since the fund managers were appointed to 31 March 2015. Since launch or since the fund managers were appointed 84% were in the first quartile (see Figure 2 below). Figure 1 – AuM weighted quartile ranking since launch or launch/manager inception 16% 84% First Quartile Third Quartile Second Quartile Fourth Quartile detailed quartile rankings by fund over one, three and five years and since launch or the fund manager was appointed are shown in the table below: liontrust Macro equity Income Fund liontrust Macro uK Growth Fund liontrust uK Growth Fund liontrust Special Situations Fund liontrust uK Smaller Companies Fund liontrust european Growth Fund liontrust Asia Income Fund liontrust Global Income Fund Quartile ranking - 1 year Quartile ranking - 3 year Quartile ranking - 5 year Quartile ranking – Since Manager tenure 2 1 1 2 3 4 3 4 3 2 3 2 2 4 2 – 2 2 1 1 2 2 – – 1 1 1 1 1 1 1 3 Launch / Manager appointed 31/10/2003 01/08/2002 25/03/2009 10/11/2005 08/01/1998 15/11/2006 05/03/2012 03/07/2013 Source: Financial express, total return, bid to bid, to 31 March 2015 unless otherwise stated. the above funds are all uK authorised unit trusts (retail share class). liontrust FtSe 100 tracker Fund (index fund) not included. liontrust Global Income Fund’s investment objective changed to Global Income on 3 July 2013. past performance is not a guide to the future; the value of investments and the income from them can fall as well as rise. Investors may not get back the amount originally subscribed. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 11 strategic report continued Offshore fund performance Fund vs Benchmark - 1 year Fund vs Benchmark – Since Manager tenure Launch – 5.4% vs 5.1% 04/04/2014 – 12.4% 25/04/2014 6.1% vs 6.6% 25.9% vs 31.5% 08/11/2012 (3.6%) (12.3%) 06/02/2013 – – 5.3% vs 1.5% 03/09/2014 1.2% vs 6.8% 03/09/2014 liontrust GF Macro equity Income Fund liontrust GF european Strategic equity Fund liontrust GF Special Situations Fund liontrust GF Global Strategic Bond Fund liontrust GF uK Growth Fund liontrust GF Global Income Fund Source: Financial express, total return for the base currency class, to 31 March 2015 unless otherwise stated. the above funds sub-funds of liontrust Global Funds plc, an open ended umbrella type investment company with variable capital incorporated with limited liability under the laws of Ireland. past performance is not a guide to the future; the value of investments and the income from them can fall as well as rise. Investors may not get back the amount originally subscribed. Fund Awards We are proud to announce the following awards for liontrust’s fund management teams in the financial year ended 31 March 2015:  the liontrust uK Smaller Companies Fund was named the uK Smaller Companies Fund of the Year by Investment Adviser magazine in october 2014.  the liontrust uK Smaller Companies Fund was named as the Fund with the Best Risk Adjusted Return (equity) by Rayner Spencer Mills in november 2014.  the liontrust uK Smaller Companies Fund was named as the Best uK Small Cap equity Fund by Morningstar in February 2015.  Jan luthman and Stephen Bailey are two of only 30 managers to be named in Financial express’s Hall of Fame in March 2015.  Anthony Cross and Julian Fosh were named Best uK equity Managers by Financial express in March 2015. 12 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Distribution review We have made significant progress during the financial year. We recorded net inflows of £667 million, which was our fifth successive year of net positive flows, and our AuM increased to £4,494 million from £3,613 million. We have continued to develop our strong distribution channel in the uK and internationally and this will help drive the future expansion of the business. We reorganised our distribution capability in the uK last year. Simon Hildrey took on responsibility for the sales and marketing strategy to ensure we have complete alignment across distribution. We also restructured the uK sales team to increase the focus of individual salesmen on the discretionary or advisory distribution channels, led by Stephen Corbett and Mark Keogh respectively, to enhance relationships, knowledge and service levels. this new structure is also enabling us to extend our distribution to the broader adviser market. to aid this process, we have invested in a new CRM system and digital marketing technology, along with building a new website. this is enabling us to improve still further the high standards of customer service we have set ourselves including through more personalised communications to clients. the new systems and technology will also enhance our ability to track and evaluate the success of our sales and marketing campaigns. An example of the strength of our engagement with intermediaries is the fact that we attracted more than 200 professional advisers and fund buyers to attend our 6th Annual Investment Conference in January 2015 and 300 intermediaries to our equity Income Roadshow around the uK in September 2014. the strength of the liontrust brand is reflected in the fact that between September 2014 and April 2015, we achieved an average 85% correct attribution for our advertisements among intermediaries, according to Marketing pulse, compared to an average score among peers of 62.5%. We have recruited James Beddall to work alongside Jonathan Hughes- Morgan as Co-Head of International Sales and opened a Branch office in luxembourg. James and Jonathan are broadening our distribution capability internationally and have begun attracting greater inflows from continental europe. We are seeing significant demand for alternative investments from international markets, which is partly being driven by the current valuations of equity and bond markets. Operations review We are focused on maintaining an operations team that is efficient, scalable and that gives us the ability to continue our growth whilst delivering returns to shareholders. With the growth in our business, we performed a strategic review of our Front office It infrastructure, and as a result strengthened our It governance arrangements and also restructured and expanded our It support team. our three key operations team are: • It/office team, which focuses on the development and implementation of a cloud-based server infrastructure, delivery of It hardware upgrades and the maintenance of a higher quality office environment; • Investment operations team to continue to improve systems and processes and monitor our outsourced providers (for accounting and fund valuation services); • transfer Agency team to monitor our transfer agency orientated outsourced providers. In the financial year to 31 March 2015, the operations teams, amongst other things, achieved the following: • Successfully integrated Institutional account management from sales to investment operations team; • Migration of our Guernsey feeder funds to our dublin oeIC; • launched “My liontrust”, our direct client online portal; • live dealing in our uK Retails funds via SWIFt; • live with settlement for our uK Retail funds via Clearstream and Calastone phase II net Settlement; and • Migrated to Microsoft office 365 (email and applications). Financial review Financial performance Adjusted profit before tax increased to £12.102 million from £8.352 million last year, reflecting increased AuM and increased performance fee revenues. Table (a) Analysis of financial performance Gross profit Realised gain on sale of financial assets directors, employee and members compensation (1) other Administration expenses Adjusted operating profit Interest receivable Interest payable Adjusted profit before tax (1) Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 Year on Year Change 36,764 28,372 30% 2 – – (17,788) (13,809) (6,897) 12,081 21 – 12,102 29% 12% 44% (6,153) 8,410 23 133% (81) 8,352 – 45% (1) See note 7 on page 61 for reconciliation of adjusted profit before tax to profit for the year. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 13 DistributionUK SalesStephen CorbettHead of Discretionary SalesMark KeoghHead of Advisory SalesMark AllpressHead of Strategic PartnersJames BeddallCo-Head of International SalesJonathan Hughes- MorganCo-Head of International SalesInternational SalesSimon Hildrey Head of Marketing & Distribution Strategystrategic report continued AuM Average AuM increased by 18% compared to last year and by 68% over two years (see Figure 1 below), reflecting strong net flows and market performance. Figure 1 – Change in average AuM £’million £4,500 £4,000 £3,500 £3,000 £2,500 £2,000 £1,500 £1,000 £500 £0 FY13 FY14 FY15 Average AuM Revenues Revenues excluding performance fees increased by 18% compared to last year and by 76% compared to two years ago, equivalent to an annualised growth rate of 33% over the three years (see Figure 2 below). Figure 2 – Change in Gross profit £’000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Profit and operating margin Adjusted operating profit increased to £12.081 million from £8.410 million last year and from £3.985 million two years ago reflecting the increase in average AuM, this in turn is reflected in strong growth in basic and diluted earnings per share (see Figures 3 and 4). Figure 3 – Change in Adjusted operating profit £’000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 FY13 FY14 Adjusted Operating profit FY15 Figure 4 – Change in basic and diluted earnings per share pence 25.00 20.00 15.00 10.00 5.00 0.00 FY13 FY14 FY15 Adjusted Basic earnings per share (3) Adjusted Diluted earnings per share (3) FY13 FY14 FY15 Performance fee revenues Non-performance fee revenues Revenue margin (Gross profit (excluding performance fees) divided by average AuM) remains unchanged at 0.83% compared to last year and 0.79% two years ago, reflecting the increased impact of higher average AuM and improving revenue margin. 14 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Administration expenses the largest component of our costs, in common with other service companies, is director, member and employee related expenses. director, member/employee compensation increased by 29% reflecting higher fund manager compensation. However, as a percentage of Gross profit our director, employer and member related expenses has decreased to 48% from 49% last year and from 56% two years ago (see Figure 7 below). Figure 7 – director, employee and member related expenses as a percentage of Gross profit 58% 56% 54% 52% 50% 48% 46% 44% FY13 FY14 FY15 Director, employee and members related expenses divided by Gross profit (1) (4) (4) Member and employee related costs are the sum of director and employee costs, pensions, members drawings charged as an expense, and members’ advance drawings (where applicable). Adjusted operating margin (calculated as Adjusted operating profit divided by Gross profit) has been increasing year on year reflecting the increase in revenues compared to costs and the strong operating gearing in the business (see Figure 5 below). Figure 5 – Change in adjusted operating margin 35% 30% 25% 20% 15% 10% 5% 0% FY13 FY14 FY15 Adjusted Operating margin (3) Adjusted operating profit as a percentage of average AuM has increased to 0.30% compared to last year when it was 0.24% and two years ago when it was 0.16%), reflecting the strong operating gearing in the business (see Figure 6 below). Figure 6 – Change in Adjusted operating profit as a % of average AuM 0.35% 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% FY13 FY15 Adjusted Operating profit as % of average AuM (3) FY14 (3) Adjusted for expenses for share incentivisation, severance compensation and related legal costs, acquisitions related costs, professional services (restructuring, acquisition related and other), depreciation and intangible asset amortisation, and the Financial Services Compensation Scheme Interim levy. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 15 strategic report continued other administration expenses as a percentage of Gross profit decreased to 19%, as a result of strong cost control within the business (see Figure 8 below). Figure 8 – other administration expenses as a percentage of Gross profit 30% 25% 20% 15% 10% 5% 0% FY13 FY14 FY15 Other administration expenses divided by Gross Profit Dividend the Board has considered current market environment, the financial performance for the Group in the current year and its cash generation abilities in future years, and is declaring a second interim dividend of 6.0 pence per share (2014: 2.0 pence) which will result in total dividends for the financial year ending 31 March 2015 of 8.0 pence per share (2014: 3.0 pence) (See Figure 9 below). this reflects a dividend margin (dividend per share divided by Adjusted diluted earnings per share) of 36%, an increase of 83% on last year (See Figures 9 and 10 below). Figure 9 – dividend per share 10 8 6 4 2 0 FY13 FY14 Dividend per share (pence) FY15 Figure 10 – dividend margin 40% 30% 20% 10% 0 FY13 FY14 FY15 Dividend margin Dividend policy our policy is to grow our dividend progressively in line with our view of the underlying adjusted earnings per share on a diluted basis (excluding performance fees) and cash flow of liontrust; When setting the dividend, the Board looks at a range of factors, including: • the macro environment; • the current balance sheet; and • future plans. It is our intention that dividends will be declared and paid half yearly. Principal Risks and mitigations the Group takes a cautious and pro-active approach to risk management. Management recognises the importance of understanding the risks to the business and the systems and controls required to mitigate them. A Risk Register is maintained that captures the core risks inherent in our business and assesses how those risks are managed and mitigated, the key indicators that would suggest if the risk is likely to materialise together with an assessment that each risk may have on our regulatory capital. our professional Indemnity Insurance covers us for losses, errors, and fraud. our current assessment of our key operational risks and our risk management framework suggest that we are not at material risk of breaching our insurance limits. In order to help identify, manage and control risk, liontrust breaks it down into four categories. on the basis of disciplined risk assessment, the key risks to the Group’s business are considered. A high level summary is shown below with details of any mitigating factors and the risks are also discussed in the Risk Management and Internal Controls section of the directors’ Report on page 28. Credit risk Credit risk covers the risk of loss due to a debtor’s inability to pay. the liontrust Group maintains a liquidity policy document which identifies the credit risks that may affect any area of the business and details how these risks are monitored and controlled. these risks include: failure of banks / credit institution / significant counterparties; failure of a client to pay fees; failure of a client to pay funds for an investment; failure a fund to pay redemption monies. 16 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Major counterparties are reviewed at least monthly and this covers, for each institution, agency ratings, interest rates currently offered and credit default swap spreads (where these measures are applicable or available). these are all indicators of any potential problems. If any such issues are identified the Group will take action to either move any functions or cash away from the institution or closely monitor the institution as per our counterparty selection and monitoring policy. Market risk Market risk is the risk that the value of assets will decrease due to the change in value of the market risk factors. Common market risk factors include asset prices, interest rates, foreign exchange rates, and commodity prices. liontrust as an investment management company is exposed to market risk in several forms, these include: seed investments; box management; funds under management; and management fee income. liontrust has only minor direct exposure to market risk through manager box positions and small holdings in the sub-funds of liontrust Global Funds plc which have been undertaken to aid incorporation and are redeemed when funds grow in size. the Group has a regular review process for any assets subject to market risk which identifies specific criteria to ensure that these remain within agreed limits. Operational risk operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. the management of operational risk is formalised in a number of ways including risk assessments and scorecards, documented procedures and compliance manuals, a comprehensive compliance monitoring programme (both internal and external), issue tracking and a regular assessment of third party providers. liontrust manages its operational risk with a framework based upon the Basel Committee on Banking Supervision’s paper “Sound practices for the Management and Supervision of operational Risk” using seven operational risk event types that may result in substantial losses including: Operational Risk Event Type Description Internal Fraud external Fraud Misappropriation of assets, tax evasion, intentional mismarking of positions, bribery theft of information, hacking damage, third-party theft and forgery employment practices and Workplace Safety discrimination, workers’ compensation, employee health and safety Clients, products, & Business practice damage to physical Assets Market manipulation, antitrust, improper trade, product defects, fiduciary breaches, account churning natural disasters, terrorism, vandalism Business disruption & Systems Failures utility disruptions, software failures, hardware failures execution, delivery, & process Management data entry errors, accounting errors, failed mandatory reporting, negligent loss of client assets these risk event types are further broken down into 36 sub-categories. each operational department undergoes a risk assessment for each of these risks to identify the likelihood of a risk materialising as well as the impact of the risk. the impact is the likely effect of a risk crystallising; these are two measures, the cost of a typical event as well as the cost of an extreme case. these departmental risk assessments discuss risk at a process and controls level so that each member of the team is able to participate in the management of risk on a day to day basis. the output from the departmental risk assessments or risk registers are co-ordinated with the Group’s Risk Register to ensure that we are capturing evolving risks for the Group as they emerge. the risk assessment and risk scorecard can then be used to create risk maps which visually model and communicate risks and their trends. As we outsource many of our labour intensive operational functions, we commit high levels of resource to the management of these third party providers. We work hard to ensure that the relationship is a collaborative one and that both parties are working together towards the same goals, via a dedicated relationship management team and through a comprehensive monitoring programme. the key operational risks that have been identified as potentially having a significant impact on our business or capital are as follows: • trading errors • Failure of key systems • Failure of key supplier or outsource provider • Corporate action errors • Regulatory breaches • Breach of mandate restrictions • Business continuity failure liontrust also commissions an external audit firm to report on internal controls in accordance with AAF 01/06. Other risks the firm also faces other risks such as regulatory risk, key employee risk, market changes, mis-selling and the underperformance of one, or more, of the investment processes. Regulatory risk the regulatory environment that the Group operates in continues to grow more complex. there have been significant new legislative changes around the globe which has impacted both the Group and the investment vehicles operated by the Group. these changes bring additional, or increased, risks of errors or omissions which can result in financial or other penalties and could result in a loss of confidence by our clients. Regulatory changes may also affect the products and services the Group offers, to whom or where it may offer them and the fees and charges it is able to charge. liontrust’s Compliance department operates a comprehensive compliance monitoring programme to confirm regulatory obligations are met and works with industry bodies, lawyers and consultants to ensure all regulatory change is appropriately managed. Competitive Environment liontrust operates within a highly competitive environment with both local and global businesses, many of which have greater scale and resources. the changes to the regulatory and business landscape have resulted in a greater focus on fees & charges, a growing importance of brand & marketing and distributor relationships. Failure to compete effectively in this environment may result in loss of existing clients and a reduced opportunity to capture new business which may have a material adverse impact on the Group’s financial wellbeing and growth. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 17 strategic report continued Key employee risk people are a key part of our business and the stability of our investment and operational expertise is critical to the success of the business and the Group takes appropriate steps to manage expectations and minimise the loss of good quality staff. Any departure of significant personnel may result in a loss of funds under management, especially the loss of one of our fund management teams. liontrust believes building and maintaining our distinct culture is key to the future success of our business and the engagement and retention of its staff, therefore, we invest significantly in our people, including through training and qualifications. the development of our business and increasing the diversification of our fund management talent is a core objective of the Group and as recently demonstrated, the business is willing to finance acquisitions, etc. to achieve this diversification where it is prudent to do so while leaving sufficient capital to operate the business. The risk of investment performance leading to customer loss liontrust provides specialist, actively managed portfolios to its clients aiming to produce good relative investment returns over the medium to long term. there may be periods where the portfolios have a weaker performance record and clients may redeem their investments during these periods potentially impacting the Group’s earnings. It is also harder to attract new clients during periods of under-performance in a fund, or across the Group’s portfolios which may impact the ability for the Group to grow. Suitability and Conduct risk It is a key aim of the Group to ensure our clients and customers understand the products and services we offer and for us to ensure that the products deliver what a client expects. All our investment processes are fully documented, which enables clients to understand clearly how we manage assets. For private investors investing through intermediaries, the process documents are supplemented by simplified monthly fund factsheets, the key investor information document and other reports and marketing literature available via the website or direct from us, which are clear and concise. For our institutional clients, we produce quarterly investment commentaries and regular detailed reports. ensuring that our clients understand the product is a core element in treating them fairly. We believe our documented processes, detailed reports and literature reduce the likelihood of a product either being misunderstood or not delivering the appropriate customer outcomes, this may also reduce the risk of client losses in the event of portfolio underperformance. Client Concentration and the risk of redemptions at short notice liontrust has several large, key clients and relationships. Should a large client leave (or conversely a new large client be acquired) there is a risk that earnings may be impacted. the largest client represents approximately 7.5% of the Group’s assets under management and the concentration is lower than this by revenue. Clients are also able to withdraw their assets at short notice. the retail funds have daily liquidity and most institutional mandates have no lock in periods or liquidity constraints. this may mean that in times of crisis assets under management may fall quickly increasing the potential volatility of earnings. Corporate Social Responsibility liontrust is committed to the principle of Corporate Social Responsibility (“CSR”) and intends that it should become embedded, where appropriate, into its policies and practices, to the benefit of stakeholders as well as the wider community. liontrust aims to be recognised as an organisation that is transparent and ethical in all its dealings as well as making a positive contribution to the community in which it operates. liontrust is committed to the following core values in all aspects of its work, including the fulfilment of its social responsibility: • Clear direction and strong leadership; • Customer focus and treating customers fairly; • Working to deliver good customer outcomes; • open communication and transparency; • Commitment to the highest ethical standards; • Respect for people and the development of positive working relationships with others; and • Valuing and harnessing the equality and the diversity of liontrust members and employees. CSR Strategies liontrust seeks to achieve its corporate and social objectives by focusing on the following areas: Equal Opportunities, Diversity, Inclusion and Human Rights liontrust has committed to the promotion of equal opportunities and the preservation of human rights. liontrust is vehemently opposed to the use of slavery in all forms; cruel, inhuman or degrading punishments; and any attempt to control or reduce freedom of thought, conscience and religion. liontrust will not knowingly enter into any business arrangement with any person, company or organisation which fails to uphold the human rights of its workers or who breach the human rights of those affected by the organisation’s activities. liontrust has put in place a series of policies, including a recruitment policy, parental leave policy, and a discipline and grievance policy which aims to ensure that all partners/directors, employees and associated persons have equal opportunities. the Board recognises the importance of diversity, including gender and recognises the benefits it brings to the Board and Group. the Board is committed to ensuring its composition is appropriate for the business and that members and candidates should possess the broad range of skills, expertise, industry knowledge, and other experience necessary for the effective oversight and management of the Group. liontrust believes that its people should be appointed to their roles based on skills, merit and performance and makes all appointments within the guidelines of its equal opportunities policy. Fundamental to increasing diversity is the development of a pipeline of talented and diverse employees within the business. We do not support quotas or to set prescriptive, quantitative diversity targets however, we endeavour to have a proactive and coordinated approach to attracting, retaining and developing a diverse workforce. As at 31 March 2015 the gender diversity within the group was as follows: 2015 executive directors Members of llp’s employees Male Female 3 28 21 – 1 18 Purchasing, Procurement and Bribery liontrust is committed to adhering to the highest standards of business conduct; compliance with the law and regulatory requirements; and best practice. the firm has established an anti-bribery policy to aid liontrust’s partners/directors, employees and associated persons in ensuring that they comply at all times with relevant anti-bribery laws. In implementing this policy the firm demonstrates its commitment to preventing bribery, and establishing a zero-tolerance approach to bribery in all parts of the firm’s operations. 18 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Sponsorship of Walking the Courses: liontrust is proud to be supporting Richard Farquhar’s Walking the Courses to raise money for pancreatic Cancer and Racing Welfare. over the course of 13 months from March 2015 to April 2016, Richard will walk between all 60 racecourses across mainland Britain. each leg of Walking the Courses will end with Richard’s arrival at a racecourse on the day that there is a race meeting. the combined distance that Richard will cover during the 13 months will be around 2,750 miles. Sponsorship of old Colfeians rugby club liontrust is proud to sponsor the 1st XV of the old Colfeians rugby club in lee, south-east london. this support helps to fund the club as a whole, including the colts and junior teams. Approval the Strategic Report was approved by the Board on 17 June 2015 and Signed on its behalf by: John Ions Chief executive 17 June 2015 liontrust is committed to procuring its works, goods and services in an ethically and environmentally sensitive way, yet with proper regard to its commercial obligations, ensuring that suppliers deliver to agreed timescales, quality and cost. purchasing is undertaken in a manner that encourages competition, and offers fair and objective evaluation of offers from all potential suppliers. Any significant transaction or agreement is reviewed by the Board. Environment and Sustainability liontrust believes that businesses are responsible for achieving good environmental practice and operating in a sustainable manner. We are therefore committed to minimising our environmental impact and continually improving our environmental performance as an integral and fundamental part of our business strategy and operating methods. liontrust has put in place an environmental policy that details the key points of our strategy on the environment. As part of our selection and review process, we encourage our suppliers, service providers and all business associates to do the same and where appropriate we have obtained the environmental policies of these counterparties. not only is this sound commercial sense for all; it is also a matter of delivering on our duty of care towards future generations. liontrust aims, firstly to minimise its commercial waste, and secondly to recycle as much of its commercial waste as possible, with any non-recyclable items being incinerated to produce energy. In the year to 31 december 2014 liontrust achieved a 98% recycling rate (year to 31 december 2013: 100%). using the most recent data available from our landlords, we have identified an emissions intensity per member of staff (employees and members) of 2.2 tC02 per annum (2014: 2.3 tCo2 per annum). Charitable Giving and Social Responsibility As the business has grown over the past few years, we have considered our social responsibilities both locally and globally. In addition to making some small donations in response to staff requests, liontrust will enter into partnerships with charities and charitable endeavours that we believe make a difference at both global and local levels. Sponsorship of ZSl’s lions500 campaign: the mission of ZSl london Zoo as part of the Zoological Society of london is to promote and achieve the worldwide conservation of animals and their habitats. As the wild lion population is so vulnerable, those in zoos are crucial to the future conservation of the species. We are proud to be sponsoring ZSl’s lions500 campaign to protect the last remaining Asiatic lions in the wild as well as building a new conservation breeding centre at ZSl london Zoo for this courageous and incredible animal. our sponsorship and the education and engagement provided by ZSl london Zoo is inspiring our stakeholders to take a lifelong interest in wild animals. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 19 Board of DirectorsDirectors’ reportDirectors’ responsibility statementCorporate Governance reportRisk management and internal controls reportDirectors‘ Board Attendance reportAudit and Risk Committee reportNominations Committee reportRemuneration report222325262831323536GovernanceBoard of DirectorsDirectors’ reportDirectors’ responsibility statementCorporate Governance reportRisk management and internal controls reportDirectors‘ Board Attendance reportAudit and Risk Committee reportNominations Committee reportRemuneration report222325262831323536GovernanceBoard of Directors Adrian Collins, 61, (Chairman). Joined the Board in June 2009. Adrian has worked in the fund management business for over 30 years, a large part of which was at Gartmore Investment Management limited where, latterly, he was the Managing director. He was a consultant to Strand partners limited, a corporate finance business based in the West end of london. He is also a director of Bahamas petroleum Company plc, City natural Resources High Yield trust plc, tristar Resources plc, and new City High Yield trust plc. Mike Bishop, 64, (Senior Independent Director). Joined the Board in May 2011. Mike has more than forty years’ experience as a fund manager and is currently a non-executive director of RWC Focus Asset Management and an adviser to its uK equity activist funds. Before joining Hermes in 2005, Mr Bishop was Head of pan-european equities at Morley Fund Management limited and a director and fund manager at Gartmore Investment Management. George Yeandle, 57, (Non-executive Director). Joined the Board in January 2015. George is a chartered accountant with over 30 years’ experience having specialised throughout most of his career in advising clients on executive pay and remuneration issues. He has also held a number of internal leadership roles. He trained with Coopers & lybrand (now pricewaterhouseCoopers llp) before being admitted as a partner in 1989. More recently, George was operational leader of the london Region Human Resource Services Business and a Senior partner of pricewaterhouseCoopers llp, retiring in december 2013. John Ions, 49, (Chief Executive). Joined the Board in May 2010. prior to joining liontrust in February 2010, John was Chief executive of tactica Fund Management since it was established in 2005. previously, John was Joint Managing director of SG Asset Management and Chief executive of Société Generale unit trusts limited, having been a co-founder of the business in 1998. John was also formerly Head of distribution at Aberdeen Asset Management. Vinay Abrol, 50, (Chief Operating Officer & Chief Financial Officer). Joined the Board in September 2004. Vinay is responsible for overseeing all finance, information technology, operations, risk and compliance of the Group. After obtaining a first class degree in computing science from Imperial College london, Vinay worked for W.I. Carr (uK) limited specialising in the development of equity trading systems for their Far east subsidiaries, and then at HSBC Asset Management (europe) limited where he was responsible for global mutual funds systems. Following a short period at S.G. Warburg and Co., he joined liontrust in 1995. Alastair Barbour, 62, (Non-executive Director). Joined the Board in April 2011. Alastair is a chartered accountant with 25 years’ experience spent auditing and advising boards and management of public companies in the uK and internationally, principally in the financial services industry. He trained with peat, Marwick, Mitchell & Co in london before being admitted as a partner with KpMG in Bermuda in 1985. Alastair returned to the uK as a partner of KpMG in 1991 and has specialised in financial services with extensive experience in advising on accounting, financial reporting and corporate governance. He is also a director of RSA Insurance Group plc, phoenix Group Holdings, the Bank of n.t. Butterfield & Son limited, Standard life european private equity trust plc and CAtCo Reinsurance opportunities Fund ltd. 22 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Directors’ report the directors present their report and the audited consolidated financial statements of liontrust Asset Management plC for the year ended 31 March 2015. the directors declare a second interim dividend of 6.0 pence per share (2014: 2.0 pence). this results in total dividends of 8.0 pence per share for the financial year ending 31 March 2015 (2014: 4.0 pence per share). Principal activities liontrust Asset Management plc is a holding company whose shares are quoted on the official list of the london Stock exchange and is domiciled and incorporated in the uK. It has three operating subsidiaries as follows: Review of the business and future developments A review of the business and future developments is set out in the Chairman’s statement, Chief executive’s statement and Strategic Report on page 6 and 7 to 19 respectively. Subsidiary name liontrust Fund partners llp liontrust Investment partners llp (1) liontrust Investment Solutions limited % owned by the Company Subsidiary principal activities 100% A financial services organisation managing unit trusts, authorised and regulated by the Financial Conduct Authority. 100% A financial services organisation offering investment management services to professional investors directly, through investment consultants and through other professional advisers, which is authorised and regulated by the Financial Conduct Authority. liontrust Investment partners llp is also approved as an Investment Manager by the Central Bank of Ireland. 100% A financial services organisation offering discretionary fund management services to the advisory intermediary market in the uK (formerly north Investment partners limited), authorised and regulated by the Financial Conduct Authority. (1) liontrust Investment partners llp has a branch based in luxembourg. In addition to the operating subsidiaries listed above, liontrust Asset Management plc has five other 100% owned subsidiaries. liontrust Investment Funds limited and liontrust Investment Services limited which act as a corporate member in liontrust Fund partners llp and liontrust Investment partners llp respectively. liontrust Management Services limited, which employed all employees of the Company until 31 october 2010, liontrust european Investment Services limited, which acted investment manager for certain portfolios, liontrust Asset Managers limited (previously Walker Crips Asset Managers limited), and liontrust International (Guernsey) limited, which managed offshore investments funds, and all will be liquidated in due course. Results and dividends profit before tax was £7.265 million (2014: £3.225 million). Adjusted profit before tax was £12.102 million after adding back expenses such as, share incentivisation, severance compensation and related legal costs, acquisitions related costs, professional services (restructuring, acquisition related and other), members advanced drawings, depreciation and intangible asset amortisation, and the Financial Services Compensation Scheme Interim levy (2014: £8.352 million). Directors the directors of the Company during the year and up to the date of the signing of the financial statements were as follows. their interests in the share capital of the Company at 31 March 2015 are set out in the Remuneration report on page 41. Adrian Collins John Ions Vinay Abrol Jonathan Hughes-Morgan (resigned 15 december 2014) Alastair Barbour Mike Bishop Glyn Hirsch (retired 9 September 2014) George Yeandle (joined 2 January 2015) Disclosure required under the Listing Rules LR 4.1.5.(R) and DTR 4.1.8 R Information which is the required content of the management report can be found in the Strategic report and in this directors’ report. LR 9.8.4R the following table is disclosed pursuant to listing Rule 9.8.4R. the information required to be disclosed, where applicable to the Company, can be located in these Annual Report and Financial Statements at the references set out below: Information required Location Interest capitalised Shareholder waiver of dividends Shareholder waiver of future dividends Agreements with controlling shareholders provision of services by a controlling shareholder Key contracts details of long-term incentive schemes Waiver of emoluments by a director Waiver of future emoluments by a director non-pre-emptive issues of equity for cash non-pre-emptive issues of equity for cash in relation to major subsidiary participation by parent of a placing by a listed subsidiary publication of unaudited financial information not applicable note 20 page 66 note 20 page 66 not applicable not applicable Risk Management and Internal Controls Report Remuneration report not applicable not applicable not applicable not applicable not applicable Historical Summary All the information cross referenced above is incorporated by reference into this directors’ report. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 23 Directors’ report continued DTR 7.2 Structure of capital and voting rights As at 31 March 2015 and 17 June 2015, there were 45,471,555 fully paid ordinary shares of 1p amounting to £454,715. each share in issue is listed on the official list maintained by the FCA in its capacity as the uK listing Authority. there was a change to the issued share capital during the year, the Company issued 3,000,000 shares on 1 July 2014. the Company has one class of ordinary shares which carry the right to attend, speak and vote at general meetings of the Company. the holders of ordinary shares have the right to participate in dividends and other distributions according to their respective rights and interests in the profits of the Company and a return of capital on a winding-up of the Company. Full details regarding the exercise of voting rights in respect of the resolutions to be considered at the Annual General Meeting to be held on 8 September 2015 are set out in the notice of Annual General Meeting. to be valid, the appointment of a proxy to vote at a general meeting must be received not less than 48 hours before the time appointed for holding the meeting. none of the ordinary shares carries any special rights with regard to control of the Company. under Resolution 14 of the Annual General Meeting held on 9 September 2014, the shareholders authorised the Company to purchase its own shares pursuant to section 701 of the Companies Act 2006. this authority is limited to the maximum number of 6,816,186 ordinary shares of 1 pence each (equivalent to approximately fifteen per cent of the issued share capital of the Company). this authority expires at this year’s Annual General Meeting of the Company or 9 december 2016 (whichever is the earlier). the maximum price that may be paid for an ordinary share will be the amount that is equal to 5 per cent above the average of the middle market prices shown in quotations for an ordinary share in the london Stock exchange daily official list for the five business days immediately preceding the day on which that ordinary share is purchased. the minimum price which may be paid for an ordinary share is 1 pence. Corporate governance A report on corporate governance appears on pages 26 to 27. Risks and uncertainties A report on principal risks appears in the Strategic Review on pages 16 to 18 and a report on the risk management and internal controls appear on pages 28 to 30. Corporate social responsibility liontrust aims to be recognised as an organisation that is transparent and ethical in all its dealings as well as making a positive contribution to the community in which it operates. the Board recognises the Group’s impact, responsibilities and obligations on and towards society and aims to promote equal opportunities and human rights, reduce environmental risk and operate in a sustainable manner. the Group is committed to the highest standards of business conduct. policies and procedures are in place to facilitate the reporting of suspect and fraudulent activities, including money laundering and anti-bribery policies. the Group’s health and safety policy aims, insofar as it is reasonably practical, to ensure the health and safety of all employees and other persons who may be affected by the Group’s operations and provide a safe and healthy working environment. the Group has a good record of safety. Financial instruments the Group’s financial instruments at 31 March 2015 comprise cash and cash equivalents, financial assets and receivable and payable balances that arise directly from its daily operations. Receivables arise principally in respect of fees receivable on funds under management, cancellations of units in unit trusts and sales of units in unit trusts, title to which are not transferred until settlement is received. the Group’s credit risk is assessed as low. Financial assets comprise assets held at fair value through profit or loss and assets held as available-for-sale. Assets held at fair value through profit or loss are unit trust units held in the ‘manager’s box’ to ease the calculation of daily creations and cancellations. Assets held as available-for-sale are shares in the sub-funds of the liontrust Global Funds plc. Cash flow is managed on a daily basis, both to ensure that sufficient cash is available to meet liabilities and to maximise the return on surplus cash through use of overnight and monthly deposits. the Group is not reliant on income generated from cash deposits. deposit banks are selected on the basis of providing a reasonable level of interest on cash deposits together with a strong independent credit rating from a recognised agency. Any banks selected for holding cash deposits are selected using a detailed counterparty selection and monitoring policy which is approved by the Board. Based on holding the financial instruments as noted above the Group does not feel subject to any significant liquidity risks. Full details of the Group’s financial risk management can be found in note 2 on page 56. Annual General Meeting the eighteenth Annual General Meeting of the Company will be held in the pinafore Room at the Savoy, london WC2R 0eu on 8 September 2015 at 2 p.m. A notice convening this meeting will be sent to shareholders in August 2015. Section 992, Companies Act 2006 the Following information is disclosed in accordance with section 992 of the Companies Act 2006: the Company’s capital structure and voting rights are summarised on page 24. details of the most substantial shareholders in the Company are listed on page 27. the rules concerning the appointment and replacement of directors are contained in the Company’s articles of association and are discussed on page 26. there are: no restrictions concerning the transfer of the securities in the Company; no special rights with the regard to control attached to securities; no agreement between holders of the securities regards their transfer known to the Company; and no agreement which the Company is party to that might affect its control following a takeover bid. there are no agreements between the Company and its directors concerning compensation for loss of office as at 31 March 2015. 24 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Directors’ responsibility statement Basis of financial statements Having given consideration to the uncertainties and contingencies disclosed in the financial statements, the directors have satisfied themselves that the Group has adequate resources to continue in operation for the foreseeable future and they continue to adopt the going concern basis of accounting in preparing the annual financial statements. Statement of disclosure of information to Auditors As so far as the directors are aware, there is no relevant information of which the Company’s independent auditors are unaware. the directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Company’s independent auditors are aware of that information. Independent Auditors pricewaterhouseCoopers llp were the independent auditors to the Company during the year and have confirmed their willingness to continue in office. A resolution to reappoint pricewaterhouseCoopers llp as auditors to the Company and to authorise the directors to fix their remuneration will be proposed at the 2015 Annual General Meeting. Political donations the Group made no political donations or contributions during the year. (2014: £nil). By order of the Board Mark Jackson Company Secretary 17 June 2015 Statement of Directors’ responsibilities the directors are responsible for preparing the Annual Report and Financial Statements and the Remuneration Report in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. under that law the directors have prepared the Group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the european union. under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the company and 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 applicable IFRSs as adopted by the european union have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. the directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. 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. the directors are responsible for the maintenance and integrity of the Company’s website. legislation in the united Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. the directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess a company’s performance, business model and strategy. each of the directors, whose names and functions are listed on page 22 confirm that, to the best of their knowledge and belief: • the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the eu, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the Group; and • the Strategic Report contained on pages 7 to 19 includes a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties that it faces. By order of the Board Vinay Abrol Chief operating officer & Chief Financial officer 17 June 2015 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 25 corporate governance report Compliance with the provisions of the Code the Company is committed to the principles of the uK Corporate Governance Code (September 2012) (the “Code”). during the year the Company has complied with the main principles of the Code, with the following exceptions: the Board appointed Mike Bishop as Senior Independent director on 18 June 2014. prior to this period the Board did not identify a Senior Independent director (As noted in the Code A.3.3). Based on the experience of the non-executive directors during the year the Board does not believe that this instance of non-compliance was significant but has chosen to rectify it. The Board the Board is responsible for organising and directing the affairs of the Company and the Group in a manner that is in the best interests of the shareholders, meets legal and regulatory requirements and is also consistent with good corporate governance practices. there is a formal document setting out the way in which the Board operates, which is available upon request from the Company Secretary. the division of responsibilities between Adrian Collins, Chairman, and John Ions, Chief executive, has been clearly established by way of written role statements, which have been approved by the Board. the Chairman’s main responsibilities are to lead the Board, ensure that shareholders are adequately informed with respect to the Company’s affairs and that there are efficient relations and communication channels between management, the Board and shareholders, liaising as necessary with the Chief executive on developments, and to ensure that the Chief executive and his executive management team have appropriate objectives and that their performance against those objectives reviewed. the Chief executive’s main responsibilities are the executive management of the Group, liaison with the Board and shareholders (as required by the Chairman), to manage the strategy of the Group, to manage the senior management team, oversee and manage the sales and marketing teams, and to be an innovator and facilitator of change. the Chief executive discharges his responsibilities in relation to the executive management of the Group via three executive management committees as detailed in the Risk management and internal controls report on page 28 to 30. the Chairman and Chief executive are responsible, to the Board for the executive management of the Group and for liaising with the Board and keeping it informed on all material matters. the non-executive director’s role has the following key elements: • constructively challenging, and contributing to, the development of the strategy of the Company and the Group; • scrutinising the executive management team’s performance in meeting agreed goals and objectives, and monitoring the reporting of performance to the Board; • satisfying themselves that financial information is accurate and that financial controls and risk management systems are robust and defensible; and • being responsible for determining appropriate levels of remuneration for executive directors and a prime role in appointing (and where necessary removing) senior management and in succession planning. under the Company’s articles of association, one third of the directors must retire from office by rotation at each Annual General Meeting and may offer themselves for re-election (this does not include directors appointed to the Board since the last Annual General Meeting). under the Company’s Corporate Governance Guidelines, which reflect the provisions of the Code on Corporate Governance, non-executive directors must retire and may offer themselves for re-election annually once they have served nine or more years on the Board. the uK Corporate Governance Code recommends that all directors of FtSe 350 companies retire and are put up for re-election at the Annual General Meeting. Although the Company is not a FtSe 350 company; the Board considers this to be best practice and, accordingly, has decided to go beyond the requirements of the Company’s Corporate Governance Guidelines and articles of association and require that all directors of the Company retire and offer themselves for re-election. the Board met eight times during the year. In addition, there were occasions when the directors met as a committee of the Board in order to authorise transactions already agreed in principle at Board meetings. on those occasions, a quorum of either two or three directors was required. Directors Biographical details of all current directors can be found on page 22. there were three changes to the Board during the financial year and up to the date of the signing of the financial statements. Glyn Hirsch retired on 9 September 2014, Jonathan Hughes-Morgan resigned on 15 december 2014 and George Yeandle was appointed on 2 January 2015. Attendance at meetings of the Board and the Audit & Risk, nomination and Remuneration Committees is shown in the table on page 31. At all times during the year there have been at least two non-executive directors. the Board believes that the balance achieved between executive and non-executive directors is appropriate and effective for the control and direction of the business. the Chairman has met during the year with the non-executive directors both individually and collectively without the other executive directors. Having duly evaluated each of the non-executive directors, the Board considers that, notwithstanding the provisions of the Code, all such directors are independent, in that they neither represent a major shareholder group nor have any involvement in the day to day management of the Company or its subsidiaries. As such they continue to bring objectivity and independent judgement to the Board and complement the executive directors’ skills, experience and detailed knowledge of the business. none of the executive directors nor the Chairman are on the board of a FtSe 100 company. non-executive directors are aware that they have to report any change in their circumstances or those of the members of their families that might lead to the Board reconsidering whether they are independent. directors are also aware that they have to inform the Board of any conflict of interest they might have in respect of any item of business and absent themselves from consideration of any such matter. the non-executive directors have disclosed to the Company Secretary their significant commitments other than their directorship of the Company and have confirmed that they are able to meet their respective obligations to the Company. directors have the right to have any concerns about the running of the Company minuted and documented in a written statement on resignation. the Company has arranged insurance cover in respect of legal action against its directors and officers. 26 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Performance the Board conducts a formal review and rigorous evaluation of individual directors, its own performance and that of its committees. the evaluation process is constructively used to improve Board effectiveness, maximise strengths and address any weaknesses. the executive directors have been subject to a formal performance appraisal. these appraisals were carried out in May 2015 and in all cases their performance was appraised as continuously effective. the performance of the non-executive directors during the year to 31 March 2015 has been reviewed by the executive directors. the review has confirmed that the performance of the non-executive directors is effective and appropriate. In addition to the individual appraisals, the Board considers its overall performance as a body and of its committees. this review has confirmed that the performance of the Board and its committees is effective and appropriate. Professional development and training every director is entitled to receive appropriate training and guidance on their duties and responsibilities. Continuing professional development is offered to all directors and the Board is given guidance and training on new developments, such as new regulatory requirements. As at 17 June 2015 Name Number of voting rights Percentage of voting rights Schroders plc polygon Global partners llp legal & General Group plc BlackRock Inc. Jonathan Hughes-Morgan Artemis Investment Management llp liontrust Asset Management employee trust 9,005,319 4,568,799 2,999,157 2,466,271 2,167,709 2,100,000 1,627,946 19.8 10.0 6.6 5.4 4.8 4.6 3.6 Resources directors have access to the services and advice of the Company Secretary, and may take additional independent professional advice at the Group’s expense in furtherance of their duties. the terms of reference of the Audit & Risk, nomination and Remuneration Committees have been considered by their members with a view to ensuring they have available adequate resources to discharge their duties. In order to promote awareness and understanding of the Group’s operations, the Chairman ensures there are additional opportunities for the non-executive directors to meet with senior management outside of the Board and its committees. Committees details of the chairmen and membership of the Audit & Risk, nomination and Remuneration Committees are set out in the table on page 31 together with details of attendance at meetings. Communication with shareholders the Chairman regularly meets with major shareholders and the Chief executive and Chief operating officer & Chief Financial officer also have regular meetings with existing and potential new shareholders. the views of the shareholder are conveyed to non-executive directors by the presentation at Board meetings of surveys of shareholder opinion carried out by the Group’s brokers and of analysts’ reports and also by feedback from the executive directors who regularly meet with shareholders. Substantial shareholders the Company has received notifications in accordance with the Financial Conduct Authority’s (“FCA”) disclosure and transparency Rule 5.1.2R of the following interests in 3% or more of the voting rights attaching to the Company’s issued share capital as follows: As at 31 March 2015 Name Number of voting rights Percentage of voting rights Schroders plc polygon Global partners llp legal & General Group plc BlackRock Inc. Jonathan Hughes-Morgan Artemis Investment Management llp liontrust Asset Management employee trust 9,005,319 2,906,000 2,999,157 2,466,271 2,167,709 2,100,000 1,627,946 19.8 6.8 6.6 5.4 4.8 4.6 3.6 Share buy backs At the 2014 Annual General Meeting shareholders gave approval for the Company to buy back up to 6,816,186 ordinary shares. Shareholders have also renewed the directors’ authority to issue ordinary shares up to an aggregate nominal value of £151,571. Annual General Meeting notices convening Annual General Meetings are despatched to shareholders at least twenty working days before the relevant meeting and contain separate resolutions on each issue, including a resolution to adopt the annual report and financial statements. At every Annual General Meeting, the Chairman of the Group and the chairmen of the Audit & Risk, nomination and Remuneration Committees make themselves available to take questions from shareholders. the Company has put arrangements in place with its registrars to ensure that all proxy votes are received and accurately accounted for. the level of proxies lodged on each resolution, including votes for, against and abstained, will be available on the Company’s website or upon request from the Company Secretary after the Annual General Meeting. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 27 Risk Management and Internal Controls Report the Board is ultimately responsible for determining the risk appetite, risk strategy and risk management framework of the Group. the FCA have noted that it is for each individual firm to determine, based on its nature, scale and complexity, as well as its attitude to exposure to risk, whether or not to establish a Risk Committee of the governing body. the Group has determined not to establish a separate Risk Committee but to combine it with the Audit Committee, although this is reviewed on an annual basis. c) Liontrust Investment Partners LLP Partnership Management Committee (“lIppM”) for dealing, trading systems, research tools (including fund management data services and research tools), for investment operations, risk management (including portfolio risk), and investment processes (including performance of the process, outlook, amendments or enhancements to the investment processes and new instruments within funds). the Audit & Risk Committee, on behalf of the Board, is accountable for, and responsible for, overseeing the Group’s financial reporting, risk management and system of internal controls, including suitable monitoring procedures, which are designed to provide reasonable, but not absolute, assurance against material misstatement or loss. the Audit & Risk Committee, on behalf of the Board, is also responsible for keeping under review the scope, results, and cost effectiveness of the audit and the independence of the external auditors. the Head of Risk is responsible for overseeing all risk management and legal functions of the Group and monitors the Group’s risks in a pro-active manner, with all departments fully aware of and managing the key risks appropriate to their responsibilities. All material risks to the business are monitored, appropriate mitigations for each risk are recorded and identified to the Board with markers for those with increased risk levels. Management recognise the importance of risk management and view risk management as an integral part of the management process which is tied into the business model and is described further in the principal risks and mitigations section of the Strategic Report on pages 16 to 18. Committee structure and delegation of powers the Corporate Governance report on page 26 details the Board’s and the Chief executive’s responsibilities for organising and directing the affairs of the Company. the Board has delegated a number of its powers to three sub- committees; the Audit & Risk Committee, the nomination Committee and the Remuneration Committee. Sub-Committees Fig 1: Board and Sub-Committees the Board has delegated the authority for the executive management of the Group to the Chief executive except where any decision or action requires approval as a Reserved Matter in accordance with the Schedule of Matters Reserved for the Board. the Group have set up several management committees to assist the Chief executive, namely the: a) Executive Advisory Group Committee (“eAG”) chaired by the Chief executive and consisting of the executive members of the Board and other key personnel as the eAG sees fit. the eAG is responsible for the management of the general business and affairs of the company including, strategy development, financial planning and performance, employment and termination decisions. b) Liontrust Fund Partners LLP Partnership Management Committee (“lFppM”) for retail and institutional sales and marketing, advertising, promotion of liontrust Funds, transfer Agency, Information technology (including business continuity), treating Customers Fairly, Compliance & Financial Crime, Human Resources, Finance, product development and other asset gathering related powers; and the Matters Reserved for the Board All those powers of general management not contained in the Matters Reserved for the Board Partnership Committees Sub-Committees Fig 2: Board and Management committees and sub-committees the eAG meets at least monthly, and the partnership Management Committee Meetings are quarterly. there are several sub-committees of the partnership meetings that have been set up including the treating Customers Fairly Committee, the Financial Crime prevention Committee, the portfolio Risk Committee and the Health and Safety Committee. Treating Customers Fairly Committee the treating Customers Fairly Committee (“tCFC”) oversees the management of the Group’s treating Customers Fairly initiatives throughout the business. the tCFC agrees the Group’s approach to tCF and how our responsibilities are discharged. It keeps track of any regulatory developments and also manages the tCF training programmes. the core to the tCFC’s work is the management of our tCF programme in relation to the six outcomes that the FCA has set out for the industry. this work includes an ongoing assessment of our business against those outcomes with any actions tracked accordingly. Financial Crime Prevention Committee the Financial Crime prevention Committee (“FCpC”) oversees the effectiveness, scope and performance of the procedures throughout the business to prevent money laundering (including the review of any sanctions breaches, review of politically exposed persons and suspicious activity reports), fraud including excessive or inappropriate gifts and entertainment given and received, and anti-bribery and corruption policies and procedures within liontrust including the due diligence of third parties. Portfolio Risk Committee the portfolio Risk Committee (“pRC”) oversees the management of portfolio risk throughout the business. this oversight encompasses portfolio risk management systems and operations together with the monitoring of portfolio risk investment restrictions. the pRC has documented the approach to risk management in the Risk Management process document (“RMp”). the pRC also monitors portfolio performance, establishing parameters for exception reporting and ensuring that appropriate client communications are prepared as 28 LIontRust Asset MAnAgeMent pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Liontrust Asset Management Plc Main BoardAudit & Risk CommitteeNomination CommitteeRemuneration CommitteeLiontrust Asset Management PLC Main BoardFinancial Crime CommitteeTreating Customers Fairly CommitteeHealth and Safety CommitteePortfolio Risk CommitteeLiontrust FundPartners LLPLiontrust InvestmentPartners LLPExecutive Advisory Groupnecessary. the portfolio Risk Committee meets on an at least monthly basis to ensure that all the monitored risk controls are in place and the risk limits are appropriate for funds managed and reports on the various aspects and activities discussed within the RMp. Health and Safety Committee the Health and Safety Committee (“HSC”) is responsible for all health and safety matters for the Group including the health and safety policy statement, any required health and safety related risk assessments for the Group, the first aid requirements, all fire safety and emergency procedures, the environmental policy and any other matters relating to the general health and safety requirements of the Group’s staff. there are terms of Reference for all committees, setting out the way in which the meetings operate. the terms of Reference are formally adopted by the liontrust Board and are reviewed annually. Minutes are taken of each meeting and are circulated to the main board for review and challenge where appropriate. Risk Management framework In order to ensure that the Group regularly reviews and monitors all the potential areas of risk to the business, liontrust has implemented a risk management framework which allows management, the Audit & Risk Committee and the Board to be kept fully informed of potential risks to the business and also how these risks would impact the group’s capital adequacy. the Group breaks risk down into four main categories that feed into the Risk Register and the ICAAp: Credit Risk, Market Risk, operational Risk and other Risk. Further details of the risks are listed in the principal risks and mitigations section of the Strategic Report on pages 16 to 18. each element of risk is formally reviewed by the Audit & Risk committee on a minimum of an annual basis, and the Group ensures appropriate controls are in place to manage these risks. the risk and uncertainties that affect the Group’s business can also be broken down into risks that are within the management’s influence and risks that are outside it. Risks that are within management’s influence include areas such as the expansion of the business, prolonged periods of under-performance, loss of key personnel, human error, poor communication and service leading to reputation damage and fraud. Risks outside the management’s influence include falling markets, terrorism, a deteriorating uK economy, investment industry price competition and hostile takeovers. Internal controls the internal control system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives. the Group’s internal control system is based on a “three lines of defence” model summarised in the diagram below: Liontrust Asset Management PLC Board the diagram below summarises the Group’s Risk Framework. LIPPM/LFPPM Audit & Risk Committee Business Departments Control Departments Other Assurance Providers Front Office Risk Compliance Visits Operations Compliance Systems & Controls Review Sales Finance (Controls) External Audit Marketing Internal Controls AAF Assurance Process Finance (Treasury) IT Security Consultancy Reviews 1st Line of Defence 2nd Line of Defence 3rd Line of Defence liontrust’s Business departments, supervised by the partnership Committees, are responsible for identifying and managing risk and control activities within their business lines. this is the first line of defence. the Control departments supervised by the Audit & Risk Committee develop and implement risk frameworks to support the front line and objectively challenge the identification of risk and the design of the controls within the business as a whole. the third line is a review of the risk and control activities in the Company by parties independent from the design, implementation and execution to highlight weaknesses, and provide assurance on the effectiveness and suitability of the internal controls. there are two main elements to capturing and reviewing risk within the Group; the Risk Register and the Internal Capital Adequacy Assessment process (“ICAAp”). the Risk Register records potential risks, their materiality and their likelihood of occurrence and is updated regularly with input from executives and function heads. the most material and likely risks from the complete Risk Register are reported to the main Board at each Board Meeting in a Key Risk Report. the ICAAp sets out the Group’s risk appetite for the different business areas and brings the Risk Register together with scenario analysis and stress testing to determine how the realisation of risks might impact on the Group’s financial position. the main elements of the Internal Controls which have operated throughout the year are as follows: • a clear division of responsibilities and lines of accountability, allowing adequate supervision of staff; • detailed procedures and controls for each department; • the development and implementation of specific accounting policies; • preparation of annual plans and performance targets in light of the overall Group objectives; • reports from the executive directors to the Board on the actual performance against plans; LIontRust Asset MAnAgeMent pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 29 Liontrust BoardRiskCredit RiskICAAPCounterpartiesMarket RiskICAAPInvestmentsOperational RiskICAAPDepartmental Risk RegisterOther RiskICAAPe.g. Regulatory or CorporateAudit & Risk CommitteeKey Risk ReportICAAPRisk RegisterRisk Management and Internal Controls Report continued • Senior Management Arrangements, Systems and Controls review from the Chief operating officer & Chief Financial officer to the Board; the table below details the companies that provide these outsourced functions: Jurisdiction Transfer Agent Fund Accounting & Fund Valuation uK Ireland International Financial data Services limited State Street Bank & trust Company northern trust International Fund Administration Services (Ireland) limited northern trust International Fund Administration Services (Ireland) limited liontrust has detailed service level agreements in place with these key outsource providers and they are closely monitored to ensure these standards are met. the Board have agreed a counterparty selection and management policy which details monitoring, contingency and resilience plans for all counterparties. Internal audit the Board considered whether to establish a separate internal audit function. It was decided that, under the direction of the Chief operating officer & Chief Financial officer, the compliance department meets most of the objectives of an internal audit function. Consequently a separate internal audit function is not currently required. this will continue to be reviewed on an annual basis. Assurance process the senior management arrangements, systems and controls environment in place across the Group is reviewed during the course of a year by the Chief operating officer & Chief Financial officer and his report is provided to senior management, the Board and Audit & Risk Committee. on an annual basis, liontrust commissions deloitte llp, an external audit firm, to perform testing of integrity of aspects of the Group-wide control environment. liontrust has adopted the principles established in the “Assurance Reports on internal controls of service organisations made available to third parties” as recommended by the Institute of Chartered Accountants of england and Wales in the March 2011 technical release of AAF 01/06. the results of this testing, including any exceptions identified, are made available to senior management, the Board, Audit & Risk Committee and our institutional customers as appropriate. • reports from the Head of Risk highlighting the key risks faced by the Group detailing the exposures, controls and mitigations in place; • reports from the Head of Compliance detailing the robustness of procedures and controls for each department; • reports from the Money laundering Reporting officer (MlRo) detailing the arrangements in place for anti-money laundering and financial crime prevention; • reports to the Board in respect of the management of, and results of visits to, third parties to whom functions have been outsourced; • compliance by all members of staff with the Group’s policies and statement of business conduct, which seeks to ensure business is conducted in accordance with the highest standards; and • capture and evaluation of failings and weaknesses and confirmation that necessary action is taken to remedy the failings, particularly those categorised as ‘significant’. the Board has reviewed the effectiveness of the Group’s system of internal control for the financial year and up to the date of this annual report and financial statements. the Board has carried out an evaluation of the major risks affecting the business and has a process in place within the business to control and monitor risks on an ongoing basis, in accordance with the guidance from the Financial Reporting Council’s report on Internal Controls (formally the turnbull Guidance). the Board is of the view that all necessary actions have been, or are being, taken to remedy any significant failings identified as part of the ongoing risk management process and that no significant weaknesses were identified during the year. Stakeholders and Key Contracts Additionally the Group has a significant number of stakeholders whose future risks and uncertainties are linked to the Group. these significant stakeholders are: shareholders; clients; members; employees; service providers that provide the Group with outsourced functions; and industry bodies. each of these groups presents different risks and uncertainties and the Group ensures that there is regular contact and monitoring of the various bodies. outsourcing is an integral part of the liontrust operating model. Recent changes in legislation and renewed interest by the FCA in the topic have prompted the documenting of how the model operates and determining if any changes are required within the new regulatory environment. liontrust outsources in two key areas, transfer Agency and Fund Accounting & Fund Valuation Services across three main jurisdictions. Transfer Agency liontrust appoints a trust company, bank or similar institution to maintain records of investors and account balances and transactions, to cancel and issue certificates, to process investor mailings and to deal with any associated problems. Fund Accounting & Fund Valuation liontrust appoints a trust company, bank or similar institution to perform net Asset Value (“nAV”) calculations for each of the funds. the following services are also typically included in this service: processing of corporate actions and dividends, expense accrual management, cash management and reconciliation, calculation and timely payment of all management and performance fees, and preparation of interim and annual financial statements. 30 LIontRust Asset MAnAgeMent pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Directors’ Board Attendance Report Board and board committee membership and attendance the number of Board and Board committee meetings attended by directors in the year ended 31 March 2015 was as follows: Board1 Audit & Risk Committee Remuneration Committee Nomination Committee Total number of meetings during the year Adrian Collins John Ions Vinay Abrol Jonathan Hughes-Morgan (2) Alastair Barbour Mike Bishop Glyn Hirsch (3) George Yeandle (4) 8 8* 7 8 6 6 7 1 2 5 – – – – 5* 5 1 1 6 – – – – 6 6 1 2* 3 3 1 – – 2 3* 1 1 * Chairman of the Board or Committee (1) of the 8 board meetings that took place during the year, 6 were scheduled meetings. (2) Resigned 15 december 2014. (3) Retired 9 September 2014. (4) Joined 2 January 2015. LIontRust Asset MAnAgeMent pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 31 Audit & Risk Committee Report Introduction by the Chairman of the Audit & Risk Committee Dear shareholder, on behalf of the Audit & Risk Committee (the “Committee”), I am pleased to present the Audit & Risk Committee report for year ended 31 March 2015. the Committee’s principal duties are as follows: • assist the Board in its presentation of the Company’s financial results and position through its review of the interim and full year financial statements before approval by the Board, focusing on compliance with accounting principles and policies, changes in accounting practice and major matters of judgement; • keep under review the effectiveness of the risk framework that is used to monitor Group’s system of internal controls and risk management systems, including suitable monitoring procedures for the identification, assessment, mitigation, monitoring and management of all risks including liquidity, market, regulatory, credit, legal, operational and strategic risks, with particular emphasis on the key risks faced by the Company, which are designed to provide reasonable, but not absolute, assurance against material misstatement or loss; • review and recommend to the Board for approval, the Company’s Internal Capital Adequacy Assessment process (“ICAAp”) to fulfil its regulatory obligations under the Capital Requirements directive and assess whether the pillar 2 assessments and pillar 3 disclosures remain appropriate; • review periodically and monitor the Company’s procedures for ensuring compliance with regulatory and financial reporting requirements, including whistle blowing arrangements, its relationship with the relevant regulatory authorities, arrangements for the deterrence, detection, prevention and investigation of fraud, and to receive and consider special investigation reports relating to fraud or major breakdowns in internal controls or major errors and omissions including remedial action by management; and • keep under review the scope, results and cost effectiveness of the audit and the independence of the external auditors. the terms of reference of the Committee, which explain its role and the authority delegated to it by the Board of directors, are published on the Company’s website or are available upon request from the Company Secretary. this introduction is intended to provide a summary of key events during the year from a Committee perspective and to give further insight into the workings of the Committee and its approach. during the year, a significant proportion of the Committee’s time was spent reviewing the Group’s system of risk management and internal control; the integrity of financial reporting; and the effectiveness of the Group’s Finance, Risk and Compliance functions, and external audit. the Committee’s focus was on the continuing appropriateness of the Group’s financial reporting. In particular this included the significant financial judgements taken in the financial year ended 31 March 2015, and the ongoing assessment of risks faced by the business and management’s response to these risks. Composition and attendance during the year, the Committee comprised of independent non-executive directors: • Alastair Barbour (Chairman) • Mike Bishop • Glyn Hirsch (Retired 9 September 2014) • George Yeandle (Joined 2 January 2015) the attendance record of members of the Committee during the year is shown in the table on page 31. the Chief operating officer & Chief Financial officer, Head of Compliance and Financial Crime, Head of Finance and Head of Risk were regular attendees at the Committee meetings and reported on their respective areas. the external auditor, pricewaterhouseCoopers llp, attended the meetings following the half and full year ends and met privately with the Committee. Alastair Barbour Chairman of the Audit & Risk Committee 17 June 2015 32 LIontRust Asset MAnAgeMent pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Activities during the year the Committee has a formal programme of issues which it covers during the year. this programme is formulated by the Committee Chairman and the Chief operating officer & Chief Financial officer and is designed to ensure that all matters that fall within the Committee’s remit are reviewed during the year. the Committee has access to external independent advice at the Company’s expense. In the financial year to 31 March 2015, the Committee met five times and discussed, amongst other things, the subjects described below: • Reviewing the annual financial statements for the year ended 31 March 2014 and half year financial statements for the six months to 30 September 2014 with particular emphasis on their fair presentation, the reasonableness of judgements made and the valuation of assets and liabilities; • the appropriateness of the accounting policies used in drawing up the Group’s financial statements; Significant accounting matters during the year the Committee considered key accounting issues, matters and judgement in relation to the Group’s financial statements and disclosures relating to: i) Revenue recognition the risk of recognising revenue in incorrect periods via management manipulation is significant in that revenue levels may affect management’s levels of remuneration and incentivisation. Risks of such manipulation are heightened where there is judgement applied in calculation or recognition of revenue. Any such calculations are subject to internal approvals and sign offs and is subject to independent verification. Revenue is recognised in accordance with the accounting policy on note 1m) on page 54. the Committee discussed recognition of revenue with management and questioned them on the application of the group’s accounting policy with particular emphasis on fee income, performance fees and profits from dealing in unit trusts. Revenue recognition was also a key focus for the auditors and they reported to the Committee on their work and findings. • Review of the Group’s governance, risk framework, risk management , risk ii) Risk of management override of controls management processes and related policies; • Consideration of the external auditors’ report on the full year ending 31 March 2014 audit and discussion of their findings with them; • Consideration of the external auditors’ report on the half year ending 30 September 2014 audit and discussion of their findings with them • Consideration and approval of the external audit plan for 2015; • Review and approval of the Group’s ICAAp; • Review of the Group’s compliance monitoring programme, compliance manual (including whistle blowing arrangements), annual anti-money laundering report; • Review and discussion of regular reports on financial reporting, key risks, compliance and financial crime from the Head of Finance, Head of Risk and Head of Compliance & Financial Crime; • Review of reports relating to the following: o llp Salaried Members Rules impact analysis; o Anti-Money laundering and Anti-Bribery and Corruption Systems and Controls Gap Analysis; o Review of the Compliance Culture with the Group; o Review of the IMA’s Inducement Guidelines; o Review of threesixty’s Assessment Report on liontrust Investment Solutions limited; o Client Money and Annual Client Money Audit review; and o Money laundering Reporting officer’s Annual Report which includes a Financial Crime & Money laundering Assessment; • Review of the type 2 AAF 01/06 report on the Group’s control environment; • Review of the 2014 Senior Management Arrangements, Systems and Controls Review Report for the Group; • Assessment of the performance, independence and objectivity of the external auditors; and • A review of fees for non-audit services carried out by the external auditors. the Chief operating officer & Chief Financial officer is a regular attendee, as are the Head of Finance, Head of Risk and the Head of Compliance & Financial Crime. International Standards on Auditing (‘ISA’s’) require that this is identified as a significant risk by our auditors and, as such, it is treated as a significant risk by the Committee. Management have the potential to manipulate accounting records and financial reports by overriding controls. Reported financial information is regularly reviewed and discussed by the Committee and the Board with any significant deviations from expectations being queried. Findings from the audit are discussed with the external auditor. iii) Share based payments Share based payments are a focus for the Committee in view of the complexity of accounting, interpretation of the reporting standard and valuation of awards. the Committee receives information and explanations from management which is discussed with them and the auditors, taking into account the results of their audit work. the Committee re-considered the accounting for the share options issued under the liontrust Senior Incentive plan as described in note 25 to the financial statements on page 69. After reviewing the accounting treatment of the potential liability to pay employer national Insurance Contributions and discussing the treatment with management and the external auditors, the committee concluded, and recommended to the Board, that it would more appropriately be accounted for in accordance with IFRS2 ‘Share based payments’ with a liability being accrued from the grant date by reference to the fair value of the underlying options together with related corporation tax adjustment. the adjustments arising from this are set out in note 25. External auditors pricewaterhouseCoopers llp (“pwC”) were appointed as the Group’s auditors in 1999, since that date, there have been regular rotations of the partner responsible for the audit, with the most recent rotation occurring in 2014. However, since pwC’s appointment in 1999, no audit related tender has been conducted, (although in line with good governance) it is intended to put the Group’s audit work out to tender in the financial year ending 31 March 2016. the Committee are aware of the new eu audit regulation requirements will require 10-year audit firm tendering and 20-year audit firm rotation which means that the liontrust will be required to replace pwC as external auditors by 2023. this regulation will then require liontrust to undertake a formal tender process at least every ten years. LIontRust Asset MAnAgeMent pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 33 Audit & Risk Committee Report continued the Committee meets regularly with the external auditors without management present. the audit engagement partner attends the committee meetings at which the half yearly and annual reports are reviewed. each year, the Committee considers the performance of the external auditors prior to proposition of a resolution on their reappointment and remuneration at the Annual General Meeting. In conjunction with the Committee, the Board has adopted a policy and guidelines on use of non-audit services from the external auditors to safeguard the objectivity and independence of the external auditors. this policy is reviewed regularly and sets out standards for approval of the external auditors in relation to non-audit services, details of services that are not permitted to be purchased from the external auditors, procedures for the approval of non-audit services provided by the auditors and restrictions on the employment of senior members of the audit engagement team or a partner of the external auditors. the Committee receives a regular report setting out the non-audit services provided by the external auditors during the year and the fees charged; an analysis of fees paid in respect of audit and non-audit-services provided by the external auditors is provided within the administrative services note of the financial statements. during the year, the external auditors were, on a number of occasions, engaged as advisers. the range of non-audit services provided included tax compliance advice, and employee and member incentivisation advice to management. In order to maintain their independence, such appointments are only made when the Committee is satisfied that there are no matters that would compromise the independence of the auditors or affect the performance of their statutory duties. the Committee is satisfied that the external auditors were best placed to provide these services because of their familiarity with the relevant areas of Group’s business and that there are no matters that would compromise the independence of the external auditors or affect the performance of their statutory duties. details of fees paid to the auditors can be found in note 6 of the financial statements on page 61. pwC have also considered their position and have confirmed their independence to the Company in writing. the Group’s external auditors are also required to provide an annual report to the Committee detailing all non-audit services, including the level of fees charged, and to have their own internal processes to ensure that the firm, its partners and its staff are independent of the Group. Annually the Committee reviews a formal letter provided by the external auditors confirming its independence and objectivity within the context of applicable regulatory requirements and professional standards. Based on the satisfactory conclusions of the work described above carried out by the Committee to assess the performance of the external auditors and safeguard their independence, the Committee considers that it is in the best interests of the Group that pricewaterhouseCoopers llp continue to act as the Group’s external auditors and has recommended this to the Board. the Board has accepted the Committee’s recommendation a resolution will be proposed at the 2015 Annual General Meeting for the reappointment of pwC as external auditors. Alastair Barbour Chairman of the Audit & Risk Committee 17 June 2015 34 LIontRust Asset MAnAgeMent pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Nomination Committee Report Introduction by the Chairman of the Nomination Committee Dear shareholder, on behalf of the nomination Committee (the “Committee”), I am pleased to present the nomination Committee report for year ended 31 March 2015, which is my first as Chairman of this Committee. the Committee’s principal duties are as follows: • review the structure, size and composition of the Board; • to evaluate the directors’ skills, knowledge and experience; • considers the leadership needs and succession planning of the Board when making decisions on new appointments; • review annually the schedule of employees and members who carry our significance influence functions (“SIF”) under the FCA’s approved persons regime, and to ensure the individuals continue to be fit and proper, competent and capable; and • consider and approve recommendations from the management committees of liontrust Investment partners llp (“lIp”) and liontrust Fund partners llp (“lFp”) for new SIF employees or members, including details of the controlled functions that they will perform and consider and approve recommendations from the management committees of lIp and lFp for amendments to the controlled functions carried out by existing SIF employees or members. the terms of reference of the Committee, which explains its role and the authority delegated to it by the directors, are available on the Company’s website or upon request from the Company Secretary. the terms and conditions of appointment of the directors will be available for inspection at the 2015 Annual General Meeting. this introduction is intended to provide a summary of key events during the year from a Committee perspective and to give further insight into the workings of the Committee and its approach. during the year, the Board’s composition and succession planning remained a major focus with a number of non-executive and executive director changes. In June 2014, we announced that Glyn Hirsch would be stepping down as a non-executive director at the 2014 Annual General Meeting (9 September 2014), Mike Bishop was appointed as our Senior Independent director in June 2014, Jonathan Hughes-Morgan stepped down as an executive director in december 2014 and George Yeandle joined the Board as a non-executive director in January 2015. Composition and attendance during the year, the Committee comprised of independent non-executive directors and executive directors: • Mike Bishop (Chairman) • Alastair Barbour • Adrian Collins • Glyn Hirsch (Retired 9 September 2014) • John Ions • George Yeandle (Joined 2 January 2015) the attendance record of members of the Committee during the year is shown in the table on page 31. Mike Bishop Chairman of the nomination Committee 17 June 2015 Activities during the year In the financial year to 31 March 2015, the Committee met three times and discussed, amongst other things, the subjects described below: • Reviewed the size and composition of the Board including reviewing and approving the Board Composition and Key personnel Succession plan; • Following Glyn Hirsch’s decision to step down from the Board at the 2014 Annual General Meeting, the Committee initiated a search assignment; • the search for an additional non-executive director to become the Chairman of the Remuneration Committee was commenced immediately after the announcement of Glyn Hirsch’s decision to step down from the Board and Adrian Collins was appointed to lead the search assignment. the Committee identified the skills, knowledge and experience that would be required and the search has resulted in the appointment of George Yeandle who joined the Board in January 2015. George Yeandle is a Chartered Accountant and was a partner in pricewaterhouseCoopers llp’s Human Resources practice for a number of years. With over 30 years’ experience and having specialised throughout most of his career in advising clients on executive pay and remuneration issues he will bring new insights to the role; • Considered whether there was any need to appoint a Senior Independent director and concluded that it was and approved the appointment of Mike Bishop to this position; • Considered and approved a number of recommendations from the management committees of lIp and lFp for new SIF employees and members, including details of the controlled functions that they will perform; • Reviewed and approved the Compliance department’s Annual Compliance Monitoring Review of Controlled Functions and approved the recommendations contained therein; and • Reviewed and approved the adoption of a formal policy on diversity, in particular when looking to appoint new directors. the Committee received information and support from the Chief operating officer & Chief Financial officer during the year. In order to enable the Committee to carry out its duties and responsibilities effectively the Committee has the right to appoint external recruitment consultants or external advisers to fill vacancies where it believes that to be appropriate. Diversity the Committee considers diversity when looking to appoint additional directors. It is a prerequisite that each director or proposed director must have the skills, experience and character to contribute both individually and as part of the Board, to the effectiveness of the Board and the success of the Company and Group. Subject to this overriding principle, the Board believes that diversity, amongst its members, including gender diversity, is of great value and it is the Board`s policy to give careful consideration to issues of overall Board balance and diversity, in making new appointments to the Board. the Company currently has no female directors and the Committee aims to recommend the appointment and to increase the number of female directors if appropriate candidates are available when Board vacancies arise. the Company operates a policy of equal opportunity, details of which can be found in the Corporate Social Responsibility section of the Strategic Report. Mike Bishop Chairman of the nominations Committee 17 June 2015 LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 35 Remuneration Report Introduction by the Chairman of the Remuneration Committee Dear shareholder, on behalf of the Remuneration Committee (the “Committee”), I am pleased to present the Remuneration report for year ended 31 March 2015, my first as Chairman of this Committee. At our 2014 Annual General Meeting, shareholders approved our directors’ remuneration policy. We are not proposing any changes to this policy and so have only included the policy’s elements of reward table in this year’s report. our full remuneration policy is available on the Company’s website and in our 2014 Annual Report. the Annual report on remuneration outlines how our policy has been implemented in financial year ended 31 March 2015 and how it is intended to apply in financial year ending 31 March 2016. the Annual report on remuneration will be subject to an advisory vote at our 2015 Annual General Meeting, to be held on 8 September 2015. the Committee is charged with determining remuneration policy for, and setting pay and other benefits of, the executive directors of the Company, its members and employees. All its recommendations are referred to the Board. Any director, who has an interest in the matter which is the subject of a recommendation to the Board, abstains from the Board’s vote in relation to that matter and takes no part in its deliberations. the Committee may use external advisors if required. the terms of reference of the Committee, which explains its role and the authority delegated to it by the Board, are available on the Company’s website or upon request from the Company Secretary. Base fees for the non-executive directors of the Company are to remain unchanged for the financial year ending 31 March 2016. However, with effect from 1 April 2015, the Board has introduced additional non-executive director fee elements (Senior Independent director fee, Committee Chairman fee and Committee member fee) ranging from £7,500 to £2,500 per element. the Committee has frozen the base remuneration of the executive directors and has also approved annual bonuses and variable allocations to the executive directors of between 49% and 181% of annual base remuneration, with an equivalent amount deferred into ordinary shares of the Company, which vest after three years. the Committee believes that the level of annual bonus/variable allocation and deferral is commensurate with the exceptional corporate and personal performance of the executive directors over the financial year ended 31 March 2015 and that the annual bonus and variable allocation for all employees and members including the executive directors for the financial year ended 31 March 2015 is 18% of pre-annual bonus and variable allocation Adjusted operating profit. Composition and attendance during the year, the Committee comprised entirely independent non- executive directors: • George Yeandle (Chairman from 2 January 2015) • Glyn Hirsch (retired 9 September 2014) • Alastair Barbour • Mike Bishop the attendance record of members of the Committee during the year is shown in the table on page 31. this introduction is intended to provide a summary of key events during the year from a Committee perspective and to give further insight into the workings of the Committee and its approach. George Yeandle Chairman of the Remuneration Committee 17 June 2015 Directors’ remuneration policy this section of the Remuneration report provides an overview of the key remuneration elements in place for executive directors. After the strong support received from shareholders last year, we have not made any changes to our remuneration policy and as such remain bound by the policy. We have not reproduced the full policy report in this report. the below presents our approved elements of reward table for executive directors’ and non-executive directors’ for reference. A copy of our full directors’ Remuneration policy as approved by shareholders can be found in our 2014 Remuneration report, on pages 33 to 40 of our Annual Report and Accounts 2014 (available on our website: www.liontrust.co.uk). the Committee considered the Group’s overall performance in the financial year ended 31 March 2015 when assessing executive directors’ annual base remuneration for the financial year ending 31 March 2016 and bonus/variable allocation for the financial year ending 31 March 2015. over the past year the Group has continued the progress made in previous years in executing its business strategy, has increased profitability (on an adjusted basis) by 45%, increased assets under management by nearly 25%, increased net inflows year on year by 75% and increased dividends to shareholders by 167% (in pence per share terms). these achievements have been reflected in the executive directors’ bonus/variable allocation for the financial year ending 31 March 2015 as set out in further detail in the Annual report on remuneration, and can be summarised as follows: • Salary/Fixed allocation for the executive directors to remain unchanged for the financial year ending 31 March 2016; • An equivalent amount to the annual bonus/variable allocation is deferred into the Company’s shares for a three year period thereby ensuring that the interests of the executive directors and shareholders are closely aligned; and • Aggregate annual bonus and variable allocation pool for all employees and members including executive directors is to be normally capped at no more than 20% of pre-annual bonus/variable allocation Adjusted operating profit. 36 LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Elements of reward the following table summarises each of the elements of liontrust’s total compensation package and the ongoing remuneration policy for the executive directors: Performance measures and assessment not applicable. Individual risk and compliance behaviour is also considered in detail for relevant roles and factored into the assessment of performance and the determination of the bonus/variable allocation amount payable. the Chief operating officer & Chief Financial officer, who is responsible for risk and compliance at Board level, attends at least two Committee meetings each year to provide input on risk and compliance. A claw back principle applies to the annual bonus and/or variable allocations. this enables the Committee to recoup annual bonus or variable allocations in the exceptional event of: misstatement or misleading representation of performance, a significant failure in risk management and control, or serious misconduct of an individual. Objective and Link to strategy Operation Maximum opportunity Salary or Fixed allocations Annual bonus or variable allocation to provide a satisfactory salary/fixed allocation within a total package comprising salary/fixed allocation and bonus/variable allocation. the level of salary/fixed allocation broadly reflects the value of the individual, their role, skills and experience. It is also designed to attract and retain talent in the market in which the individual is employed and/or a member. the annual bonus or variable allocation rewards good performance of the Group and individual executive director and is based on the Group’s profits, which is considered one of the most prominent KpIs. Salaries and Fixed allocations are reviewed annually effective in April taking account of market levels, corporate performance, individual performance and levels of increase for the broader employee/ member population. Reference is made to median – upper quartile levels within the asset management sector. there is no guaranteed or maximum annual increase. the Committee considers it important that base salary and fixed allocation increases are kept under tight control given the potential multiplier effect of such increases on future costs. the Committee will aim to keep salaries and fixed allocations in line with inflation. liontrust does not explicitly link incentive awards to a multiple of salary and/or fixed allocation or cap awards to individuals but it should be noted that the aggregate annual bonus and variable allocation pool for all employees and members including executive directors but excluding the fund managers is normally capped at no more than 20% of pre-bonus/variable allocation Adjusted operating profit. this is to ensure that high performers can be rewarded in line with the market on a total cash (salary/fixed allocation plus bonus/variable allocation) basis. this also reduces the need to increase salaries/fixed allocations and thereby increase fixed costs. due to the nature of the factors used by the Committee to determine level of annual bonus/variable allocation it is not possible to set out the minimum level of performance and any further levels of performance. the risk controls incorporated in the Group’s investment process and financial controls ensures that the uncapped annual bonus and variable allocations encourages both excellent performance and prudent risk management. the annual bonus pool or variable allocation pool is based on a percentage of the Group’s pre- bonus/variable allocation Adjusted operating profit unless exceptional circumstances justify a higher level. the Committee believes that this ensures that annual bonuses or variable allocations are affordable. Annual bonus/variable allocation payments to executive directors are made from this aggregate annual bonus/variable allocation pool in which all employees and members, excluding the fund managers, participate and which is approved by the Committee each year. the actual level of annual bonus/variable allocation payment to the individual executive director take account of a number of factors relating to the individual’s role and performance from both a personal and corporate perspective. In addition, the Committee will also apply further measures such as assets under management, gross/ net flows, cost control, corporate governance and risk management. details of the performance metrics used to measure performance in each financial year will be disclosed where appropriate in the Annual report on remuneration. the structure of the annual bonus or variable allocation is reviewed annually at the start of the financial year to ensure that it is appropriate and continues to support the Group’s strategy. the Committee will determine how much of the bonus/variable allocation is deferred into shares. LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 37 Remuneration Report continued Objective and Link to strategy Operation Maximum opportunity Performance measures and assessment deferred Bonus and Variable Allocation plan (“dBVAp”) the dBVAp provides a deferral element to annual bonuses and variable allocations above a certain level, to ensure a link to longer term performance and to align the interests of executive directors with shareholders. Share Incentive plan (“SIp”) the SIp allows the executive directors to purchase shares (partnership shares) with a matching element (matching shares), to build up an interest in shares and increase alignment of interests with shareholders. Benefits to provide benefits which are appropriately competitive. pension to provide competitive levels of retirement benefit the dBVAp offers deferrals into awards over shares in the Company, to ensure alignment of future risk exposure between the executive directors and shareholders: Awards vest up to three years after the date of grant subject to a continuing employment and/or membership requirement. dBVAp awards are be satisfied by market purchased ordinary shares. An all-employee HMRC approved share plan that allows the executive directors to purchase shares, in a tax efficient manner and subject to limits, which are matched by the Company. In line with the normal operation of a SIp envisaged by HMRC, there are no performance conditions on matching shares. Matching shares are satisfied by market purchased ordinary shares. executive directors are entitled to a range of benefits including: • private Medical Insurance • life Assurance; • disability Assurance; and • access to an employee / Member Assistance programme Where relocation payments or allowances are paid it will be limited to 50% of salary/fixed allocation. executive directors’ pension contributions are made at percentage of salary/fixed allocation into the liontrust Group pension plan. executive directors have the choice of taking an equivalent cash payment/fixed allocation in lieu of pension contributions. Awards under the dBVAp are compulsory and are calculated by the Committee on a formulaic basis such that a proportion of annual bonus or variable allocation (deferred amount is a minimum 50% and a maximum of 100% of the cash bonus/variable allocation). the maximum period of deferral is 3 years. no further performance conditions apply to dBVAp awards as, in determining the original annual cash bonus or variable allocation amount, the Committee has been satisfied that performance objectives have been met. Claw back provisions apply during the deferral period in the event the recipient is a bad leaver. up to a maximum of £1,800 per annum (or such amount as permitted by HMRC rules) to purchase shares which are matched by the Company on a 2 for 1 basis. no performance conditions apply. Claw back provisions apply on matching shares during the vesting period in the event the recipient is a bad leaver. Matching shares vest after three years. not applicable. the maximum opportunity for other benefits is defined by the nature of the benefit itself and the cost of providing it. As the cost of providing such insurance benefits varies according to premium rates and the cost of other benefits is dependent on market rates and other factors, there is no formal maximum monetary value. the executive directors pension contribution or cash equivalent is capped at 15% of base salary/ fixed allocation. not applicable. note, the Committee does not operate formal shareholding guidelines given the size of current shareholdings and/or vested option awards amongst the executive directors. 38 LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 non-executive directors the following table summarises each of the elements of liontrust’s total compensation package and the ongoing remuneration policy for the non-executive directors: Performance measures and assessment not applicable. Objective and link to strategy Operation Maximum opportunity non-executive director fees to provide a satisfactory level of non-executive director fees which is sufficient to attract individuals with appropriate knowledge and experience to review and support the implementation of the Group’s strategy. non-executive director fees capped at £150,000. Fee increases are determined by reference to individual responsibilities, inflation and an appropriate comparator group. non-executive director fees are reviewed annually effective April. this is reflected in the policy of positioning non-executive director fees at, generally, around what the executive directors believe is median in the market for a company of similar size and complexity from the asset management sector. the executive directors are responsible for setting the remuneration of the non- executive directors. non-executive directors do not participate in any variable remuneration element, other than there being the flexibility to introduce additional non- executive director fee elements (e.g. Senior Independent director fee, Committee Chairman fee, Committee member fee). Annual report on remuneration Implementation In the financial year to 31 March 2015, the Committee met six times and discussed, amongst other things, the subjects described below: • Approval of the 2014 Remuneration Report; • Review and approval of the variable allocations and bonus for the executive directors (including the executive Chairman) for the financial year ending 31 March 2014; • Review of long term and short term incentivisation for fund managers; • Review and approval of the internal Compliance Report on the adherence with the liontrust’s FCA Remuneration policy and the FCA Remuneration Code; • Approval of director, employee and member appraisal process for the financial year ended 31 March 2015; • Review and approval of changes to the pension contribution arrangements for members and employees (including the executive directors); • Review and approval of the fixed allocations and salaries for the executive directors (including the Chairman) for the financial year ending 31 March 2015; and • purchase of incentive capital interests from members. the Board itself determines the fees of the non-executive directors of the Company, each of whom abstains in respect of matters relating to his own position. After having increased base fees by 28% last year, the Board has frozen base fees for the non-executive directors for the financial year ending 31 March 2016. However, the Board has introduced additional non-executive director fee elements. these fee elements were introduced from 1 April 2015 to reflect the increasing size, complexity and time commitment required of these roles, in particular due to the ongoing changes to the regulatory environment. the annual fee rates applicable for non-executive directors for financial year ending 31 March 2016 are as follows: • Base fee: £35,000 (2014: £35,000); • Senior Independent director fee: £5,000 (2014: £nil); • Audit & Risk Committee Chairman fee: £7,500 (2014: £nil); • Remuneration Committee Chairman fee: £7,500 (2014: £nil); • nomination Committee Chairman fee: £2,500 (2014: £nil); and • Committee member fee: £2,500 (2014: nil). non-executive directors are reimbursed for reasonable business expenses. LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 39 Remuneration Report continued the Committee has frozen the base remuneration of the executive directors for the financial year ending 31 March 2016 and has approved annual bonuses and variable allocations to the executive directors of between 49% and 181% of annual base remuneration, with an equivalent amount deferred into ordinary shares of the Company, and based on an assessment of the following key performance indicators: • Strategic goals - increase in assets under management of nearly 25% over the year and net inflows by 75% when compared to last year; Director • Financial goals– Adjusted profit before tax grew by 45%, Gross profit by 30% and the dividend by 167% (in pence per share terms); • Share price performance - share price up 13% over the financial year; • personal goals; and • overall corporate performance. the Committee has sought to clarify the operation of claw back and malus in respect of annual bonus and variable allocation, and are deferred into ordinary shares in respect of the financial year ended 31 March 2015 and onwards. For the annual bonus and variable allocation, and deferral into ordinary Shares in respect of the financial year ended 31 March 2015 and onwards, claw back and malus provisions will apply whereby the payment of such annual bonus and variable allocation, and the unvested amount deferred into ordinary Shares can be reduced, withheld or reclaimed in the exceptional event of: misstatement or misleading representation of performance, a significant failure in risk management and control, or serious misconduct for which the individual is personally responsible or directly accountable. Annual bonus and variable allocations, and deferrals for the financial year ending 31 March 2016 will be based on similar criteria and would be determined by the Committee taking into account overall financial performance. Single total figure for remuneration executive directors (audited information) the annual base remuneration for each of the directors for the financial year ending 31 March 2016 and the increase compared to the previous year is as follows: Salary (for employees), Fixed Allocations (for members) and Fees for the year ending 31 March 2016 (£) Increase compared to the previous year (%) 153,000 331,500 312,100 47,500 (2) 47,500 (3) 47,500 (4) nil nil nil 36% 36% n/a Adrian Collins John Ions Vinay Abrol Alastair Barbour Mike Bishop George Yeandle (1) (1) Joined 2 January 2015. (2) Base fee plus Audit & Risk Committee Chairman fee plus Remuneration Committee Member fee plus nomination Committee Member fee. (3) Base fee plus Senior Independent director fee, plus nomination Committee Chairman fee plus Remuneration Committee Member fee and Audit & Risk Committee Member fee. (4) Base fee plus Remuneration Committee Chairman fee plus Audit & risk Committee Member fee plus nomination Committee Member fee. no payments for loss of office were made during the financial year ended 31 March 2015. Base salary/Fixed allocation Benefits in kind (2) pension/allowance in lieu Annual bonus/Variable allocation dBVAp (3) lSIp awards vesting (4) SIp matching shares (5) Total Adrian Collins John Ions Vinay Abrol Year to 31 March Year to 31 March Year to 31 March 2015 £’000 2014 £’000 153 4 5 75 75 – 4 316 150 3 5 58 58 692 3 969 2015 £’000 332 3 5 600 600 – 4 1,544 2014 £’000 325 3 5 345 345 1,245 3 2,271 2015 £’000 312 3 5 375 375 – 4 1,074 2014 £’000 306 3 5 230 230 138 3 915 Jonathan Hughes-Morgan (1) Year to 31 March 2015 £’000 2014 £’000 134 2 4 – – – 4 144 175 3 5 50 50 – 3 286 (1) Resigned 15 december 2014. Although Jonathan Hughes-Morgan continues working for the Group as Co-Head of International Sales. (2) Benefits in kind comprise private medical insurance. (3) deferred Bonus (for employees) or Variable Allocations (for members) to be linked to the performance of ordinary shares of the Company and deferred over the period 1 April 2015 to 31 March 2018 for awards in the financial year ended 31 March 2015 (2014: 1 April 2014 to 31 March 2017). For the year ended 31 March 2015, 100% of the annual bonus/variable allocation has been deferred (2014: 100%). (4) 2014 amounts represent option awards vesting under the liontrust Senior Incentive plan (Adrian Collins, John Ions and Vinay Abrol on 1 February 2014). Awards under the liontrust Senior Incentive plan were granted on a one-off basis on 1 February 2011 and were front loaded as part of the Company’s turnaround plan. the amounts shown above represent annualised amounts for comparability with standard long-term incentive awards which are usually granted annually. the value of vested options for 2014 was calculated based on the closing share price on 31 January 2014, the business day prior to the vesting day, which was 1 February 2014. (5) Matching shares granted under the liontrust Share Incentive plan (Adrian Collins, John Ions, Vinay Abrol and Jonathan Hughes-Morgan on 25 April 2014). For matching shares, the value has been calculated based on the closing bid share price on the business day prior to the allocation of the matching shares plus one quarter of the difference between closing bid and closing offer on the same day, which was 25 April 2014. 40 LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 non-executive directors (audited information) Basic fee other consultancy fees Total (1) Joined 2 January 2015. (2) Retired 9 September 2014. Alastair Barbour Mike Bishop Year to 31 March Year to 31 March George Yeandle (1) Year to 31 March Glyn Hirsch (2) Year to 31 March 2015 £’000 2014 £’000 2015 £’000 2014 £’000 2015 £’000 2014 £’000 2015 £’000 2014 £’000 35 – 35 27 – 27 35 – 35 27 – 27 9 – 9 – – – – 15 15 – 28 28 External directorships Adrian Collins is a non-executive director of the following companies (and retains fees as detailed) Bahamas petroleum Company plc ($uS 85,000), City natural Resources High Yield trust plc (£18,000), tristar Resources plc (£30,000), and new City High Yield trust plc (£20,000). Directors’ shareholdings (audited information) the interests of the directors and their families in the share capital of the Company at 31 March 2015 were as follows: Ordinary shares Unvested Ordinary shares Total Ordinary shares Vested but unexercised options Unvested options subject to performance conditions Unvested options not subject to performance conditions Total options over Ordinary shares Executive Directors Adrian Collins (1) John Ions (1) Vinay Abrol (1) Non-executive Directors Alastair Barbour (1) Mike Bishop George Yeandle 401,322 736,701 777,078 32,000 25,106 – 2,705 168,508 113,411 – – – 404,027 905,209 890,489 32,000 25,106 – – – – – – – – – – – – – 35,611 – – 35,611 – – – – – – – – (1) Includes connected persons’ holding there were the following changes to the directors’ interests between 1 April 2015 and 17 June 2015: • Adrian Collins, John Ions and Vinay Abrol each purchased 625 additional ordinary shares and were each allocated 1,250 unvested ordinary shares. payments to former directors (audited information) Jonathan Hughes-Morgan stepped down from the Board on 15 december 2014. He continues to work, as a member of liontrust Fund partners llp (“lFp”), for the Group as Co-Head of International Sales on a fixed allocation of £147,900 per annum. He received no payment for loss of office. As Jonathan Hughes- Morgan remains a member of lFp, he retains his unvested dBVAp awards. His dBVAp awards relate to the deferral of bonus/variable allocation in prior years. Share awards (audited information) liontrust Senior Incentive plan options Options held start of year Options exercised during the year Number of option as at 01-Apr-14 1,000,000 1,800,000 200,000 Number of options exercised 1,000,000 (1) 1,800,000 (2) 200,000 (3) Options held at the end of the year Number of options as at 31-Mar-15 – – – Director Adrian Collins John Ions Vinay Abrol (1) the share price on the date of exercise, 1 July 2014, was 240p. this resulted in a gain on exercise of £2,390,000. (2) the share price on the date of exercise, 1 July 2014, was 240p. this resulted in a gain on exercise of £4,302,000. (3) the share price on the date of exercise, 1 July 2014, was 240p. this resulted in a gain on exercise of £478,000. LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 41 Remuneration Report continued liontrust Incentive plan options Options held start of year Options exercised during the year Number of option as at 01-Apr-14 Number of options exercised Options held at the end of the year Number of options as at 31-Mar-15 Director John Ions 200,000 200,000 (1) – (1) the share price on the date of exercise, 1 August 2014, was 243.375p. this resulted in a gain on exercise of £483,750. dBVAp share options and shares Director Financial year ended 31-Mar Face value (1) Share price used to determine the grant or award Options granted Shares awarded Number of shares/ options held at 31 March 2015 Exercise price Issue date Adrian Collins John Ions Vinay Abrol 2014 (in respect of 2013) 2015 (in respect of 2014) 2014 (in respect of 2013) 2015 (in respect of 2014) 2014 (in respect of 2013) 2015 (in respect of 2014) £25,000 183.5p 13,623 £57,500 261.5p 21,988 – – 13,623 21,988 nil nil 21-Jun-13 19-Jun-14 £150,000 192.5p £345,000 253.0p £100,000 192.5p £230,000 253.0p – – – – 59,146 59,146 n/a 19-Jun-13 106,657 106,657 n/a 30-Jun-14 39,602 71,104 39,602 n/a 19-Jun-13 71,104 n/a 30-Jun-14 (1) Face value of the share or option award is equivalent to one third of the total bonus/variable allocation for the financial year ended 31 March 2013 and one half for subsequent financial years. the options granted or shares awarded are calculated as the face value divided by the share price used to determine the grant or award; (2) Share options issued under the dVBAp in June 2013 are exercisable 21 June 2016 and 20 June 2023, share options issued under the dVBAp in June 2014 are exercisable 19 June 2017 and 20 June 2024; (3) Shares issued in June 2013 vest 19 June 2016, shares issued in June 2014 vest 21 June 2017; (4) no performance measures are attached to options granted or shares awarded under the dBVAp, although claw back provisions apply, see directors’ remuneration policy table for further details; and (5) exercise price for options granted is 1p. 42 LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 SIp shares Director Adrian Collins John Ions Vinay Abrol Awards held start of year Awards held at the end of the year Number of shares as at 01-Apr-14 Face value Grant date Face value Number of shares Number of shares as at 31-Mar-15 1,276 £3,000 1,276 £3,000 1,276 £3,000 25 April 2014 £3,600 25 April 2014 £3,600 25 April 2014 £3,600 1,368 1,368 1,368 1,276 1,368 1,276 1,368 1,276 1,368 Earliest vesting date 25 March 2017 25 April 2017 25 March 2017 25 April 2017 25 March 2017 25 April 2017 (1) price used to determine the number of shares awarded has been calculated as 263p being a quarter up from the previous business day’s share price (i.e. closing bid price plus one quarter of the difference between the closing bid price and the closing offer price); and (2) the vesting of shares awarded are not subject to any performance condition, but are subject to claw back provisions, see Directors’ remuneration policy table for further details. Pensions up to 31 March 2015, all employees and members (including executive directors) were eligible to receive employer pension contributions of 10% of base salary (for employees), subject to a cap of £416.67 per month or to receive additional fixed allocation of £416.67 per month in lieu of pension contributions (for members). From 1 April 2015, all employees and members (including executive directors) are eligible to receive employer pension contributions of 10% of base salary (for employees) or to receive additional fixed allocation of 10% in lieu of pension contributions (for members). Dilution and employee benefit trust our policy regarding dilution from employee share awards and member incentivisation has been, and will continue to be, to ensure that dilution will be no more than 10% in any rolling ten year period. Pay versus performance the Committee intends to utilise the Company’s existing discretionary employee benefit trust (the “employee trust”) to reduce and manage dilution. the employee trust will have full discretion with regard to the application of the trust fund (subject to recommendations from the Committee). the Company will be able to fund the employee trust to acquire shares in the market and/or to subscribe for shares at nominal value in order to satisfy option awards granted under the liontrust option plan and dBVAp. Any shares issued to the employee trust in order to satisfy awards will be treated as counting towards the dilution mentioned earlier. For the avoidance of doubt, any shares acquired by the employee trust in the market will not count towards these limits. Share awards under the SIp and the dBVAp are satisfied by market purchased shares, so have no dilutive effect. Share price performance the graph below illustrates the performance of the Group, based on total shareholder returns, compared to three indices over the last 5 years: 300% 250% 200% 150% 100% 50% Liontrust Asset Management PLC FTSE All-Share Index FTSE Small Cap. Index LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 43 Apr/2010Apr/2011Jul/2010Jun/2011Oct/2010Oct/2011Jan/2011Jan/2012Apr/2012Jul/2012Oct/2012Jan/2013Apr/2013Jul/2013Oct/2013Jan/2014Oct/2014Jan/2014Apr/2014Jul/2014 Remuneration Report continued the indices were chosen as follows: • the FtSe All-Share Index, so as to put the Group’s performance into the context of the uK stock market’s best known index; • the FtSe Small Cap. Index, so as to put the Group’s performance into the context of similar sized companies. table of historic levels of Chief executive remuneration the table below shows the percentage change in the Chief executive’s remuneration package over the past 6 years: Year ended 31 March Name Single figure of total remuneration (£’000) Long term incentive vesting rates (as % maximum opportunity) 2015 2014 2013 2012 2011 2010 John Ions John Ions John Ions John Ions John Ions/ nigel legge (1) nigel legge 1,544 2,271 2,186 1,891 659 not applicable 100% not applicable not applicable not applicable 445 not applicable (1) John Ions appointed Chief executive on 6 May 2010 and nigel legge resigned as Chief executive on 6 May 2010. the Single figure of total remuneration for the year ended 31 March 2011 is the summation of the remuneration for John Ions and nigel legge when holding the position of Chief executive, but excludes nigel legge’s severance compensation. Percentage change in Chief Executive’s remuneration the percentage change in the Chief executive’s pay (defined for these purposes as salary, fixed allocation, taxable benefits, annual bonus/variable allocation and dBVAp awards in respect of the relevant year) between the year ended 31 March 2015 and the prior year and the same information, on an averaged basis, for all employees and members (excluding the executive directors) is shown in the table below: Chief Executive percentage change year ended 31 March 2014 to 2015 Employees and Members year ended 31 March 2014 to 2015 Base salary/Fixed allocation Benefits (1) Bonus/Variable allocation (2) 2% (3)% 74% 2% (2)% 31% (1) Benefits comprise private medical insurance and pension contributions. (2) Includes the dBVAp, but excludes any revenue share arrangements for fund managers. the table below shows the advisory vote on the 2014 directors’ Remuneration Report at the Annual General Meeting held on 9 September 2014. Votes for Votes % Against % Votes withheld 2014 Annual report on remuneration directors’ remuneration policy 26,521,710 99.4 146,507 0.6 676,055 26,068,992 95.3 1,275,680 4.7 – Relative importance of spend on pay the following chart shows the Group’s adjusted profit after tax, total member and employee remuneration and dividends declared on ordinary shares for the financial year ended 31 March 2015 and 31 March 2014. Adjusted profit before tax (£’000) 8,352 12,102 (45% increase) Total member and employee remuneration (£’000) 13,809 17,788 (29% increase) Dividend (£’000) 1,187 3,430 189% increase 0 5,000 10,000 15,000 2014 2015 Advisers the Committee invites individuals to attend meetings as it deems beneficial to assist it in reviewing matters for consideration. during the year, these individuals included the Chairman of the Company, the Chief executive officer, the Chief Financial officer & Chief operating officer and the Company Secretary. In the performance of its duties, the Committee is able to seek assistance from external advisers. However, during the year ended 31 March 2015 no external advisers were appointed by the Committee. 44 LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Compliance with the FCA Remuneration Code and the UK Corporate Governance Code liontrust is a level three company for the purposes of the FCA Remuneration Code. the Committee fulfils all of its requirements under the FCA Remuneration Code and ensures that the principles of the FCA Remuneration Code are adhered to in the remuneration policy. the Company has followed the requirements of the uK Corporate Governance Code. Best practice the Committee believes that the Group has complied with the new directors’ remuneration report regulations issued by the united Kingdom department for Business, Innovation and Skills, Schedule B of the Code and has given full consideration to Schedule A of the Code in formulating the remuneration packages of the executive directors and other senior members of the Group. the Chairman of the Committee will attend the 2015 Annual General Meeting and will be available to answer Shareholders’ questions regarding remuneration. George Yeandle Chairman of the Remuneration Committee 17 June 2015 LioNtRust Asset MANAgeMeNt pLC AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 45 Consolidated Statement of Comprehensive IncomeConsolidated Balance SheetConsolidated Cash Flow StatementConsolidated Statement of Changes in EquityNotes to the Financial StatementsLiontrust Asset Management Plc Financial StatementsLiontrust Asset Management Plc Notes to the Financial StatementsIndependent Auditors’ Report 4849505152707482Financial Statementsconsolidated statement of comprehensive income for the year ended 31 March 2015 Revenue Cost of sales Gross profit Realised profit on sale of financial assets Administration expenses Operating profit Interest receivable Interest payable Profit before tax taxation Profit for the year other comprehensive income Total comprehensive income Earnings per share Basic earnings per share diluted earnings per share there has been a restatement of the 2014 financial statements as detailed in note 25 on page 69. the notes on pages 52 to 69 form an integral part of these consolidated financial statements. Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 (restated) £’000 Notes 4 4 5 6 8 8 36,821 (57) 28,459 (87) 36,764 2 (29,522) 28,372 – (25,089) 7,244 21 – 3,283 23 (81) 7,265 (1,058) 3,225 (1,104) 10 6,207 – 6,207 2,121 – 2,121 Pence Pence 11 11 14.61 13.58 5.64 4.58 48 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 consolidated Balance sheet as at 31 March 2015 Assets Non current assets Intangible assets property, plant and equipment deferred tax assets Total non current assets Current assets trade and other receivables Financial assets Cash and cash equivalents Total current assets Liabilities Non current liabilities Convertible unsecured loan stock - loan component Current liabilities trade and other payables Corporation tax payable Total current liabilities Net current assets Net assets Shareholders’ equity attributable to owners of the parent ordinary shares Share premium Capital redemption reserve Convertible unsecured loan stock - equity component Retained earnings own shares held Total equity Notes 31-Mar-15 £’000 31-Mar-14 (restated) £’000 31-Mar-13 (restated) £’000 12 13 14 15 16 4,998 277 1,088 6,363 32,405 242 16,393 49,040 7,446 265 1,228 8,939 31,328 703 15,273 47,304 10,098 184 1,757 12,039 31,123 131 10,483 41,737 – – – – (2,621) (2,621) 18 (30,969) (686) (31,655) (35,635) (437) (36,072) (34,402) – (34,402) 17,385 23,748 11,232 20,171 7,335 16,753 19 20 454 17,692 19 – 11,395 (5,812) 23,748 424 17,692 19 – 14,263 (12,227) 20,171 398 14,692 15 479 13,371 (12,202) 16,753 the financial statements on pages 48 to 69 were approved and authorised for issue by the Board of directors on 17 June 2015 and signed on its behalf by V.K. Abrol, Chief operating officer and Chief Financial officer. Company number 2954692 there has been a restatement of the 2014 financial statements as detailed in note 25 on page 69. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 49 consolidated cash Flow statement for the year ended 31 March 2015 Cash flows from operating activities Cash received from operations Cash paid in respect of operations net cash (paid)/received from changes in unit trust receivables and payables net cash generated from operations Interest received tax paid net cash generated from operating activities Cash flows from investing activities purchase of property and equipment purchase of ICIs Acquisitions purchase of Seeding investments Sale of Seeding investments net cash used in investing activities Cash flows from financing activities Issue of new shares purchase of own shares Conversion of convertible unsecured loan stock Repayment of convertible unsecured loan stock Interest payable on convertible unsecured loan stock dividends paid net cash used in financing activities Net increase in cash and cash equivalents opening cash and cash equivalents* Closing cash and cash equivalents * Cash and cash equivalents consist only of cash balances. the notes on pages 52 to 69 form an integral part of these consolidated financial statements. Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 41,411 (33,477) (2,964) 4,970 21 (657) 4,334 35,581 (28,789) 311 7,103 23 – 7,126 (103) (694) – (180) 4 (973) 30 (553) – – – (1,718) (2,241) 1,120 15,273 16,393 (146) – (228) (42) – (416) 3,030 (1,019) (3,030) (70) (81) (750) (1,920) 4,790 10,483 15,273 50 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 consolidated statement of changes in equity for the year ended 31 March 2015 Balance at 1 April 2014 brought forward profit for the year total comprehensive income for the year dividends paid Shares issued purchase of own shares purchase of ICIs equity share options issued Balance at 31 March 2015 Ordinary shares £’000 Share premium £’000 Capital redemption £’000 Retained earnings £’000 Notes 424 – – – 30 – – – 454 17,692 – – – – – – – 17,692 19 20 5 19 – – – – – – – 19 14,263 6,207 6,207 (1,718) – – (7,662) 305 11,395 Own shares held £’000 (12,227) – – – – (553) 6,968 – (5,812) Total Equity £’000 20,171 6,207 6,207 (1,718) 30 (553) (694) 305 23,748 consolidated statement of changes in equity for the year ended 31 March 2014 (restated) Ordinary shares £’000 Share premium £’000 Capital redemption £’000 Notes Loan equity element £’000 Retained earnings £’000 Own shares held £’000 Balance at 1 April 2013 brought forward profit for the year total comprehensive income for the year dividends paid net losses as part of the acquisition of north Investment partners limited Conversion of Convertible unsecured loan stock - equity component Shares issued purchase of own shares equity share options issued Balance at 31 March 2014 398 – – – – – 26 14,692 – – – – 479 2,521 – 424 – 17,692 15 – – – – – 4 – 19 22 19 5 there has been a restatement of the 2014 financial statements as detailed in note 25 on page 69. the notes on pages 52 to 69 form an integral part of these consolidated financial statements. Total Equity £’000 16,753 2,121 2,121 (750) 479 – – – 13,371 2,121 2,121 (750) (12,202) – – – – (202) – (202) (479) – – – – – (994) 717 14,263 – – (25) – (12,227) – 2,551 (1,019) 717 20,171 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 51 Notes to the Financial Statements 1 Principal accounting policies a) Basis of preparation the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations issued by either the International Accounting Standards Board or the IFRS Interpretations Committee or their predecessors as adopted by the european union, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. the consolidated financial information presented within these financial statements has been prepared on a going concern basis under the historical cost convention (except for the measurement of financial assets at fair value through profit and loss and financial assets available-for-sale which are held at their fair value). the preparation of financial statements in conformity with IFRS requires the directors of the Company to make judgements and assumptions (see note 1d) that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial information and the reported income and expense during the reporting periods. Although these judgements and assumptions are based on the directors’ best knowledge of the amount, events or actions, actual results may differ from these estimates. the accounting policies set out below have been used to prepare the financial information. All accounting policies have been consistently applied. the financial information has been prepared based on the IFRS standards effective as at 31 March 2015. the Group has continued to apply the accounting policies used for its 2014 financial statements but has adopted the following standards from 1 April 2014: IFRS 10 Consolidated Financial Statements IAS 27 (revised) Separate Financial Statements IFRS 12 disclosures of Interests in other entities IAS 36 Impairment of Assets Amendment to IAS 32 Financial Instruments Clarifies the principle of control, and establishes control as the basis for consolidation in the preparation of consolidated financial statements. Includes the disclosure requirements for all forms of interests in other entities,such as joint arrangements, associates and other off balance sheet vehicles. Clarifies the disclosure requirement for Recoverable Amount disclosures for non-Financial Assets. these amendments clarify some of the requirements for offsetting financial assets and liabilities on the balance sheet. the International Accounting Standards Board and IFRS Interpretations Committee have issued a number of new accounting standards, amendments to existing standards and interpretations. the following new standards are not applicable to these financial statements, but may have an impact when they become effective. the Group plans to apply these standards in the reporting period in which they become effective. the following standards and interpretations relevant to the Group that were not yet endorsed by the eu: IFRS 9 Financial Instruments: Classification IFRS 15 Revenue from Contracts with Customers the Group does not expect these updated standards to have any material effect on the Group when they are adopted. b) Basis of consolidation Subsidiaries are all entities over which the Group has control. the Group has control of an entity if, and only if it has all of the following: power over the entity; exposure, or rights to, variable returns from its involvement with the entity; and the ability to use its power over the entity to affect its returns. the Group considers all relevant facts and circumstances in assessing whether it has power over an entity, including: the purpose and design of an entity, its relevant activities, substantive and protective rights, and voting rights and potential voting rights. there is no fixed minimum percentage at which the Group consolidates, and each exposure is reviewed individually. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. they are de-consolidated from the date that control ceases. uniform accounting policies are applied accross all Group entities. Inter-company transactions, balances, income and expenses on transactions between Group entities are eliminated on consolidation. profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated on consolidation. c) Adjusted profit or loss the Group provides additional disclosure in the form of an adjusted profit note (note 7, page 61) in order to provide shareholders with a clearer indication of the profitability of the Group. the adjusted profit or loss is the total of Group profit or loss excluding the following items: non-cash items which include depreciation, intangible asset amortisation and IFRS2 related expenses; and non-recurring items which include cost reduction expenses, professional services (restructuring, acquisition related and other), acquisition related costs, integration costs, share incentivisation expenses, severance compensation and Financial Services Compensation Scheme Interim levy. the Group presents a reconciliation to the profit for the year per the statutory financial information. 52 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 1 Principal accounting policies (continued) d) Accounting estimates and judgements the preparation of the financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. estimates and judgements used in preparing the financial statements are periodically evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. the resulting accounting estimates may not equal the related actual results. the estimates and assumptions that have a significant effect on the carrying amounts of assets and liabilities are set out as follows: Valuation and impairment of financial assets details of the valuation policy for financial assets can be found in note 1i) below. Valuation and impairment of other assets details of the valuation policy for other assets can be found in notes 1e) and 1h) below. taxation the Group is subject to income taxes in a number of jurisdictions. Judgement is required in determining the total provision for income taxes. there are transactions and calculations for which the ultimate tax determination may be uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. e) Property, plant and equipment property, plant and equipment are stated at historic purchase cost less accumulated depreciation. the cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. leasehold improvements are included at cost and are depreciated on a straight line basis over the lower of the estimated useful life and the remaining lease term. office equipment is depreciated on a straight line basis over the estimated useful life of the asset, which is between three and ten years. Computer equipment is depreciated on a straight line basis over the estimated useful life of the asset which is three years. At each reporting date management reviews the assets’ residual values and useful lives, and will make adjustments if required. f) Trade and other receivables trade and other receivables include prepayments as well as amounts the Group is due to receive from third parties in the normal course of business. these include fees as well as settlement accounts for transactions undertaken. these receivables are normally settled by receipt of cash. trade and other receivables are initially recognised at fair value and then at amortised cost after deducting provisions for bad and doubtful debts. prepayments arise where the Group pays cash in advance for services. As the service is provided, the prepayment is reduced and the operating expenses are recognised in the Consolidated Statement of Comprehensive Income. g) Trade and other payables trade and other payables (excluding deferred income) represent amounts the Group is due to pay to third parties in the normal course of business. these include expense accruals as well as settlement accounts (amounts due to be paid for transactions undertaken). trade payables are costs that have been billed, accruals represent costs, including remuneration, that are not yet billed or due for payment. they are initially recognised at fair value and subsequently held at amortised cost. h) Intangible assets the costs of acquiring intangible assets such as fund management contracts are capitalised where it is probable that future economic benefits that are attributable to the assets will flow to the Group and the cost of the assets can be measured reliably. the assets are held at cost less accumulated amortisation. the fund management contracts are recorded initially at fair value and recorded in the consolidated financial statements as an intangible asset, they are then amortised over their useful lives on a straight-line basis over 5 years. the assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its recoverable amount. i) Financial assets the Group classifies its financial assets in the following categories: at fair value through profit or loss, available-for-sale and loans and receivables Financial assets are classified as available-for-sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. After initial recognition, investments which are classified as available-for-sale are measured at fair value. Gains or losses, together with transaction costs, on available- for-sale investments are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in ‘other comprehensive income’ is included within ‘Realised gain/(loss) on sale of financial assets’ in the Consolidated Statement of Comprehensive Income. Assets categorised as available-for-sale are reviewed at the end of each reporting period for impairment. LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 53 Notes to the Financial Statements continued 1 Principal accounting policies (continued) Financial assets are classified as held at fair value through profit or loss if their carrying amounts will be recovered through continuing use. these financial assets consist of units held in the Group’s collective investment schemes as part of a ‘manager’s box (as detailed below). the Group holds the following assets at fair value through profit or loss: For the uK Authorised unit trusts, the units held in the ‘manager’s box’ are to ease the calculation of daily creations and cancellations of units. these box positions are not held to create speculative proprietary positions but are managed in accordance with specified criteria and authorisation limits. the units in the ‘manager’s box’ are accounted for on a trade date basis. these units are valued on a bid price basis. the Group holds the following assets as available-for-sale: the Group’s assets held as available-for-sale represent shares in the sub-funds of liontrust Global Funds plC as detailed in note 16 and are valued on a bid price basis. Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. they are included in current assets. the Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet. the Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a Group of financial assets is impaired. j) Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. under IFRS cash and cash equivalents are included in the consolidated cash flow statement. k) Own shares own shares held by the liontrust Asset Management employee trust are valued at cost and are shown as a deduction from the Group’s shareholders’ equity. no gains or losses are recognised in the Consolidated Statement of Comprehensive Income. l) Operating leases leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. payments made under operating leases (net of any incentives received from the lessor) are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the period of the lease. m) Income and expenses Income and expenses are accounted for on an accruals basis when they become receivable or payable. the Group’s primary source of revenue is fee income from investment management activities. these fees are generally based on an agreed percentage of the valuation of the assets under management (‘AuM’) and are recognised as the service is provided and it is probable that the fee will be received. operating expenses represent the Group’s administrative expenses and are recognised as the services are provided. Front end fees received and commissions paid on the sales of units in unitised funds are amortised over the estimated life of the unit. performance fees are recognised in the period in which they become due and collectable. Any portion of performance fees that are not due and collectable, and whose future entitlement is not certain, is not recognised but noted as a contingent asset. n) Deferred taxation deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for, if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. o) Pensions the Group operates defined contribution schemes for its employees. the assets are invested with insurance companies and are held separately from the Group. the costs of the pension scheme are recognised in the Consolidated Statement of Comprehensive Income in the period in which they are incurred. the Group has no further payment obligations once the contributions have been paid. 54 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 1 Principal accounting policies (continued) p) Employee share options and member incentive plans the Group operates a number of equity-settled, share-based compensation and incentive plans, under which the relevant entity receives services from employees or members as consideration for equity instruments (options) of the Group or capital interests in the relevant entity (‘Instruments’). the fair value of the employee and member services received in exchange for the grant of the Instruments is recognised as an expense (and credited to equity reserves) over the vesting period. the total amount to be expensed is determined at the date of grant by reference to the fair value of the Instruments granted. A number of models have been used to calculate the fair value as follows: – liontrust option plan (‘lop’) A binomial model is used with the following assumptions having been made the fair value for each options is spread over the vesting period which is three years with an exercise price of 110.50 pence; the expected life of options issued under lop is 6.5 years. the expected volatility has been calculated using historical daily data over a term commensurate with the expected life of the option and is 39.9% the risk-free interest rate has been based on the implied yield of zero-coupon government bonds (uK strips) with a remaining term equal to the expected term and is 3.37%. no expected dividends have been factored into the model. – liontrust Incentive plan (‘lIp’) with no performance conditions attached A discounted face value model has been used for valuation. the fair value for each options is spread over the vesting period which is 2 years; the expected life of options issued under lIp is between 2.14 and 2.29 years the risk-free interest rate has been based on the implied yield of zero-coupon government bonds (uK strips) with a remaining term equal to the expected term and is 1.27%. no expected dividends have been factored into the model. – liontrust Senior Incentive plan (‘lSIp’) with performance conditions A Monte Carlo simulation model is used with the following assumptions having been made the fair value for each options is spread over the vesting period which is 3 years with an exercise price of 1 pence; the expected life of options issued under this lSIp scheme is 10 years the expected volatility has been calculated using historical daily data over a term commensurate with the expected life of the option and is 39% the risk-free interest rate has been based on the implied yield of zero-coupon government bonds (uK strips) with a remaining term equal to the expected term and is 1.82%. no expected dividends have been factored into the model. – liontrust Members Incentive plan (‘lMIp’) with performance conditions A Monte Carlo simulation model is used with the following assumptions having been made: the fair value for each Incentive Capital Interest (‘ICI’) is spread over the vesting period which is 3 years with an exercise price of nil; the expected life of ICIs issued under this lMIp scheme is 10 years the expected volatility has been calculated for each plan using historical daily data over a term commensurate with the expected life of the ICIs and ranges from 28% 40% the risk-free interest rate for each plan has been based on the implied yield of zero-coupon government bonds (uK strips) with a remaining term equal to the expected term and ranges from 0.28% to 1.95%. no expected dividends have been factored into the model. q) Dividends dividend distributions to the shareholders of the Company are recognised as a liability in the period during which they are declared. In the case of final dividends they are recognised as a liability in the period that they are declared and approved by shareholders. r) Holiday pay accrual under IAS 19, all accumulating employee compensated absences that are unused at the balance sheet date are recognised as a liability. the Group’s entitlement period runs for the financial year and any employees with unused holiday allowance at the period end have no contractual entitlement to this. s) Foreign currency gains/losses Items in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). the consolidated financial statements are presented in Sterling (‘£’) which is the Company’s functional and presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income. t) Share Capital ordinary shares are 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. LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 55 Notes to the Financial Statements continued 2 Financial risk management the Group’s activities expose it to a variety of financial risks: market risk (including price risk, cash flow interest rate risk and foreign exchange risk), credit risk, liquidity risk and capital risk. the Group’s overall risk management programme understands the unpredictable nature of financial markets and seeks to minimise any potential adverse effects on the Group’s financial performance. the Group uses a number of analytical tools to measure the state of the business. the financial review on pages 13 to 16 of the Strategic Report identifies some of these measures. a) Market risk i) Price risk the Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet as current financial assets (either held at fair value through profit or loss or held as available-for-sale). the Group holds the following types of investment as assets held at fair value through profit or loss or assets held as available-for-sale (see note 16): 1. units in uK Authorised unit trusts; 2. shares in sub-fund of an Ireland domiciled open-ended-investment-company. For uK Authorised unit trusts, the units and shares held in the ‘manager’s box’ are to ease the calculation of daily creations and cancellations of units and shares. these box positions are not held to create speculative proprietary positions but are managed in accordance with specified criteria and authorisation limits. the manager’s box for each fund is reviewed daily. If there is a negative box position then units or shares are created to bring the box level positive. three control levels of the manager’s box exist for each fund and each level is required to be signed off by progressively more senior staff. there are clearly defined maximum limits, over which manager’s box levels cannot exceed. the units and shares in the ‘manager’s box’ are accounted for on a trade date basis. these units are valued on a bid price basis and held at fair value through profit and loss. the investment in the sub-funds of liontrust Global Funds plc, (an Ireland domiciled open ended investment company) have been undertaken as an investment to aid incorporation and will be redeemed when the sub funds grow in size. the Group has a regular review process for the investments which identifies specific criteria to ensure that investments are within agreed limits. Management consider, based on historic information, that a sensitivity rate of 10% is appropriate. Based on the holdings in sub-funds of liontrust Global Funds plc at the balance sheet date a price movement of 10% would result in a movement in the value of the investment of £22,000 (2014: £5,000). the Group monitors its investments with respect to its regulatory capital requirements and reviews its investments’ values with respect to overall Group capital on a monthly basis. ii) Cash flow interest rate risk Interest rate risk is the risk that the Group will sustain losses from the fair value or future cash flows of adverse movements in interest bearing assets and liabilities and so reduce profitability. the Group holds cash on deposit in GBp. the interest on these balances is based on floating rates and fixed rates. the Group monitors its exposure to interest rate movements and may decide to adjust the balance between deposits on fixed or floating interest rates, or adjust the level of deposits. Management consider that given current interest rate levels a sensitivity rate of 1% is appropriate for GBp cash. Following a review of sensitivity based on average cash holdings during the year a 1% increase or decrease in the interest rate will cause a £136,000 increase or a decrease to nil in interest receivable (2014: £122,000). iii) Foreign exchange risk Foreign exchange risk is the risk that the Group will sustain losses through adverse movements in currency exchange rates. the Group’s policy is to hold the minimum currency exposure required to cover operational needs and, therefore, to convert foreign currency on receipt. the Group is currently exposed to foreign exchange risk in the following areas: Investments and income receivable in euros and uS dollars. In calculating the sensitivity analysis below it has been assumed that expenses/income will remain in line with budget in their relative currencies year on year. Management consider that a sensitivity rate of 10% is appropriate given the current level of volatility in the world currency markets. In respect of investments denominated in foreign currencies a 10% movement in the uK Sterling vs. the relevant exchange rate would lead to an exchange gain or loss as follows: Sterling vs. euros - a movement of 10% would lead to a movement of £5,000 (2014: less than £1,000). Sterling vs. uS dollar - a movement of 10% would lead to a movement of £5,000 (2014: £nil). In respect of Income receivable in euro a 10% movement in the exchange rate would result in a movement of £71,000 (2014: £110,000) in the income statement. In respect of Income receivable in uS dollar a 10% movement in the exchange rate would result in a movement of £30,000 (2014: £4,000) in the income statement. 56 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 2 Financial risk management (continued) b) Credit risk Credit risk is managed at a Group level. the Group is exposed to credit risk primarily on its trade receivables and from its financing activities, including deposits with banks and financial institutions and other financial instruments. Fees receivable arise mainly from the Group’s investment management business and amounts are monitored regularly. Historically, default levels have been insignificant and the Group’s maximum exposure to credit risk is represented by the carrying value of its financial assets. Maximum exposure to credit risk Cash and cash equivalents trade receivables 31-Mar-15 £’000 16,393 32,405 31-Mar-14 £’000 15,273 31,328 For banks and financial institutions only independently rated parties with a minimum rating of ‘A-2’ are used and their ratings are regularly monitored by the portfolio Risk Committee. For receivables the Group takes into account the credit quality of the client and credit positions are monitored. the Group has three main types of receivables: management and performance fees, settlement due from investors in its funds and from the funds themselves for unit/share liquidations. For management and performance fee receivables, the Group proactively manages the invoicing process to ensure that invoices are sent out on a timely basis and has procedures in place to chase for payment at pre-determined times after the despatch of the invoice to ensure timely settlement. For receivables due from investors, the Group has rigorous procedures to chase investors by phone/letter to ensure that settlement is received on a timely basis. For settlement due from the fund for liquidations, the settlement of these types of receivables are governed by regulation and are monitored on an exception basis. In all cases, detailed escalation procedures are in place to ensure that senior management are aware of any problems at an early stage. during the year there have been no losses due to non-payment of receivables and the Group does not expect any losses from the credit counterparties as held at the balance sheet date. c) Liquidity risk prudent liquidity risk management requires the maintenance of sufficient cash and marketable securities. the Group monitors rolling forecasts of the Group’s liquidity reserves (comprising readily realisable investments and cash and cash equivalents) on the basis of expected cash flows. the Group has categorised its financial liabilities into maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. the amounts disclosed in the table below are the contractual undiscounted cash flows. As at 31 March 2015 payables As at 31 March 2014 (restated) payables Due within 3 months £’000 Due between 3 months and one year £’000 Due in over one year £’000 30,969 – – Due within 3 months £’000 Due between 3 Month and one year £’000 Due in over one year £’000 35,635 – – d) Capital risk management the Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders whilst maintaining an optimal company structure to reduce the cost of capital and meet working capital requirements. the Group’s policy is that it and its subsidiaries should have sufficient capital to meet regulatory requirements, keep an appropriate standing with counterparties and meet working capital requirements at both a Group and subsidiary level. Management reviews the Group’s assets on a monthly basis and will ensure that operating capital is maintained at the levels required. Management consider capital to comprise of cash and net assets. As at 31 March 2015 the Group has cash and net assets of £17.4 million (2014: £11.2 million). In order to maintain or adjust the capital structure the Group may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new shares, buy back shares or sell financial assets which will increase cash and reduce capital requirements. LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 57 Notes to the Financial Statements continued 2 Financial risk management (continued) Regulatory risk capital Recognised regulatory bodies, such as the FCA in the uK, oversee the activities of a number of the Group’s operating subsidiaries and impose minimum capital requirements on the subsidiaries. the Group is regulated by the FCA as a uK consolidation Group. the FCA issued revised rules on Capital Adequacy following the implementation of the Capital Requirements directive IV which came into force on 1 January 2015. Having reviewed the new rules, liontrust remains subject to the BIpRu regulations. Further details are available in the liontrust pillar III disclosure. the FCA requires the Group to hold more regulatory capital resources than the total capital resource requirement as defined in the Capital Requirements directive. the total capital requirement for the Group is the base and variable capital resource requirement (the pillar 1 requirement) and any additional requirements identified during the Internal Capital Adequacy Assessment process (the pillar 2 requirement). the pillar 1 minimum capital requirement for the Group is £ 3.0 million (2014: £2.7 million) the Internal Capital Adequacy Assessment process carried out in 2014 under pillar 2 of concluded that a minimum of £2.7 million (2014: £2.1 million) capital should be retained in the business. the total capital requirement for the Group is £ 3.0 million (2014: £2.7 million). As at 31 March 2015, the Group has regulatory capital resources of £18.7 million (2014: £13.5 million), significantly in excess of the Group’s total capital requirement. during the period the Group and its subsidiary entities complied with all regulatory capital requirements. 3 Segmental reporting the Group operates only in one operating segment – Investment Management. Management offers different fund products through different distribution channels. All key financial, business and strategic decisions are made centrally by the Board, which determines the key performance indicators of the Group. the Group reviews financial information presented at a Group level. the Board, is therefore, the chief operating decision-maker for the Group. the information used to allocate resources and assess performance is reviewed for the Group as a whole. on this basis, the Group considers itself to be a single-segment investment management business. Revenue by location of client united Kingdom europe (ex uK) Guernsey uSA Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 35,415 1,260 146 – 36,821 25,829 2,427 159 44 28,459 during the year ended 31 March 2015 the Group had one customer contributing more than 10% of total revenue (2014: no customers). 4 Revenue and cost of sales Revenue from earnings includes: Investment management, performance and administration fees; the net value of sales and repurchases of units in unit trusts and shares in open-ended investment companies (net of discounts); the net value of liquidations and creations of units in unit trusts and shares in open-ended investment companies; and foreign currency gains and losses. the cost of sales includes: Sales commission paid or payable and external investment advisory fees paid or payable. – Revenue – performance fee revenue Total Revenue Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 33,631 3,190 36,821 28,459 – 28,459 58 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 5 Administration expenses Employee related expenses director and employee costs (1) pensions Share incentivisation expense Severance compensation Non employee related expenses Members drawings charged as an expense professional services (restructuring, acquisition related and other) (2) Acquisition related expenses depreciation and Intangible asset amortisation loan repurchase Financial Services Compensation Scheme levy other administration expenses Share incentivisation expense – Share option expense – Share option nIC expense(3) – Share incentive plan expense – Share option related expenses (1) Full details of the directors emoluments can be found in the directors Remuneration Report on page 40. (2) Includes legal costs relating to claim by former member (see note 24). (3) See note 25 prior year adjustment Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 (restated) £’000 3,145 141 562 31 3,879 14,502 1,840 – 2,539 – (135) 6,897 29,522 2,375 122 1,320 99 3,916 11,312 576 333 2,717 82 – 6,153 25,089 Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 (restated) 305 – 100 157 562 717 453 102 48 1,320 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 59 Notes to the Financial Statements continued 5 Administration expenses (continued) the average number of members and employees of the Group (as calculated on a weighted average basis over the year), excluding non-executive directors, was 63 (2014: 58). All employees are involved in the investment management business of the Group. the costs incurred in respect of the directors, members and employees was: General management Fund management Finance, operations and It Risk management and Compliance Sales and Marketing non-executive directors General management Fund management Finance, operations and It Risk management and Compliance Sales and Marketing non-executive directors Member and employee expenses Year ended 31-Mar-15 Employees Average number of members and employees during the year Wages and salaries £’000 Social security costs £’000 Total employee expense £’000 Members Members drawings charged as an expense £’000 4 17 18 4 20 3 66 452 316 768 100 1,045 79 2,760 47 36 150 10 134 8 385 499 352 918 110 1,179 87 3,145 1,060 9,457 1,602 447 1,936 – 14,502 Member and employee expenses Year ended (restated) 31-Mar-14 Employees Average number of employees during the year Wages and salaries £’000 Social security costs £’000 Total employee expense £’000 Members Members drawings charged as an expense £’000 4 16 17 3 18 3 61 366 258 570 67 804 55 2,120 38 30 61 8 113 5 255 404 288 631 75 917 60 2,375 719 7,405 1,305 374 1,509 – 11,312 60 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 6 Operating profit the following items have been included in arriving at operating profit: Foreign exchange gains/(losses) depreciation and Intangible asset amortisation Amortisation of initial commission asset Amortisation of amounts accrued in relation to income received on sale of units operating lease costs Costs relating to directors, members and employees (note 5) Auditors remuneration: Fees payable to the Company’s auditors and its associates for the audit of the parent Company and consolidated financial statements Fees payable to the Company’s auditors and its associates for other services: – the audit of the Company’s subsidiaries pursuant to legislation – taxation services – other services 7 Adjusted profit/(loss) Adjusted profit (as explained in note 1(c) reconciled in the table below: profit for the year taxation profit/(loss) before tax from Continuing and discontinued operations Share incentivisation expense Severance compensation professional services (restructuring, acquisition related and other)(1) Acquisition related costs Financial Services Compensation Scheme levy Convertible loan repurchase depreciation and Intangible asset amortisation Adjustments Adjusted profit/(loss) before tax Interest receivable Interest payable Adjusted operating profit Adjusted basic earnings per share(2) Adjusted basic earnings per share (excluding performance fees)(2)(3) Adjusted diluted earnings per share(2) Adjusted diluted earnings per share (excluding performance fees)(2)(3) (1) Includes legal costs relating to claim by former member (see note 24). (2) Assumes a tax rate of 21% (2014: 23%) (3) performance fee revenues contribution calculated in line with operating margin of 32.9% (2014: 29.4%) Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 (restated) £’000 (15) 2,539 128 (8) 428 18,381 75 68 41 64 (8) 2,717 35 (83) 428 15,228 73 71 76 13 Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 6,207 1,058 7,265 562 31 1,840 – (135) – 2,539 4,837 12,102 (21) – 12,081 22.51 20.56 20.92 19.10 2,121 1,104 3,225 1,320 99 576 333 – 82 2,717 5,127 8,352 (23) 81 8,410 17.10 17.10 13.90 13.90 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 61 Notes to the Financial Statements continued 8 Interest receivable and payable disclosures relating to the Group’s financial instruments risk management policies are detailed in note 2. Cash earns interest at floating or fixed rates based on daily bank deposit rates. the weighted average effective interest rate on cash is 0.2% (2014: 0.2%). 9 Dividends Ordinary Shares Second interim at 2 pence per share (2014: 1 pence) First interim at 2 pence per share (2014: 1 pence) total Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 859 859 1,718 388 362 750 In addition, the directors are proposing a second interim dividend in respect of the financial year ending 31 March 2015 of 6p per share which will absorb an estimated £2.6m of shareholders’ funds. It will be paid on 23 July 2015 to shareholders who are on the register of members at 24 June 2015. 10 Taxation (a) Analysis of charge in year Current tax: uK corporation tax at 21% (2014: 23%) * Adjustment in respect of prior periods total current tax deferred tax: deferred tax originated from timing differences deferred tax charged in respect of future rate change to 20% Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 (restated) £’000 918 – 918 91 49 562 12 574 405 125 total charge in period 1,058 1,104 (b) Factors affecting current tax loss on ordinary activities before tax profit on ordinary activities at uK corporation tax rate of 21% (2014: 23%) effects of: expenses not deductible for tax purposes effect of reinstatement of loans to the eBt depreciation in excess of capital allowances Adjustment in respect of business acquisition Adjustment to deferred tax in respect of tax rate change net Members drawings not taxable tax relief on exercise of unapproved options Adjustment in respect of prior periods total taxation 7,265 1,526 38 891 (2) – 49 68 (1,512) – 1,058 3,225 742 163 – (12) (61) 124 136 – 12 1,104 * the standard rate of corporation tax in the uK changed from 23% to 21% with effect from 1 April 2014. Accordingly, the Group’s profits for this accounting period are taxed at an effective rate of 21%. on 1 April 2014 further changes were enacted in the 2014 Finance Act that will reduce the standard rate of corporation tax to 20% with effect from 1 April 2015. 62 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 11 Earnings per share the calculation of basic earnings per share is based on profit after taxation for the year and the weighted average number of ordinary Shares in issue for each period. the weighted average number of ordinary Shares was 42,472,053 for the year (2014:37,617,940). Shares held by the liontrust Asset Management employee trust are not eligible for dividends and are treated as cancelled for the purposes of calculating earnings per share. diluted earnings per share are calculated on the same bases as set out above, after adjusting the weighted average number of ordinary Shares for the effect of options to subscribe for new ordinary Shares, Incentive Capital Interests or ordinary Shares held in the liontrust Asset Management employee trust that were in existence during the year ended 31 March 2015. the adjusted weighted average number of ordinary Shares so calculated for the year was 45,700,575 (2014: 46,269,702). this is reconciled to the actual weighted number of ordinary Shares as follows: Weighted average number of ordinary Shares Weighted average number of dilutive ordinary shares under option: – to the liontrust Senior Incentive plan – to the liontrust Incentive plan – to the liontrust option plan – to the liontrust Members Incentive plan – to the dBVAp dilutive effect of shares from Convertible unsecured loan stock Adjusted weighted average number of ordinary Shares 2015 number 2014 number 42,472,053 37,617,940 745,012 66,587 39,358 2,346,713 30,852 – 45,700,575 2,986,487 199,099 34,884 4,069,178 10,552 1,351,562 46,269,702 details of the options outstanding at 31 March 2015 to directors are set out in the directors’ Remuneration Report on page 42. Management have added the weighted average number of dilutive ordinary shares related to the liontrust Members Incentive plan and have adjusted the 2014 calculations accordingly. Based on the total profit for the year of £6,207,000. Basic earnings per share diluted earnings per share 2015 pence 14.61 13.58 2014 pence (restated) 5.64* 4.58* * prior to the restatement the 2014 Basic earnings per share was 6.57 pence and the 2014 diluted earnings per share was 5.85 pence. 12 Intangible assets Year to 31 March 2015 Description Investment management contracts acquired from Walker Crips Cost At 1 April 2014 Additions disposals At 31 March 2015 Accumulated amortisation At 1 April 2014 Amortisation charge for the year disposals At 31 March 2015 Net Book Value At 31 March 2015 At 31 March 2014 Carrying value £’000 Remaining amortisation period 4,998 2 Years Investment management contracts £’000 14,406 – – 14,406 6,960 2,448 – 9,408 4,998 7,446 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 63 Notes to the Financial Statements continued 13 Property, plant and equipment Year to 31 March 2015 Cost At 1 April 2014 Additions disposals At 31 March 2015 Accumulated depreciation At 1 April 2014 Charge for the year disposals At 31 March 2015 Net Book Value At 31 March 2015 At 31 March 2014 Year to 31 March 2014 Cost At 1 April 2013 Additions disposals At 31 March 2014 Accumulated depreciation At 1 April 2013 Charge for the year disposals At 31 March 2014 Net Book Value At 31 March 2014 At 1 April 2013 Leasehold Improvements £’000 Office Equipment £’000 Computer Equipment £’000 Total £’000 288 21 – 309 101 50 – 151 158 187 232 29 – 261 215 7 – 222 39 17 257 53 – 310 196 34 – 230 80 61 777 103 – 880 512 91 – 603 277 265 Leasehold Improvements £’000 Office Equipment £’000 Computer Equipment £’000 Total £’000 193 95 – 288 56 45 – 101 187 137 229 3 – 232 211 4 – 215 17 18 209 48 – 257 180 16 – 196 61 29 631 146 – 777 447 65 – 512 265 184 2015 £’000 1,228 (91) – (49) 1,088 2014 £’000 1,757 (462) 58 (125) 1,228 depreciation has been included in the Consolidated Statement of Comprehensive Income within administration expenses 14 Deferred tax Deferred tax assets Balance as at 1 April deferred tax reversed on timing differences deferred tax on current year losses Movement in deferred tax on change in tax rate to 20% (2014: 21%) Balance as at 31 March deferred tax relating to losses which are expected to be credited to taxation payable on future profits £1,088,000 (2014: £1,228,000). the standard rate of corporation tax in the uK changed from 21% to 20% with effect from 1 April 2015. Accordingly, the Group’s profits for this accounting period are taxed at an effective rate of 20%. deferred tax has been recognised at 20% to reflect this reduction. 64 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 15 Trade and other receivables trade receivables – Fees receivable – unit trust sales and cancellations prepayments and accrued income Initial commission asset 2015 £’000 2014 £’000 6,661 24,307 1,436 1 32,405 3,329 26,815 1,177 7 31,328 All financial assets listed above are non-interest bearing. the carrying amount of these non-interest bearing trade and other receivables approximates their fair value. trade receivables that are less than 3 months past due are not considered impaired. As at 31 March 2015, trade receivables of £nil (2014: £nil) were past due but not impaired. 16 Financial assets the Group holds financial assets that have been categorised within one of three levels using a fair value hierarchy that reflects the significance of the inputs into measuring the fair value. these levels are based on the degree to which the fair value is observable and are defined as follows: – level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets and liabilities; – level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); – level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data. As at the balance sheet date all financial assets are categorised as level 1. Assets held as available-for-sale: the Group’s assets held as available-for-sale represent shares in the liontrust GF Global Strategic Bond Fund, the liontrust GF Special Situations Fund, the liontrust GF Macro equity Income Fund, the liontrust GF european Strategic equity Fund, the liontrust GF uK Growth Fund and the liontrust GF Global Income Fund (all sub-funds of liontrust Global Funds plc) and are valued at bid price). the gain on the fair value adjustments during the year net of tax was £nil (2014:£nil). Foreign currency assets are translated at rates of exchange ruling at the balance sheet date and any exchange rate differences arising are shown in note 17. Financial assets in Level 1 uK Authorised unit trusts Guernsey open-ended-investment companies dublin open-ended-Investment-company Total Financial Assets 2015 2014 Assets held at fair value through profit and loss £’000 Assets held as available- for-sale £’000 18 – – 18 18 – – 224 224 224 Assets held at fair value through profit and loss £’000 Assets held as available-for- sale £’000 619 37 – 656 656 – – 47 47 47 Total £’000 18 – 224 242 242 Total £’000 619 37 47 703 703 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 65 Notes to the Financial Statements continued 17 Foreign currency translations As a result of operating activities the Group has made gains and losses on foreign currency translation. the activities and the relevant foreign currency gains and losses associated with them are identified below: Foreign currency translation losses on: – other operating activities Gain/(losses) on foreign currency translations are taken to the income statement within Revenue. 18 Trade and other payables trade payables – unit trust repurchases and creations other payables including taxation and social security deferred income and other payables 2015 £’000 2014 £’000 (15) (15) (8) (8) 2015 £’000 2014 (restated) £’000 24,357 84 6,528 30,969 29,829 1,153 4,653 35,635 All financial liabilities listed above are non-interest bearing. the carrying amount of these non-interest bearing trade and other payables approximates their fair value. 19 Ordinary Shares Authorised ordinary shares of 1 pence As at 31 March Allotted, called up and fully paid ordinary shares of 1 pence As at 1 April Issued during the year Repurchased during the year As at 31 March 2015 Shares 2015 £’000 2014 Shares 2014 £’000 60,000,000 600 60,000,000 600 42,471,555 3,000,000 – 45,471,555 424 30 – 454 39,896,555 3,030,000 (455,000) 42,471,555 398 26 – 424 20 Own shares Approval was given at a General Meeting in January 2011 for the grant of options under the liontrust Senior Incentive plan (the “lSIp”). the Board adopted the liontrust Incentive plan (the “lIp”) in november 2009, the liontrust option plan (the “lop”) in december 2009 and the deferred Bonus and Variable Allocation plan (“dBVAp”) in June 2013. the options granted under the dBVAp, lSIp, lIp, and lop, including the executive directors (in the case of dBVAp, lIp and lSIp), were as follows: Issue Date 10 February 2010 10 February 2010 1 February 2011 21 June 2013 19 June 2014 1 April 2014 69,455 200,000 3,000,000 13,623 – Options Granted Options Exercised Lapsed 31 March 2015 Exercise price – – – – 21,988 – (200,000) (3,000,000) – – – – – – – 69,455 * – – 13,623 21,988 110.5 pence 1.0 pence 1.0 pence nil nil Scheme lop lIp lSIp dBVAp dBVAp * options that are exercisable as at 31 March 2015 66 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 20 Own shares (continued) Issue Date 10 February 2010 10 February 2010 1 February 2011 21 June 2013 1 April 2013 69,455 200,000 3,000,000 – Options Granted Options Exercised Lapsed 31 March 2014 Exercise price – – – 13,623 – – – – – – – – 69,455 200,000 3,000,000 13,623 110.5 pence 1.0 pence 1.0 pence nil Scheme lop lIp lSIp dBVAp no options under lop were exercised during the year. under the liontrust Members Incentive plan (“lMIp”) certain individual members have been allocated Incentive Capital Interests (“ICIs”), which entitle such individual member to a fixed amount. the entitlement which the holder of an Incentive Capital Interest would have is calculated on the basis of the application of a percentage to the “Maximum Incentive Capital Interest” (“MICI”) attributable to that Incentive Capital Interest. the MICI is a variable amount in pounds Sterling equal to the number of ordinary shares set out in his side letter multiplied by the price of ordinary shares from time to time (by reference to a 30 day market average price). the MICI allocated, in terms of number of ordinary shares, to individual members were as follows: Issue Date 1 April 2014 Granted Exercised Lapsed 31 March 2015 14 April 2011 22 november 2011 28 March 2012 28 September 2012 8 July 2013 1,425,000 1,000,000 75,000 1,565,000 35,000 – – – – – (1,425,000) (1,000,000) – – – – – – – – – – 75,000 1,565,000 35,000 Issue Date 1 April 2013 Granted Exercised Lapsed 31 March 2014 14 April 2011 22 november 2011 28 March 2012 28 September 2012 8 July 2013 1,450,000 1,000,000 75,000 1,565,000 – – – – – 35,000 (25,000) – – – – – – – – – 1,425,000 1,000,000 75,000 1,565,000 35,000 details of the share options can be found in the directors’ Remuneration report on pages 41 and 42. Exercise price Scheme nil nil nil nil nil lMIp lMIp lMIp lMIp lMIp Exercise price Scheme nil nil nil nil nil lMIp lMIp lMIp lMIp lMIp dBVAp, lIp, lop and lSIp operate in conjunction with the liontrust Asset Management employee trust on the basis that at 100% of the options for dBVAp, lIp and lop, and a percentage determined by the Remuneration Committee for lSIp will be satisfied by market purchased shares. this is to ensure that dilution of shareholders’ interest is limited. At 31 March 2015 the weighted average remaining life of the options was 3.8 years (2014: 6.8 years). At 31 March 2015, the liontrust Asset Management employee trust owned 1,627,946 shares (2014: 3,740,908) at a cost of £5,811,600 (2014: £12,227,000). dividends on these shares have been waived and they are treated as cancelled for the purposes of calculating the earnings per share of the Group. As at 31 March 2015 the market value of the shares was £4,399,000 (2014: £8,978,000). 21 Operating lease commitments the Group and Company are committed to making the total of annual future minimum lease payments for office properties under non-cancellable operating leases in each of the following periods: Amounts due within one year Between one year and five years later than five years Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 428 713 – 1,141 428 1,140 – 1,568 there are no special terms for renewal or purchase options for the Group’s leasehold property, nor are there any restrictions on dividends, additional debt or further leasing imposed from the leasing arrangements. LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 67 Notes to the Financial Statements continued 22 Acquisition of North Investment Partners Limited on 15 october 2013, liontrust Asset Management plc (“liontrust”) announced that it had entered into a conditional share purchase agreement (the “SpA”) to purchase the entire issued ordinary share capital of north Investment partners limited (“north”) from the existing north shareholders. the purchase completed on 15 october 2013. on the 1 March 2014 north was renamed liontrust Investment Solutions limited. the Consideration at 15 october 2013 was £1. Recognised identifiable amounts of assets acquired and liabilities Cash trade and other receivables trade and other payables total consideration £’000 279 74 (353) – Acquisition related costs of £333,000 were charged to Administration expenses in the Consolidated statement of comprehensive income for the year ended 31 March 2014. the revenue included in the Consolidated statement of Comprehensive Income between 15 october 2013 and 31 March 2014 contributed by north was £176,000. north also contributed a loss of £246,000 over the same period. Had north been consolidated for the full year to 31 March 2014 the revenue included in the Consolidated statement of Comprehensive Income contributed by north would have been £609,000. north would also have contributed a loss before tax of £429,000 over the same period. 23 Related party transactions during the year the Group received fees from unit trusts under management of £32,795,000 (2014: 31,866,000). transactions with these unit trusts comprised creations of £613,201,000 (2014: 689,871,000) and liquidations of £376,512,000 (2014: 402,682,000). directors can invest in unit trusts managed by the Group on commercial terms that are no more favourable than those available to staff in general. As at 31 March 2015 the Group owed the unit trusts £24,357,000 (2014: £28,528,000) in respect of unit trust creations and was owed £24,307,000 (2014: 26,815,000) in respect of unit trust cancellations and fees. during the year members received loans totalling £490,000 from liontrust Fund partners llp and liontrust Investment partners llp (the ‘llps’), these loans were provided in connection with the relevant members’ duties as a member of the relevant llp. As at 31 March 2015 members owed the llp’s £706,000 (2014: £216,000). Compensation to key management personnel (executive directors) is disclosed in the directors’ Remuneration Report on page 40. 24 Contingent assets and liabilities the Group can earn performance fees on some of the segregated and fund accounts that it manages. In some cases a proportion of the fee earned is deferred until the next performance fee is payable or offset against future underperformance on that account. As there is no certainty that such deferred fees will be collectable in future years, the Group’s accounting policy is to include performance fees in income only when they become due and collectable and therefore the element (if any) deferred beyond 31 March 2015 has not been recognised in the results for the year. A contingent liability has arisen during the normal course of business which relates to a claim made by a former member against liontrust Asset Management plC, liontrust Investment partners llp, liontrust Investment Services limited and the individual members of the llp (together, the “Respondents”). As the timing and amount of any potential liability cannot be reliably estimated at this stage they are not disclosed. 68 LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 25 Prior period Adjustment In preparing the accounts to 31 March 2015, the directors have adjusted the accounting for the prior period. on 1 February 2011, 3 million share options were awarded by the Company under the liontrust Senior Incentive plan with a three year vesting period. these vested on 1 February 2014. As at the Company’s financial year end on 31 March 2014 the options had not been exercised and a contingent liability was disclosed for the national Insurance Contribution (‘nIC’) which would become payable on exercise. the options were all exercised on 1 July 2014. Having reviewed the accounting treatment of the potential liability to pay nIC, the directors have concluded that it would more appropriately be accounted for in accordance with IFRS2 ‘Share based payments’ with a liability being accrued from the grant date by reference to the fair value of the underlying options together with related corporation tax adjustment. Accordingly the financial statements have been restated to reflect the liability and expense as set out below: Consolidated Statement of Comprehensive Income Administration expenses - Share option nIC expense profit before tax taxation profit for the period Basic earnings per share diluted earnings per share Consolidated Balance Sheet trade and other payables Corporation tax payable Retained earnings 31-Mar-14 Adjustment £’000 453 (453) 104 (349) (0.93) (0.82) 31-Mar-14 Adjustment £’000 1-Apr-13 Adjustment £’000 (990) 233 (757) (537) 129 (408) As the adjusted profit calculation removes the effect of the share option awards, this is unaffected by the adjustment. there is no impact on the cash flows of the Group or the Company in prior periods. 26 Post balance sheet date event there were no post balance sheet date events. LioNtruSt ASSet MANAgeMeNt pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 69 company statement of comprehensive income for the year ended 31 March 2015 Revenue dividends received from subsidiary companies Gross profit Realised profit on sale of financial assets Reinstatement of loan to liontrust Asset Management employee trust Administration expenses Operating profit Interest receivable Interest payable Profit before tax taxation Profit for the year other comprehensive income Total comprehensive income there has been a restatement of the 2014 financial statements as detailed in note 25 page 69. the notes on pages 74 to 81 form an integral part of these Company financial statements. Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 (restated) £’000 Notes 29 30 31 32 32 33 2,627 8,400 11,027 2 4,245 (4,851) 10,423 2 – 10,425 (87) 2,660 4,000 6,660 – – (5,507) 1,153 2 (81) 1,074 (69) 10,338 1,005 – – 10,338 1,005 70 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 company Balance sheet as at 31 March 2015 Assets Non current assets property, plant and equipment Intangible assets Investment in subsidiary undertakings deferred tax assets loan to liontrust Asset Management employee trust Total non current assets Current assets trade and other receivables Financial assets Cash and cash equivalents Total current assets Liabilities Non current liabilities Convertible unsecured loan stock - loan component Current liabilities trade and other payables Total current liabilities Net current assets Net assets Shareholders’ equity attributable to owners of the parent ordinary shares Share premium Capital redemption reserve Convertible unsecured loan stock - equity component Retained earnings Total equity Notes 31-Mar-15 £’000 31-Mar-14 (restated) £’000 31-Mar-13 (restated) £’000 34 35 36 37 29 38 39 41 42 277 4,998 10,261 1,088 4,125 20,749 5,568 224 2,584 8,376 265 7,446 5,480 1,174 4,415 18,780 4,253 47 3,150 7,450 184 9,894 4,930 1,335 4,390 20,733 1,944 4 605 2,553 – – – – (2,621) (2,621) (777) (777) 7,599 28,348 454 17,692 19 – 10,183 28,348 (6,560) (6,560) 890 19,670 424 17,692 19 – 1,535 19,670 (3,085) (3,085) (532) 17,580 398 14,692 15 479 1,996 17,580 the financial statements on pages 70 to 81 were approved and authorised for issue by the Board of directors on 17 June 2015 and signed on its behalf by V.K. Abrol, Chief operating officer and Chief Financial officer. Company number 2954692 there has been a restatement of the 2014 financial statements as detailed in note 25 on page 69. the notes on pages 74 to 81 form an integral part of these Company financial statements. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 71 company cash Flow statement for the year ended 31 March 2015 Cash flows from operating activities Cash inflow from operations Cash outflow from operations net cash (used in)/generated from operations Interest received tax received net cash (used in)/generated from operating activities Cash flows from investing activities purchase of property and equipment Repayment from/(investment in) subsidiary entities loan to the employee Benefit trust purchase of seeding investments Sale of seeding investments net cash used in investing activities Cash flows from financing activities Issue of shares purchase of own shares Conversion of Convertible unsecured loan stock Repayment of Convertible unsecured loan stock Interest paid on Convertible unsecured loan stock dividends received dividends paid net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents effect of exchange rate changes opening cash and cash equivalents* Closing cash and cash equivalents * Cash and cash equivalents consist only of cash balances. the notes on pages 74 to 81 form an integral part of these Company financial statements. Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 – (6,755) (6,755) 2 – (6,753) (103) 307 (553) (180) 4 (525) 30 – – – – 8,400 (1,718) 6,712 (566) – 3,150 2,584 5,717 (4,516) 1,201 2 – 1,203 (146) (550) – (42) – (738) 3,030 (1,019) (3,030) (70) (81) 4,000 (750) 2,080 2,545 – 605 3,150 72 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 company statement of changes in equity for the year ended 31 March 2015 Balance at 1 April 2014 brought forward profit for the year Amounts recycled through the Statement of Comprehensive Income total comprehensive income for the year dividends paid Shares issued equity share options issued Balance at 31 March 2015 Ordinary shares £’000 Share premium £’000 Capital redemption £’000 Retained earnings £’000 Total Equity £’000 424 – – – 30 – 454 17,692 – – – – – 17,692 19 – – – – – 19 1,535 10,338 – 10,338 (1,718) – 28 10,183 19,670 10,338 – 10,338 (1,718) 30 28 28,348 company statement of changes in equity for the year ended 31 March 2014 (restated) Balance at 1 April 2013 brought forward profit for the year total comprehensive income for the year dividends paid Addition of Convertible loan stock - equity component Shares issued purchase of shares equity share options issued Balance at 31 March 2014 Ordinary shares £’000 Share premium £’000 Capital redemption £’000 Loan equity element £’000 Retained earnings £’000 Total Equity £’000 398 – – – – 26 – – 424 14,692 – – – 479 2,521 – – 17,692 15 – – – – 4 – – 19 479 – – – (479) – – – – 1,996 1,005 1,005 (750) – – (994) 278 1,535 17,580 1,005 1,005 (750) – 2,551 (994) 278 19,670 the notes on pages 74 to 81 form an integral part of these Company financial statements. there has been a restatement of the 2014 financial statements as detailed in note 25 on page 69. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 73 notes to the Financial statements continued 27 Significant Accounting policies the separate financial statements of the Company are presented as required by the Companies Act 2006 applicable to companies reporting under IFRS. As permitted by that Act, the separate financial statements have been prepared in accordance with International Financial Reporting Standards, which comprise standards and interpretations approved by the International Financial Reporting Interpretations Committee or their predecessors, which have been approved by the european Commission. the financial statements have been prepared on the going concern basis under the historical cost convention. the principle accounting policies are the same as those set out in note 1. Investment in subsidiaries are stated at cost less, where appropriate, provisions for impairment. notes 27 to 46 reflect the information for the Company. 28 Financial risk management the Company’s activities expose it to a variety of financial risks: market risk (including price risk, cash flow interest rate risk and foreign exchange risk), credit risk, capital risk and liquidity risk. the Company is covered by the Group’s overall risk management programme. the risk management policies are the same as those set out in note 2 and elsewhere in the report and financial statements. the specific risks affecting the Company are as follows: Market risk the investments in the sub-funds of liontrust Global Funds plC are valued on a daily basis at bid price. the investments are held as available-for-sale financial assets and are held at fair value and any permanent impairment in the value of the shares held would be taken to revenue. Management consider, based on historic information, that a sensitivity rate of 10% is appropriate. Based on the holdings in the liontrust Global Funds at the balance sheet date a price movement of 10% would result in a movement in the value of the investment of £22,000 (2014: less than £1,000). Cash flow interest rate risk the Company holds cash on deposit. the interest on these balances is based on floating rates and fixed rates. the Company monitors its exposure to interest rate movements and may decide to adjust the balance between deposits on fixed or floating interest rates, or adjust the level of deposits. Following a review of sensitivity based on average cash holdings during the year a 1% increase or decrease in the interest rate will cause a £11,000 increase or decrease in interest receivable (2014: £27,000). In addition to the risks covered by the Group risk management polices. the Company is subject to some specific risks relating to its interaction with other Group companies. the Company reviews its balances due to and from other Group companies on a regular basis. prudent liquidity risk management required the maintenance of sufficient cash and marketable securities. the Company monitors rolling forecasts of the it’s liquidity reserves (comprising readily realisable investments and cash and cash equivalents) on the basis of expected cash flow. the Company has analysed its financial liabilities into maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. the amounts disclosed in the table below are the contractual undiscounted cash flows. As at 31 March 2015 payables As at 31 March 2014 (restated) payables within 3 months £’000 Between 3 months £’000 Over one year £’000 777 – – within 3 months £’000 Between 3 months £’000 Over one year £’000 6,560 – – 29 Loan to the Liontrust Asset Management Employee Trust the Company is the sponsor of liontrust Asset Management employee trust (the ‘eBt’). Following a number of loan repayments during the year, a review of previous impairment was carried out under the appropriate accounting standards and the value of the loans was reinstated resulting in a gain of £4,245,000 (2014: nil). this gain has been included in the Company statement of Comprehensive Income. the value of the loans to the eBt was calculated at £4,125,000 (2014: £4,415,000). the current value of the shares held in the eBt are disclosed in note 20. 74 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 30 Administration expenses Employee costs – director, member and employee costs – pension costs – Share incentivisation expense – termination costs Non employee costs other administration expenses Share incentivisation expense – Share option expense – Share option nIC expense (1) – Share incentive plan expense – Share option related administration expenses (1) See note 25 prior year adjustment Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 (restated) £’000 1,112 8 284 31 1,435 3,416 4,851 853 123 880 75 1,931 3,576 5,507 Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 (restated) £’000 28 – 100 156 284 278 453 69 80 880 the average number of members and employees engaged in business for the Company excluding non-executive directors, was 6 (2014: 6). All members and employees are involved in the investment management business of the Group. the costs incurred in respect of the directors, members and employees was: General management Finance, operations and It non-executive directors General management Finance, operations and It non-executive directors Year ended 31-Mar-15 Average number of members and employees during the year Wages and salaries £’000 Social security costs £’000 3 3 3 9 739 99 88 926 149 20 17 186 Year ended 31-Mar-14 Average number of members and employees during the year Wages and salaries £’000 Social security costs £’000 3 3 3 9 579 120 62 761 70 15 7 92 Total £’000 888 119 105 1,112 Total £’000 649 135 69 853 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 75 notes to the Financial statements continued 31 Operating profit the following items have been included in arriving at operating profit: Foreign exchange gains depreciation Staff costs (note 30) Services provided by the Company’s auditors: Fees payable to the company’s auditor for the audit of the company’s annual financial statements Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 (restated) £’000 2 91 1,435 2 65 1,931 14 14 Fees paid to pricewaterhouseCoopers llp for non-audit services to the Company are not disclosed in the financial statements because the Group's consolidated financial statements are required to disclose such fees on a consolidated basis. 32 Interest receivable and payable the Company follows the same risk management policies as detailed for the Group in note 2. Cash earns interest at floating or fixed rates based on daily bank deposit rates. the weighted average effective interest rate on cash is 0.0% (2014: 0.0%). 33 Taxation (a) Analysis of charge in year Current tax: uK corporation tax at 21% (2014: 23%) * Adjustments in respect of prior year total current tax (note (b)) deferred tax total charge in period (b) Factors affecting current tax profits on ordinary activities before tax profit on ordinary activities at uK corporation tax rate of 21% effects of: Group dividends not taxable expenses not deductible for tax purposes depreciation in excess of capital allowances Adjustment in respect of deferred tax recoverability rate to 20% tax relief on exercise of unapproved options taxation relief given to other Group companies Adjustment in respect of prior periods total taxation Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 (restated) £’000 – – – – 87 87 (104) 12 (92) (92) 161 69 10,425 1,074 2,189 247 (1,764) 9 (2) 49 (1,512) 1,118 – 87 (920) 108 (12) 120 – 514 12 69 * the standard rate of corporation tax in the uK changed from 23% to 21% with effect from 1 April 2014. Accordingly, the Group's profits for this accounting period are taxed at an effective rate of 21%. on 1 April 2014 further changes were enacted in the 2014 Finance Act that will reduce the standard rate of corporation tax to 20% with effect from 1 April 2015. 76 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 34 Property, plant and equipment Year to 31 March 2015 Cost At 31 March 2014 Additions disposals At 31 March 2015 Accumulated depreciation At 31 March 2014 Charge for the year disposals At 31 March 2015 Net Book Value At 31 March 2015 At 31 March 2014 Year to 31 March 2014 Cost At 31 March 2013 Additions disposals At 31 March 2014 Accumulated depreciation At 31 March 2013 Charge for the year disposals At 31 March 2014 Net Book Value At 31 March 2014 At 31 March 2013 Leasehold Improvements £’000 Office Equipment £’000 Computer Equipment £’000 Total £’000 288 21 – 309 101 50 – 151 158 187 232 29 – 261 215 7 – 222 39 17 257 53 – 310 196 34 – 230 80 61 777 103 – 880 512 91 – 603 277 265 Leasehold Improvements £’000 Office Equipment £’000 Computer Equipment £’000 Total £’000 193 95 – 288 56 45 – 101 187 137 229 3 – 232 211 4 – 215 17 18 209 48 – 257 180 16 – 196 61 29 631 146 – 777 447 65 – 512 265 184 depreciation has been included in the Statement of Comprehensive Income within administration expenses. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 77 notes to the Financial statements continued 35 Intangible assets Year to 31 March 2015 Description Carrying value £’000 Remaining amortisation period Investment management contracts acquired from Walker Crips 4,998 2 Years Cost At 1 April 2014 Additions disposals At 31 March 2015 Accumulated amortisation and impairment At 1 April 2014 Amortisation charge for the year disposals At 31 March 2015 Net Book Value At 31 March 2015 At 31 March 2014 Investment management contracts £’000 12,240 – – 12,240 4,794 2,448 – 7,242 4,998 7,446 36 Investment in subsidiary undertakings the Company’s investment in subsidiary undertakings represents 100% interests (unless otherwise stated) in the ordinary shares, capital, voting rights and redeemable preference shares (unless stated otherwise) of liontrust Investment Funds limited and liontrust Investment Services limited, both registered in england whose principal activity is as operating companies for the Group’s investment management llp’s; liontrust Investment Solutions limited, whose principal activity is investment management; and liontrust International (Guernsey) limited, incorporated in Guernsey (in liquidation). All subsidiary undertakings have the same accounting date as the parent company. Full details of the Company’s subsidiary undertakings can be found on page 23. during the year to 31 March 2015 the Company has reduced its investment In liontrust International (Guernsey) limited by £1 million prior to the liquidation of this business. the Company has increased its investment in liontrust Investment Funds limited by £1.46 million and liontrust Investment Services limited by £4.32 million as part of the process of the exercise of the ICI’s. Balance at 1 April Additions during the year Balance at 31 March 2015 £’000 5,480 4,781 10,261 2014 £’000 4,930 550 5,480 78 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 37 Deferred tax Deferred tax assets Balance as at 1 April deferred tax on timing differences Adjustment in respect of tax rate change Balance as at 31 March 2015 £’000 1,174 (37) (49) 1,088 2014 £’000 1,335 (41) (120) 1,174 the following items are included in the above deferred tax balance: deferred tax relating to losses which are expected to be credited to taxation payable on future profits: £1,088,000 (2014: £1,174,000). the standard rate of corporation tax in the uK changed from 21% to 20% with effect from 1 April 2015. Accordingly the Company has recognised deferred tax at 20% to reflect this reduction. 38 Trade and other receivables Receivables due from subsidiary undertakings prepayments and accrued income 2015 £’000 5,479 89 5,568 2014 £’000 3,878 375 4,253 All financial assets listed above are non-interest bearing. the carrying amount of these non-interest bearing trade and other receivables approximates their fair value. 39 Financial assets Assets held as available-for-sale: the Company’s financial assets held as available-for-sale represent shares in the sub funds of the liontrust Global Fund plC and are valued at bid price. the assets are all categorized as level 1 in line with the categorization detailed in note 16. Financial assets Ireland open ended Investment Company 40 Foreign currency translations Foreign currency translation (losses)/gains on: – other operating activities 2015 2014 Assets held at fair value through profit and loss £’000 Assets held as available- for-sale £’000 – – 224 224 Assets held at fair value through profit and loss £’000 Assets held as available- for-sale £’000 – – 47 47 Total £’000 224 224 Total £’000 47 47 2015 £’000 2014 £’000 (1) (1) (1) (1) Gain/(losses) on foreign currency translations are taken to the Company Statement of Comprehensive Income. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 79 notes to the Financial statements continued 41 Trade and other payables other payables including taxation and social security payables due to subsidiary undertakings other payables 2015 £’000 80 63 634 777 2014 (restated) £’000 143 4,982 1,435 6,560 All financial liabilities listed above are non-interest bearing. the carrying amount of these non-interest bearing trade and other payables approximates their fair value. 42 Ordinary Shares Authorised shares of 1 pence As at 31 March Allotted, called up and fully paid shares of 1 pence As at 1 April Issued during the year Repurchased during the year As at 31 March 2015 Shares 2015 £’000 2014 Shares 2014 £’000 60,000,000 600 60,000,000 600 42,471,555 3,000,000 – 45,471,555 424 30 – 454 38,896,555 3,030,000 (455,000) 41,471,555 398 26 – 424 43 Operating lease commitments the Company is committed to making the total of future minimum lease payments on office properties under non-cancellable operating leases in each of the following periods: Amounts due within one year Between one year and five years later than five years Year ended 31-Mar-15 £’000 Year ended 31-Mar-14 £’000 428 713 – 1,141 428 1,140 – 1,568 there are no special terms for renewal or purchase options for the Company’s leasehold property, nor are there any restrictions on dividends, additional debt or further leasing imposed from the leasing arrangements. 44 Related Party Transactions As at 31 March 2015 the Company owed the following intercompany balances to: liontrust Fund partners llp - £nil (2014: £3,782,000), these amounts arose from Group operations; and liontrust Investment partners llp - £63,000 (2014: £48,000), these amounts arose from Group operations; and liontrust International (Guernsey) limited - £nil (2014: £1,152,000), these amounts arose from Group operations. As at 31 March 2015 the Company was owed the following intercompany balances by: liontrust Fund partners llp - £1,157,000 (2014: £nil); and liontrust Investment Fund limited - £244,000 (2014: £nil); and liontrust Investment Solutions limited - £417,000 (2014: £218,000); and liontrust Investment Services limited - £3,661,000 (2014: £3,661,000); these amounts arose from Group operations. liontrust Asset Management employee trust - £4,414,000 (2014: £4,414,000). during the year the Company received £2,448,000 (2014: £2,448,000) from liontrust Investment partners llp in respect of Group operations. 80 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 45 Contingent assets and liabilities A contingent liability has arisen during the normal course of business which relates to a claim made by a former member against liontrust Asset Management plC, liontrust Investment partners llp, liontrust Investment Services limited and the individual members of the llp (together, the “Respondents”). As the timing and amount of any potential liability cannot be reliably estimated at this stage they are not disclosed. 46 Post balance sheet event there have been no post balance sheet events. Forward Looking Statements this report contains certain forward-looking statements with respect to the financial condition, results of operations and businesses and plans of the Group. these statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that have not yet occurred. there are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. nothing in this announcement should be construed as a profit forecast. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 81 independent Auditors’ report to the members of Liontrust Asset Management pLc Report on the financial statements Our opinion In our opinion, liontrust Asset Management plc’s Group financial statements and Company financial statements (the “financial statements”): • Give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 March 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 and Article 4 of the IAS Regulation. What we have audited liontrust Asset Management plc’s financial statements comprise: • the Consolidated and Company Statements of Comprehensive Income for the year ended 31 March 2015; • the Consolidated and Company Balance Sheets as at 31 March 2015; Our audit approach overview • the Consolidated and Company Cash Flow Statements for the year then ended; • the Consolidated and Company Statements of Changes in equity for the year then ended; and • the notes to the Financial Statements, which include a summary of significant accounting policies and other explanatory information. Certain required disclosures have been presented elsewhere in the Annual Report and Financial Statements (the “Annual Report”), rather than in the notes to the Financial Statements. these are cross-referenced from the financial statements and are identified as audited. the financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the european union. overall Group materiality: £360,000 which represents 5% of profit before tax. Materiality significant entities and, together representing more than 95% of the profit before tax of the Group. • Full scope audits of liontrust Investment partners llp and liontrust Fund partners llp because these are the financially • Full scope audits of liontrust Investment Solutions limited, liontrust Investment Funds limited and liontrust Investment Services limited as a number of financial statements items, including cash and cash equivalents and revenue, are material to the Group financial statements. Audit scope Group and Company Areas of focus • Recognition of management fees, box profits and performance fees. • Recognition of share-based payments. Company only • Gain on re-instatement of loans to liontrust Asset Management employee trust. The scope of our audit and our areas of focus We conducted our audit in accordance with International Standards on Auditing (uK and Ireland) (“ISAs (uK & Ireland)”). We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls and fraud in revenue recognition, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud. the risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. this is not a complete list of all risks identified by our audit. 82 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 Area of focus Group and Company Recognition of management fees, box profits and performance fees Refer to note 4. Revenue and note 1. Principal accounting policies. Revenue is the most significant account balance in the Consolidated Statement of Comprehensive Income. We focussed on this area as a result of the inherent risk in the components of revenue described below. the Groups operations are largely manual in nature and most of the revenue entries are recorded by manual journals. Management Fees In 2015, management fees net of rebates made up the majority of revenue. the recognition of management fees is dependent on the terms of the underlying investment management contracts (“IMCs”) between the Group and its clients and/or the funds it manages. It is calculated as a percentage of Assets under Management (“AuM”) and the percentage applied varies across different funds and products. Assessing the AuM of these funds involves judgement as it is correlated to the market value of a wide range of financial instruments held by these funds and/or clients. Management fees are accounted for net of rebates and renewal commissions. Box Profits Box profits vary from one transaction to another and result from the daily creations and cancellations of fund units which make this revenue stream complex. this creates an increased risk of fraud and error. Performance fees performance fees are driven by the outperformance of one individual segregated mandate this year. like management fees, performance fees are set by the IMCs. performance fees are standard industry practice but are often one-off or infrequent and involve complex calculations. the fund managers are entitled to receive a significant portion of the fee, as such there is an incentive to overstate this fee and/or recognise it before the performance criteria have been met. How our audit addressed the area of focus For all the revenue streams we understood and evaluated the design and implementation of key controls, including relevant Information technology systems and controls, in place at the outsourced providers. this included both in-house and outsourced activities at the administrators and transfer agent (‘outsourced providers’). to obtain audit evidence over the key controls at liontrust and at the outsourced providers supporting the calculation and recognition of revenue, we: • performed testing of key liontrust controls to obtain evidence of operational effectiveness of those key controls throughout the year; and • Assessed the control environment in place at outsourced providers to the extent that it was relevant to our audit. this assessment of the operating and accounting structure in place involved obtaining and reading the report issued by the independent auditor of the outsourced providers in accordance with generally accepted assurance standards for such work. We then identified those key controls on which we could place reliance to provide audit evidence. Where the controls reports had not been prepared for year ended 31 March 2015, we assessed the gap period and obtained bridging letters where necessary. We identified no significant control weaknesses. We performed tests over manual journal entries posted to revenue to identify unusual or irregular items which included understanding the nature and purpose of the journal and agreed the details to supporting and corroborative evidence. no material exceptions were noted. Management Fees We re-performed a sample of the management fee calculations by using independently confirmed AuM and fee rates obtained from the IMCs as inputs. In respect of rebates, we obtained data generated by the transfer agent of the units trusts and reconciled back to Group records. For a sample, we recomputed rebate by using rebates contracts. Box Profits We reconciled the box profits revenue recognised in the accounting records to supporting values obtained independently from the transfer agent. We relied on information obtained from the transfer agent for which controls evidence was obtained. Performance fees We recalculated a sample of the performance fees and confirmed that the computation was in accordance with the signed IMCs. We agreed that the fee had crystallised and was recognised in the correct period. Based on our procedures, revenue was measured and recognised in accordance with the various contractual agreements in place with customers and outsourced providers. In addition, the judgements made by management were supportable and reasonable in the context of materiality and the input data used was consistent with supporting documentation. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 83 independent Auditors’ report to the members of Liontrust Asset Management pLc continued Area of focus Group and Company Recognition of share-based payments Refer to the Remuneration report, note 20. Own shares and note 1. Principal accounting policies. We focused on this area because there is an inherent risk due to the judgemental nature in determining the value of the awards, the interpretation of complex terms in the scheme agreements, the number of schemes in operation, the required record keeping and the manual nature of the calculations. the key assumptions in calculating the share-based payment expense are the leaver rate and performance conditions. Management can choose among a wide range of complex pricing models to assess the value of the options granted. In addition, the expense is material to the financial statements. Company only Gain on re-instatement of loans to Liontrust Asset Management Employee Trust. Refer to note 29. Loan to Liontrust Asset Management Employee Trust and note 1. Principal accounting policies. liontrust Management Services limited granted loans to the employee Benefit trust to buy share options as part of the Members Capital Incentive plan. these loans were partially impaired in 2010 as the value of the shares had dropped below their initial cost. Some of these options were exercised during the year. this resulted in a gain as the exercise price received exceeded the carrying value of the loans. these exercises also trigged the partial reversal of impairment of the remaining loans. the amount of the re-instatement was calculated using the share price as at 31 March 2015, provided that the share price was lower or equal to the initial cost. We focused on this area because there is a risk that the gain on re-instatement of the loans was improperly calculated and a risk that the conditions were not met for the impairment to be reversed. How our audit addressed the area of focus We obtained an understanding of the controls in place around share-based payments. the controls on share-based payments were not formalised, therefore we have not relied on controls for this area. We performed the following substantive procedures for each type of share- based payments transaction: • We obtained and read the deed of grant for new awards issued during the year. For these new awards, we verified that they were appropriately authorised, consistent with scheme plans, classified correctly as equity or cash settled and used the correct share price. • We checked that the option pricing models remained appropriate for the existing awards and that the awards granted during the year did not require the use of an option pricing model. • We assessed for reasonableness of the estimates made in relation to leaver rate, performance conditions and/or service conditions for the existing awards by examining historical data. • We tested a sample of options exercised during the year to confirm that they were exercised in accordance with the terms of the grant, recorded at the correct value and appropriately authorised. We obtained details of all the outstanding awards and checked that the charge was spread in accordance with the appropriate period of the award. Based on our work, the treatment and disclosures relating to the schemes were consistent with the requirements of IFRS 2. Furthermore, we found that the pricing model used to value the awards to be in line with accepted market practice and we considered that the assumption made by management were reasonable based on the evidence provided. We tested that the conditions were met for the impairment to be reversed and gain to be recognised, in particular we checked that the share price used to assess the value of the loans at year end was higher than the price at the impairment date. We recalculated the gain on re-instatement and compared it to management figures. the main input of this computation was the number of shares and the share price. We obtained the number of shares from the audited financial statements for awards granted in previous years. We tested the new awards as set out in the share based payments area of focus above. We obtained the share price from a publicly available external source. We ensured that the reversal of impairment was lower or equal to the impairments previously recorded. Based on our work we found that the gain on the reinstatement of loans to liontrust Asset Management employee trust was materially correct and appropriately recognised. 84 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the Group operates. the Group is structured along a single business line being investment management. the Group financial statements are a consolidation of the Company and seven subsidiary entities, six of which are based in the united Kingdom. In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed over the Company and each of the subsidiaries by us, as the Group engagement team, and also as auditors for each of the subsidiaries to be able to conclude whether sufficient appropriate audit evidence as a basis for our opinion on the Group financial statements as a whole had been obtained. We therefore performed full scope audits on the complete financial information of liontrust Investment partners llp, liontrust Fund partners llp because they are financially significant components, together representing more than 95% of Group revenue and Group profit before tax. We performed a full scope audit of liontrust Investment Solutions limited, liontrust Investment Funds limited and liontrust Investment Services limited as a number of financial statements items, including cash and cash equivalents and revenue, are material to the Group financial statements. this, together with additional procedures performed at the Group level, gave us the evidence we needed for our opinion on the Group financial statements as a whole. Materiality the scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. these, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall Group materiality How we determined it Rationale for benchmark applied £360,000 (2014: £283,000). 5% of Group profit before tax. We have applied this benchmark because it is a benchmark against which the Group’s performance is commonly measured and a recognised GAAp measure. We agreed with the Audit & Risk Committee that we would report to them misstatements identified during our audit above £18,000 (2014: £14,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Going concern under the listing Rules we are required to review the directors’ Responsibility Statement, set out on page 25, in relation to going concern. We have nothing to report having performed our review. As noted in the directors’ Responsibility Statement, the directors have concluded that it is appropriate to prepare the financial statements using the going concern basis of accounting. the going concern basis presumes that the Group and Company have adequate resources to remain in operation, and that the directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s and Company’s ability to continue as a going concern. Other required reporting Consistency of other information Companies Act 2006 opinion In our opinion, the information given in the Strategic Report and the directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. ISAs (UK and Ireland) reporting Under ISAs (UK and Ireland) we are required to report to you if, in our opinion: • Information in the Annual Report is: - Materially inconsistent with the information in the audited financial statements; or - Apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group and Company acquired in the course of performing our audit; or - otherwise misleading. • the statement given by the directors on page 25, in accordance with provision C.1.1 of the uK Corporate Governance Code (“the Code”), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group’s and Company’s performance, business model and strategy is materially inconsistent with our knowledge of the Group and Company acquired in the course of performing our audit. We have no exceptions to report arising from this responsibility. We have no exceptions to report arising from this responsibility. • the section of the Annual Report on page 32, as required by provision C.3.8 of the Code, describing the work of the Audit & Risk Committee does not appropriately address matters communicated by us to the Audit & Risk Committee. We have no exceptions to report arising from this responsibility. Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 85 independent Auditors’ report to the members of Liontrust Asset Management pLc continued 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 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. Sally Cosgrove (Senior Statutory Auditor) for and on behalf of pricewaterhouseCoopers llp Chartered Accountants and Statutory Auditors london 17 June 2015 a) the maintenance and integrity of the liontrust Asset Management plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. b) legislation in the united Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Adequacy of information and explanations received 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. We have no exceptions to report arising from this responsibility. Directors’ remuneration Remuneration report - Companies Act 2006 opinion In our opinion, the part of the Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. other Companies Act 2006 reporting 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. Corporate governance statement under the listing Rules we are required to review the part of the Corporate Governance Statement relating to the Company’s compliance with ten provisions of the uK Corporate Governance Code. We have nothing to report having performed our review. Responsibilities for the financial statements and the audit Our responsibilities and those of the directors As explained more fully in the directors’ Responsibility Statement set out on page 25, 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 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 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 Group’s and 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. 86 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 shareholder information Directors and Advisers Registered Office and Company number 2 Savoy Court, london WC2R 0eZ Registered in england with Company number 2954692 Company Secretary Mark Jackson tower Bridge House St Katharine’s Way london e1W 1dd Independent Auditors pricewaterhouseCoopers llp Chartered Accountants and Statutory Auditors 7 More london, Riverside london, Se1 2Rt Legal Advisers Macfarlanes llp 20 Cursitor Street london eC4A Ilt Financial Calendar Year end Half Year end Results announced: Interim report available: Annual Report available: Annual General Meeting: Share price information: Bankers Royal Bank of Scotland plc 280 Bishopsgate london eC2m 4RB Financial Adviser and Corporate Broker numis Securities limited the london Stock exchange Building 10 paternoster Square london eC4M 7lt Registrars Capita Registrars the Registry 34 Beckenham Road Kent BR3 4tu 31 March 30 September Full year: June, half year: november december June September the Company’s shares are quoted on the london Stock exchange and the price appears daily in the Financial times, (listed under ‘General Financial’). UK authorised unit trusts: liontrust uK Growth Fund liontrust Global Income Fund liontrust uK Smaller Companies Fund liontrust Special Situations Fund liontrust FtSe 100 tracker Fund liontrust european Growth Fund liontrust Asia Income Fund liontrust Macro equity Income Fund liontrust Macro uK Growth Fund Ireland domiciled open-ended investment company liontrust Global Funds plC, comprising seven sub funds: liontrust GF european Strategic equity liontrust GF Global Strategic Bond Fund liontrust GF Macro equity Income Fund liontrust GF Special Situations Fund liontrust GF uK Growth Fund liontrust GF Global Income Fund liontrust GF Asia Income Fund Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 87 shareholder information continued Unit trust prices: the prices of liontrust’s range of authorised unit trusts are listed on our website www.liontrust.co.uk. Further information: For further information on the Company’s range of funds and services please contact our Broker Services department at: liontrust Fund partners llp 2 Savoy Court london WC2R 0eZ telephone: 020 7412 1700 Facsimile: 020 7412 1779 e-mail: info@liontrust.co.uk or visit: www.liontrust.co.uk Group subsidiary entities – board members: Liontrust Investment Funds Limited V.K. Abrol Liontrust Fund Partners LLP J.S. Ions A list of members is open for inspection at 2 Savoy Court, london WC2R 0eZ Liontrust Investment Services Limited V.K. Abrol Liontrust Investment Partners LLP J.S. Ions A list of members is open for inspection at 2 Savoy Court, london WC2R 0eZ Liontrust Investment Solutions Limited V.K. Abrol Investment companies – board members: Liontrust Global Funds Plc e.J.F. Catton d.J. Hammond J.S. Ions S. o’Sullivan 88 Liontrust Asset MAnAgeMent pLc AnnuAl RepoRt And FInAnCIAl StAteMentS 2015 NOTES PRIDE IN OUR PERFORMANCE LIONTRUST ASSET MANAGEMENT PLC ANNUAL REPORT & FINANCIAL STATEMENTS 2015 L I O N T R U S T A S S E T M A N A G E M E N T P L C A N N U A L R E P O R T & F I N A N C I A L S T A T E M E N T S 2 0 1 5 LIONTRUST ASSET MANAGEMENT PLC 2 Savoy Court, London WC2R 0EZ Telephone: +44 (0)20 7412 1700 Fax: +44 (0)20 7412 1779 Email: info@liontrust.co.uk Web: www.liontrust.co.uk 

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