_________________________________
ANNUAL REPORT 2015
Welcome to Manx Financial Group PLC
Welcome to Manx Financial Group PLC
Welcome to Manx Financial Group PLC
Welcome to Manx Financial Group PLC
Integrity through independence and service
An independent banking group founded in 1935, domiciled in the
Isle of Man
offer
companies
Manx Financial Group PLC (“MFG”) is
an AIM-listed company (LSE: MFX.L)
which has subsidiaries engaged in a
suite of financial service companies
based in the Isle of Man and the UK.
financial
These
services to both retail and commercial
customers. MFG’s strategy is to grow
both organically and through strategic
acquisition to further augment the range
of services it offers.
Principal wholly owned subsidiaries:
• Conister Bank Limited
• Edgewater Associates Limited
• Conister Card Services Limited
• Manx Incahoot Limited
Contents
Financial Highlights
Chairman’s Statement
Directors and Advisers
Directors’ Report
Corporate Governance Report
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Report of the Independent Auditors
Consolidated Income Statement
01
02
04
06
07
10
12
13
14
Conister Bank Limited (the “Bank”) is a
licensed independent bank, regulated
by the Financial Services Authority in
the Isle of Man and a full member of
the MasterCard® network and the Isle
of Man’s Association of Licensed
Banks.
The Bank provides a variety of
financial
services,
including saving accounts, fiduciary
deposits, asset
financing, personal
loans, loans to small and medium
sized entities, block discounting and
other specialist secured credit facilities
the UK
Isle of Man and
to
consumer and business sectors.
products
and
the
card
pre-paid
Conister Card Services Limited is the
Group’s
division
providing
clients with
payment solutions that are both cost
effective and create new revenue
opportunities.
business
Edgewater Associates Limited
(“EWA”) is one of the pre-eminent
independent financial advisers in
the Isle of Man.
It provides a bespoke and
personal service to Isle of Man
residents and
the Group’s
to
business and personal customers
and manages assets in excess of
£154 million.
EWA specialises in the areas of
wealth management, mortgage
and
and
general
retirement planning.
insurance,
Manx Incahoot Limited operates
as a UK based aggregation
targeting the Employee Benefit
market. Incahoot Limited was
founded
in 2011 and Manx
Incahoot was launched in March
2015.
Consolidated Statement of Other Comprehensive Income
15
Consolidated and Company Statement of Financial
Position
Consolidated Statement of Cash Flows
Consolidated and Company Statement of Changes in
Equity
Notes to the Consolidated Financial Statements
16
17
18
19
® MasterCard is a registered trademark of MasterCard International Incorporated
Manx Financial Group PLC
Financial Highlights
01
Profit before tax
Profit before tax
Profit before tax
Profit before tax
Profit for the year
Profit for the year
Profit for the year
Profit for the year
Net interest income
Net interest income
Net interest income
Net interest income
Loans
Loans
Loans
Loans
Total assets
Total assets
Total assets
Total assets
Customer accounts
Customer accounts
Customer accounts
Customer accounts
share
Earnings per share
Earnings per
share
share
Earnings per
Earnings per
+3+3+3+34444%%%%
£2.£2.£2.£2.3333 mmmm
2014 : £1.7m
+3+3+3+32222%%%%
£2.£2.£2.£2.1111 mmmm
2014 : £1.6m
+34%+34%+34%+34%
£14.6 m
£14.6 m
£14.6 m
£14.6 m
2014 : £10.8m
+13%+13%+13%+13%
£10£10£10£101.41.41.41.4 mmmm
2014 : £89.3m
++++9999%%%%
£1£1£1£130303030.0 m.0 m.0 m.0 m
2014 : £119.5m
+6%+6%+6%+6%
£106.3 m
£106.3 m
£106.3 m
£106.3 m
2014 : £100.3m
++++32323232%%%%
2.062.062.062.06 pppp
2014 : 1.56 p
Manx Financial Group PLC
Chairman’s Statement
02
Jim Mellon
Jim Mellon
Jim Mellon
Jim Mellon
Chairman
Dear Shareholders,
Dear Shareholders,
Dear Shareholders,
Dear Shareholders,
I am pleased to announce that we have secured a record Profit
Before Tax for the year, which has increased by 34% to £2.31
million (2014: £1.73 million), providing a Return on Equity of
17.3% (2014: 15.9%) which, in relative terms to the banking
sector, is extremely high. This is the sixth period running where
we have demonstrated unbroken growth and, as a result, our
balance sheet is stronger than ever. Of particular note is that
Conister Bank, our principal banking subsidiary, increased Profit
Before Tax by 95% to £2.24 million (2014: £1.15 million).
million). This led to a 24% increase in Operating Income to £9.10
million (2014: £7.35 million). Although Total Costs increased by
21% to £6.79 million (2014: £5.62 million), including a 20%
increase in Personnel expenses to £3.52 million (2014: £2.93
million), the Profit Before Tax increased by 34% to £2.31 million
(2014: £1.73 million). As a result, our 2015 Profit After Tax rose
by 32% to £2.10 million (2014: £1.59 million), leading to a 32%
increase in our basic earnings per share to 2.06 pence (2014:
1.56 pence).
We have achieved this result against an ever increasing global
concern over the world’s banking system which has given rise to
increased regulation and capital support requirements. In the Isle
of Man and UK, this will manifest itself through the introduction of
Basel III and the adoption of recommendations of the various
committees that were established in the aftermath of the 2008
crisis. In particular, the regulation of consumer credit lending in
the UK, an area we have long identified as providing profitable
opportunities, has been strengthened by the UK Financial
Conduct Authority (“FCA”) taking oversight of this market from
the Office of Fair Trading. As part of this change of regulator, the
FCA is reviewing all consumer credit licence holders. Currently,
we hold interim licences as our existing licences are reviewed
and we would expect to have completed the re-application
process by the end of 2016 with new full licences being granted.
In tandem, we have strengthened our banking subsidiary’s risk
evaluation and compliance processes to ensure we continue to
grow in a controlled and disciplined manner. In the last two years
alone, our net assets have increased by more than a third and
this investment in such an important element of our infrastructure
will prove to be invaluable as we continue to grow in an ever
increasing competitive market.
through
for growth
Our strategy
innovative product
is
diversification. This allows us to leverage our existing expertise
for both direct lending and lending through trusted relationships.
As well as supporting growth, this strategy will provide an
insulation against the wider increase in liquidity that is now
returning to our lending markets.
New developments in financial technology have enabled fleet-
footed lenders to create ever smarter distribution networks for
their customers’ advantage. In the last two years, we have seen
developments that will materially improve the efficiency of
financial institutions. In order to match these benefits, we will
continue with the process of upgrading our key banking systems
which we believe will inevitably lead to both the improved
delivery of our products and the achievement of financial
efficiencies.
Manx Financial Group PLC
Manx Financial Group PLC
Manx Financial Group PLC
Manx Financial Group PLC
Turning to our financial performance, Net Interest Income
increased by 34% to £14.55 million (2014: £10.83 million), with
Net Trading Income rising by 23% to £8.93 million (2014: £7.25
Our balance sheet showed a similar improvement, whereby
Loans and Customer Advances increased by 13% to £101.36
million (2014: £89.34 million), supported by Deposits of £106.33
million (2014: £100.26 million) and Cash of £7.16 million (2014:
£6.12 million). Total Assets increased by 9% to £130.01 million
(2014: £119.51 million) and Equity increased by 22% to £12.15
million (2014: £9.98 million).
Conister Bank Limited
Conister Bank Limited
Conister Bank Limited
Conister Bank Limited
The 2015 outcome is a reflection of the Group as a whole.
Interest Income grew by 29% to £17.56 million (2014: £13.63
million) leading to a 23% increase in Net Trading Income to
£7.38 million (2014: £6.02 million). Operating Income grew by
24% to £7.62 million (2014: £6.15 million). We have prudently
increased Provisions by £1.06 million during the year (2014:
£0.55 million) to a total of £2.06 million (2014: £1.81 million),
loan book. Personnel,
representing 1.6% of our gross
Depreciation and all other Costs decreased by 3% to £4.32
million (2014: £4.45 million), which resulted
in an 95%
improvement in Profit Before Tax to £2.24 million (2014: £1.15
million).
Being totally funded by Isle of Man deposits remains a key
strength and our Loan to Deposit ratio improved by 5.6% to
94.6% (2014: 89.0%). We remain committed to our very
conservative liquidity policy: one which has no behavioural
adjustments and no negative cumulative mismatches. This,
along with our high regulatory Risk Asset Ratio of 16.4% (2014:
16.6%), provides additional comfort to our deposit base. Our
reputation for prudent stewardship will assist deposit acquisition
as we continue to grow our balance sheet.
International Regulators and other
I am pleased to welcome Ian Morley to the Bank’s board as an
independent Non-executive Director. Ian has advised Central
Banks,
International
Organisations, such as the EU and OECD on matters related to
Economics, Markets and Regulation. Ian joins Neil Duggan who,
as already reported, succeeded Don McCrickard as Chairman of
the bank, following Don’s retirement on 30 June 2015.
Manx Financial Group PLC
2014
03
Edgewater Associates Limited
Edgewater Associates Limited
Edgewater Associates Limited
Edgewater Associates Limited
In my last annual report, I predicted an annual run rate of £0.36
million and I am pleased to report that our adjusted performance
achieved this goal. During the year, we reviewed our cost base
and incurred several one-off costs relating to moving office
accommodation. The business is now housed in the same
building as Conister Bank and the full impact of the cost savings
achieved by this move will flow through to the 2016 Income
Statement. With an annual adjusted return on equity of 18% and
a fully developed ‘back office’ offering, this market sector is one I
am keen on investing further in. As such we continue to review
potential IFA acquisitions to bolt onto this business.
Conister Card Services Limited
Conister Card Services Limited
Conister Card Services Limited
Conister Card Services Limited
Whilst progress
towards our ambition of monetising our
MasterCard® licence has been slow, I am content that proper
due diligence and contract negotiations take precedence to any
short term gain. We have a number of opportunities within in pre-
paid card space which are in the process of development.
Other operating subsidiaries
Other operating subsidiaries
Other operating subsidiaries
Other operating subsidiaries
We continue to incubate new business lines, including foreign
exchange services, peer-to-peer lending and loan broking, both
to test market competitiveness and to broaden the suite of
financial services we offer. We continue to nurture those that
show promise and I look forward to reporting in more detail about
these ventures in future reports.
Outlook
Outlook
Outlook
Outlook
I believe further liquidity will return to the traditional lending
markets forcing pressure on yields and that interest rates in the
UK will continue to remain at their historic low levels for most of
2016. With this backdrop, I believe that our lending strategy of
growth through product extension will continue to be successful
as we further increase our product range and source our liquidity
through our fixed term rate structure. Our fixed term deposits will
also provide a partial shield against yield pressure in the more
competitive lending markets. Thus I see no current reason as to
why the year-end 2016 should not continue our profit growth at
the same or similar rate.
Whilst our strategy is not acquisition led we will continue to
review acquisition opportunities where they make good, sound
financial sense.
Finally, I would like to take this opportunity to thank you, our
shareholders, our staff, your Board and our wider stakeholders
for their continued support. I look forward to working with you all
to continue to grow Manx Financial Group into an enlarged and
diversified financial services company.
Jim Mellon
Jim Mellon
Jim Mellon
Jim Mellon
Executive Chairman
29 February 2016
Manx Financial Group PLC
Directors and Advisers
04
Executive Directors
Jim Mellon (59)‡
Executive Chairman
Jim Mellon holds directorships in a number of
publicly quoted companies, many of which are in
the financial services sector. He is the beneficial
owner of Burnbrae Group Limited which, in turn,
indirectly holds approximately 17% of Manx
Financial Group PLC. He is the founder, principal
shareholder and co-chairman of the Regent Pacific
Group, quoted on the Hong Kong Stock Exchange.
He is also founder, principal shareholder and non-
executive director of Charlemagne Capital, based
on the Isle of Man and quoted on the London AIM
market.
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 2 November 2007 and
appointed as Executive Chairman on 12 February
2009.
Denham Eke (64) ‡
Chief Executive Officer
Denham Eke is the Managing Director of Burnbrae
Group Limited, a private
international asset
management company. He began his career in
stockbroking with Sheppards & Chase before
moving into corporate planning for Hogg Robinson
plc, a major multinational insurance broker. He is
a director of many years standing, of both public
and private companies involved in the financial
services, property, mining, and manufacturing
sectors. He is chairman of Webis Holdings PLC,
chief executive officer of Speymill PLC, chief
finance officer of West African Minerals
Corporation Limited, chief finance officer of
Life Science Developments Limited, chief finance
Investments
officer of Port Erin Biopharma
Limited, and a non-executive director of Billing
Services Group Limited – all quoted on the
London AIM market.
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 2 November 2007 and
appointed as Chief Executive on 12 February
2009.
Juan Kelly (45) ‡
Executive Director
Juan Kelly started his career with Maersk
before moving into structured finance with
ABN AMRO in Chile and subsequently the
Netherlands. Following this he
joined SG
Hambros in London, acting as adviser to a
range of transactions. In 2004, he joined the
London based structured finance team of
Allied Irish Bank with a focus on large ticket
asset finance, before being posted to Sydney
as head of corporate and asset finance in the
Asia Pacific region. Juan has a wide range of
experience within commercial and investment
banking including building quality loan books
and
reviewing merger and acquisition
opportunities.
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 19 September
2011. He is Managing Director of Conister
Bank Limited.
Douglas Grant (51) ‡
Group Finance Director
Douglas Grant has over 30 years’ experience
working in finance, initially with Scottish Power
before moving to the industrial sector to work with
ICI and then Allenwest. Prior to joining Manx
Financial Group PLC, he was the group financial
controller and later financial director of various UK
and Isle of Man private sector companies and has
extensive capital raising experience.
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 14 January 2010.
Non-executive Directors
Manx Financial Group PLC
05
Alan Clarke (65)‡†*
Non-executive Director
David Gibson (68) ‡†* ≠
Non-executive Director
John Banks (47) ‡
Non-executive Director
Alan Clarke is a chartered accountant and former
senior partner of Ernst & Young during which time
he worked closely with HSBC offshore operations
in both the Channel Islands and the Isle of Man.
Currently he specialises in corporate finance and
strategic consultancy, advising a variety of both
listed and private companies. He holds several
is deputy
non-executive directorships and
president of ICAEW Manchester. He is also a
registered auditor, being the senior partner of
Downham Mayer Clarke.
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 2 November 2007.
Chairman of the Audit, Risk and Compliance
Committee and Chairman of the Remuneration
Committee.
Neil Duggan (55) ‡* ≠
Non-executive Director
Neil is a qualified chartered accountant and up to
September 2012 was a partner in KPMG in the Isle
of Man. He was head of the audit practice in the
Isle of Man and Gibraltar and also headed up
KPMG’s transaction services delivery across a
number of jurisdictions, including the Caribbean.
His specialist areas were the finance sector and
property. Currently, he holds a number of non-
executive positions in Isle of Man based listed and
private groups. qualified as a certified accoun
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 1 July 2015. He is
Chairman of Conister Bank Limited.
joined
throughout
treasurer. He
David Gibson qualified as a certified accountant
whilst holding posts with Shell-Mex and BP and
CIBA-Geigy
the UK and abroad
before transferring into treasury management in
senior positions with Turner and Newall and
Westland Helicopters where he qualified as a
corporate
the Trustee
Savings Bank of the Channel Islands as finance
director prior to becoming general manager
finance at TSB Retail Bank where he gained his
formal qualifications as a banker. Prior to retiring
from executive life for family reasons, he was
group
finance director of Portman Building
Society for 9 years. He is currently deputy
chairman of commercial property
investment
companies Chellbrook Properties plc and
Mountstephen Investments Limited.
John Banks is a solicitor qualified in both
England and Wales and Hong Kong. He has
worked in private practice with Lovells, in both
England and Hong Kong and as an in house
counsel for Standard Chartered Bank in Hong
Kong. He joined Group Direct Limited, later part
of Brightside Group PLC as group legal counsel
in 2006, where he worked on the group’s
admission to trading on AIM. He joined Southern
Rock Insurance Company Limited and Eldon
Insurance Services Limited in 2013 and is a
director of both companies.
Gibson qualified as a certified accoun
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 5 August 2014.
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 12 February 2009.
dvisers
AAAAdvisers
dvisers
dvisers
Company Secretary
Company Secretary
Company Secretary
Company Secretary
Lesley Crossley
Registered Office
Registered Office
Registered Office
Registered Office
Clarendon House
Victoria Street
Douglas
Isle of Man IM1 2LN
Registered Agent
Registered Agent
Registered Agent
Registered Agent
CW Corporate Services
Limited
Bank Chambers
15-19 Athol Street
Douglas
Isle of Man IM1 1LB
Legal Advisers
Legal Advisers
Legal Advisers
Legal Advisers
As to Isle of Man law
Long & Humphrey
The Old Courthouse
Athol Street
Douglas
Isle of Man IM1 1LD
As to English law
Kerman & Co LLP
200 Strand
London WC2R 1DJ
Independent Auditors
Independent Auditors
Independent Auditors
Independent Auditors
KPMG Audit LLC
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
Principal Bankers
Principal Bankers
Principal Bankers
Principal Bankers
Royal Bank of Scotland
135 Bishopsgate
London
EC2M 3UR
Consulting Actuaries
Consulting Actuaries
Consulting Actuaries
Consulting Actuaries
BWCI Consulting Limited
Albert House
South Esplanade
St Peter Port
Guernsey GY1 3BY
Pension Fund
Pension Fund
Pension Fund
Pension Fund
Investment Manager
Investment Manager
Investment Manager
Investment Manager
Thomas Miller Investment
(Isle of Man) Limited
Level 2
Samuel Harris House
5-11 St George’s Street
Douglas
Isle of Man IM1 1AJ
Nominated Advisor
Nominated Advisor
Nominated Advisor
Nominated Advisor
and Broker
and Broker
and Broker
and Broker
Beaumont Cornish
Limited
2nd Floor
Bowman House
29 Wilson Street
London EC2M 2SJ
Registrar
Registrar
Registrar
Registrar
Computershare Investor
Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES
Presentation of Annual
Presentation of Annual
Presentation of Annual
Presentation of Annual
Report and Accounts
Report and Accounts
Report and Accounts
Report and Accounts
Presented here
is
Annual
Accounts
Financial Group PLC.
the
and
Manx
Report
of
Company Information
Company Information
Company Information
Company Information
The Annual and
Interim
Reports, along with other
supplementary information
of interest to Shareholders,
are
our
website. The address of
the website is www.mfg.im
investor
which
includes
information and
relations
contact details.
included
on
* Member of the Audit, Risk and Compliance Committee
†Member of the Remuneration Committee
‡Member of the Nominations Committee
≠ Independent Non-executive Director
Manx Financial Group PLC
Directors’ Report
06
The Directors present their annual report and the audited financial
statements for the year ended 31 December 2015.
The number of shares held by the current Directors is as follows:
Principal
activities
regulated activities
Principal regulated
activities
activities
regulated
regulated
Principal
Principal
The principal activities of Manx Financial Group PLC (the
“Company”) and its subsidiaries (together referred to as the
“Group”) are the provision of asset and personal finance, investing
activities and wealth management.
Conister Bank Limited, a wholly owned subsidiary of
the
Company, holds a class 1 deposit taking licence issued under
section 7 of the Isle of Man Financial Services Act 2008. Deposits
made with the Bank are covered by the Isle of Man Depositors’
Compensation Scheme contained
the Banking Business
(Compensation of Depositors) Regulations 1991.
in
Edgewater Associates Limited is authorised by the Isle of Man
Financial Services Authority under section 7 of the Financial
Services Act 2008 to conduct investment business as a class 2,
sub-classes (3), (6) and (7) licence holder.
Results and dividends
Results and dividends
Results and dividends
Results and dividends
The proposed transfers to and from reserves are as set out in the
Statement of Changes in Equity on page 18. The Directors do not
recommend the payment of a dividend (2014: nil).
Share capital
Share capital
Share capital
Share capital
Particulars of the authorised and issued share capital of the
Company are set out in note 27 to the financial statements.
Significant shareholdings
Significant shareholdings
Significant shareholdings
Significant shareholdings
The number of shares held and the percentage of the issued
shares which that number represented as at 18 February 2016
are:
Rene Nominees (IOM) Limited1
Jim Mellon
Lynchwood Nominees Limited
Island Farms Limited
Number
Number
Number
Number
26,288,992
17,635,332
10,429,537
4,222,319
% of % of % of % of
issued capital
issued capital
issued capital
issued capital
25.76
17.28
10.22
4.14
1 Together with other holdings, Arron Banks, a former Director of
the Group, is beneficially interested in 30,339,825 ordinary
shares (29.72%) of which 2,336,833 ordinary shares are held by
Rene Nominees (IOM) Limited in trust for Arron Banks, his
underage children and John Banks’ underage children.
The Directors are not aware of any other individual holding of
greater than 3% as at 18 February 2016.
share interests
Directors and Directors’’’’ share interests
Directors and Directors
share interests
share interests
Directors and Directors
Directors and Directors
Details of current Directors are set out on pages 4 and 5. Details of
changes in Directors in the year are shown below:
Don McCrickard retired on 30 June 2015 after 9 years of service
with the Group. Neil Duggan was appointed on 1 July 2015.
Jim Mellon1
John Banks2
David Gibson3
Douglas Grant
Alan Clarke
Juan Kelly
Number
Number
Number
Number
18181818////00002/12/12/12/16666
17,635,332
17,635,332
17,635,332
17,635,332
2,336,833
2,336,833
2,336,833
2,336,833
1,547,227
1,547,227
1,547,227
1,547,227
505,821
505,821
505,821
505,821
52,149
52,149
52,149
52,149
27,860
27,860
27,860
27,860
Number
Number
Number
Number
31/12/15
31/12/15
31/12/15
31/12/15
17,635,332
17,635,332
17,635,332
17,635,332
2,336,833
2,336,833
2,336,833
2,336,833
1,547,227
1,547,227
1,547,227
1,547,227
505,821
505,821
505,821
505,821
52,149
52,149
52,149
52,149
27,860
27,860
27,860
27,860
Number
31/12/14
17,635,332
2,336,833
1,400,000
505,821
52,149
27,860
1 Burnbrae Limited holds 16,000,000 Ordinary Shares. Jim Mellon,
Executive Chairman of Manx Financial Group plc (“MFG”), is a director
of Burnbrae Limited. Burnbrae Limited is beneficially owned by Jim
Mellon. Denham Eke, CEO of MFG, is also a director of Burnbrae
Limited. Pershing Nominees Limited holds 968,666 Ordinary Shares
and Vidacos Nominees holds 666,666 Ordinary Shares in trust for Jim
Mellon.
2 Comprises 2,336,833 Ordinary Shares held by Rene Nominees (IOM)
Limited in trust for John Banks’ underage children, Arron Banks and his
underage children.
3 Comprises 1,547,227 Ordinary Shares held by TD Direct Investing
Nominees (Europe) Limited in trust for David Gibson.
The number of share options held by the current Directors is as
follows:
Douglas Grant
Juan Kelly
Number
Number
Number
Number
18181818////00002/12/12/12/16666
1,042,466
1,042,466
1,042,466
1,042,466
700,000
700,000
700,000
700,000
Number
Number
Number
Number
31/12/15
31/12/15
31/12/15
31/12/15
1,042,466
1,042,466
1,042,466
1,042,466
700,000
700,000
700,000
700,000
Number
31/12/14
1,042,466
700,000
Directors
liability insurance
Directors’’’’ liability insurance
liability insurance
liability insurance
Directors
Directors
The Group maintains insurance cover for Directors’ potential
liability.
assets
and intangible assets
Fixed and intangible
Fixed
assets
assets
and intangible
and intangible
Fixed
Fixed
The movement in fixed and intangible assets during the year are
set out in notes 18 and 19 respectively to the financial statements.
StaffStaffStaffStaff
At 31 December 2015 there were 64 members of staff (2014: 56),
of whom 6 were part-time (2014: 6).
Investment in subsidiaries
Investment in subsidiaries
Investment in subsidiaries
Investment in subsidiaries
Investments in the Company’s subsidiaries are disclosed in note
20 to the financial statements.
Auditors
Auditors
Auditors
Auditors
KPMG Audit LLC, being eligible, have expressed their willingness
to continue in office.
Manx Financial Group PLC
Corporate Governance Report
07
Group Audit, Risk and Compliance Committee
Group Audit, Risk and Compliance Committee
Group Audit, Risk and Compliance Committee
Group Audit, Risk and Compliance Committee
The Group Audit, Risk and Compliance Committee meets at
least three times each year and comprises three Non-executive
Directors, currently Alan Clarke (Chairman), David Gibson and
Neil Duggan. The Executive Directors and representatives from
the internal and external auditors attend by invitation. Its role is
to be responsible for reviewing the integrity of the financial
statements and the balance of information disclosed in the
accompanying Directors’ Report, to review the effectiveness of
internal controls and risk management systems, to monitor and
review the effectiveness of the internal audit function and to
consider and recommend to the Board (for approval by the
members)
the appointment or re-appointment of external
auditors. The Committee reviews and monitors the external
auditors’
and
competence,
independence, ensuring that if they or their associates are
invited to undertake non-audit work it will not compromise auditor
objectivity and independence.
effectiveness
objectivity,
Division of Responsibilities
Division of Responsibilities
Division of Responsibilities
Division of Responsibilities
Code Principle A.2: There should be a clear division of
Code Principle A.2:
Code Principle A.2:
Code Principle A.2:
responsibilities at the head of the company between the running
of the board and the executive responsibility for the running of
the company’s business. No one individual should have
unfettered powers of decision.
GrouGrouGrouGroupppp’’’’s Approach
s Approach
s Approach
s Approach
The offices of Chairman and Chief Executive Officer are distinct
and held by different people. The role of each is set out in their
respective job descriptions. The Chairman is responsible for
leading the Board, ensuring its effectiveness in all aspects of its
role, promoting a culture of openness of debate and
communicating with the Group’s members on behalf of the
Board. The Chief Executive Officer is responsible for managing
the Group’s business and operations within the parameters set
by the Board.
The Chairman
The Chairman
The Chairman
The Chairman
Code Principle A.3:
Code Principle A.3: The Chairman is responsible for leadership
Code Principle A.3:
Code Principle A.3:
of the board and ensuring its effectiveness on all aspects of its
role.
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
The Chairman sets the direction of the Board and promotes a
culture of openness and debate by facilitating the effective
contribution of Non-executive Directors and ensuring
constructive relations between Executive and Non-executive
Directors. The Chairman also ensures that Directors receive
accurate, timely and clear information.
is committed
to best practice
in corporate
The Board
governance. This report explains how the Group has regard to
the principles in the UK Corporate Governance Code issued by
the Financial Reporting Council in June 2010 and updated in
September 2014 (the Code), which was the prevailing guidance
for the year covered by this report.
Report
Corporate Governance Report
Corporate Governance
Report
Report
Corporate Governance
Corporate Governance
As an Isle of Man registered company there is no requirement to
produce a corporate governance report. However, the Board
follows best practice and therefore has prepared such a report.
This report illustrates how the Group would comply with the
principles set out in the UK Corporate Governance Code
principles found in the UK Corporate Governance Code 2014
relating to corporate governance.
Remuneration Committee
Remuneration Committee
Remuneration Committee
Remuneration Committee
The Remuneration Committee usually meets at least twice a
year and comprises of two Non-executive Directors, with the
Chairman of the Board, Chief Executive Officer, Head of Human
Resources and external advisers attending by invitation when
appropriate. It is chaired by Alan Clarke, and is responsible for
determining the remuneration of the Chief Executive Officer, the
Chairman, the Executive Directors, the Company Secretary and
other members of the management. Committee members do not
take part in discussions concerning their own remuneration.
Nomination Committee
Nomination Committee
Nomination Committee
Nomination Committee
The Nomination Committee, which meets at least once a year, is
comprised of the whole Board. It is chaired by the Chairman of
the Board and is responsible for making recommendations to the
Board on matters relating to the composition of the Board,
including Executive and Non-executive Director succession
planning, the appointment of new directors and the election and
re-election of directors.
The Role of the Board
The Role of the Board
The Role of the Board
The Role of the Board
Code Principle A.1: Every company should be headed by an
Code Principle A.1:
Code Principle A.1:
Code Principle A.1:
effective board, which is collectively responsible for the long-
term success of the company.
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
The Board is collectively responsible for the long-term success of
the organisation. Its principal function is to determine the
strategy and policies of the Group within an effective control
framework which enables risk to be assessed and managed. The
Board ensures
financial and human
the necessary
resources are in place for the Group to meet its objectives and
that business and management performances are reviewed.
Furthermore, the Board ensures that the Group operates within
its constitution, relevant legislation and regulation and that
proper accounting records and effective systems of business
control are established, maintained, documented and audited.
that
There are at least four formal Board meetings each year. All
Board members have the benefit, at the Group’s expense, of
liability insurance in respect of their responsibilities as Directors
and have access to independent legal or other professional
advice if required. The Board has a formal schedule of matters
which are reserved for its consideration and it has established
three committees to consider specific issues in greater detail,
being the Group Audit, Risk and Compliance, Remuneration and
Nomination Committees. The Terms of Reference for each of
these Committees is published on the Group’s website.
Manx Financial Group PLC
08
NonNonNonNon----executive Directors
executive Directors
executive Directors
executive Directors
Code Code Code Code Principle A.4
Principle A.4: As part of their role as members of a unitary
Principle A.4
Principle A.4
board, non-executive directors should constructively challenge
and help develop proposals on strategy.
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
Prior to appointment Non-executive Directors are required to
demonstrate that they are able to allocate sufficient time to
undertake their duties.
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
for bringing
The Non-executive Directors are responsible
independent judgement to the discussions held by the Board,
using their breadth of experience and understanding of the
business. Their key
to constructively
challenge and contribute to strategic proposals, and to monitor
performance, resources, and standards of conduct, compliance
and control, whilst providing support to executive management in
developing the Group.
responsibilities are
Development
Development
Development
Development
Code Principle B.4444: All directors should receive induction on
Code Principle B
Code Principle B
Code Principle B
joining the board and should regularly update and refresh their
skills and knowledge.
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
All new Directors undergo formal induction with any training or
development needs being
this process.
Directors continue to attend external and internal seminars and
presentations to maintain and update their knowledge and skills.
identified during
The Composition of the Board
The Composition of the Board
The Composition of the Board
The Composition of the Board
Code Principle B.1: The board and its committees should have
Code Principle B.1:
Code Principle B.1:
Code Principle B.1:
the appropriate balance of skills, experience, independence and
knowledge of the company to enable them to discharge their
respective duties and responsibilities effectively.
Information and Support
Information and Support
Information and Support
Information and Support
Code Principle B.5:
Code Principle B.5: The board should be supplied in a timely
Code Principle B.5:
Code Principle B.5:
manner with information in a form and of a quality appropriate to
enable it to discharge its duties.
s Approach
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
At the year end, the Board comprised four Non-executive
Directors and four Executive Directors. At least two Non-
executive Directors are considered by
to be
independent in character and judgement and to have an
appropriate balance of skills and experience. They are all also
considered to be free of any relationship or circumstances which
could materially interfere with the exercise of their judgement,
impede the provision of constructive challenge to management
and provide assistance with the development of strategy.
the Board
Appointments to the Board
Appointments to the Board
Appointments to the Board
Appointments to the Board
Code Principle B.2:
Code Principle B.2: There should be a formal, rigorous and
Code Principle B.2:
Code Principle B.2:
transparent procedure for the appointment of new directors to
the board.
the Board against
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
The principal purpose of the Nomination Committee is to
undertake the assessment of the balance of skills, experience,
independence and knowledge on
the
requirements of the business, with a view to determining whether
any shortages exist. Having completed the assessment, the
Committee makes recommendations to the Board accordingly.
Appointments to the Board are made on merit, with due regard to
the benefits of diversity, including gender. Within this context, the
paramount objective is the selection of the best candidate,
irrespective of background, and it is the view of the Board that
establishing quotas or targets for the diversity of the Board is not
appropriate.
All Director appointments must be approved by the Company’s
Nominated Adviser, as required under the AIM Rules, before
they are appointed to the Board.
Commitment
Commitment
Commitment
Commitment
Code Principle B.3: All directors should be able to allocate
Code Principle B.3:
Code Principle B.3:
Code Principle B.3:
sufficient time to the company to discharge their responsibilities
effectively.
s Approach
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
The Chairman ensures that the Board receives accurate, timely
and clear information in a form and of sufficient quality to enable
it to fulfil its responsibilities.
All Directors have access to the advice and services of the
Secretary who is responsible for ensuring compliance with all
Board procedures and advising the Board on governance
matters.
Evaluation
Evaluation
Evaluation
Evaluation
Code Principle B.6:
Code Principle B.6: The board should undertake a formal and
Code Principle B.6:
Code Principle B.6:
rigorous annual evaluation of its own performance and that of its
committees and individual directors.
s Approach
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
An internal process exists to evaluate, on an annual basis, the
performance and effectiveness of individual Directors and of the
Board and its Committees. The Non-executive Directors are
evaluated by the Chairman, taking into account the views of
other Directors. Executive Directors are evaluated in accordance
with the appraisal framework for Group employees generally with
the Chief Executive Officer’s appraisal being conducted by the
Chairman, after taking into account the views of other Directors
and his immediate subordinates.
ReReReRe----election
election
election
election
Code Principle B.7:
Code Principle B.7: All directors should be submitted for re-
Code Principle B.7:
Code Principle B.7:
election at regular intervals, subject to continued satisfactory
performance.
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
The Group’s Rules require that all Directors are submitted for
election at the AGM following their first appointment to the Board
and one third of the Directors are subject to retirement by
rotation on an annual basis. As stated above, the Nomination
Committee is responsible for recommending to the Board
whether an individual should be submitted for re-election.
Manx Financial Group PLC
effectiveness
09
reviews and monitors
effectiveness of the internal audit function and to consider and
recommend to the Board (for approval by the members) the
re-appointment of external auditors. The
appointment or
the external auditors’
Committee
objectivity, competence, effectiveness and
independence,
ensuring that if they or their associates are invited to undertake
non-audit work it will not compromise auditor objectivity and
independence. The activities of the Group’s internal audit
function, which is undertaken in-house, are overseen by the
Executives and have direct access to the Committee Chairman.
Remuneration
Remuneration
Remuneration
Remuneration
Code Principle D.1: Levels of remuneration should be sufficient
Code Principle D.1:
Code Principle D.1:
Code Principle D.1:
to attract, retain and motivate directors of the quality required to
run the company successfully, but a company should avoid
paying more than is necessary for this purpose. A significant
proportion of executive directors’ remuneration should be
structured so as to link rewards to corporate and individual
performance.
Code Principle D.2:
Code Principle D.2: There should be a formal and transparent
Code Principle D.2:
Code Principle D.2:
procedure for developing policy on executive remuneration and
for fixing the remuneration packages of individual directors. No
director should be involved in deciding his or her own
remuneration.
s Approach
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
The Report on Directors’ Remuneration, prepared by the
Chairman of the Group’s Remuneration Committee, is to be
found on pages 10 and 11 and explains how the Group complies
with the Code Principles relating to remuneration. Details of
Directors’ Emoluments during 2015 can be found on page 11.
Dialogue with Shareholders
Dialogue with Shareholders
Dialogue with Shareholders
Dialogue with Shareholders
Code Principle E.1:
Code Principle E.1: There should be a dialogue with
Code Principle E.1:
Code Principle E.1:
shareholders based on the mutual understanding of objectives.
The board as a whole has responsibility for ensuring that a
satisfactory dialogue with shareholders takes place.
is owned by both
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
institutional
The Group
informed of
All shareholders are kept
shareholders.
developments and feedback is encouraged both at the AGM and
through communication on the Group’s website.
individual and
Constructive Use of the AGM
Constructive Use of the AGM
Constructive Use of the AGM
Constructive Use of the AGM
Code Principle E.2: The board should use the AGM to
Code Principle E.2:
Code Principle E.2:
Code Principle E.2:
communicate with investors and to encourage their participation.
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
Each year the Group sends details of the AGM, including
appointment of proxy and voting forms, to members who are
eligible to vote.
Approval
Approval
Approval
Approval
This report was approved by the Board of Directors on 29
February 2016 and signed on its behalf by:
Jim Mellon
Jim Mellon
Jim Mellon
Jim Mellon
Executive Chairman
29 February 2016
Financial and Business
Reporting
Financial and Business Reporting
Reporting
Reporting
Financial and Business
Financial and Business
Code Principle C.1:
Code Principle C.1: The board should present a fair, balanced
Code Principle C.1:
Code Principle C.1:
and understandable assessment of the company’s position and
prospects.
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
s Approach
The Board confirms that the annual report and accounts, taken
as a whole, is fair, balanced and understandable and provides
the information necessary for members to assess the Group’s
performance, business model and strategy. The responsibilities
of the Directors in relation to the preparation of the Group’s
accounts are set out on page 12. The Chairman’s Statement on
pages 2 and 3 provide a detailed review of the Group’s business
activities and future prospects.
Risk Management and Internal Control
Risk Management and Internal Control
Risk Management and Internal Control
Risk Management and Internal Control
Code Principle C.2:
Code Principle C.2: The board is responsible for determining the
Code Principle C.2:
Code Principle C.2:
nature and extent of the significant risks it is willing to take in
achieving its strategic objectives. The board should maintain
sound risk management and internal control systems.
responsible
tolerance. Senior management are
s Approach
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
The Board is responsible for determining a framework for risk
management and control, to include the Group’s risk appetite
and
for
designing, operating and monitoring risk management and
internal control processes in line with the risk appetite and
tolerance while
the Group Audit Risk and Compliance
Committee, on behalf of the Board, are responsible for reviewing
the adequacy and effective operation of these processes. The
role of the Group Audit, Risk and Compliance Committee is
described previously, and provides the Board with independent
assurance that the Group is operating specifically in accordance
with the risk appetite parameters determined and approved by
the Board and to ensure that the outcomes for the Group’s
various activities are in line with those parameters.
The system of internal control overall is designed to enable the
Group to achieve its corporate objectives within the Board’s pre-
determined risk appetite, not to eliminate risk. The internal audit
function, performed
independent and
objective assurance that these processes are appropriate and
effectively applied.
in-house, provides
Audit Committee and Auditors
Audit Committee and Auditors
Audit Committee and Auditors
Audit Committee and Auditors
Code Principle C.3:
Code Principle C.3: The board should establish formal and
Code Principle C.3:
Code Principle C.3:
transparent arrangements for considering how they should apply
the corporate reporting and risk management and internal control
principles and for maintaining an appropriate relationship with
the company’s auditors.
s Approach
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
Currently, the Group Audit, Risk and Compliance Committee
comprises of three Non-executive Directors. The Chairman of
the Board is not a member of the Committee. The Board is
satisfied that the Committee is comprised of members with
financial experience who are capable of
recent relevant
discharging their duties and responsibilities. The role of the
Committee is to review the integrity of the financial statements
and the balance of information disclosed in the accompanying
Directors’ Report, to review the effectiveness of internal controls
and risk management systems, to monitor and review the
Manx Financial Group PLC
Directors’ Remuneration Report
10
Report
Remuneration Report
Directors’’’’ Remuneration
Directors
Report
Report
Remuneration
Remuneration
Directors
Directors
As an Isle of Man registered company there is no requirement to
produce a directors’ remuneration report. However, the Board
follows best practice and therefore has prepared such a report.
This report illustrates how the Group would comply with the
principles set out in the UK Corporate Governance Code
principles found in the UK Corporate Governance Code 2014
relating to Directors’ remuneration. The Group has adopted a
Remuneration Policy. This Policy is reviewed periodically by the
Remuneration Committee.
The Level and Components of Executive Director Remuneration
The Level and Components of Executive Director Remuneration
The Level and Components of Executive Director Remuneration
The Level and Components of Executive Director Remuneration
Code Principle D.1:
Code Principle D.1:
Code Principle D.1:
Code Principle D.1:
Levels of remuneration should be sufficient to attract, retain and
motivate Directors of the quality required to run the company
successfully, but a company should avoid paying more than is
necessary for this purpose. A significant proportion of Executive
Directors’ remuneration should be structured so as to link
rewards to corporate and individual performance.
GroupGroupGroupGroup’’’’s Approach:
s Approach:
s Approach:
s Approach:
The Group’s remuneration policy reflects the Group’s business
strategy and objectives as well as sustained and long-term value
creation for shareholders. In addition, the policy aims to be fair
and provide equality of opportunity, ensuring that:
•
the Group is able to attract, develop and retain high-
performing and motivated employees in the competitive local
and wider UK markets;
• employees are offered a competitive remuneration package
to encourage enhanced performance and are, in a fair and
responsible manner, rewarded for their individual contribution
to the success of the Group;
reflects our culture and values; and
there is full transparency of the Group’s Remuneration
Policy.
•
•
In line with the Board’s approach, which reflects that adopted
within
the Group’s
Remuneration Policy provides for the reward of Executive
Directors through salaries and other benefits.
organisations,
comparable
other
Executive Directors
Emoluments
Executive Directors’’’’ Emoluments
Emoluments
Emoluments
Executive Directors
Executive Directors
The
their
remuneration
responsibilities. It comprises basic salary, performance related
variable pay when this is considered appropriate, and various
benefits detailed below.
for Executive Directors
reflects
Performance related payments are not pensionable.
As with staff generally, whose salaries are subject to annual
reviews, basic salaries payable to Executive Directors are
reviewed each year with reference to jobs carrying similar
responsibilities in comparable financial organisations, market
conditions generally and local employment competition in view of
the Group’s geographical position.
the Group and
The Group operates a non-contractual discretionary annual
performance
trading
related pay scheme based on
the
performance of
individual employee’s
performance assessed for the period under review in a manner
which promotes sound risk management and does not promote
excess risk taking. The non-contractual discretionary annual
performance related pay scheme may be paid in one year but
that does not confer any entitlement in future years.
the
Performance assessments are conducted annually to determine
the performance rating of each employees’ achievements
against a mix targets set and agreed at the beginning of each
year between the employee and their manager. No incentives
are paid to employees or executives where the performance
rating reflects below an agreed expected level for the role
employed.
The non-contractual discretionary annual performance related
pay scheme may be disbursed as a cash payment through
payroll, share based instruments (including share options) or a
mixture of both. An element of deferment to align the interests of
the employee to the longer term performance of the Group may
also be included.
Financial Advisors are salaried and commission is calculated on
a pre-agreed percentage over target which is set at between 2 to
3 times annual gross salary depending on the size of the
Advisor’s client base and their historical performance. Each
Financial Advisor is set objectives at the beginning of the year
including a 100% pass in all compliance requirements. Where
indemnified commission is paid and the underlying client policy
lapses and the commission is clawed back then this is reviewed
by an Executive Director in order to monitor trends and is then
clawed back from the relevant Financial Advisor.
the Group
Where
guaranteed
performance related pay, the contractual conditions must be
considered by the Remuneration Committee.
contractually
operates
Contractual Terms
Executive Directors’’’’ Contractual Terms
Executive Directors
Contractual Terms
Contractual Terms
Executive Directors
Executive Directors
In keeping with current recommended practice, the standard
terms for Executive Director appointments include a contractual
notice period of 6 months.
Remuneration
executive Directors’’’’ Remuneration
NonNonNonNon----executive Directors
Remuneration
Remuneration
executive Directors
executive Directors
Non-executive Directors do not receive any benefits other than
their fees and travelling expenses for which they are reimbursed.
The level of fees payable to Non-executive Directors is assessed
using benchmarks
financial
organisations.
from a group of comparable
Manx Financial Group PLC
11
The Procedure for Determining Remuneration
The Procedure for Determining Remuneration
The Procedure for Determining Remuneration
The Procedure for Determining Remuneration
Code Principle D.2:
Code Principle D.2: There should be a formal and transparent procedure for developing policy on Executive remuneration and for
Code Principle D.2:
Code Principle D.2:
fixing the remuneration packages of individual Directors. No Director should be involved in deciding his or her own remuneration.
GroupGroupGroupGroup’’’’s Approach:
s Approach:
s Approach:
s Approach:
The Remuneration Committee, comprising two Non-executive Directors, is responsible for setting the remuneration of the Executive
Directors and is chaired by Alan Clarke. The Committee also sets the additional payments for the Chairman of the Board, with
Committee members not taking part in discussions concerning their own remuneration. The basic Non-executive Director fee is set by
the Executive Directors. The Chairman of the Committee reports at the Board meeting following a Committee meeting.
It is the view of the Committee that Directors’ remuneration for the year has been in accordance with the Group’s stated
Remuneration Policy and on behalf of the Committee, I recommend that you endorse this report. An analysis of Directors’
emoluments is as follows:
emoluments
Directors’’’’ emoluments
Directors
emoluments
emoluments
Directors
Directors
Executives
Executives
Executives
Executives
Denham Eke
Douglas Grant
Juan Kelly
Jim Mellon
NonNonNonNon----Executives
Executives
Executives
Executives
John Banks1
Alan Clarke
Neil Duggan2
David Gibson
Don McCrickard3
Remuneration/
Fees
£
Performance
Related Pay
£
25,000
146,889
150,758
25,000
25,000
38,958
30,000
38,958
18,750
-
27,300
26,700
-
-
-
-
-
-
Pension
£
-
14,677
15,057
-
-
-
-
-
-
2012012012015555
Total
Total
Total
Total
££££
25,000
25,000
25,000
25,000
188,866
188,866
188,866
188,866
192,515
192,515
192,515
192,515
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
38,958
38,958
38,958
38,958
30,000
30,000
30,000
30,000
38,958
38,958
38,958
38,958
18,750
18,750
18,750
18,750
2014
Total
£
25,000
184,754
190,885
25,000
10,417
37,500
-
37,500
37,500
Aggregate emoluments
499,313
54,000
29,734
3,047
585858583,047
3,047
3,047
548,556
1
2
3
John Banks was appointed on 5 August 2014.
Neil Duggan was appointed on 1 July 2015.
Don McCrickard retired on 30 June 2015.
Approval
Approval
Approval
Approval
This report was approved by the Board of Directors on 29 February 2016 and signed on its behalf by:
Alan Clarke
Alan Clarke
Alan Clarke
Alan Clarke
Chairman of the Remuneration Committee
29 February 2016
Manx Financial Group PLC
Statement of Directors’ Responsibilities
in respect of the Directors’ Report and the financial statements
12
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Parent
Company’s transactions and disclose with reasonable accuracy at
any time its financial position. They have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website.
The Directors are responsible for preparing the Directors’ Report
and the financial statements in accordance with applicable law and
regulations. In addition, the Directors, as required by AIM, have
elected to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU).
The financial statements are required to give a true and fair view of
the state of affairs of the Group and Parent Company and of the
profit or loss of the Group for that year.
In preparing these financial statements, the Directors are required
to:
(cid:1)
select suitable accounting policies and then apply them
consistently;
(cid:1) make judgements and estimates that are reasonable and
prudent;
(cid:1)
(cid:1)
state whether they have been prepared in accordance
with IFRS as adopted by the EU; and
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and Parent Company will continue in business.
Manx Financial Group PLC
Report of the Independent Auditors
13
Emphasis of Matter –––– Reclaim of Value Added Tax (VAT)
Reclaim of Value Added Tax (VAT)
Emphasis of Matter
Reclaim of Value Added Tax (VAT)
Reclaim of Value Added Tax (VAT)
Emphasis of Matter
Emphasis of Matter
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosures made
in note 21 to the financial statements concerning a reclaim of VAT in
relation to a revised Partial Exemption Special Method. The Group’s
total exposure in relation to this matter is £589,000, comprising a
debtor balance of £466,000 in respect of retrospective VAT and an
amount of £123,000 reclaimed under the revised method in the period
from Q4 2011 to Q3 2012. As detailed in note 21, the ultimate
recovery of the debtor balance and the decision as to whether the VAT
already reclaimed will be required to be repaid rests on the outcome of
discussions with the Isle of Man Government Customs and Excise
Division (“C&E”), which in turn will take into account the final resolution
of the dispute between Volkswagen Financial Services (UK) Limited v
HM Revenue & Custom (“the VWFS case”). Due to the inherent
uncertainty associated with the final resolution of the VWFS case and
its impact on discussions with C&E, the amount of the VAT debtor
balance recovered and the amount of the sum already reclaimed that
will be required to be repaid may differ materially from the amounts
stated in the financial statements.
KPKPKPKPMMMMG Audit LLC
G Audit LLC
G Audit LLC
G Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
1 March 2016
Report of the Independent Auditors, KPMG Audit LLC
, to the members
Report of the Independent Auditors, KPMG Audit LLC, to the members
, to the members
, to the members
Report of the Independent Auditors, KPMG Audit LLC
Report of the Independent Auditors, KPMG Audit LLC
of Manx Financial Group PLC
of Manx Financial Group PLC
of Manx Financial Group PLC
of Manx Financial Group PLC
We have audited the financial statements of Manx Financial Group
PLC for the year ended 31 December 2015 which comprise the
Consolidated Income Statement, Consolidated Statement of Other
Comprehensive Income, the Consolidated and Parent Company
Statements of Financial Position, the Consolidated Statement of Cash
Flows and the Consolidated and Parent Company Statements of
Changes in Equity and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRS) as adopted by
the EU.
This report is made solely to the Company’s members, as a body. Our
audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them in
an Auditors’ report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a body, for
our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditors
Respective responsibilities of Directors and Auditors
Respective responsibilities of Directors and Auditors
Respective responsibilities of Directors and Auditors
As explained more fully in the Directors’ Responsibilities Statements
set out on page 12, the Directors are responsible for the preparation of
financial statements that give a true and fair view. Our responsibility is
to audit, and express an opinion on, the financial statements in
accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors.
of the audit of the financial statements
Scope of the audit of the financial statements
Scope
of the audit of the financial statements
of the audit of the financial statements
Scope
Scope
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 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.
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.
Opinion on the financial statements
Opinion on the financial statements
Opinion on the financial statements
Opinion on the financial statements
In our opinion the financial statements:
(cid:1) give a true and fair view of the state of the Group’s and Parent
Company’s affairs as at 31 December 2015 and of the Group’s
profit for the year then ended; and
(cid:1)
have been properly prepared in accordance with IFRS as
adopted by the EU.
Manx Financial Group PLC
Consolidated Income Statement
14
For the year ended 31 December
For the year ended 31 December
For the year ended 31 December
For the year ended 31 December
Interest income
Interest expense
Net interest income
Net interest income
Net interest income
Net interest income
Fee and commission income
Profit / (loss) on joint venture
Fee and commission expense
Commission sharing schemes
Net trading income
Net trading income
Net trading income
Net trading income
Other operating income
Operating income
Operating income
Operating income
Operating income
Personnel expenses
Other expenses
Provision for impairment on loan assets
Depositors’ Compensation Scheme recovery
Depreciation
Amortisation
Realised gains on available for sale financial assets
Unrealised gain / (loss) on financial assets carried at fair value
Gain on acquisition of subsidiary
Bargain purchase
Profit before tax payable
Profit before tax payable
Profit before tax payable
Profit before tax payable
Tax payable
Profit for the year
Profit for the year
Profit for the year
Profit for the year
Basic earnings per share (pence)
Diluted earnings per share (pence)
The notes on pages 19 to 48 form part of these financial statements.
The Directors believe that all results derive from continuing activities.
Notes
6
10
20
3(t)
7
8
9
18
19
16
15
20
20
10
11
12
12
2012012012015555
000
££££000
000
000
2014
£000
17,556
17,556
17,556
17,556
(3,002)
(3,002)
(3,002)
(3,002)
14,554
14,554
14,554
14,554
1,51,51,51,527272727
28282828
(984)
(984)
(984)
(984)
(6,196666))))
(6,19
(6,19
(6,19
8,98,98,98,929292929
166166166166
9,9,9,9,095095095095
(3,5(3,5(3,5(3,515151515))))
(2,3(2,3(2,3(2,385858585))))
(1,(1,(1,(1,059059059059))))
10101010
(226)
(226)
(226)
(226)
(44)
(44)
(44)
(44)
80808080
30303030
28282828
295295295295
2,2,2,2,309309309309
(207)
(207)
(207)
(207)
2,2,2,2,102102102102
2.02.02.02.06666
1.21.21.21.29999
13,634
(2,809)
10,825
1,276
(2)
(1,102)
(3,749)
7,248
97
7,345
(2,931)
(1,950)
(550)
11
(228)
-
32
(1)
-
-
1,728
(139)
1,589
1.56
0.98
Manx Financial Group PLC
Consolidated Statement of Other Comprehensive Income
15
Notes
2012012012015555
000
££££000
000
000
2014
£000
16
26
12
12
----
19191919
2,2,2,2,121121121121
2.02.02.02.08888
1.1.1.1.30303030
6
(173)
1,422
1.39
0.89
For the year ended 31 December
For the year ended 31 December
For the year ended 31 December
For the year ended 31 December
Other comprehensive income:
Other comprehensive income:
Other comprehensive income:
Other comprehensive income:
Items that will be reclassified to profit or loss
Items that will be reclassified to profit or loss
Items that will be reclassified to profit or loss
Items that will be reclassified to profit or loss
Available for sale gains taken to equity
Items that will never be reclassified to profit or loss
Items that will never be reclassified to profit or loss
Items that will never be reclassified to profit or loss
Items that will never be reclassified to profit or loss
Actuarial gains / (losses) on defined benefit pension scheme taken to equity
for the period attributable to owners
otal comprehensive income for the period attributable to owners
TTTTotal comprehensive income
for the period attributable to owners
for the period attributable to owners
otal comprehensive income
otal comprehensive income
Basic earnings per share (pence)
Diluted earnings per share (pence)
The notes on pages 19 to 48 form part of these financial statements.
Manx Financial Group PLC
Consolidated and Company Statement of Financial Position
16
As at 31 December
As at 31 December
As at 31 December
As at 31 December
Assets
Assets
Assets
Assets
Cash and cash equivalents
Financial assets at a fair value through profit or loss
Available for sale financial instruments
Loans and advances to customers
Commissions receivable
Property, plant and equipment
Intangible assets
Investment in Group undertakings
Amounts due from Group undertakings
Trade and other receivables
Investment in joint venture
Subordinated loan
Deferred tax asset
Goodwill
Total assets
Total assets
Total assets
Total assets
Liabilities
Liabilities
Liabilities
Liabilities
Customer accounts
Creditors and accrued charges
Block creditors
Amounts owed to Group undertakings
Loan notes
Pension liability
Total liabilities
Total liabilities
Total liabilities
Total liabilities
Equity
Equity
Equity
Equity
Called up share capital
Profit and loss account
Total equity
Total equity
Total equity
Total equity
Total liabilities and equity
Total liabilities and equity
Total liabilities and equity
Total liabilities and equity
Notes
14
15
16
17
18
19
20
20
21
20
20
11
20
22
23
24
20
25
26
27
Group
Company
2012012012015555
££££000000000000
7,156
7,156
7,156
7,156
77777777
15,981
15,981
15,981
15,981
101010101111,,,,356356356356
333366661111
872872872872
398398398398
----
----
1,1,1,1,373737377777
----
----
83838383
2,344
2,344
2,344
2,344
111130303030,,,,000000005555
106,328
106,328
106,328
106,328
3,343,343,343,343333
588588588588
----
7,265
7,265
7,265
7,265
334334334334
111111117,857,857,857,858888
2014
£000
6,123
47
18,775
89,338
326
605
-
-
-
1,166
499
-
284
2,344
119,507
100,259
1,715
-
-
7,165
388
109,527
2012012012015555
££££000000000000
100100100100
----
----
----
----
247247247247
----
12,072
12,072
12,072
12,072
285285285285
98989898
----
4,078
4,078
4,078
4,078
----
----
16,880
16,880
16,880
16,880
----
12121212
----
2,2,2,2,874874874874
7,265
7,265
7,265
7,265
----
10,151
10,151
10,151
10,151
2014
£000
-
-
-
-
-
-
-
12,072
350
62
-
4,078
-
-
16,562
-
20
-
2,599
7,165
-
9,784
18,933
18,933
18,933
18,933
(6,(6,(6,(6,787878786666))))
12,12,12,12,111144447777
18,933
(8,953)
9,980
130,005555
130,00
130,00
130,00
119,507
18,933
18,933
18,933
18,933
(12,204)
(12,204)
(12,204)
(12,204)
6,729
6,729
6,729
6,729
16,880
16,880
16,880
16,880
18,933
(12,155)
6,778
16,562
The financial statements were approved by the Board of Directors on 29 February 2016 and signed on its behalf by:
Jim Mellon
Jim Mellon
Jim Mellon
Jim Mellon
Executive Chairman
Denham Eke
Denham Eke
Denham Eke
Denham Eke
Chief Executive Officer
Douglas Grant
Douglas Grant
Douglas Grant
Douglas Grant
Group Finance Director
The notes on pages 19 to 48 form part of these financial statements.
Manx Financial Group PLC
Consolidated Statement of Cash Flows
For the year ended 31 December
For the year ended 31 December
For the year ended 31 December
For the year ended 31 December
Notes
RECONCILIATION OF
BEFORE TAXATION TO OPERATING CASH FLOWS
PROFIT BEFORE TAXATION TO OPERATING CASH FLOWS
RECONCILIATION OF PROFIT
BEFORE TAXATION TO OPERATING CASH FLOWS
BEFORE TAXATION TO OPERATING CASH FLOWS
PROFIT
PROFIT
RECONCILIATION OF
RECONCILIATION OF
Profit before tax on continuing activities
Unrealised (gain) / loss on financial assets carried at fair value
Gain on disposal of property, plant and equipment
(Profit) / loss on joint venture
Gain on acquisition of subsidiary
Depreciation
Amortisation
Bargain purchase
Actuarial loss on defined benefit pension scheme taken to equity
(Decrease) / increase in pension liability
Share-based payment expense
Increase in trade and other receivables
Increase in trade and other payables
Increase in commission debtors
20
18
19
20
26
26
27
2012012012015555
££££000000000000
2,32,32,32,309090909
(30)
(30)
(30)
(30)
(12)
(12)
(12)
(12)
((((28282828))))
(28)
(28)
(28)
(28)
226226226226
44444444
((((295295295295))))
19191919
(54)
(54)
(54)
(54)
46464646
((((222208080808))))
1,1,1,1,168168168168
(3(3(3(35555))))
17
2014
£000
1,728
1
(5)
2
-
228
-
-
(173)
136
24
(152)
934
(37)
Net cash inflow from trading activities
Increase in loans and advances to customers
Increase in deposit accounts
3,3,3,3,122122122122
2,686
(1(1(1(11,369
1,369))))
1,369
1,369
6,069
6,069
6,069
6,069
(13,519)
22,144
from operating activities
/ inflow from operating activities
Cash (outflow) / inflow
Cash (outflow)
from operating activities
from operating activities
/ inflow
/ inflow
Cash (outflow)
Cash (outflow)
2,178))))
((((2,178
2,178
2,178
11,311
CASH FLOW STATEMENT
CASH FLOW STATEMENT
CASH FLOW STATEMENT
CASH FLOW STATEMENT
Cash
flows from operating activities
Cash flows from operating activities
flows from operating activities
flows from operating activities
Cash
Cash
Cash (outflow) / inflow from operating activities
Taxation paid
from operating activities
/ inflow from operating activities
Net cash (outflow) / inflow
Net cash (outflow)
from operating activities
from operating activities
/ inflow
/ inflow
Net cash (outflow)
Net cash (outflow)
Cash inflow
from investing activities
/ (outflow) from investing activities
Cash inflow / (outflow)
from investing activities
from investing activities
/ (outflow)
/ (outflow)
Cash inflow
Cash inflow
Purchase of property, plant and equipment
Purchase of intangible assets
Acquisition of Incahoot Limited business
Sale / (purchase) of available for sale financial instruments
Sale of property, plant and equipment
Cash acquired on acquisition of subsidiary
Investment in joint venture
from investing activities
/ (outflow) from investing activities
Net cash inflow / (outflow)
Net cash inflow
from investing activities
from investing activities
/ (outflow)
/ (outflow)
Net cash inflow
Net cash inflow
Cash flows from financing activities
Cash flows from financing activities
Cash flows from financing activities
Cash flows from financing activities
Issue of loan notes
Net cash inflow from financing activities
Net cash inflow from financing activities
Net cash inflow from financing activities
Net cash inflow from financing activities
Increase in cash and cash equivalents
Increase in cash and cash equivalents
Increase in cash and cash equivalents
Increase in cash and cash equivalents
Included in cash flows are:
Included in cash flows are:
Included in cash flows are:
Included in cash flows are:
Interest received – cash amounts
Interest paid – cash amounts
The notes on pages 19 to 48 form part of these financial statements.
18
19
20
16
20
20
25
2,178))))
((((2,178
2,178
2,178
(6)(6)(6)(6)
11,311
-
2,184))))
((((2,184
2,184
2,184
11,311
(493)
(493)
(493)
(493)
((((21212121))))
(101)
(101)
(101)
(101)
2,794
2,794
2,794
2,794
12121212
926926926926
----
(208)
-
-
(9,769)
7
-
(501)
3,117
3,117
3,117
3,117
(10,471)
100100100100
100100100100
1,01,01,01,033333333
1,100
1,100
1,940
17,203
17,203
17,203
17,203
(2,906)
(2,906)
(2,906)
(2,906)
13,360
(2,802)
Manx Financial Group PLC
Consolidated and Company Statement of Changes in Equity
18
31 December
For the year ended 31 December
For the year ended
31 December
31 December
For the year ended
For the year ended
GroupGroupGroupGroup
Balance as at 1 January
Profit for the year
Other comprehensive income
Transactions with owners:
Transactions with owners:
Transactions with owners:
Transactions with owners:
Share-based payment expense (see note 27)
Balance as at 31 December
For the
31 December
year ended 31 December
For the year ended
31 December
31 December
year ended
year ended
For the
For the
Company
Company
Company
Company
Balance as at 1 January
(Loss) / profit for the year
Transactions with owners:
Transactions with owners:
Transactions with owners:
Transactions with owners:
Share-based payment expense (see note 27)
Balance as at 31 December
The notes on pages 19 to 48 form part of these financial statements.
Share
Share
Share
Share
apital
CCCCapital
apital
apital
££££000000000000
18,933
18,933
18,933
18,933
----
----
----
18,933
18,933
18,933
18,933
Share
Share
Share
Share
CCCCapital
apital
apital
apital
££££000000000000
18,933
18,933
18,933
18,933
----
Retained
Retained
Retained
Retained
arningssss
EEEEarning
arning
arning
££££000000000000
(8,953)
(8,953)
(8,953)
(8,953)
2,2,2,2,101010102222
19191919
46464646
(6,(6,(6,(6,787878786666))))
Retained
Retained
Retained
Retained
arningssss
EEEEarning
arning
arning
££££000000000000
(12,155)
(12,155)
(12,155)
(12,155)
(95)
(95)
(95)
(95)
----
46464646
18,933
18,933
18,933
18,933
12,204))))
((((12,204
12,204
12,204
2012012012015555
££££000000000000
9,980
9,980
9,980
9,980
2,2,2,2,101010102222
19191919
46464646
12,112,112,112,144447777
2012012012015555
££££000000000000
6,778
6,778
6,778
6,778
(95)
(95)
(95)
(95)
46464646
6,729
6,729
6,729
6,729
2014
£000
8,534
1,589
(167)
24
9,980
2014
£000
6,356
398
24
6,778
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
19
1.1.1.1. Reporting entity
Reporting entity
Reporting entity
Reporting entity
Manx Financial Group PLC is a company incorporated in the Isle of Man. The consolidated financial statements of Manx Financial
Group PLC (the “Company”) for the year ended 31 December 2015 comprise the Company and its subsidiaries (the “Group”).
A summary of the principal accounting policies, which have been applied consistently, are set out below.
2.2.2.2. Basis of preparation
Basis of preparation
Basis of preparation
Basis of preparation
(a)(a)(a)(a) Statement of compliance
Statement of compliance
Statement of compliance
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as adopted by the European Union (“EU”) and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations
applicable to companies reporting under IFRS, including International Accounting Standards (“IAS”).
The Group has continued to apply the accounting policies used for the 2014 annual report, with the exception of those detailed below.
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to
other standards, with a date of initial application of 1 January 2015:
(cid:1) Defined Benefit Plans: Employee Contributions (Amendments to IAS 19);
(cid:1) Annual Improvements to IFRS 2010 – 2012 Cycle; and
(cid:1) Annual Improvements to IFRS 2011 – 2013 Cycle.
No significant changes followed the implementation of these standards and amendments.
(b)(b)(b)(b) Basis of measurement
Basis of measurement
Basis of measurement
Basis of measurement
The financial statements are prepared on a historical cost basis except:
(cid:1)
financial instruments at fair value through profit or loss and available for sale financial instruments are measured at fair
value; and
(cid:1) equity settled share-based payment arrangements are measured at fair value.
(c)(c)(c)(c) Functional and presentation currency
Functional and presentation currency
Functional and presentation currency
Functional and presentation currency
These financial statements are presented in pounds sterling, which is the Group’s functional currency. Except as indicated, financial
information presented in pounds sterling has been rounded to the nearest thousand. All subsidiaries of the Group have pounds
sterling as their functional currency.
(d)(d)(d)(d) Use of estimates and judgements
Use of estimates and judgements
Use of estimates and judgements
Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that
have the most significant effect on the amounts recognised in the financial statements are described in note 3(p).
3.3.3.3. Significant accounting policies
Significant accounting policies
Significant accounting policies
Significant accounting policies
(a)(a)(a)(a) Basis of consolidation of subsidiaries
Basis of consolidation of subsidiaries
Basis of consolidation of subsidiaries
Basis of consolidation of subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has power over an investee, exposure or rights to
variable returns from its involvement with the investee and the ability to use its power to affect those returns. In assessing control,
potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in
the consolidated financial statements from the date that control commences until the date that control ceases.
Intra-Group balances, income and expenses and unrealised losses or gains arising from intra-Group transactions, are eliminated in
preparing the consolidated financial statements.
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
20
3.3.3.3. Significant accounting policies
(continued)
Significant accounting policies (continued)
Significant accounting policies
(continued)
(continued)
Significant accounting policies
(b)(b)(b)(b) Accounting for
business combinations
Accounting for business combinations
business combinations
business combinations
Accounting for
Accounting for
Business combinations are accounted for by using the acquisition method as at the acquisition date, which is the date on which
control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are
exercisable.
The Group measures goodwill at the acquisition date as:
(cid:1)
(cid:1)
(cid:1)
(cid:1)
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus
if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in the income statement.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are
generally recognised in the income statement.
(c)(c)(c)(c) Property, plant and equipment
and intangible assets
Property, plant and equipment and intangible assets
and intangible assets
and intangible assets
Property, plant and equipment
Property, plant and equipment
Items of property, plant and equipment are stated at historical cost less accumulated depreciation (see below). Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
The assets’ residual values and useful economic lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s
carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
When parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate
items of property, plant and equipment.
An intangible asset is an identifiable non-monetary asset without physical substance. An item is identifiable if it is separable or arises
from contractual or other legal rights. The initial measurement of an intangible asset depends on whether it has been acquired
separately or has been acquired as part of a business combination.
Intangible assets that are acquired by an entity and having finite useful lives are measured at cost less accumulated amortisation and
any accumulated impairment losses.
Intangible assets acquired as part of a business combination, with an indefinite useful live are measured at fair value. Intangible
assets with indefinite useful lives are not amortised but instead are subject to impairment testing at least annually.
and amortisation
Depreciation and amortisation
Depreciation
and amortisation
and amortisation
Depreciation
Depreciation
Assets are depreciated or amortised on a straight-line basis, so as to write off the book value over their estimated useful lives. The
useful lives of property, plant and equipment and intangibles are as follows:
Property, plant and equipment
Leasehold improvements
Equipment
Vehicles
Furniture
Intangible assets
Customer contracts
Business intellectual property rights
Website development costs
to expiration of the lease
4-5 years
4 years
10 years
to expiration of the agreement
indefinite
indefinite
Manx Financial Group PLC
21
3.3.3.3. Significant accounting policies (continued)
Significant accounting policies (continued)
Significant accounting policies (continued)
Significant accounting policies (continued)
(d)(d)(d)(d) Financial assets
Financial assets
Financial assets
Financial assets
Management have determined the classification of the Group’s financial assets into one of the following categories:
Loans and receivables
Loans and receivables
Loans and receivables
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money directly to a customer with no intention of trading the receivable. This
classification includes advances made to customers under HP and finance lease agreements, litigation, finance loans, personal loans,
block discounting, secured commercial loans and stocking plans.
Loans are recognised when cash is advanced to the borrowers. Loans and receivables are carried at amortised cost using the
effective interest rate method with all movements being recognised in the income statement after taking into account provision for
impairment losses (see note 3(e)).
Financial assets at fair
value through profit or loss
Financial assets at fair value through profit or loss
value through profit or loss
value through profit or loss
Financial assets at fair
Financial assets at fair
A financial asset is classified in this category if it is acquired principally for the purpose of selling in the short term or if so designated
by management. The fair value of the financial asset at fair value through profit or loss is based on the quoted bid price at the
reporting date.
financial instruments
Available for sale financial instruments
Available for sale
financial instruments
financial instruments
Available for sale
Available for sale
Available for sale investments are non-derivative investments that are designated as available for sale or are not classified as another
category of financial assets. Available for sale investments are carried at fair value.
Dividend income is recognised in the income statement when the Group becomes entitled to the dividend. Other fair value changes
are recognised in other comprehensive income until the investment is sold or impaired, whereupon the cumulative gains and losses
previously recognised in other comprehensive income are recognised in the income statement.
Investments in subsidiary undertakings
Investments in subsidiary undertakings
Investments in subsidiary undertakings
Investments in subsidiary undertakings
Investments in subsidiary undertakings in the parent company statement of financial position are measured at cost less any provision
for impairment.
Fair value
Fair value
Fair value
Fair value
The fair value hierarchy is applied to all financial assets. Refer to note 4(c) for further information.
Impairment of financial assets
Impairment of financial assets
Impairment of financial assets
Impairment of financial assets
(e)(e)(e)(e)
The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is
impaired. This arises if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the
financial asset, or group of financial assets, that can be reliably estimated. Impairment losses are recognised in the income statement
for the year.
Objective evidence that financial assets are impaired can include default or delinquency by a borrower, restructuring of a loan or
advance by the Group on terms that the Group would not otherwise consider, indications that a borrower or issuer will enter
bankruptcy or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers.
Loans and other receivables are reviewed for impairment where there are repayment arrears and doubt exists regarding
recoverability. The impairment allowance is based on the level of arrears together with an assessment of the expected future cash
flows, and the value of any underlying collateral after taking into account any irrecoverable interest due. Amounts are written off when
it is considered that there is no further prospect of recovery.
Where past experience has indicated that, over time, a particular category of financial assets has suffered a trend of impairment
losses, a collective impairment allowance is made for expected losses to reflect the continuing historical trend.
(f)(f)(f)(f) Cash and c
ash equivalents
Cash and cash equivalents
ash equivalents
ash equivalents
Cash and c
Cash and c
For the purpose of the statement of cash flows, cash and cash equivalents comprise cash and deposit balances with an original
maturity date of three months or less.
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
22
3.3.3.3. Significant accounting policies (continued)
Significant accounting policies (continued)
Significant accounting policies (continued)
Significant accounting policies (continued)
(g)(g)(g)(g) Financial liabilities
Financial liabilities
Financial liabilities
Financial liabilities
Financial liabilities consist of customer deposit accounts, other creditors, loan notes and accrued charges. Customer accounts are
recognised immediately upon receipt of cash from the customer. Interest payable on customer deposits is provided for using the
interest rate prevailing for the type of account.
(h)(h)(h)(h) Long term e
mployee benefits
Long term employee benefits
mployee benefits
mployee benefits
Long term e
Long term e
Pension obligations
Pension obligations
Pension obligations
Pension obligations
The Group has pension obligations arising from both defined benefit and defined contribution pension plans.
A defined contribution pension plan is one under which the Group pays fixed contributions into a separate fund and has no legal or
constructive obligations to pay further contributions. Defined benefit pension plans define an amount of pension benefit that an
employee will receive on retirement, usually dependent on one or more factors such as age, years of service and remuneration.
Under the defined benefit pension plan, in accordance with IAS 19 Employee benefits, the full service cost for the period, adjusted for
any changes to the plan, is charged to the income statement. A charge equal to the expected increase in the present value of the plan
liabilities, as a result of the plan liabilities being one year closer to settlement, and a credit reflecting the long-term expected return on
assets based on the market value of the scheme assets at the beginning of the period, is included in the income statement.
The statement of financial position records as an asset or liability as appropriate, the difference between the market value of the plan
assets and the present value of the accrued plan liabilities. The difference between the expected return on assets and that actually
achieved in the period, is recognised in the income statement in the year in which they arise. The defined benefit pension plan
obligation is calculated by independent actuaries using the projected unit credit method and a discount rate based on the yield on AA
rated corporate bonds.
The Group’s defined contribution pension obligations arise from contributions paid to a Group personal pension plan, an ex gratia
pension plan, employee personal pension plans and employee co-operative insurance plans. For these pension plans, the amounts
charged to the income statement represent the contributions payable during the year.
based compensation
Share----based compensation
Share
based compensation
based compensation
Share
Share
The Group maintains a share option programme which allows certain Group employees to acquire shares of the Group. The change
in the fair value of options granted is recognised as an employee expense with a corresponding change in equity. The fair value of the
options is measured at grant date and spread over the period during which the employees become unconditionally entitled to the
options.
At each statement of financial position date, the Group revises its estimate of the number of options that are expected to vest and
recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
The share option programme was originally set up for Group employees to subscribe for shares in Conister Trust Limited (now
Conister Bank Limited). Since the Scheme of Arrangement, the shareholders of Conister Bank Limited became shareholders of Manx
Financial Group PLC. The share option programme is now operated by Manx Financial Group PLC. The fair value is estimated using
a proprietary binomial probability model. The proceeds received, net of any directly attributable transaction costs, are credited to
share capital (nominal value) and share premium when the options are exercised.
Other obligations
Other obligations
Other obligations
Other obligations
Provision is made for short-term benefits payable for salaries, holiday pay, social security costs and sick leave on a pro-rata basis and
is included within creditors and accrued charges.
(i)(i)(i)(i) Leases
Leases
Leases
Leases
A Group company is the lessor
A Group company is the lessor
A Group company is the lessor
A Group company is the lessor
Finance leases and
contracts
Finance leases and HPHPHPHP contracts
contracts
contracts
Finance leases and
Finance leases and
When assets are subject to a finance lease or HP contract, the present fair value of the lease payments is recognised as a receivable.
The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. HP
and lease income is recognised over the term of the contract or lease reflecting a constant periodic rate of return on the net
investment in the contract or lease. Initial direct costs, which may include commissions and legal fees directly attributable to
negotiating and arranging the contract or lease, are included in the measurement of the net investment of the contract or lease at
inception.
Manx Financial Group PLC
23
3.3.3.3. Significant accounting policies (continued)
Significant accounting policies (continued)
Significant accounting policies (continued)
Significant accounting policies (continued)
(i) Leases (continued)
(i) Leases (continued)
(i) Leases (continued)
(i) Leases (continued)
A Group company is the lessee
A Group company is the lessee
A Group company is the lessee
A Group company is the lessee
Operating leases
Operating leases
Operating leases
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 income statement
on a straight-line basis over the period of the lease.
(j)(j)(j)(j) Current and d
eferred taxation
Current and deferred taxation
eferred taxation
eferred taxation
Current and d
Current and d
Current taxation relates to the estimated corporation tax payable in the current financial year. Deferred taxation is provided in full,
using the liability method, on timing differences arising between the tax bases of assets and liabilities and their carrying amounts in
the consolidated financial statements. Deferred taxation is determined using tax rates (and laws) that have been enacted or
substantially enacted by the reporting date and are expected to apply when the related deferred tax is realised. Deferred taxation
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.
Interest income and expense
Interest income and expense
Interest income and expense
Interest income and expense
(k)(k)(k)(k)
Interest income and expense are recognised in the income statement using the effective interest rate method.
Effective interest rate
Effective interest rate
Effective interest rate
Effective interest rate
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts of the financial instrument to
the net carrying amount of the financial asset or financial liability. The discount period is the expected life or, where appropriate, a
shorter period. The calculation includes all amounts receivable or payable by the Group that are an integral part of the overall return,
including origination fees, loan incentives, broker fees payable, estimated early repayment charges, balloon payments and all other
premiums and discounts. It also includes direct incremental transaction costs related to the acquisition or issue of the financial
instrument. The calculation does not consider future credit losses.
Once a financial asset or a group of similar financial assets has been written down as a result of impairment, subsequent interest
income continues to be recognised using the original effective interest rate applied to the reduced carrying value of the financial
instrument.
(l)(l)(l)(l) Fees and commission income
Fees and commission income
Fees and commission income
Fees and commission income
Fees and commission income other than that directly related to the loans is recognised over the period for which service has been
provided or on completion of an act to which the fees relate.
(m) Programme costs
(m)
Programme costs
Programme costs
Programme costs
(m)
(m)
Programme costs are direct expenditure incurred in relation to prepaid card programmes. The costs are recognised over the period in
which income is derived from operating the programmes.
(n)(n)(n)(n) Segmental reporting
Segmental reporting
Segmental reporting
Segmental reporting
A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment),
or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and
rewards that are different from those of other segments. The Group’s primary format for segmental reporting is based on business
segments.
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
24
3.3.3.3. Significant accounting policies
(continued)
Significant accounting policies (continued)
Significant accounting policies
(continued)
(continued)
Significant accounting policies
(o)(o)(o)(o) New standards and interpretations not yet adopted
New standards and interpretations not yet adopted
New standards and interpretations not yet adopted
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are not effective for the year and have not been applied in
preparing these consolidated financial statements.
(IAS/IFRS)
New/revised International Accounting Standards/International Financial Reporting Standards (IAS/IFRS)
New/revised International Accounting Standards/International Financial Reporting Standards
(IAS/IFRS)
(IAS/IFRS)
New/revised International Accounting Standards/International Financial Reporting Standards
New/revised International Accounting Standards/International Financial Reporting Standards
IFRS 14 Regulatory Deferral Accounts
Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)
Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)
Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)
Equity Method in Separate Financial Statements (Amendments to IAS 27)
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
Annual Improvements to IFRS 2012 – 2014 Cycle – various standards
Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)
Disclosure Initiative (Amendments to IAS 1)
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments
Effective date
Effective date
Effective date
Effective date
(accounting periods
commencing on or after)
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2018
1 January 2018
The Directors do not expect the adoption of the standards and interpretations to have a material impact on the Group’s financial
statements in the period of initial application with the exception of IFRS 9 Financial Instruments.
IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS
9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss
model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the
guidance on recognition and de-recognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods
beginning on or after 1 January 2018, with early adoption permitted.
The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 9. Given
the nature of the Group’s operations, this standard is expected to have a pervasive impact on the Group’s financial statements. In
particular, calculation of impairment of financial instruments on an expected credit loss basis is expected to result in an increase in the
overall level of impairment allowances.
(p)(p)(p)(p) Key sources of estimation uncertainty
Key sources of estimation uncertainty
Key sources of estimation uncertainty
Key sources of estimation uncertainty
Management believe that a key area of estimation and uncertainty is in respect of the impairment allowances on loans and advances
to customers, goodwill and the Incahoot bargain purchase. Loans and advances to customers are evaluated for impairment on a
basis described in note 4a(i), credit risk. The Group has substantial historical data upon which to base collective estimates for
impairment on HP contracts, finance leases and personal loans. The accuracy of the impairment allowances and provisions for
counter claims and legal costs depend on how closely the estimated future cash flows mirror actual experience. An impairment review
is performed annually for goodwill at different discount rates to allow for any uncertainty.
(q)(q)(q)(q) Fiduciary deposits
Fiduciary deposits
Fiduciary deposits
Fiduciary deposits
Deposits received on behalf of clients by way of a fiduciary agreement are placed with external parties and are not recognised in the
statement of financial position. Income in respect of fiduciary deposit taking is included within interest income and recognised on an
accruals basis.
(r)(r)(r)(r) Prepaid card funds
Prepaid card funds
Prepaid card funds
Prepaid card funds
The Group could receive funds for its prepaid card activities. These funds would be held in a fiduciary capacity for the sole purpose of
making payments as and when card-holders utilise the credit on their cards and therefore would not be recognised in the statement of
financial position.
Manx Financial Group PLC
25
3.3.3.3. Significant accounting policies (continued)
Significant accounting policies (continued)
Significant accounting policies (continued)
Significant accounting policies (continued)
(s)(s)(s)(s) Foreign exchange
Foreign exchange
Foreign exchange
Foreign exchange
Foreign currency assets and liabilities (applicable to the Conister Card Services division only) are translated at the rates of exchange
ruling at the reporting date. Transactions during the year are recorded at rates of exchange in effect when the transaction occurs. The
exchange movements are dealt with in the income statement.
(t)(t)(t)(t) Commission shar
schemes
Commission sharinginginging schemes
schemes
schemes
Commission shar
Commission shar
This represents the cost incurred in relation to certain loan books where commission is paid based on the overall profitability of the
relevant book. Each such lending scheme has its own commercially agreed terms.
(u)(u)(u)(u) Joint ventures
Joint ventures
Joint ventures
Joint ventures
Investments in joint ventures are initially recognised at cost. Joint ventures are those entities over whose activities the Group has joint
control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Joint
ventures are accounted for using the equity method. The consolidated financial statements include the Group’s share of the income
and expenses of the equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the
date that joint control commences until it ceases. When the Group’s share of losses exceeds its interest in an equity accounted
investee, the carrying amount of that interest is reduced to nil and the recognition of further losses is discontinued except to the extent
that the Group has an obligation or has made payments on behalf of the investee.
Unrealised gains on transactions between the Company and its equity accounted investees are eliminated to the extent of the
Company’s interest in the equity accounted investees. Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred.
Investments in joint ventures and associates are kept under review for impairment. Where, in the opinion of the Directors, the net
realisable value of an investment falls below the carrying value, a provision is made against the investment and charged to the
income statement.
4.4.4.4. Risk and capital management
Risk and capital management
Risk and capital management
Risk and capital management
(a)(a)(a)(a) Risk management
Risk management
Risk management
Risk management
Introduction and overview
Introduction and overview
Introduction and overview
Introduction and overview
The Group has exposure to the following risks from its use of financial instruments:
(cid:1) credit risk;
(cid:1)
liquidity risk;
(cid:1) operational risk; and
(cid:1) market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes
for managing risk and capital within the Bank. The Bank is the main operating entity exposed to these risks.
Risk management framework
Risk management framework
Risk management framework
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework within the
Group.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to
reflect changes in market conditions. The Group has a disciplined and constructive control environment, in which all employees
understand their roles and obligations.
The Board of Directors of the Bank (the “Board of the Bank”) delegate responsibility for risk management to the Executive Risk
Committee (“ERC”) which reports to the Audit, Risk and Compliance Committee (“ARCC”). It is responsible for the effective risk
management of the Bank. Operational responsibility for asset and liability management is delegated to the Executive Directors of the
Bank, through the Bank’s Assets and Liabilities Committee (“ALCO”).
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
26
4.4.4.4. Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
(a)(a)(a)(a) Risk management (continued)
Risk management (continued)
Risk management (continued)
Risk management (continued)
ARCC is responsible for monitoring compliance with the risk management policies and procedures faced by the Group’s regulated
entities, and for reviewing the adequacy of the risk management framework. Internal Audit undertakes both regular and ad hoc
reviews of risk management controls and procedures, the results of which are reported to the ARCC.
Credit risk
Credit risk
Credit risk
Credit risk
i)i)i)i)
Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. For risk management reporting purposes, the Bank considers and consolidates all elements of credit risk exposure, such
as individual obligor default, country and sector risk. The Bank is principally exposed to credit risk with regard to loans and advances
to customers, comprising HP and finance lease receivables, litigation funding loans, unsecured personal loans, secured commercial
loans, block discounting and stock plan loans. It is also exposed to credit risk with regard to cash balances and trade and other
receivables.
Management of credit risk
Management of credit risk
Management of credit risk
Management of credit risk
The Board of the Bank delegates responsibility for the management of credit risk to the Credit Committee (“CC”) for loans and ALCO
for other assets. The following measures are taken in order to manage the exposure to credit risk:
(cid:1) explicit credit policies, covering collateral requirements, credit assessment, risk grading and reporting, documentary and legal
procedures, and compliance with regulatory and statutory requirements;
(cid:1) a rigorous authorisation structure for the approval and renewal of credit facilities. Each opportunity is researched for viability,
legal/regulatory restriction and risk. If recommended, the proposal is submitted to Board of the Bank or the CC. The CC reviews
lending assessments in excess of individual credit control or executive discretionary limits;
(cid:1) reviewing and assessing existing credit risk and collateral. The CC assesses all credit exposures in excess of designated limits, as
set out in the underwriting manual for asset and personal finance;
(cid:1) limiting concentrations of exposure to counterparties, geographies and industries defining sector limits, lending caps and exposure
to minimise interest rate risk;
(cid:1) ensuring that appropriate records of all sanctioned facilities are maintained;
(cid:1) ensuring regular account reviews are carried out for all accounts agreed by the CC; and
(cid:1) ensuring Board of the Bank approval is obtained on all decisions of the CC above the limits set out in the Bank’s credit risk policy.
An analysis of the credit risk on loans and advances to customers is as follows:
Carrying amount
Carrying amount
Carrying amount
Carrying amount
Individually impaired1
Grade A
Grade B
Grade C
Gross value
Allowance for impairment
Carrying value
Carrying value
Carrying value
Carrying value
Collective allowance for impairment
Collective allowance for impairment
Collective allowance for impairment
Collective allowance for impairment
Past due but not impaired
Less than 1 month
1 month but less than 2 months
2 months but less than 3 months
3 months and over
Carrying value
Carrying value
Carrying value
Carrying value
2012012012015555
££££000000000000
101,356
101,356
101,356
101,356
----
----
2,916
2,916
2,916
2,916
2,916
2,916
2,916
2,916
2,011))))
((((2,011
2,011
2,011
905905905905
(5(5(5(50000))))
3,03,03,03,070707070
1,507
1,507
1,507
1,507
397397397397
630630630630
5,5,5,5,604604604604
2014
£000
89,338
-
-
3,043
3,043
(1,754)
1,289
(51)
712
1,001
305
371
2,389
Neither past due nor impaired
1 Loans are graded A to C depending on the level of risk. Grade C relates to agreements with the highest of risk, Grade B with medium risk and Grade A relates to
agreements with the lowest risk.
94,94,94,94,897897897897
85,711
Manx Financial Group PLC
27
4.4.4.4. Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
(a)(a)(a)(a) Risk management (continued)
Risk management (continued)
Risk management (continued)
Risk management (continued)
i)i)i)i)
Credit risk (continued)
Credit risk (continued)
Credit risk (continued)
Credit risk (continued)
Management of credit risk (continued)
Management of credit risk (continued)
Management of credit risk (continued)
Management of credit risk (continued)
Impaired loans
Impaired loans
Impaired loans
Impaired loans
Impaired loans are loans where the Group determines that it is probable that it will be unable to collect all principal and interest due
according to the contractual terms of the loan agreements.
Past due but not impaired loans
Past due but not impaired loans
Past due but not impaired loans
Past due but not impaired loans
Past due but not impaired loans are loans where the contractual interest or principal payments are past due but the Group believes
that impairment is not appropriate on the basis of the level of security, collateral available and/or the stage of collection of amounts
owed to the Group.
Allowances for impairment
Allowances for impairment
Allowances for impairment
Allowances for impairment
The Group establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The
main components of this allowance are a specific loss allowance that relates to individually significant exposures, and a collective
loan loss allowance, which is established for the Group’s assets in respect of losses that have been incurred but have not been
identified on loans subject to individual assessment for impairment. The collective loan loss allowance is based on historical
experience, the current economic environment and an assessment of its impact on loan collectability. Guidelines regarding specific
impairment allowances are laid out in the Bank’s Debt Recovery Process Manual which is reviewed annually.
WriteWriteWriteWrite----off policy
off policy
off policy
off policy
The Group writes off a loan balance (and any related allowances for impairment losses) when management determines that the loans
are uncollectable. This determination is reached after considering information such as the occurrence of significant changes in the
borrower’s financial position such that the borrower can no longer pay the obligation, or that proceeds from collateral will not be
sufficient to pay back the entire exposure.
Collateral
Collateral
Collateral
Collateral
The Group holds collateral in the form of the underlying assets (typically private and commercial vehicles, plant and machinery) as
security for HP, finances leases, vehicle stocking plans, block discounting and secured commercial loan balances, which are sub-
categories of loans and advances to customers. In addition, the commission share schemes have an element of capital indemnified,
2015: 57.6% of loans and advances (2014: 53.2%). Estimates of fair value are based on the value of collateral assessed at the time
of borrowing, and generally are not updated except when a loan is individually assessed as impaired. At the time of granting credit
within the sub-categories listed above, the loan balances due are secured over the underlying assets held as collateral (see note 17
for further details).
Concentration of credit risk
Concentration of credit risk
Concentration of credit risk
Concentration of credit risk
Geographical
Geographical
Geographical
Geographical
Lending is restricted to individuals and entities with Isle of Man or UK addresses.
Segmental
Segmental
Segmental
Segmental
The Bank is exposed to credit risk with regard to customer loan accounts, comprising HP and finance lease balances, unsecured
personal loans, secured commercial loans, block discounting and vehicle stocking plan loans. In addition, the Bank lends via
significant introducers into the UK. There were two introducers that accounted for more than 20% of the Bank’s total lending portfolio
at the end of 31 December 2015 (2014: one introducer).
Liquidity risk
Liquidity risk
Liquidity risk
Liquidity risk
ii)ii)ii)ii)
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial liability obligations as they fall due.
of liquidity risk
Management of liquidity risk
Management
of liquidity risk
of liquidity risk
Management
Management
The Group’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group uses various methods, including forecasting of cash positions, to monitor and manage its liquidity risk to avoid undue
concentration of funding requirements at any point in time or from any particular source. Maturity mismatches between lending and
funding are managed within internal risk policy limits.
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
28
4. 4. 4. 4. Risk and
capital management (continued)
Risk and capital management (continued)
Risk and
capital management (continued)
capital management (continued)
Risk and
(a)(a)(a)(a) Risk management (continued)
Risk management (continued)
Risk management (continued)
Risk management (continued)
(ii)(ii)(ii)(ii) Liquidity risk (continued)
Liquidity risk (continued)
Liquidity risk (continued)
Liquidity risk (continued)
risk (continued)
liquidity risk (continued)
Management of liquidity
Management of
risk (continued)
risk (continued)
liquidity
liquidity
Management of
Management of
Minimum liquidity
Minimum liquidity
Minimum liquidity
Minimum liquidity
The Isle of Man Financial Services Authority (“FSA”) requires that the Bank should be able to meet its obligations for a period of at
least one month. In order to meet this requirement, the Bank measures its cash flow commitments, and maintains its liquid balances
in a diversified portfolio of short-term bank balances and short dated UK Government Treasury Bills.
Bank balances are only held with financial institutions approved by the Board of the Bank and which meet the requirements of the
FSA.
Measurement of liquidity risk
Measurement of liquidity risk
Measurement of liquidity risk
Measurement of liquidity risk
The key measure used by the Bank for managing liquidity risk is the assets and liabilities maturity profile.
The table below shows the Group’s financial liabilities classified by their earliest possible contractual maturity, on an undiscounted
basis including interest due at the end of the deposit term. Based on historical data, the Group’s expected actual cash flow from these
items vary from this analysis due to the expected re-investment of maturing customer deposits.
the balance sheet date (undiscounted)
Residual contractual maturities of financial liabilities as at the balance sheet date (undiscounted)
Residual contractual maturities of financial liabilities as at
the balance sheet date (undiscounted)
the balance sheet date (undiscounted)
Residual contractual maturities of financial liabilities as at
Residual contractual maturities of financial liabilities as at
31 December 2015555
31 December 201
31 December 201
31 December 201
Sight
Sight----
SightSight
8 days
8 days
8 days
8 days
££££000000000000
>8 days
>8 days
>8 days
>8 days
1 month
---- 1 month
1 month
1 month
££££000000000000
>1 month
>1 month
>1 month
>1 month
---- 3 months
3 months
3 months
3 months
££££000000000000
>3 months
>3 months
>3 months
>3 months
---- 6 months
6 months
6 months
6 months
££££000000000000
>6 months
>6 months
>6 months
>6 months
---- 1 year
1 year
1 year
1 year
££££000000000000
>1 year
>1 year
>1 year
>1 year
---- 3 years
3 years
3 years
3 years
££££000000000000
>3 years
>3 years
>3 years
>3 years
---- 5 years
5 years
5 years
5 years
££££000000000000
>5 years
>5 years
>5 years
>5 years
££££000000000000
Total
Total
Total
Total
££££000000000000
Customer accounts
Other liabilities
2,312
2,312
2,312
2,312
3,353
3,353
3,353
3,353
1,176
1,176
1,176
1,176
58585858
2,287
2,287
2,287
2,287
131131131131
4,213
4,213
4,213
4,213
111199999999
25,279
25,279
25,279
25,279
1,1,1,1,288288288288
52,859
52,859
52,859
52,859
4,061
4,061
4,061
4,061
23,533333
23,53
23,53
23,53
3,383,383,383,386666
----
334334334334
111111111111,6,6,6,659595959
2,810
11112,810
2,810
2,810
Total liabilities
Total liabilities
Total liabilities
Total liabilities
5,5,5,5,665665665665
1,21,21,21,234343434
2,2,2,2,418418418418
4,4,4,4,412412412412
26,26,26,26,567567567567
56,56,56,56,920920920920
26,926,926,926,919191919
334334334334
4,469
121212124,469
4,469
4,469
31 December 2014
Sight-
8 days
£000
>8 days
- 1 month
£000
>1 month
- 3 months
£000
>3 months
- 6 months
£000
>6 months
- 1 year
£000
>1 year
- 3 years
£000
>3 years
- 5 years
£000
>5 years
£000
Total
£000
Customer accounts
Other liabilities
1,865
1,725
2,429
29
2,646
1,028
4,282
346
35,498
489
36,904
4,173
21,791
1,990
-
388
105,415
10,168
Total liabilities
3,590
2,458
3,674
4,628
35,987
41,077
23,781
388
115,583
Manx Financial Group PLC
29
4. 4. 4. 4. Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
(a)(a)(a)(a) Risk management (continued)
Risk management (continued)
Risk management (continued)
Risk management (continued)
ii)
Liquidity risk (continued)
ii) Liquidity risk (continued)
Liquidity risk (continued)
Liquidity risk (continued)
ii)
ii)
Measurement of liquidity risk (continued)
Measurement of liquidity risk (continued)
Measurement of liquidity risk (continued)
Measurement of liquidity risk (continued)
balance sheet date
Maturity of assets and liabilities at the balance sheet date
Maturity of assets and liabilities at the
balance sheet date
balance sheet date
Maturity of assets and liabilities at the
Maturity of assets and liabilities at the
31 December 2015
31 December 2015
31 December 2015
31 December 2015
Assets
Assets
Assets
Assets
Cash & cash
equivalents
Available for sale
financial instruments
Customer accounts
receivable
Commission debtors
Other assets
Total assets
Total assets
Total assets
Total assets
Liabilities
Liabilities
Liabilities
Liabilities
Customer accounts
Other liabilities
Total liabilities
Total liabilities
Total liabilities
Total liabilities
31 December 2014
Assets
Cash & cash
equivalents
Available for sale
financial instruments
Customer accounts
receivable
Commission debtors
Other assets
Total assets
Liabilities
Customer accounts
Other liabilities
Total liabilities
Sight
Sight----
SightSight
8 days
8 days
8 days
8 days
££££000000000000
>8 days
>8 days
>8 days
>8 days
---- 1 month
1 month
1 month
1 month
££££000000000000
>1 month
>1 month
>1 month
>1 month
---- 3 months
3 months
3 months
3 months
££££000000000000
>3>3>3>3 monthmonthmonthmonth----
6 months
6 months
6 months
6 months
££££000000000000
>6>6>6>6 monthmonthmonthmonth
---- 1 year
1 year
1 year
1 year
££££000000000000
>1 year
>1 year
>1 year
>1 year
---- 3 years
3 years
3 years
3 years
££££000000000000
>3 years
>3 years
>3 years
>3 years
---- 5 years
5 years
5 years
5 years
££££000000000000
>5 years
>5 years
>5 years
>5 years
££££000000000000
Total
Total
Total
Total
££££000000000000
7,156
7,156
7,156
7,156
----
2,02,02,02,054545454
33333333
77777777
9,320
9,320
9,320
9,320
2,313
2,313
2,313
2,313
3,343
3,343
3,343
3,343
5,5,5,5,656656656656
----
,000
3333,000
,000,000
1,71,71,71,765656565
88888888
----
4,4,4,4,888853535353
1,175
1,175
1,175
1,175
28282828
1,1,1,1,203203203203
----
----
6,995
6,995
6,995
6,995
5,986
5,986
5,986
5,986
6,36,36,36,367676767
222240404040
----
9,006
9,006
9,006
9,006
----
----
13,13,13,13,602602602602
14,914,914,914,999992222
2,283
2,283
2,283
2,283
56565656
2,2,2,2,339339339339
4,179
4,179
4,179
4,179
84848484
4,4,4,4,263263263263
----
----
16,16,16,16,746746746746
----
----
16,16,16,16,777746464646
24,869
24,869
24,869
24,869
1,072
1,072
1,072
1,072
25,25,25,25,941941941941
----
----
47,47,47,47,742742742742
----
----
47,47,47,47,742742742742
50,498
50,498
50,498
50,498
3,3,3,3,453453453453
53,53,53,53,951951951951
----
----
16,716,716,716,782828282
----
----
16,716,716,716,782828282
21,011
21,011
21,011
21,011
3,160
3,160
3,160
3,160
24,171
24,171
24,171
24,171
----
----
888894949494
----
5,5,5,5,074074074074
5,968
5,968
5,968
5,968
----
334334334334
334334334334
7,156
7,156
7,156
7,156
15,981
15,981
15,981
15,981
101010101,356
1,356
1,356
1,356
363636361111
5,5,5,5,151151151151
30,005
111130,005
30,005
30,005
106106106106,,,,328328328328
1,530
11111,530
1,530
1,530
7,858
111111117,858
7,858
7,858
Sight-
8 days
£000
>8 days
- 1 month
£000
>1 month
- 3 months
£000
>3 month-
6 months
£000
>6 month
- 1 year
£000
>1 year
- 3 years
£000
>3 years
- 5 years
£000
>5 years
£000
Total
£000
6,123
-
-
-
-
2,000
10,789
5,986
166
29
47
6,365
1,861
1,715
3,576
2,681
80
-
4,761
2,427
-
2,427
6,519
217
-
9,061
-
-
17,525
15,047
2,639
960
3,599
4,250
250
4,500
-
-
17,107
-
-
17,107
34,936
300
35,236
-
-
-
-
40,478
-
-
13,138
-
-
40,478
13,138
34,851
3,750
19,295
1,905
38,601
21,200
-
-
188
-
4,898
5,086
-
388
388
6,123
18,775
89,338
326
4,945
119,507
100,259
9,268
109,527
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
30
4. 4. 4. 4. Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Risk management (continued)
(a) Risk management (continued)
(a)
Risk management (continued)
Risk management (continued)
(a)
(a)
(iii) Operational risk
(iii)
Operational risk
Operational risk
Operational risk
(iii)(iii)
Operational risk arises from the potential for inadequate systems including systems’ breakdown, errors, poor management, breaches
in internal controls, fraud and external events to result in financial loss or reputational damage. Operational risk also occurs when
lending through an outsourced partner. The Group manages the risk through appropriate risk controls and loss mitigation actions.
These actions include a balance of policies, procedures, internal controls and business continuity arrangements. Operational risk
across the Group is analysed and discussed at all Board meetings, with ongoing monitoring of actions arising to address the risks
identified.
(iv) Market risk
(iv)
Market risk
Market risk
Market risk
(iv)
(iv)
Market risk is the risk that changes in the level of interest rates, changes in the rate of exchange between currencies or changes in
the price of securities and other financial contracts including derivatives will have an adverse financial impact. The primary market risk
within the Group is interest rate risk exposure in the Bank. As at 31 December 2015 and 2014, the fair value of the financial
instruments as presented in the interest risk table below are considered to be equal to their carrying amounts.
During the year the Group was exposed to market price risk through holding available for sale financial instruments, and a financial
asset carried at fair value through profit and loss. The only significant exposure relates to the financial asset carried at fair value
through profit and loss, which is an equity investment stated at market value. Given the size of this holding, which was £77,000 at 31
December 2015 (2014: £47,000) the potential impact on the results of the Group is relatively small and no sensitivity analysis has
been provided for the market price risk.
Interest rate risk
Interest rate risk
Interest rate risk
Interest rate risk
Interest rate risk exposure in the Bank arises from the difference between the maturity of capital and interest payable on customer
deposit accounts, and the maturity of capital and interest receivable on loans and financing. The differing maturities on these products
create interest rate risk exposures due to the imperfect matching of different financial assets and liabilities. The risk is managed on a
continuous basis by management and reviewed by the Board of the Bank. The Bank monitors interest rate risk on a monthly basis via
the ALCO. The matching of the maturity interest rates of assets and liabilities is fundamental to the management of the Bank. The
maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest bearing liabilities as they mature are
important factors in assessing the liquidity of the Bank and its exposure to changes in interest rates.
Interest rate re
pricing table
Interest rate re----pricing table
pricing table
pricing table
Interest rate re
Interest rate re
The following tables present the interest rate mismatch position between assets and liabilities over the respective maturity dates. The
maturity dates are presented on a worst case basis, with assets being recorded at their latest maturity and customer accounts at their
earliest.
Sight
Sight----
SightSight
1 month
1 month
1 month
1 month
££££000000000000
>1month
>1month
>1month
>1month
3monthhhh
----3mont
3mont
3mont
££££000000000000
>3month
>3month----
>3month
>3month
6months
6months
6months
6months
££££000000000000
>6montttthhhh
>6mon
>6mon
>6mon
---- 1111 year
year
year
year
££££000000000000
>1 year
>1 year
>1 year
>1 year
---- 3 years
3 years
3 years
3 years
££££000000000000
>3 years
>3 years
>3 years
>3 years
---- 5 years
5 years
5 years
5 years
££££000000000000
>5 years
>5 years
>5 years
>5 years
££££000000000000
NonNonNonNon----Int
Int....
IntInt
Bearing
Bearing
Bearing
Bearing
££££000000000000
Total
Total
Total
Total
££££000000000000
31 December 2015555
31 December 201
31 December 201
31 December 201
Assets
Assets
Assets
Assets
Cash & cash equivalents
Available for sale financial
instruments
Customer accounts receivable
Commission debtors
Other assets
7,156
7,156
7,156
7,156
3333,000
,000
,000,000
3,3,3,3,819819819819
----
----
----
----
----
----
----
6,995
6,995
6,995
6,995
6,367
6,367
6,367
6,367
----
----
5,986
5,986
5,986
5,986
9,006
9,006
9,006
9,006
----
----
----
16,16,16,16,746746746746
----
----
----
47,47,47,47,742742742742
----
----
----
16,716,716,716,782828282
----
----
Total assets
Total assets
Total assets
Total assets
3,975
11113,975
3,975
3,975
13,313,313,313,362626262
14,914,914,914,992929292
16,16,16,16,746746746746
47,47,47,47,742742742742
16,716,716,716,782828282
Liabilities
Liabilities
Liabilities
Liabilities
Customer accounts
Other liabilities
Total capital and reserves
3,488
3,488
3,488
3,488
28282828
----
2,283
2,283
2,283
2,283
56565656
----
4,179
4,179
4,179
4,179
84848484
----
24,869
24,869
24,869
24,869
1,072
1,072
1,072
1,072
----
50,498
50,498
50,498
50,498
3,453
3,453
3,453
3,453
----
21,011
21,011
21,011
21,011
3,3,3,3,160160160160
----
Total liabilities and equity
Total liabilities and equity
Total liabilities and equity
Total liabilities and equity
Interest rate sensitivity gap
3,3,3,3,516516516516
10,459
10,459
10,459
10,459
2,2,2,2,339339339339
11,023333
11,02
11,02
11,02
4,4,4,4,263263263263
10,710,710,710,729292929
22225,941
5,941
5,941
5,941
9,195))))
((((9,195
9,195
9,195
55553,951
3,951
3,951
3,951
6,209))))
((((6,209
6,209
6,209
24,24,24,24,171171171171
(7,(7,(7,(7,389389389389))))
----
----
888894949494
----
----
894894894894
----
334334334334
----
334334334334
560560560560
----
7,156
7,156
7,156
7,156
----
----
363636361111
5,5,5,5,151151151151
5,512
5,512
5,512
5,512
----
3,343
3,343
3,343
3,343
12,147777
12,14
12,14
12,14
15,15,15,15,444490909090
(9,(9,(9,(9,978978978978))))
15,981
15,981
15,981
15,981
101010101,356
1,356
1,356
1,356
363636361111
5,5,5,5,151151151151
30,005
111130,005
30,005
30,005
106,328
106,328
106,328
106,328
11111,530
1,530
1,530
1,530
12,147777
12,14
12,14
12,14
111130,005
30,005
30,005
30,005
----
Cumulative
Cumulative
Cumulative
Cumulative
10,459
10,459
10,459
10,459
1,482
22221,482
1,482
1,482
32,211
32,211
32,211
32,211
23,016
23,016
23,016
23,016
16,807
16,807
16,807
16,807
9,418
9,418
9,418
9,418
9,978
9,978
9,978
9,978
----
----
Manx Financial Group PLC
31
4. 4. 4. 4. Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Risk management (continued)
(a) Risk management (continued)
(a)
Risk management (continued)
Risk management (continued)
(a)
(a)
(iv)
Market risk (continued)
(iv) Market risk (continued)
Market risk (continued)
Market risk (continued)
(iv)
(iv)
pricing table (continued)
Interest risk re----pricing table (continued)
Interest risk re
pricing table (continued)
pricing table (continued)
Interest risk re
Interest risk re
Sight-
1 month
£000
>1month
-3month
£000
>3month-
6months
£000
>6month
- 1 year
£000
>1 year
- 3 years
£000
>3 years
- 5 years
£000
>5 years
£000
Non-Int.
Bearing
£000
Total
£000
31 December 2014
Assets
Cash & cash equivalents
Available for sale financial
instruments
Customer accounts receivable
Commission debtors
Other assets
6,123
2,000
2,847
-
-
-
-
-
-
-
10,789
6,519
-
-
5,986
9,061
-
-
-
17,107
-
-
-
40,478
-
-
-
13,138
-
-
Total assets
10,970
17,308
15,047
17,107
40,478
13,138
Liabilities
Customer accounts
Other liabilities
Total capital and reserves
Total liabilities and equity
Interest rate sensitivity gap
1,861
-
-
1,861
9,109
2,427
-
-
2,639
960
-
4,250
250
-
34,936
300
-
34,851
3,750
-
19,295
1,905
-
2,427
14,881
3,599
11,448
4,500
12,607
35,236
5,242
38,601
(25,463)
21,200
(21,012)
12,083
(6,812)
Cumulative
9,109
23,990
35,438
48,045
53,287
27,824
6,812
-
-
Sensitivity analysis for interest rate risk
Sensitivity analysis for interest rate risk
Sensitivity analysis for interest rate risk
Sensitivity analysis for interest rate risk
The Bank monitors the impact of changes in interest rates on interest rate mismatch positions using a method consistent with the FSA
required reporting standard. The methodology applies weightings to the net interest rate sensitivity gap in order to quantify the impact
of an adverse change in interest rates of 2.0% per annum (2014: 2.0%). The following tables set out the estimated total impact of
such a change based on the mismatch at the balance sheet date.
31 December 2015
31 December 2015
31 December 2015
31 December 2015
Sight
Sight----
SightSight
1 month
1 month
1 month
1 month
££££000000000000
>1month----
>1month
>1month
>1month
3month
3month
3month
3month
££££000000000000
>3month
>3month----
>3month
>3month
6months
6months
6months
6months
££££000000000000
>6montttthhhh
>6mon
>6mon
>6mon
---- 1111 year
year
year
year
££££000000000000
>1 year
>1 year
>1 year
>1 year
---- 3 years
3 years
3 years
3 years
££££000000000000
>3 years
>3 years
>3 years
>3 years
---- 5 years
5 years
5 years
5 years
££££000000000000
>5 years
>5 years
>5 years
>5 years
££££000000000000
NonNonNonNon----Int
Int....
IntInt
Bearing
Bearing
Bearing
Bearing
££££000000000000
Interest rate sensitivity gap
10,459
10,459
10,459
10,459
Weighting
£000
0.000
0.000
0.000
0.000
----
11,023
11,023
11,023
11,023
0.003
0.003
0.003
0.003
33333333
10,729
10,729
10,729
10,729
0.007
0.007
0.007
0.007
75757575
9,195))))
((((9,195
9,195
9,195
0.014
0.014
0.014
0.014
(1(1(1(129292929))))
6,209))))
((((6,209
6,209
6,209
7,389))))
((((7,389
7,389
7,389
0.027
0.027
0.027
0.027
(1(1(1(168686868))))
0.054
0.054
0.054
0.054
((((399399399399))))
555566660000
0.115
0.115
0.115
0.115
63636363
(9,(9,(9,(9,978978978978))))
0.000
0.000
0.000
0.000
----
(525)
(525)
(525)
(525)
31 December 2014
Interest rate sensitivity gap
Weighting
£000
Sight-
1 month
£000
>1month-
3month
£000
>3month-
6months
£000
>6month
- 1 year
£000
>1 year
- 3 years
£000
>3 years
- 5 years
£000
>5 years
£000
Non-Int.
Bearing
£000
9,109
0.000
-
14,881
0.003
45
11,448
0.007
12,607
0.014
5,242
0.027
(25,463)
(21,012)
0.054
0.115
(6,812)
0.000
80
177
142
(1,375)
(2,416)
-
(3,347)
Total
Total
Total
Total
££££000000000000
----
----
Total
£000
-
-
-
-
188
-
-
188
-
6,123
-
-
326
4,945
5,271
-
2,103
9,980
18,775
89,338
326
4,945
119,507
100,259
9,268
9,980
119,507
-
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
32
4. 4. 4. 4. Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Capital Management
(b)(b)(b)(b) Capital Management
Capital Management
Capital Management
Regulatory capital
Regulatory capital
Regulatory capital
Regulatory capital
The Group considers capital to comprise share capital, share premium, reserves and subordinated loans. Capital is deployed by the
Board to meet the commercial objectives of the Group, whilst meeting regulatory requirements in the Bank. The Group’s policy is to
maintain a strong capital base so as to maintain investor, creditor, depositor and market confidence and to sustain future development
of the business.
In implementing current capital requirements the capital position in the Bank is also subject to prescribed minimum requirements by
the FSA in respect of the ratio of total capital to total risk-weighted assets. The requirement applies to the Bank (a wholly owned
subsidiary of Manx Financial Group PLC) as a component of Manx Financial Group PLC and has been adhered to throughout the
year.
(c)
Fair value of financial instruments
(c) Fair value of financial instruments
Fair value of financial instruments
Fair value of financial instruments
(c)
(c)
The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or
dealer price quotations. For all other financial instruments, the Group determines fair values using other valuation techniques.
For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying
degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks
affecting the specific instrument.
Valuation models
Valuation models
Valuation models
Valuation models
The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making
the measurements:
(cid:1) Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments;
(cid:1) Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e.
derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar
instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation
techniques in which all significant inputs are directly or indirectly observable from market data; and
(cid:1) Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not
based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category
includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable
adjustments or assumptions are required to reflect differences between the instruments.
Financial instruments measured at fair value – fair value hierarchy
The following table analyses financial instruments measured at fair value at the reporting date, by the level in the fair value hierarchy
into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial
position.
31 December 2015
31 December 2015
31 December 2015
31 December 2015
Investment securities
Investment securities
Investment securities
Investment securities
Government bonds
Equities
Level 1
Level 1
Level 1
Level 1
££££000000000000
Level 2
Level 2
Level 2
Level 2
££££000000000000
Level 3
Level 3
Level 3
Level 3
££££000000000000
Total
Total
Total
Total
££££000000000000
15,981
15,981
15,981
15,981
77777777
16,058
16,058
16,058
16,058
----
----
----
----
----
----
15,981
15,981
15,981
15,981
77777777
16,058
16,058
16,058
16,058
Manx Financial Group PLC
33
4. 4. 4. 4. Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
Risk and capital management (continued)
(continued)
Fair value of financial instruments (continued)
(c)(c)(c)(c) Fair value of financial instruments
(continued)
(continued)
Fair value of financial instruments
Fair value of financial instruments
(continued)
Valuation models (continued)
Valuation models
(continued)
(continued)
Valuation models
Valuation models
Financial instruments not measured at fair value
The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the
fair value hierarchy into which each fair value measurement is categorised.
31 December 2015
31 December 2015
31 December 2015
31 December 2015
Assets
Assets
Assets
Assets
Cash and cash equivalents
Loans and advances to customers
Commissions receivable
Trade and other receivables
Liabilities
Liabilities
Liabilities
Liabilities
Customer accounts
Creditors and accrued charges
Block creditors
Loan notes
Level 1
Level 1
Level 1
Level 1
££££000000000000
Level 2
Level 2
Level 2
Level 2
££££000000000000
Level 3
Level 3
Level 3
Level 3
££££000000000000
----
----
----
----
----
----
----
----
----
----
7,156
7,156
7,156
7,156
101,356
101,356
101,356
101,356
363636361111
1,1,1,1,377377377377
10,250
111110,250
10,250
10,250
106,328
106,328
106,328
106,328
3,343
3,343
3,343
3,343
588588588588
7,265
7,265
7,265
7,265
7,524
111111117,524
7,524
7,524
----
----
----
----
----
----
----
----
----
----
Total fair
Total fair
Total fair
Total fair
values
values
values
values
££££000000000000
7,156
7,156
7,156
7,156
101010101,356
1,356
1,356
1,356
363636361111
1,1,1,1,377377377377
Total
Total
Total
Total
carrying
carrying
carrying
carrying
amount
amount
amount
amount
££££000000000000
7,156
7,156
7,156
7,156
101010101,356
1,356
1,356
1,356
363636361111
1,1,1,1,377377377377
10,250
111110,250
10,250
10,250
10,250
111110,250
10,250
10,250
106,328
106,328
106,328
106,328
3,343
3,343
3,343
3,343
588588588588
7,265
7,265
7,265
7,265
7,524
111111117,524
7,524
7,524
106,328
106,328
106,328
106,328
3,343
3,343
3,343
3,343
588588588588
7,265
7,265
7,265
7,265
117,524
117,524
117,524
117,524
Where available, the fair value of loans and advances is based on observable market transactions. Where observable market
transactions are not available, fair value is estimated using valuation models, such as discounted cash flow techniques. Input into the
valuation techniques includes expected lifetime credit losses, interest rates, prepayment rates and primary origination or secondary
market spreads. For collateral-dependent impaired loans, the fair value is measured based on the value of the underlying collateral.
Input into the models may include data from third party brokers based on over the counter trading activity, and information obtained
from other market participants, which includes observed primary and secondary transactions.
5.5.5.5. Segmental analysis
Segmental analysis
Segmental analysis
Segmental analysis
Segmental information is presented in respect of the Group’s business segments. The Directors consider that the Group currently
operates in one geographic segment, the Isle of Man and UK. The primary format, business segments, is based on the Group’s
management and internal reporting structure. The Directors consider that the Group operates in four product orientated segments in
addition to its investing activities: Asset and Personal Finance (including provision of HP contracts, finance leases, personal loans,
commercial loans and block discounting); Manx Incahoot; Conister Card Services; and Edgewater Associates Limited.
ended 31 December 2015
For the year ended 31 December 2015
For the year
ended 31 December 2015
ended 31 December 2015
For the year
For the year
Net interest income
Operating income
payable
Profit/(loss) before tax payable
Profit/(loss) before tax
payable
payable
Profit/(loss) before tax
Profit/(loss) before tax
Capital expenditure
Total assets
Total assets
Total assets
Total assets
Asset and
Asset and
Asset and
Asset and
Personal
Personal
Personal
Personal
Finance
Finance
Finance
Finance
££££000000000000
14,554
14,554
14,554
14,554
7,7,7,7,591591591591
2,2,2,2,222299999999
171717173333
8,357
121212128,357
8,357
8,357
ManxManxManxManx
Incahoot
Incahoot
Incahoot
Incahoot
££££000000000000
Conister
Conister
Conister
Conister
CardCardCardCard
Services
Services
Services
Services
££££000000000000
Edgewater
Edgewater
Edgewater
Edgewater
Associates
Associates
Associates
Associates
££££000000000000
Investing
Investing
Investing
Investing
Activities
Activities
Activities
Activities
££££000000000000
----
84848484
203203203203
121212122222
447447447447
----
((((99998)8)8)8)
((((71717171))))
----
123123123123
----
1,1,1,1,369369369369
148148148148
44444444
580580580580
Total
Total
Total
Total
££££000000000000
14,554
14,554
14,554
14,554
9,9,9,9,095095095095
----
149149149149
((((270270270270))))
2,32,32,32,309090909
274274274274
613613613613
498498498498
30,005
111130,005
30,005
30,005
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
34
5.5.5.5. Segmental analysis (continued)
Segmental analysis (continued)
Segmental analysis (continued)
Segmental analysis (continued)
For the year ended 31 December 2014
Net interest income
Operating income
Profit/(loss) before tax payable
Capital expenditure
Total assets
6.6.6.6.
Interest income
Interest income
Interest income
Interest income
Asset and
Personal
Finance
£000
Litigation
Finance
£000
Conister
Card
Services
£000
Edgewater
Associates
£000
Investing
Activities
£000
10,825
8,492
1,733
183
118,515
-
-
45
-
-
-
(108)
(150)
-
106
-
1,255
146
25
824
Total
£000
10,825
7,345
-
-
(46)
1,728
-
208
62
119,507
Interest receivable and similar income represents charges and interest on finance and leasing agreements attributable to the year
after adjusting for early settlements and interest on bank balances.
7.7.7.7. Other expenses
Other expenses
Other expenses
Other expenses
Professional and legal fees
Marketing costs
IT costs
Establishment costs
Communication costs
Travel costs
Bank charges
Insurance
Irrecoverable VAT
Other costs
8.8.8.8. Allowance for impairment
Allowance for impairment
Allowance for impairment
Allowance for impairment
The charge in respect of specific allowances for impairment comprises:
Specific impairment allowances made
Reversal of allowances previously made
Total charge for specific provision for impairment
Total charge for specific provision for impairment
Total charge for specific provision for impairment
Total charge for specific provision for impairment
The credit in respect of collective allowances for impairment comprises:
Collective impairment allowances made
Release of allowances previously made
for impairment
for collective allowances for impairment
Total credit for collective allowances
Total credit
for impairment
for impairment
for collective allowances
for collective allowances
Total credit
Total credit
Total charge for allowances for impairment
Total charge for allowances for impairment
Total charge for allowances for impairment
Total charge for allowances for impairment
2012012012015555
££££000000000000
654654654654
161161161161
339339339339
547547547547
66666666
75757575
115115115115
115115115115
228228228228
85858585
2014
£000
496
131
348
355
71
72
71
111
206
89
2,32,32,32,385858585
1,950
2012012012015555
££££000000000000
1,255
1,255
1,255
1,255
(1(1(1(195959595))))
1,1,1,1,060060060060
2012012012015555
££££000000000000
2222
(3(3(3(3))))
(1(1(1(1))))
1,1,1,1,059059059059
2014
£000
890
(212)
678
2014
£000
23
(151)
(128)
550
9.9.9.9. Depositors
Compensation Scheme
Depositors’’’’ Compensation Scheme
Compensation Scheme
Compensation Scheme
Depositors
Depositors
Receipt in respect of the Isle of Man Government Depositors’ Compensation Scheme
Manx Financial Group PLC
35
2012012012015555
££££000000000000
10101010
2014
£000
11
On 27 May 2009, Kaupthing Singer & Friedlander (Isle of Man) Limited activated the Isle of Man Government Depositors’
Compensation Scheme (the Scheme) in connection with its liquidation. Three payments of £73,880 were made in to the Scheme.
Repayments from the FSA of £133,506 and £34,424 have been received and a further £53,710 is expected from the Scheme. In
2015, the Bank received £9,408 as a final repayment for a Scheme for the Bank of Credit and Commerce Overseas Limited launched
in 1991.
10.10.10.10. Profit
payable
before tax payable
Profit before tax
payable
payable
before tax
before tax
Profit
Profit
The profit before tax payable for the year is stated after charging:
Interest expense payable to depositors
Interest expense payable on loan notes
Profit on sale of fixed assets
Share options expense
Directors’ remuneration
Directors’ fees
Directors’ pensions
Directors’ performance related pay
Auditors’ remuneration:
as Auditors current year
non-audit services
Pension cost defined contribution scheme
Operating lease rentals for property
11.11.11.11. Tax Tax Tax Tax expense
expense
expense
expense
Current tax expense
Current tax expense
Current tax expense
Current tax expense
Current year
Changes to estimates for prior years
Deferred tax expense
Deferred tax expense
Deferred tax expense
Deferred tax expense
Origination and reversal of temporary differences
Utilisation of previously recognised tax losses
Changes to estimates for prior years
Total tax expense
Total tax expense
Total tax expense
Total tax expense
Reconciliation of effective tax rate
Reconciliation of effective tax rate
Reconciliation of effective tax rate
Reconciliation of effective tax rate
Profit before tax on continuing operations
Tax using the Banking division’s domestic tax rate
Effect of tax rates in foreign jurisdictions
Non-deductible expenses
Tax exempt income
Timing differences in current year
Origination and reversal of temporary differences in deferred tax
Changes to estimates for prior years
2012012012015555
££££000000000000
2,32,32,32,309090909
231231231231
8888
15151515
((((18181818))))
((((18181818))))
6666
(17(17(17(17))))
10.0%10.0%10.0%10.0%
0.40.40.40.4%%%%
0.60.60.60.6%%%%
((((0.80.80.80.8)%)%)%)%
((((0.80.80.80.8)%)%)%)%
0.0.0.0.3333%%%%
((((0.70.70.70.7)%)%)%)%
2015
2015
20152015
££££000000000000
2,573
2,573
2,573
2,573
429429429429
(12)
(12)
(12)
(12)
46464646
297297297297
202020202222
30303030
54545454
88886666
19191919
14141414
342342342342
2012012012015555
££££000000000000
21212121
(15)
(15)
(15)
(15)
6666
6666
111197979797
(2)(2)(2)(2)
201201201201
207207207207
10.0%
0.9%
2.3%
(3.3)%
(0.9)%
0.6%
(1.5)%
2014
£000
2,360
449
(5)
24
286
179
29
60
85
26
12
213
2014
£000
29
-
29
12
123
(25)
110
139
2014
£000
1,728
173
12
40
(58)
(15)
12
(25)
Total tax expense
Total tax expense
Total tax expense
Total tax expense
9.09.09.09.0%%%%
207207207207
8.1%
139
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
36
11.11.11.11. Tax Tax Tax Tax expense (continued)
expense (continued)
expense (continued)
expense (continued)
The main rate of corporation tax in the Isle of Man is 0.0% (2014: 0.0%). However the profits of the Group’s Manx banking activities
are taxed at 10.0% (2014: 10.0%). The profits of the Group’s subsidiaries that are subject to UK corporation tax are taxed at a rate of
20.0% (2014: 21.5%).
The value of tax losses carried forward and timing differences reduced to £83,000 (2014: £284,000) and resulted in an expense of
£201,000 (2014: £110,000) to the income statement.
12.12.12.12. Earnings per share
Earnings per share
Earnings per share
Earnings per share
Profit for the year
Profit for the year
Profit for the year
Profit for the year
Weighted average number of ordinary shares in issue
Basic earnings per share (pence)
Diluted earnings per share (pence)
Total comprehensive income for the period
Total comprehensive income for the period
Total comprehensive income for the period
Total comprehensive income for the period
Weighted average number of ordinary shares in issue
Basic earnings per share (pence)
Diluted earnings per share (pence)
2015
2015
20152015
2014
,000
££££2,102,102,102,102222,000
,000,000
£1,589,000
102,070,252
102,070,252
102,070,252
102,070,252
2.062.062.062.06
1.21.21.21.29999
102,070,252
1.56
0.98
,000
££££2,122,122,122,121111,000
,000,000
£1,422,000
102,070,252
102,070,252
102,070,252
102,070,252
2.082.082.082.08
1.301.301.301.30
102,070,252
1.39
0.89
The basic earnings per share calculation is based upon the profit for the year after taxation and the weighted average of the number
of shares in issue throughout the year.
Reconciliation of w
between basic and
shares in issue between basic and
eighted average number of ordinary shares in issue
Reconciliation of weighted average number of ordinary
between basic and
between basic and
shares in issue
shares in issue
eighted average number of ordinary
eighted average number of ordinary
Reconciliation of w
Reconciliation of w
diluted earnings per share
diluted earnings per share
diluted earnings per share
diluted earnings per share
As per basic earnings per share
Number of shares issued if all convertible loan notes were exchanged for equity (note 25)
Dilutive element of warrants if taken up (note 25)
Dilutive element of share options if exercised (note 27)
As per dilutive earnings per share
Reconciliation of
earnings between basic and diluted earnings per share
Reconciliation of earnings between basic and diluted earnings per share
earnings between basic and diluted earnings per share
earnings between basic and diluted earnings per share
Reconciliation of
Reconciliation of
As per basic earnings per share
Interest expense saved if all convertible loan notes were exchanged for equity (note 25)
As per dilutive earnings per share
2015
2015
20152015
2014
102,070,252
102,070,252
102,070,252
102,070,252
61,500,000
61,500,000
61,500,000
61,500,000
17,641,990
17,641,990
17,641,990
17,641,990
22,665
22,665
22,665
22,665
102,070,252
61,500,000
21,172,093
130,990
181,234,907
181,234,907
181,234,907
181,234,907
184,873,335
£2,102222,000
,000
£2,10
,000,000
£2,10
£2,10
£230,150
£230,150
£230,150
£230,150
£1,589,000
£221,900
,150
£2,332222,150
£2,33
,150,150
£2,33
£2,33
£1,810,900
The diluted earnings per share calculation assumes that all convertible loan notes, warrants and share options have been
converted/exercised at the beginning of the year where they are dilutive.
13.13.13.13. Company
loss
Company loss
loss
loss
Company
Company
The loss on ordinary activities after taxation of the Company is £95,000 (2014: £398,000 profit).
14.14.14.14. Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Group
Company
2012012012015555
££££000000000000
7,156
7,156
7,156
7,156
----
7,156
7,156
7,156
7,156
2014
£000
6,123
-
6,123
2012012012015555
££££000000000000
100100100100
----
100100100100
2014
£000
-
-
-
Cash at bank includes an amount of £140,000 (2014: £25,000) representing receipts which are in the course of transmission.
Manx Financial Group PLC
37
15.15.15.15. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
The investment represents shares in a UK quoted company, elected to be classified as a financial asset at fair value through profit or
loss. The investment is stated at market value and is classified as a level 1 investment in the IFRS 13 fair value hierarchy. The cost of
the shares was £471,000. The unrealised difference between cost and market value has been taken to the income statement.
Dividend income of £350,000 has been received from this investment since it was made.
16.16.16.16. Available for sale
struments
financial instruments
Available for sale financial in
struments
struments
financial in
financial in
Available for sale
Available for sale
UK Government Treasury Bills
Group
Company
2012012012015555
££££000000000000
15,981
15,981
15,981
15,981
15,981
15,981
15,981
15,981
2014
£000
18,775
18,775
2012012012015555
££££000000000000
----
----
2014
£000
-
-
UK Government Treasury Bills are stated at fair value and unrealised changes in the fair value are reflected in equity.
17.17.17.17. LoLoLoLoanananans and advances to customers
s and advances to customers
s and advances to customers
s and advances to customers
GroupGroupGroupGroup
Hire Purchase balances
Finance lease balances
Unsecured personal loans
Vehicle stocking plans
Block discounting
Secured commercial loans
Secured personal loans
GrossGrossGrossGross
Amount
Amount
Amount
Amount
££££000000000000
62,62,62,62,814814814814
10,10,10,10,240240240240
4,023
4,023
4,023
4,023
1,119
1,119
1,119
1,119
8,935
8,935
8,935
8,935
4,4,4,4,947947947947
11,339
11,339
11,339
11,339
2012012012015555
Impairment
Impairment
Impairment
Impairment
Allowance
Allowance
Allowance
Allowance
££££000000000000
((((1,136
1,136))))
1,136
1,136
(656
(656))))
(656(656
(180
(180))))
(180(180
----
----
(89(89(89(89))))
----
Carrying
Carrying
Carrying
Carrying
Value
Value
ValueValue
££££000000000000
61,61,61,61,678678678678
9,9,9,9,584584584584
3,843
3,843
3,843
3,843
1,119
1,119
1,119
1,119
8,935
8,935
8,935
8,935
4,4,4,4,858858858858
11,339
11,339
11,339
11,339
101010103333,,,,417417417417
(2,061))))
(2,061
(2,061
(2,061
101,356
101,356
101,356
101,356
Gross
Amount
£000
52,059
11,422
3,514
1,284
6,766
7,347
8,751
91,143
2014
Impairment
Allowance
£000
(881)
(714)
(148)
-
-
(62)
-
Carrying
Value
£000
51,178
10,708
3,366
1,284
6,766
7,285
8,751
(1,805)
89,338
Collateral is held, in the form of underlying assets, for HP, finance leases, vehicles stocking plans, block discounting, secured
commercial and personal loans. An estimate of the fair value of collateral on past due or impaired loans and advances is not
disclosed as it would be impractical to do so.
Specific allowance for impairment
Specific allowance for impairment
Specific allowance for impairment
Specific allowance for impairment
Balance at 1 January
Specific allowance for impairment made
Release of allowances previously made
Write-offs
Balance at 31 December
Balance at 31 December
Balance at 31 December
Balance at 31 December
Collective allowance for impairment
Collective allowance for impairment
Collective allowance for impairment
Collective allowance for impairment
Balance at 1 January
Collective allowance for impairment made
Release of allowances previously made
Balance at 31 December
Balance at 31 December
Balance at 31 December
Balance at 31 December
Total allowances for impairment
Total allowances for impairment
Total allowances for impairment
Total allowances for impairment
2012012012015555
££££000000000000
1,754
1,754
1,754
1,754
1,255
1,255
1,255
1,255
(130)
(130)
(130)
(130)
(868)
(868)
(868)
(868)
2,011
2,011
2,011
2,011
2012012012015555
££££000000000000
51515151
2222
(3)(3)(3)(3)
50505050
2,061
2,061
2,061
2,061
2014
£000
3,578
890
(212)
(2,502)
1,754
2014
£000
179
23
(151)
51
1,805
Advances on preferential terms are available to all Directors, management and staff. As at 31 December 2015 £208,017 (2014:
£125,983) had been lent on this basis. In the Group’s ordinary course of business, advances may be made to Shareholders but all
such advances are made on normal commercial terms.
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
38
17.17.17.17. Loans and advances to customers
(continued)
Loans and advances to customers (continued)
(continued)
(continued)
Loans and advances to customers
Loans and advances to customers
As detailed below, at the end of the current financial year four loan exposures exceeded 10.0% of the capital base of the Bank (2014:
two loan exposures):
Exposure
Exposure
Exposure
Exposure
Block discounting facility
Outstanding
Outstanding
Outstanding
Outstanding
Balance
Balance
Balance
Balance
2012012012015555
££££000000000000
7,345
7,345
7,345
7,345
Outstanding
Balance
2014
£000
3,501
HPHPHPHP and finance lease receivables
and finance lease receivables
and finance lease receivables
and finance lease receivables
Loans and advances to customers include the following Hire Purchase and finance lease receivables:
Less than one year
Between one and five years
2012012012015555
££££000000000000
33333,3,3,3,987987987987
60,60,60,60,501501501501
Facility
Facility
Facility
Facility
limit
limit
limit
limit
££££000000000000
,500
12121212,500
,500,500
2014
£000
30,615
50,456
Gross investment in HP and finance lease receivables
Gross investment in HP and finance lease receivables
Gross investment in HP and finance lease receivables
Gross investment in HP and finance lease receivables
4,488
99994,488
4,488
4,488
81,071
The investment in HP and finance lease receivables net of unearned income comprises:
Less than one year
Between one and five years
Net investment in HP and finance lease receivables
18.18.18.18. Property, plant and equipment
Property, plant and equipment
Property, plant and equipment
Property, plant and equipment
GroupGroupGroupGroup
CostCostCostCost
As at 1 January 2015
Additions
On acquisition (see note 20)
Disposals
As at 31 December 2015555
As at 31 December 201
As at 31 December 201
As at 31 December 201
Accumulated depreciation
Accumulated depreciation
Accumulated depreciation
Accumulated depreciation
As at 1 January 2015
Charge for year
Disposals
As at 31 December 2015555
As at 31 December 201
As at 31 December 201
As at 31 December 201
Carrying value at 31 December 2015555
Carrying value at 31 December 201
Carrying value at 31 December 201
Carrying value at 31 December 201
Carrying value at 31 December 2014
2012012012015555
££££000000000000
24,24,24,24,425425425425
44448,8,8,8,629629629629
2014
£000
22,514
40,967
3,054
77773,054
3,054
3,054
63,481
Leasehold
Leasehold
Leasehold
Leasehold
Improvements
Improvements
Improvements
Improvements
££££000000000000
ITITITIT
Equipment
Equipment
Equipment
Equipment
££££000000000000
Furniture &
Furniture &
Furniture &
Furniture &
Equipment
Equipment
Equipment
Equipment
££££000000000000
MotorMotorMotorMotor
Vehicles
Vehicles
Vehicles
Vehicles
££££000000000000
182182182182
235235235235
----
----
417417417417
56565656
11114444
----
70707070
347347347347
126
1,263
1,263
1,263
1,263
205205205205
----
----
1,1,1,1,468468468468
893893893893
111132323232
----
1,025
1,025
1,025
1,025
443443443443
370
600600600600
22222222
1111
----
666622223333
510510510510
68686868
----
578578578578
44445555
90
80808080
31313131
----
((((54545454))))
57575757
61616161
12121212
((((55553333))))
20202020
37373737
19
Total
Total
Total
Total
££££000000000000
2,125
2,125
2,125
2,125
493493493493
1111
((((54545454))))
2,2,2,2,555566665555
1,520
1,520
1,520
1,520
222222226666
((((55553333))))
1,1,1,1,696969693333
872872872872
605
Manx Financial Group PLC
18.18.18.18. Property, plant and equipment (continued)
Property, plant and equipment (continued)
Property, plant and equipment (continued)
Property, plant and equipment (continued)
Company
Company
Company
Company
CostCostCostCost
As at 1 January 2015
Additions
Disposals
As at 31 December 2015
As at 31 December 2015
As at 31 December 2015
As at 31 December 2015
Accumulated depreciation
Accumulated depreciation
Accumulated depreciation
Accumulated depreciation
As at 1 January 2015
Charge for year
Disposals
As at 31 December 2015
As at 31 December 2015
As at 31 December 2015
As at 31 December 2015
Carrying value at 31 December 2015
Carrying value at 31 December 2015
Carrying value at 31 December 2015
Carrying value at 31 December 2015
Carrying value at 31 December 2014
19.19.19.19.
Intangible assets
Intangible assets
Intangible assets
Intangible assets
GroupGroupGroupGroup
CostCostCostCost
As at 1 January 2015
Additions
On acquisition (see note 20)
Disposals
As at 31 December 2015
As at 31 December 2015
As at 31 December 2015
As at 31 December 2015
Accumulated
amortisation
Accumulated amortisation
amortisation
amortisation
Accumulated
Accumulated
As at 1 January 2015
Charge for year
Disposals
As at 31 December 2015
As at 31 December 2015
As at 31 December 2015
As at 31 December 2015
Carrying value at 31 December 2015
Carrying value at 31 December 2015
Carrying value at 31 December 2015
Carrying value at 31 December 2015
Carrying value at 31 December 2014
Leasehold
Leasehold
Leasehold
Leasehold
Improvements
Improvements
Improvements
Improvements
££££000000000000
ITITITIT
Equipment
Equipment
Equipment
Equipment
££££000000000000
Furniture &
Furniture &
Furniture &
Furniture &
Equipment
Equipment
Equipment
Equipment
££££000000000000
----
234234234234
----
234234234234
----
15151515
----
15151515
219219219219
-
----
13131313
----
13131313
----
----
----
----
13131313
-
----
15151515
----
15151515
----
----
----
----
15151515
-
Customer
Customer
Customer
Customer
Contracts
Contracts
Contracts
Contracts
££££000000000000
Intellectual
Intellectual
Intellectual
Intellectual
Property Rights
Property Rights
Property Rights
Property Rights
££££000000000000
Website
Website
Website
Website
Development
Development
Development
Development
££££000000000000
----
----
76767676
----
76767676
----
44444444
----
44444444
32323232
-
----
----
343434345555
----
343434345555
----
----
----
----
343434345555
-
----
22221111
----
----
22221111
----
----
----
----
22221111
-
39
Total
Total
Total
Total
££££000000000000
----
262262262262
----
262262262262
----
15151515
----
15151515
247247247247
-
Total
Total
Total
Total
££££000000000000
----
22221111
444422221111
----
442442442442
----
44444444
----
44444444
398398398398
-
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
40
20.20.20.20. Investment in Group undertakings
Investment in Group undertakings
Investment in Group undertakings
Investment in Group undertakings
The Company has the following investments in subsidiaries incorporated in the Isle of Man:
Carrying value of investments
Carrying value of investments
Carrying value of investments
Carrying value of investments
Nature of
Business
31 December
31 December
31 December
31 December
2012012012015555
% Holding
% Holding
% Holding
% Holding
Date of
Incorporation
Conister Bank Limited
TransSend Holdings Limited
Bradburn Limited
Edgewater Associates Limited
Asset and Personal Finance
Holding Company for Prepaid Card Division
Holding Company
Wealth Management
100100100100
100100100100
100100100100
100100100100
05/12/1935
05/11/2007
15/05/2009
24/12/1996
Total
Total
Total
Total
2012012012015555
££££000000000000
10,067
10,067
10,067
10,067
----
----
2,005
2,005
2,005
2,005
12,072
12,072
12,072
12,072
Total
2014
£000
10,067
-
-
2,005
12,072
Amounts owed to and from Group undertakings are unsecured, interest-free and repayable on demand.
Subordinated loans
Subordinated loans
Subordinated loans
Subordinated loans
MFG has issued several subordinated loans as part of its equity funding into the Bank and EWA. Interest charged is at the discretion
of the lender.
Creation
Maturity
Interest rate
Company
Company
Company
Company
2012012012015555
££££000000000000
Company
2014
£000
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
Conister Bank Limited
Conister Bank Limited
Conister Bank Limited
Conister Bank Limited
25 October 2013
11 February 2014
27 May 2014
9 July 2014
17 September 2014
22 July 2013
22 October 2020
11 February 2024
27 May 2024
9 July 2024
17 September 2026
22 July 2033
Edgewater Associates Limited
Edgewater Associates Limited
Edgewater Associates Limited
Edgewater Associates Limited
14 May 2012
28 February 2013
14 May 2017
28 February 2018
Goodwill
Goodwill
Goodwill
Goodwill
Edgewater Associates Limited (“EWA”)
ECF Asset Finance PLC (“ECF”)
Three Spires Insurance Services Limited (“Three Spires”)
1,000
1,000
1,000
1,000
500500500500
500500500500
500500500500
400400400400
1,000
1,000
1,000
1,000
128128128128
50505050
4,078
4,078
4,078
4,078
GroupGroupGroupGroup
2015
2015
20152015
££££000000000000
1,849
1,849
1,849
1,849
454454454454
41414141
2,344
2,344
2,344
2,344
1,000
500
500
500
400
1,000
128
50
4,078
Group
2014
£000
1,849
454
41
2,344
Goodwill impairment
Goodwill impairment
Goodwill impairment
Goodwill impairment
The goodwill is considered to have an indefinite life and is reviewed on an annual basis by comparing its estimated recoverable
amount with its carrying value.
The estimated recoverable amount in relation to the goodwill generated on the purchase of EWA is based on the forecasted 3 year
cash flow projections, extrapolated to 10 years using a 5.0% annual increment, and then discounted using a 12.0% discount factor.
The sensitivity of the analysis was tested using additional discount factors of 15.0% and 20.0% on stable profit levels.
Manx Financial Group PLC
41
20.20.20.20. Investment in Group undertakings (continued)
Investment in Group undertakings (continued)
Investment in Group undertakings (continued)
Investment in Group undertakings (continued)
Goodwill impairment (continued)
Goodwill impairment (continued)
Goodwill impairment (continued)
Goodwill impairment (continued)
The estimated recoverable amount in relation to the goodwill generated on the purchase of ECF is based on forecasted 3 year sales
interest income calculated at 5.0% margin, extrapolated to 10 years using a 5.0% annual increment, and then discounted using a
12.0% discount factor. The sensitivity of the analysis was tested using additional discount factors of 15.0% and 20.0% on varying
sales volumes.
There has been no change in the detailed method of measurement for EWA and ECF when compared to 2014. The goodwill
generated on the purchase of Three Spires has been reviewed at the current year end and is considered adequate given its income
streams referred to EWA. On the basis of the above reviews no impairment to goodwill has been made in the current year.
subsidiary
and acquisition of subsidiary
Investment in joint venture and acquisition of
Investment in joint venture
subsidiary
subsidiary
and acquisition of
and acquisition of
Investment in joint venture
Investment in joint venture
On 7 August 2014, a joint venture agreement was entered into between Manx Financial Limited (“MFL”), previously a subsidiary of the
Group, and Andrew Flowers. Additional shares were issued such that 49.9% of the voting share capital was sold for £500,000,
creating £1,000 share premium in the company. Control was lost on this day and consequently the assets and liabilities of the
subsidiary were derecognised. There was no profit or loss incurred upon ceding control. Manx Financial Group PLC has invested
£501,000 for 50.1% of the voting share capital and has provided a corporate guarantee to block funders in Manx Financial Limited. In
December 2015, Andrew Flowers disposed of his shares to the parent of MFL, Bradburn Limited, for £500,000 when the net assets of
MFL at the time were £1,053,000. This generated a gain on acquisition of the joint venture of £28,000 and MFL became a subsidiary
of the Group.
consideration
Fair value of consideration
Fair value of
consideration
consideration
Fair value of
Fair value of
Cash (included in creditors and accrued charges)
Fair value of assets acquired
Fair value of assets acquired
Fair value of assets acquired
Fair value of assets acquired
Cash
Loans and advances
Trade and other receivables
Fair value of liabilities acquired
Fair value of liabilities acquired
Fair value of liabilities acquired
Fair value of liabilities acquired
Block creditors
Creditors and accrued charges
50% acquired
50% acquired
50% acquired
50% acquired
Gain on acquisition
Gain on acquisition
Gain on acquisition
Gain on acquisition
Acquisition of Incahoot
Acquisition of Incahoot
Acquisition of Incahoot
Acquisition of Incahoot
2015
2015
20152015
££££000000000000
926926926926
666649494949
78787878
1,653))))
((((1,653
1,653
1,653
588588588588
9999
(1,056666))))
(1,05
(1,05
(1,05
2015
2015
20152015
££££000000000000
500500500500
(528)
(528)
(528)
(528)
((((28282828))))
On 6 March 2015, the business of Incahoot Limited was acquired by Manx Incahoot Limited, a subsidiary of the Group. Incahoot
Limited was in administration at the time and sold its intellectual property rights, a customer contract and property, plant and
equipment. Two employees were also transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006
which carried over £26,000 of unpaid wages.
In exchange for the net assets acquired, Manx Incahoot Limited paid £101,000 in cash and pledged a further 10.0% share of future
revenue streams on pipeline listed at the time of acquisition generated within 2 years of purchase, up to a cap of £100,000. No
revenue has yet been generated from this pipeline and the Directors believe that it is unlikely that any will. Therefore the contingent
consideration has been valued at nil.
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
42
20.20.20.20. Investment in Group undertakings (continued)
Investment in Group undertakings (continued)
Investment in Group undertakings (continued)
Investment in Group undertakings (continued)
Acquisition of Incahoot (continued)
Acquisition of Incahoot (continued)
Acquisition of Incahoot (continued)
Acquisition of Incahoot (continued)
of consideration
Fair value of consideration
Fair value
of consideration
of consideration
Fair value
Fair value
Cash
Contingent consideration
Fair value of assets acquired
Fair value of assets acquired
Fair value of assets acquired
Fair value of assets acquired
Intellectual property rights (including website)
Fair value increase on intellectual property rights
Customer contract
Property, plant and equipment
Fair value of liabilities acquired
Fair value of liabilities acquired
Fair value of liabilities acquired
Fair value of liabilities acquired
Unpaid employee wages
Bargain purchase
Bargain purchase
Bargain purchase
Bargain purchase
2015
2015
20152015
££££000000000000
101101101101
----
35353535
310310310310
76767676
1111
((((422422422422))))
26262626
2015
2015
20152015
££££000000000000
101101101101
(396)
(396)
(396)
(396)
(295)
(295)
(295)
(295)
On 12 November 2015, a valuation was conducted by an independent firm of professional advisers on the intellectual property rights
acquired for the purpose of including within these financial statements as determined by IFRS 3: Business Combinations. The
independent firm addressed the three levels of the IFRS fair value hierarchy and concluded that level 3 was most appropriate as the
intellectual property rights acquired had no active markets (Level 1), or comparable assets against which to index prices (Level 2).
Therefore, the report valued the intellectual property rights acquired based on internally generated data (Level 3) being: costs
incurred to date and cash flow projections. The replacement cost approach was determined as £310,500 after tax and the income
approach valued the business at £233,701 using a discount factor of 42.5%. The report averaged the two approaches to arrive at a
final valuation of £276,000. In addition, the domain name was separately valued as an intangible asset, citing comparable domains
sold recently with a range of £6,000 to £35,000.
It is the view of the Directors that only one approach should be used when valuing the assets acquired and that the replacement cost
approach is the better of the two due to the uncertainty of the cash flows given its recent acquisition. Thus the replacement cost has
been adopted as the basis for the valuation in order to arrive at a reliable estimate. In addition, the Directors believe that the value of
the domain name should be valued at the upper end of the range cited given market conditions for this product. Therefore, the value
attributed in these financial statements on the assets acquired is £345,500, being £310,500 for the intellectual property and £35,000
for the domain name.
This valuation gave rise to the fair value of assets and liabilities acquired being £295,000 greater than what was paid and
consequently in accordance with IFRS 3: Business Combinations has been recognised as a gain on bargain purchase in the
consolidated income statement as a separate line item.
21.21.21.21. Trade and other
receivables
Trade and other receivables
receivables
receivables
Trade and other
Trade and other
Prepayments and other debtors
Depositors Compensation Scheme Receivable
VAT recoverable
Group
Company
2015
2015
20152015
££££000000000000
857857857857
54545454
466466466466
2014
£000
646
54
466
1,1,1,1,377377377377
1,166
2015
2015
20152015
££££000000000000
98989898
----
----
98989898
2014
£000
62
-
-
62
Included in trade and other receivables is an amount of £466,000 (2014: £466,000) relating to a reclaim of value added tax (“VAT”).
Conister Bank Limited, as the Group VAT registered entity, has for some time considered the VAT recovery rate being obtained by the
business was neither fair nor reasonable, specifically regarding the attribution of part of the residual input tax relating to the HP
business not being considered as a taxable supply. Queries have been raised with the Isle of Man Government Customs & Excise
Division (“C&E”), and several reviews of the mechanics of the recovery process were undertaken by the Company’s professional
advisors.
Manx Financial Group PLC
43
21.21.21.21. Trade and other receivables (continued)
Trade and other receivables (continued)
Trade and other receivables (continued)
Trade and other receivables (continued)
The decision of the First-Tier Tax Tribunal released 18 August 2011 in respect of Volkswagen Financial Services (UK) Limited
(“VWFS”) v HM Revenue & Customs (TC01401) (“VWFS Decision”) added significant weight to the case put by the Bank and a
request for a revised Partial Exemption Special Method was submitted in December 2011. The proposal put forward by the Bank was
that the revised method would allocate 50.0% of costs in respect of HP transactions to a taxable supply and 50.0% to an exempt
supply. In addition at this time a Voluntary Disclosure was made as a retrospective claim for input VAT under-claimed in the last 4
years.
In November 2012, it was announced that the HMRC Upper Tribunal had overturned the First-Tier Tribunal in relation to the VWFS
Decision. VWFS has subsequently been given leave to appeal and this was scheduled to be heard in October 2013. However, this
was delayed and the case was heard by the court of appeal on 17 April 2015 who overturned the Upper Tribunal’s decision ruling in
favour of VWFS. HMRC have now been given leave to appeal this decision to the Supreme Court and to seek reference to the
European Court.
The Bank’s total exposure in relation to this matter is £589,000, comprising the debtor balance referred to above plus an additional
£123,000 VAT reclaimed under the partial Exemption Special Method, in the period from Q4 2011 to Q3 2012 (from Q4 2012 the
Bank reverted back to the previous method). On the basis of the discussions and correspondence which have taken place between
the Bank and C&E, in addition to the VWFS case, the Directors are confident that the VAT claimed referred to above will be secured.
22.22.22.22. Customer accounts
Customer accounts
Customer accounts
Customer accounts
Retail customers: term deposits
Corporate customers: term deposits
23.23.23.23. Creditors and accrued charges
Creditors and accrued charges
Creditors and accrued charges
Creditors and accrued charges
Commission creditors
Other creditors and accruals
Consideration for acquisition of MFL (see note 20)
24.24.24.24. Block creditors
Block creditors
Block creditors
Block creditors
2015
2015
20152015
££££000000000000
103,041
103,041
103,041
103,041
3,287
3,287
3,287
3,287
106,328
106,328
106,328
106,328
2014
£000
98,420
1,839
100,259
Group
Company
2015
2015
20152015
££££000000000000
2,2,2,2,333313131313
530530530530
500500500500
3,343
3,343
3,343
3,343
2014
£000
1,389
326
-
1,715
2015
2015
20152015
££££000000000000
----
12121212
----
12121212
2015
2015
20152015
££££000000000000
194194194194
394394394394
588588588588
2014
£000
-
20
-
20
2014
£000
-
-
-
Drawdown 1 – repayable 25/12/2016, interest payable at 5.6%, secured on assets of MFL
Drawdown 2 – repayable 25/07/2018, interest payable at 5.6%, secured on assets of MFL
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
44
25.25.25.25. Loan notes
Loan notes
Loan notes
Loan notes
Related parties
Related parties
Related parties
Related parties
J Mellon
Burnbrae Limited
Southern Rock Insurance Company Limited
Life Science Developments Limited
Unrelated parties
Unrelated parties
Unrelated parties
Unrelated parties
Group
Company
NotesNotesNotesNotes
JMJMJMJM
BLBLBLBL
SRSRSRSR
LSLSLSLS
UPUPUPUP
2015
2015
20152015
££££000000000000
1,750
1,750
1,750
1,750
1,200
1,200
1,200
1,200
460460460460
500500500500
3,910
3,910
3,910
3,910
3,355
3,355
3,355
3,355
7,265
7,265
7,265
7,265
2014
£000
1,750
1,200
460
500
3,910
3,255
7,165
2015
2015
20152015
££££000000000000
1,750
1,750
1,750
1,750
1,200
1,200
1,200
1,200
460460460460
500500500500
3,910
3,910
3,910
3,910
3,355
3,355
3,355
3,355
7,265
7,265
7,265
7,265
2014
£000
1,750
1,200
460
500
3,910
3,255
7,165
JMJMJMJM – Two loans, one of £500,000 maturing on 31 July 2017 with interest payable of 7.0% per annum, and one of £1,250,000 maturing
on 26 February 2020, paying interest of 6.5% per annum. Both loans are convertible at the rate of 4 pence and 9 pence respectively.
JM is also entitled to 8.3 million warrants at an exercise price of 6 pence which lapse on 31 July 2017.
BLBLBLBL – One loan consisting of £1,200,000 maturing on 31 July 2017 with interest payable of 7.0% per annum. Jim Mellon is the
beneficial owner of BL and Denham Eke is also a director. The loan is convertible at a rate of 4 pence. BL is also entitled to 20
million warrants at an exercise price of 6 pence which lapse on 31 July 2017.
SRSRSRSR – One loan consisting of £460,000 maturing on 26 February 2020 with interest payable of 6.5% per annum. The loan is
convertible at a rate of 9 pence. SR is also entitled to 8.3 million warrants on a previously converted loan note at an exercise price of 6
pence which lapse on 24 October 2017. Arron Banks is a non-executive director and is a major shareholder of SR. John Banks, a
Non-executive Director is also a director of SR.
LS LS LS LS – One loan of £350,000 maturing on 5 September 2017 with interest payable of 5.0% per annum, and another loan of £150,000
maturing on 3 October 2017 paying interest of 5.0% per annum. Denham Eke is a director of LS.
UPUPUPUP – Fifteen loans consisting of an average £223,667, with an average interest payable of 5.6% per annum. The earliest maturity
date is 14 July 2016 and the latest maturity is 25 November 2020.
With respect to the convertible loans, the interest rate applied was deemed by the Directors to be equivalent to the market rate with no
conversion option.
26.26.26.26. Pension liability
Pension liability
Pension liability
Pension liability
The Conister Trust Pension and Life Assurance Scheme (“Scheme”) operated by the Company is a funded defined benefit
arrangement which provides retirement benefits based on final pensionable salary. The Scheme is closed to new entrants and the last
active member of the Scheme left pensionable service in 2011.
The Scheme is approved in the Isle of Man by the Assessor of Income Tax under the Income Tax (Retirement Benefit Schemes) Act
1978 and must comply with the relevant legislation. In addition, it is registered as an authorised scheme with the FSA in the Isle of
Man under the Retirement Benefits Scheme Act 2000. The Scheme is subject to regulation by the FSA but there is no minimum
funding regime in the Isle of Man.
The Scheme is governed by two corporate trustees, Conister Bank Limited and Boal & Co (Pensions) Limited. The trustees are
responsible for the Scheme’s investment policy and for the exercise of discretionary powers in respect of the Scheme’s benefits.
The rules of the Scheme state: “Each Employer shall pay such sums in each Scheme Year as are estimated to be required to
provide the benefits of the Scheme in respect of the Members in its employ”.
Exposure to risk
Exposure to risk
Exposure to risk
Exposure to risk
The Company is exposed to the risk that additional contributions will be required in order to fund the Scheme as a result of poor
experience. Some of the key factors that could lead to shortfalls are:
investment performance – the return achieved on the Scheme’s assets may be lower than expected; and
(cid:1)
(cid:1) mortality – members could live longer than foreseen. This would mean that benefits are paid for longer than expected, increasing
the value of the related liabilities.
Manx Financial Group PLC
45
26.26.26.26. Pension liability
(continued)
Pension liability (continued)
(continued)
(continued)
Pension liability
Pension liability
In order to assess the sensitivity of the Scheme’s pension liability to these risks, sensitivity analyses have been carried out. Each
sensitivity analysis is based on changing one of the assumptions used in the calculations, with no change in the other assumptions.
The same method has been applied as was used to calculate the original pension liability and the results are presented in comparison
to that liability. It should be noted that in practice it is unlikely that one assumption will change without a movement in the other
assumptions; there may also be some correlation between some of these assumptions. It should also be noted that the value placed
on the liabilities does not change on a straight line basis when one of the assumptions is changed. For example, a 2.0% change in an
assumption will not necessarily produce twice the effect on the liabilities of a 1.0% change.
No changes have been made to the method or to the assumptions stress-tested for these sensitivity analyses compared to the
previous period. The investment strategy of the Scheme has been set with regard to the liability profile of the Scheme. However, there
are no explicit asset-liability matching strategies in place.
Restriction of assets
Restriction of assets
Restriction of assets
Restriction of assets
No adjustments have been made to the balance sheet items as a result of the requirements of IFRIC 14 issued by IASB’s
International Financial Reporting Interpretations Committee.
Scheme amendments
Scheme amendments
Scheme amendments
Scheme amendments
There have not been any past service costs or settlements in the financial year ending 31 December 2015 (2014: none).
Funding policy
Funding policy
Funding policy
Funding policy
The funding method employed to calculate the value of previously accrued benefits is the Projected Unit Method. Following the
cessation of accrual of benefits when the last active member left service in 2011, regular future service contributions to the Scheme
are no longer required. However, additional contributions will still be required to cover any shortfalls that might arise following each
funding valuation.
The most recent full actuarial valuation was carried out at 1 April 2013, which showed that the market value of the Scheme’s assets
was £1,283,000 representing 80.0% of the benefits that had accrued to members, after allowing for expected future increases in
earnings. As required by IAS 19 this valuation has been updated by the actuary as at 31 December 2015.
The amounts recognised in the Consolidated Statement of Financial Position are as follows:
Total underfunding in funded plans recognised as a liability
Total underfunding in funded plans recognised as a liability
Total underfunding in funded plans recognised as a liability
Total underfunding in funded plans recognised as a liability
Fair value of plan assets
Present value of funded obligations
Movement in the liability for defined benefit obligations
Movement in the liability for defined benefit obligations
Movement in the liability for defined benefit obligations
Movement in the liability for defined benefit obligations
Opening defined benefit obligations at 1 January
Benefits paid by the plan
Interest on obligations
Actuarial (gain) / loss
Liability for defined benefit obligations at 31 December
Liability for defined benefit obligations at 31 December
Liability for defined benefit obligations at 31 December
Liability for defined benefit obligations at 31 December
Movement in plan assets
Movement in plan assets
Movement in plan assets
Movement in plan assets
Opening fair value of plan assets at 1 January
Expected return on assets
Contribution by employer
Actuarial (loss) / gain
Benefits paid
Closing fair value of plan assets at 31 December
Closing fair value of plan assets at 31 December
Closing fair value of plan assets at 31 December
Closing fair value of plan assets at 31 December
2015
2015
20152015
££££000000000000
1,332
1,332
1,332
1,332
(1,666)
(1,666)
(1,666)
(1,666)
(334)
(334)
(334)
(334)
2015
2015
20152015
££££000000000000
1,733
1,733
1,733
1,733
(82)
(82)
(82)
(82)
64646464
(49)
(49)
(49)
(49)
1,666
1,666
1,666
1,666
2015
2015
20152015
££££000000000000
1,345
1,345
1,345
1,345
50505050
49494949
(30)
(30)
(30)
(30)
(82)
(82)
(82)
(82)
1,332
1,332
1,332
1,332
2014
£000
1,345
(1,733)
(388)
2014
£000
1,497
(62)
70
228
1,733
2014
£000
1,245
58
49
55
(62)
1,345
Manx Financial Group PLC
Notes to Consolidated Financial Statements
46
26.26.26.26. Pension liability (continued)
Pension liability (continued)
Pension liability (continued)
Pension liability (continued)
Expense recognised in income statement
Expense recognised in income statement
Expense recognised in income statement
Expense recognised in income statement
Interest on obligation
Expected return on plan assets
Total included in personnel costs
Total included in personnel costs
Total included in personnel costs
Total included in personnel costs
Actual return on plan assets
Actual return on plan assets
Actual return on plan assets
Actual return on plan assets
Actuarial gain / (loss) recognised in other comprehensive income
Actuarial gain / (loss) recognised in other comprehensive income
Actuarial gain / (loss) recognised in other comprehensive income
Actuarial gain / (loss) recognised in other comprehensive income
Actuarial (loss) / gain on plan assets
Actuarial gain / (loss) on defined benefit obligations
The actuarial assumptions used to calculate Scheme liabilities under
The actuarial assumptions used to calculate Scheme liabilities under
The actuarial assumptions used to calculate Scheme liabilities under
The actuarial assumptions used to calculate Scheme liabilities under
IAS19 are as follows:
IAS19 are as follows:
IAS19 are as follows:
IAS19 are as follows:
Rate of increase in pension in payment:
service up to 5 April 1997
service from 6 April 1997 to 13 September 2005
service from 14 September 2005
Rate of increase in deferred pensions
Discount rate applied to scheme liabilities
Inflation
2015
2015
20152015
££££000000000000
64646464
(50)
(50)
(50)
(50)
14141414
20202020
2015
2015
20152015
££££000000000000
(30)
(30)
(30)
(30)
49494949
19191919
2015
2015
20152015
%%%%
2014
%
----
2.72.72.72.7
2.02.02.02.0
5.05.05.05.0
3.93.93.93.9
2.82.82.82.8
-
2.7
2.0
5.0
3.8
2.8
2014
£000
70
(58)
12
113
2014
£000
55
(228)
(173)
2013
%
-
3.1
2.1
5.0
4.8
3.2
The assumptions used by the actuary are best estimates chosen from a range of possible assumptions, which due to the timescale
covered, may not necessarily be borne out in practice.
27.27.27.27. Called up share capital
Called up share capital
Called up share capital
Called up share capital
Authorised: Ordinary shares of no par value
Authorised: Ordinary shares of no par value
Authorised: Ordinary shares of no par value
Authorised: Ordinary shares of no par value
At 31 December 2014 & 2015
At 31 December 2014 & 2015
At 31 December 2014 & 2015
At 31 December 2014 & 2015
Issued and fully paid: Ordinary shares of no par value
Issued and fully paid: Ordinary shares of no par value
Issued and fully paid: Ordinary shares of no par value
Issued and fully paid: Ordinary shares of no par value
At 31 December 2014 & 2015
At 31 December 2014 & 2015
At 31 December 2014 & 2015
At 31 December 2014 & 2015
Number
Number
Number
Number
150,000,000
150,000,000
150,000,000
150,000,000
Number
Number
Number
Number
102,070,252
102,070,252
102,070,252
102,070,252
££££000000000000
18,933
18,933
18,933
18,933
There are a number of convertible loans at 31 December 2015 of £3.41 million (2014: £3.41 million) involving warrants of 28.3 million
(31 December 2014: 28.3 million) (see note 25 for further details). The total number of warrants in issue at 31 December 2015 is 36.6
million (2014: 36.6 million) (see note 25 for further details).
On 23 June 2014, 1.75 million share options were issued to Executive Directors and senior management within the Group at an
exercise price of 14 pence. The options vest over three years with a charge based on the fair value of 8 pence per option at the date
of grant.
Share options
Share options
Share options
Share options
Share option reserve
Share option reserve
Share option reserve
Share option reserve
As at 31 December 2014
Grant of options
Lapses
December 2015
As at 31 December 2015
As at 31
December 2015
December 2015
As at 31
As at 31
No of Shares
No of Shares
No of Shares
No of Shares
000000000000
2,806
-
-
2,806
2,806
2,806
2,806
Value
Value
ValueValue
££££000000000000
142
46
-
188188188188
Manx Financial Group PLC
47
27.27.27.27. Called up share capital (continued)
Called up share capital (continued)
Called up share capital (continued)
Called up share capital (continued)
Performance and service conditions attached to share options that have not fully vested are as follows:
(a) The options granted on 25 June 2010 (1,056,000 options) will vest if the mid-market share price of £0.30 is achieved during the
period of grant (10 years ending 25 June 2020).
(b) The options granted on 25 June 2010 and 23 June 2014 require a minimum of three years continuous employment service in
order to exercise upon the vesting date.
The fair value of services received in return for share options granted is based on the fair value of share options granted, measured
using a binomial probability model with the following inputs for each award:
Fair value at date of grant
Share price
Exercise price
Expected volatility
Option life
Risk-free interest rate (based on government bonds)
Forfeiture rate
28.28.28.28. Analysis of changes in financing during the year
Analysis of changes in financing during the year
Analysis of changes in financing during the year
Analysis of changes in financing during the year
in financing during the year
Analysis of changes in financing during the year
Analysis of changes
in financing during the year
in financing during the year
Analysis of changes
Analysis of changes
Balance at 1 January
Issue of loan notes
23 June
2014
£0.08
£0.14
£0.14
55.0%
3
0.5%
33.3%
2015
2015
20152015
££££000000000000
26,098
26,098
26,098
26,098
100100100100
26,198
26,198
26,198
26,198
25 June
2010
£0.03
£0.11
£0.11
47.0%
3
2.2%
0.0%
2014
£000
24,998
1,100
26,098
The 2015 closing balance is represented by £18.933 million share capital (2014: £18.933 million) and £7.265 million of loan notes
(2014: £7.165 million).
29.29.29.29. Regulator
Regulator
Regulator
Regulator
The Group is regulated by the Isle of Man Government FSA licensed to undertake banking activities and conduct investment
business. In addition the Group is regulated by the Financial Conduct Authority in the United Kingdom for credit and brokerage
related activities.
30.30.30.30. Related party transactions
Related party transactions
Related party transactions
Related party transactions
Cash deposits
Cash deposits
Cash deposits
Cash deposits
During the year, the Bank held cash on deposit on behalf of Jim Mellon (Executive Chairman of MFG) and companies related to Jim
Mellon and Denham Eke (Chief Executive Officer of MFG). Total deposits amounted to £0.031 million (2014: £0.067 million), at
normal commercial interest rates in accordance with the standard rates offered by the Bank.
Funds held in a fiduciary capacity
Funds held in a fiduciary capacity
Funds held in a fiduciary capacity
Funds held in a fiduciary capacity
Fiduciary deposits
Fiduciary deposits
Fiduciary deposits
Fiduciary deposits
The Bank acts as agent bank to a number of customers, for balances totalling £4.0 million (2014: £4.9 million). The Bank invests
these customer assets with third party banks on their behalf and in return for this service receives a fee. These balances are not
included within the statement of financial position.
All funds held and accounts maintained in connection with the fiduciary services that the Bank offers in 2015 are to companies
connected with Jim Mellon and Denham Eke.
Staff and
ommercial loans
Staff and ccccommercial loans
ommercial loans
ommercial loans
Staff and
Staff and
Details of staff loans are given in note 17 to the financial statements.
Manx Financial Group PLC
Notes to Consolidated Financial Statements
48
30.30.30.30. Related party transactions
(continued)
Related party transactions (continued)
(continued)
(continued)
Related party transactions
Related party transactions
Staff and
(continued)
ommercial loans (continued)
Staff and ccccommercial loans
(continued)
(continued)
ommercial loans
ommercial loans
Staff and
Staff and
Normal commercial loans are made to various companies connected to Jim Mellon and Denham Eke. As at 31 December 2015,
£0.132 million of capital and interest was outstanding (2014: £0.193 million).
promotions services
Media promotions services
Media
promotions services
promotions services
Media
Media
In 2015, Manx Incahoot Limited provided services to Burnbrae Media Limited, a company associated with Denham Eke and Jim
Mellon, for £12,000.
Intercompany recharges
Intercompany recharges
Intercompany recharges
Intercompany recharges
Various intercompany recharges are made during the course of the year as a result of the Bank settling debts in other Group
companies. In addition, MFG provided investment management and administration services in the previous year for £0.439 million.
No charge for such services was made in 2015. EWA provides services to the Group in arranging its insurance and defined
contribution pension arrangements.
Investments
Investments
Investments
Investments
The Bank holds less than 1% equity in the share capital of an investment of which Jim Mellon is a shareholder (note 15). Denham
Eke acts as a non-executive director.
Subordinated loans
Subordinated loans
Subordinated loans
Subordinated loans
Manx Financial Group PLC has advanced no further subordinated loans in 2015 (2014: £1.9 million) (see note 20).
Loan notes
Loan notes
Loan notes
Loan notes
See note 25 for a list of related party loan notes as at 31 December 2015 and 2014.
including Executive Directors
remuneration including Executive Directors
Key management personnel’snel’snel’snel’s remuneration
Key management person
including Executive Directors
including Executive Directors
remuneration
remuneration
Key management person
Key management person
Short-term employee benefits
31.31.31.31. Operating leases
Operating leases
Operating leases
Operating leases
Non-cancellable lease rentals are payable in respect of property and motor vehicles as follows:
2015
2015
20152015
££££000000000000
402402402402
2014
£000
397
2015
2015
20152015
2014
Leasehold
Leasehold
Leasehold
Leasehold
Property
Property
Property
Property
££££000000000000
193193193193
782782782782
594594594594
1,569
1,569
1,569
1,569
OtherOtherOtherOther
££££000000000000
----
----
----
----
Leasehold
Property
£000
317
493
213
1,023
Other
£000
-
-
-
-
Less than one year
Between one and five years
Over five years
32.32.32.32. Subsequent events
Subsequent events
Subsequent events
Subsequent events
There are no significant subsequent events to report.
Manx Financial Group PLC
Shareholders’ Notes
49
Clarendon House
Victoria Street
Douglas
Isle of Man
IM1 2LN
Tel: (01624) 694694
Fax: (01624) 624278
www.mfg.im
www.mfg.im
www.mfg.im
www.mfg.im