_________________________________
ANNUAL REPORT 2016
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
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
£213 million.
EWA specialises in the areas of
wealth management, mortgage,
general insurance, and retirement
planning.
Manx Incahoot Limited provides
Employee Benefit solutions to the
UK and Isle of Man employment
market.
This product was
launched in November 2016.
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
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
02
04
06
07
10
12
13
14
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
Chairman’s Statement
02
Dear Shareholders,
Dear Shareholders,
Dear Shareholders,
Dear Shareholders,
When I wrote to you in September 2016 presenting the Interim
Results, I had every expectation that the full year would see a
return to the previous levels of profitability. In the event, although
net interest income has increased by 18% to £16.0 million (2015:
£13.5 million), profit before tax for the year has fallen by 33% to
£1.5 million (2015: £2.3 million). As I previously commented, the
main reason for this reduction was the significant increase in the
amounts paid away by our principal subsidiary, Conister Bank
Limited (the “Bank”), to our UK introducers in commissions and
the settlement of early terminations – a total of £9.1 million (2015:
£7.0 million).
However, whilst this overall result is disappointing, our second
half profit before tax at £0.8 million (2015: £1.3 million) showed a
respectable improvement of 17% over the first half as we
changed our Bank’s lending mix to encompass a greater
proportion of direct business, thus lessening our reliance on
third-party
introductions. Also, as a concomitant, we are
experiencing a fall in early terminations. I anticipate that the full
benefit of this change will be reflected in 2017 and already we
are seeing considerable progress by the end of 2017 first quarter
results. I will return to this point later.
I am also encouraged that the second half operating income of
£4.7 million (2015: £4.2 million) is the highest that we have ever
achieved. Thus, I am confident that by re-focussing the lending
mix, we have taken the correct steps to build a base for a
profitable future.
MaMaMaManx Financial Group PLC
nx Financial Group PLC
nx Financial Group PLC
nx Financial Group PLC
As stated, profit before income tax for the year was £1.5 million
(2015: £2.3 million) on a net interest income of £16.0 million
(2015: £13.5 million). Our key metrics remain positive: our return
on equity was 10% (2015: 17%), which remains within the range
of that of our peer group. Our lending grew by 15% (2015: 13%)
over the year. The level of performing loans remains impressive
at 94%, a testament to our prudent lending policy.
Turning to the balance sheet, our loan book grew by £14.7
million to £116.1 million (2015: £101.4 million) and our deposit
base increased to £126.0 million (2015: £106.3 million), a growth
of 15% and 18% respectively. In turn, our equity increased by
8% to £13.2 million (2015: £12.1 million).
It is important to remember that almost the entirety of this equity
is used to support the regulatory capital base of the Bank. Each
year, as we grow the Bank’s balance sheet, we require ever
increasing Tier 1 capital, being the regulatory measure of
applicable assets, to support that growth. One of the Board’s
main aims is to reach the optimum size whereby we become
Jim Mellon
Jim Mellon
Jim Mellon
Jim Mellon
Chairman
self-supporting in our regulatory capital requirements, thus
achieving a prudential balance between growth and the future
ability to distribute any excess capital to our shareholders. It is
important to remember that the cash and near-cash figure of
£6.1 million (2015: £7.2 million) sitting on the balance sheet is
solely available for further lending, representing as it does a
mismatch between customers’ deposits and advances.
Certain loans supporting the Bank’s capital provided by the
principal shareholders – mostly from myself – will come up for
renewal during the course of this year. I have indicated to the
Board that I will renew these loans and, as before, the
independent directors, in conjunction with our advisors, will
determine fair and equitable renewal terms for the benefit of both
parties.
We made one acquisition in 2016, when on 23 December our
wholly owned subsidiary, Edgewater Associates Limited,
acquired the MBL book of Independent Financial Advisory (“IFA”)
business. This acquisition created the largest IFA operation on
the Isle of Man and I can report that the integration of the two
businesses is proceeding as planned. The full benefit of this
acquisition will materialise in future periods.
Conister Bank Limited
Conister Bank Limited
Conister Bank Limited
Conister Bank Limited
Our strategy of providing our existing products to new markets
and developing new products to our existing markets is creating
consistent growth. During the year on the Isle of Man, we
launched a unique bridging loan product, and an Approved
Partner lending programme focused on SMEs – both attracting
considerable interest. In the UK, we launched a PCP product in
conjunction with one of our long-standing partners. We have
entered the Jersey secured lending market on a local regulated
basis, and we are currently evaluating a Hire Purchase product
for the Irish market and intend to launch an Isle of Man PCP
product shortly.
With regard to the UK, we see continuing growth opportunities in
both hire and lease purchase, block discounting and secured
personal loans. Indeed, we will look to increase our UK presence
during 2017 and beyond, by significantly broadening our lending
distribution. However, our view of the UK unsecured lending
market, now representing less than 6% of our total advances,
has led us to become more cautious as the macro environment
of increasing inflation and unprecedented levels of unsecured
consumer debt will, we believe, drive
future arrears.
Furthermore, the competitive environment for this product has
worsened with more liquidity driving down yields which is counter
intuitive when the wider market dynamics are considered. Our
risk appetite continues to be prudent and, therefore, we access
this market through our capital indemnified partners which
partially insulates us from suffering a loss. We test our entire
loan book each month and it is a reflection of our careful credit
scoring that our arrears’ profile continues at a low level.
Manx Financial Group PLC
03
With loan advances increasing by 25% to £72.5 million (2015:
£58.0 million), interest income increased by 16% to £19.1 million
(2015: £16.5 million). Our net interest income margin showed a
small increase to 83% (2015: 82%) as our cost of funds
continued to decrease. Operating income, however, decreased
by 0.2% to £6.9 million (2015: £7.0 million) as commissions paid
to our introducers grew by 30% to £9.1 million (2015: £7.0
million). Our personnel and other costs increased by £0.9 million
in the year, largely driven by additional headcount to support our
forecasted plans for growth.
New lending increased our loan book by 15% to £115.2 million
(2015: £100.6 million). The most notable contributors to this
positive performance were direct lending in the Isle of Man, our
direct UK broker network and our block lending product.
Provisions have increased by only 5% (despite a 15% increase
in net loans) to £2.2 million (2015: £2.1 million) which represents
1.9% of the net loan book (2015: 2.1%). As I reported previously,
we have ceased funding UK hand-held card terminals and our
legal action continues to ensure we recover any losses to the
fullest extent possible. This discontinued lending stream will be
materially run off by the end of 2017.
The Bank’s asset base grew by 17% to £147.5 million (2015:
£126.2 million) and total equity increased by 2% to £13.0 million
(2015: £12.6 million).
As I reported in the Interim Accounts, under the HMRC’s Partial
Exemption Special Method, we have increased our VAT debtor
by a further £0.3 million, to a total of £0.8 million. Following
further discussions and correspondence with the Isle of Man
Customs & Excise, the Board remains confident that the VAT
debtor claimed will be secured, reinforced by a very recent ruling
by the Supreme Court that, despite referring the entire matter to
the European Court of Justice, a 50% allowance is both fair and
equitable. As our VAT debtor reflects 50% of the recoverable
amount, this can only be positive news.
Finally, I am pleased to welcome both Douglas Grant as the new
Managing Director of the Bank, and James Smeed who takes his
place as the Finance Director and joins the Board. I am pleased
to note that both appointments are well deserved internal
promotions, demonstrating that the Bank now offers meaningful
career path at all levels.
Edgewater Associates Limited
Edgewater Associates Limited
Edgewater Associates Limited
Edgewater Associates Limited
Our IFA business continues to grow, supported by its general
insurance and loan brokering units. Indeed, 2016 was the most
profitable year so far, with pre-MBL acquisition profit for the year
increasing by 149% to £0.4 million (2015: £0.1 million) on a 6%
increased
(2015: £1.4 million).
Edgewater Associates unconsolidated total assets have grown
by 93% to £2.3 million (2015: £1.2 million) and equity has
increased by 40% to £1.3 million (2015: £0.9 million).
turnover of £1.5 million
One pleasing fact to note is that assets under management have
grown by 38% to £213 million following the MBL acquisition
(2015: £154 million).
The December 2016 MBL acquisition will enhance future
profitability and brings with it talented staff who are already
making a significant contribution to the business. As part of the
overall acquisition transaction, we exercised the Lazenby Knox
option at the beginning of 2017 which will further enhance profits
and add to what is already the Isle of Man’s largest IFA business.
We are well positioned to add other local IFA books to this
business subject to strict due diligence.
Other operating subsidiaries
Other operating subsidiaries
Other operating subsidiaries
Other operating subsidiaries
As I reported previously our foreign exchange advisory service,
Manx FX Limited, is now trading profitably and continues to
tender for new accounts and to look for additional ways to
enhance its niche Isle of Man position.
Our IT-enriched employee benefit subsidiary, Manx Incahoot
Limited, was successfully re-launched at the Olympia UK
Employee Benefit Show in London during November 2016.
Following which, it is in advanced negotiations with a number of
companies to provide their staff with tailor-made incentives to
promote increased loyalty. I hope to be able to announce more
on this in the near future.
Outlook
Outlook
Outlook
Outlook
Following the internal publication of our Quarter 1, 2017 figures, I
am confident we are well set for a meaningful increase in profit at
both the Interim and full-year stage. Whilst I am the first to admit
that our 2016 performance appears lack-lustre, we were able to
implement certain changes in the second half which will serve us
well in the next twelve months. We have placed additional
emphasis on new business generation which is bearing fruit. We
have moved Edgewater into being a main player in the Isle of
Man market. We are reviewing our IT systems with a view to a
further upgrade. But most importantly, we are considering a
significant increase in our presence in the UK and elsewhere,
bolstered by our belief that Brexit offers enhanced opportunities.
This year will see a simplification of our capital structure and will
be the year that we do more to reach out to the investing public.
Finally, it remains for me to thank you, our shareholders; our
excellent executive and staff who contribute so much to the
development of business; and our customers, be they depositors
or borrowers, for your continued loyalty.
Jim Mellon
Jim Mellon
Jim Mellon
Jim Mellon
Executive Chairman
28 April 2017
2014
Manx Financial Group PLC
Directors, Officers and Advisers
04
Executive Directors
in
Jim Mellon (60)‡
Executive Chairman
Executive Chairman Jim Mellon is a well-known
and successful entrepreneur, author and economic
fund
commentator, starting his career
including biopharma,
management and now
property, mining and
technology
amongst his many
investments. Jim 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
chairman of the Regent Pacific Group, quoted on
the Hong Kong Stock Exchange.
information
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 2 November 2007 and
appointed as Executive Chairman on 12 February
2009.
Non-executive Directors
Douglas Grant (52) ‡
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.
He is Managing Director of Conister Bank
Limited.
is
Denham Eke (65) ‡
Chief Executive Officer
Chief Executive Officer Denham Eke
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 finance
officer of West African Minerals Corporation
Limited, chief finance officer of Life Science
Developments Limited, chief finance officer of Port
Erin Biopharma Investments 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.
Alan Clarke (66)‡†*
Non-executive Director
David Gibson (69) ‡†* ≠
Non-executive Director
John Banks (48) ‡
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
non-executive directorships and is President of
is also a registered
ICAEW Manchester. He
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.
David Gibson qualified as a certified accountant
whilst holding posts with Shell-Mex and BP and
CIBA-Geigy throughout 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
treasurer. He joined 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.
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 12 February 2009.
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.
Manx Financial Group PLC
05
* Member of the Audit, Risk and Compliance
Committee
† Member of the Remuneration Committee
‡ Member of the Nominations Committee
≠ Independent Non-executive Director
Non-executive Directors
Company secretary
Neil Duggan (56) ‡* ≠
Non-executive Director
Lesley Crossley (49)
Company Secretary
Neil Duggan 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. a certified accoun
Appointment
Appointment
Appointment
Appointment
Appointed to the Board on 1 July 2015. He is
Chairman of Conister Bank Limited.
Lesley Crossley is a Fellow of the Chartered
Institute of Secretaries and Administrators and has
30 years of wide ranging experience in the financial
services industry both in the UK and Isle of
Man. Prior to joining Manx Financial Group PLC
she held the position of Company Secretary for
Scottish Provident International based on the Isle of
Man.
Appointment
Appointment
Appointment
Appointment
Appointed as Company Secretary on 29 September
2008.
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
Advisers
Advisers
Advisers
Advisers
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
Hill Dickinson LLP
The Broadgate Tower
20 Primrose Street
London EC21 2EW
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
Boal & Co Ltd
Marquis House
Isle of Man Business Park
Douglas
Isle of Man IM2 2QZ
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
Presentation of Annual
Presentation of Annual
Presentation of Annual
Presentation of Annual
Report and Accounts
Report and Accounts
Report and Accounts
Report and Accounts
is
Presented here
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
includes
which
relations
information and
contact details.
included
on
Manx Financial Group PLC
Directors’ Report
06
The Directors present their annual report and the audited financial
statements for the year ended 31 December 2016.
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, prepaid cards and wealth management.
Jim Mellon1
John Banks2
David Gibson3
Douglas Grant
Alan Clarke
Number
Number
Number
Number
18181818////00004444/1/1/1/17777
17,635,332
17,635,332
17,635,332
17,635,332
2,336,833
2,336,833
2,336,833
2,336,833
1,721,433
1,721,433
1,721,433
1,721,433
505,821
505,821
505,821
505,821
52,149
52,149
52,149
52,149
Number
Number
Number
Number
31/12/1
31/12/16666
31/12/1
31/12/1
17,635,332
17,635,332
17,635,332
17,635,332
2,336,833
2,336,833
2,336,833
2,336,833
1,721,433
1,721,433
1,721,433
1,721,433
505,821
505,821
505,821
505,821
52,149
52,149
52,149
52,149
Number
31/12/15
17,635,332
2,336,833
1,547,227
505,821
52,149
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 (2015: nil).
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 for the benefit
of 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 1,721,433 Ordinary Shares held by TD Direct Investing
Nominees (Europe) Limited for the benefit of David Gibson.
The number of share options held by the current Directors is as
follows:
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.
Douglas Grant
Number
Number
Number
Number
18181818////00004444/1/1/1/17777
1,042,466
1,042,466
1,042,466
1,042,466
Number
Number
Number
Number
31/12/1
31/12/16666
31/12/1
31/12/1
1,042,466
1,042,466
1,042,466
1,042,466
Number
31/12/15
1,042,466
holdings
Significant shareholdings
Significant share
holdings
holdings
Significant share
Significant share
The number of shares held and the percentage of the issued
shares which that number represented as at 18 April 2017 are:
Rene Nominees (IOM) Limited1
Jim Mellon
Lynchwood Nominees Limited
Island Farms Limited
Number
Number
Number
Number
26,288,992
17,635,332
10,338,045
4,222,319
% of % of % of % of
issued capital
issued capital
issued capital
issued capital
25.76
17.28
10.18
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 April 2017.
Directors and Directors
share interests
Directors and Directors’’’’ share interests
share interests
share interests
Directors and Directors
Directors and Directors
Details of current Directors are set out on pages 4 and 5. Juan
Kelly resigned on 28 March 2017.
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 2016 there were 73 members of staff (2015: 64),
of whom 6 were part-time (2015: 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
that
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.
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.
Division of Responsibilities
Division of Responsibilities
Division of Responsibilities
Division of Responsibilities
Code Principle A.2:
Code Principle A.2: There should be a clear division of
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.
s Approach
GroupGroupGroupGroup’’’’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
The Board
in corporate
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
April 2016 (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 2016
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
Executive Directors, 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 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 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
including Executive and Non-
executive Director succession planning, the appointment of new
Directors and the election and re-election of Directors.
the Board,
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. Executive Directors and representatives from
compliance and risk, 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’ 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 Role of the Board
The Role of the Board
The Role of the Board
The Role of the Board
Code Principle A.1:
Code Principle A.1: Every company should be headed by an
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
Manx Financial Group PLC
08
NonNonNonNon----executive Directors
executive Directors
executive Directors
executive Directors
Code Principle A.4
Code Principle A.4: As part of their role as members of a unitary
Code Principle A.4
Code 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 Code Code Code Principle B.2:
Principle B.2: There should be a formal, rigorous and
Principle B.2:
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.
election
ReReReRe----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.
s Approach
GroupGroupGroupGroup’’’’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.
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: Executive directors’ remuneration should be
Code Principle D.1:
Code Principle D.1:
Code Principle D.1:
designed to promote the long-term success of the company.
Performance-related elements should be transparent, stretching
and rigorously applied.
Code Principle D.2: There should be a formal and transparent
Code Principle D.2:
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.
GroupGroupGroupGroup’’’’s Approach
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 2016 can be found on page 11.
Dialogue with Shareholders
Dialogue with Shareholders
Dialogue with Shareholders
Dialogue with Shareholders
Code Principle E.1: There should be a dialogue with
Code Principle E.1:
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
s Approach
GroupGroupGroupGroup’’’’s Approach
s Approach
s Approach
institutional
The Group
shareholders.
informed of
All shareholders are kept
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:
Code Principle E.2: The board should use general meetings to
Code Principle E.2:
Code Principle E.2:
communicate with investors and to encourage their participation.
s Approach
GroupGroupGroupGroup’’’’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 28 April
2017 and signed on its behalf by:
Jim Mellon
Jim Mellon
Jim Mellon
Jim Mellon
Executive Chairman
28 April 2017
Financial and
Business Reporting
Financial and Business Reporting
Business Reporting
Business Reporting
Financial and
Financial and
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 2016
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:
Executive directors’ remuneration should be designed to
promote the long-term success of the company. Performance-
related elements should be transparent, stretching and
rigorously applied.
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 and are not
contracted.
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
trading
the
related pay scheme based on
performance
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
guaranteed
Where
performance related pay, the contractual conditions must be
considered by the Remuneration Committee.
contractually
operates
Executive Directors
Contractual Terms
Executive Directors’’’’ Contractual Terms
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 3 months.
NonNonNonNon----executive Directors
Remuneration
executive Directors’’’’ Remuneration
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. Committee members do not take 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 awarded across the Group 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 Group 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 Kelly1
Jim Mellon
NonNonNonNon----Executives
Executives
Executives
Executives
John Banks
Alan Clarke
Neil Duggan2
David Gibson
Don McCrickard3
Remuneration/
Fees
£
Performance
Related Pay
£
25,000
150,300
154,186
25,000
25,000
40,000
40,000
40,000
-
-
33,700
26,000
-
-
-
-
-
-
Pension
£
-
15,020
15,408
-
-
-
-
-
-
2012012012016666
Total
Total
Total
Total
££££
25,000
25,000
25,000
25,000
111199,020
99,020
99,020
99,020
191919195,594
5,594
5,594
5,594
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
40,000
40,000
40,000
40,000
44440,000
0,000
0,000
0,000
40,000
40,000
40,000
40,000
----
2015
Total
£
25,000
188,866
192,515
25,000
25,000
38,958
30,000
38,958
18,750
Aggregate emoluments
499,486
59,700
30,428
9,614
585858589,614
9,614
9,614
583,047
1
2
3
Juan Kelly resigned on 28 March 2017.
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 28 April 2017 and signed on its behalf by:
Alan Clarke
Alan Clarke
Alan Clarke
Alan Clarke
Chairman of the Remuneration Committee
28 April 2017
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 £865,000, comprising a
debtor balance of £752,000 in respect of retrospective VAT and an
amount of £113,000 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
28 April 2017
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 2016 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 2016 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 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
Terminal funding
Operating income
Operating income
Operating income
Operating income
Personnel expenses
Other expenses
Provision for impairment on loan assets
Depositors’ Compensation Scheme recovery
Depreciation
Amortisation and impairment of intangibles
VAT recovery
Realised gains on available for sale financial assets
Unrealised (loss) / gain 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)
3(v)
7
8
9
18
19
21
16
15
20
20
10
11
12
12
(Note 33)
2012012012016666
000
££££000
000
000
2015
£000
19191919,,,,369369369369
(3,3(3,3(3,3(3,368686868))))
16,001
16,001
16,001
16,001
1,660
1,660
1,660
1,660
----
(1,(1,(1,(1,222266666666))))
(7,840))))
(7,840
(7,840
(7,840
8,8,8,8,555555555555
191919198888
((((151515154444))))
8,8,8,8,595959599999
(3,(3,(3,(3,935935935935))))
(2,(2,(2,(2,706706706706))))
(447)
(447)
(447)
(447)
----
(246)
(246)
(246)
(246)
(80(80(80(80))))
222295959595
71717171
(6)(6)(6)(6)
----
----
1,1,1,1,545545545545
((((222244444444))))
1,1,1,1,301301301301
1.1.1.1.27272727
0000....87878787
16,545
(3,002)
13,543
1,527
28
(792)
(6,196)
8,110
166
157
8,433
(3,515)
(2,385)
(397)
10
(226)
(44)
-
80
30
28
295
2,309
(207)
2,102
2.06
1.29
Manx Financial Group PLC
Consolidated Statement of Other Comprehensive Income
15
(Note 33)
2012012012016666
000
££££000
000
000
2015
£000
1,1,1,1,301301301301
2,102
16
26
12
12
(8)(8)(8)(8)
(316)
(316)
(316)
(316)
977977977977
0.960.960.960.96
0.0.0.0.66668888
-
19
2,121
2.08
1.30
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
Profit for the year
Profit for the year
Profit for the year
Profit for the year
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
Losses on available for sale financial instruments taken to equity
Items that will never be
reclassified to profit or loss
Items that will never be reclassified to profit or loss
reclassified to profit or loss
reclassified to profit or loss
Items that will never be
Items that will never be
Actuarial (losses) / gains 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
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
Deferred tax 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
14
15
16
17
18
19
20
20
21
20
11
20
22
23
24
20
25
26
11
27
Notes
Group
2012012012016666
££££000000000000
2015
£000
2012012012016666
££££000000000000
----
----
----
----
----
222200007777
----
12121212,,,,072072072072
296296296296
29292929
5,178
5,178
5,178
5,178
----
----
17,17,17,17,782782782782
----
82828282
----
2222,,,,494949499999
8,545
8,545
8,545
8,545
----
----
Company
2015
£000
100
-
-
-
-
247
-
12,072
285
98
4,078
-
-
16,880
-
12
-
2,874
7,265
-
-
11,126666
11,12
11,12
11,12
10,151
6,6,6,6,129129129129
70707070
23,991
23,991
23,991
23,991
116,050505053333
116,
116,116,
332332332332
719719719719
1,316
1,316
1,316
1,316
----
----
1,1,1,1,732732732732
----
----
2,344
2,344
2,344
2,344
151515152222,,,,666686868686
125,952
125,952
125,952
125,952
2,2,2,2,975975975975
1,390
1,390
1,390
1,390
----
8,545
8,545
8,545
8,545
614614614614
44440000
139,516516516516
139,
139,139,
7,156
77
15,981
101,356
361
872
398
-
-
1,377
-
83
2,344
130,005
106,328
3,343
588
-
7,265
334
-
117,858
18,933
18,933
18,933
18,933
((((5,5,5,5,777763636363))))
13,13,13,13,170170170170
18,933
(6,786)
12,147
152,686868686
152,6
152,6
152,6
130,005
18,933
18,933
18,933
18,933
(1(1(1(12222,,,,277277277277))))
6,656
6,656
6,656
6,656
17,782
17,782
17,782
17,782
18,933
(12,204)
6,729
16,880
The financial statements were approved by the Board of Directors on 28 April 2017 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 Group Finance Director
Douglas Grant
Douglas Grant
Douglas Grant
Douglas Grant
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 loss / (gain) on financial assets carried at fair value
Gain on disposal of property, plant and equipment
Profit on joint venture
Gain on acquisition of subsidiary
Depreciation
Amortisation and impairment of intangibles
Bargain purchase
Actuarial (loss) / gain on defined benefit pension scheme taken to equity
Increase / (decrease) in pension liability
Share-based payment expense
Increase in trade and other receivables
Increase in trade and other payables
Decrease / (increase) in commission debtors
20
18
19
20
26
26
27
2012012012016666
££££000000000000
1,1,1,1,545545545545
6666
----
----
----
246246246246
80808080
----
(316)
(316)
(316)
(316)
280280280280
46464646
((((355355355355))))
47474747
29292929
17
2015
£000
2,309
(30)
(12)
(28)
(28)
226
44
(295)
19
(54)
46
(208)
1,168
(35)
Net cash inflow from trading activities
Increase in loans and advances to customers
Increase in deposit accounts
1,61,61,61,600008888
3,122
(14,
(14,697697697697))))
(14,
(14,
19,624
19,624
19,624
19,624
(11,369)
6,069
from operating activities
(outflow) from operating activities
Cash inflow / / / / (outflow)
Cash inflow
from operating activities
from operating activities
(outflow)
(outflow)
Cash inflow
Cash inflow
6,56,56,56,535353535
(2,178)
CASH FLOW STATEMENT
CASH FLOW STATEMENT
CASH FLOW STATEMENT
CASH FLOW STATEMENT
Cash flows from operating activities
Cash flows from operating activities
Cash flows from operating activities
Cash flows from operating activities
Cash inflow / (outflow) from operating activities
Taxation paid
from operating activities
(outflow) from operating activities
Net cash inflow / / / / (outflow)
Net cash inflow
from operating activities
from operating activities
(outflow)
(outflow)
Net cash inflow
Net cash inflow
Cash (outflow)
from investing activities
inflow from investing activities
Cash (outflow) / / / / inflow
from investing activities
from investing activities
inflow
inflow
Cash (outflow)
Cash (outflow)
Purchase of property, plant and equipment
Purchase of intangible assets
Acquisition of Incahoot Limited business
Acquisition of Manx Financial Limited
Acquisition of MBL business
(Purchase) / sale of available for sale financial instruments
Sale of property, plant and equipment
Cash acquired on acquisition of subsidiary
from investing activities
inflow from investing activities
Net cash (outflow) / / / / inflow
Net cash (outflow)
from investing activities
from investing activities
inflow
inflow
Net cash (outflow)
Net cash (outflow)
Cash flows from financing activities
Cash flows from financing activities
Cash flows from financing activities
Cash flows from financing activities
Receipt of loan notes
Increase borrowings from block creditors
activities
Net cash inflow from financing activities
Net cash inflow from financing
activities
activities
Net cash inflow from financing
Net cash inflow from financing
ncrease in cash and cash equivalents
(Decrease) / increase in cash and cash equivalents
(Decrease) / i
ncrease in cash and cash equivalents
ncrease in cash and cash equivalents
(Decrease) / i
(Decrease) / i
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
20
19
16
20
25
6,56,56,56,535353535
(36)
(36)
(36)
(36)
(2,178)
(6)
6,46,46,46,499999999
(2,184)
(9(9(9(93333))))
(50)
(50)
(50)
(50)
----
(500)
(500)
(500)
(500)
(948)
(948)
(948)
(948)
(8,017777))))
(8,01
(8,01
(8,01
----
----
(493)
(21)
(101)
-
-
2,794
12
926
(9,6(9,6(9,6(9,608)08)08)08)
3,117
1111,,,,280280280280
802802802802
2,082
2,082
2,082
2,082
100
-
100
(1,027)
(1,027)
(1,027)
(1,027)
1,033
18,628
18,628
18,628
18,628
(3,260)
(3,260)
(3,260)
(3,260)
17,203
(2,906)
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 notes 10 and 27)
Balance as at 31 December
For the year ended
31 December
For the year ended 31 December
31 December
31 December
For the year ended
For the year ended
Company
Company
Company
Company
Balance as at 1 January
Loss for the year
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
((((6,786
6,786))))
6,786
6,786
1,1,1,1,301301301301
(324)
(324)
(324)
(324)
46464646
((((5,5,5,5,777766663333))))
Retained
Retained
Retained
Retained
arningssss
EEEEarning
arning
arning
££££000000000000
(12,204204204204))))
(12,
(12,
(12,
((((119119119119))))
Transactions with owners:
Transactions with owners:
Transactions with owners:
Transactions with owners:
Share-based payment expense (see notes 10 and 27)
Balance as at 31 December
----
46464646
18,933
18,933
18,933
18,933
(12,277777777))))
(12,2
(12,2
(12,2
The notes on pages 19 to 48 form part of these financial statements.
2012012012016666
££££000000000000
12,147
12,147
12,147
12,147
1,1,1,1,301301301301
(324)
(324)
(324)
(324)
46464646
13,13,13,13,170170170170
2012012012016666
££££000000000000
6,76,76,76,729292929
((((119119119119))))
46464646
6,6,6,6,656656656656
2015
£000
9,980
2,102
19
46
12,147
2015
£000
6,778
(95)
46
6,729
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 2016 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 2015 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 2016:
(cid:1) IFRS 14 Regulatory Deferral Accounts;
(cid:1) Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11);
(cid:1) Investment Entities: Applying the Consideration Exception (Amendments to IFRS 10, 12 and IAS 28);
(cid:1) Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38);
(cid:1) Equity Method in Separate Financial Statements (Amendments to IAS 27);
(cid:1) Disclosure Initiative (Amendments to IAS 1); and
(cid:1) Annual Improvements to IFRSs 2012-2014 Cycle – various standards.
No significant changes following 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
combinations
combinations
Accounting for business
Accounting for business
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 and lists
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, 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
profit or loss
profit or loss
Financial assets at fair value through
Financial assets at fair value through
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 asset 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 ca
sh equivalents
Cash and cash equivalents
sh equivalents
sh equivalents
Cash and ca
Cash and ca
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, block creditors 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 high
quality 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)
ed International Accounting Standards/International Financial Reporting Standards (IAS/IFRS)
New/revised International Accounting Standards/International Financial Reporting Standards
New/revis
(IAS/IFRS)
(IAS/IFRS)
ed International Accounting Standards/International Financial Reporting Standards
ed International Accounting Standards/International Financial Reporting Standards
New/revis
New/revis
Disclosure initiative (Amendments to IAS 7)
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
Annual improvements to IFRSs 2014-2016 Cycle (Amendments to IFRS 12 Disclosure of Interests in Other Entities)
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Amendments to IFRS 4)
Transfers of Investment Property (Amendments to IAS 40)
Annual Improvements to IFRSs 2014-2016 Cycle (Amendments to IFRS 1 First-time Adoption of IFRSs and IAS 28
Investments in Associates and Joint Ventures)
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRS 16 Leases
Effective date
Effective date
Effective date
Effective date
(accounting periods
commencing on or after)
1 January 2017
1 January 2017
1 January 2017
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2019
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, defined benefit pension valuation 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 c
ard funds
Prepaid card funds
ard funds
ard funds
Prepaid c
Prepaid c
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.
(v)(v)(v)(v) Terminal fun
Terminal fundingdingdingding
Terminal fun
Terminal fun
In September 2014, the Bank discontinued funding handheld payment devices (referred to as Terminal Funding) due to the volume of
write offs. Ever since, the book is being run off whilst the Bank vigorously pursues historical write offs. A decision was made by the
Board this year to permanently cease funding and wind up the book upon the final repayment date of August 2019.
2012012012016666
££££000000000000
601601601601
(166)
(166)
(166)
(166)
(589)
(589)
(589)
(589)
(154)
(154)
(154)
(154)
(note 33)
2015
£000
1,011
(192)
(662)
157
Interest income
Fee and commission expense
Provision for impairment on loan assets
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.
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)
(continued)
(continued)
Risk management
Risk management
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”).
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, unsecured personal loans, secured commercial loans, block discounting
and stocking 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
2012012012016666
££££000000000000
116,050505053333
116,
116,116,
2015
£000
101,356
----
----
3,010
3,010
3,010
3,010
3,010
3,010
3,010
3,010
(2,0(2,0(2,0(2,099999999))))
999911111111
(5(5(5(57777))))
2,558
2,558
2,558
2,558
1,1,1,1,314314314314
575575575575
1,146
1,146
1,146
1,146
5,5,5,5,593593593593
-
-
2,916
2,916
(2,011)
905
(50)
3,070
1,507
397
630
5,604
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.
109,600006666
109,6
109,6
109,6
94,897
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,
2016: 54.4% of loans and advances (2015: 57.6%). 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, UK or Channel Islands 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 was one introducer that accounted for more than 20% of the Bank’s total lending portfolio at
the end of 31 December 2016 (2015: two introducers).
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 2016666
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
2,2,2,2,831831831831
3,026
3,026
3,026
3,026
4,601
4,601
4,601
4,601
90909090
8,257
8,257
8,257
8,257
198198198198
8,079
8,079
8,079
8,079
301301301301
35,517
35,517
35,517
35,517
2,509
2,509
2,509
2,509
53,280
53,280
53,280
53,280
3,787
3,787
3,787
3,787
18,024
18,024
18,024
18,024
3,691
3,691
3,691
3,691
----
614614614614
111130,589
30,589
30,589
30,589
14,14,14,14,216216216216
Total liabilities
Total liabilities
Total liabilities
Total liabilities
5,5,5,5,857857857857
4,691
4,691
4,691
4,691
8,455
8,455
8,455
8,455
8,380
8,380
8,380
8,380
38,026
38,026
38,026
38,026
57,067
57,067
57,067
57,067
21,715
21,715
21,715
21,715
614614614614
144,805805805805
144,
144,144,
31 December 2015
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
2,312
3,353
1,176
58
2,287
131
4,213
199
25,279
1,288
52,859
4,061
23,533
3,386
-
334
111,659
12,810
Total liabilities
5,665
1,234
2,418
4,412
26,567
56,920
26,919
334
124,469
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 2016666
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
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 2015
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
6,129
6,129
6,129
6,129
----
4,4,4,4,191919198888
29292929
77770000
10,410,410,410,422226666
2,2,2,2,840840840840
3,028
3,028
3,028
3,028
5,5,5,5,868868868868
----
6,499
6,499
6,499
6,499
3,067
3,067
3,067
3,067
110110110110
----
9,676
9,676
9,676
9,676
4,597
4,597
4,597
4,597
39393939
4,636
4,636
4,636
4,636
----
----
6,6,6,6,499499499499
10,993333
10,99
10,99
10,99
7,650
7,650
7,650
7,650
193193193193
----
14,342
14,342
14,342
14,342
8,235
8,235
8,235
8,235
104104104104
8888,,,,339339339339
10,037
10,037
10,037
10,037
----
----
21,030
21,030
21,030
21,030
8,028
8,028
8,028
8,028
159159159159
8,187
8,187
8,187
8,187
----
----
18,675
18,675
18,675
18,675
----
----
8,675
11118,675
8,675
8,675
34,988
34,988
34,988
34,988
2,276
2,276
2,276
2,276
37,264
37,264
37,264
37,264
----
----
54,074
54,074
54,074
54,074
----
----
54,074
54,074
54,074
54,074
50,50,50,50,931931931931
3,754
3,754
3,754
3,754
55554444,,,,685685685685
----
----
17,704
17,704
17,704
17,704
----
----
17,704
17,704
17,704
17,704
16,333
16,333
16,333
16,333
3,590
3,590
3,590
3,590
19,923
19,923
19,923
19,923
----
----
648648648648
----
6,6,6,6,111111111111
6,6,6,6,759759759759
----
614614614614
614614614614
6,129
6,129
6,129
6,129
23,991
23,991
23,991
23,991
111111116666,,,,050505053333
333332323232
6,16,16,16,181818181
111152,652,652,652,686868686
111125,952
25,952
25,952
25,952
13,13,13,13,564564564564
111139,39,39,39,516516516516
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
7,156
-
2,054
33
77
9,320
2,313
3,343
5,656
-
3,000
1,765
88
-
4,853
1,175
28
1,203
-
-
6,995
5,986
6,367
240
-
9,006
-
-
13,602
14,992
2,283
56
2,339
4,179
84
4,263
-
-
16,746
-
-
16,746
24,869
1,072
25,941
-
-
-
-
47,742
-
-
16,782
-
-
47,742
16,782
50,498
3,453
21,011
3,160
53,951
24,171
-
-
894
-
5,074
5,968
-
334
334
7,156
15,981
101,356
361
5,151
130,005
106,328
11,530
117,858
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 2016 and 2015, 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 £70,000 at 31
December 2016 (2015: £77,000) 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
----
----
----
----
----
----
----
6,129
6,129
6,129
6,129
Total assets
Total assets
Total assets
Total assets
10,410,410,410,422226666
9,676
9,676
9,676
9,676
14,342
14,342
14,342
14,342
21,030
21,030
21,030
21,030
8,675
11118,675
8,675
8,675
54,074
54,074
54,074
54,074
17,704
17,704
17,704
17,704
6,499
6,499
6,499
6,499
3,067
3,067
3,067
3,067
110110110110
----
6,6,6,6,499499499499
7,650
7,650
7,650
7,650
193193193193
----
10,993
10,993
10,993
10,993
10,037
10,037
10,037
10,037
----
----
----
18,675
18,675
18,675
18,675
----
----
----
54,074
54,074
54,074
54,074
----
----
----
17,704
17,704
17,704
17,704
----
----
4,597
4,597
4,597
4,597
39393939
----
4,636
4,636
4,636
4,636
5,040
5,040
5,040
5,040
8,235
8,235
8,235
8,235
104104104104
----
8888,,,,339339339339
6,003
6,003
6,003
6,003
8,028
8,028
8,028
8,028
159159159159
----
34,988
34,988
34,988
34,988
2,276
2,276
2,276
2,276
----
50,50,50,50,931931931931
3,754
3,754
3,754
3,754
----
16,333
16,333
16,333
16,333
3,590
3,590
3,590
3,590
----
----
614614614614
11113,3,3,3,170170170170
8,187
8,187
8,187
8,187
12,843
12,843
12,843
12,843
37,264
37,264
37,264
37,264
18,589))))
((((18,589
18,589
18,589
55554444,,,,685685685685
((((611611611611))))
19,923
19,923
19,923
19,923
(2,219)
(2,219)
(2,219)
(2,219)
13,13,13,13,784784784784
((((7,7,7,7,025025025025))))
9,9,9,9,598598598598
15,15,15,15,601601601601
28,28,28,28,444444444444
9,855
9,855
9,855
9,855
9,9,9,9,222244444444
7,7,7,7,025025025025
----
----
----
648648648648
----
6,6,6,6,111111111111
6,6,6,6,759759759759
23,991
23,991
23,991
23,991
111116,16,16,16,053053053053
333332323232
6,16,16,16,181818181
111152,652,652,652,686868686
111125,952
25,952
25,952
25,952
13,13,13,13,564564564564
11113,3,3,3,170170170170
111152,652,652,652,686868686
----
31 December 2016666
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
6,129
6,129
6,129
6,129
----
4,4,4,4,191919198888
29292929
77770000
Liabilities
Liabilities
Liabilities
Liabilities
Customer accounts
Other liabilities
Total capital and reserves
Total liabilities and equity
Total liabilities and equity
Total liabilities and equity
Total liabilities and equity
Interest rate sensitivity gap
Cumulative
Cumulative
Cumulative
Cumulative
2,2,2,2,840840840840
3,028
3,028
3,028
3,028
----
5,5,5,5,868868868868
4,4,4,4,558558558558
4,4,4,4,558558558558
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 2015
Assets
Cash & cash equivalents
Available for sale financial
instruments
Customer accounts receivable
Commission debtors
Other assets
7,156
3,000
3,819
-
-
-
-
-
-
-
6,995
6,367
-
-
5,986
9,006
-
-
-
16,746
-
-
-
47,742
-
-
-
16,782
-
-
Total assets
13,975
13,362
14,992
16,746
47,742
16,782
Liabilities
Customer accounts
Other liabilities
Total capital and reserves
3,488
28
-
2,283
56
-
4,179
84
-
24,869
1,072
-
50,498
3,453
-
21,011
3,160
-
Total liabilities and equity
Interest rate sensitivity gap
3,516
10,459
2,339
11,023
4,263
10,729
25,941
(9,195)
53,951
(6,209)
24,171
(7,389)
-
-
894
-
-
894
-
334
-
334
560
-
7,156
-
-
361
5,151
5,512
-
3,343
12,147
15,490
(9,978)
15,981
101,356
361
5,151
130,005
106,328
11,530
12,147
130,005
-
Cumulative
10,459
21,482
32,211
23,016
16,807
9,418
9,978
-
-
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 (2015: 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 2016666
31 December 201
31 December 201
31 December 201
Interest rate sensitivity gap
Weighting
£000
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
4,4,4,4,558558558558
0.000
0.000
0.000
0.000
----
5,040
5,040
5,040
5,040
0.003
0.003
0.003
0.003
15151515
6,003
6,003
6,003
6,003
0.007
0.007
0.007
0.007
42424242
12,843
12,843
12,843
12,843
18,589))))
((((18,589
18,589
18,589
((((611611611611))))
(2,219)
(2,219)
(2,219)
(2,219)
0.014
0.014
0.014
0.014
180180180180
0.027
0.027
0.027
0.027
((((502502502502))))
0.054
0.054
0.054
0.054
0.115
0.115
0.115
0.115
((((33333333))))
(255)
(255)
(255)
(255)
----
(55(55(55(553333))))
((((7,7,7,7,025025025025))))
0.000
0.000
0.000
0.000
31 December 2015
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
Interest rate sensitivity gap
10,459
Weighting
£000
0.000
-
11,023
0.003
33
10,729
(9,195)
(6,209)
(7,389)
0.007
0.014
0.027
75
(129)
(168)
0.054
(399)
560
0.115
63
(9,978)
0.000
-
(525)
Total
Total
Total
Total
££££000000000000
----
----
Total
£000
-
-
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)
value of financial instruments
(c) Fair Fair Fair Fair value of financial instruments
value of financial instruments
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 2016666
31 December 201
31 December 201
31 December 201
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
23,991
23,991
23,991
23,991
77770000
24,061
24,061
24,061
24,061
----
----
----
----
----
----
23,991
23,991
23,991
23,991
77770000
24,061
24,061
24,061
24,061
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.
December 2016666
31313131 December 201
December 201
December 201
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
----
----
----
----
----
----
----
----
----
----
6,129
6,129
6,129
6,129
116,050505053333
116,
116,116,
332332332332
1,1,1,1,732732732732
124,246246246246
124,
124,124,
125,952
125,952
125,952
125,952
2,2,2,2,975975975975
1,390
1,390
1,390
1,390
8,545
8,545
8,545
8,545
138,862862862862
138,
138,138,
----
----
----
----
----
----
----
----
----
----
Total fair
Total fair
Total fair
Total fair
values
values
values
values
££££000000000000
6,129
6,129
6,129
6,129
116,050505053333
116,
116,116,
332332332332
1,1,1,1,732732732732
Total
Total
Total
Total
carrying
carrying
carrying
carrying
amount
amount
amount
amount
££££000000000000
6,129
6,129
6,129
6,129
116,050505053333
116,
116,116,
332332332332
1,1,1,1,732732732732
124,246246246246
124,
124,124,
124,246246246246
124,
124,124,
125,952
125,952
125,952
125,952
2,2,2,2,975975975975
1,390
1,390
1,390
1,390
8,545
8,545
8,545
8,545
138,862862862862
138,
138,138,
125,952
125,952
125,952
125,952
2,2,2,2,975975975975
1,390
1,390
1,390
1,390
8,545
8,545
8,545
8,545
138,862862862862
138,
138,138,
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, UK and Channel Islands. 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.
For the year ended 31 December 2016666
For the year ended 31 December 201
For the year ended 31 December 201
For the year ended 31 December 201
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
16,001
16,001
16,001
16,001
7,07,07,07,044447777
1,1,1,1,787787787787
66669999
148,523523523523
148,
148,148,
ManxManxManxManx
Incahoot
Incahoot
Incahoot
Incahoot
££££000000000000
----
81818181
(205)
(205)
(205)
(205)
52525252
418418418418
Conister
Conister
Conister
Conister
CardCardCardCard
Services
Services
Services
Services
££££000000000000
----
(106)
(106)
(106)
(106)
(223)
(223)
(223)
(223)
----
2222
Edgewater
Edgewater
Edgewater
Edgewater
Associates
Associates
Associates
Associates
££££000000000000
Investing
Investing
Investing
Investing
Activities
Activities
Activities
Activities
££££000000000000
Total
Total
Total
Total
££££000000000000
11116,001
6,001
6,001
6,001
8,58,58,58,599999999
----
1,465
1,465
1,465
1,465
371371371371
----
112112112112
(185))))
(185
(185(185
1,1,1,1,545545545545
970970970970
----
1,091
1,091
1,091
1,091
1,546
1,546
1,546
1,546
2,197
2,197
2,197
2,197
152,686868686
152,6
152,6
152,6
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 2015
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
13,543
6,929
2,299
173
128,357
Manx
Incahoot
£000
Conister
Card
Services
£000
Edgewater
Associates
£000
Investing
Activities
£000
-
84
203
122
447
-
(98)
(71)
-
123
-
1,369
148
44
580
Total
£000
13,543
8,433
-
149
(270)
2,309
274
613
498
130,005
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 charge / (credit) in respect of collective allowances for impairment comprises:
Collective impairment allowances made
Release of allowances previously made
for collective allowances for impairment
credit)))) for collective allowances for impairment
charge / (credit
Total charge / (
Total
for collective allowances for impairment
for collective allowances for impairment
credit
credit
charge / (
charge / (
Total
Total
Total charge for allowances for impairment
Total charge for allowances for impairment
Total charge for allowances for impairment
Total charge for allowances for impairment
2012012012016666
££££000000000000
858858858858
167167167167
425425425425
362362362362
61616161
79797979
136136136136
112112112112
238238238238
268268268268
2015
£000
654
161
339
547
66
75
115
115
228
85
2,2,2,2,706706706706
2,385
2012012012016666
££££000000000000
999915151515
((((475475475475))))
444440404040
2012012012016666
££££000000000000
11112222
((((5555))))
7777
447447447447
(note 33)
2015
£000
593
(195)
398
(note 33)
2015
£000
2
(3)
(1)
397
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
2012012012016666
££££000000000000
----
2015
£000
10
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 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
Interest expense payable to block funders
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 benefit 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
2012012012016666
££££000000000000
1,1,1,1,545545545545
155155155155
24242424
28282828
((((6666))))
((((9999))))
24242424
22228888
10.0%10.0%10.0%10.0%
1.1.1.1.5555%%%%
1.1.1.1.8888%%%%
(0.(0.(0.(0.4444)%)%)%)%
(0.(0.(0.(0.6666)%)%)%)%
1.1.1.1.6666%%%%
1.1.1.1.8888%%%%
2012012012016666
££££000000000000
2,795
2,795
2,795
2,795
474747475555
98989898
----
46464646
304304304304
195195195195
30303030
60606060
78787878
38383838
11113333
231231231231
2015
£000
2,544
429
29
(12)
46
297
202
30
54
86
19
14
342
2012012012016666
££££000000000000
2015
£000
111111114444
7777
111122221111
24242424
78787878
21212121
121212123333
222244444444
10.0%
0.4%
0.6%
(0.8)%
(0.8)%
0.3%
(0.7)%
21
(15)
6
6
197
(2)
201
207
2015
£000
2,309
231
8
15
(18)
(18)
6
(17)
Total tax expense
Total tax expense
Total tax expense
Total tax expense
11115555....8888%%%%
222244444444
9.0%
207
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% (2015: 0.0%). However the profits of the Group’s Manx banking activities
are taxed at 10.0% (2015: 10.0%). The profits of the Group’s subsidiaries that are subject to UK corporation tax are taxed at a rate of
20.0% (2015: 20.0%).
The value of tax losses carried forward reduced to nil and there is now a timing difference related to accelerated capital allowances
resulting in a £40,000 liability (2015: £83,000 asset). This resulted in an expense of £123,000 (2015: £201,000) 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)
2012012012016666
2015
,000
££££1,1,1,1,301301301301,000
,000,000
£2,102,000
102,070,252
102,070,252
102,070,252
102,070,252
1.1.1.1.27272727
0.0.0.0.87878787
102,070,252
2.06
1.29
,000
££££977977977977,000
,000,000
£2,121,000
102,070,252
102,070,252
102,070,252
102,070,252
0000....99996666
0.0.0.0.68686868
102,070,252
2.08
1.30
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
eighted average number of ordinary shares in issue between basic and
Reconciliation of weighted average number of ordinary shares in issue
between basic and
between basic and
eighted average number of ordinary shares in issue
eighted average number of ordinary shares in issue
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
diluted earnings per share
diluted earnings per share
Reconciliation of earnings between basic and
Reconciliation of earnings between basic and
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
2012012012016666
2015
102,070,252
102,070,252
102,070,252
102,070,252
61,500,000
61,500,000
61,500,000
61,500,000
12,733,968
12,733,968
12,733,968
12,733,968
----
102,070,252
61,500,000
17,641,990
22,665
176,304,220
176,304,220
176,304,220
176,304,220
181,234,907
£1,£1,£1,£1,301301301301,000
,000
,000,000
£230,150
£230,150
£230,150
£230,150
£2,102,000
£230,150
,150
£1,£1,£1,£1,531531531531,150
,150,150
£2,332,150
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 £119,000 (2015: £95,000).
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
2012012012016666
££££000000000000
6666,1,1,1,129292929
----
6,129
6,129
6,129
6,129
2015
£000
7,156
-
7,156
2012012012016666
££££000000000000
----
----
----
2015
£000
100
-
100
Cash at bank includes an amount of £63,000 (2015: £140,000) 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
instruments
financial instruments
Available for sale financial
instruments
instruments
financial
financial
Available for sale
Available for sale
UK Government Treasury Bills
Group
Company
2012012012016666
££££000000000000
23,991
23,991
23,991
23,991
23,991
23,991
23,991
23,991
2015
£000
15,981
15,981
2012012012016666
££££000000000000
----
----
2015
£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
61,952
61,952
61,952
61,952
14,779
14,779
14,779
14,779
6,638
6,638
6,638
6,638
1,366
1,366
1,366
1,366
13,213
13,213
13,213
13,213
2,2,2,2,252525257777
18,004
18,004
18,004
18,004
2012012012016666
Impairment
Impairment
Impairment
Impairment
Allowance
Allowance
Allowance
Allowance
££££000000000000
(1,(1,(1,(1,309309309309))))
(6(6(6(673737373))))
(1(1(1(162626262))))
----
----
((((12121212))))
----
Carrying
Carrying
Carrying
Carrying
Value
Value
ValueValue
££££000000000000
66660,643
0,643
0,643
0,643
14,106
14,106
14,106
14,106
6,476
6,476
6,476
6,476
,366
1111,366
,366,366
13,213
13,213
13,213
13,213
2,2,2,2,245245245245
18,004
18,004
18,004
18,004
Gross
Amount
£000
62,814
10,240
4,023
1,119
8,935
4,947
11,339
2015
Impairment
Allowance
£000
(1,136)
(656)
(180)
-
-
(89)
-
Carrying
Value
£000
61,678
9,584
3,843
1,119
8,935
4,858
11,339
118,209999
118,20
118,20
118,20
(2,(2,(2,(2,156156156156))))
111111116666,,,,050505053333
103,417
(2,061)
101,356
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
2012012012016666
££££000000000000
2,011
2,011
2,011
2,011
915915915915
((((475475475475))))
((((352352352352))))
2,02,02,02,099999999
2012012012016666
££££000000000000
55550000
12121212
((((5555))))
55557777
2015
£000
1,754
1,255
(130)
(868)
2,011
2015
£000
51
2
(3)
50
2,2,2,2,156156156156
2,061
Advances on preferential terms are available to all Directors, management and staff. As at 31 December 2016 £306,895 (2015:
£208,017) 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 three loan exposures, both in connection with block discounting lending,
exceeded 10.0% of the capital base of the Bank (2015: four loan exposures):
Exposure
Exposure
Exposure
Exposure
Block discounting facility
Outstanding
Outstanding
Outstanding
Outstanding
Balance
Balance
Balance
Balance
2012012012016666
££££000000000000
9,302
9,302
9,302
9,302
Outstanding
Balance
2015
£000
7,345
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
2012012012016666
££££000000000000
5,537
33335,537
5,537
5,537
60,60,60,60,542542542542
Facility
Facility
Facility
Facility
limit
limit
limit
limit
££££000000000000
11111111,,,,000000000000
2015
£000
33,987
60,501
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
6,079
99996,079
6,079
6,079
94,488
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 2016
Additions
Disposals
As at 31 December 2016666
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 2016
Charge for year
Disposals
As at 31 December 2016666
As at 31 December 201
As at 31 December 201
As at 31 December 201
Carrying value at 31 December 2016666
Carrying value at 31 December 201
Carrying value at 31 December 201
Carrying value at 31 December 201
Carrying value at 31 December 2015
2012012012016666
££££000000000000
22226,562
6,562
6,562
6,562
50,168
50,168
50,168
50,168
2015
£000
24,425
48,629
6,730
77776,730
6,730
6,730
73,054
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
417417417417
----
----
417417417417
70707070
59595959
----
129129129129
288288288288
347
1,468
1,468
1,468
1,468
87878787
----
1,555
1,555
1,555
1,555
1,025
1,025
1,025
1,025
164164164164
----
1,189
1,189
1,189
1,189
366366366366
443
623623623623
6666
----
629629629629
578578578578
10101010
----
588588588588
41414141
45
57575757
----
----
57575757
20202020
13131313
----
33333333
24242424
37
Total
Total
Total
Total
££££000000000000
2,565
2,565
2,565
2,565
93939393
----
2,652,652,652,658888
1,691,691,691,693333
246246246246
----
1,939
1,939
1,939
1,939
719719719719
872
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 2016
Additions
Disposals
As at 31 December 2016666
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 2016
Charge for year
Disposals
As at 31 December 2016666
As at 31 December 201
As at 31 December 201
As at 31 December 201
Carrying value at 31 December 2016666
Carrying value at 31 December 201
Carrying value at 31 December 201
Carrying value at 31 December 201
Carrying value at 31 December 2015
19.19.19.19.
Intangible assets
Intangible assets
Intangible assets
Intangible assets
GroupGroupGroupGroup
CostCostCostCost
As at 1 January 2016
Additions
Acqusitions
Disposals
As at 31 December 2016666
As at 31 December 201
As at 31 December 201
As at 31 December 201
Accumulated
amortisation
Accumulated amortisation
amortisation
amortisation
Accumulated
Accumulated
As at 1 January 2016
Charge for year
Impairment (see note 20)
Disposals
As at 31 December 2016666
As at 31 December 201
As at 31 December 201
As at 31 December 201
Carrying value at 31 December 2016666
Carrying value at 31 December 201
Carrying value at 31 December 201
Carrying value at 31 December 201
Carrying value at 31 December 2015
Acquisition of MBL
Acquisition of MBL
Acquisition of MBL
Acquisition of MBL
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
38383838
----
53535353
181181181181
219
13131313
----
----
13131313
----
1111
----
1111
11112222
13
15151515
----
----
15151515
----
1111
----
1111
11114444
15
Customer
Customer
Customer
Customer
Contracts & Lists
& Lists
Contracts
& Lists
& Lists
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
----
948948948948
----
1,024
1,024
1,024
1,024
44444444
32323232
----
----
76767676
948948948948
32
345345345345
----
----
----
343434345555
----
----
48484848
----
48484848
297297297297
345
21212121
50505050
----
----
77771111
----
----
----
----
----
77771111
21
39
Total
Total
Total
Total
££££000000000000
262262262262
----
----
262262262262
15151515
40404040
----
55555555
222200007777
247
Total
Total
Total
Total
££££000000000000
442442442442
50505050
948948948948
----
1,440
1,440
1,440
1,440
44444444
32323232
48484848
----
121212124444
1,316
1,316
1,316
1,316
398
On 23 December 2016, EWA acquired the majority of the Isle of Man’s IFA business held by Knox Financial Services Limited
("KFSL") carrying a trading name of MBL. The initial acquisition includes approximately 4,000 clients together with 6 members of staff.
The basis of consideration is in part contingent, as it is determined by 4 times renewal income received in the first 12 months of
ownership, reduced down by any clawbacks in the same period. The final value cannot fall below £800,000. EWA entered into a loan
agreement with Conister Bank Limited (see note 30 for terms) and paid the non-refundable minimum of £800,000 and a further
£200,000 into an escrow account until the final valuation has been determined. When the value has been finalised, any surplus or
shortfall will be settled.
Manx Financial Group PLC
Notes to the Consolidated Financial Statements
40
19.19.19.19. Intangible assets
(continued)
Intangible assets (continued)
(continued)
(continued)
Intangible assets
Intangible assets
(continued)
Acquisition of MBL (continued)
Acquisition of MBL
(continued)
(continued)
Acquisition of MBL
Acquisition of MBL
By reference to the renewal income received by KFSL in the 12 months prior to disposal, an estimate of £236,906 has been assumed
for the next 12 months, which would generate a consideration sum of £947,624. Therefore, EWA has accounted for this transaction
by recognising an intangible asset of £947,624 and a receivable of £52,376 (see note 21) of the monies held in escrow. The fair value
of the assets acquired is considered to be of the same amount as the sum estimated to be paid and principally relates to customer
contracts. The period by which these contracts are amortised over is estimated to be 18.75 years given the average duration of
EWA’s existing portfolio for renewal income.
In tandem, both parties entered into an option agreement, exercisable within three months from the transaction date, for EWA to
acquire the remainder of the vendor's IFA business which includes approximately 150 clients. This option was exercised on 18
January 2017. The fair value of this option agreement was estimated to be nil.
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
2012012012016666
% Holding
% Holding
% Holding
% Holding
Date of
Incorporation
Conister Bank Limited
Edgewater Associates Limited
TransSend Holdings Limited
Bradburn Limited
Asset and Personal Finance
Wealth Management
Holding Company for Prepaid Card Division
Holding Company
100100100100
100100100100
100100100100
100100100100
05/12/1935
24/12/1996
05/11/2007
15/05/2009
Total
Total
Total
Total
2012012012016666
££££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
2015
£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
Conister Bank Limited
Conister Bank Limited
Conister Bank Limited
Conister Bank Limited
11 February 2014
27 May 2014
9 July 2014
17 September 2014
22 July 2013
25 October 2013
23 September 2016
11 February 2024
27 May 2024
9 July 2024
17 September 2026
22 July 2033
22 October 2033
23 September 2036
Edgewater Associates Limited
Edgewater Associates Limited
Edgewater Associates Limited
Edgewater Associates Limited
14 May 2012
28 February 2013
14 May 2017
28 February 2018
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
Company
Company
Company
Company
2012012012016666
££££000000000000
Company
2015
£000
500500500500
500500500500
500500500500
400400400400
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,100
1,100
1,100
1,100
128128128128
50505050
5555,,,,111178787878
500
500
500
400
1,000
1,000
-
128
50
4,078
20.20.20.20. Investment in Group undertakings
(continued)
Investment in Group undertakings (continued)
(continued)
(continued)
Investment in Group undertakings
Investment in Group undertakings
Goodwill
Goodwill
Goodwill
Goodwill
Edgewater Associates Limited (“EWA”)
ECF Asset Finance PLC (“ECF”)
Three Spires Insurance Services Limited (“Three Spires”)
Manx Financial Group PLC
41
Group
2015
£000
1,849
454
41
2,344
GroupGroupGroupGroup
2012012012016666
££££000000000000
1,849
1,849
1,849
1,849
454454454454
41414141
2,344
2,344
2,344
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 2.0% 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.
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 2.0% 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 2015. 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.
and acquisition of subsidiary
Investment in joint venture and acquisition of subsidiary
Investment in joint venture
and acquisition of subsidiary
and acquisition of subsidiary
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.
Acquisition of Incahoot
Acquisition of Incahoot
Acquisition of Incahoot
Acquisition of Incahoot
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)
Fair value of consideration
Fair value of consideration
Fair value of consideration
Fair value of consideration
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
liabilities acquired
Fair value of liabilities acquired
Fair value of
liabilities acquired
liabilities acquired
Fair value of
Fair value of
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. The Directors believe that the assets acquired will have an enduring benefit to the company and therefore have
adopted an indefinite life as the appropriate basis for determining its useful life for amortisation purposes.
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.
On 9 December 2016, this valuation was conducted again which led to a reduced valuation of £262,474 for the intellectual property.
This created an impairment of £48,026. There were no adverse trends arising from comparable market disposals of domain names to
warrant any impairment to this intangible.
21.21.21.21. Trade and other receivables
Trade and other receivables
Trade and other receivables
Trade and other receivables
Prepayments and other debtors
VAT recoverable
Depositors Compensation Scheme Receivable
Monies held in escrow from MBL acquisition (see note 19)
2012012012016666
££££000000000000
878787874444
752752752752
54545454
52525252
Group
2015
£000
857
466
54
-
1,1,1,1,732732732732
1,377
Company
2012012012016666
££££000000000000
2015
£000
29292929
----
----
----
29292929
98
-
-
-
98
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)
Included in trade and other receivables is an amount of £752,000 (2015: £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.
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. A secondary claim was also made to cover periods Q4 2012 to Q4 2016 for the value of £295,000.
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 appealed this decision to the Supreme Court, which has referred the issue to the European Court of
Justice.
The Bank’s total exposure in relation to this matter is £865,000, comprising the debtor balance referred to above plus an additional
£113,000 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
Taxation creditors
Consideration for acquisition of MFL (see note 20)
24.24.24.24. Block creditors
Block creditors
Block creditors
Block creditors
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
Drawdown 3 – repayable 08/03/2019, interest payable at 6.5%, secured on assets of MFL
2012012012016666
££££000000000000
124,398
124,398
124,398
124,398
1,554
1,554
1,554
1,554
25,952
111125,952
25,952
25,952
2015
£000
103,041
3,287
106,328
Group
Company
2012012012016666
££££000000000000
2,2,2,2,504504504504
333363636363
111100008888
----
2,2,2,2,975975975975
2015
£000
2,313
332
198
500
3,343
2012012012016666
££££000000000000
----
88882222
----
----
88882222
2012012012016666
££££000000000000
----
248248248248
1,142
1,142
1,142
1,142
1,390
1,390
1,390
1,390
2015
£000
-
12
-
-
12
2015
£000
194
394
-
588
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
2012012012016666
££££000000000000
1,750
1,750
1,750
1,750
1,200
1,200
1,200
1,200
460460460460
350350350350
3,3,3,3,767676760000
4,785
4,785
4,785
4,785
8,548,548,548,545555
2015
£000
1,750
1,200
460
500
3,910
3,355
7,265
2012012012016666
££££000000000000
1,750
1,750
1,750
1,750
1,200
1,200
1,200
1,200
460460460460
350350350350
3,3,3,3,767676760000
4,785
4,785
4,785
4,785
8,548,548,548,545555
2015
£000
1,750
1,200
460
500
3,910
3,355
7,265
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. Denham Eke is a director of LS.
UPUPUPUP – Twenty one loans consisting of an average £227,857, with an average interest payable of 5.3% per annum. The earliest
maturity date is 1 October 2017 and the latest maturity is 3 November 2021.
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 2016 (2015: 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 2016, which showed that the market value of the Scheme’s assets
was £1,379,000 representing 80.7% 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 2016.
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 loss / (gain)
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 gain / (loss)
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
2012012012016666
££££000000000000
1,1,1,1,420420420420
2,034))))
((((2,034
2,034
2,034
((((616161614)4)4)4)
2012012012016666
££££000000000000
1,1,1,1,666666666666
((((68686868))))
64646464
372372372372
2,034
2,034
2,034
2,034
2012012012016666
££££000000000000
1,31,31,31,332323232
55551111
49494949
56565656
((((68686868))))
1,1,1,1,420420420420
2015
£000
1,332
(1,666)
(334)
2015
£000
1,733
(82)
64
(49)
1,666
2015
£000
1,345
50
49
(30)
(82)
1,332
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
costs
Total included in personnel costs
Total included in personnel
costs
costs
Total included in personnel
Total included in personnel
Actual return on plan assets
Actual return on plan assets
Actual return on plan assets
Actual return on plan assets
recognised in other comprehensive income
Actuarial (loss) / / / / gaingaingaingain recognised in other comprehensive income
Actuarial (loss)
recognised in other comprehensive income
recognised in other comprehensive income
Actuarial (loss)
Actuarial (loss)
Actuarial gain / (loss) on plan assets
Actuarial (loss) / gain on defined benefit obligations
Plan assets consist of the following
Plan assets consist of the following
Plan assets consist of the following
Plan assets consist of the following
Equity securities
Corporate bonds
Government bonds
Cash
Other
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
2012012012016666
££££000000000000
64646464
(5(5(5(51111))))
11113333
111100007777
2012012012016666
££££000000000000
56565656
(372)
(372)
(372)
(372)
((((316316316316))))
2016
2016
20162016
%%%%
47474747
16161616
25252525
7777
5555
100100100100
2015
£000
64
(50)
14
20
2015
£000
(30)
49
19
2015
%
27
23
41
3
6
100
2012012012016666
%%%%
2015
%
2014
%
----
3.13.13.13.1
2.12.12.12.1
5.05.05.05.0
2.72.72.72.7
3.23.23.23.2
-
2.7
2.0
5.0
3.9
2.8
-
2.7
2.0
5.0
3.8
2.8
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
& 2016666
At 31 December 2015555 & 201
At 31 December 201
& 201
& 201
At 31 December 201
At 31 December 201
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
& 2016666
At 31 December 2015555 & 201
At 31 December 201
& 201
& 201
At 31 December 201
At 31 December 201
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 2016 of £3.41 million (2015: £3.41 million) involving warrants of 28.3 million
(31 December 2015: 28.3 million) (see note 25 for further details). The total number of warrants in issue at 31 December 2016 is 36.6
million (2015: 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.
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
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
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
26,26,26,26,111198989898
1111,28,28,28,280000
22227777,,,,474747478888
25 June
2010
£0.03
£0.11
£0.11
47.0%
3
2.2%
0.0%
2015
£000
26,098
100
26,198
The 2016 closing balance is represented by £18.933 million share capital (2015: £18.933 million) and £8.545 million of loan notes
(2015: £7.265 million).
29.29.29.29. Regulator
Regulator
Regulator
Regulator
The Group is regulated by the Isle of Man FSA and is 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 £0.076 million (2015: £0.031 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 £3.4 million (2015: £4.0 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 2016 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)
Related party transactions (continued)
Related party transactions (continued)
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 2016,
£0.401 million of capital and interest was outstanding (2015: £0.132 million).
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. EWA provides services to the Group in arranging its insurance and defined contribution pension arrangements.
Loan advance to
Loan advance to EWAEWAEWAEWA
Loan advance to
Loan advance to
On 14 December 2016, a loan advance was made to EWA by the Bank in order to provide the finance required to acquire MBL (see
note 19). The advance was for £700,000 at an interest rate of 8% repayable over 6 years. A negative pledge was given by EWA to
not encumber any property or assets or enter into an arrangement to borrow any further monies.
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 £1.1m of subordinated loans in 2016 to the Bank (2015: none) (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 2016 and 2015.
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:
2012012012016666
££££000000000000
444414141414
2015
£000
402
Less than one year
Between one and five years
Over five years
32.32.32.32. Subsequent events
Subsequent events
Subsequent events
Subsequent events
2012012012016666
2015
Leasehold
Leasehold
Leasehold
Leasehold
Property
Property
Property
Property
££££000000000000
111187878787
801801801801
390390390390
1,378
1,378
1,378
1,378
OtherOtherOtherOther
££££000000000000
----
----
----
----
Leasehold
Property
£000
193
782
594
1,569
Other
£000
-
-
-
-
On 18 January 2017, an option was exercised to acquire an IFA business which includes 150 clients. The price of the acquisition will
be calculated by four times the renewal income received over the 12 month period subsequent to completion. The price is estimated
to be £75,000.
33.33.33.33. Comparative figures
Comparative figures
Comparative figures
Comparative figures
The Consolidated Income Statement for the previous year has been restated in order to present Terminal funding, as analysed by
note 3(v), in a consistent manner to the current year.
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