RIV Capital Annual Report 2020

FY2020 Annual Report · RIV Capital

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annual RepoRt and accountS 2020

inveStinG
FoR pRoFitaBle
GRoWtH

StRateGic RepoRt

04 Chairman’s statement
06 Group Chief Executive’s statement
10 Our strategy and business model
14 Key Performance Indicators
16 Financial review
20 Chief Investment Officer’s review
26 Sales and marketing review
28 Operations review
30 People, sustainability and corporate

social responsibility

40 Risk management
44 Viability statement

GoveRnance

48 Board of Directors
50 Corporate governance report
58 Directors’ report
61 Directors’ responsibilities
62 Nomination Committee report
64 Audit Committee report
68 Risk Committee report
70 Investment Committee report
72 Remuneration
75 Directors’ remuneration policy
88 Remuneration Committee report

Financial StateMentS

98 Independent auditor’s report
104 Consolidated income statement
105 Consolidated statement of comprehensive

income

106 Consolidated statement of financial position
107 Consolidated statement of cash flows
108 Consolidated statement of changes in

shareholders’ equity

109 Notes to the consolidated financial statements
134 Company statement of financial position
135 Company statement of cash flows
136 Company statement of changes in

shareholders’ equity

137 Notes to the Company financial statements

additional inFoRMation

144 Glossary
IFC Shareholder information and advisors

River and Mercantile
is a client focussed asset
management and
investment advisory
specialist working closely
with clients in the uK,
europe, uSa, australia
and new Zealand.

clients
Our clients include institutional pension schemes,
wholesale financial intermediaries, insurance
companies, state and local government funds,
charitable institutions and family offices.
Understanding clients’ complex investment
requirements and, where relevant, their financial
liabilities profile is the key to our success.

investment
We design, build, manage and distribute
specialist investment products designed to meet
specific client needs which have broad client
application across our target audience groups.
We work with our clients as partners to ensure
their needs, and the resultant solutions
and products, are clearly understood
and implemented.

Forward looking statements
This document contains certain forward looking statements with
respect to the financial condition, results of operations and businesses
of River and Mercantile Group PLC. These statements are made by the
Directors in good faith based on the information available to them up
to the time of their approval of this report. However, such statements
should be treated with caution as they involve risk and uncertainty
because they relate to events and depend upon circumstances that
may occur in the future.

There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward looking statements. The continuing uncertainty in
the global economic outlook inevitably increases the economic and
business risks to which the Group is exposed.

Nothing in this document should be construed as a profit forecast.

innovation
We have developed a rewarding, diverse
and open environment to allow innovation
and investment expertise to flourish where
environmental, social and governance (ESG)
considerations are at the forefront
of our thinking.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

2020

HiGHliGHtS

assets under
Management (auM)

£44.2bn

2020

net management and
advisory fees

£69.4m

2020

CAGR = 16%

2015

2016

2017

2018

2019

2020

)
£
(

s
n
o

i
l
l
i

)
£
(

s
n
o

i
l
l
i

auM

net management and advisory fees

performance fees

Adjusted underlying profit before tax1

Statutory profit before tax

Basic adjusted underlying earnings per share

Statutory earnings per share

total dividend for the year2

CAGR = 8%

2015

2016

2017

2018

2019

2020

2019

change

£44.2bn

£39.8bn

+11.1%

£69.4m

£65.6m

+5.8%

£1.2m

£12.5m

(90.7%)

£12.6m

£14.7m

(14.2%)

£8.3m

£16.8m

(50.6%)

11.18p

13.91p

(19.6%)

6.39p

9.54p

16.22p

(60.6%)

16.40p

(41.8%)

1. Adjusted underlying profit before tax comprises statutory profit before tax adjusted for amortisation and impairment of intangible assets, dilutive share awards,

other gains and losses and performance fees net of associated remuneration. See page 14 and note 13 of the consolidated financial statements for a reconciliation to
statutory profit.
Including 2.81 pence second interim dividend and 2.34 pence proposed final dividend.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

StRateGic
RepoRt
paGeS 04–45

neW YoRK: uS
HudSon RiveR

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

social responsibility

40 Risk management
44 Viability statement

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

cHaiRMan’S StateMent

JonatHan daWSon
CHAIRMAN OF THE BOARD

“ We continue to invest
in our people and
systems for profitable
growth.”

introduction
The Coronavirus pandemic has been
little short of a disaster for the world.
Economies have been shattered,
stock markets have been very volatile,
companies have folded, unemployment
is rising inexorably and family finances
have been hard hit. It is likely to take
many years for the economic losses
to be restored and public borrowings
to be paid down. In the meantime,
we have begun to live our lives in
new and different ways and the UK’s
economy, along with those of other
countries, will have to reform itself
to reflect the new paradigm. This will
have far reaching implications for many
sectors of the economy – banking,
financial services, retail, property,
transport, leisure to mention a few.

However, we must not allow ourselves
to be drawn into a whirlpool of
apocalyptic worry. The hard reality is
that people will still need banking and
financial services; people will still need
to buy food and will still want to buy
clothes, cars and other discretionary
items; there will still be a need for
commercial property, but perhaps not
as we have known it; people will still
want to buy houses; and people will
still want to travel or take time off on
holiday. We will all just have to learn
how to do things differently – that
is one of the great characteristics
of human inventiveness and should
provide hope for the future.

Despite the external pressures, we
have not placed any member of staff on
furlough and our capital position has
not required us to seek any government
funding assistance. I am delighted with
the manner in which the business has
conducted itself through this period
and how well the business operated
remotely, whilst still retaining our high
standards of professional conduct and
efficiency in keeping with the culture to
which we aspire. I would therefore like
to take this opportunity on behalf of
my fellow Directors to thank everyone
for their hard work and diligence
through this challenging period.

Results and dividend
River and Mercantile has delivered
an encouraging outcome for the
year against this background with
underlying revenue growing by 6
per cent. to £69.4 million. Adjusted
underlying profit before tax was

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

the positives that we have learnt over
the last few months. The challenges
of the past year have underscored
our strengths – our client focus, our
core values, our team spirit and our
resilient culture – and we therefore
look forward with confidence that we
will deliver good performance for our
clients and for our shareholders.

JonatHan daWSon
CHAIRMAN

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lower by some 14 per cent. held
back by the significant investment,
discussed below, that we are making
in distribution and investment
manufacturing. In line with our stated
policy the Directors have declared a
second interim dividend of 2.81 pence
per share and are recommending
a final dividend of 2.34 pence per
share, making a total of 9.54 pence for
the year. The absence of significant
performance fees in this period has
contributed to these lower dividend
levels and James Barham, our Group
Chief Executive has commented on
this in more detail in his report.

As highlighted, our earnings for the
year were also held back by investment
in significant new hires, particularly in
distribution and fund management.
Expanding and upgrading our team
is part of the Board’s strategy to
grow the Group organically with
stronger and more effective wholesale
distribution and fund management.
The theme of this strategy is amplified
in James’ report, but is summed up
in the phrase ‘Investing for profitable
growth’. We think that there are
exciting opportunities available to us,
both for individual new hires as well as
teams to broaden our manufacturing
capabilities and providing greater
scale in our existing business.

people
We continue to invest in our people
and systems and in this financial
year, as already announced, we have
made a number of changes within
the senior management team. James
Barham was appointed Group Chief
Executive on 1 July 2019, succeeding
Mike Faulkner who became the Group’s
Chief Investment Officer. During his
first year James has refreshed the
senior management team and in May
2020 Simon Wilson joined as our new
Chief Financial Officer succeeding Kevin
Hayes. There have been a number
of other senior positions that have
also been announced over the last 18
months with David Hanratty joining
as Global Head of Distribution, Fran
Fahey being appointed as Group Chief
Operating Officer and David Peach
appointed as our new HR Director.
In addition, James Sym, a senior fund
manager with a strong track record,
joined us in the last quarter from
Schroders and we have recently
launched our European Fund managed

by him. These developments are
part of a clear strategy that James
has highlighted in his report. We are
investing in a number of areas over
the next few years to deliver on our
shared ambitions and the delivery of
strong performance for shareholders.
These ambitions will be linked into
our remuneration strategy through
the proposals being put forward for
shareholder approval at this year’s AGM.

Summary and outlook
The year has brought huge challenges
for our industry. I am proud of the
way, however, that the Group moved
with great speed and efficiency to
remote working. Our IT systems
were further strengthened and new
collaborative tools were introduced to
facilitate working from home. Client
feedback has been very positive. I am
deeply grateful to everyone at River
and Mercantile for their hard work
to ensure that our high standard
of client service performance was
sustained, and for ensuring that we
were able at all times to keep our
promise of ‘client first’. As a Board
we focussed on ensuring that the
Group’s financial controls and risk
processes were maintained, as
well as supporting the executive
team in protecting our culture. This
is no easy task when everyone is
working from home. I particularly
wish to recognise the leadership
and communication efforts made by
James in keeping all our people fully
up to date with our progress and our
responses to the challenges. It is also
noteworthy that James donated part
of his salary to charity and waived
his bonus entitlement for the year.

The year ahead is going to have more
challenges – obviously. There may
be more lockdowns in the face of
additional outbreaks of the virus which
may frustrate economic recovery. In
August, we began a gradual opening
up of our two offices in the City,
with the emphasis on maintaining
distancing, sanitisation and deep
cleaning, and ensuring as best we
can, the protection of all of our
people. Like many other companies
we have reverted to a remote working
environment for the most part
following the Government’s guidance
in September. We will however
incorporate additional agility to our
working practices reflecting some of

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

GRoup cHieF eXecutive’S StateMent

JaMeS BaRHaM
GROUP CHIEF EXECUTIVE

“ I see the linking of our
ability to identify client
need with investment
R&D through to product
design, creation and
distribution as our
core competence.”

introduction
I set out in some detail in last year’s
annual report my views on the
business and our industry, focussing
on some of the changes that were
evolving and how I saw our Group
response to these developments.
I also wrote at length in the Interim
Report about some of the changes and
investments that we are making and
I would like to take the opportunity
later in this report to set out my clear
strategy and vision for our business
over the next five years. Like all
plans they are there to give a sense
of shape and concept, however it
is important to recognise that the
role of leadership is to adapt those
plans to the emerging challenges and
therefore there must be a degree of
flexibility embedded within this vision.

River and Mercantile is an investment
led asset management business, built
around strong product manufacturing
and a growing distribution capability.
Our understanding of client need
provides us with an invaluable
perspective and the ability to design
and deliver products and services
informed by this appreciation.

Our objective over the next five
years is for River and Mercantile to
significantly increase our growth
rate and profitability, having at
least doubled AUM from current
levels. We will have best of class
operational and infrastructure
systems designed to deliver profitable
and scalable growth and delivering
on the needs of our clients.

We expect to see that growth delivered
across our existing business, however
there will be development and
enhancement within our underlying
business lines, such as equities,
where we will look to continue to add
regional equity strategies alongside
an alternate Global ESG Growth/
Quality Equity franchise. In addition,
as I have highlighted previously,
we would like to add an alternative
credit team. Distribution is key to
this development plan and over
the last year alone we have begun
a significant transformation of our
distribution capabilities. We want our
business to have a technically strong
and properly resourced distribution
function based around our core
markets supported by a scalable
and efficient operating platform.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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2020 review
It has been an extraordinary year
not just for River and Mercantile
but for society as a whole. It was
unimaginable this time last year to
most that we would suffer a global
pandemic that has impacted our way
of life in such a dramatic fashion. As
I write, there is still a high degree of
uncertainty around when and how we
want to return to the office and what
changes we will make to our longer-
term working practices. The business
moved quickly once the Government
advice developed and we closed all
our offices in late March 2020 and
moved seamlessly to a remote working
environment. I was very impressed
with how well the business coped with
this new operating environment and
we have continued to look after all of
our clients’ interests in the same way
had we physically been in the office.

The COVID-19 pandemic has
fundamentally changed the way
people interact, and the restrictions
on travelling and physical meetings
mean, that companies more generally
need to adapt their working practices
and implement alternative methods of
communication with clients, potential
investors and shareholders. However,
the development of technology over
the last decade has allowed us to
embrace this remote working protocol
quickly and effectively. This has meant
that the way we engage has adapted
and that online communication,
whether voice, video or email, has
been able to ensure that our clients
and shareholders have been kept
up to date with developments in
our business and their portfolios.

Against this backdrop, the Group
has performed well over the period
and total AUM has grown by 11 per
cent. to £44.2 billion. The net flow
ratio was +9 per cent. and investment
performance was positive, contributing
an additional 2 per cent. The growth
was slightly below the 12 per cent.
minimum growth per annum that we
have set as a target, however given
the conditions over the second half
of our fiscal year I believe that this is
a more than creditable performance

and is a testament to the hard work
of all the teams across the Group.

Net flow ratio
%
20

Underlying revenue rose by 6 per
cent. to £69.4 million and adjusted
profit before tax was £13.2 million,
a decrease of 37 per cent. against
the previous year’s result of £20.9
million. Statutory profit before
tax was £8.3 million (2019: £16.8
million). A significant factor behind
these numbers has been the lower
performance fees earned by the Group
over the period. In 2019 the Group
earned over £12 million in performance
fees split across our Equities and
Fiduciary businesses, however in
2020 this was not the case. There are
some specific reasons behind this.

The majority of Fiduciary performance
fees are calculated against clients’
liability-related objectives. Over
the last year, falling gilt yields have
increased these liabilities significantly,
in some cases in excess of 10 per
cent. The hurdle that needs to be
achieved before performance fees
begin to accrue has been more
difficult to meet despite most clients,
following our advice, having high
levels of interest rate and inflation
hedging in place to mitigate this risk.

Outperformance relative to the
liability benchmarks is primarily
driven by allocating to risk assets
such as equities, credit, property and
alternatives. Over that same period,
performance for these asset classes
has been at times challenging, creating
headwinds for generating high levels
of outperformance. Our Fiduciary
portfolio managers took swift action in
Q1 2020 to reduce risk when it became
clear how economically far-reaching
the COVID-19 crisis would become.
Protecting capital, however, is unlikely
to generate high performance fees
in the period protection is needed,
but we hope will be beneficial in
later years as assets are put to work
in stronger market conditions.

Our Equities performance fees in
prior years have mainly been driven
from our Micro Cap strategy, where

2016

2017

2018

2019

2020 Average

Net flows divided by opening AUM

Investment return ratio
%
7

2016

2017

2018

2019

2020 Average

Investment performance divided by
opening AUM

Performance fees since IPO
£’m
14

2014

2015

2016

2017

2018

2019

2020

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

GRoup cHieF eXecutive’S StateMent

continued

we receive a performance fee linked
to the performance of the net asset
value of the UK Micro Cap Investment
Company, however this is only
crystallised when it undertakes a
capital repayment event ensuring
that our interest is aligned with the
Micro Cap shareholders. These capital
repayment events are only triggered
once the NAV of the company exceeds
£110 million. Over the last year under
the stewardship of George Ensor, the
strategy has performed very well and
the NAV has recovered and is now
approaching £100 million and therefore
within striking distance of a capital
repayment event and the release
of embedded performance fees.

We have seen volatile market
conditions over the last twelve
months and in particular in this
calendar year. Our diversified
business model where circa 60 per
cent. of our revenues are largely
independent of equity market beta
has provided the business and our
shareholders with greater protection.
This is shown in the revenue weighted
asset attribution (RWAA) detailed
in Simon’s Financial Review.

Our Fiduciary and Advisory businesses
have performed well during this
period, a period where we saw a
return to more normalised operating
conditions following the completion
of the Competition and Markets
Authority (CMA) market review. The
Fiduciary business had gross sales in
excess of £1.5 billion and combined
with strong investment performance
assets grew to over £14.6 billion. We
have seen a great level of activity from
the business as a result of the re-
tender process and it is encouraging
that to date we have received a very
positive response from our existing
clients and those where we are asked
to pitch as other schemes undertake
similar processes. We have strong
relationships with the intermediaries
in this space and we are working
hard to ensure that our differentiated
approach, strong investment returns
and excellent client service are more
broadly understood across the market.

Our Equities business has continued
to perform in line with our
expectations and those portfolios
with a strong value and recovery
bias struggled against the anti-

value headwinds, whilst our more
quality orientated portfolios have
performed very strongly through
the period. This has been borne
out in the value assessment
undertaken by the independent
Authorised Corporate Director of
our investment funds where none
of our strategies were red flagged.

Assets were down over the year
across both our institutional and
wholesale client base, however with
the investment we are making in
distribution along with the broadening
of our product offering, we believe
we will see a return to growth from
this important part of our business.
We have continued to build our
investment team with the recruitment
into the PVT team of James Sym from
Schroders and we have recently
launched our European fund managed
by him. Will Lough and George Ensor
in the PVT team, who have been
managing portfolios for the last few
years, have demonstrated some
excellent and consistent returns across
their portfolios and, along with the
recruitment of James, ensures that
we have a broad and growing range
of relevant products in this area.

Derivatives has been through a
very strong period of growth which
is unsurprising given the market
conditions during the year. Assets
have grown strongly with sales of
over £5.8 billion with a strong focus
on structured equity solutions. We
continue to develop our relationships
with the intermediaries and we have
strong support from the majority of the
key consultants in the UK institutional
market. Our relationships with the local
government pension schemes are very
strong and this has been a key part in
our growth over the last few years.

The development of our Liquid
Alternatives capabilities continues,
consistent with our long history of
bespoke investment development to
meet investment demand from our
Fiduciary and Advisory clients. It is this
creative and innovative research and
development that has ensured that
River and Mercantile has been one of
the leading businesses in our chosen
field. I see the linking of our ability to
identify client need with investment
R&D through to product design,
creation and distribution as our core

Rail
WE ARE PROUD TO LOOK AFTER
THE PENSION SCHEMES OF THOSE
WHO KEEP US MOVING.

Group RWAA1
June 2020 (%)

Equities – Non-discretionary
Equities – Discretionary
Interest rates
Cash/independent
Other

(page 18 for further detail)

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

competence. The development of our
Global Macro Hedge Fund and our
Global Responsible Equity Fund (GREF)
are the most recent examples of this.

have made over the last eighteen
months and I am delighted to be
working with them as we deliver
on these exciting developments.

outlook
River and Mercantile is well positioned
in this exciting and evolving industry
in which we operate. Our focus on
developing highly relevant investment
solutions for our broadening
client base, founded on our deep
understanding of client needs,
combined with strong and broadening
distribution, and a robust and scalable
operational infrastructure is key to
our future development. We have
an incredibly talented employee
base, rich in diversity and we have
committed to continue to invest in our
people to make sure that we provide
the positive outcomes of which our
clients have become accustomed.

I have set out in the next few pages
the ambitions for our business, the
investments we are making that will
deliver the growth that we expect
over the next few years and I am
confident that we have the team to
deliver on this expectation. I would
like to take the opportunity to thank
all of our staff and clients for their
support during an extraordinary year.

JaMeS BaRHaM
GROUP CHIEF EXECUTIVE

ReSeaRcH and developMent
OUR CLIENTS ARE INVOLVED IN
CUTTING EDGE HEALTH SCIENCES
RESEARCH TO IMPROVE OUR HEALTH
AND THAT OF FUTURE GENERATIONS.
WE ARE PROUD TO MANAGE AND
GROW THEIR ASSETS USING OUR
INNOVATIVE AND CAREFULLY
RESEARCHED INVESTMENT IDEAS.

The development of ESG globally
has been a powerful phenomenon
over the last few years and this will
be fully integrated across all aspects
of investment markets over the next
decade. We have made advances
as a business on our commitments
around diversity and sustainability
and the positive impact we are able
to have across all our stakeholders.
More importantly this is being
integrated into our investment
products and vertically into our own
business model. Whilst there has
been a great deal of rhetoric around
this issue, the majority of the action
has taken place around Governance
with little or at best limited action on
Environmental and Social Issues. We
are in the process of launching our first
dedicated ESG strategy, the River and
Mercantile GREF and we have been
developing this in conjunction with
a range of our clients to ensure that
this meets their needs as investors.

We are continuing to develop our
projects to support local charities
and, crucially, where we believe we
can make a difference. We encourage
all our staff to take an active role in
local charities and support groups
where relevant, however as a business
this year we felt it was important to
support those in our community that
are there to support us when we are
unable to support ourselves. As a
business and personally, we supported
the “Critical NHS” charity that was
established to provide support to
the critical care workers operating
across many of our London hospitals
and we also supported a range of
charities in the US and Australia.

There has been a reasonable
amount of change across the senior
management team at River and
Mercantile. I have refreshed the team
to help implement the strategic plans
that I have set out for the business
over the next few years. The arrival
of Simon Wilson as Chief Financial
Officer, David Hanratty as Global
Head of Distribution, Fran Fahey as
Group Chief Operating Officer and
David Peach as HR Director are four
of the key appointments that we

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

ouR StRateGY and BuSineSS Model

Investing for profitable growth

Our strategy as we develop the Group is for it to have the
following key characteristics:

A diversified and responsible
investment capability
• A broad range of highly relevant products and solutions

designed to meet clients’ needs where responsible
investing and ESG are central to our beliefs.

Distribution driving profitable growth
• Growth delivered through strength in distribution across

our core markets (UK, US, Australia) and distribution
partnerships in target geographies (US wholesale, Japan,
Asia/China). Supporting this growth with a targeted
business and investment team acquisition policy.

a robust and scalable operational platform
•
Investing to enhance our operational infrastructure to
support this growth and deliver increasing efficiencies.

an embedded client service culture
• Providing our clients with exceptional service supported
by high quality reporting. We will invest in broadening our
online and digital presence.

a strong understanding of our
human capital and a clear employee
value proposition
• Our people are our greatest strength and we will continue
to invest in training and development. The provision of a
strong Employee Value Proposition will ensure that River
and Mercantile is regarded as a forward thinking, diverse
and technically strong workforce.

Background
We are an asset management
business, managing and advising a
broad range of strategies and clients
on their assets. We will become
more recognisable as a pure asset
management company, and our route
to market for our investment thinking
and advice outside of Fiduciary and
Advisory will increasingly be through
products as opposed to services.

Historically there was a view across
investment markets that was based
on a belief that “solutions” was the
nirvana state; it was the elusive elixir
of the investment world and countless
investment businesses chased the
establishment of solutions businesses,
in many cases hiring at great expense
from the consultant community.
The irony of this is that “solutions”
is not tangible, it is not a product
that could be created by smashing
together a couple of high profile
individual consultants with a multi-
asset capability, it is a mindset based
on a deep and holistic understanding
of client need. Shifting from a simple
consultant to a fiduciary requires more
than a shift in execution, it requires
a much deeper understanding of
real client need that embraces both
the financial and emotional sides.

I strongly believe that River and
Mercantile is firmly positioned as
“the” pure play business in the
solutions market, however we will
continue to develop this thinking in
product form that can be utilised
across a broader market spectrum.

We are still delivering market leading
investment returns tailored to
individual client needs, combined
with bespoke internal liability hedging
strategies and this will continue to be
the core of our business. Mike Faulkner
has again developed some innovative
thinking in terms of how we deal
with complex investment problems
within the market that is, in its own
right, as revolutionary as the original
concept of Fiduciary Management
we brought to the market in 2003.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

We have already set out the additional
investment capabilities that we
would like to develop over the next
few years, not simply to meet our
base aspirations but also to provide
alternative sources of revenue in the
event of underperformance in one
or more of our underlying strategies.
We do not want the success or
otherwise of this Group strategy to
be dependent on one strategy. The
concept of picking “two funds” and
committing the resources of the
business to these strategies alone
is naïve. We expose our business to
too much execution and demand
risk. Equally we are not suggesting we
should launch a fund a month and
move down the product proliferation
route in a similar way to some of
our peers over the last decade.

We will deliver this based on the
following strategic business model
set out on the next few pages.

SHoeMaKeRS
OUR CLIENTS’ EMPLOYEES DESIGN
AND CRAFT THE SHOES WE WEAR.
OUR INVESTMENT STRATEGIES
ARE DESIGNED TO DELIVER
SUSTAINABLE RETURNS.

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Where we have begun to make a
real difference is the translation of
the “solutions” mindset into tangible
product. The first example of this
was the Dynamic Asset Allocation
Fund, where we were able properly
to take a concept of client need
and map this into a strategy that
satisfies this need and where
that need is broadly universal.

River and Mercantile in 2025
It is this change that will ensure that by
2025 we are an investment led asset
manager with products at its heart,
where in many cases the product has
been designed based on a holistic
solutions mindset. This commercial
direction of travel will accelerate as we
continue to take investment intellectual
property and apply it to our strategies.
As already highlighted, we see this as
our core competence – the ability to
link client need to investment R&D
to product design and distribution.

This aligns with my view of the
industry through the valley analogy
that I espoused in my report last
year. We want our business to reflect
all that is positive about managers
with demonstrable skill with the
following core characteristics:
• We aspire to a high percentage
of our products and solutions
being ahead of their respective
benchmarks since inception whilst
offering value for money;

• Products and solutions must all

meet identifiable client needs and
be structured in a format that
is appropriate to the underlying
liquidity available;

• We distribute these investment
products in scale to a broad
range of clients where demand
characteristics are common. This is
as much an investment challenge
as a distribution one and the two
key parts of our business have to be
able to work in tandem to achieve
this objective; and

• We will have a modern and scalable
operational platform to support this
growth.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

ouR StRateGY and BuSineSS Model

continued

operational
This is the glue that binds our
investment manufacturing and client
facing functions and ensures that we
can deliver high quality and seamless
support to our clients. We have begun
a programme of investment in our
operational infrastructure to ensure
that we can provide the support to
the business as we scale up over
the coming years. This support will
be increasingly centralised and this
ensures that as we bring on more
investors to this platform we are able
to extract greater operational leverage.

We are progressing with our
objective of delivering a consistent
and scalable operating platform
across the Group. This will provide a
simplified and standardised platform
that has the functionality to service
all parts of the business, whilst at
the same time delivers a flexible
approach and level of technology
in line with the rest of the market
and the ability to plug straight into
custodians and third-party platforms.

We will marry in-house expertise with
common industry platforms in our new
operating model, enhancing the ability
to change as the business evolves.
This will allow the consolidation and
streamlining of resources, across
the Group, to drive out operational
efficiencies, benefit from economies of
scale and further enhance our control
environment. Critically the business
will have the ability and flexibility
to meet client needs with a broad
range of instruments on standard
process flows that do not create
work arounds or ad-hoc processes.

our business model
to deliver on this
strategy is set around
the three key pillars
of any successful
asset management
business and we
have set out the
developments we
are making in these
areas as we target our
objectives over the
next five years.

investment manufacturing
We have a high quality and
relevant investment capability
providing products and services
meeting client need across a
range of audience groups. This
is currently set out across our
Fiduciary and Advisory investment
team, our equities teams
managing UK and Global equities,
our derivatives team managing
Liability Driven Investment
(LDI) including gilt collateral
management and structured
equity solutions and our liquid
alternatives team managing
a growing range of specialist
return orientated products.

We will continue to invest in these
teams and add new teams where
appropriate. We have already
highlighted that we are seeking
additional capabilities and in
particular, Alternative Credit
and further equity capabilities,
specifically a Global ESG Quality/
Growth team to complement the
existing equities teams. We have
also continued to invest in our
existing investment teams for
example James Sym, a highly rated
European value manager joined
the PVT team from Schroders
and we have recently added
additional analyst resource. We will
continue to make these additions
to the investment teams across
the business to make sure that
we continue to deliver for our
investors and develop innovative
products to meet their needs.

distribution
We are investing heavily in our
distribution capabilities however the
sheer cost of exploring all the markets
and geographies available will, almost
certainly, take too long and cost too
much. The combination of internally
sourced distribution around core
markets and external partnerships
for those markets where entry costs
are too high or cultural challenges
make having localised distribution
imperative, is a key part of our strategy.

The investment we are making will
create a large, high quality distribution
network in the major global markets for
asset management. Our focus will still
be on selling our products and services
to or through professional investors
and intermediaries. We will not be
involved in retail asset gathering,
rather we will sell to the aggregators
of retail assets in an increasingly
vertically integrated value chain.

In the main we will own our distribution
network as at scale this model
generates the highest margin and
return on investment due to the
overall institutional flavour of the
assets which we seek to raise in large
one to one relationships. Our own
network will be concentrated in our
home markets of the UK and Europe,
North America and Australia. These are
large institutional and sophisticated
wholesale markets where our existing
and planned product line-up is well
aligned with the deepest asset pools.
Without the addition of other channels,
the right sales strategy with a quality
distribution team and continued
product strength, these markets are
capable of delivering significant assets
in our higher margin products, whether
performance or market trend driven.
Lower margin derivative solutions
will add to these sales figures.

We will also selectively seek distribution
partnerships in markets and channels
where the complexity and cost of
having our presence is beyond what
we are prepared to accept. This will
be mainly accessing retail markets
where our product set has a good fit,
but we do not want the cost burdens
that retail selling registrations bring
with local regulators, nor the huge and
constant volume of product and client
service activities that require large
internal and external teams. In effect
we continue to follow our mantra of
one to one high value relationships.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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capital allocation
This “profitable growth” programme
will require continued investment as
we attract more investment teams
to our platform and the ongoing
investment in our distribution
and operational platform.

However, we are a cash generative
business with a formulaic dividend
policy. Therefore, against this
backdrop and looking forward
over the next five years we intend
to apply the following capital
allocation approach:
• We will consider any capital
requirement for internal
and external investment
opportunities and the seeding of
new funds we launch, at all times
maintaining a robust balance
sheet and a prudent approach
to our regulatory capital surplus;

• We will maintain our minimum
distribution of 60 per cent. of
adjusted underlying profit as
dividend, recognising that this
is valued by the market and our
shareholders; and

• We will consider share buybacks
and special dividends where
and when appropriate to
return surplus capital including
performance fee profit.

Summary
Our strategic objectives are ambitious
over the coming years and we expect
to see a transformation in the business
as we continue this programme of
investment in key parts of the Group.
The delivery of high quality investment
products and solutions to our clients
and investors is paramount and the
changes we are making we believe will
deliver equally strong and growing
returns for our shareholders. This
process has already begun and we
have made significant changes to the
senior management team to deliver
on these plans and we have also
commenced the restructuring of our
distribution teams and the investment
in our operational infrastructure.

conStRuction
OUR CLIENTS’ EMPLOYEES BUILD
THE ROADS WE DRIVE ON, THE
CITIES WE WORK IN AND THE
HOMES WE LIVE IN. WE INVEST
AND GROW THE PENSION SCHEME
ASSETS FOR OUR CLIENTS.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

KeY peRFoRMance
indicatoRS (Kpis)

Fee earning auM
(£ billion)

£44.2bn

net management and
advisory fees (£ million)

£69.4m

2020

2019

2018

2017

2016

44.2

39.8

33.8

31.0

25.5

2020

2019

2018

2017

2016

69.4

65.6

64.2

55.9

45.7

2020

2019

2018

2017

2016

2020

2019

2018

2017

2016

Change in fee earning
AUM

11%

18%

22%

The growth in AUM is a key indicator of the client engagement
process and is the driver for growth in net management fees. The
growth in AUM is a function of new mandates, low attrition rates,
aggregate investment performance and net rebalance.

In 2020 overall AUM growth was strong despite difficult market
conditions. While the change in working practices made
institutional and wholesale mandates more difficult, sales of
structured equity products in the Derivatives business were
strong.

Change in net
management and
advisory fees

15%

22%

(2%)

Management and advisory fees represent the underlying
revenues generated by the business. This metric measures the
core performance and sustainability of the business.

The growth in 2020 represented the fourth consecutive year in
which underlying revenues grew.

Adjusted underlying profit
before tax (£ million)

£12.6m

2020

2019

2018

2017

2016

12.6

14.7

16.1

16.4

11.1

2020

2019

2018

2017

2016

Adjusted underling
pre-tax margin

18%

22%

25%

29%

24%

Adjusted underlying profit before tax represents the core
profitability of the Group. It has reduced in 2020 as a result of
the increase in remuneration and administration costs as the
business continues to invest for profitable growth.

Adjusted underlying pre-tax margin is adjusted underlying profit
before tax divided by total revenue excluding performance fees.
It is an indication of the ability to achieve scale through increased
AUM and revenues, at a lower marginal increase in related
expenses.

Adjusted profit before tax to statutory
profit reconciliation (£ million)

4.6

0.3

0.0

13.2

12.6

(0.6)

8.3

Statutory profit before tax

Amortisation and

impairments of
intangible assets

Other gains and losses

Dilutive share awards

Adjusted profit before tax

Performance fees profit
before tax

Adjusted underlying profit
before tax

See note 13 of the Consolidated Financial Statements.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

For the year ended 30 June 2020 the Board has decided
to make changes to the Group’s key performance indicators
(KPIs).

Regretted Institutional Attrition (“RIA”) has been historically
reported as a measure of the Group’s success in retaining
institutional clients. The measure adjusted certain
redemptions to reflect the fact that a client’s decision to
redeem is often unrelated to the performance of the Group
e.g. a defined benefit scheme buy-out. As our business
and the market has developed, for example a greater
prevalence in structured equity derivatives which by their
nature tend to have a different profile than other areas
of the business, the Board believes that RIA has become
increasingly less relevant for large parts of the Group and
necessarily more subjective given the nuanced reasons
why a client might redeem. It believes a better indication of
performance is not the reason why a client has redeemed,
i.e. whether it was related to the Group’s performance, but
its ability to replace and grow assets and revenue such
that the profits of the Group grow accordingly. Readers
of the Annual Report and Accounts are able to make
this assessment through the Group’s KPIs of AUM and
underlying revenue growth. Furthermore, the investment
performance report included in the CIO review provides
readers with detailed information on the performance of its
strategies which, over the long term, is an important factor
in the success of the Group. Accordingly, the Group will no
longer report RIA.

The percentage of adjusted earnings per share distributed
as a dividend is a measure which the Group will continue
to report in its financial review, however the Board has
decided to remove this as a Group KPI and replace it
with basic earnings per share (adjusted underlying and
adjusted). The percentage of earnings distributed is more
a function of the Board’s capital allocation policy rather
than a measure of the Group performance. Earnings per
share is a well understood KPI and a principal measure
of profitability for shareholders given it reflects any share
issuance made by the Company. In view of the Company’s
dividend policy, BUAEPS and BAEPS also drive the quantum
of minimum dividend paid and the potential to pay further
dividends having considered the Group’s capital allocation
requirements.

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Basic adjusted underlying
earnings per share (pence)

11.18p

2020

2019

2018

2017

2016

11.18

13.91

16.06

15.92

10.89

2020

2019

2018

2017

2016

Change in BUAEPS

(20%)

(13%)

46%

(17%)

BUAEPS reflects the core adjusted earnings per share. The
calculation of this metrics is shown in note 13 of the Consolidated
Financial Statements.

Basic adjusted earnings
per share (pence)

11.79p

2020

2019

2018

2017

2016

11.79

11.62

20.26

21.85

22.90

2020

2019

2018

2017

2016

Change in BAEPS

(42%)

(7%)

(5%)

97%

24%

BAEPS reflects the total adjusted earnings per share. The
calculation of this metric is shown in note 13 of the Consolidated
Financial Statements.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

Financial RevieW

• Fiduciary Management, Derivatives, Advisory and
Institutional Equity have all shown solid revenue
growth however Wholesale Equities has had another
challenging year and declining revenue which is
addressed in the Group Chief Executive’s statement;
and

• The Group has continued to invest in a number of
areas which resulted in increased remuneration
and administrative costs, primarily relating to
our distribution capabilities, new fund structures
to facilitate global distribution and new product
launches. This has reduced our margins and absolute
levels of profitability in the short term given the
time-lag between incurring cost and winning new
assets, particularly in the institutional space where we
currently generate most of our revenues.

outlook
Asset raising activity levels and the pipeline of new
opportunities has improved in recent months since
lockdown was imposed in March. However, given the
normal interval between interaction with clients and
allocation, it is more likely that gross sales will be higher
in the second half of the current financial year ending
30 June 2021.

As explained in the Group Chief Executive’s Statement
we will continue to invest for profitable growth during the
current year which will further increase remuneration
and administrative costs as explained later in this review.
Our programme of organic investment seeks to enhance
the foundations of the business to achieve our ultimate
objective of a step change in earnings per share and the
value of the Group. The areas of investment are:

•

investment manufacturing – new products to meet
our growing clients’ needs by investing in the hire of
additional investment teams and the development
and launch of new strategies;

• distribution – to build on our global institutional and
wholesale capabilities through hiring in several key
areas; and

• operational infrastructure – to achieve a step

change in earnings per share, we need to improve our
profit margins. The programme of operational and
IT infrastructure investment will enable us to benefit
from operational leverage through greater efficiency
in the medium and long term and to ensure that we
have the operational bandwidth to accommodate the
growth in product and strategies.

SiMon WilSon
CHIEF FINANCIAL OFFICER

overview
For the sixth consecutive year the Group has grown
its AUM which is noteworthy given the difficult market
conditions faced during the period. We have changed our
description of AUM, although the basis of measurement
is unchanged, as explained further in this review.
Furthermore, underlying revenue has grown for the
fourth consecutive year albeit this was countered by a
significant reduction in performance fees for the period.
The following key factors during the year have impacted
the financial performance of the business:
• Significant market volatility during the second half of
the year which impacted fees earned and, together
with the wider disruption in working practices
across industry, reduced the scope for winning new
institutional and wholesale assets;

• The exception to this was within our Derivatives

business where activity levels in structured equity
products was high during the period as clients
repositioned or established new or increased levels of
hedging strategies;

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

S
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G

C
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P
O
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G
O
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E
R
N
A
N
C
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F
I
N
A
N
C

A
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S
T
A
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M
E
N
T
S

A
D
D
I
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I
O
N
A
L

N
F
O
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M
A
T
I
O
N

auM

£ million

Opening AUM
Sales
Redemptions

Net rebalance and transfers

Net flow
Investment performance

closing auM

Change in AUM

Fiduciary
Management

Liquid

Derivative Solutions

Equity Solutions

Alternatives

S. Equity

LDI

Total

Wholesale

Institutional

Total

12,335
1,581
(746)

835
391

1,226
1,058

529
36
(426)

(390)
–

(390)
15

5,801 15,882 21,683
5,846
1,266
4,580
(3,978)
(517)
(3,461)

1,119
475

1,594
–

749
1,186

1,935
–

1,868
1,661

3,529
–

1,482
211
(574)

(363)
–

(363)
(95)

3,785
545
(864)

(319)
–

(319)
(255)

5,267
756
(1,438)

(682)
–

(682)
(350)

Total
AUM

39,814
8,219
(6,588)

1,631
2,052

3,683
723

14,619

154

7,395 17,817 25,212

1,024

3,211

4,235

44,220

18.5%

(70.9%)

27.5% 12.2% 16.3%

(30.9%)

(15.2%)

(19.6%)

11.1%

The Board has decided to simplify the description of the reported level of fee earning mandates across asset classes managed
by the Group, by consolidating the description AUM/NUM to AUM. AUM represents amounts on which management fees and
performance fees are charged across all asset classes managed by the Group. In relation to derivatives, AUM represents the
aggregate billing notional of the derivative contracts on which management fees are charged. There has been no change to the
basis of measurement of AUM and the reported data is comparable on a like for like basis with that reported in prior periods.

AUM grew by £4.4 billion (11%) during the year comprising £3.7 billion of net flows and £0.7 billion of positive investment
performance. Fiduciary Management and Derivatives performed strongly with positive net sales and flows across all activities.
Our Equities business had a more difficult year in respect of both sales and performance which is addressed in the Group Chief
Executive’s Statement. Redemptions in Liquid Alternatives principally represents a single client redemption from the DAA Fund.

Financial highlights

£’000s (unless stated)

Net management fees
Advisory fees

Total underlying revenue
Performance fees

Total revenue

Total remuneration and benefits

Administration expenses

Adjusted underlying profit before tax
Adjusted underlying profit after tax

Performance fee profit before tax
Performance fee profit after tax

Adjusted profit before tax
Adjusted profit after tax

Statutory profit before tax
Statutory profit after tax

Adjusted underlying earnings per share basic (pence)
Adjusted earnings per share basic (pence)
Earnings per share basic (pence)

Dividend per share (pence)

Cash (£ million)

Surplus regulatory capital (£ million)

Year Ended 30 June

2020

2019

Movement Movement %

58,449
10,932

69,381
1,161

70,542

41,158

15,926

12,564
9,352

622
504

13,186
9,856

8,299
5,343

11.18
11.79
6.39

9.54

24.3

16.1

55,546
10,038

65,584
12,519

78,103

41,664

15,647

14,650
11,143

6,279
5,085

20,929
16,228

16,788
12,995

13.91
20.26
16.22

16.40

24.0

12.3

2,903
894

3,797
(11,358)

(7,561)

(506)

279

(2,086)
(1,791)

(5,657)
(4,581)

(7,743)
(6,372)

(8,489)
(7,652)

(2.73)
(8.47)
(9.83)

(6.86)

0.3

3.8

+5%
+9%

+6%
(91%)

(10%)

(1%)

+2%

(14%)
(16%)

(90%)
(90%)

(37%)
(39%)

(51%)
(59%)

(20%)
(42%)
(61%)

(42%)

+1%

+31%

Note adjusted and adjusted underlying results are alternative performance measures which are reconciled to statutory profit in note 13 of the consolidated financial statements.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

Financial RevieW

continued

Management fee margins

Average fee earning AUM (£ million)
Net management fees (£ million)
Average margin 2020 (bps)
In-force margin at 30 June 2020 (bps)
Medium term guidance (bps)

Fiduciary
Management

Derivative
Solutions

Equity Solutions

Wholesale

Institutional

13,467
21.1
15.7
14.8
13–14

23,746
15.4
6.5
6.5
6–7

1,299
8.9
68
66
60–65

3,571
13.1
37
35
33–36

Fee margins during the year were broadly in line with our
previous medium-term guidance. We have reviewed and
revised our medium-term guidance to reflect both the
trends in industry but more specifically our strategic focus
to target larger mandates across the business. The CMA
market review and the subsequent re-tender process has
and will continue to have an impact on margins and fee
structures across the fiduciary market. In addition, as we
target larger mandates, we expect the margin earned on
these assets to be lower than our current average albeit
with a higher level of absolute revenue earned per client. As
the wholesale equity market continues to evolve, becoming
more institutional in nature with larger asset awards from
the aggregators, margins have reduced although the impact
going forward will be dependent on our business mix.
Within Institutional Equities our fee margin guidance has
been reduced to reflect the loss of a small number of old
higher margin mandates and our strategy of targeting larger
mandates, particularly in growth markets such as Australia.

Revenue Weighted asset attribution
The revenues of traditional asset management firms have
a high correlation to equity markets. However, the relative
diversification of the Group’s revenue streams compared to
many of our peers mean they display greater stability and
resilience to negative equity market movements.

RWAA classifies our underlying revenues by the underlying
asset class on which the management fees are charged.
Net management fees from Equity Solutions are related to
the variability of the underlying equity markets. In Fiduciary
Management the management fees are based on the client’s

portfolio which will include equities, bonds and government
securities. The management fee revenue is attributed in
proportion to the composition of the underlying portfolio
between credit instruments, equities and government
securities. The Equities – Non-discretionary category
represents the minimum level of equity exposure we are
required to hold in client portfolios, where this is specified.
In Derivative Solutions the underlying revenue is linked to
the contractual notional amount of the derivative instrument
used to hedge interest rates, inflation and equities. As a
result, these revenues are also considered “independent” or
cash-like in their characteristics. The Other category includes
property and alternatives.

Advisory revenues are based on retainers or specific projects
and are not directly linked to asset classes and are therefore
classified as being “independent”.

performance fees
Performance fees for the period were principally earned
during the first half of the year. As explained in the Group
Chief Executive’s Statement the equity market downturn
during the second half of the year impacted our ability to
generate outperformance within Fiduciary and, while the
Group has the potential to earn performance fees in the
current financial year, both within Fiduciary and Equity
Solutions, this will be at significantly lower levels than we
have historically generated. The business will have the ability
to generate performance fees through some of the new
strategies being developed and we will keep the market
updated as this develops.

RWaa

30 June 2020
31 December 2019
30 June 2019
31 December 2018
30 June 2018

Equities – Non-
Discretionary

Equities –
Discretionary

Interest
Rates

Cash /
Independent

33%
36%
37%
38%
38%

4%
4%
3%
2%
2%

21%
20%
19%
22%
19%

39%
37%
38%
35%
38%

Other

3%
3%
3%
3%
3%

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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Administrative expenses
Administrative expenses increased by £0.3 million (2%) year
on year primarily as a result of an increase in technology
costs and professional fees in relation to our operational
infrastructure. Remote working led to an increase in market
data costs which were partly offset by a reduction in travel
and entertainment costs.

Administrative expenses are anticipated to increase by
approximately £1.5 million for the year ending 30 June
2021 as a result of the costs of launching new investment
strategies and products in the form of professional fees
and fund administration costs, further technology costs
in relation to our operational infrastructure project and
increased market data costs.

Remuneration
Fixed remuneration costs increased by £2.8 million (11%) to
£28.9 million reflecting, in the main, additional hires across
the Group and investment in Australia and the US. Variable
remuneration reduced by £3.3 million (21%) predominantly
due to significantly lower performance fees earned. Total
remuneration costs (excluding recruitment costs) as a
percentage of total revenue increased from prior year from
53 per cent. to 58 per cent. (54 per cent. when investment
in Australia and the US is excluded, in line with our current
Group remuneration policy). As we continue to invest in the
business, we expect remuneration to range between 58 per
cent. and 60 per cent. of underlying revenue for the current
financial year before any impact of any performance fees
earned.

operational infrastructure
One of the means to achieve a step change in the earnings of
the Group is to unlock operational leverage in everything we
do, particularly by improving efficiency in distribution, client
servicing, operations and IT. Our target operating model
is one of the cornerstones of the Group achieving greater
operational leverage and we have commenced a multi-year
programme of investment which will start in earnest in 2021.

For the year ended 30 June 2020, costs incurred in relation
to this investment were £0.8 million of which £0.4 million
were capitalised. Further detail regarding the costs of
the programme and timing once the full scope has been
determined will be presented in our Interim Report next year.

liquidity and regulatory capital
Cash and cash equivalents increased marginally to £24.3
million as at 30 June 2020. The Group prudently manages
its regulatory capital position and maintains a significant
surplus of regulatory capital resources over its capital
requirement. At the year-end that surplus was £16.1 million
and our regulatory capital resources represented just under
200 per cent. of the Group’s current regulatory capital
requirement.

authorised corporate director (acd)
Historically a Group entity acted as the ACD of River and
Mercantile Funds ICVC. However, in line with best practice
an independent firm, Equity Trustees Fund Services Limited,
was appointed as independent ACD in October 2019. As
a result of this appointment, the Group ceased to hold

investment management balances (assets and liabilities)
hence these were nil at the year-end (2019: assets £22.3
million; liabilities £22.3 million). There was no impact on the
net assets of the Group.

intangible assets
The investment management agreements (IMA) in relation
to the ILC business was acquired in 2017 for £0.1 million and
a revenue trail for a period post acquisition. The acquisition
resulted in the recognition of the IMA as an intangible asset,
the value of which was fully impaired at the year-end due to
reduced AUM, resulting in a full year charge of £1.1 million.

Taxation
The effective tax rate on adjusted underlying profit was
26 per cent. for the year ended 30 June 2020 (2019: 24 per
cent.) reflecting unrelieved tax losses in the US. The statutory
profit effective tax rate was 36 per cent. for the year ended
30 June 2020 (2019: 23 per cent.) reflecting the impairment
of the ILC IMAs without an associated deferred tax asset, the
US loss position together with a reduced proportion of profit
generated in the UK primarily due to lower performance fees
for the period.

distributable reserves
Following approval by Shareholders at the Company’s AGM
in December 2019 to undertake a reduction in capital, and
with a view to effecting this on approval from the Court, the
Company capitalised its merger reserve of £44.4 million by
paying up and issuing deferred shares in the Company (the
“Deferred Shares”). The Company received Court approval in
January 2020 to affect the reduction in capital by cancellation
of the Deferred Shares, creating distributable reserves
available to the Company.

As at 30 June 2020, the Company had £55.0 million of
distributable reserves (2019: £10.8 million).

dividends
On 16 April 2020 an interim dividend of 4.39 pence was
paid of which 0.5 pence was a special dividend in relation to
net performance fee profit. The Directors have declared a
second interim dividend of 2.81 pence per share to be paid
on 20 November 2020 to shareholders on the register as at
23 October 2020. The ex-dividend date will be 22 October
2020. The Directors are proposing to shareholders a final
dividend of 2.34 pence per share which will take total
dividends per share paid, declared and proposed for the year
ended 30 June 2020 to 9.54 pence per share representing 80
per cent. of adjusted underlying profit after tax and 100 per
cent. of performance fee profit after tax. The final dividend
will be paid on 18 December 2020 to shareholders on the
register as at 27 November 2020. The ex-dividend date will
be 26 November 2020.

SiMon WilSon
CHIEF FINANCIAL OFFICER

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

cHieF inveStMent oFFiceR’S RevieW

MiKe FaulKneR
GROUP CHIEF INVESTMENT OFFICER

“ Through our ESG
process we are seeking
to significantly reduce
the cost of capital for
great companies, and
to significantly increase
it for weak ones.”

In my statement this year I would like to
address the following key areas:
• Market environment and outlook;
• New strategies we are seeking

to offer;

• Our approach to ESG in portfolio

management; and

• Overview of performance.

Market environment and outlook
While much attention – rightly – has
been placed on the market’s reaction
to COVID-19, from an investment
perspective the market has been
complicated. As we came out of
2019 into 2020, our view was that
the effect of global stimulus through
lower bond yields would be stronger
Emerging Market performance,
and a return to strength of value as
bond yields rose. For much of the
first quarter of 2020, the concerns
about COVID-19 were focussed on
supply chain disruption rather than a
pandemic. Therefore, when markets
started falling significantly in February
there was an initial question about
whether this was simply a normal
correction or something more.

What transpired was that, as a result
of higher volatility in markets caused
by equity market hedging, some large
funds were forced to de-leverage
significantly. This put significant
selling pressure on markets, which
was amplified by the consequences
of those offering protection to others
needing to hedge themselves. It
created a pro-cyclical environment,
in which moves in a given direction
require others to trade in the same
direction. This effect on volatility was
significant and led to the volatility
index reaching 80 in March.

This sell down was exacerbated by
the oil price war that emerged during
this period between Russia and
Saudi Arabia, and also when it was
becoming clear that COVID-19 was
indeed a pandemic (although the
“how bad?” was still yet to emerge).

Part of the problem with this period is
how seriously the credit markets were
affected, on the way to what became
a significant economic problem.

Credit prices were already depressed,
when it became clear that the
economic environment was very

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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difficult indeed. In our view, the
Federal Reserve made some very
good decisions for the health of the
financial system, because it not only
provided liquidity but also a basis
upon which the credit markets could
function and re-open. This has been
a critical factor in the recovery of
financial markets, in our view.

The result has been that financial
markets have recovered strongly
from the March lows, to the point
where it appears that equity and
credit prices have disconnected from
what would be normal economic
reality. This is perhaps not surprising
given the amount of stimulus we
have seen and was more than likely
unavoidable. I would also argue that
the Federal Reserve has correctly
determined that, in an environment
where unemployment is likely to
persist, it needs two things beyond
government spending to mitigate the
effect on gross domestic product:
• Business expenditure, that at
the margin will be higher the
lower credit spreads are. It has
successfully delivered this.

• Higher consumer spending, which
is influenced by the wealth effect
(i.e. higher asset prices). It has
successfully delivered this.

We therefore consider that the
Federal Reserve has done an
excellent job in this period in the
face of an environment we have
arguably never seen before.

Our key macro themes, that we
developed early on in this period
and that will likely persist for
some time are as follows:
• the coming years will be a good
environment for equities. When
interest rates are low, and access
to credit is easy at a cheap price,
ownership of equities will tend to
make sense.

• Within equities, there will be

big winners versus losers. Stock
picking will matter. Whether or not
it is fair, companies that came into
this period with strong balance
sheets will be less distracted than

those that did not. It will give them
options, and as a result they are
more likely to win.

• this will be a good environment
for growth. We remain as ever
strong believers in value. But in an
environment of low interest rates,
the value of strong growth is all
the greater, because bigger future
cashflows are discounted at a lower
rate. We believe it may take the
market some time to catch up with
the valuation implications of this.
• underweight illiquids, real estate
will be difficult. At some point,
Illiquids may get cheap enough that
they are too compelling not to hold.
But outside of credit, we believe the
opportunities in listed markets are
strong enough that illiquidity needs
to become much cheaper to be
compelling. In addition, other than in
specific segments, we believe we are
only in the early stages of how real
estate use will change. Clearly the
retail trend was already occurring,
but remote working now means the
desire for companies to cut office
space footprints – especially in cities
– is a trend that will take some time
to play out. At the margins that may
also influence residential property
values in cities. Either way there is
a lot of uncertainty in a segment
that has capital intensity (not a great
combination).

• precious metals/real assets likely
to continue to rally. We do not see
interest rates rising for some time
yet. This means we should expect
lower real interest rates, which
tends to be supportive of precious
metals and other similar real assets.
• Bond yields to rise in the medium
term. We believe this should occur
as markets anticipate Central
Bank balance sheets contracting,
albeit we do not expect returning
to historical norms. But rises of
0.5–1 per cent. are not unrealistic in
a two to three year timeframe.

Notwithstanding these points, we do
expect markets and economic reality to
re-connect at some point.

There are two different ways I could
see this happening:
•

It becomes clear that the Federal
Reserve will not backstop credit in
all circumstances. Buying bonds
does not make them creditworthy
– the question is whether they will
continue to buy or even offer debt
to companies that are in significant
economic trouble. Without this, our
view would be that default rates
would be expected to rise and
credit spreads should be higher.
This would re-connect markets to
economic reality.

• We see economic recovery of some
form and as a result stimulus is
removed. Stimulus is currently
acting much like pain relief and
when it stops being administered
we would expect to see markets re-
connect (much as they did in 2010).

For this reason, we are not advocating
to clients to be “all in” on equities, but
rather to remain more balanced for
now, retaining some dry powder.

new strategies
In the past, I have talked about our
desire to add credit and illiquid
capabilities if an appropriate
opportunity arises. Given the
comments above, we do not currently
feel the same way about Illiquids.
We do see significant opportunities
in credit, specifically through strong
covenant analysis for apparently
weaker credits, and would very
much like to add such a capability.

Our equity offerings are primarily
value-based, and we remain strong
believers in value as an approach.
However, based on our view of growth
in the coming years (unlike some we do
not see value and growth as opposite)
we would like to offer strategies in the
“quality growth” space and therefore
are looking at this very closely.

We welcomed James Sym to the
business during the year from
Schroders, who is very well
regarded as a European equity value
manager. We have just launched the
European Fund targeted particularly
toward the wholesale market to
support growth of his AUM.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

cHieF inveStMent oFFiceR’S RevieW

continued

ESG is embedded across all of our
investment strategies. In addition,
we have been developing our own
dedicated ESG solution to meet
needs across the market. I discuss
in the next section more fully how
we approach this, but we believe
we have a very strong offering and
that this is here to stay. We expect
to launch during calendar year 2020
and have very substantial capacity
and it brings together ESG and macro
thinking into one strategy (which we
believe is unique) and offers this in
a relatively low tracking error form.
It should therefore be attractive
to a wide range of investors, and
in particular defined contribution
pensions where members will seek to
express their support for responsible
investment in an active fashion.

eSG
In this section I want to provide an
overview of how we think about ESG
in the Global Responsible Equity
Fund we are seeking to launch in
the near term. We have for a long
time taken account of ESG related
themes in our equity strategies,
but the approach we are taking in
the ESG specific fund is different.

The history of what we now call ESG
investing is a long one. Back in the
1990s there was something called the
Institute for Tomorrow’s Company
that we would argue was reaching for
the same thing. Ethical investment
became vogue soon after, although
the Friends Provident Stewardship
Fund had been around for some
time before that. Subsequently
we have had ESG, sustainability
and responsible investment.

We know that many people would
argue there are significant differences
between these and in one sense they
are right – they are implemented in
quite different ways. But we would
argue that the issue – or the underlying
question they are seeking to address –
is essentially the same. That question
is “does behaviour matter in the
production of economic returns?”

Most people would probably find it
hard to answer this question “no”.
But obviously there are degrees.
Some people think that if companies
are behaving legally that’s fine. Most
people wouldn’t think it’s acceptable
to treat your employees terribly, or
to support slavery, or engage with
child labour etc. Other people are
more extreme, and do not want to
support any activity that is considered
“bad”, such as manufacturing arms,
tobacco and pornography.

But we are in a world that increasingly
considers behaviour to be very
important, and much more so than it
used to. Politically it is important, and
social media certainly has a hand in
raising issues quickly and broadly in
a way that can threaten companies
who are behaving below what may be
considered an appropriate standard.

At a very personal level we like the
trend towards ESG, responsible
investment, ethics, whatever we
choose to call it. If we had to call
it something, we’d call it conduct
investment. What we’re really saying
is that conduct towards a variety of
stakeholders matters. It should. We see
this as a backlash against a trend for
the last twenty to thirty years towards
companies’ focus on shareholder
value, through a variety of approaches.
Examples include Economic Value
Added (in the classic Stern Stewart
book from the 1990s), to measures
intended to improve governance of
corporates in shareholder interests.
These were aimed at reducing the
effects of a range of undesirable
behaviours on the part of company
management, where misalignment
between their and shareholder
objectives led to inappropriate
decisions, the most obvious of which
is value destructive acquisitions.

One could argue that the increased
focus on shareholder value may have
been a factor in underweighting the
emphasis towards other stakeholders,
such as employees, communities,
perhaps customers. The world
is too complex ever to be able to
prove this, but we can see how it
might have had an influence.

The very low increase in pay for
the lowest paid in the US over
the last thirty years has shown
that the historical distribution of
corporate gains, that was in the
past shared between shareholders
and employees, is now not
particularly shared by the latter.

Now, we are not arguing against
economic returns, but rather that
it is perhaps not surprising in an
environment of worsening inequality,
that corporate behaviour is under
the spotlight. Especially given
there is no shortage of very public
examples of what on the face of
it appears to be poor corporate
behaviour. Is it reasonable for
people to expect better? Almost
certainly, but even if it isn’t, they do.

The complexity of the issue is such
that it is important for any investment
organisation to set out the principles
on which it applies thinking on ESG into
a policy. This obviously recognises that
people will disagree as individuals.

We do believe as a house that good
behaviour is important. We hope that
we represent it ourselves and we
expect it in others. But in investing,
good behaviour cannot come at
the price of returns that are not
economic – we are seeking good
economic investments in the first
instance, that are achieved through
a process that encourages good and
improving behaviour or conduct.

Subject to producing strong economic
returns, the overarching outcome
that we are trying to effect through
our ESG process is as follows:

We are seeking to significantly
reduce the cost of capital for great
companies, and to significantly
increase it for weak ones. In doing
so we believe that will either create
an incentive for weak companies to
improve, or for them to be acquired
by great ones cheaply and for
the improvement to be imposed.
Both are accretive to shareholders
and beneficial to society in
improved behaviour.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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Because our approach is on directly
influencing the cost of capital, it is
focussed in the first instance on
exclusion rather than engagement.
We are, however, prepared in
certain circumstances to consider
companies that are not yet great
but demonstrating a willingness to
improve and are already making
progress. This should be matched by
an expectation of higher economic
returns than we could achieve
on already great companies.

principles we adopt in pursuit of
desired outcomes
Firstly, what we are not trying to do
is take a view about which industry is
good or bad. Certainly, we would not
necessarily defend the impact of the
energy industry on carbon emissions,
but, without energy as it currently
stands the world will grind to a halt.
We should not behave in a way that,
if successful, would be fundamentally
detrimental to the functioning of the
world’s economies and people’s health.

Similarly, it is not for us to determine
how humans spend their time,
provided it is judged by governments
to be legal. We are reminded of a
question asked to Warren Buffett at the
Berkshire Hathaway Annual General
Meeting a couple or so years ago. At
the time, the backlash against sugary
drinks was in full flow, with some good
reason. Warren and his partner Charlie
Munger were asked about their view
of Coca Cola (a significant Berkshire
holding) considering this. Warren’s
point was that he doesn’t see why his
freedom to choose to consume 25%
of his daily calories in Coke should be
curtailed because of the decisions
of others. It is a question of freedom
expressed in a responsible way.
Charlie Munger went much further
and referred to the idea of this type
of control as a “juvenile” argument.

We’re not sure we’d use the same
language, but the fact is the bedrock of
most developed societies is freedom
in a variety of forms, be it speech,
movement, religion, etc. We may not
always like the result, but we don’t
yet have anything better. Hence
the old saying “I do not agree with
what you have to say, but I’ll defend
to the death your right to say it.”

We therefore do not exclude industries
or activities for what they do provided
they are legal.

However, we do believe strongly that
behaviour within these activities must
continually improve. Within this, we
believe that the most important means
of change is a motivated, effective
employee base that is meritocratic
and diverse. Our view is that, where
this exists, change in other areas
such as attitude to environment,
social engagement, governance and
a range of stakeholders will happen.
Without it, there is no policy applied
by a board that will make this happen.
This therefore forms the centrepiece
of our approach to investment.

We cannot say this strongly enough. If
this isn’t present, the ability to effect
or sustain any other change will be
limited. Without employee support,
companies have no sustainability
strategy and therefore no ability
to effect behavioural change.

We believe that innovation is the next
most important factor. If a company
is not able to innovate, then however
good it once was it is unlikely to survive
effectively in the long run. It will not
hang on to good people and therefore
it will be unable to effect change.

Finally, we look for outcomes in the
traditional ESG dimensions. These
are, in a sense, outcomes of the
other areas. We would certainly
like to see success in aggregate
across these factors. But they
are arguably measurements of
underlying fundamentals, rather
than fundamentals in themselves.

While relatively simple, these
represent the outcomes and
principles we employ in our ESG
approach. In summary, these are:

1. We seek to achieve change in the
cost of capital for good and weak
companies, in order to effect
behavioural change. As a result, we
focus primarily on exclusion.

2. We focus in the first instance

on companies with a motivated,
effective employee base that is
meritocratic and diverse. We believe
this is the engine of all change.

3. We are then interested in companies
that reflect innovation as a means
of achieving sustainability and
retaining its great people.

4. We seek to measure the

effectiveness of this through change
in the traditional ESG factors.

5. We do not seek to exclude based on
industry. Rather we seek to reward
change from within by supporting
the better, more transformational
companies within each industry.

6. We employ these principles in a
pragmatic way, considering each
company in the context of their peer
group. We consider industry, as well
as geography, market cap and style.

7. These principles are integrated into
our wider investment process in a
way which reflects our desire for
behavioural change, but not at the
cost of economic returns.

We have brought all of these principles
together in our GREF and have already
begun the process of discussing this
with clients.

performance
The table on page 25 summarises the
performance achieved over our range
of strategies. As well as the long-term
track records being relatively strong,
what this does illustrate is the range
of outcomes in the short run, as our
strategies aim to achieve different
things. We will seek to extend this
diversity of strategy in the future.

This information is disclosed in order
to allow shareholders to assess the
current performance of our investment
strategies. While historical investment
performance is not an indicator of
future investment performance,
the long term track records of our
strategies give shareholders an
indication of the sustainability of
our investment performance across
different investment cycles.

The information regarding the capacity
of the strategies gives shareholders an
indication of the potential scale of the
opportunities in each of the strategies
to determine the potential for future
growth in AUM and revenues.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

cHieF inveStMent oFFiceR’S RevieW

continued

Except as indicated to the contrary in
the table to the right, all investment
performance is shown before the
Group’s management and performance
fees are deducted. This gross of
fees basis is chosen as it enables
comparison of investment returns
to be made across share classes and
clients with different fee arrangements.
The benchmark and target used to
calculate relative performance is also
on a gross of fees basis. Accordingly,
we believe that the presentation of the
gross investment performance allows
shareholders to more clearly assess
the potential for each of the strategies,
independent of the investors’ specific
contractual fee arrangements.

All of our strategies have produced
outcomes that are consistent with
the approach they take to generate
returns. I continue to consider that our
investment team has strong talent and
capability and is well placed to continue
to produce great results through time.

overall summary
Our strategies have performed as we
would expect in the environment we
have faced. We believe the market
environment we expect to face should
support our various strategies, but
also would be strengthened by adding
quality growth and credit capabilities.
We expect to launch funds in ESG
and European Value, and there are
additional strategies such as Market
Neutral Equity and Discretionary
Macro that, dependent on bandwidth,
we will also look to develop, which
will additionally strengthen our
market positioning and serve to
diversify the business further.

As a result, I believe we remain
well placed to deliver on our client
objectives, as well as offer attractive
new strategies to support growth.

MiKe FaulKneR
GROUP CHIEF INVESTMENT OFFICER

inFRaStRuctuRe
OUR CLIENTS’ EMPLOYEES BUILD
THE INFRASTRUCTURE THAT IS
THE BACKBONE OF OUR COUNTRY
– WHILE WE FOCUS ON GROWING
AND PROTECTING THEIR ASSETS.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Annualised Investment Performance
By Investment Strategy

StaBilitY/RetuRn GeneRation
Fiduciary DB1
RAMIL Stable Growth Fund
Fiduciary DC – Long-Term Growth
Fiduciary DC – Stable Growth
Fiduciary DC – Cautious Growth

Dynamic Asset Allocation
Global Macro
US Solutions

total Solutions auM

RetuRn GeneRation – incoMe
UK Equity Income
RetuRn GeneRation – SpecialiSt
UK Equity Smaller Companies
UK Recovery
Global Recovery
Global Recovery Focus Segregated
Global Recovery Concentrated Segregated
RetuRn GeneRation – coRe
UK Equity High Alpha
UK Core Segregated
UK Dynamic Equity
UK Micro Cap Investment Company
Global High Alpha
International High Alpha
Segregated Mandates2
ilc eMeRGinG MaRKetS
Global EM
Small/Mid Cap

total equity Solutions auM

Structured Equity
LDI

total derivatives auM

total auM

AUM £bn

30 June
2020

Estimated
Capacity4
£bn

1 Year (%)

5 Years (% p.a.)

Since Inception (% p.a.)

Absolute

Relative

Absolute

Relative

Absolute

Relative

Date

12.3
1.0
0.1
0.1
0.1

0.2
0.2
0.8

14.8

0.1

0.3
0.2
0.3
0.1
0.5

0.1
0.2
0.1
0.1
0.2
0.0
1.9

0.1
0.0

4.2

7.4
17.8

25.2

44.2

10.4%
(1.0%)
0.3%
0.8%
2.7%

(0.5%)
(8.8%)
1.2%

(1.4%)
(4.7%)
(6.3%)
(5.7%)
(6.1%)

(5.4%)
n/a
(2.2%)

9.6%
4.8%
6.1%
5.7%
6.4%

4.5%
n/a
4.7%

1.1%
1.2%
(2.2%)
(2.1%)
(2.0%)

(0.2%)
n/a
(1.0%)

9.5%
7.2%
7.8%
7.0%
7.6%

4.4%
4.2%
5.6%

1.7% Jan 04
3.4% Dec 08
(2.0%) Oct 11
(1.4%) Oct 11
(0.0%) Oct 11

(0.3%) Sep 14
n/a Mar 18
(0.5%) Aug 13

50.0

10.0
10.0
1.6

71.6

1.5

(3.8%)

10.9%

2.9%

0.5%

9.9%

1.8% Feb 09

5.9% 16.6%
(0.2%)
(13.8%)
(10.5%)
(14.5%)

(14.9%)
(8.6%)
(8.3%)
(11.7%)

(16.0%)
(6.6%)
(6.6%)
(5.8%)
(6.6%)
n/a
n/a

(1.3%)
8.1%
8.0%
4.9%
(11.7%)
n/a
n/a

7.6%
3.5%
7.0%
1.8%
n/a

2.2%
3.8%
4.1%
11.6%
8.9%
n/a
n/a

11.3%
5.5%
1.1% 10.0%
10.6%
(4.7%)
10.5%
(4.7%)
5.8%
n/a

6.0%
(0.2%)
6.6%
1.4%
1.7%
5.8%
9.4% 12.3%
9.2%
(2.8%)
8.5%
n/a
n/a
n/a

7.4% Nov 06
4.3%
Jul 08
0.1% Mar 13
2.1% Feb 12
(3.1%) Apr 16

1.9% Nov 06
2.0% Nov 10
2.0% Mar 07
8.3% Dec 14
(1.6%) Dec 14
(0.2%) May 20

n/a

(2.3%)
(8.1%)

1.1%
0.7%

2.5%
(0.5%)

(0.4%)
0.9%

2.8%
1.9%

0.5% Jan 12
2.3% Jan 13

n/a3

Dec 05
Dec 05

0.8
0.5
1.6
0.5
1.5

0.8
0.5
2.0
0.1
6.0
3.8
n/a

3.5
2.0

25.1

>20
>30

>50

>100

Z share class (gross of fees) performance for all funds except the ES R&M UK Equity Income and ES R&M UK Equity Smaller Companies funds which is B class performance.
Performance for the ES R&M UK Equity Income Fund B share class (Inc) and the ES R&M UK Equity Smaller Companies Fund B share class (accumulation units) is net of an
annual management charge of 0.75% per annum.

1. Fiduciary Defined Benefit (DB) reflects an equally weighted composite of all full fiduciary active schemes total portfolio returns against its full liabilities benchmark where

used to report to the client, does not include schemes with asset restrictions.

2. Segregated mandates are measured against specific client benchmarks and therefore a composite performance benchmark is not meaningful.
3. Derivatives mandates do not target investment outperformance therefore this is not measured.
4. Capacity is the estimated maximum level of assets that could be managed without compromising the relevant investment strategy.

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

SaleS and MaRKetinG RevieW

david HanRattY
GLOBAL HEAD OF DISTRIBUTION

introduction
As highlighted in the Group Chief
Executive’s Statement, we commenced
a significant development programme
in our Distribution operation this
year, one that will continue into the
next financial year as we develop
a technically focussed and results
orientated distribution business.

Our distribution strategy remains
focussed on developing high value,
one to one relationships, whether with
wholesale investors, intermediaries
or institutional investors. We
will also adapt this strategy to
introduce appropriate distribution
partnerships to complement our
internal capabilities, allowing us access
to new markets. This partnership
approach facilitates the use of
established networks by providing
the manufacturing expertise to
complement the brand and service
platform of local and regional players.

We have four discrete sales teams
within our Distribution business,
each extremely well placed to
deliver meaningful growth. That
potential is enhanced by the product
and infrastructure developments
described in the Group Chief
Executive’s Statement and Chief
Investment Officer’s review. Market
demand, quality relevant product
and modern distribution architecture
are the essential components for
success and taking each business
channel in turn it will be evident
that we have all the ingredients
to make significant progress.

uK institutional
At the core of the UK Institutional
investment segment is the
occupational pension system. More
than anywhere else the rapid evolution
of the market has dramatically
changed the demand profile. River
and Mercantile is better placed
than most to access old and new
world opportunities. We have had
support from the intermediaries for
our investment components used
in advisory arrangements for many
years and this continued to be a focus.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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We also have the longest history of
any provider in delegated fiduciary
management and alongside that we
possess a market leading derivative
capability. Our skillset plays to the key
trends for further delegation, ESG
friendly strategies, more outcome
targeted strategies both synthetic and
real, driven by the mature challenges
facing DB schemes and the rapid
growth of Defined Contribution (DC).

We have doubled the size of the sales
team under the leadership of Arabella
Townshend; we have dedicated
specialist groups focusing on the
three main sub-channels of investor,
intermediary and independent trustee
but with complete coordination and
understanding of the nuances across
these markets. Our pipeline has
grown significantly in recent months
and is reassuringly diverse. We have
material live opportunities mapped
out for the next year in Fiduciary
Management (both CMA driven and
new delegations), ESG global equity
and structured equity and LDI. The
new products coming through will
only reinforce our ability to build scale
and compete in the modern business
lines in the UK institutional market.

uK Wholesale
Though there is much to report in our
UK Wholesale business one of the
most significant factors in our favour
is the continued vertical integration
in the financial advice market and
the push towards discretionary
management relationships with
clients. This is a subject in itself, but
the effect is that a retail brand will
become unnecessary (apart from DIY
investors), and as more assets are
controlled by professional manager
research teams then it is investment
quality and service that will determine
success. This opens up pools of
assets to River and Mercantile that
once would have been closed to us.

We have made some fundamental
changes to our Wholesale business
and in recent months we have doubled
the size of the UK Wholesale team
which includes the appointment of

Simon Smith from Merian to head
that business. Historically our product
offering has been quite narrow with
the majority of the assets being
raised in UK equity strategies. We
have implemented a new distribution
strategy, strongly focussed on
the largest tier one accounts. The
expanded team has allowed us to
move to a more efficient territorial
coverage model and, in keeping with
our institutional heritage, we are now
competing in the growing wholesale
mandate market which is growing
on the back of the trend for vertical
integration mentioned earlier.

In the second half of the year we
received confirmation that we had
won our first segregated mandate
originating from the wholesale market
which funded in Q1 of the current
financial year. We are confident our
UK Wholesale business can deliver
growth in the next few years and it
remains our highest margin business.
That belief is borne out by not only
the renewed strength of the team
but the addition of new strategies to
diversify our offering, starting with
the launch of the European Fund,
managed by James Sym who joined in
the summer. The product set will be
further widened with the acquisition
of new capabilities as set out in the
Group Chief Executive’s Statement. In
a short time, we will have transformed
our UK Wholesale proposition from a
small team promoting UK equities to a
larger team with a much broader array
of competitive products, in a market
that is coming to us in the way asset
management products are accessed.

australia
The appointment of Tim Horan to
head our Australian business two
years ago and the opening of offices
were signs of our commitment to
grow. Australian distribution is now
profitable and we are transferring
one of our senior investment people,
Barbara Wilson, to join Tim as and
when travel restrictions introduced in
the COVID-19 pandemic are relaxed.
Our focus remains the Superannuation
Funds market which continues to
consolidate as many have predicted.

As in our other distribution activities,
this is a ‘business to professional’
segment where investment quality and
service are critical. You will recognise
a familiar thread once more regarding
product diversification. Our business
was established by securing assets
into Global Equity strategies managed
by Hugh Sergeant and we are now
extending our offerings. The addition
of our Global ESG, Global Macro and
Emerging Market Equity Strategies
allows us access to a wider range
of searches in areas where we have
credibility and track record. We have
established relationships with the
large Superannuation Funds that we
have targeted and the addition of local
specialist investment resource and
the wider product opportunity set
means we are well placed to continue
to deliver strong growth in Australia.

uS
The development of our US
distribution business is an area of
focus for the coming year. So far we
have concentrated on addressing the
manufacturing angle in energising
our distribution in the US. In May
2020 we launched pooled vehicles
for exempt and taxable institutional
investors. We made them available in
existing strategies where there was
evidenced market demand, Global
Equity, Global Macro and Emerging
Market Equities, and in an important
step we launched an International
High Alpha (INHA) strategy managed
by Will Lough. Other than US Equities,
International Equity is the largest
equity allocation made by US investors.
As well as demonstrating commitment
to the market, we have created the
opportunity to tap into a significant
pool and flow of assets as a successful
track record is built. Our concentration
this coming year will be on bolstering
the distribution presence and
developing well-resourced sales and
marketing plans to take advantage of
the stronger manufacturing platform.

david HanRattY
GLOBAL HEAD OF DISTRIBUTION

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

opeRationS RevieW

FRan FaHeY
GROUP CHIEF OPERATING OFFICER

introduction
We are pleased to report that
our move to working remotely in
late March 2020 was seamless,
without business disruption or
operational issues. We adapted
to the new working environment
quickly, addressing the new working
practice challenges and risks they
presented. We continue to look to
develop and improve our working
practices as the situation evolves.

industry backdrop
In addition to addressing the necessary
changes in working practices as a
result of the COVID-19 pandemic,
the asset management industry
continues to go through significant
structural operational change. There
are a number of themes driving this
transformation from operational
resilience requirements, ongoing
regulatory change and the need
to address operational agility, to
increasing data, analytics and reporting
demands and margin pressures.

investment in our infrastructure
With this backdrop in mind and to
support the growth strategy set
out in the Group Chief Executive’s
Statement we will continue to invest
in our infrastructure to ensure we
have a resilient and scalable operating
platform, to drive efficiencies and
minimise operational risk. This
investment programme will allow the
Group to drive down the marginal
cost of adding new business and give
the Group greater opportunities to
partner with specialist third party
providers. As part of this programme,
we have reviewed our infrastructure
and designed a consistent Group
wide target operating model that
will meet our future needs. The
planned investment will be phased
over the next few years and can be
grouped into three main areas:

• distribution

infrastructure;

• operational

•

infrastructure; and
it infrastructure and
data architecture.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

distribution infrastructure
To support the investment in our
distribution capabilities and the growth
of a large high quality distribution
network, as discussed in the Sales and
marketing review, we need to have a
best in class distribution operating
platform with the full suite of client
service applications integrated into
high quality client data. This is essential
in helping develop sales strategy,
directing and managing sales activity,
and generating powerful management
information that informs analysis
all the way along the value chain.

We have put in place a clear client data
governance and business ownership
framework, and have completed the
first phase of the implementation
and roll out of a market leading Client
Relationship Manager (CRM) platform
across the Group globally, which is now
the golden source of all our client data.
The CRM system is the platform around
which the whole client service model
revolves. It has enhanced opportunity
tracking capabilities, curated client
data and automated marketing
functionality and enables the
distribution team to have visibility of
all relevant client activity globally with
the ability to manage it in an efficient,
structured data driven environment.

The next phase will focus on building
out the functionality of the CRM
system and expanding its integrated
applications. Then as we progress our
operational, IT and data architecture
projects we will be able integrate
the CRM system with the relevant
systems to incorporate investment
and accounting data (AUM, flows and
portfolio data), leading to improved
client reporting processes.

In parallel with the first phase of
the CRM project, we have simplified
and standardised our processes
and implemented a single Request
For Particulars (RFP) tool across the
Group, which we are in the process
of rolling out. In a similar vein, we
are currently reviewing and refining
our on-boarding processes with the
intention of implementing one tool
across the Group, centralising the
process to enhance efficiency.

operational infrastructure
We are committed to building an
efficient, scalable operating platform
which can meet the business growth
demands. We aim to increase operating
efficiency, improve operational
resilience and address the changing
needs around client product demand.

We are investing in a common
Order Management and Portfolio
Management Solution (OMS/PMS) to
provide a standard Investment Book
of Record across all divisions. This
will allow for standardisation of core
common processes, leveraging new
cloud-based technologies to maximise
efficiency, increase flexibility and
scalability and improve marginal costs
in delivering the Group strategy. After
completing a detailed research and
design phase, we have commenced
the vendor selection process, and are
finalising the technical implementation
plan. This is a significant change project
which is being carefully phased to
ensure seamless business continuity.

Alongside the OMS/PMS project we
are also reviewing our investment
performance measurement, attribution
and risk systems to ensure that they
meet our future requirements.

it infrastructure and data
architecture
We have undertaken an IT strategy
review and are accelerating the
move to the “cloud” by ensuring
all new applications are SaaS
(software as a service) compatible.
Operating a “Cloud First” strategy
will reduce the need for traditional
IT infrastructure spend in the future.

With the move to SaaS based
technology, we are taking the
opportunity to update and
modernise our data architecture.
This will allow for the ability to
quickly meet client and regulatory
demands around custom data sets
like ESG and regulatory reporting
alongside the more traditional
data sets. The data infrastructure
project will introduce improved data
governance and allow for greater
transparency and reduce the risks of
maintaining operational resilience.

This modernised approach will
enable us to focus spend on core
differentiating areas of development
rather than maintaining non-core
areas. This strategy will also facilitate
the integration of 3rd party best
of breed applications, allowing for
operational agility while optimising
the infrastructure wallet.

The investment in our IT infrastructure
and data architecture will position
the Group strongly to support future
organic and inorganic growth.

FRan FaHeY
GROUP CHIEF OPERATING OFFICER

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

people, SuStainaBilitY and
coRpoRate Social ReSponSiBilitY

In the last financial
year we embedded our
approach to corporate
and social responsibility
through community,
environment and
Stewardship. As explained,
we are enhancing this
approach by incorporating
two additional pillars;
namely people and
innovation, in 2020. By
doing this, we believe we
will promote a sustainable
future that benefits all.

Our core Corporate Social Responsibility principles are set out below:

1. Responsible stewardship
A commitment that our corporate culture, strategy and investment beliefs
lead to responsible stewardship. This includes integrating responsible
investment issues into our decision-making for the benefit of our clients
together with the aim of sustainable benefits for the economy, the
environment and society.

2. people
We aim to create value for all stakeholders through having high levels of trust
and cooperation between employees, customers and the stakeholders we
serve. This includes best practice governance, adhering to regulation, treating
people equally, respecting human rights and promoting diversity.

3. community
As a responsible corporation we aim to foster a sense of social responsibility
within our organisation and, in turn, make a positive impact within the
communities we operate. This includes supporting our corporate and
employee initiatives in endeavours to give back.

4. environment
We aim to create value for all stakeholders without causing undue harm to
the environment, nor compromising the ability of future generations to do so.
This includes acting in an environmentally responsible manner, to deliver an
effective strategy with proper consideration for our natural surroundings.

5. innovation
As a sustainable business, we require constant innovation to respond to
changes in market fundamentals, the environment and society. This is
imperative for long-term value, for the benefit of all stakeholders. We take a
broad view of innovation, which we believe encapsulates changes in strategy,
process and the products we develop. Innovation is also fostered through
diverse perspectives.

eated by Andi Nur Abdillahoject31

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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our people

People are one of the key pillars
of our 2025 strategy as they are
critical to the success of the Group.
We are committed to upscaling and
upskilling our human capital through
recruiting, retaining and developing
our employees. To do this more
effectively the Group is currently
developing an “Employee Value
Proposition” (EVP) that incorporates
purpose, employee voice, effective
leadership and appropriate incentives.
This proposition is under-pinned by
the Group’s principles and values.

On a quarterly basis the Group
holds Townhall meetings to provide
employees with an update on
business performance and to give
an opportunity to ask questions
directly to senior management. We
have continued to do this remotely
during the COVID-19 pandemic. This
engagement has been enhanced over
the last six months and the Group
Chief Executive has undertaken regular
live broadcasts to the whole Group
and writes a weekly email to all staff
covering all aspects of our business.

The Group has committed to
undertaking an employee engagement
survey every two years and is due to
run the second survey in autumn 2020.

As reported last year, there was a 76%
response rate and an overall rate of
engagement of 59%. The 2018 survey
showed several areas for improvement
including the need for greater
collaboration and communication,
and improvement in our technology
infrastructure. Many of these areas are
being addressed continuously. There
have been significant improvements
in the technology infrastructure
over the past two years. Through
the regular Group Chief Executive
updates, briefings and Townhalls
which, as already highlighted, have
continued throughout the pandemic,
communication has also improved. In
2018 we brought our business together
into two offices in the City and we are
already looking into options for having
a single office space to support better
collaboration and communication.

principles

integrity

authenticity

Respect

community

We understand that any sense of us operating without integrity
will destroy our business; clients don’t want to engage with
people they can’t trust.

One of the important things that differentiates us is our
authenticity. Many of our new employees have commented on
how genuine they find our people. We encourage a sense that
people are direct and clear about what they believe.

We expect people to be candid with others, however this must
be done with respect. Our people think about how they frame
their views in a way that is respectful to other team members.

Internally, our people are helpful in supporting the good of the
organisation and externally, we encourage people to do things
that have genuine benefit for others; we aim to make a
difference through the things we do, including charitable work
and contributions.

diversity

We believe that a diversity of perspectives and thought, when
part of an inclusive culture, results in better judgments and
decision making.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

people, SuStainaBilitY and
coRpoRate Social ReSponSiBilitY

continued

our people continued

values
The Group has an established set of values against which we expect all of our
employees to operate. We will be enhancing and updating these as part of the
development of the EVP.

Passionate about client success
We expect our people to be passionate about client success. We care about our
clients. We gauge this by whether clients believe our commitment.

Creative – involving, challenging and convincing others
Creativity is critical to our client proposition. We aim to keep reinventing
ourselves to achieve our business objectives of growth and to avoid becoming
commoditised. This is best achieved by bringing together diverse people to
debate issues. We therefore seek to hire and advance people who are creative,
who involve others to get higher quality input and are comfortable challenging.
In debate, we do not recognise hierarchy, only the quality of the argument.

Open, candid and constructive
We expect our people to be open with information and their views. We expect
people to be candid, particularly in the management of others and want all
interaction to be constructive.

Demanding of our best
We aim to stretch ourselves and each other to be the best we can. We are
demanding of our people and we are committed to helping them achieve
excellence. We expect people to express constructively their disappointment for
anything that is mediocre, be it client work, performance or internal processes.

Commercial in all that we do
Commerciality means more than just profitability. We aim to engage in client
relationships in a way that works for both the client and our business. Ultimately,
commerciality is about how we balance risk and cost against potential reward.

performance
The Group’s values describe the
behaviours that the business considers
to be critical to success. Behaviours not
consistent with the values are identified
and dealt with through reduced
variable pay, through development
or by performance management.

To assist in this process, the Group
has identified a number of behavioural
competences which measure our
employees’ performance against
the Group’s values and feed into
the Group’s annual performance
appraisal programme.

Reward and recognition
As well as offering competitive base
salaries the Group runs a discretionary
employee bonus scheme which is
dependent on personal and business
performance. Bonuses may be paid
as cash or as part of the Company’s
deferred equity plan under which
payments may be made in units
of funds or in Company shares.

The Company also runs an annual
Save-As-You-Earn scheme and during
this financial year 157,457 shares
were exercised by 31 employees.

River and Mercantile Derivatives
won the award for LDI Manager of
the Year at the Pensions Age Awards
2020 for the 3rd year running and
River and Mercantile Solutions won
Fiduciary Manager of the Year at the
Professional Pensions UK Awards 2020.

Work life balance, and health
and wellbeing
The Group understands the need to
take a balanced approach between
work and home life. In 2018–2019 the
Group enhanced its maternity and
holiday entitlements and continues to
offer flexible working arrangements
to all employees where it is possible.
The need to work remotely during
the COVID-19 pandemic has allowed
us to understand much more
clearly where and how remote
working and flexible working can be
accommodated in the businesses.

As a result, there are plans underway
to review and develop a more
effective use of technology and
physical office space in the future.

We will be developing the Group’s
approach to agile working and
embedding this into the formal and
informal arrangements we have with
our employees. Agile working brings
many advantages and efficiencies;
however, we must be cognisant of the
challenges this also provides for some
of the workforce. We are a people and
ideas rich organisation and it is difficult
to place a value on the spontaneous
conversations between colleagues.
Over the last six to nine months we
have missed the chance conversations,
unplanned questions, the ability to
learn from colleagues, along with the
training and camaraderie that the
office provides. At its best, an office
can be a cauldron for new ideas
and enhanced collaboration and we
recognise the danger if this is lost.

Employees are offered comprehensive
medical insurance which incorporates
many health and wellbeing features
including an employee assistance
helpline, wellbeing assessments
and workshops on key topics like
managing stress and lifestyle. We
have continued to provide this
support during the pandemic by
issuing guidance, providing resources
and maintaining communication.

We have undertaken a full risk
assessment of both of our City offices
and those overseas and in line with
government guidance allow employees
to attend the office where they are
unable to work effectively from home.
Our UK offices are COVID-19 secure. We
provided COVID-19 guidelines to those
who attended the office and Health
and Safety measures were put in place
in line with government guidance.

Our mental health first aiders
continue to provide support to
our employees and have managed
10 enquiries in the past year.

The Group continues to offer to all
employees the opportunity to benefit
from the cycle to work salary sacrifice
scheme and this has been extended
during the last six months due to
the exceptional circumstances.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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Food FoR tHouGHt
OUR CLIENTS’ EMPLOYEES HELP
TO FEED US ALL.

Recruitment
The Group is committed to the
fair and equitable treatment of
all employees and applicants
in the recruitment process.

During the year several workshops
focusing on developing recruitment
skills have been rolled out to the
Group’s line managers. In addition,
recruitment technology was
implemented this year that will
allow us to monitor recruitment
from several perspectives including
effectiveness, equality and cost.

diversity and inclusion
The Group will continue to focus on
diversity and inclusion at all levels
as it is one of our key principles and
forms part of the work we intend
to undertake developing our EVP.
The Company will launch a Diversity
Action Plan in 2020–21 with a series
of key deliverables including data
collection, training for key managers
and technology for monitoring
recruitment KPIs including diversity
related indicators. This first step will
allow us to understand the specific
challenges we face and put in place
more targeted actions. We are also a
member of the Diversity Project and
our Group Chief Executive is a member
of the project’s Advisory Board and
our Group Head of Investments is
a member of its Steering Group.

The Group continues to disclose
the gender balance of senior
management and their direct
reports as required by the 2018 UK
Corporate Governance Code which
follows the recommendation of the
UK’s Hampton-Alexander Review.

27.8% of our Board and Senior
Management are female and 23.2%
of the upper quartile of the Group
in terms of seniority are female.
River and Mercantile Group was a
sponsor of the “Count me in” initiative
run by the Institute and Faculty of
Actuaries. Last year as part of this
initiative our employees spoke to
children about diversity and the
careers available in our industry.

Gender balance as at 30 June 2020

Position

Female

Male

Directors
Senior management
Senior management
direct reports

total employees

2
3
14

4
9
50

206

Gender pay reporting
Although the Company is not obliged
to publish the gender pay reporting
analysis as it does not have 250
or more UK based employees, it is
included here for general information,
and is comparable to our industry
peers. It is also notable that the
same proportion of men and women
receive a bonus, albeit there is a
wider gender gap with bonus than on
pay which is reflective of the existing
gender seniority pattern, as can be
seen from the second table below.
We are developing an action plan to
drive change over time. Ultimately
in the short to medium term any
significant changes will require
the hiring of more senior women
in a very competitive market.

2020

2019

Gender
pay gap –

mean

Gender
pay gap –
median

Gender bonus
gap – mean

Gender bonus
gap – median

Proportion of
men getting
bonus

Proportion
of women
getting bonus

20.4%

17.9%

39.6%

41.4%

86.8%

94.6%

Gender
pay gap –

mean

Gender
pay gap –
median

Gender bonus
gap – mean

Gender bonus
gap – median

Proportion of
men getting
bonus

Proportion
of women
getting bonus

24.6%

31.5%

41.2%

87.9%

87.7%

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continued

our people
continued

The mean gender pay gap is a measure
of the difference between women’s
average hourly wage and men’s
average hourly wage. The median
hourly rate is calculated by ranking
employees from the highest paid to
the lowest paid and taking the middle
hourly wage in the sample. The median
gender pay gap is the difference
between women’s median hourly wage
and the men’s median hourly wage.

We compare the same mean and
median figures with bonus amounts.
As can be seen we have improved
our median and mean gender pay
gap from 2019 to 2020 by addressing
some obvious areas in salary and
roles for female members of staff.
We have also increased the number
of women receiving a bonus from
87.7% to 94.6%. However, this has had
an impact on the mean and median
bonus pay gap with more junior roles
held by women receiving bonus. It is
clear that the solutions to improving
the pay gap will take some time and
effort to address and we will continue
to look at ways we can improve the
numbers of women in senior roles.

advancement
All employees have an equal
opportunity for advancement,
including training and development.
The Group operates an internal
grading system which provides
career pathing and supports a
promotion process that is calibrated
by the Group Chief Executive, HR and
representatives of the Group Executive
Committee. During the financial year
31 employees were promoted.

training development and
professional qualifications
The Group has delivered a wide
range of general and management
training over the financial year
and has offered time and financial
assistance to those employees
undertaking professional qualifications.
In the year ending June 2020 the

Group spent £200,500 centrally
on development for our people,
including qualifications, professional
memberships and training. That is
a spend of over £800 per employee
per year on development. Our
businesses also funds continuing
professional development such as
conferences, events and local technical
development separately. COVID-19
has impacted this spend in 2020 as
the spend was 19% less than in 2019.

The Group has recently implemented
an online performance management
platform and all employees have
received training on how to use the
system, set objectives and record
personal development plans. This
platform was used to drive the
employee certification process in 2020.
We will look to enhance and improve
these systems over the coming years
to ensure that they remain relevant to
the changing needs of our business.

All employees are required to complete
mandatory compliance training.
Since the implementation of senior
managers and certification regime
the Group has invested extensively
in training employees and has rolled
out a number of training sessions
for the Group’s directors and senior
managers. In 2020–2021 the Group
will roll out conduct rules training
to all employees. The Group sees
training around all elements of the
SMCR as an ongoing commitment.

The Group remains fully supportive
of apprenticeships and as an
apprenticeship levy paying
organisation, the Group has access
to levy funds which are being
utilised to support management
development programmes at Levels
3 and 5, business administration
and finance qualifications.

Sustainability
and stewardship

River and Mercantile takes our role as
custodians of our clients assets very
seriously and we have been working to
develop and enhance our approach to
environmental, social and governance
(ESG) matters and initiatives.
Considerations of our role as stewards
and an evolving understanding of
stewardship being “the responsible
allocation, management and oversight
of capital to create long-term value for
clients, leading to sustainable benefits
for the economy, the environment
and society” as defined in the 2020
UK Stewardship Code, are consistent
with our clients’ evolving investment
needs and expectations. Therefore,
stewardship plays an expanding role
in the Group’s focus on delivering
investment solutions to meet those
needs. As the Group combines
asset management and institutional
solutions, the different divisions
fulfil their stewardship obligations
in subtly different ways but based
around some core principles.

River and Mercantile is a sustainable
business that aims to compound
value for all stakeholders over the
long term. It is a responsible steward
of capital with a culture of longevity.
It will strive for sustainability through
the pillars of Responsible Stewardship,
People, Community, Environment
and Innovation, leading to positive
long-term outcomes for all.

eSG committee
In 2018 we established our ESG
Committee, which is comprised of
representatives from across the
Group’s global business divisions.

Primary responsibilities include:
• Assisting the Group in providing
direction on the development
and implementation of ESG policy
initiatives;

• Managing relationships and
reporting requirements with
external ESG regulatory and
collaborative bodies and initiatives
to which we are signatories; and

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The Shareholder Rights Directive II
(SRd ii)
The Shareholder Rights Directive
II (SRD II) is a European Union (EU)
directive, which aims to encourage long
term shareholder engagement with
companies to ensure that decisions
are made for the long-term stability
of a company. SRD II requires greater
transparency on engagement and
voting as well as the publication of a
shareholder engagement policy. During
the year we updated and enhanced
our voting and engagement policies
throughout the Group to comply with
these disclosure requirements.

engagement initiative with social
media companies
Following the tragic shootings
in Christchurch New Zealand in
March 2019, the Group supported a
collaborative engagement initiative
with social media companies led by the
New Zealand Super Fund. The initiative
aims to make social media platforms
a safe place for all by taking action
to prevent the live streaming and
distribution of objectionable content.

We have also been involved in a
range of other initiatives and policies
that have been implemented across
the Group.

cluster munitions
The Group is committed to avoiding
direct investment in companies that
design, produce, sell, or maintain
cluster munitions and/or land mines.
We currently exclude such companies
from the Group’s investment
processes and exclude asset managers
that engage in or with companies
involved with cluster munitions.

• Overseeing the consistency of ESG
messaging and approach across
various business areas through
effective communication, engagement
with our stakeholders and with
employees on Group initiatives.

Over the year the ESG Committee has
spearheaded the Group’s involvement
in a wide range of initiatives including:
• The ESG Committee improved

Group-wide ESG communications,
raising the profile and importance
of ESG internally, while contributing
to various external collaborations
including the Ceres Brazilian
rainforest deforestation statement;

• All parts of our business are

signatories to the UK Stewardship
Code 2012 (the Code). The
Committee has been preparing for
the new 2020 Stewardship Code
that sets higher expectations of
those investing money on behalf of
UK savers and pensioners and the
reporting of stewardship activities;

• The Group is in the process of

becoming signatories to the United
Nations Global Compact. This is a
non-binding United Nations pact to
encourage businesses worldwide
to adopt sustainable and socially
responsible policies, and to report
on their implementation.

• The Group was awarded an “A+”

Strategy & Governance rating from
the Principles for Responsible
Investment (PRI) Assessment
Report for the 2019 reporting year.
The report is designed to provide
feedback to signatories to support
ongoing learning and development.
MSCI ESG Research, an ESG rating
agency gave the Group an A rating,
an improvement from the previous
rating of BBB; and

• CFA ESG qualification added to
our Group-wide study policy.
The qualification sets out the
fundamentals for ESG investing and
will equip employees with the skills
and knowledge to integrate ESG
issues into their day-to-day work.

Stewardship
As we have already highlighted, we
have a common set of principles
that governs how we coordinate
our approach to ESG. The Group’s
proprietary investment processes and
teams integrate the broader principles
around stewardships and sustainability
in their investment selection. This
involves how we exercise our voting
responsibilities in conjunction with
our clients’ needs and our direct
engagement with companies and
investors where appropriate.

We focus on collaborations with
external bodies such as the
UN Principles for Responsible
Investment (UN PRI), implementing
the expectations of the UK
Stewardship Code and working with
third party funds and companies
to encourage adoption and
disclosure of ESG practices.

un pRi signatory
Since 2019, the Group has been a
signatory to the PRI, the largest global
reporting project on responsible
investment. As a signatory, the
Group commits to uphold the six key
principles. Reporting is one of the
explicit commitments when signing
the PRI, and we submitted our second
report this year. This will help us
evaluate our responsible investment
progress against an industry-
standard framework, strengthen
our internal processes and enhance
our ESG credentials for the future.

the 2012 uK Stewardship code
and the new 2020 code
The Group is committed to, and is an
active supporter of, the background
and principles set out in the 2012
Code established by the Financial
Reporting Council. Our responsibilities
as an asset manager extend to having
a clear commitment to engagement.
This ensures we are fulfilling our
stewardship obligations by reporting
on these activities to our clients. The
new 2020 UK Stewardship Code, which
took effect on 1st January 2020, is a
substantial and ambitious revision to
the UK Stewardship Code and sets high
expectations for those investing money
on behalf of UK savers and pensioners.

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environment
and community

WE AIM TO CREATE VALUE FOR
ALL STAKEHOLDERS WITHOUT
CAUSING UNDUE HARM TO
THE ENVIRONMENT, NOR
COMPROMISING THE ABILITY OF
FUTURE GENERATIONS TO DO SO.

environment
The Group has implemented alternative facilities management approaches in
order to reduce the carbon footprint within its offices and is considering the
impact of climate related risks, aiding global projects.

community
Support of COVID-19 relief response, Group and personal donations to charities
in the UK, US and Australia to support local communities. The Group and its
employees were collectively involved in various community projects in the
countries in which it operates.

Below we provide examples of work we have undertaken in each of these
core areas over the last financial year.

environment
The Group believes that businesses
are responsible for achieving good
environmental practice and operating
in a sustainable manner. We are
therefore committed to minimising
our environmental impact. With the
evident impact of climate change on
our daily lives, the Group acknowledges
its role in helping to combat the growth
of greenhouse gas (GHG) emissions
and as a result implemented green-
friendly alternatives to reduce the
carbon footprint within our offices:
• Our offices are equipped with

recycling facilities for paper and
plastics and encourage conservation
of water and other resources. We
have water dispensers, reusable
dinnerware, and dairy free
alternatives to milk. We have also
made efforts to reduce our printing
requirements.

• Various initiatives are available to
help reduce our carbon footprint.
We offer the UK Government’s
Cycle to Work scheme, and bike
storage and electric vehicle charging
stations are available at some office
buildings.

• Our travel reimbursement policy
encourages staff to use public
transport, where available, when
attending client meetings.
• Our offices all have video

conferencing facilities so we can
reduce travel requirements for
ourselves and our clients. We use
standard technology systems so
that documents can be transmitted
electronically.

• Greenhouse gas (GHG) emissions.

The Group is committed to

minimizing its impact on the
environment and as such fully
offsets its GHG emissions in
recognised offset schemes,
combining green energy funding
and forestry protection and
renewal.

• The Group’s calculated GHG

emissions figure is 1,375 tCO2e
including all travel and commuting,
including Scope 1–3. This number
is not representative due to the
impact of COVID-19, therefore
cannot be compared to previous
years.

• The Group’s calculated energy
consumption from operational
activities consumed was 196,766.0
kWh, energy consumed in the UK
was 180,766.0 kWh and overseas
was 16,000.0 kWh.

• The Directors are pleased to report
that the Group has once again been
certified carbon neutral by Natural
Capital Partners, a recognition
that as a company, our business
has achieved carbon neutrality in
accordance with The CarbonNeutral
Protocol. To receive CarbonNeutral®
certification, we are committed to
reducing GHG emissions to zero
for the certification period. The
calculations for GHG emissions and
Electricity usage are made by an
independent assessment through
Natural Capital Partners, taking into
account Scope 1,2 and 3 emission
sources from data collected by the
Group. Achieving CarbonNeutral®
certification includes internal and
external reductions.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

The Group has supported several
projects globally since 2014 to help
reduce GHG emissions, through
carbon offset purchase and
certification payments such as the
Household Agricultural Biogas in
Vietnam. This award-winning project
has installed over 170,000 small scale
biogas plants in households and
small livestock operations across 55
provinces in Vietnam. Small fixed-
dome biogas plants, also known as
anaerobic digesters, provide a clean,
affordable, and convenient form of
energy to some two million rural
families, who have pig farms that create
huge odour and waste problems.

In 2019, the Group, as a responsible
investor, proudly joined 244
institutional investors representing
$16.2 trillion in AUM in a joint
statement urging companies to take
action against the escalating crisis of
deforestation in Brazil and Bolivia. The
Group believes it is our fiduciary duty
as investors to act in the best long-
term interest of the beneficiaries of
the assets we manage. We recognise
the important role rainforests play
in combating climate change and
protecting biodiversity. The joint
statement asked companies to commit
to eliminating deforestation within
their operations and supply chains.

In 2019, the UK Government’s Green
Finance Strategy recommended
that all listed companies should
make disclosures in line with the
Taskforce for Climate-related Financial
Disclosures (TCFD) by 2022. The Group
fully supports the Financial Services
Board TCFD recommendations for
voluntary, consistent climate-related
financial risk disclosures by companies
in providing information to investors.
We are aiming to report by 2022 the
four widely adopted recommendations
tied to: governance, strategy, risk
management, and metrics and targets.

GuidinG uS
WE LOOK AFTER THE ASSETS OF
SEVERAL CHARITIES AND ARE PROUD
TO WORK WITH THEM TO PROTECT
THE FUTURE OF THOSE WHO LOOK
AFTER US.

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continued

Modern slavery
We are committed to preventing
acts of modern slavery and the
occurrence of human trafficking in
our business and supply chain. We
expect our suppliers to uphold human
rights. We have a Modern Slavery
Statement, which is available on our
website, and continue to survey our
largest suppliers for compliance
with the Modern Slavery Act.

anti-bribery, corruption and anti-
facilitation of tax evasion
The Group is committed to good
conduct and to carrying out all
business in an honest and ethical
manner. We are committed to acting
professionally, fairly and with integrity
in all our business dealings and
relationships wherever we operate and
implementing and enforcing effective
systems to counter bribery, corruption
and tax evasion facilitation. As part
of this all new joiners are required
to complete countering bribery and
corruption training in their induction
training and ongoing annual training.

data protection/cyber security
All employees are required to take
part in a monthly online training
module on cyber awareness.
Employees are also subjected to
random phishing simulations to test
reaction to suspicious emails and
web links. The Group currently holds
a 94% module completion rate of
compulsory basic training completion
with industry leading correct response
rates. The Group is certified with
Cyber Essentials, a Government-
backed scheme designed to guard
against the most common internet
based cyber security threats.

community
With community as one of the Group’s
core principles, we aim to make an
impact within the communities we
operate, whilst fostering a sense
of community amongst employees
through collaborative volunteer events
as well as raising funds for charity.

In the US, the Group donated a
combined $25,000 to local charities
close to our US offices and US
employees organised the R&M
Miles for Medicine Challenge, a
socially distanced walking and
running challenge to raise funds
for frontline healthcare workers.

caRinG FoR tHoSe WHo
caRe FoR uS
WE WERE THE LEAD SPONSOR
FOR CRITICAL NHS AND ARE
PROUD TO HELP TO CARE FOR
THOSE WHO CARE FOR US ALL.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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SMALL CHANGES CAN ALL ADD
UP TO BRING ABOUT A SIGNIFICANT
CHANGE FOR THE BETTER.

Given the importance of giving back to
our local communities, we also support
our employees in their endeavours
through a number of initiatives:

• Give as You Earn (GAYE) payroll

giving scheme.

• Two annual paid volunteer days.
• Donation matching up to £1,500

annually.

• Fundraising events run by the
Group’s employee-led Charity
Committee.

Examples of fundraising events
supported by our employees include:

• coaStSWeep river clean-up
Employees helped collect and

categorise marine debris at the local
Charles River to aid Massachusetts’
ocean conservatory efforts.

• West end House Boys & Girls club
Employees spent the day helping
at this after-school club, which
serves 250 children from urban
communities daily, with a focus on
high impact programmes to ensure
success within academics, arts, and
a healthy lifestyle. This has now
become a quarterly event.

• MacMillian coffee mornings
Employees hosted a coffee morning

with coffee and baked goods
which were sold to raise funds for
MacMillan Cancer Support.

• R&M charity Quiz night

The Group hosted various quiz
nights amongst employees with all
proceeds supporting the Evelina
Children’s Hospital.

covid-19 relief response
This has been an extraordinary year for society as a whole and it has been
very rewarding to see how everyone from all walks of life have pulled together
to help during this period of national crisis.

Critical NHS was founded as a community based non-profit organisation,
established in March 2020, to support NHS staff at the Critical Care Unit at
St George’s Hospital, responding to the outbreak of coronavirus, and sustain
local businesses and restaurants as suppliers. This innovative and community
based solution led to a roster of deliveries, coordinated across 50 volunteers,
to deliver regular lunch and evening meals supplemented by donations of
protective clothing, electronic items, care packages, baked treats and desserts
to critical care unit staff and other key and frontline healthcare workers during
the height of the pandemic.

The team have also facilitated accommodation and car parking for staff
members to continue to work under the lockdown. They have expanded
the supply chain, working with multiple partners, to provide meals to NHS
frontline staff at 15 hospitals across London, Surrey & Cornwall. They now also
cover a number of care and community centres to cater for more vulnerable
individuals affected by the COVID-19 pandemic. The funds raised by individual
donations and lead sponsors have subsidised over 99,000 meals and provided
a lifeline to many local businesses.

River and Mercantile was the lead sponsor of this charity which allowed the
team to deliver much needed support to those in our society who support
us in our hour of need. Our Group Chief Executive and a number of our staff
have also donated personally to this charity to supplement the donations
made by the Group.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

RiSK ManaGeMent

Taking risk is an inherent part of the
Group’s business activities: when
a Group member advises a client
on their investments, undertakes
a fiduciary management mandate,
or offers investment products and
services the Group takes on a degree
of risk. We endeavour only to take
risks that we understand, have the
capability to manage, and where
we conclude that potential benefits
justify the risks taken. We take risk
carefully and within the risk appetite
set by the Board and monitored
by the Board’s Risk Committee.

This section explains how we identify
and manage the risks in our business. It
outlines our key risks, how we mitigate
them and our assessment of their
potential impact on our business in the
context of the current environment.

approach to risk management
The Group’s overall risk management
objective is to manage its business
and associated risks in a manner that
balances maintaining the safety and
soundness of the Group while limiting
the risk of not delivering expected
outcomes to clients. The Group
considers this objective to be strongly
aligned to the outcomes expected by
its other stakeholders: shareholders,
employees, regulators, and the
broader market and community.

We take a cautious and proactive
approach to risk management,
recognising the importance of
understanding risks to the business,
and managing them effectively.
We have a formal structure for
managing risks across the Group
comprising independent governance
and oversight of risk, a risk appetite
statement approved by the Board,
risk management frameworks
(including policies and supporting
documentation) and a formalised
process for providing risk reporting to
the Board through the Risk Committee.
We continue to invest in our risk
management approach and resources.

The Board has overall responsibility
for risk management within the Group
and is accountable for oversight of
the risk management processes.
On an annual basis, the Board
reviews the principal risks, using
appropriate quantitative assessment
techniques such as stress testing to
understand the level of exposure.

Governance
The Group has established a
structured approach to risk
governance, ensuring an effective level
of alignment between oversight and
management responsibility for risk.
This approach includes risk policies
and standards, and executive-level
Risk Oversight Committees. The risk
governance structure includes clearly
defined roles and responsibilities
for Board and Group Executive
Committees, control functions and
the accountable executives. Non-
Executive Director oversight of
the risk management process with
respect to standards of conduct, risk
management and internal control is
exercised through the Risk Committee,
more details of which are on page 68.

The Group has implemented a
‘three lines of defence’ model to
manage risk and provide assurance
to management and the Board with
regards to the effectiveness of the
Group’s control environment.

The first line of defence comprises
business management and employees
(not including those employees in
the second line of defence). They are
the risk owners and have primary
responsibility for managing risk as part
of their day-to-day business activities.

The second line of defence comprises
the risk and compliance functions, and
parts of the legal, finance and human
resource functions. They provide
objective oversight, monitoring and
independent challenge of risk taking
and risk management activities.

The third line of defence comprises
the Group’s internal assurance/
audit function which has been
outsourced to our selected service
partner, RSM UK. Internal audit
supports the Board and executive
management in protecting the
assets, reputation and sustainability
of the organisation by providing
independent and objective assurance.

Risk appetite
The Group’s risk appetite statement
sets out the aggregate level and types
of risk that we are willing to accept, or
wish to avoid, in pursuit of our business
objectives. It includes qualitative
statements as well as quantitative
measures expressed relative to
earnings, capital, risk measures
or other relevant measures as
appropriate. It includes a consideration
of certain risks that are more difficult
to quantify, such as conduct-related
risks. It underpins the implementation
of our evolving risk monitoring
and risk reporting processes.

Risk management framework
The Group’s risk management
framework sets out the approach
we take to identify, assess, manage,
monitor and report risks. It is
designed to enable the Board to
receive assurance that risks are being
appropriately identified and managed
in line with the Group’s risk appetite.

Our risk assessment processes enable
us to identify and assess the most
significant risks that we face. These
processes are the foundation of our
risk management framework. We
conduct stress testing and scenario
analysis, covering a broad range of
scenarios including market shocks
and idiosyncratic risk events, to
understand the Group business
model’s resilience to internal and
external shocks, and to model
quantitatively the risk to the Group’s
capital requirements and profitability.
We conduct these assessments across
the Group and involve department
heads, senior managers, executives
and the Board. The assessments
allow executive management to
make informed risk-based decisions
and to plan appropriately for the
ongoing running of the Group.

As the Group includes authorised
and regulated subsidiaries, the
Group and relevant subsidiaries are
required to hold appropriate levels of
capital and liquidity to ensure their
sustainability. Systems and controls
and the process for assessing the
adequacy of financial resources and
associated risks are documented in
the Group’s Internal Capital Adequacy

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Assessment Process, which examines
downside events including revenue
declines and the costs of an orderly
cessation of the Group; if appropriate
the Group will hold additional
capital as a result of these tests.

We will continue to strengthen the
risk management framework and its
operation over the coming year.

conduct
In addition to an effective risk
management framework, good conduct
and clarity on the expectations around
it is critical to effective management
of risk. We have always considered
ourselves to be a business focussed
on client outcomes, with conduct a
core value to our thinking. We place
significant focus on the integrity and
good conduct of employees, with
our appraisal process including an
assessment of displayed behaviours.
Conduct as a broader theme has
received a great deal of attention and
active support from the Board and
the Group’s executive management,
led from the front by our Chairman
and by the Group’s Chief Executive.

Conduct-related risks are those that
could result in negative impacts
on clients and/or market stability
or restrict effective competition.
We do not see conduct risk as
a separate risk category.

principal risks and uncertainties
The Directors have conducted a robust
assessment of the principal risks,
including current and emerging risks,
facing the Group, including those that
would threaten its business model,
future performance, solvency and
liquidity. These assessments have
been made in light of the current
environment, taking into consideration
the views of subject matter experts and
risk owners within the Group, market
conditions, regulatory sentiment
and changes within the business.

Our principal risks and uncertainties
are set out in the table on the
following pages.

Risk governance

Board

Board Risk committee

Group Executive Committee

Group cRo
Group Head
of Compliance

Risk and operating committee

Risk management framework

identify

Report

assess

Risk
management
process

Monitor

Manage

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

RiSK ManaGeMent

continued

principal risks and uncertainties

Principal risks

Risk management approach

Sustained market decline
The risk of a severe economic downturn and
related sustained decline in asset prices.

A severe economic downturn could lead to
a reduction in AUM resulting in a decline in
revenue and capital levels.

Sustained fund
underperformance
The risk that our clients will not meet their
investment objectives due to poor relative
performance of one or more of the Group’s
funds over a prolonged period.

Sustained underperformance across a
range of the Group’s products and
strategies could result in a corresponding
reduction in management and
performance fee revenue.

people risk (loss of critical
staff)
The risk of failure to retain or attract the
people critical to successfully delivering
investment outperformance to our clients
and all other aspects of our strategy.

The unplanned departure of a senior fund
manager or a member of our leadership
team could lead to significant redemptions
from our funds, failure to deliver our
strategy or failure to run our business
efficiently, resulting in a material impact
on revenue and capital levels.

liquidity risk
The risk that the Group, although solvent,
either does not have available sufficient
financial resources to enable it to meet its
obligations as they fall due or can only secure
such resources at excessive cost.

The diversification of the Group’s business activities reduces the impact of procyclicality, i.e. the risk of
deterioration in business or economic conditions requiring a firm to contract its business when market
conditions are unfavourable.

During challenging economic times, advisory retainer and project revenues in River and Mercantile
Investments Limited (RAMIL) would be expected to increase in the short term as clients seek additional
guidance to manage through the challenging conditions. Likewise, in strong markets the River and
Mercantile Asset Management LLP (RAMAM) business would be expected to experience stronger
performance and growth.

Revenue within our Derivatives business is largely dependent on notional under management which,
unlike AUM, is unaffected by market movements. Although a severe economic downturn could impact
the viability of some derivatives counterparties, we have no direct exposure to derivatives
counterparties as we act as agent, rather than principal, on all derivatives transactions.

The Group has clearly defined investment processes designed to meet investment targets within stated
risk parameters.

The Group carries out review and challenge of investment risks and associated investment performance,
independent of our fund managers, across all asset classes. Issues and areas of excessive risk are
escalated to members of senior management and the Group Investment Committee as are investment
performance issues. The review and challenge include seeking rationale from the fund managers for
performance to ensure the appropriate due diligence has been carried out and all intended risks are
being taken and managed.

The loss of a portfolio manager from RAMAM is most likely to affect the Group. The Group mitigates this
risk through developed succession planning and a shared philosophy and approach that combines
investment manager independence with a disciplined investment process. This is supported by a
systematic screening tool and shared analyst resource, so that reliance on individuals is reduced.

Our remuneration structures provide incentives linked to their individual, divisional and Group
performance. They are designed to attract and retain critical staff, and to motivate and support the
development of our employees.

The liquidity risk management objective of the Group is to ensure that at all times it has sufficient
liquidity to meet its liabilities as they fall due under both ‘business as usual’ and stressed conditions and
without incurring losses above the applicable risk tolerance.

The Group holds several classes of liquid resources. Liquid assets identified by the Group include trade
debtors, other debtors, investments, cash and cash equivalents. The business is cash generative before
the payment of dividends and has balances that support working capital requirements. All cash balances
are held in ‘on call’ accounts with tier 1 ranking UK banks and are therefore immediately available.

Liquidity stress testing is performed in order to test and examine the adequacy of the Group’s overall
liquidity resources, and hence allow executive management to make informed decisions and to plan
appropriately for the ongoing running of the Group.

counterparty and credit risk
The risk that clients or counterparties fail to
fulfil their contractual obligations to make a
payment.

The Group deposits cash at credit institutions with high long-term and short-term credit ratings reducing
the risk that the institution will default on repayment of the cash deposits.

The Group has established a robust debt collection process mitigating the risk of clients defaulting on
payment of fees. Additionally, the Group has the contractual right and ability to take fees from assets for
many clients who incur management and advisory fees.

Ahead of outsourcing critical operational activities, the Group performs due diligence that reflects the
potential risk to our business and clients. Where the Group outsources operational activities, it chooses
parties of an appropriate nature and scale who provide robust controls.

All outsource partners who provide the Group with critical services are subject to ongoing oversight,
giving us assurance that they meet our required standards.

Failure of a critical outsourced
service provider
The risk that an outsourced partner fails to
provide the service required either through
their own organisational failure, or through
substandard performance.

Our relationships with stakeholders may
be jeopardised if our outsourced partners
provide inadequate service, resulting in
the loss of clients or regulatory or financial
censure and negative financial
consequences.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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Principal risks

Risk management approach

information and
communication technology
The risk of critical systems or connectivity
failures leading to an inability of the Group to
operate for a period of time.

The unavailability of our key systems could
mean we are unable to act on behalf of
our clients and/ or perform other
time-critical activities to ensure the
smooth running of our business. This
could lead to trading losses, as well as
client losses and reputational damage.

cyber crime
The risk that a successful cyberattack could
result in the loss of Group or client assets or
data or cause significant disruption to key
systems.

Failure to repel successfully a significant
attack could undermine stakeholder
confidence in our ability to safeguard assets,
which could affect our ability to retain
existing clients and attract new business,
and hence affect capital and revenue.

legal and regulatory risks
The risk of breaching, or non-compliance with
applicable law and regulations, resulting in an
increased level of regulatory intervention,
regulatory censure and/or fines, and temporary
restrictions on our ability to operate.

A breach of regulatory or legal requirements
could result in fines and sanctions which
could diminish the Group’s reputation with
clients and the market generally.

Failure to perform fiduciary
duty
The risk that we unintentionally or negligently
fail to meet a professional obligation to
specific clients (including fiduciary and
suitability requirements).

This could lead to direct financial loss, a
loss of clients, failure to win new business
and reputational issues.

Breakdown of processes
and controls resulting in
operational errors
The risk that inadequate or failed processes,
people, systems and controls or from external
events could result in direct financial losses,
reputational damage and failure to win
new business.

A significant error or breach of a client
agreement may result in additional costs to
redress the issue and could lead to outflows.

The unavailability of our business
premises could mean we are unable to act
on behalf of our clients and/or perform
other time-critical activities to ensure the
smooth running of our business. This
could lead to trading losses, as well as
client losses and reputational damage.

The Group’s information and communication technology infrastructure is hosted in secure Tier 3 data
centres with a high degree of redundant power and network connections. This infrastructure is designed
to be fully resilient from a disaster recovery perspective and includes diverse communications lines, near
real-time data replication between geographically separated data centres and multiple network routing
paths.

Disaster recovery is supported by replication technology providing a copy of the production environment
that can be quickly brought back in the disaster recovery data centre. Unlike traditional point-in-time
backups, this enables a recovery point objective of several seconds and a recovery time objective of
‘near uninterruption’ for critical market facing systems, and several hours for less critical systems.

This disaster recovery strategy is tested at least annually to provide assurance of its effectiveness. The
most recent disaster recovery test provided a high degree of confidence in the design’s ability to cope
with a major disruptive event to the primary data centre.

The Group adopts a multi-layered approach to cybersecurity, consisting of training, policies and cyber
controls. The Group maintains physical preventions (firewalls, filters, device management, network threat
detection) and best practices such as patch management to minimise the risk of successful cyberattack.
Systems are subject to periodic penetration testing; the Group attained Cyber Essentials certification in
December 2019.

We have established a mandatory security awareness programme for all employees to extend
knowledge and understanding of cyber risks within the business. Employees are regularly reminded to
remain vigilant to the risk of cyberattack and periodic attack simulations are deployed across the
organisation via email to further test reaction and awareness.

Data back-ups are replicated to a secure offsite data centre and stored in an encrypted state. The data
backups are not accessible through normal operating procedures and are therefore offline during storage.

The Group promotes a strong compliance culture and requires all relevant employees to undertake
training on regulatory matters.

The legal and compliance functions support the business in implementing and maintaining appropriate
regulatory controls, guided by relevant policies. Compliance with relevant regulatory requirements is
monitored in accordance with a risk-based programme.

The Group’s legal and compliance functions continually monitor legal and regulatory developments to
assess potential business implications. We maintain active dialogue both with our clients and with
regulatory bodies so that we can adapt our business model and strategy accordingly.

The compliance function operates processes and controls to ensure the timely and accurate submission
of information to the Financial Conduct Authority.

The client engagement process is based on engagement with regulatory approved investment
professionals and advisors who develop with the client their desired client outcomes.

Suitability is assessed by experienced and approved personnel who work closely with clients to
understand their needs and desired outcomes to develop tailored solutions.

We have a long track record of investment performance which allows us to model for the client’s historical
and hypothetical performance scenarios under different market conditions which informs our clients of the
range of possible outcomes that they could expect relative to their risk appetite and objectives.

The investment management process is documented within the investment mandates, including risk
limits and concentration limits. Investment guidelines and restriction metrics are monitored against
mandate parameters to maintain compliance. Variance triggers and thresholds are in place, and
breaches are promptly escalated.

Underlying liquidity within funds is monitored and adjusted as market conditions dictate.

Our governance process with clients provides for regular interaction to identify changes in the client’s
desired outcomes and solicits feedback on the actual outcomes experienced by the client.

The Group’s compliance and risk functions, which operate alongside the business but have independent
reporting lines, act as a second line of defence in respect of the investment management process.

Effective Group oversight and governance through the Board and Board Committees.

Our policies, procedures and other documentation govern workflows, internal control procedures and
escalation protocols. We look to continuously improve our processes and controls and their
formalisation.

We employ experienced and knowledgeable employees and apply appropriate segregation of roles and
responsibilities. A business continuity management programme is in place for the continuity of critical
business functions and services. We have implemented remote working, including core system access
for all our staff if they cannot travel to our offices.

Insurance covering errors and omission is used to mitigate significant financial loss.

The Group’s compliance and risk functions operate alongside the business, and provide guidance and
oversight of process and control procedures designed to ensure compliance with governance and
regulatory requirements. Measures include a clear, consistent view on risk and risk appetite, proactive
and effective monitoring to minimise unexpected incidents, and a comprehensive compliance
monitoring programme.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

STRATEGIC REPORT

viaBilitY StateMent

BuildinG to laSt
WE RECOGNISE THE VALUE
OF ENSURING THE LONG-TERM
SUSTAINABLE SUCCESS OF
A COMPANY.

the directors have
assessed the viability of the
Group over the next three
years and confirm that
they have a reasonable
expectation that the Group
will continue in operation
and meet its liabilities as
they fall due.

The Directors reviewed the viability
assessment period of three years
and have confirmed that it remains
appropriate as it most closely
corresponds to the planning
horizons used within the Group.

The viability process was run
using the same methodology as
the financial modelling for the
ICAAP, involving business heads,
divisional Chief Operating Officers,
and senior representatives
from corporate functions.

The viability process considered the
principal risks that could threaten the
Group’s business model, profitability,
solvency and regulatory capital
adequacy. As the Group is cash
generative, the risks which would
threaten viability were those which
would reduce revenues or lead to cost
increases, thereby eroding regulatory
capital and solvency over time.
These could be the result of market
events and macroeconomic shocks
leading to possible investment losses
and outflows, operational issues or
regulatory changes leading to cost
increases, or reputational damage.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Five scenarios were chosen to
simulate severe yet plausible stressed
outcomes:

1. A prolonged downturn, with

stagnant recovery over the viability
assessment period.

2. Group-wide, severe and sustained
reduction in basis points charged
on AUM.

3. The loss of key investment

personnel within the Group, leading
to outflows of assets.

4. The occurrence of both (1) & (2)

simultaneously.

5. The occurrence of both (1) & (3)

simultaneously.

The scenario evaluation was
based on the Group’s 2020/2021
budget, three-year financial
projections and the modelled
impact of each of the scenarios.

The impact of market events on asset
values and investment performance
was modelled by investment teams
within the business, and the second-
order impact on AUM flows was
assessed with input from business
heads and distribution team members.
The impact of cost increases was
assessed based upon known costings
at current operational levels and the
levels of additional resource required.
Management actions to reduce costs
or otherwise protect regulatory capital,
cash or profits were subject to rigorous
challenge to ensure actions were
feasible, both in scope and timing.

The Group’s balance sheet, cash and
regulatory capital positions in each
scenario were modelled by applying
known historical behaviours (such
as invoicing timing and frequency,
average debtor payment days) and
adjusting for any expected impact
arising from the stress scenarios.

The lowest profit, regulatory capital
and cash position prior to management
actions arose in scenario four, however
in each scenario, after mitigating
actions, the Group remained profitable,
solvent and in excess of capital
requirements, albeit at reduced levels.
As a result, the Group remained viable.

The resilience of the Group to these
different scenarios resulted from:
• The relative diversification of
revenue between different
asset classes, notional amounts
and advisory revenues – this is
illustrated further in the Group’s
RWAA on page 18;

• A reduction in discretionary variable
remuneration as a result of impaired
financial performance which results
in a partial offset in each scenario;
and

• The current profitability levels,

combined with a dividend policy
based upon a distribution ratio
of actual profits, as opposed to a
progressive dividend. This approach
gives the Group more flexibility to
respond to severe stresses.

The nature of the viability testing is
that the scenarios chosen should
be severe. Where appropriate, the
Group has controls and processes
in place to reduce the impact of
negative events occurring.

The Section 172 statement set
out on page 55 is incorporated by
reference into the Strategic Report
and forms part of the Strategic
Report. Pages 4 to 45 constitute the
Strategic Report which was approved
by the Board on 30 October 2020
and signed on its behalf by:

JaMeS BaRHaM
GROUP CHIEF EXECUTIVE

SiMon WilSon
CHIEF FINANCIAL OFFICER

london, uK
OUR OFFICES IN THE CITY OF
LONDON ARE THE HUB OF OUR
BUSINESS AND BRING TOGETHER
OUR UK BASED BRIGHTEST MINDS
IN AN IDEAS RICH BUSINESS.

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GoveRnance
paGeS 48–95

BoSton: uS
cHaRleS RiveR

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

BoaRd oF diRectoRS

JonatHan daWSon
CHAIRMAN

JaMeS BaRHaM
GROUP CHIEF EXECUTIVE

SiMon WilSon
CHIEF FINANCIAL OFFICER

appointment: Jonathan was appointed
to the Board on 1 October 2017 as
Chairman of the Company and is the
Chair of the Nomination Committee.
tenure: Three years

appointment: James was appointed Group
Chief Executive of River and Mercantile
Group PLC in July 2019. He has been a Group
Board Director since the IPO in 2014.
tenure: Six years as an Executive Director
of which one year as Group Chief Executive.

appointment: Simon was appointed to
the Board as an Executive Director and
Chief Financial Officer on 19 May 2020.
tenure: Less than one year

career and experience:
A graduate of the universities of St Andrews
and Cambridge, Jonathan started his career
in the Ministry of Defence before joining
Lazard, the investment bank, where he spent
over 20 years. He left Lazard in 2005 and
co-founded Penfida Limited, the leading
independent corporate finance advisor to
pension fund trustees. Jonathan previously
served as Senior Independent Director and
Chair of the Remuneration Committee of Next
plc. Jonathan has also chaired three pension
scheme boards of trustees. Other previous
appointments include, Non-Executive Director
of Galliford Try plc, National Australia Group
Europe Limited and Standard Life Investments
(Holdings) Limited. Most recently Jonathan
served as Senior Independent Director
and Chair of the Audit and Risk Committee
of Jardine Lloyd Thompson Group plc.

current external appointments:
Jonathan currently serves as a Non-Executive
Director and Chair of the Remuneration
Committee of National Grid plc and is
the Chairman of Penfida Limited.

Skills and competencies:
Jonathan has extensive financial services,
pensions and non-executive experience.
Jonathan is an experienced leader, having
held senior board level positions in several
high profile organisations. He previously held
the position of Senior Independent Director
of Next plc and Jardine Lloyd Thompson
group plc. Jonathan brings an innovative
perspective and independent oversight to
the Board. Jonathan’s breadth of experience,
understanding of diverse issues and strong
corporate governance expertise allow him to
lead an effective Board and are vital to the
Company’s long-term sustainable success.

career and experience:
James founded River and Mercantile Asset
Management LLP in 2006 with the backing of
Pacific Investments and was its Chief Executive
Officer until the merger with P-Solve in 2014.
Thereafter James became Global Head of
Distribution before becoming Head of Asset
Management in 2016 and subsequently
Deputy Group Chief Executive Officer in
2018. Through this period, he retained his
responsibilities for Group wide distribution.

James completed his education at the Royal
Military Academy Sandhurst and following
service with the Royal Welch Fusiliers joined
Shandwick Consultants in 1989. He subsequently
joined James Capel in 1991. In 1995 James was
part of the team that founded and successfully
floated Liontrust Asset Management plc, where
he established and managed the institutional
business. James joined Intermediate Capital
Group in 2004 as Sales and Marketing Director,
leaving to establish the RAMAM business with
the financial backing of Pacific Investments.

current external appointments:
James has committed not to holding any
external non-executive positions during
his time as Group Chief Executive. He is
however a Trustee of The Royal Welsh
Regimental Welfare and Benevolence
Foundation and sits on its Investment Sub-
Committee. He also is a committee member
of the City of London Club and sits on the
Advisory Council of the Diversity Project.

Skills and competencies:
Having founded RAMAM 14 years ago, James
has served on the Board since the IPO of
the Company and brings not only extensive
experience and knowledge of the Group
combined but significant asset management
industry expertise and commerciality to
his leadership of the Group. James has
set out a clear vision and strategy for the
Group over the next five years and has
undertaken a substantive refresh of his senior
management team which is critical to the
Company’s long-term sustainable success.

career and experience:
Simon is a Chartered Accountant and has over
20 years’ experience in asset management
and the financial services sector gained in
senior financial roles. Prior to joining, Simon
spent five years as Group Finance Director
for the Topland Group, one of the UK’s largest
privately owned investment groups which
focuses on real estate, hotels, healthcare and
the provision of equity and debt finance. He
qualified as a Chartered Accountant at Deloitte
in its financial services assurance department
in London and moved to Hawkpoint, the M&A
advisory business, where he advised on public
and private transactions, capital raises and
IPOs in the financial services and mid-market
sectors. From Hawkpoint he joined the financial
services investment group, Pacific Investments,
where he spent twelve years, latterly as
Managing Director of Corporate Finance and
Chief Operating Officer of fund management.
While at Pacific Investments, Simon
represented Pacific’s interests in RAMAM
from its formation in 2006 until its merger
in 2014 prior to the IPO of the Company.

current external appointments:
Simon has no external appointments.

Skills and competencies:
Simon has significant financial experience,
having held a number of senior financial roles.
This, combined with his asset management
experience and previous knowledge of the
Group’s asset management business, allows
him to bring in-depth expertise on a broad
range of relevant areas to the Board. His
appointment completes the Group’s refreshed
senior management team which is integral to
the delivery of the Group Chief Executive’s
strategy. Simon’s contribution to the Board
and senior management team is key to the
long-term sustainable success of the Company.

in financial services for 30 years during

John has extensive financial services and

With qualifications as a barrister and in

corporate finance, Miriam has spent more

years’ experience in financial services and was

than 30 years working for a number of

the Chief Operating Officer of Baring Asset

leading investment banks and other financial

with major financial services institutions.

OBE for services to corporate finance in

As a qualified Chartered Accountant, Angela

financial experience to the Board. Angela

John brings significant financial services

financial services sector experience. As

reflected in her current appointments,

Angela has significant experience as a Non-

chair of major financial services institutions.

allow her to bring a financial and strategic

Mayor of London’s Energy Efficiency Fund.

financial services sector, brings significant

and financial matters to her role as Chair

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Chief Financial Officer on 19 May 2020.

the provision of equity and debt finance. He

qualified as a Chartered Accountant at Deloitte

in its financial services assurance department

IPOs in the financial services and mid-market

sectors. From Hawkpoint he joined the financial

services investment group, Pacific Investments,

Chief Operating Officer of fund management.

While at Pacific Investments, Simon

represented Pacific’s interests in RAMAM

Simon has significant financial experience,

having held a number of senior financial roles.

co-founded Penfida Limited, the leading

independent corporate finance advisor to

Deputy Group Chief Executive Officer in

Pacific Investments and was its Chief Executive

and the financial services sector gained in

Officer until the merger with P-Solve in 2014.

senior financial roles. Prior to joining, Simon

spent five years as Group Finance Director

floated Liontrust Asset Management plc, where

the financial backing of Pacific Investments.

the Chairman of Penfida Limited.

Jonathan has extensive financial services,

high profile organisations. He previously held

lead an effective Board and are vital to the

combined but significant asset management

Group over the next five years and has

anGela cRaWFoRd-inGle
SENIOR INDEPENDENT NON-
EXECUTIVE DIRECTOR

JoHn MiSSelBRooK
INDEPENDENT NON-EXECUTIVE
DIRECTOR

appointment: Angela was appointed to
the Board on 29 May 2014. Angela is Chair of
the Company’s Audit Committee, the Senior
Independent Director and additionally sits
on the Remuneration, Nomination, Group
Board Investment and Risk Committees.
tenure: Six years

appointment: John was appointed to
the Board on 16 February 2018. John is the
Chair of the Risk Committee and the Group
Board Investment Committee. Additionally,
he sits on the Audit, Remuneration
and Nomination Committees.
tenure: Two years

MiRiaM GReenWood
INDEPENDENT NON-EXECUTIVE
DIRECTOR

appointment: Miriam was appointed
to the Board on 28 May 2019. Miriam is
Chair of the Company’s Remuneration
Committee and additionally sits on
the Audit, Group Board Investment,
Nomination and Risk Committees.
tenure: One year

career and experience:
John has extensive financial services and
non-executive experience. John has over 40
years’ experience in financial services and was
the Chief Operating Officer of Baring Asset
Management Limited for 11 years. John was
formerly the Chairman of Aviva Investors.
John holds a number of non-executive roles
with major financial services institutions.

current external appointments:
John currently serves as the Chair of
Hargreaves Lansdown Fund Managers
Limited, Chair of JPMorgan China Growth and
Income plc, and as a Non-Executive Director
and Chair of the Risk and Remuneration
Committees of Brown Shipley & Co. Limited.

Skills and competencies:
John brings significant financial services
experience to the Board. He has in-depth
expertise in organisational compliance,
operations and risk. John’s valuable non-
executive experience combined with his
deep understanding of risk and insight into
regulatory matters is crucial to his role as Chair
of the Risk Committee. As the Group operates
within a highly regulated environment,
regulatory experience and understanding of
risk management is vital to the sustainability
of the long-term success of the Company.

career and experience:
Angela is a chartered accountant with
extensive audit experience of multinational
and listed companies. Angela was a Partner
in PricewaterhouseCoopers specialising
in financial services for 30 years during
which time she led the insurance and
investment management division and
retired in 2008. In previous roles, Angela
served as a Non-Executive Director of
Beazley plc and Swinton Group Limited.

current external appointments:
Angela is a Non-Executive Director and
audit chair of Lloyds of London, TP ICAP
plc and Openwork Holdings Limited.

Skills and competencies:
As a qualified Chartered Accountant, Angela
brings substantial industry, and technical
financial experience to the Board. Angela
contributes scrutiny and oversight to the
Board, drawing on her experience of audit
and advisory work to multinational and
listed companies. Her previous roles as
Non-Executive Director of Beazley plc and
Swinton Group Limited cement her extensive
financial services sector experience. As
reflected in her current appointments,
Angela has significant experience as a Non-
Executive Director and audit committee
chair of major financial services institutions.
Angela’s audit and industry experience
allow her to bring a financial and strategic
outlook on diverse subjects in support of the
Board and its Committees. Her considerable
knowledge and experience continue to be
an important contribution to the long-term
sustainable success of the Company.

career and experience:
With qualifications as a barrister and in
corporate finance, Miriam has spent more
than 30 years working for a number of
leading investment banks and other financial
institutions. A Deputy Lieutenant of the
City of Edinburgh, Miriam was awarded an
OBE for services to corporate finance in
2000. In previous roles Miriam served as a
Non-Executive Director of the UK energy
regulator OFGEM, Henderson Global Trust
plc, Mithras Investment Trust plc and Telit
Communications plc. Miriam was also a
founding partner in SPARK Advisory Partners,
an independent corporate advisory business.

current external appointments:
Miriam currently serves as the Chair of the
Board of Smart Metering Systems plc, as
Non-Executive Director of Eclipse Shipping
Limited and of Gulf International Bank (UK)
Limited. She is an advisor to Ofgem and the
Mayor of London’s Energy Efficiency Fund.

Skills and competencies:
Miriam, through her broad range of
expertise and experience within the
financial services sector, brings significant
in-depth understanding of remuneration
and financial matters to her role as Chair
of the Remuneration Committee. Miriam
has relevant and recent experience as a
remuneration committee chair, having
chaired the Remuneration Committee
of Smart Metering Systems plc, where
she also served as Senior Independent
Director prior to her appointment as Chair
of their Board. Miriam has garnered further
remuneration committee experience serving
on the remuneration Committees of Telit
Communications plc and Henderson Global
Trust plc. As a Non-Executive Director, Miriam
brings scrutiny, constructive challenge
and independent oversight to the Board.

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

coRpoRate GoveRnance RepoRt

“ The Board recognises
the key value of good
corporate governance
in ensuring the long-
term sustainable
success of the
Company, generating
value for shareholders
and contributing to
wider society.”

compliance with the uK corporate Governance code
The Board recognises the key value of good corporate
governance in ensuring the long-term sustainable success
of the Company, generating value for shareholders and
contributing to wider society. Good corporate governance
is critical to the successful management of a sustainable
business. Accordingly, we are committed to the principles
of corporate governance contained in the UK Corporate
Governance Code (the Code), issued by the Financial
Reporting Council in July 2018, which can be found on
the FRC website at www.frc.org.uk/directors/corporate-
governance-and-stewardship.

This is the first year that the revised Code has applied to
the Company. The Board has carried out a review of its
compliance with the Code and confirms that the Company
has applied the principles and complied with the relevant
provisions of the Code, with the exceptions detailed below.

Further information on how the Company has applied the
principles of the Code is set out in this Governance section
and details of the cross-referenced sections are set out
below.

Board leadership and company
purpose
Provides shareholders with information
on the Board, an overview of the work
undertaken to promote the long-term
success of the Company and how the Board
has considered stakeholders’ interests.

division of responsibilities
Provides shareholders with information on
the division of responsibilities between the
leadership of the Board and the executive
leadership of the business, and the
effective operation of the Board.

See pages: 51
to 53, 55 and
56

See page 52

composition, succession and
evaluation
Provides an overview of the Board
evaluation process and includes the report
from the Nomination Committee on its
work during the year on Board composition
and succession planning.

See page
52 and
Nomination
Committee
Report on
page 62

audit, risk and internal control
Provides a report from the Group’s Audit
and Risk Committees on their work during
the year to oversee the Company’s external
and internal audit, the integrity of the
financial statements, risk management,
oversight of the internal controls
framework and determining the nature and
extent of principal risks the Company is
willing to take in order to achieve its long-
term strategic objectives.

Audit
Committee
Report page
64
Risk
Committee
Report page
68
Principal risks
pages 40 to 43

See page 88

Remuneration
Provides a report from the Remuneration
Committee on the work of the
Remuneration Committee to oversee the
Group’s remuneration practices ensuring
that they are linked to the successful and
sustainable delivery of the Company’s long-
term strategy.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Board and committee member attendance for the period ended 30 June 2020

Director

Jonathan Dawson

James Barham

Angela Crawford-Ingle

Miriam Greenwood

John Misselbrook

Simon Wilson (appointed 19 May 2020)

Board
quarterly

Board
ad hoc

Audit

n/a

10/10

9/10

10/10

8/10

10/10

n/a

4/4

1/1

Risk

n/a

5/5

n/a

Remun-
eration

Nomin-
ation

Investment

n/a

14/14

n/a

1/1

n/a

1/1

n/a

3/3

2/3

3/3

n/a

The Executive Directors listed below did not seek re-election at the AGM on 9 December 2019 and resigned from the Board as
at that date:

Jack Berry

Mike Faulkner

Kevin Hayes

1/1

2/5

0/5

5/5

n/a

Where a director has been appointed or has retired, meeting attendance is shown against the number of possible meetings they could have attended rather than the annual
number of meetings.

Where ad hoc Board meetings have been held for a specific purpose to discuss matters at short notice, all Board members are sent papers and given the opportunity to
comment by telephone or email if they are unable to attend at short notice.

Leadership
The Board has provided the Group with entrepreneurial
leadership and is responsible for the long-term sustainable
success of the Group for the benefit of its shareholders.
The Board has regard for other stakeholders, including
employees, clients, suppliers and wider society. Further
details of the Board’s consideration of its stakeholders are
set out in our Section 172 Statement on page 55.

Strategy
The Board planned to hold an overnight offsite strategy day
in March, however due to COVID-19, the Board strategy day
was broken-up into a series of virtual strategy presentations.
Virtual presentations were given by various members of
senior management on key areas of strategic importance,
including the Group Chief Executive’s strategy for the
business, the distribution of the Group’s products, ESG
and the development of a new ESG fund and the Group’s
operating platform, detailing the proposed investment in
the operating platform. Sufficient time was allocated in each
virtual presentation for questions and discussion by the
Board.

In addition, the Board reviewed, challenged and approved
the Group’s annual budget. The Board further considered
the resources required for the Company’s strategic growth
plans.

The Board received regular reports on product development
and received detailed presentations when considering
requests for seed funding for new products.

•

The Board undertook a deep dive review of the Group’s
distribution capabilities presented by David Hanratty and a
further review of the current operating platform presented
by Fran Fahey.

Risk
The Risk Committee considered the following key risk
areas, which were then either reported to the Board or
recommended to the Board for approval:
•
•
•

the Risk Appetite Statement;
the ICAAP;
the principal risks, emerging risks and uncertainties facing
the Company;

• Fund liquidity and liquidity stress testing; and
• an enhanced suite of risk and compliance policies.

The Audit Committee received and considered the reports of
the internal auditor, RSM UK.

Reward
The Remuneration Committee considered the following key
remuneration matters during the year, which were then
reported to the Board or recommended to the Board for
approval:
•

the selection and appointment of a new remuneration
consultant, PwC;
the review and design of the new Directors’ Remuneration
Policy; and
the remuneration arrangements for the workforce,
including variable remuneration pools and arrangements,
base salary increase and the vesting of share awards.

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

coRpoRate GoveRnance RepoRt

continued

Governance
During the year, the Board and its committees considered
items related to the following key governance matters:
the wider executive level committee structure;
•
the product governance framework and supporting
•
policies;
the implementation of SMCR; and

•
• whistleblowing arrangements supporting policies.

culture
The Board is responsible for setting the purpose, values
and strategy of the Group and for ensuring that these are
aligned with the Group’s culture. Integrity is fundamental to
our conduct-led culture and the Directors lead by example,
setting high standards to promote the desired culture
across the Group. The Board assesses and monitors culture
regularly through the reports received from the Executive
Directors and senior management. The Risk Committee
receives a regular report from the Head of Compliance on
conduct matters and the HR Director on matters relating to
the employees. The Board has received regular updates on
the work undertaken to ensure compliance with the SMCR.
This work has included the establishment of a Group Fitness
and Propriety Committee chaired by the Chief Risk Officer.
The Board seeks assurance from the Executive Directors and
senior management that conduct matters are appropriately
dealt with and escalated if necessary.

division of responsibilities
The roles of the Chairman, Senior Independent Director and
the Group Chief Executive are clearly established. The Board
has reviewed and approved the delegated authorities to the
Chairman, Group Chief Executive and Senior Independent
Director.

The Chairman is responsible for the leadership of the Board,
setting the Board’s agenda and ensuring constructive
relations between Executive Directors and Non-Executive
Directors (NEDS). The Chairman also maintains appropriate
contact with major shareholders in order to understand
their concerns, if any, relating to governance, strategy and
remuneration. The Chairman holds meetings with the NEDs
without the Executive Directors present on a regular basis.

The Group Chief Executive is responsible for the day-to-day
management of the Company. The Group Chief Executive
has established an Executive Committee to assist with the
management of the business. The Executive Committee has
been strengthened by a number of key appointments.

Angela Crawford-Ingle has been appointed as Senior
Independent Director to provide a sounding board for
the Chairman and to serve as an intermediary for the
other directors and shareholders. The NEDs meet without
the Chairman present at least annually to appraise the
Chairman’s performance.

The NEDs:
• Provide constructive challenge in respect of matters
before the Board and help to develop proposals on
strategy;

• Provide well-considered and constructive opinions, skill

and knowledge to Board discussions;

• Offer strategic guidance and specialist advice based on

their significant industry experience;

• Satisfy themselves that financial information is accurate

and that financial controls and risk management systems
are robust and defensible; and

• Scrutinise and hold to account the performance of senior

management and the Executive Directors.

The Board is satisfied that the NEDs provide a robust and
independent element on the Board.

The Board has a formal schedule of matters reserved for
its decision which it has reviewed and approved in the past
year. Examples of these matters include the approval of
the annual operating and capital expenditure budgets and
any material changes to them, the approval of major capital
projects and appointments to and removals from the Board.

Board composition
As at 30 June 2020, the Board comprised six Directors: the
Chairman, three independent NEDs and two Executive
Directors. At least half of the Board, excluding the Chairman,
comprises of independent NEDs. The Group continues
to drive diversity and inclusion at all levels. The Company
complies with the Hampton-Alexander Review target of 33
per cent. female representation on the Board.

On 19 May 2020, Simon Wilson joined the Group as Chief
Financial Officer and was appointed as an Executive Director
of the Company. Jack Berry, Mike Faulkner and Kevin Hayes
retired from the Board with effect 9 December 2019. Jack
Berry and Mike Faulkner remain employees of the Group as
the Global Head of Complex Clients and Chief Investment
Officer respectively. Kevin Hayes retired from the Group in
May 2020.

No individual or group of individuals dominates the Board or
its decision-making.

All Directors are subject to annual re-election at the
Company’s AGM. Details of the reasons why each Director’s
contribution is and continues to be important to the
Company’s long-term sustainable success is set out on pages
48 and 49 alongside the Directors’ biographies.

The Nomination Committee keeps the balance of skills,
experience and diversity under review. The Board is
considered to have an appropriate balance of skills and
experience.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

operation of the Board
The Board meets on a scheduled quarterly basis and on an
ad-hoc basis to consider specific items of business as the
need arises.

The Board attendance of the Directors is set out in the table
on page 51.

At each quarterly Board meeting, a report from the Group
Chief Executive and Chief Financial Officer are typically
tabled. The Chairman of each Board Committee reports on
its activities since the last Board meeting.

The Chairman, Group Chief Executive and Company
Secretary liaise sufficiently in advance of each meeting
to finalise the agenda. A comprehensive set of papers is
circulated before Board and Committee meetings using an
online board pack portal. The Company Secretary advises
the Board on all governance matters.

All Directors have access to the Company Secretary’s
services and advice. The appointment and removal of the
Company Secretary is a matter reserved for the full Board.

committees
The Board has established Nomination, Remuneration,
Investment, Audit, and Risk Committees. The composition
of these Committees complies with the requirements of the
Code. The Company Secretary advises and supports these
Committees. Committees may take additional independent
professional advice at the Company’s expense in the
furtherance of their duties.

The Chairman is not a member of the Investment,
Remuneration, Audit, or Risk Committees, but attends these
meetings at the invitation of the Chair of the respective
Committees.

The Board has formally defined and documented, by way of
terms of reference, the duties and responsibilities delegated
to the Board Committees and these are available on the
Group’s website: www.riverandmercantile.com.

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independence
Angela Crawford-Ingle, Miriam Greenwood and John
Misselbrook have been determined by the Board to be
independent (the iNEDs). The Board has determined that
each iNED is independent in both character and judgement.
There are no relationships or circumstances which are
likely to affect or appear to affect the iNEDs judgement or
independence.

On appointment, the Chairman met the independence
criteria set out in the Code.

appointments to the Board
The Board has established a Nomination Committee to lead
the process for Board appointments and to consider the
balance of skills, experience and knowledge on the Board.
The Nomination Committee ensures that there is a formal
and rigorous process for appointments to the Board. Details
of the work of the Nomination Committee are set out in the
Nomination Committee Report on page 62.

Consideration is given to the length of service of the Board
as a whole and membership is regularly refreshed. The
Chairman was appointed to the Board on 1 October 2017.
Angela Crawford-Ingle is the longest serving iNED on the
Board, having been appointed to the Board at the IPO of the
Company in 2014.

New Directors are given a tailored induction arranged by the
Company Secretary, which includes meetings with senior
management, including the Head of Legal and Compliance,
the Chief Risk Officer, Group Chief Operating Officer and
relevant business heads across the Company’s operating
divisions. The induction programme is designed to provide
a thorough understanding of the strategy, business, key
stakeholders, governance structure and the regulatory
environment. In addition, each Director is provided
with access to previous Board and Committee papers
and minutes.

commitment
The Board requires all Directors to devote sufficient
time to their duties and to use their best endeavours to
attend meetings.

Each NED’s letter of appointment sets out the time
commitment required for the role. As part of the Nomination
Committee’s appointment process other significant
commitments of candidates are considered and any new
appointments or significant interests are required to be
approved by the Nomination Committee. The Nomination
Committee report on page 62 describes the work
undertaken by the Committee to provide oversight of these
matters.

None of the Executive Directors is on the board of a FTSE
100 company.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

coRpoRate GoveRnance RepoRt

continued

performance evaluation
An annual evaluation of the performance of the Board,
its Committees, the Chairman and Directors has been
undertaken. The internal Board and Committee evaluation
process was coordinated by the Company Secretary. The
evaluation process involved the completion of anonymous
questionnaires collated by the Company Secretary and
a series of one-to-one meetings with the Chairman. The
evaluation process sought individual Directors’ assessments
of the Board’s effectiveness including strategy development,
culture, the decision-making process, Board relationships,
information flows and the operation of the Board Committees.

The evaluation process is constructively used to improve
Board effectiveness, maximise strengths and address any
weaknesses. The Chairman considers the results of the
evaluation process and addresses any issues identified
by the process.

The Chairman did not consider an externally facilitated
board evaluation to be appropriate for the financial year
ending 30 June 2020 due to the recent extensive change
to the Board and the current remote working environment.
This will be reviewed in the next financial year and an
externally facilitated board evaluation will be undertaken
by 30 June 2022 at the latest.

views of shareholders
The Board actively solicits the views of shareholders on
governance, remuneration and performance against
strategy through meetings with major shareholders, investor
roadshows and ad hoc contact. The Chairman and the Chair
of Remuneration Committee meet with major shareholders
without the Executive Directors present to obtain their
view on significant matters. The views of shareholders are
reported back to the Board.

2019 aGM vote
All of the resolutions put to shareholders to vote upon at
the December 2019 AGM passed by more than 80 per cent.
(lowest vote in favour of a resolution being 96.58 per cent.).

explanation of non-compliance with the code
Provision 36 of the Code states that the Remuneration
Committee should develop a formal policy for post-
employment shareholding requirements encompassing both
unvested and vested shares. The Remuneration Committee
has proposed a post-retirement shareholding requirement of
200 per cent. of base salary for 3 years following retirement
in the new Directors’ Remuneration Policy that is subject to
shareholder approval at the December 2020 AGM.

Provision 38 of the Code states that pension contribution
rates for Executive Directors should be aligned with those
available to the workforce. While Simon Wilson’s rate of
pension is aligned with the workforce, James Barham’s
pension contribution was not aligned with the workforce
in the past financial year. However, James Barham has
agreed to align his pension contribution rate with that of
the workforce with effect from the first month following
the approval of the new Directors’ Remuneration Policy
at the AGM in December 2020.

power of directors in respect of share capital
The Directors may exercise all the powers of the Company
(including, subject to obtaining the required authority from
the shareholders in general meeting, the power to authorise
the issue of new shares and the purchase of the Company’s
shares). The Company issued 157,457 shares during the
year to satisfy the exercise of options under the Company’s
Save-As-You-Earn (SAYE) Scheme and 1 share as part of the
reduction of capital process.

JonatHan daWSon
CHAIRMAN OF THE BOARD

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

In order for the Company to succeed in the long-term, the
Board must build and maintain successful relationships with
a wide range of stakeholders. The Board recognises that the
long-term success of the Company is dependent on how it
works with a number of important stakeholders.

The Board’s decision-making process considers both risk
and reward in the pursuit of delivering the long-term success
of the Company. As part of the Board’s decision-making
process, the Board considers the interests of a broad range
of the Company’s stakeholders – including the impact of its
decisions on regulators, employees, clients, suppliers and
the local community as well as shareholders.

The Board fulfils its duties in collaboration with the senior
management team, to which day-to-day management has
been delegated. The Board seeks to understand stakeholder
groups’ priorities and interests. The Board listens to
stakeholders through a combination of information provided
by management and also by direct engagement where
appropriate. The following overview provides further insight
into how the Board has had regard to the interests of our
stakeholders, while complying with its duty to promote the
success of the Company in accordance with Section 172 of
the Companies Act 2006.

our stakeholders: Section 172 Statement

duty to promote the success of the company
Section 172(1) of the Companies Act 2006 requires Directors
to act in the way they consider, in good faith, would be most
likely to promote the success of the Company for the benefit
of its members as a whole, and in doing so have regard
(amongst other matters) to:
•
•
•

the likely consequences of any decision in the long-term;
the interests of the Company’s employees;
the need to foster the Company’s business relationships
with suppliers, customers and others;
the impact of the Company’s operations on the
community and the environment;
the desirability of the Company maintaining a reputation
for high standards of business conduct; and
the need to act fairly as between members of the
Company.

•

This Section 172 Statement sets out how the Directors have
discharged this duty.

Our key stakeholders

How we engage with them

clients
Our clients are the people and
firms that entrust us with the
investment of their assets. We
focus on understanding our clients’
needs and developing relevant
solutions and products to meet
those needs.

Shareholders
The ongoing support of our
shareholders is vital in helping us
deliver our long-term strategic
objectives and the profitable
growth of the business.

Our client services, distribution, investment consulting and investment management
teams all maintain contact with our clients through regular meetings, reporting and
written communication.

We continue to evolve the manner in which we engage with clients with a greater
emphasis on virtual communication to address client’s evolving investment and
governance needs. Client engagement activities are reported to the Board regularly by
the Group Chief Executive.

The Group Chief Executive and members of the senior management team meet
directly with key clients. To support engagement with our clients, we are investing in a
new client relationship management platform.

The Board engages with the Company’s shareholders in a number of ways. Our AGM
is held in December annually and allows shareholders the opportunity to engage
directly with the Board. All Directors attend the AGM and are available to answer
shareholder queries. The Company Secretary collates shareholder and proxy voting
agency feedback provided in advance of the AGM and circulates this to the Board for
consideration.

The Group Chief Executive and Chief Financial Officer regularly meet (in person and
virtually) the Company’s major shareholders to discuss the financial performance of
the Company.

The Chairman is available to meet major shareholders without the Executive Directors
present to permit direct feedback. The Chairman and Chair of the Remuneration
Committee have held several meetings with the Company’s major shareholders to
consider the design of the new Directors’ Remuneration Policy.

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

coRpoRate GoveRnance RepoRt

continued

Our key stakeholders

How we engage with them

We engage with our employees regularly through senior management
communications and quarterly Townhall presentations. Our NEDs regularly attend
our town hall meetings to allow for interaction and engagement with our employees.

With the initiation of Group-wide remote working in March 2020, we introduced
a number of measures to try to ensure the physical and mental wellbeing of our
employees. Our Group Chief Executive writes to all employees on a weekly basis and
additional virtual town halls have been held to allow employees to raise concerns
directly using an online platform. At each biweekly senior management meeting, the
Head of HR provides an update on HR matters, including matters relating to staff
wellbeing and health. The Group Chief Executive then reports on any people related
matters during his informal regular Board calls.

Miriam Greenwood, the Chair of the Remuneration Committee, is the Director
responsible for employee engagement. Miriam attends Group induction days for
new employees and the rest of the Board attends by invitation. Miriam has also been
involved in the working group formed to discuss the Group’s return to the office
planning and longer-term working practices plans. An HR led all employee survey
was conducted to understand the views of employees on returning to the office
environment and the results discussed by the Board.

Our Remuneration Committee reviews and considers the overall Group wide
employee pay trends, has oversight of the various bonus pools and approves the
remuneration of the Group’s senior management and Executive Directors. The Risk
Committee receives a quarterly report from the Group HR Director on the working
environment which includes data on new joiners, leavers and employee wellbeing.

The Group is committed to the highest standards of business conduct. Each business
area is responsible for the day to day contact with our third-party service providers.
We ensure that there is an appropriate framework of oversight of our key third-party
suppliers. Regular meetings are held with key third-party service providers and issues
escalated to Fran Fahey, Group Chief Operating Officer, where required.

The oversight of outsourced service providers was an area of focus of the Risk
Committee during the past year. The Risk Committee receives quarterly papers on the
Group’s outsourcing and third-party supplier risks prepared by the Chief Risk Officer.

people
Our people are critical to the
success of the Group. It is
imperative that the Board engages
effectively with employees. It is
of the utmost importance to the
Board that we have a culture
that attracts and retains talented
employees. We value our diverse
workforce and seek inclusion at
all levels.

Suppliers and service providers
Our suppliers and service
providers include outsourced
third-party service providers such
as our IT service provider, payroll
administrator and middle and back
office support function, and other
key third-party service providers.
Their services and support are
vital in helping us deliver our
services to our clients, pay and
support our employees and to
grow our business, including being
key to us being able to meet our
regulatory obligations.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Our key stakeholders

How we engage with them

community and environment
We aim to make a difference
through the things that we do,
including charitable work, carbon
offsetting and the stewardship of
our clients’ assets.

The Board considers the impact of our operations on the community and
environment. The Group has established a Group ESG Committee to co-ordinate the
Group’s ESG and corporate responsibility activities.

Further details of our approach to sustainability and corporate responsibility can
be found on pages 34 to 39. Highlights include the Group’s stewardship activities,
charitable donations and activities, and increased consideration of the positive steps
to improve the environment.

One of the Board’s virtual strategy day presentations focussed on our macro
investment team’s approach to ESG investing. This allowed the Board the opportunity
to have an in-depth explanation from subject matter experts on their approach to ESG
investing and consider the launch of a new ESG focussed fund.

We engage with our regulators primarily thorough our Group compliance function by
way of regular mandatory reporting as well as any ad hoc interactions required by our
regulators. We are open and co-operative with our regulators and take our regulatory
responsibilities seriously.

Regulators
The Group operates in the UK,
US and Australia and is therefore
subject to the oversight of various
regulators. We have a conduct-led
culture that encourages our people
to act with integrity at all times.

The Group’s Head of Compliance and the Chief Risk Officer attend the Risk Committee
meetings and report on the Group’s regulatory and compliance matters, interaction
with regulators and the risk management framework. The Risk Committee receives
a regular report on conduct and culture and a quarterly compliance report covering
compliance matters for both UK regulated subsidiaries and the US regulated
subsidiary. In the UK, the relevant Financial Conduct Authority (FCA) “Dear CEO” letters
are circulated to the Board for review.

The implementation of SMCR has been an area of focus for the Risk Committee
and Board during the current year. The Risk Committee has received regular
implementation project status reports during this period.

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

diRectoRS’ RepoRt

The Directors present their report and the Group’s audited
financial statements for the year ended 30 June 2020.

principal activities and business review
The Company’s principal activity is to act as a holding
company for a group of investment advisory and
management companies. The Company is a public limited
company incorporated in England and Wales under
registered number 04035248. The Group operates
principally in the UK and has a trading subsidiary in the US.
One of the Group’s trading subsidiaries is registered as a
foreign registered entity in Australia. A review of the business
is set out in the Strategic Report on pages 6 to 9, which is
incorporated by reference into this report.

Board of directors
The Directors of the Company at 30 June 2020 are set out
below. Their biographies are set out in the Governance
section on pages 48 to 49.

Director

James Barham
Angela Crawford-Ingle
Jonathan Dawson
Miriam Greenwood
John Misselbrook
Simon Wilson

Date of appointment

27 March 2014
29 May 2014
1 October 2017
28 May 2019
16 February 2018
19 May 2020

In accordance with the Company’s Articles of Association and
best practice set out in the Code, all continuing Directors
will offer themselves for re-election at the AGM, with the
exception of Simon Wilson, who will be standing for election,
as this is the first AGM since his appointment.

directors’ interests
Directors’ interests in the shares of the Company are
disclosed in the Directors’ Remuneration Report on page 94.
No Director had a material interest in any significant contract
(other than a service contract) with the Company or any
subsidiary company at any time during the year.

Statement of directors’ responsibilities
This statement, which is included later in this section, is
deemed to form part of this Directors’ Report.

Conflicts of interest
A Director has a statutory duty to avoid a situation in
which they have or could have a conflict of interest or
possible conflict with the interests of the Company.

The Company has adopted a policy relating to the handling
by the Company of matters that represent conflicts of
interest or possible conflicts of interest involving the
Directors. Where a conflict of interest or potential conflict
of interest is identified, only Directors that are not involved
in the conflict or potential conflict may participate in any
discussions or authorisation process.

directors’ indemnities and insurance
The Company maintains appropriate insurance cover in
respect of litigation against Directors and officers.

The Company’s Articles of Association permit the provision
of indemnities to the Directors. In accordance with the
Articles of Association, qualifying third-party indemnity
provisions (as defined in the Companies Act 2006) are in
force for the benefit of Directors and former Directors who
held office during the year to 30 June 2020 and up to the
signing of the Annual Report.

directors’ service agreements
Each Executive Director has a written service agreement,
which may be terminated by either party on not less than
12 months’ notice in writing.

non-executive directors’ letters of appointment
Each Non-Executive Director has a written letter of
appointment for a term of three years. Three months’
notice in writing is required to be served by either party to
terminate the appointment of a Non-Executive Director.

The role and responsibilities of each Non-Executive Director
are clearly set out and include the duties of a Director as set
out in the Companies Act. These duties do not include any
management function, but set out that the Non-Executive
Director is expected to support and challenge management.
The Non-Executive Director letters of appointment are
available for inspection at the Company’s registered office
during business hours and at the AGM.

Compensation for loss of office
There are no agreements in place between the Company and
any Director or employee for loss of office in the event of a
takeover.

change of control
The Company does not have agreements with any Director
or employee that would provide compensation for loss of
office or employment resulting from a change in a control
following a takeover bid, except that provisions of the
Company’s share schemes may cause awards granted under
such schemes to vest in those circumstances.

Management report
For the purposes of Disclosure and Transparency Rule 4.1.8,
this Directors’ Report combined with the Strategic Report
comprises the Management Report.

dividends
The Directors have proposed a final dividend of 2.34 pence
per ordinary share (2019: 5.0 pence) of which 0.10 pence is a
special dividend relating to net performance fees. Payment
of this dividend is subject to approval by shareholders at
the Company’s 2020 AGM and, if approved, will be paid on
18 December 2020 to shareholders on the register at the
close of business on 27 November 2020.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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capital structure and voting rights
As at 30 June 2020, there were 85,453,634 ordinary shares of
0.003 pence each. Each share in issue is listed on the Official
List maintained by the FCA in its capacity as the UK Listing
Authority. The Company issued 157,457 ordinary shares
during the year to satisfy options under the Group’s SAYE
Scheme.

The Company has one class of ordinary shares, which carry
the right to attend, speak and vote at general meetings of
the Company. Further detail regarding the exercise of voting
rights at the AGM are set out in the Notice of AGM.

Each ordinary share in the capital of the Company ranks
equally in all respects. No shareholder holds shares carrying
special rights relating to the control of the Company.
There are no restrictions on voting rights or the transfer
of shares in the Company. The Company is not aware of
any agreements between shareholders that may result in
restrictions on the transfer of shares or on voting rights.

auditors
BDO LLP, the external auditors of the Company, have advised
of their willingness to continue in office and a resolution to
reappoint them will be proposed at the forthcoming AGM.
The Audit Committee report considers the independence of
the auditors on pages 66 to 67.

audit information
As far as each Director is aware, there is no relevant
information that has not been disclosed to the Company’s
auditors. Furthermore, each of the Directors believes that
all reasonable steps have been taken to make them aware
of any relevant audit information and to establish that
the Company’s auditors have been made aware of that
information.

Substantial shareholdings
As at 30 September 2020, the Company had received
the notifications of control of 3 per cent. or more over
the Company’s total voting rights and capital in issue in
accordance with DTR 5 as set out below:

At the 2019 AGM, the Company was granted the authority
to buy back its own shares up to a maximum of 8,540,346
shares. There have been no share buy-backs during the
period. The Company does not hold any shares in treasury.

PSG

Number of
ordinary shares

% of total issued
share capital

22,242,703

26.03

Shares held in an employee benefit trust (EBT)
Shares are held on trust for the benefit of Group’s staff in
the Company’s EBT in order to satisfy awards under the
Company’s share award plans, further details of which are
set out in the Remuneration Committee Report.

The Company’s EBT is operated by Apex Financial Services
(Trust Company) Limited. During the reporting period,
the trustee of the EBT did not purchase any shares. As at
30 September 2020, the EBT held 1.79 per cent. of the total
issued share capital of the Company.

The EBT has agreed to waive current and future dividends
on the shares it holds pursuant to non-dilutive share awards
made to employees of the Group.

Aberdeen Standard Investments

6,494,849

Unicorn Asset Management

6,185,000

Premier Miton Asset Management

5,871,395

Legal & General Investment

Management

Aviva Investors

Sir John Beckwith

Mike Faulkner

Jupiter Asset Management

4,599,194

4,302,829

4,252,163

4,063,071

2,963,909

Chelverton Asset Management

2,775,000

7.60

7.24

6.87

5.38

5.04

4.98

4.75

3.47

3.25

disclosure of information under listing rule 9.8.4R
The following table is disclosed pursuant to Listing Rule 9.8.4R. The information required to be disclosed, where applicable to
the Company can be located in the Annual Report and Accounts at the references set out below:

Information

Location

Interest capitalised
Shareholder waiver of dividends
Shareholder future waiver of dividends
Agreements with controlling shareholders
Provision of services by controlling shareholder
Details of long-term incentive schemes
Waiver of emoluments by a Director
Waiver of future emoluments by a Director
Significant contracts with directors or controlling shareholders
Non pre emptive issues of equity for cash
Non pre emptive issues of equity for cash in relation to

major subsidiary

Participation by parent of a placing by a listed subsidiary
Publication of unaudited financial information

Not applicable
See section above of Directors’ Report – Shares held in an EBT
See section above of Directors’ Report – Shares held in an EBT
Not applicable
Not applicable
Remuneration Report page 88
Not applicable
Not applicable
Not applicable
Not applicable

Not applicable
Not applicable
Not applicable

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

diRectoRS’ RepoRt

continued

Going concern
The Strategic Report discusses the Group’s business
activities, together with the factors likely to affect its future
development, performance and position. The Group
has access to the financial resources required to run
the business efficiently and has a strong cash position.
The Directors have concluded that there is a reasonable
expectation that the Group has adequate resources to
continue in operational existence for a period of at least
twelve months from the date of approval of the financial
statements, and have accordingly prepared the Group and
parent financial statements on a going concern basis. Please
refer to the Viability Statement on page pages 44 and 45 for
further details.

Statement of viability
In accordance with Provision 31 of the Code, the Directors
have assessed the prospects of the Group over a longer
period than the twelve months as required by the Going
Concern provision. Details of the assessment can be found
on pages 44 and 45.

political donations
The Group made no political donations or contributions
during the year (2019: £nil).

events after the reporting period
The Directors are not aware of any events after the reporting
period which are not reflected in these financial statements
but which would have a material impact upon them.

Financial instruments
Details of the financial instruments used by the Group and
the risks associated with them (including the financial risk
management objectives and policies, and exposure to price,
credit and liquidity risk) are set out on pages 40 to 43 and
this information accordingly is incorporated into this report
by reference.

Future developments
Details on the likely future developments for the Group
can be found in the Group Chief Executive’s Statement on
pages 10 and 11.

GHG emissions
Details on the GHG emissions of the Group can be found on
page 36.

corporate governance statement
DTR 7.2.1 requires that the Group’s disclosures on corporate
governance be included in the Directors’ Report. This
information is presented on page 50 in the Corporate
Governance Report and is incorporated by reference into
this Directors’ Report and is deemed to form part of this
report.

employee engagement
The Group holds regular all-employee Townhall meetings,
which are recorded and made available to employees who
are unable to attend or are based outside of the UK. These
Townhall meetings provide employees with information
about the performance of the Group and other matters of
concern to employees. Employees are able to ask members
of senior management and Executive Directors questions
at Townhall meetings. The Group encourages employee
participation in its SAYE Scheme, which it has run on annual
basis for the past four years. Further details of the Group’s
approach to its employees are set out in the People section
and the Company’s Section 172 Statement.

internal control and risk management
Details of how the Board monitor the Group’s internal
control and risk management approach can be found in the
Risk Management section of the Strategic Report on pages
40 to 43.

aGM
The AGM will be held on 14 December 2020, starting at 9am.
The Notice of Meeting convening the AGM will be circulated
to all shareholders at least 20 working days before the AGM
and will set out the details of the resolutions to be proposed
at the AGM. The Notice of Meeting will be available on the
Company’s website at www.riverandmercantile.com.

approval of annual report
The Corporate Governance Report, the Strategic Report
and the Directors’ Report were approved by the Board on
30 October 2020.

By order of the Board.

SallY BucKMaSteR
GROUP COMPANY SECRETARY

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

diRectoRS’ ReSponSiBilitieS

The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.

Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors are required to prepare the Group financial
statements and have elected to prepare the Company
financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
Company and of the profit or loss for the Group for that
period.

In preparing these financial statements, the Directors are
required to:
•

select suitable accounting policies and then apply them
consistently;

• make judgements and accounting estimates that are

reasonable and prudent;

• present information, including accounting policies, in a

•

manner that provides relevant, reliable, comparable and
understandable information;
state whether they have been prepared in accordance
with IFRS as adopted by the EU, subject to any material
departures disclosed and explained in the financial
statements;

• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business; and

• prepare a Directors’ report, a Strategic Report and

Directors’ Remuneration Report which comply with the
requirements of the Companies Act 2006.

The Directors confirm that the financial statements comply
with the above requirements.

The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.

They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Board is satisfied that the assets of the Company
are safeguarded and protected from fraud and other
irregularities.

Website publication
The Directors are responsible for ensuring the Annual
Report and the financial statements are made available
on a website. Financial statements are published on
the Company’s website in accordance with legislation
in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and
integrity of the Company’s website is the responsibility of
the Directors. The Directors’ responsibility also extends to
the ongoing integrity of the financial statements contained
therein.

directors’ responsibilities pursuant to dtR4
Each Director confirms that, to the best of his or her
knowledge:
• The financial statements have been prepared in

accordance with IFRS as adopted by the EU and Article 4
of the IAS Regulation and give a true and fair view of the
assets, liabilities, financial position and profit and loss of
the Company and Group;

• The Strategic Report and Directors’ Report contained
in this Annual Report includes a fair review of the
development and performance of the business and the
financial position of the Company and the Group, together
with a description of the principal risks and uncertainties
that they face; and

• The Annual Report and financial statements, taken as a

whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Company’s position, performance, business model and
strategy.

In accordance with Section 418 of the Companies Act,
the Directors’ report includes a statement, in the case of
each Director in office at the date the Directors’ report is
approved, that:
(a) so far as the Director is aware, there is no relevant audit
information (as defined in section 418(3) of the Act) of
which the Company’s auditors are unaware; and

(b) he/she has taken all the steps that he/ she ought to have

taken as a Director in order to make himself/herself aware
of any relevant audit information and to establish that the
Company’s auditors are aware of that information.

This Responsibility Statement was approved by the Board on
30 October 2020.

By order of the Board

SallY BucKMaSteR
GROUP COMPANY SECRETARY

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

noMination coMMittee RepoRt

Membership and attendance
Membership of the committee comprised the
independent non-executive directors
(meeting attendance is on page 51):

Jonathan Dawson (Chair)
•
•
John Misselbrook
• Miriam Greenwood
• Angela Crawford-Ingle

Role and responsibilities
The Board has established a Nomination Committee to
lead the process for Board appointments and to review the
composition of the Board and Board Committees to ensure
they are balanced in terms of skills, experience and diversity.

The Committee ensures that there is a formal, rigorous
and transparent process for appointments to the Board.
This includes identifying the skills and experience required
for a particular role. The Committee oversees succession
planning and the role changes of Executive Directors
and senior management across the Group. A full copy
of the Committee’s terms of reference can be found at
www.riverandmercantile.com.

committee membership
The Committee comprises all independent Non-Executive
Directors in accordance with the Code. It is chaired by
Jonathan Dawson, the Chairman of the Board. Other
attendees, such as the Group Chief Executive and Group
HR Director attend the Committee by invitation. The Group
Company Secretary advises and supports the Committee.
The Committee is empowered to appoint search consultants
and seek legal advice where it sees fit to assist with its work.

No individual participates in discussion or decision-making
when the matter under consideration relates to him or her.

committee focus for FY2020
The Nomination Committee focussed on the recruitment and
appointment of Simon Wilson as the Group’s Chief Financial
Officer. Simon Wilson was identified as the preferred
candidate and joined the Board on 19 May 2020.
This follows the announcement of Kevin Hayes’ intention to
retire from the Board in November 2019.

Further strategic organisational developments
Last year the Committee had oversight of a number of
significant organisational changes at Board level – including
the appointment of James Barham as Group Chief Executive
from 1 July 2019 and the appointment of a new Chair of the
Remuneration Committee, Miriam Greenwood. As described
in last year’s Annual Report, Jonathan Punter and Robin
Minter-Kemp retired from the Board as at 30 June 2019 and
Mike Faulkner and Jack Berry stood down from the Board at
the 2019 AGM to focus on their respective roles as Group
Chief Investment Officer and Global Head of Complex
Clients.

This year the Committee has overseen the recruitment and
appointment of a new Chief Financial Officer, Simon Wilson.
Simon’s appointed as Chief Financial Officer completes James
Barham’s strengthened senior management team – which
has included the appointment of David Hanratty as Global
Head of Distribution, David Peach as Group HR Director and
Fran Fahey as Group Chief Operating Officer. Further details
of Simon’s appointment are set out on the next page.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Recruitment and appointment of Simon Wilson
In mid-2019, the Committee commenced a search for a new
Chief Financial Officer. The Committee considered candidates
recommended by a recruitment firm, an internal candidate
and Simon Wilson, who was known to the business and
Group Chief Executive, having worked for one of the Group’s
founder shareholders, representing its interest in River and
Mercantile Asset Management LLP before the IPO in 2014.

The Committee’s shortlisted candidates were interviewed
by the Non-Executive and Executive Directors. Feedback
from the interviews was provided to the Committee. This
process led to a unanimous conclusion with the Committee
recommending the appointment of Simon Wilson as an
Executive Director and Chief Financial Officer based on his
expertise and significant knowledge of the Group’s business.

commitments
The Committee keeps under review each Director’s external
appointments to ensure they have sufficient time to dedicate
to their duties. As part of the Committee’s appointment
process, other significant commitments of candidates are
considered. Any new appointments or significant interests
are required to be approved in advance by the Committee.
When considering the approval of any new appointment
or interest, detail of the estimated time commitments of
the proposed new role are provided to the Committee for
consideration. The Committee is satisfied that all Directors
have sufficient time to meet their Board responsibilities.

Board skills and experience
The Committee keeps the skills and experience of the
Board and its Committees under review. The Board and its
Committees are able to draw on the expertise of different
teams across the Group, including the Group’s General
Counsel, Chief Technology Officer, Chief Risk Officer and
the Chief Financial Officer. Regular scheduled updates
are provided to the Board and its Committees on legal
and regulatory matters, changes to accounting standards
and cyber risk and security. This is supplemented by
presentations by external advisers where required – the
Board received externally facilitated training on SMCR
and will receive training on the FCA’s proposed new
prudential regime.

Board evaluation
In line with the provisions of the Code the Board undertakes
a formal evaluation annually. The process followed for the
Board’s evaluation is:
• Tailored questionnaires are developed for the Board and
its Committees by the Group Company Secretary and
agreed with the Chairman of the Nomination Committee;
• Questionnaires are completed and the results compiled.

The results are then provided to the Chairman;
• The Chairman then reports on the results of the

evaluation and holds meetings with individual Directors
where required to discuss the conclusion of the
evaluation process; and

• Outcomes and actions are then agreed.

There were no significant matters highlighted in the
Board evaluation process in the previous year. The Board
considered that it had operated effectively and had the right
mix of skills and experience appropriate to the Group. The
Chairman of the Board is reviewing the results of the most
recent Board evaluation and will address any actions with
the Board. The Chairman did not consider this year to be
appropriate to undertake an externally facilitated Board
evaluation due to the recent Board composition changes and
the challenges of a remote working environment in the last
quarter of the Group’s financial year.

appointments to the Board and diversity
Appointments to the Board are made on merit and are
based on an evaluation of the skills and relevant sectoral
experience of the candidates. The Committee recognises
that diversity leads to better decision-making and improved
overall performance. Diversity is more than gender – as
such the Committee is cognisant that a combination
of demographics, skills, experience, race, age, gender,
educational and professional background, and other relevant
personal attributes on the Board is important in providing
a range of perspectives, insights and challenge needed to
support good decision-making. The Board has not formally
documented its policy on diversity to date, however the
Committee continues to consider diversity when reviewing
Board composition. The gender balance of those in
senior management and their direct reports and further
information on the Group’s approach to diversity is set out
on page 33 of the People Report.

JonatHan daWSon
CHAIR OF NOMINATION COMMITTEE

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

audit coMMittee RepoRt

Membership and attendance
Membership of the committee comprised the
independent non-executive directors
(meeting attendance is on page 51):

• Angela Crawford-Ingle (Chair)
•
John Misselbrook
• Miriam Greenwood

The Board considers all the members to have the relevant
skills and experience to be members of the Committee.
The Board has determined through previous experience
gained in other organisations, that members collectively
have the competence relevant to the sector in which
the Group operates. The Board has also confirmed that
Angela Crawford-Ingle holds recent and relevant financial
experience. The Committee members are also members of
the Remuneration Committee and Risk Committee, ensuring
the identification of issues relevant to those Committees.

Responsibilities of the audit committee
The principal role of the Committee is to assist the Board in
fulfilling its oversight responsibilities in relation to financial
reporting, financial controls and audit, and internal controls.
The Committee plays a primary role in overseeing the
integrity of the Group’s financial statements, assessing the
independence and objectivity of the external auditors and
monitoring the effectiveness of internal audit.

The Committee recognises its role in promoting the integrity
of the Group’s financial results and high-quality reporting.

During 2020, the Committee continued to focus on its
responsibility for the monitoring and oversight of the Group’s
control environment and system of internal controls. As part
of this work, the Committee considered the Group’s ICAAP
wind down plan, risk appetite, risk control assessments and
various operational stress scenarios to support the Board’s
conclusions on the Viability Statement set out on page pages
44 and 45.

Key activities and areas of review during the year
• Considered whether the Group’s 2020 interim and annual
financial reports were fair, balanced and understandable
and provided the information necessary for shareholders
to assess the Group’s position and performance, business
model and strategy.

• The Group’s viability statement and papers in support of
the Board’s assessment of the Company and Group as a
going concern.

• The appropriateness of accounting estimates and

judgements.

• Review of reports from PwC on the Company’s

distributable reserves.

• Oversight of the Group’s capital reduction process,

including the review of the relevant court documents and
supporting statements.

• Engaged with the Nomination Committee and Board

on the recruitment and appointment of Simon Wilson
as Chief Financial Officer, including participation in the
interview and selection process.

• Reviewed the performance and independence of the
external auditors and monitored the provision of non-
audit services.

• Reviewed the Group’s updated whistleblowing

arrangements.

• Liquidity management and forecasting of the Group’s

working capital and regulatory capital surplus.

• Reviewed the internal audit annual programme, the
findings and monitored management’s responses to
address audit actions.

• Reviewed the effectiveness of the internal audit function.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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The Committee’s key responsibilities include:

Financial reporting

Review of judgemental
assertions

• Monitoring the integrity of the financial statements of the Group.
• Assessing changes to accounting policies and major judgemental areas.
• Assessing compliance with accounting, legal and regulatory requirements.

• Reviewing key judgemental areas of work completed by the Group, including going

concern, viability and ICAAP.

• Significant accounting judgements.

internal audit

• Monitoring and reviewing the effectiveness of the Group’s internal audit function in

the context of the Group’s overall risk management system.

external audit

• Overseeing the relationship with the external auditors which supports the

Committee’s responsibilities with respect to the content and integrity of the Group’s
financial reporting.

• Reviewing and approval of the annual audit plan.
• Reviewing the findings of the external audit.
• Overseeing the effectiveness of the external audit taking into consideration relevant
UK professional and regulatory requirements, the independence of the external
auditors and recommending to the Board the appointment and remuneration of the
external auditors.

• Developing and implementing policy on the engagement of the external auditors

to supply non-audit services, ensuring there is prior approval of non-audit services,
considering the impact this may have on independence, taking into account the
relevant regulations and ethical guidance in this regard, and reporting to the Board
on any improvement or action required.

Whistleblowing and fraud

• Reviewing the adequacy and security of the Group’s arrangements for its employees

and contractors to raise concerns, in confidence.

• Reviewing Group procedures for detecting internal and external fraud.
• Reviewing the Group’s systems and controls for the prevention of fraud and

non-compliance and to consider appropriate action if required.

A full copy of the Committee’s terms of reference can be found in the corporate governance section of the Group’s website
www.riverandmercantile.com.

Meetings
Committee members have all attended the quarterly
meetings, with ad hoc meetings held as required. The
Committee met ten times in the past year; these were held at
key times in the audit and financial reporting schedule.

The Committee invites other participants as appropriate
and has standing invitations for the Chairman, Group
Chief Executive and Chief Financial Officer. Other regular
attendees who advised the Committee were the Group
Financial Controller, the Chief Risk Officer and the Group
Head of Compliance and General Counsel. Other members
of senior management were also invited to attend as
appropriate.

The Chairman regularly meets on a one-on-one basis with
members of senior management to fully understand any
matters of concern and to facilitate effective debate at
Committee meetings.

Representatives from BDO, including the lead audit
partner for the 2020 financial year, attended all of the
Committee’s scheduled meetings. During 2020, private
meetings were held with the external auditors without
management present. Representatives from RSM UK, the
Group’s internal audit function attend all of the Committee’s
scheduled meetings. Private meetings were also held with
representatives from RSM UK. These meetings provided an
opportunity for any matters to be raised confidentially.

annual report and accounts
The Committee has assessed the financial statements
of the Group as to whether they are fair, balanced and
understandable and that they accurately represent the
financial position and performance of the Group, business
model and strategy.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

audit coMMittee RepoRt

continued

The key areas of estimation and judgement considered by
the Committee are detailed below:

Key areas of estimation and judgment
Share-based payments The most significant share-based
payment accounting costs for the Group relate to Long-
Term Incentive Awards (“LTIA”) and Deferred Equity Plans
(“DEP”). The key area of estimation is on the anticipated
levels of vesting. The Committee reviewed the performance
conditions for vesting over the life of the awards. The impact
of this assumption to the Income Statement was reviewed
and the Committee agreed that these assumptions were
appropriate.

Goodwill and intangible assets An impairment test using
a discounted cash flow model was conducted during the
year. The test demonstrated an impairment in relation to
the IMAs acquired as part of the acquisition of the ILC team
in 2017. The carrying value of intangible assets in relation
to the ILC team was reduced to nil. There is significant
headroom available between the fair value of the goodwill
asset and the carrying value for the remaining intangibles.

lease assets and liabilities IFRS 16 became effective for
periods beginning on or after 1 January 2019. The new
standard removes the distinction between operating and
finance leases and requires the recognition of a right of use
asset and corresponding liability for future lease payments.
The Committee received updates throughout the year
on the impact of IFRS 16 and key judgements, including
the determination of the lease term and identification
of an appropriate discount rate to use in the calculation
of the lease liability. The Group opted to apply IFRS 16
using a modified retrospective approach and adjusted its
opening reserves at 1 July 2019. The Committee agreed
with the discount rate recommended by management and
the estimation and judgement required to determine the
incremental borrowing rate.

Seed investments The Group holds seeding investments
in funds which it manages. Judgement is required to be
exercised in terms of assessing whether these funds
are to be consolidated in accordance with IFRS 10. The
Group’s policy is to hold seed investments as assets for
sale applying a simplified consolidation in accordance with
IFRS 5 unless factors dictate that the investments should
be consolidated in full under IFRS 10. At the reporting date
there were no funds which require full consolidation under
IFRS 10. A number of factors are applied to identify the funds
that require full consolidation. The Committee discussed
the approach taken by management and agreed that the
methodology applied was appropriate.

Going concern
The Committee is responsible for reviewing whether it is
appropriate for the Group and the Company to adopt the
going concern basis of accounting in preparing the half-year
and annual financial statements for the year ended 30 June
2020.

The Committee reviewed a number of factors such as
liquidity management and cash generation from operations,
its regulatory capital requirement, contingent liabilities,
unfavourable market scenarios versus the Group’s forecasts
and other risks to the Group’s operations or balance sheet
position.

The Committee resolved that it was appropriate for the
Group and the Company to adopt the going concern basis
of accounting in preparing the half-year and annual financial
statements for the year ended 30 June 2020 and that the
Group would be able to continue to operate over a period
of at least twelve months from the date of approving the
financial statements.

Statement of viability
Under the 2018 Corporate Governance Code the Group is
required to provide a statement of viability which can be
found on pages 44 and 45. The Committee reviewed the
Group’s viability for a period of three years and discussed
the Group’s current financial position, the Group’s liquidity
and any risk to its future liquidity and its regulatory capital
requirement and its forecast surplus capital. The Committee
recommended to the Board that the viability statement be
approved.

capital reduction
At the 2019 AGM, the Company sought and gained
shareholder approval for the reduction of the Company’s
share capital to facilitate the reclassification of the merger
reserve as a distributable reserve. The purpose of this
reduction of capital was to create distributable reserves to
support the Company’s ability to pay future dividends in
accordance with its dividend policy.

The capital reduction process is complex and requires High
Court approval. The Committee reviewed the application,
supporting witness statement and documents and
recommended their approval to the Board.

On 21 January 2020, the High Court granted the final order
and the appropriate filings were made with Companies
House resulting in an increase of £44.4 million in the
retained earnings of the Company.

external audit
BDO served as the Group’s external auditors during the year.

tenure
BDO was reappointed as the Group’s external auditors
following appointment in 2014. The Group is in compliance
with the requirements of the Statutory Audit Services for
Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 and the Corporate Governance
Code. This is the last year for the Lead Audit Partner Leigh
Treacy before she rotates off after five years tenure and
a new Lead Audit Partner will be approved by the Audit
Committee for the financial year ending 30 June 2021.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

internal audit
The Group’s internal audit function is outsourced to RSM UK.
The lead Internal Audit Partner reports directly to the Chair
of the Committee.

The Committee worked with internal audit to ensure that the
audit plan for the year addressed the most material risks to
the Group and the key themes affecting the industry and
considered the actions management has taken to implement
the recommendations of RSM. This included a focus on
financial promotions, SMCR implementation, key financial
controls and the detection and prevention of financial crime.
A total of six internal audits have been completed with
further internal audits planned for the remainder of the
2020 calendar year.

Effectiveness of internal audit
In reviewing the effectiveness and independence of the
internal audit function, The Committee is satisfied with
the quality, experience and expertise of RSM UK as an
outsourced internal audit function.

In its assessment, the Committee met with the lead partner
of Internal Audit to discuss the effectiveness of the function,
reviewed and assessed the annual internal audit work plan;
received reports on the results of the internal auditors’ work
and monitored and assessed the role and effectiveness
of the internal audit function in the overall context of the
company’s risk management systems.

anGela cRaWFoRd-inGle
CHAIR OF AUDIT COMMITTEE

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Effectiveness
An evaluation of the independence and effectiveness of
BDO as the Group’s external auditors was made, taking
into consideration relevant UK professional and regulatory
requirements.

In its evaluation the Committee considered explanations
from the auditors of the risks to audit quality that they
identified and how these have been addressed. The
Committee reviewed whether the external auditors have
met the agreed audit plan, including changes in perceived
audit risks and the work undertaken by the external
auditors to address those risks. In addition, the Committee
obtained feedback about the conduct of the audit from
key people involved including the Chief Financial Officer.
Finally, the Committee reviewed and monitored the content
of the external auditors’ management letter, and other
communications with the Audit Committee, in order to
assess whether it is based on a good understanding of the
Group’s business and establish whether recommendations
have been acted upon.

Overall, BDO was found to have performed effectively
during the audit and to have upheld the same standards of
professional service as prior years.

Fees
During the year BDO informed the Committee of its
expectation that fees charged in respect of the audit would
increase going forwards, driven principally by changes to
the audit market and an increased focus on audit quality.
The Committee challenged the level and rationale for the
increases.

The fees incurred with BDO during the year are disclosed
below.

Audit of the Company’s annual accounts
Audit of the Company’s subsidiaries
Audit related assurance services

Year ended
30 June 2020
£’000

Year ended
30 June 2019
£’000

130
114
75

319

104
99
52

255

Services classified as audit related assurance services
include the review of the interim results, and CASS audit. The
Committee is of the view that the provision of these services
by BDO continues to be the most efficient and cost-effective
means for this work to be completed.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

RiSK coMMittee RepoRt

Membership and attendance
Membership of the committee comprised the
independent non-executive directors
(meeting attendance is on page 51):

John Misselbrook (Chair)

•
• Angela Crawford-Ingle
• Miriam Greenwood

The Board considers all the members to have the relevant
skills and experience to be members of the Committee and
they have all attended the quarterly meetings, with ad hoc
meetings held as required. The Committee met five times in
the past year. The Committee invites other participants as
appropriate and has standing invitations for the Chairman,
Group Chief Executive and Head of Compliance, Chief
Financial Officer, Group Chief Risk Officer, Group General
Counsel and Head of Compliance and Group Chief Operating
Officer.

The Committee has had a full agenda consistent with the
Board’s objectives. During the year the Risk function was
further strengthened with the appointment of an investment
risk specialist.

Key responsibilities
• Assessing the principal risks that arise from the Group’s

business model that can impact future performance, and
to provide the Board with advice on risk strategy.

• Oversight of the risk framework.
• Review and recommendation for annual approval by the

Board of the risk appetite statement, including the key risk
indicators reflecting the Board’s risk tolerance.
• Reviewing and monitoring the effectiveness of our

processes and controls in identifying, mitigating and
managing significant strategic, credit, operational
regulatory, conduct and liquidity risks.

• Reviewing the Group’s ICAAP.

The Committee’s full terms of reference can be found at
www.riverandmercantile.com.

covid-19
The primary risks to the Group from the COVID-19
pandemic have been 1) the potential for significant fall in
equity markets and other asset prices, due to a significant
economic downturn, severely impacting on revenues, and 2)
the potential operational failures brought about by the move
to remote working.

As part of the Group’s ICAAP, the Group examined several
stress scenarios that could significantly impact Group
revenue and profitability. One such is a severe economic
downturn and associated fall in equity markets and other
asset prices. Under this scenario the Group is forecast to
generate cash and profits even in the face of the severe
economic downturn modelled.

In late Q1 2020 / early Q2 2020 we conducted a review of
actual market falls compared with the assumptions made
in our severe economic downturn stress scenario. The
maximum falls experienced to date during the COVID-19
period lie well within the stressed assumptions made in
our scenario.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

I would like to commend the focus executive management
have given to strengthening the risk culture in a particularly
challenging business environment and to my colleagues on
the Committee for their challenge and oversight.

JoHn MiSSelBRooK
CHAIR OF RISK COMMITTEE

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Additionally, the Group conducted a specific COVID-19-
related operational risk assessment to understand how
the Group’s business operations could be impacted. This
assessment examined two points in time:
• point 1 – Remote Working Adopted – the point when

the decision was taken for the whole Group to switch to
remote working.

• point 2 – Remote Working Established, approximately one
month after ‘Point 1’ when remote working both internally
and externally had become more established.

The assessment demonstrated that although inherent risks
have increased with the move to remote working, these
increases have been mitigated by one-off initiatives and
the existing control framework with minimal enhancement
needed.

The measures the Group has taken to continue business
operations in response to COVID-19 have demonstrated
the flexibility of staff to adapt quickly to new working
environments, as well as the resilience of the Group’s
infrastructure and operational processes to adapt to
function remotely.

Risk framework
Further work has been carried out through the year to
refine and improve the risk framework. To review and revise
policies, duties and responsibilities. The third line of defence
was strengthened with the appointment of an outsourced
internal audit function.

SMcR
The project that was underway at the time of my last report
was completed on time and enabled the business to meet
the senior manager regime requirements in December 2019.
Work has continued in 2020 to develop the fit and proper
certification regime and to provide the training required to
senior managers and certified staff.

icaap
During 2020 we have enhanced the capital allocation
methodology with the use of a statistical model.

conduct
Embedding the cultural values that puts the client first and
delivers good client outcomes has continued to be a focus
for the Executive Directors and the Board and particularly
through the significant change to operational practices as
the business moved from an office environment to working
from home.

Mutual funds
We successfully transferred the ACD for the UK domiciled
funds to Equity Trustees Fund Services Limited in Q4 last
year, and we have continued to improve our oversight of
fund liquidity. Through the sharp market correction and
increased volatility in the first quarter our funds retained
sound levels of liquidity. We have continued to enhance
oversight of funds through development of the second line
of defence investment risk function.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

inveStMent coMMittee RepoRt

Membership and attendance
Membership of the committee comprised the
independent non-executive directors
(meeting attendance is on page 51):

John Misselbrook (Chair)

•
• Angela Crawford-Ingle
• Miriam Greenwood

The Investment Committee was re-engineered and re-
constituted as a committee of the Board in early 2020 to
provide the Board with greater oversight of the Group’s
investment functions as they grow, develop and become
more diverse. As an investment focussed business that will
only grow significantly through strong investment processes
and performance, this will help to achieve the Group’s
growth objectives. The Committee as well as providing the
Board with deeper oversight of investment, investment
process and investment performance, will also enhance and
strengthen communications between the Board and the
investment teams.

The Board considers all the members to have the relevant
skills and experience to be members of the Committee.
The Committee met three times in the past year. There are
standing invitations to attend meetings extended to the
Chairman, Group Chief Executive, Group Chief Risk Officer,
Head of Distribution and Senior Managers responsible for
Investment for the RAMAM and RAMIL businesses.

Key responsibilities
• Reviewing the investment performance of the Group’s

investment products and solutions.

• Oversight of changes to investment policies and

processes.

• Where relevant, in-depth reviews of investment products

including policy and process.

• Oversight of the Group’s approach to ESG within our

investment solutions.

• Oversight of our investment competencies and capacity in

product development.

Focus to date
During this financial year the Committee Chair in conjunction
with the other members and standing attendees identified
the following areas of focus:
• eSG and sustainability: Oversight of how the investment

teams integrate ESG and sustainability into their
investment processes.

• liquidity assessment: A review of liquidity across Group
products was carried out to understand if there were any
that could be considered outside of investor expectation.
While liquidity differs across portfolios, none were
considered to be out of line with expectations.

• process and models: The Committee has been working
with the executive to document how changes to models
underlying investment processes should be governed
including the sign off process and which will be notified to
the Committee.

• Benchmarking and peer groups: A review of the

benchmarks and peer groups used across the Group’s
products to understand and assess their suitability, with
the aim of ensuring that success could be appropriately
assessed.

• value assessment: Oversight of the first value for money

assessment for the Group’s UK fund products.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Focus for the next year
Similar to last year the Committee with the standing
attendees have highlighted a number of areas for focus over
the coming 12 months:
• eSG and sustainability: This will continue to be an
important area for the Group both in launching new
products with a specific ESG focus and also integrating
into existing processes to provide more sustainable
portfolios.

• Second line risk reporting: With new hires in the risk

team we will be formalising the second line of defence risk
reporting up to the Board.

• liquidity stress testing: Reviewing the outcomes of

this testing and considering if any additional analysis is
relevant for the Groups’ products to ensure that investors’
expectations align with actual portfolio liquidity.

JoHn MiSSelBRooK
CHAIR OF INVESTMENT COMMITTEE

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

ReMuneRation

Membership and attendance
Membership of the committee comprised the
independent non-executive directors
(meeting attendance is on page 51):

• Miriam Greenwood (Chair)
• Angela Crawford-Ingle
John Misselbrook
•

Dear shareholders,

2020 has shaped up to be a year like no other. When I last
wrote to you, who could have imagined what the coming
year would bring? We are acutely aware of the difficulties and
uncertainty faced by many this year. As a company we do
not operate in isolation, and our clients and people too have
been affected by the events of this year.

James Barham, our Group Chief Executive, waived his
entitlement to receive variable remuneration this year in
advance of the Remuneration Committee’s determination of
year-end remuneration outcomes. This waiver of entitlement
includes both cash variable remuneration and the award
of an LTIA. James took this leadership decision in light of
the economic uncertainty and challenges presented by
the COVID-19 crisis and to protect the Group’s employees’
variable remuneration from further reduction because of the
reduction in performance fees earned in the period. We have
included in the Directors’ Remuneration Report, details of
James’ annual bonus appraisal.

Simon Wilson, having recently joined us, was not entitled to
any award of variable remuneration for the period. However,
in order to secure a candidate of Simon’s calibre, we granted
Simon a buy-out award of shares to compensate him for the
forfeiture of cash incentive compensation from his previous
employer.

The careful stewardship of the Company during this period,
has ensured that we have continued to pay dividends to our
shareholders in line with our dividend policy. We have not
required the assistance of any government sponsored relief,
such as the UK’s furlough scheme.

Remuneration review and new policy
You will recall that we said in last year’s annual report that we
were planning on undertaking a fundamental review of our
Remuneration Policy and consultation with our shareholders
on the design of a new policy. As you would expect, the
design and structure of a new Remuneration Policy has been
a key focus of the Remuneration Committee over the past
year. We have appointed new remuneration advisers, PwC,
to provide us with advice on the design and structure of a
new Remuneration Policy. Following careful consideration
of the Committee of the most appropriate policy for the
Group, we determined that our aim of a simplified policy
aligning shareholder and stakeholder interests with the
incentivisation of our Executive Directors to deliver the
Group’s strategy of profitable growth was best served by a
simplified remuneration structure focussed on long-term
incentives and the appropriate sharing in value creation
between shareholders and executives.

Our existing remuneration arrangements for Executive
Directors were put in place in 2017. Certain elements of
our existing Remuneration Policy have been problematic
both in concept and application for both shareholders
and the Company. The existing policy includes Executive
Director participation in the performance fee remuneration
pool. In 2019 following shareholder concerns, we removed
performance fee remuneration as a specific element
of variable pay for Executive Directors and rather treat

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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performance fees earned as being part of the total revenue
for the Group. This element of variable remuneration has
now been removed permanently in our new policy.

• A senior management share plan for key senior

employees with performance conditions closely aligned
with the Executive Directors’ value transformation plan.

The inclusion of a group wide remuneration cap of 54 per
cent. of net management and advisory fees plus 50 per cent.
of performance fees constrains the Group’s ability to invest
and retain high calibre individuals to develop and execute on
our strategic objective to deliver value to investors through
profitable growth. While the remuneration ratio cap in the
existing policy allows for the Remuneration Committee
to exercise discretion to exclude certain items from the
remuneration ratio cap on a temporary basis, the result
is unnecessary complexity and analysis as to whether an
item can be treated as outside of the remuneration ratio
cap. We are therefore seeking to remove the Group wide
remuneration ratio cap from our existing policy as part of the
simplification. The formal removal of this cap from the policy
does not pave the way for unconstrained remuneration
growth across the Group. Individual caps on variable
remuneration will continue to be operated. The Committee
will continue to monitor both the Group’s remuneration
ratio to avoid unwarranted increases to our spend on
remuneration and the return on our investment in people to
ensure that our growth strategy is delivered on.

The past year has seen changes to our executive leadership
team, with James Barham leading the Group as Group Chief
Executive and the appointment of Simon Wilson as Chief
Financial Officer. Our proposed new policy is designed
to incentivise and retain our refocussed executive team
and align their pay with shareholder and stakeholder
outcomes to ensure that they are fairly rewarded for strong
performance over the longer-term. The key features of our
proposed new policy to support these aims are:
• A reduction in maximum cash bonus opportunity from

300% of base salary to 250% of base salary of which half
are in shares, subject to a holding period of three years
and a further restriction on sale (other than for tax) unless
the minimum shareholding requirement has been met.
• The grant of a one-off five-year value transformation plan
sharing in the growth in value created above a 12% per
annum compound Total Shareholder Return (‘TSR’) hurdle
rate, where the sharing percentage is up to 6%.

• A significant increase in the Executive Directors’ minimum
shareholding requirements to 500% of base salary for the
Group Chief Executive and 300% of base salary for the
Chief Financial Officer.

• The extension of malus and clawback to all variable

remuneration awards or payments to Executive Directors.

• The introduction of a post retirement shareholding
requirement of 200% of base salary for two years.

• A reduction and alignment of pension contributions with

the wider workforce, currently 5% of base salary.

• The ability for the Committee to exercise its discretion
to override formulaic remuneration outcomes where
the circumstances warrant this, taking into account the
overall performance and position of the Company and the
performance of the Executive Directors.

Our proposed new policy simplifies performance metrics
and provides for clear and transparent performance metrics
that our shareholders can monitor performance of our
Executive Directors against. The policy is aligned with current
governance guidelines and best practices for executive
pay in listed companies. It aims to drive behaviours across
our senior management team that are consistent with our
conduct led culture and strategy.

the link between strategy and remuneration
The proposed new policy will support the delivery of our
strategy of investing for profitable growth to deliver value to
our shareholders. This is achieved by ensuring that a greater
proportion of overall incentives are delivered in the longer
term in the form of real equity.

The value transformation plan provides for the
appropriate sharing in value creation between executives
and shareholders where material value is created for
shareholders. It requires significant value, 12 per cent. per
annum TSR growth, to be achieved before the Executive
Directors are rewarded. The Executive Directors’ share in
the value created is capped at 6 per cent., split between the
Group Chief Executive and Chief Financial Officer as 3.75 per
cent. and 2.25 per cent. respectively.

James Barham has detailed his strategy for the Group in his
statement which provides further detail on the investments
that will be made in infrastructure, product and distribution
to achieve profitable growth. The value transformation plan
is by design supportive of his strategy and vision for the
Group, as it measures growth over a five year period allowing
only for the executives to share in this growth where it is in
excess of the challenging 12 per cent. per annum TSR hurdle
set by the Committee. Value created below the TSR hurdle
will result in no payments under the plan.

Risk and reward
Conduct and compliance continue to serve an important
role in remuneration for all employees to ensure that we
have a conduct led culture. All share awards are subject
to adjustment at the discretion of the Committee, with
the ability to override formulaic outcomes where deemed
appropriate to do so. Prior to the vesting of awards,
evaluation against a set of conduct, risk and compliance
checkpoints is undertaken and confirmation provided
to the Chairman of the Committee. Post-vesting, awards
may be subject to clawback provisions as determined by
the Committee.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

ReMuneRation

continued

employee share ownership
We continue to encourage a culture of employee share
ownership. We continue to see wide support for our HMRC
approved Save-As-You-Earn share scheme in the UK, with
recent uptake of 46 per cent. in our 2020 scheme.

Attracting, incentivising and retaining talented high
calibre individuals is key to delivering our growth strategy.
As mentioned above, we plan to introduce a senior
management share plan for key senior employees closely
aligned with the performance conditions of the Executive
Directors’ value transformation plan to promote vertical
alignment through the business.

directors’ remuneration report
I am pleased to present our Directors’ Remuneration Report
for the year ended 30 June 2020. The 2020 report is split into
two parts:
• The Directors’ Remuneration Policy. This is subject to

binding vote and sets out our future policy for approval by
shareholders.

• The Annual Report on Remuneration. This outlines how
we implemented our current policy in 2019/2020 and
how we intend to apply the new Directors’ Remuneration
Policy in the current financial year (FY20/21).

To reflect changes resulting from our proposed new
Directors’ Remuneration Policy, we are also putting forward
new rules for our value transformation plan and an
amendment to our DEP to allow for awards to be satisfied
from newly issued shares in accordance with ABI guidelines
which may be used for our senior management share plan
detailed above.

Shareholder engagement
I am grateful for the constructive engagement and valuable
feedback provided by our major shareholders which helped
to develop the new policy. We have sought to incorporate
shareholder feedback where possible.

We are keen to encourage an ongoing dialogue with our
shareholders on our remuneration framework and look
forward to receiving your support at the AGM in December.

MiRiaM GReenWood
CHAIR OF REMUNERATION COMMITTEE

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

diRectoRS’ ReMuneRation policY

Remuneration policy for executive directors
River and Mercantile is seeking shareholder approval for a new Directors’ Remuneration Policy (the ‘Policy’) at our 2020 AGM.
If approved, this new Policy is intended to apply for a period of three years from the AGM.

The last Directors’ Remuneration Policy was approved by shareholders at the 2017 AGM, and provides for a cash based
annual bonus plan and a share based long term incentive plan. We are seeking to implement a new simplified policy, under
which a significant proportion of the annual bonus is delivered in shares and a new five year long term incentive plan
(“Value Transformation Plan” or “VTP”) designed to remunerate Executive Directors only where material value is created for
shareholders with phased vesting in years 3, 4 and 5 of the plan.

We are also presenting for shareholder approval:
• Plan rules for the Value Transformation Plan; and
• An amendment to the existing Deferred Equity Plan (“DEP”) to provide for vested awards to be settled through the issuance
of new shares and /or market purchase shares and the alignment of the malus and clawback provisions between the DEP
and VTP.

executive director remuneration at a glance
This table summarises the proposed changes to the 2017 Directors’ Remuneration Policy, subject to shareholder approval.

Current Policy

Proposed Policy

Group Chief Executive salary: £360,000
CFO salary: £250,000

no change Group Chief Executive salary: £360,000
CFO salary: £250,000

Executive Directors may receive up to 10 per cent.
Group contribution to pension scheme.

Group Chief Executive: An amount equivalent to 9
per cent. of base salary

CFO: An amount equivalent to 5 per cent. of base
salary

Executive Directors have access to the same
benefits as the general workforce, including
the save as you earn scheme, health and other
insurances.

Short term
incentive (“STI”)

Maximum opportunity of 300 per cent. of base
salary payable in cash, subject to a 1:1 ratio with
Long Term Incentive Award.

performance fee
remuneration

A share of performance fees earned up to a
maximum of £1 million per annum.

Reduction in pension contribution or cash in lieu
of pension for Group Chief Executive. Pension
contributions aligned with the general workforce,
currently 5 per cent. of base salary.

no change

Reduction in opportunity to 250 per cent. of
base salary subject to the achievement of annual
performance targets with half paid in shares and half
paid in cash. STI shares are subject to a minimum
three-year holding period.

No STI shares may be sold, except to meet tax
liability until the minimum shareholding requirement
is achieved.

Removed from the proposed Policy.

Element

Salary

pension

Benefits

long term
incentive

Maximum award of 400 per cent. of base salary
per annum. Three-year performance period with
a two-year holding period. Vesting based on the
achievement of performance conditions, including
the maintenance of a minimum level of growth as
measured by adjusted underlying EPS growth.

Replace the annual grant over the next 3 years, with
a single five year value transformation plan sharing
in the growth in value created above a demanding
12 per cent. per annum compound Total Shareholder
Return (‘TSR’) hurdle rate with phased vesting over
years 3, 4 and 5 of the plan.

Participants will share in 6 per cent. (Group Chief
Executive – 3.75 per cent., CFO – 2.25 per cent.) of
the total value created for shareholders above this
hurdle rate. There will be no payout for performance
below the hurdle rate.

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ANNUAL REPORT AND ACCOUNTS 2020

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diRectoRS’ ReMuneRation policY

continued

Element

Current Policy

Proposed Policy

Remuneration
cap

Group wide remuneration capped at 54 per cent.
of net management and advisory fees, plus 50 per
cent. of performance fees.

Shareholding
requirement

post-cessation
shareholding
requirement

Malus and
clawback

200 per cent. of base salary.

No post-cessation shareholding requirement.

Malus adjustment applicable to all awards.

Clawback applicable to cash variable remuneration
and performance fee remuneration for a 12 month
period.

Group wide remuneration cap removed. Individual
bonus capped as a percentage of salary and VTP
opportunities capped in both absolute terms
and shareholder dilution. In addition, overall
compensation spend will be monitored annually
relative to affordability and the overall performance
of the Group.

increased to 500 per cent. of base salary for Group
Chief Executive and 300 per cent. of base salary for
CFO.

Post-cessation shareholding requirement of 200 per
cent. of salary for a period of 2 years.

Malus and clawback applicable to all variable
remuneration, with triggers aligned with market best
practice.

policY deSiGn and SHaReHoldeR enGaGeMent
The Remuneration Committee (the ‘Committee’) has considered and reflected upon the feedback received from shareholders
both in previous years on matters related to remuneration and governance, and has also undertaken extensive shareholder
consultation in advance of putting this Policy to shareholders for approval.

In developing this new Policy, with feedback received from our shareholders, it has been central to the Committee’s thinking
to ensure that there is a strong alignment between shareholder and stakeholder interests by incentivising our Executive
Directors to deliver the Group’s strategy of profitable growth. We believe this is best served by a simplified Policy focussed on
long-term incentives and the appropriate sharing in value creation between shareholders and Executive Directors.

Key features of the new Policy include:
• A long-term (five year) element of the incentive package to align and drive the longer term strategic objectives;
• Appropriate sharing in value creation between Executives and shareholders but only if material value, over a demanding
12% per annum compound Total Shareholder Return (‘TSR’) hurdle rate which includes dividends paid, is created for
shareholders through income and capital growth;

• A greater proportion of overall incentives will be delivered over the longer term in the form of shares, with a reduction in

the short-term cash incentive opportunity;

• Alignment with the pension contributions of the general workforce; and an
•

Increased alignment of executive interests to those of shareholders through a substantial increase in Executive Directors’
shareholding requirement and the introduction of a post-cessation shareholding requirement.

The Committee has been mindful of the weighting of fixed and variable pay and the balance of short and long-term awards,
and has sought to position a larger proportion of the remuneration package as equity-based and performance-related pay
to support the delivery of the Group’s strategic objectives of profitable growth and the creation of shareholder value. This
alignment of these objectives is further reinforced by the phased vesting, deferral of payments and holding periods and the
substantial increase in shareholding requirements to drive strong and sustainable growth with a longer term focus for the
business from the Executive Directors.

The Policy provides for simpler and more transparent performance metrics against which our shareholders can monitor
the performance of our Executive Directors. The Policy is aligned with current governance guidelines and best practice for
executive pay in listed companies. It aims to drive behaviours across our senior management team that are consistent with
our conduct-led culture and strategy.

Attracting, incentivising and retaining talented high calibre individuals is key to delivering our growth strategy. Accordingly, a
senior management share plan will be introduced for key senior employees aligned with the performance conditions of the
value transformation plan to promote vertical alignment through the business.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

When determining the Policy, the Committee has considered the requirements under the UK Corporate Governance Code
2018 (the ‘Code’). In order to avoid conflicts of interest arising, the Executive Directors are not members of the Committee.
Attendance at Committee meetings for non-members is by invitation only at the request of the Chair. The Committee believes
that it has taken sufficient steps to avoid and manage the conflicts of interest that may arise when determining the Policy. The
table below details how the Committee addressed the principles set out in the Code:

Clarity

• Remuneration arrangements under the Policy are transparent and promote effective engagement with

shareholders and our workforce.

• As part of the Policy review and design shareholders were consulted to understand their views on the

proposed changes.

Simplicity

• One of the key objectives of the Committee’s review and design of the new Policy was to ensure that

the remuneration structures in the Policy avoid complexity and are easy to understand.

Risk

• The VTP uses a single metric – a 12% per annum compound TSR hurdle rate – avoiding the use of

multiple complex performance metrics.

•

In line with regulatory requirements, our approach aims to promote sound and effective risk
management whilst supporting the Company’s long-term success. The Committee considers that the
structure of incentive arrangements does not encourage inappropriate risk-taking.

• Holding periods and our shareholding requirement (including the post cessation shareholding

requirement) provide a clear link to the ongoing and sustainable performance of the business and the
experience of our shareholders.

• The VTP has a phased vesting over years 3, 4 and 5 to avoid the risk of single cliff edge vesting driving

excessive risk taking.

• Malus and clawback provisions apply to STI and the VTP.

Predictability

• Our policy contains details of the threshold, target and maximum opportunities showing the range of

possible values of rewards to individual directors.

Proportionality

• Our Policy links individual awards with the delivery of strategy and the long-term performance of the

Company.

• Half of STI is paid in shares subject to a three year holding period.
• Under the VTP, Executive Directors are only rewarded where material value is created for shareholders

with phased vesting in years 3, 4 and 5 of the plan.

• The Committee has discretion to adjust formulaic outcomes if they are not considered to be

representative of the overall financial performance of the Group.

Alignment to
culture

• Reward is not determined solely on financial performance but also by metrics consistent with our

conduct-led culture and strategy.

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diRectoRS’ ReMuneRation policY

continued

The following table sets out the key elements of the Policy for the Executive Directors

Element and strategic link

Operation

Maximum opportunity

Performance targets
and recovery provisions

Salary

To provide competitive fixed
remuneration that will attract and
retain appropriate talent.

Changes from previous policy
None.

Benefits

To provide competitive benefits

Changes from previous policy
None.

There are no prescribed maximum
salary levels set under this Policy.

No performance targets.

No recovery provisions apply.

Salaries for Executive Directors
will not be increased by more than
the average increase in employee
salaries over the period since the
last change in Executive Director
salary, except to reflect changes
in role.

In exceptional circumstances the
Committee will retain the discretion
to award increases at a level greater
than that applied to the general
workforce. For example, if a role
has increased significantly in scope
or complexity or if an Executive
Director has been recruited on a
below market salary.

Benefit values may fluctuate from
year to year depending on premia
and the maximum potential value
is the cost of the provision of these
benefits.

No performance targets.

No recovery provisions apply.

Base salaries are appropriately
positioned to attract and retain
Executive Directors with the
required skills and experience to
deliver our strategic objectives.

Base salaries are paid in monthly
cash instalments and are normally
reviewed annually with any
increases effective from 1 July each
year.

In reviewing base salaries, the
Committee takes into account a
number of factors, including:
• Group and individual

performance;

•

Responsibilities, experience and
size/scope of role;

• Wage increases amongst the

general workforce; and

• Market data for comparable

roles in the sector determined
by reference to factors
that include size, business
operations, complexity, and
geographical locations.

Benefits are provided to ensure
our remuneration packages are
appropriate to attract and retain
executives with the required skills
and experience to deliver our
strategic objectives.

Benefits are provided to Executive
Directors at a market competitive
level, taking into account benefits
offered to the general workforce.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Element and strategic link

Operation

Maximum opportunity

pension

Enables and encourages provision
for retirement and reflects local
market practice.

Pension contributions as a
percentage of salary are aligned
with the general workforce.

Executive Directors are eligible for
employer contributions in respect
of the Group’s defined contribution
pension scheme, which may be
received in part or in full in cash.

The maximum contribution to the
pension scheme (or cash in lieu of
pension) is the greater of up to 5%
of salary or the average pension
contribution for the general
workforce.

Performance targets
and recovery provisions

No performance targets.

No recovery provisions apply.

Changes from previous policy
Reduction in maximum pension contribution from 9% of salary for the Group Chief Executive to a maximum of 5% of salary, to bring this fully in line
with the level currently offered to employees of the Group. The CFO was recruited on a pension contribution of 5% salary and therefore aligned with
the workforce from the outset.

annual bonus

To provide clear alignment of
objectives and performance
with the delivery of our annual
financial and non-financial strategic
objectives.

The element of the annual bonus
awarded in shares is subject to a
holding period to provide longer-
term alignment with the interests of
the Group and shareholders.

Eligibility to participate in an annual
bonus plan at the discretion of the
Committee.

Annual bonus maximum award of
250% of salary.

Half of the bonus awarded will be
delivered in shares (net of payment
for tax and NIC) and subject to a
three-year holding period.

Dividends may be received on
shares during the holding period.

If regulations (Financial Conduct
Authority or another regulatory
body relevant to the Group’s
activities) require deferral levels
that are greater than those set out
under the Policy, the Committee
will approve the required level of
deferrals of annual bonus awards
required to comply fully with the
regulations.

The Committee will determine
performance measures and
weightings annually that are aligned
with the business plan and strategy.
These will comprise a combination of
financial and non-financial measures,
with financial measures making up at
least 50% of the scorecard.

A threshold, target and maximum
performance level is set for each
measure, with an outcome of 0%
for threshold performance or below
and 50% of maximum for on-target
performance.

The Committee has discretion
to adjust formulaic outcomes if
they are not considered to be
representative of the overall financial
performance of the Group. Further,
performance outcomes are subject
to a discretionary downward risk
adjustment, in consultation with the
Board Risk Committee.

The specific metrics, targets and
performance against targets will
be disclosed retrospectively in the
Annual Report on Remuneration
for the year in which the bonus is
earned.

Clawback will apply to the annual
bonus as detailed below.

Changes from previous policy
An overall reduction in the quantum of annual bonus opportunity from 300% to 250% of salary. In addition, the introduction of half of the annual
bonus being delivered in shares and subject to a three year holding period, which seeks to reinforce the alignment of interests of the Executive
Directors with shareholders.

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diRectoRS’ ReMuneRation policY

continued

Element and strategic link

Operation

Maximum opportunity

Performance targets
and recovery provisions

Value Transformation Plan (“VTP”)

In aggregate, individual amounts
that may be received by Executive
Directors will be capped as follows:

Group Chief Executive – Lower of
£20 million or 2.5% of issued share
capital.

The initial share price used for
measuring TSR will be the higher
of £1.70 and the 30 day volume
weighted average share price from
the date of the publication of the
preliminary results for the financial
year ended 30 June 2020.

CFO – Lower of £12 million or 1.5%
of issued share capital.

The TSR used at each Measurement
Date will be based on a 30 day
volume weighted average share
price following the publication of the
preliminary results for the relevant
year.

Malus and clawback will apply to the
VTP as detailed below.

The Remuneration Committee
may vary the level of vesting, if it
determines that the formulaic vesting
level would not reflect business
or personal performance or such
other factors as it may consider
appropriate.

To provide long-term alignment
of executive remuneration to
sustained business performance
relative to long-term strategic
objectives and shareholder value
creation.

A one-off award that grants
Executive Directors the opportunity
to earn share awards over a five-
year performance period.

A minimum Total Shareholder
Return (“TSR”) of 12% compounded
annually above which value starts
to accrue to participants, with
nothing earned below this hurdle
growth rate. Participants will share
in 6% (Group Chief Executive –
3.75%, CFO – 2.25%) of the total
value created for shareholders
above this hurdle rate.

The TSR hurdle will be measured on
each of the third, fourth and fifth
anniversaries of the performance
period (“Measurement Date”). On
each of these Measurement Dates,
the participants will ‘bank’ their
share in the value created in excess
of the hurdle over the prior period,
in the form of nil-cost options. This
will be calculated based on the 30
day volume weighted average share
price following the publication
of the preliminary results in the
relevant year.

The TSR calculation includes
dividend payments. If the Company
has undertaken a share buy-back
between Measurement dates, The
Committee may make appropriate
adjustments to exclude the impact
of these from the calculation of
the TSR.

Banked nil-cost options will vest as
follows:
•

25% of the bank at the 1st
Measurement Date in year 3 of
the performance period;

•

25% of the bank at the 2nd
Measurement Date (less any
prior withdrawals) in year 4 of
the performance period; and

the balance of the bank at the
3rd and final Measurement Date
in year 5 of the performance
period.

Vested awards are subject to a
holding period such that they
become unrestricted no earlier
than 5 years from award.

Changes from previous policy
Conversion of the current annually granted three year Long-Term Incentive Plan to a single five year Value Transformation Plan. The VTP simplifies
performance matrices with a single performance metric, thereby providing a greater degree of transparency and direct alignment with longer-term
sustained business performance and shareholder value creation. It also allows Executive Directors to build up material shareholdings in the Group,
creating further alignment with the interests of the shareholders.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Element and strategic link

Operation

Maximum opportunity

Performance targets
and recovery provisions

all employee share plans

Executive Directors are eligible
to participate in HMRC-approved
share plans which promote share
ownership by giving employees
an opportunity to invest in Group
shares.

Changes from previous policy
None.

Shareholding requirements

Executive Directors may participate
in these plans in line with HMRC
guidelines on the same basis as
other eligible employees.

Participation levels may be
operated up to HMRC limits as
amended from time to time.

No performance targets.

No recovery provisions apply.

The monthly savings limit for Save
As You Earn (SAYE) is currently
£500.

To ensure that Executive Directors’
interests are aligned with those of
shareholders.

Executive Directors are required to
build up their shareholding over a
five-year period.

n/a.

The shareholding requirement for
Group Chief Executive is 500% of
Salary and CFO is 300% of Salary.

In addition to personally owned
shares, shares not subject to
performance conditions will count
towards the requirement on a net-
of-tax value basis.

Executive Directors must hold
vested shares until the requirement
is met except in exceptional
circumstances with the approval
of the Chair of the Committee.
Executive Directors may sell shares
to pay taxes that arise on vesting.

Shareholding levels will be assessed
annually following completion of the
annual grant and vesting of awards,
which will be disclosed in the
Annual Report on Remuneration.

Upon leaving the Group, Executive
Directors will be required to retain
shares equivalent to 200% of salary
or the number of shares held by an
Executive Director if this is lower,
for a period of 2 years.

Changes from previous policy
Minimum shareholding requirements increased substantially for all existing Executive Directors from 200% of salary, with the introduction of a
post-cessation shareholding requirement. The increased shareholding requirement for Executive Directors further supports shareholder alignment,
encouraging sustainable share price growth. Introducing a post-cessation shareholding requirement for Executive Directors will ensure Executive
Directors consider effective succession planning and provides an ongoing exposure to the impact of decisions made during their employment
through the share price of the Group post-cessation.

Malus and clawback
Malus and clawback provisions are applicable to STI and the VTP for the following periods:

STI – Cash
STI – Shares

VTP

Clawback is applicable for at least 2 years from the payment date.

Malus adjustment applies to unvested nil cost options up to 5 years from the award date.
Clawback applies to vested nil cost options for two years following vesting of the nil cost options.

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diRectoRS’ ReMuneRation policY

continued

The circumstances in which the Committee may consider the application of malus and/or clawback are summarised as follows,
but not limited to:
• A material misstatement of the Group’s audited financial statements;
• Material failure of risk management;
• Fraud or other material financial irregularity;
• The participant has contributed to a material downturn in the financial performance of the Group (including a significant

increase in the regulatory capital);

• The participant has contributed to circumstances which give rise to a sufficiently negative impact on the reputation of the

Group or would have if the circumstances had been made public;

• An error in the information or assumptions on which the award was granted, vests or is released as a result of erroneous

or misleading data or otherwise;

• Serious misconduct by a participant or otherwise; and where the Committee, in its reasonable opinion, determines that

any act or omission by the participant warrants the exercise of malus; or

• Corporate failure.

performance measures
Performance measures for the annual bonus are determined based on a mixture of financial, operational and strategic
metrics and personal objectives. The types of measures chosen will seek to ensure alignment with the Group’s strategy each
year. The precise metrics chosen, along with the weightings of each, may vary from year to year. The Committee will review
the performance measures and targets each year and vary them as appropriate to reflect the priorities for the business in the
year ahead.

Performance under the VTP is solely based on Total Shareholder Return over a five-year period. The target reflects the
ambitious growth plans for the Group and this measure ensures that the Executive Directors’ interests are fully aligned with
shareholders.

Overall compensation spend will be monitored by the Committee annually relative to affordability and the overall
performance of the Group. Further, in order to ensure sound and effective risk management, performance outcomes are
subject to a discretionary downward risk adjustment by the Committee with appropriate input from the risk, compliance and
HR functions.

legacy arrangements
Executive Directors may be eligible to receive any payments from any remuneration arrangements in effect prior to the
approval of this Policy (including vesting of share awards granted under prior Remuneration Policies or to the appointment
to the Board). Details of any such payments will be set out in the applicable Annual Report on Remuneration as they
arise. Outstanding awards include the 2018 LTIA and 2019 LTIA awards which are due to vest in June 2021 and June 2022
respectively. The 2019 LTIA award is also subject to an additional 2 year holding period.

Recruitment policy
Remuneration packages for new Executive Directors (including those promoted internally) will be in line with the requirements
of this Policy including maximum incentive levels.

If required, awards may be granted to replace awards or amounts granted to a new Executive Director by a previous employer
that are forfeited (buy-out awards). Any buyout awards would be limited to what is considered to be a fair estimate of the
value of remuneration forfeited and with equivalent terms (including vesting dates and performance conditions). The grant
value of buyout awards is not subject to the maximum limits described in this Policy.

The Group may cover a new Executive Director’s reasonable legal costs and certain relocation expenses.

New Executive Directors may be eligible to participate in the VTP at the discretion of the Committee. Their share may be
reduced to reflect the time elapsed from the grant of the initial awards, and the date of joining. The hurdle will remain
unchanged and the starting price will be set at a minimum at the starting price for other Executive Directors. All awards limits
and caps, as set out in this Policy, will apply to any new Executive Directors. The overall share of value to Executive Directors
over the life of the VTP will not increase as a result of any new Executive Directors participating in the VTP.

performance scenarios
The charts provide an estimate of the remuneration that could be received by Executives Directors under the Policy set out
in this report. Each of the bars is broken down to show how the total under each scenario is made up of fixed elements of
remuneration, the annual bonus and the VTP. The charts illustrate that a significant proportion of both target and maximum
pay is performance-related.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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Group Chief Executive
£

Chief Financial Officer
£

Minimum

100%

£380,563

Minimum

100%

£265,063

Target

37%

44% 19%

£1,023,896

Target

38%

45% 17%

£694,230

Maximum

23%

54%

23%

£1,667,230

Maximum

24%

56% 21%

£1,123,396

500,000

1,000,000

1,500,000

2,000,000

500,000

1,000,000

1,500,000

2,000,000

Fixed
Annual bonus
VTP

The table below sets out the assumptions used to calculate the elements of remuneration for each of the scenarios.

Scenario

Minimum

Target

Maximum

Annual bonus(1)

Value Transformation Plan(2)

Performance below threshold on every
metric thus no bonus awarded

TSR growth less than 12% and thus no award
under the VTP

Performance in line with expectations and
thus 50% of maximum bonus awarded

Performance is in line with the Group’s
expectations – 50% of the average annual
initial estimate of the accounting cost of
award

Salary, Pensions
and Benefits

Fixed – included

Performance exceeds Group expectations
and thus 100% of maximum bonus
awarded

Maximum performance is achieved – 100% of
the average annual initial estimate of the
accounting cost of award

Fixed – included

1. The maximum Annual bonus is 250% for both Executive Directors.
2. The VTP is a one-off award with a performance period of five years and a minimum holding period of five years from award. In line with the guidance issued by the GC100,
the maximum value has been taken as the IFRS2 accounting cost, divided by 3 years commensurate with the life of this Policy, which is intended to provide an estimate of
the value of the award on grant for this purpose. The target value represents 50% of the maximum.

The Group is aware of the revised regulations requiring the maximum scenario in the above charts to reflect Group share
price appreciation of 50 per cent. during the relevant performance period for performance targets or measures relating to
more than one financial year (i.e. the proposed VTP). For the proposed VTP a share price appreciation of 50 per cent. over five
years would result in a nil payout i.e. that shown under the minimum scenario. As such, the 50 per cent. share price growth
scenario has not been included. In addition, dividend equivalents have not been added to the Annual Bonus or VTP share
awards.

As an alternative to the accounting value used for the VTP in the scenario charts above, the table below sets out the
potential payout to the Executive Directors under the VTP based on a linear 20 per cent. p.a. growth in TSR over the five year
performance period.

TSR Growth

Share price: start – end (including dividends)

Share of additional value created (%)

Shareholders

Group Chief Executive

CFO

20% p.a.

£1.70 to £4.23

£206m (95.1%)

£6.7m (3.1%)

£4.01m (1.8%)

executive directors’ service agreements
All Executive Directors have service agreements of an indefinite duration that can be terminated by either party by serving
12 months’ notice. Under the Policy this is the maximum notice period that may be applied to Executive Directors. The
terms of the service agreements are considered to be in line with current best practice for Executive Directors. The service
agreements are available for inspection on request at the Company’s registered office and at the AGM.

Unless approved by the Company, the Executive Directors may not accept external directorships. Any external appointments
of Executive Directors will be disclosed in the annual report.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

diRectoRS’ ReMuneRation policY

continued

Loss of office
In the event of the termination of an Executive Director, the terms of the termination will be determined by reference to the
service agreement, the Policy and the rules of the relevant incentive plan, as detailed below:

element

policy

notice period

Twelve months for either party.

termination
payments

Sti

vtp

The Company may require that all or an element of the notice period be taken as gardening leave.

If an Executive Director is dismissed for cause, there will be no notice period or payment made for loss of office.

Consistent with other employees, the Group may, depending on the circumstances of the termination, determine that it will
not pay the Executive Director in lieu of notice and may instead terminate an Executive Director’s contract in breach and
make a damages payment, taking into account as appropriate the Director’s ability to mitigate his or her loss, subject to
entering into a satisfactory settlement agreement. Payments may include insurance cover for a specified period following the
termination date, outplacement services, legal fees or repatriation assistance. The Company may elect to pay in lieu of notice
for all or a portion of the contractual notice period. In this instance, payment would be restricted to salary only and may be
delivered monthly to mitigate loss.

Any holiday entitlement will be pro-rated to reflect the proportion of the year employed. The Executive Director shall be
entitled to payment in lieu of accrued holiday. The Company may require that any outstanding holiday entitlement be used
during the notice period.

In the event of redundancy, a payment may be made in accordance with the Groups’ redundancy policy in effect at that time.

Good Leavers* may receive an annual bonus that the Committee determines would otherwise have been made, prorated
for the period worked during the performance period, with any such award being subject to the original terms of the annual
bonus (with the exception of death where the payment will be made as soon as reasonably practicable).

Any leaver not determined to be a Good Leaver* would not be eligible for any annual bonus in the year of termination.

For annual bonuses already paid under this Policy, the original holding period and clawback over this period will continue
to apply on the share element (with the exception of death where the holding period will be released as soon as reasonably
practical.

Any leaver not determined to be a Good Leaver* will not be eligible to be granted any options and any banked nil cost options
that have not vested will be forfeited. Options that have vested and which have not been exercised will lapse i) immediately if
the date of cessation of employment falls within five years of the award being made; or ii) thereafter 6 months from the date
of cessation of employment or such other period as determined by the Committee. Holding periods will continue to apply to
vested nil cost options (other than in the event of death).

For Good leavers* banked nil-cost options will vest at the normal vesting and will remain subject to the holding period (other
than in the event of death). The Committee may determine that a Good Leaver*, leaving before the first Measurement Date,
may continue to participate in the VTP on a pro-rata basis. A Good Leaver* leaving after the first Measurement Date may, at
the discretion of the Committee, be able to participate in the VTP until the next Measurement Date following the cessation
of employment on a pro-rata basis. After the vesting period, vested options that are exercisable shall lapse after 6 months
from the date of cessation of employment or such other period as determined by the Committee. Holding periods will also
continue to apply to vested nil cost options (other than in the event of death).

* An Executive Director will be considered to be a good leaver where he or she leaves for reasons including death, ill health, injury or disability, retirement, redundancy, the

transfer of the individual’s employment as part of a disposal of a business or the Company where the individual is employed or holds office ceasing to be a Group Company.
The Committee has the discretion to determine that leaving for any other reason be treated as a good leaver.

executive director

Director Name

Appointment date

Effective Date of Current Service Agreement

Notice period

James Barham

27th March 2014

Simon Wilson

19th May 2020

6th April 2014

19th May 2020

12 months

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

non-executive director

Director Name

Appointment date

Effective date of current service agreement

Notice period

Miriam Greenwood

28 May 2019

Angela Crawford-Ingle

29 May 2014

John Misselbrook

16 February 2018

Jonathan Dawson

1 October 2017

28 May 2019

5 June 2017

16 February 2018

1 October 2017

3 months

When setting notice periods, the Committee has regard to market practice and corporate governance best practice. All
service contracts are available for viewing at the Group’s registered office and at the AGM.

change of control policy
A relevant corporate action will be defined as:
• A change of control of the Company as a result of a general offer to acquire shares;
• A compulsory acquisition of shares under Section 979 to 982 of the Companies Act 2006 takes place;
• A Court sanctioned scheme of compromise or arrangement which would result in a change of control takes place;
• A competent authority approving a cross border merger pursuant to which the Company ceases to exist; or
• Notice is given for a voluntary winding up of the Company.

Remuneration element

Recruitment Policy

Annual bonus –
Cash

Annual bonus –
Shares subject to
holding period

Value
Transformation
Plan

Pro-rated for time and performance to the date of the change of control.

The Remuneration Committee has discretion to determine otherwise.

Awards subject to a holding period will be released.

The Committee has discretion to not release the award early and instead roll the award into an equivalent
award in the acquiring company, subject to the agreement of the participants.

The date of change of control will replace the end of the next VTP measurement date and the normal
calculations will be undertaken with nil-cost options being awarded and vesting immediately at that time.

The measurement price on a change of control to determine the final VTP payment (calculated from the
previous measurement date) will be equal to the offer price.

Awards will not be prorated on change of control, but remain subject to the hurdle assessment as described
above.

The Committee has discretion to not release the award early and instead roll the award into an equivalent
award in the acquiring company, subject to the agreement of the participants.

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

diRectoRS’ ReMuneRation policY

continued

Remuneration policy for non-executive directors

The following table sets out the key elements of remuneration for Non-Executive Directors.

Component

Operation

Further information

The Non-Executive Directors will be entitled
to additional fees in exceptional
circumstances if determined appropriate by
the Chairman in consultation with the Group
Chief Executive.

Fees
To attract and retain an individual
with the appropriate degree of
expertise and experience.

Benefits
To enable the non-executive
Directors to undertake their roles.

notice period

Key terms of appointment

Fees are paid in cash.

Fees for the Chairman are determined by the
Committee, and fees for other non-executive
Directors are determined by the Executive
Directors in consultation with the Chairman.
This includes the use of benchmarking data
to determine appropriate fee levels. Non-
Executive Directors are paid a base fee and
additional fees for acting as senior
independent director or the chair of a
committee. The Committee will make changes
to remuneration as appropriate, subject to
the aggregate limit on non-executive
directors’ base fees set out in the
Company’s Articles of Association.

Fees are set at a level which reflect the duties,
time commitment and contribution expected
from the Chairman and non-executive
directors.

Non-executive Directors’ benefits are
principally expenses incurred in connection
with the Group’s business and reflect
business needs.

Three months by either party without liability
for compensation for early termination.

The Chair and the Non-Executive Directors
are subject to annual re-election at the AGM.

Statement of consideration of employment conditions elsewhere in the Group
The Committee has taken careful consideration of remuneration arrangements for employees across the Group in
determining the Policy and its implementation. Although we have not formally consulted our employees on the design and
implementation of the Policy, the Committee considers employee feedback on remuneration and incentive arrangements.
The Chair of the Committee is the director responsible for employee engagement. Employee feedback on the desire for
wider equity incentive schemes has been considered and addressed through the implementation of the senior management
share scheme. The Group’s HR Director is present at all Committee meetings and provides the Committee with reporting
on proposed salary levels and variable remuneration awards during the annual remuneration process, and periodically on
request. The Committee approves the overall variable remuneration spend each year and performs a detailed review of
the remuneration of senior employees in addition to its review of remuneration of the Executive Directors. This information
helps the Committee reach a conclusion on the remuneration policy which they believe is appropriate in light of employee
remuneration and represents a consistent approach throughout the Group.

A remuneration policy is in place for establishing standards for the design and operation of remuneration across the
Group, which has consistent principles with this Policy. Pension and benefit programmes are in place for all employees.
Pension entitlement for Executive Directors is aligned with the general workforce. The majority of benefits are also aligned.
All employees are eligible for an annual bonus, determined through robust performance assessment. There are plans to
introduce a below Board senior management share plan, promoting vertical alignment through the business. Employees are
eligible to participate in all-employee share schemes on the same terms as the Executive Directors.

The Committee will receive information on remuneration across the Group, including average salary increases, variable
remuneration allocations between business areas, the design and outcomes of incentive plans and the CEO pay ratio, when
determining the implementation of the Remuneration Policy for Executive Directors.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

compliance with regulation and legislation
The regulatory and legislative environment is changing rapidly, with implications for remuneration approaches. Whilst all steps
are taken at the time of drafting a policy to ensure it is compliant with both the letter and spirit of current requirements, this
can change over a three-year cycle. As such, the Committee may be required to amend the Policy outside of this cycle and
in doing so will seek appropriate approval from shareholders in order to ensure regulatory and legislative compliance at all
times.

Statement of shareholder views
When setting the Remuneration Policy and determining remuneration, best practice guidelines issued by institutional
shareholder bodies are taken into account.

The Committee has an open relationship with shareholders and welcomes dialogue. As part of the development of this new
Policy, the Committee has engaged with the largest shareholders and institutional shareholder bodies to understand their
views on this Policy. Initial shareholder feedback in the design phase of the Policy resulted in certain changes to the approach
to STI and the approach to the initial share price used for measuring TSR in the VTP. The formal consultation process captured
views from over 50 per cent. of the shareholder base. Shareholders particularly wanted to understand:
•
•
•
•

the phased vesting under the VTP;
the holding periods for vested options under the VTP;
the Board’s approach to monitoring spend on remuneration; and
the post-cessation shareholding requirement for the Group Chief Executive.

We have endeavoured to respond to this feedback and provide clear rationale for the proposals.

The Committee will continue to monitor trends and changes in the corporate governance landscape to ensure remuneration
at River and Mercantile remains appropriate and continue to engage with shareholders on the effectiveness of the
Remuneration Policy.

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

ReMuneRation coMMittee RepoRt

The Remuneration Committee reviews and sets the
remuneration of the Executive Directors within the
parameters of the Directors’ Remuneration Policy
as approved by shareholders at the 2017 AGM
(the ‘Remuneration Policy’ or ‘Policy’).

The Committee has a wide remit to consider the
remuneration of senior management and employees across
the Group.

The Committee is chaired by Miriam Greenwood with Angela
Crawford-Ingle and John Misselbrook as members of the
Committee. The Committee held fourteen meetings during
the financial year, and Committee attendance is presented
on page 51. Other attendees, including the Chairman, Group
Chief Executive, Group HR Director and Chief Financial
Officer attend by invitation.

Both the Directors’ Remuneration Policy and the
Committee’s terms of reference can be found in the
corporate governance section of the Group’s website
www.riverandmercantile.com.

During the year, the Committee has considered a number of
key matters, and the most significant are set below:
• The design of the new Directors’ Remuneration Policy,
including the proposed Executive Directors’ Value
Transformation Plan and the performance measures used
in awards under the Value Transformation Plan;
• Major shareholder feedback on the proposed new

Directors’ Remuneration Policy;

• The timing of seeking shareholder approval on the
proposed new Directors’ Remuneration Policy;

• The design and performance measures for the new senior

management share plan;

• Following the decision to appoint Simon Wilson as Chief
Financial Officer, the remuneration proposal for Simon
Wilson including his buy-out award;

• The vesting of employee share incentive awards and

deferred bonus awards;

• The selection of new remuneration advisors to the

Committee;

• The approval of the base salary increases and variable
remuneration for the Group’s senior management;
• The oversight and review of the Group’s approach to

variable remuneration for all employees, including the
bonus pools for all employees; and

• Oversight of the application of regulatory rules on the
deferral of variable compensation of the Executive
Directors and other Material Risk Takers variable
compensation.

The Committee’s key responsibilities are:
• To determine and agree the Group’s remuneration

philosophy and the principles of its remuneration policy
for Executive Directors and senior management, ensuring
that these are in line with the Group’s strategy, objectives,
values and long-term interests and in compliance with
regulatory requirements;

• To review, agree and approve an appropriate Directors’

Remuneration Policy, having regard to the remuneration
of all employees and the views of shareholders and other
stakeholders;

• To oversee the setting of the Executive Directors’

performance objectives and assessing the extent to
which each Executive Director has met their individual
performance targets;

• To review and set the remuneration of the Chairman,

Executive Directors, senior management and oversee the
remuneration of key employees, including Material Risk
Takers;

• To review the design of all share incentive plans and

deferred bonus arrangements, including the review and
approval of share plan rules;

• To review and approve the grant, performance conditions
and vesting of any share incentive awards or deferred
bonus awards for all employees including Executive
Directors;

• To determine if any deferred bonus award or share
incentive award should be reduced or cancelled, in
accordance with the provisions of the relevant share plan
rules;

• To review the Group total compensation ratio and the

annual variable compensation pool;

• To review reports from the Chief Risk Officer and Head
of Compliance with respect to any conduct and risk
outcomes and any remuneration changes which should
reasonably be followed;

• To determine and approve on an annual basis the

individuals identified as being material risk takers for the
relevant regulated subsidiaries as defined and required by
the applicable FCA regulations; and

• To review and approve any major changes to employee

benefit structures throughout the Group.

Summary of current remuneration policy
Executive Directors’ remuneration is determined in
accordance with the Remuneration Policy. There have been
no changes to the Remuneration Policy this year and as such
we remain bound by the Policy approved by shareholders at
the 2017 AGM. As noted above, we are seeking shareholder
approval at our December 2020 AGM. If approved, this new
Policy is intended to apply for a period of three years from
the AGM.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

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Executive Director remuneration comprises base salary,
pension and other benefits; and variable remuneration in the
form of a cash bonus, a performance fee bonus and LTIAs in
either equity or fund units.

The current Policy includes an overall Group remuneration
ratio cap of 54 per cent. of net management and advisory
fees, plus 50 per cent. of performance fees, as well as
deferrals in respect of performance fee bonuses but
also permits the Committee to make adjustments to the
calculation of this cap on a temporary basis.

Malus applies to all awards during the performance period
and is considered by the Committee when vesting an award.
Clawback will apply to cash variable remuneration, LTIA and
performance fee remuneration for a period of 12 months
after the date of payment in case of material financial
misstatement or serious personal misconduct.

The Policy also requires Executive Directors to acquire and
retain at least 200 per cent. of base salary in the Company’s
shares within five years of taking office.

The following sections set out the remuneration
arrangements and outcomes for the year ended 30 June
2020 and how the Committee intends the to apply the new
Directors’ Remuneration Policy during the year ending
30 June 2021, subject to shareholder approval.

In line with our robust governance around remuneration and
normal processes, the Committee discussed the Executive
Directors’ achievement against the relevant strategic goals
of the Company. Performance against these goals would
have been achieved in full or in part and a bonus payment
would be ordinarily due to the Group Chief Executive,
James Barham. As noted below, James Barham waived any
entitlement to receive variable remuneration.

For the financial year ending 30 June 2021, each Executive
Director will be assessed against a number of financial
and non-financial metrics on a consistent basis in order
to determine their performance and their resulting
remuneration outcomes. The measures will be set by
reference to the budget agreed for the year and a detailed
description of the measures and outcomes will be published
in next year’s Annual Report.

leadership changes
The past year has been a year of significant change for
the Group. It was the first year of James Barham’s tenure
as Group Chief Executive and we welcomed a new Chief
Financial Officer, Simon Wilson. Simon’s appointment
completes our refreshed executive leadership team.
Following his handover to Simon, Kevin Hayes retired from
the Group in May 2020. Kevin did not stand for re-election
at the 2019 AGM and resigned as a Director with effect from
9 December 2019.

The following pages have been prepared in accordance
with the Companies Act 2006, the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations
2008 as amended, the UK Corporate Governance Code 2018
and the FCA’s Listing Rules and will be put to an advisory
shareholder vote at the AGM on 14 December 2020.

Review of performance for the year
ended 30 June 2020
The Committee is expected to review the Group’s Key
Performance Indicators and other metrics in assessing the
performance of the Executive Directors against their specific
individual performance objectives for 2020.

Mike Faulkner and Jack Berry did not seek re-election as
Directors at the 2019 AGM and stood down from the Board
with effect from 9 December 2019. Both Mike Faulkner
and Jack Berry remain employed by the Group in senior
management positions. Mike Faulkner is the Group’s Chief
Investment Officer and Jack Berry is the Global Head of
Complex Clients.

Full details of the remuneration arrangements in relation to
Simon Wilson’s appointment and the remuneration paid to
Jack Berry, Mike Faulkner and Kevin Hayes while they were
Directors are set out in the single figure remuneration table
below.

The year ended 30 June 2020 was an unusual year for two
reasons:
• Because of the COVID-19 crisis, James Barham elected to

take no variable remuneration of any kind.

• No variable pay was payable to Simon Wilson as he joined
at the end of the financial year and no specific objectives
were set for 2019/20.

Fixed base remuneration and benefits
On appointment as Group Chief Executive on 1 July 2019
James Barham’s base salary increased to £360,000. Simon
Wilson joined the Group on 19 May 2020 with a base salary
of £250,000. There were no other changes in Executive
Director base pay and benefits for the financial year ending
30 June 2020 and none is proposed for the financial year
commencing 1 July 2020.

Because of these unusual circumstances the Committee
used its discretion to override the requirement for a formal
assessment of performance for the purpose of determining
variable pay awards for the Executive Directors for the year
ended 30 June 2020.

Executive Director

James Barham

Simon Wilson

2019/20

2020/21

Current
salary

new
salary

360,000

250,000

Increase

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

ReMuneRation coMMittee RepoRt

continued

Cash variable remuneration (audited)
James Barham, Group Chief Executive, waived his entitlement
to receive variable remuneration for the financial year ended
30 June 2020 in advance of the Remuneration Committee’s
determination of year-end remuneration outcomes.
This waiver of entitlement includes both cash variable
remuneration and the award of an LTIA. James Barham took
this decision in light of the overall economic uncertainty and
challenges presented by the COVID-19 crisis and to protect
the Group’s employees’ variable remuneration from further
reduction as a result of lower performance fees earned in
the period. Accordingly, no cash variable remuneration has
been awarded to James Barham for the financial year ending
30 June 2020.

Simon Wilson joined the Group on 19 May 2020 and has not
been awarded any variable remuneration for the year ended
30 June 2020. Further details of Simon Wilson’s buy-out
award are detailed below.

None of the former Executive Directors received any variable
remuneration in relation to their time spent as Executive
Directors during the financial year ended 30 June 2020.

Executive Director

James Barham

Simon Wilson

Cash
bonus

Performance fee bonus (audited)
The Committee took careful note of shareholder feedback
and exercising its discretion made no performance fee
bonus payments to Executive Directors in the financial year
ended 30 June 2020.

Pension contributions (audited)
James Barham receives a fixed cash allowance of 9 per
cent. of salary (i.e. £2,708.34 per month) in lieu of pension
contributions due to his pension funding status. As noted
in the previous section detailing the proposed new Policy,
James Barham’s pension benefits, in the form of a cash
allowance, will be decreased to 5 per cent. of salary to ensure
alignment with the pension contributions for employees.

Simon Wilson receives a cash allowance equivalent to 5 per
cent. of base salary per annum.

None of the Directors has a prospective right to a defined
benefit pension by reason of qualifying services to the
Group.

The River and Mercantile Group pension scheme,
administered by Standard Life, is a Defined Contribution
Money Purchase scheme available to all staff on joining.
Other than a small number of employees who retain non-
contributory arrangements from earlier employment with
the Group, the vast majority of employees (195) contribute
5 per cent. of salary, matched by 5 per cent. in Company
contributions. All employees have the option to have their
contributions made via a salary sacrifice arrangement.

Buy-out award (audited)
On joining the Group, Simon Wilson was granted a one-off
conditional award of 177,061 shares under the terms of a
buy-out award deed approved by the Committee. The buy-
out award was to compensate Simon for the forfeiture of
cash incentive compensation from his previous employer.
The buy-out award is consistent with our Policy and was
necessary to secure an individual of Simon’s calibre.

The deferred cash bonuses that were forfeited by Simon
were not subject to any performance conditions and were
payable annually over the deferral period. The Policy
requires that buy-out awards are granted on a like-for-like
basis and take into account the nature, time horizons and
performance requirements of the forfeited remuneration.
The Committee determined that the buy-out award granted
to Simon was more onerous than the forfeited remuneration,
as the award is in shares rather than cash with vesting at the
end of the three year period.

In accordance with the Listing Rules, the buy-out award was
granted under a one-off award agreement and will be limited
to settlement with market purchased shares. The buy-out
award was granted on 19 May 2020. The buy-out award
has no performance conditions and will ordinarily vest on
30 June 2023 subject to continued service with the Company.

Other significant terms of the award are as follows:
• The award is personal to Simon and may not be

transferred.

• Dividends will not accrue in respect of the shares to which

the buy-out award relates.

• Malus and clawback – the Committee may at any time
prior to the fifth anniversary of the award date reduce,
impose further conditions or cancel the award where
there has been a material misstatement of the Company’s
audited financial statements as a result of Simon’s actions
or omissions, or a breach of the Company’s stated risk
appetite or breach of policy or regulation as a result of the
Executive’s actions or omissions, or where the Committee
reasonably determines that Simon’s actions or omissions
have caused injury to the business.
If Simon resigns or is summarily terminated before the
vesting date, the buy-out award will lapse. The award
will vest on the vesting date if Simon leaves for any other
reason.

•

• The award is non-pensionable.
• The number of shares subject to the award may be
adjusted in the event of a variation of share capital.
In the event of a certain qualifying corporate events such
as the Company entering into a scheme of arrangement
or a change of control prior to the vesting date, the award
will vest in full. Early vesting may also exceptionally arise at
the discretion of the Committee in response to a merger,
delisting, special dividend or other event which in the
opinion of the Committee may affect the current or future
value of the award.

No further award will be made to Simon Wilson under this
arrangement.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Single figure remuneration (audited)
The following table gives the single figure remuneration for Executive Directors who served during the financial years ended
30 June 2020 and 30 June 2019.

James Barham

Simon Wilson

Jack Berry

Mike Faulkner

Kevin Hayes

Year
ended

30 June

Base

salary

Taxable
benefits1

Pension5

Total of fixed
remuneration

Annual
bonus2

2020

360,000

2,563

32,500

395,063

–

312,500

2,470

31,250

346,220

343,750

29,762

n/a

1,488

31,340

n/a

2020

126,392

1,069

12,639

140,100

–

n/a

–

2019

2020

2019

PSP
shares
vested3

SAYE
Options4

Total
of variable
remuneration

Total

–

n/a

–

395,063

6,604

350,354

696,574

–

n/a

–

n/a

31,340

n/a

140,100

2019

287,650

2,470

28,765

318,885

143,825

226,238

6,566

376,629

695,514

2020

155,106

1,069

2019

353,000

2,470

–

156,175

355,470

2020

152,542

1,069

15,254

168,865

–

2019

287,650

2,470

28,765

318,885

287,650

–

156,175

435,505

6,122

441,627

797,097

–

168,865

6,566

294,216

613,101

1. Taxable benefits consist of private medical insurance.
2. Annual bonus is gross cash paid or payable in respect of the financial year.
3. PSP shares – this is the gross value of the PSP awards which vested on 16 October 2019. The Performance Share Plan (PSP) is an LTIA. These awards were made to Mike
Faulkner and Jack Berry in 2016. James Barham and Kevin Hayes did not receive a PSP award in 2016. No PSP wards vested in the financial year ending 30 June 2020.

4. SAYE Scheme – Executive Directors are eligible to participate in the SAYE Scheme. The SAYE Scheme is available to all UK employees and Executive Directors of the Group.
The SAYE Scheme runs for a three year period and allows for a maximum saving of £500 per month in accordance with HMRC requirements. The 2016 SAYE Scheme ended
in May 2019 allowing the Executive Directors to exercise their options for shares as reflected in the table above. The 2016 SAYE Scheme options were granted with an
exercise price of 186.53p per share in 2016. The Executive Directors did not exercise any options for shares under a SAYE Scheme in year ended 30 June 2020.

5. Pension contribution includes cash allowances and contributions made to self-invested personal pensions.

vested ltias
No LTIA awarded to any Executive Director vested during
the financial year ending 30 June 2020. This includes LTIA
awarded to those Executive Directors who did not seek re-
election at the 2019 AGM.

Outstanding LTIA (audited)
In 2017 certain then Executive Directors, including James
Barham, were awarded conditional share awards under the
Group’s PSP (2017 LTIA). The performance condition for the
2017 LTIA for full vesting is a compound annual TSR of at
least 12 per cent. per annum over a three year performance
period. The 2017 LTIA will not vest if the TSR for the period
is less than 8 per cent. with pro-rata vesting if the TSR is
between 8–12 per cent. The 2017 LTIA did not meet its
performance criteria and accordingly did not vest at the end
of the performance period on 30 June 2020. The 2017 LTIA
have now lapsed.

In 2018 the then Executive Directors were awarded
conditional share awards under the Group’s DEP (2018 LTIA).
Under the 2018 LTIA, the Executive Directors’ awards will
only vest in full if growth in the Group’s adjusted underlying
diluted earnings per share (‘aEPS’) of 20 per cent. per annum
is achieved between 30 June 2018 and 30 June 2021. The
2018 LTIA will not vest if the annualised aEPS for that period
is less than 10 per cent. per annum and the awards will
vest proportionally on a straight-line basis. In accordance
with the Policy, the 2018 LTIA awarded to Kevin Hayes has
lapsed following his retirement from the Company. The Policy
requires continued employment by the Group during the

performance period of any LTIA. Based on calculations as at
30 June 2020 between 0–10 per cent. of the 2018 LTIA is likely
to vest at the end of the performance period.

In 2019 James Barham and Jack Berry were awarded
conditional share awards under the Group’s DEP (2019 LTIA).
As further set out in the Annual Report and Account 2019, it
was intended that Kevin Hayes would be granted an award
under the 2019 LTIA. However, Kevin Hayes notified the
Board of his intention to retire prior to the grant of his award
and as such no 2019 LTIA was granted to Kevin Hayes.

The 2019 LTIA is structured as an award with an underpin
based upon a metric of growth in basic underlying adjusted
earnings per share (‘BUAEPS’) and if this is achieved, in
aggregate, over a three year period, then separate and
additional business performance criteria are measured. Each
business performance criterion is assessed on a standalone
basis and a portion of the overall award may vest for each
where the required standard is met; all of the additional
business performance criteria must be met for the LTIA 2019
to vest in full. If the business performance criterion for a
particular measure is not met, no vesting will occur for that
proportion of the LTIA 2019 even if the BUAEPS underpin is
achieved.

The performance period for the LTIA 2019 is the three
financial years measured from 1 July 2019, with a further two
year holding period ending on 30 June 2024. The LTIA 2019
are subject to the requirement of continued employment
throughout the three year performance period.

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

ReMuneRation coMMittee RepoRt

continued

Based on calculations as at 30 June 2020 approximately 63 per cent. of James Barham’s and 100 per cent. of Jack Berry’s 2019
LTIA is likely to vest at the end of the performance period in June 2022.

Minimum shareholding (audited)
The Policy requires that an Executive Director maintains the minimum shareholding in the Group. Executive Directors
are required to acquire and retain the Company’s shares equivalent to at least 200 per cent. of base salary. The Executive
Directors shall have five years from taking office to acquire the shares. Shares which have vested under remuneration plans
but which are subject to holding periods shall count for the purpose of determining this. James Barham complies with this
requirement. Following his appointment to the Board in May 2020, Simon Wilson is expected to build up his shareholding
within the five years following his appointment. The Committee is confident that future awards will allow Simon to build up the
required shareholding within the relevant period, and will monitor his progress against the target.

As noted in the previous section detailing the new Directors’ Remuneration Policy, the minimum shareholding requirement
will, subject to shareholder approval, increase to 500 per cent. of base salary for the Group Chief Executive and 300 per cent.
of base salary for the CFO.

Payments to past directors or for loss of office (audited)
There were no payments to past Directors or for the loss of office during the year.

Group chief executive’s remuneration
James Barham’s cash bonus has decreased from £343,750 in the prior year to zero for the current year. His single figure
remuneration set out below includes base salary, value of taxable benefits, pension contributions and cash bonus (£nil). The
total variable remuneration of the Group has decreased by 21 per cent. from £15.5 million to £12.2 million over the same
period.

The table below of historical levels of Group Chief Executive pay reflect the pay received by Mike Faulkner from June 2014
when he took on the role of Group Chief Executive until 1 July 2019 when James Barham was appointed as the Group Chief
Executive.

Year

2020

2019

2018

2017

2016

2015

Group Chief
Executive’s
single figure
remuneration

395,063

797,0975

2,543,5884

923,221

309,476

309,079

Annual bonus
payout against
maximum

37%

83%2

21%2

Long-term
incentive vesting
rate against
maximum
opportunity

n/a1

100% PSP

23% EPSP

n/a1

2014 (six months)

7,801,2603

100%

Includes share awards not included in single figure remuneration as unvested at year-end.

1. No shares vested during the financial years ended 30 June 2015, 2016, 2017 or 2020.
2.
3. 2014 remuneration includes £7.5m of previously issued shares in the pre IPO Group which converted into shares at the IPO.
4. Restated 2018 figures as Executive Performance Share Plan (EPSP) now included in the 2018 figure.
5. Mike Faulkner was the Group Chief Executive until 30 June 2019. His remuneration is accordingly reflected in the above table.
James Barham was appointed as Group Chief Executive and his remuneration is reflected in the 2020 row of the above table.
6.

ceo pay ratio
Although the requirement to disclose the CEO pay ratio does not apply to the Group, as it does not have 250 UK based
employees, it has decided to disclose this on a voluntary basis.

Year

2019

2020

Method

25th Percentile pay ratio

Median Pay ratio

75th Percentile pay ratio

15.6:1

7.2:1

9.2:1

4.6:1

5.1:1

2.7:1

We have adopted method A of calculation. We believe the median is representative of our overall reward policies on pay,
reward and progression, in that it demonstrates the possibility of variable cash pay and equity, which are both potentially
awarded as staff progress with the business.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

company share price and tSR performance
%

250

200

150

100

Jun 14

Dec 14

Jun 15

Dec 15

Jun 16

Dec 16

Jun 17

Dec 17

Jun 18

Dec 19

Jun 19

Dec 20

Jun 20

R&M Share price
R&M TSR
MSCI UK Financials share price
MSCI UK Financials TSR
TSR at IPO and each financial year end

The chart above shows the Company’s share price performance (based on total shareholder return, with dividends reinvested
net of tax) in the period since IPO on 26 June 2014, compared with the movement of the MSCI UK Financials Index. The MSCI
UK Financial Index contains UK listed Financial stocks, including asset managers.

annual percentage change in remuneration of directors compared to employees
The table below shows the percentage change in salary, taxable benefits and annual incentive for the Directors, and the
average for all employees within the Group.

James
Barham

15.2%

3.8%

(100%)

Simon
Wilson

Jonathan
Dawson

Angela
Crawford-
Ingle

Miriam
Greenwood

John
Misselbrook

n/a

1.8%

2.5%

Average
Increase
across all
employees
(excl.
directors)

5.9%

2.1%

(8.8%)

Year on Year Increase (decrease)

Salary

Taxable benefits

Annual incentive

Relative importance of spend on pay

£ million

Total remuneration and benefits

Year ended
30 June 2020

Increase/
(decrease)

Year ended
30 June 2019

41.1

9.54

(2.8%)

(41.8%)

42.3

16.4

Distributions to shareholders including proposed dividend (pence per share)

Non-Executive Director remuneration (audited)
The table below shows the total remuneration of the Non-Executive Directors paid during the years ended 30 June 2020 and
30 June 2019.

NED

Jonathan Dawson

Angela Crawford-Ingle

John Misselbrook

Miriam Greenwood1

Year

2020

2019

2020

2019

2020

2019

2020

2019

1. Miriam Greenwood was appointed as a Non-Executive Director on 28 May 2019, so the fee for 2019 is pro-rated.

Fee
£

Additional fees
for chairing
Committees1

150,000

61,750

60,500

43,750

42,500

43,750

4,940

–

8,000

–

Total

150,000

69,750

68,500

51,750

50,500

51,750

4,940

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

GOVERNANCE

ReMuneRation coMMittee RepoRt

continued

non-executive director fee review
Non-Executive Director fees were reviewed and increased effective 1 April 2020. The Chairman waived any entitlement to the
review of his fees. Non-Executive Directors are reimbursed for reasonable business expenses.

directors’ shareholdings

Director

James Barham

Jack Berry

Mike Faulkner

Kevin Hayes

Jonathan Dawson

Angela Crawford-Ingle

Miriam Greenwood

John Misselbrook

Simon Wilson

number
of ordinary
shares held at
30th June

2020

Unvested
share
awards, at
30 June
2020

1,598,573

928,840

1,357,246

4,072,720

446,405

90,800

24,924

7,144

3,000

314,658

419,254

–

177,061

The Directors’ shareholding table sets out the shareholding for each person who has served as a director of the Company
during the financial year. James Barham purchased 12,900 shares in October 2020 increasing his shareholding to 1,611,473.
Simon Wilson purchased 6,314 shares in October 2020. There have been no further changes in Directors’ share interests post
year end.

advisors
The Committee received independent advice on material matters, including:
• Compensation design advice from PricewaterhouseCoopers LLP (PwC);
• General advice from the Company Secretary and HR; and
• Legal advice on remuneration-related matters from Herbert Smith Freehills LLP.

In 2019, the Committee undertook a review of its remuneration advisors and ran a competitive selection tender process.
Following the tender process, the Committee appointed PricewaterhouseCoopers LLP (‘PwC LLP’) to provide advice to it on
remuneration matters. The Committee is satisfied that the advice received from its advisors is independent and objective.
The total cost of the advice received by the Committee from PwC in relation to directors’ remuneration is £91,250 which was
charged on a time spent basis.

post-employment shareholding requirements
The Committee notes the requirements of the Corporate Governance Code 2018 (the ‘2018 Code’) relating to post-
employment shareholding requirements for Executive Directors. The 2018 Code applies to the Company in the year
commencing 1 July 2019. The DEP, being the share plan rules under which awards are made for all employees and directors,
contains leaver provisions which are applied by the Committee to all employees in respect of unvested awards. Vested awards
are, subject to Committee discretion, normally released at the end of the holding period with no acceleration.

The Committee has proposed a post-cessation shareholding requirement of 200 per cent. of base salary for a period of two
years under the new Directors’ Remuneration Policy which is subject to shareholder approval at the 2020 AGM.

Statement of voting at 2019 aGM

Resolution

Votes cast
excluding
withheld

Votes
for

Votes

against

Votes
withheld

To approve the Directors’ report on remuneration for the year ended 30 June 2019

80.25%

99.90%

0.10%

6,252

To approve the Directors’ Remuneration Policy in 2017

83.15%

74.70%

25.30%

15,000

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

compliance and risk management in remuneration
The Chair of the Committee also serves on the Nomination, Audit and Risk Committees and the Chairs of the Audit and Risk
Committees also sit on the Committee.

In determining remuneration, the Committee take account of reports from the Group’s risk, legal and compliance teams, and
the Audit and Risk Committees as to conduct and risk outcomes, and any remuneration changes which should be reasonably
followed.

The Group’s remuneration policies and practices take account of applicable law and regulations, corporate governance
standards, best practice and guidance issued by regulators and by representative shareholder bodies.

Accordingly, the Group’s DEP provides that, at the discretion of the Committee, deferred awards may be reduced or cancelled
in the event of certain malus scenarios including a material misstatement of the Group’s financial results or misconduct by
an individual. The DEP rules have been amended during the period to provide for the ability of the Committee to clawback
awards that have vested (note this only applies to awards made after 30 June 2018).

Statement of implementation for 2020/21
Base salary
James Barham and Simon Wilson’s base salary will remain unchanged in the financial year 2020/21 and are as follows:

James Barham

Simon Wilson

£360,000

£250,000

Short term incentive
In accordance with the proposed Policy, the maximum short-term incentive opportunity for our Executive Directors is 250 per
cent. of base salary, with half paid in shares and half paid in cash.

The Committee determines performance measures and weightings aligned with the business plan and strategy. These will
compromise of a combination of financial and non-financial measures, with financial measures making up at least 50 per cent.
of the scorecard. A threshold, target and maximum performance level is set for each measure, with an outcome of 0 per cent.
for threshold performance or below and 50 per cent. of maximum for on-target performance. Specific metrics, targets and
performance against targets will be disclosed retrospectively with performance outcomes in the 2021 Annual Report due to
the commercial sensitivity of the targets as they indicate the Company’s strategy for the next year.

Short term incentive shares are subject to a three-year holding period and may not be sold, except to meet tax liability until
the minimum shareholding requirement is achieved.

Value Transformation Plan (‘VTP’)
Subject to shareholder approval of the proposed Policy, the Executive Directors will be granted a one-off five year award
under the VTP with phased vesting over years 3, 4 and 5 of the plan, subject to the achievement of a minimum TSR of 12 per
cent. compounded annually during the performance period (years 3, 4 and 5). The initial share price used for measuring
the TSR will be the higher of £1.70 and the 30 day volume weighted average share price from the date of publication of the
Company’s preliminary results for the year ended 30 June 2020 on 8 October 2020.

Approved and signed on behalf of the Board.

MiRiaM GReenWood
CHAIR OF REMUNERATION COMMITTEE

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Financial
StateMentS
paGeS 98–143

london: uK
RiveR tHaMeS

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

98 Independent auditor’s report
104 Consolidated income statement
105 Consolidated statement of comprehensive income
106 Consolidated statement of financial position
107 Consolidated statement of cash flows
108 Consolidated statement of changes in

shareholders’ equity

109 Notes to the consolidated financial statements
134 Company statement of financial position
135 Company statement of cash flows
136 Company statement of changes in

shareholders’ equity

137 Notes to the Company financial statements

additional inFoRMation

144 Glossary
IFC Shareholder information and advisors

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RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

independent auditoR’S RepoRt to tHe
MeMBeRS oF RiveR and MeRcantile GRoup plc

opinion
We have audited the financial statements of River and Mercantile Group PLC (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 30 June 2020 which comprise the consolidated income statement, the consolidated statement
of comprehensive income, the consolidated and company statements of financial position, the consolidated and company
statements of changes in shareholders’ equity, the consolidated and company statement of cash flows and notes to the
financial statements, including a summary of significant accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.

In our opinion:
•

the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
30 June 2020 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as
regards the Group financial statements, Article 4 of the IAS Regulation.

•
•

•

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK)
require us to report to you whether we have anything material to add or draw attention to:
•

the Directors’ confirmation set out on page 41 in the Annual Report that they have carried out a robust assessment of
the Group’s emerging and principal risks and the disclosures in the annual report that describe the principal risks and the
procedures in place to identify emerging risks and explain how they are being managed or mitigated;
the Directors’ statement set out on page 60 in the financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting in preparing the financial statements and the Directors’
identification of any material uncertainties to the Group and the Parent Company’s ability to continue to do so over a
period of at least twelve months from the date of approval of the financial statements;

•

• whether the Directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule

•

9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
the Directors’ explanation set out on page 60 in the annual report as to how they have assessed the prospects of the
Group, over what period they have done so and why they consider that period to be appropriate, and their statement as
to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Key Audit Matter

How the scope of our audit addressed the key audit matter

Revenue recognition (note 3 to the annual Report)
The Group’s revenue is made up of distinct revenue streams,
primarily management fees, performance fees and advisory
fees.

Revenue recognition is considered to be a significant audit
risk as it is a key driver of return to investors and requires
judgement in determining the accrual or deferral of revenue,
the treatment of performance measures and the point at
which it is highly unlikely that there will not be a significant
reversal in future periods.

We responded to this risk by performing the following
procedures:
• We recalculated a sample of management fees recognised
in the year based on assets under management (AUM)/
notional under management (NUM) information prepared
by management and rates prevalent in the respective
investment management agreements (IMAs). We traced the
sample through to invoice and subsequent cash receipt or
to debtors and accrued income where relevant.
• We agreed a sample of AUM and NUM to custodian
statements and independent 3rd party sources, for
example Bloomberg.

• We recalculated performance fees due in respect of a
sample of contracts and tested the appropriateness of
the deferral of performance fees in accordance with the
terms of the contract, the accounting policy and applicable
accounting standards and whether it is highly unlikely that
there will not be a significant reversal in future periods.

• We considered whether the investment management

agreement mandates have been complied with by selecting
a sample of days at random and reviewing for breaches on
those days.

• We developed expectations of contracts that would give
rise to a performance fee by considering underlying
performance against the terms of the contract and
compared our expectations against the performance fee
income recognised in the accounts.

• We vouched a sample of advisory fees to invoice and cash
receipt, including a sample of accrued advisory fees to
subsequent invoice and cash receipt.

• We considered the completeness of advisory fees

recognised through reviewing a sample of on-going
advisory projects and the related recognition of retained
fees in the current period.

• We compared a sample of invoices raised after the year-end
to the accrued income balance to check, where appropriate,
they were recognised in the income statement for the
current year.

Key observations:
Based on the work performed we consider that revenue has
been recognised appropriately and is in accordance with the
group’s revenue recognition accounting policy.

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100

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

independent auditoR’S RepoRt to tHe
MeMBeRS oF RiveR and MeRcantile GRoup plc

continued

Key Audit Matter

How the scope of our audit addressed the key audit matter

impairment of goodwill and other intangibles assets
(note 9 to the annual report)
The impairment review of goodwill and other intangible
assets is considered to be a significant audit risk due to
the judgements made in determining whether there is an
indication of impairment in respect of the intangible assets
and also in the calculations of recoverable amounts. The
assumptions used to calculate the recoverable amounts
considered in the impairment review of goodwill include
revenue growth rates, revenue multiples, ongoing expenses
such as the remuneration ratio and the discount factor applied
to present value of the balances.

We responded to this risk by performing the following
procedures:
• We reviewed management’s assessment of whether any

indications of impairment existed in respect of the definite-
life intangible assets and challenged this assessment in
light of our knowledge of the Group and consideration of
forecasts prepared by management.

• We reviewed the value-in-use model prepared by

management in order to calculate the recoverable amount
of the Investment Management Agreement Intangibles
and the River and Mercantile Asset Management LLP
cash-generating unit (CGU) in respect of goodwill. We re-
performed the calculation of the recoverable amount. We
challenged the key assumptions applied by management,
including revenue growth forecasts, ongoing expenses and
the discount factor applied. This involved understanding
the basis for management’s assumptions and vouching
these to available independent evidence where possible.
Together with our BDO valuations team, we determined
whether the discount factor represented an appropriate
weighted average cost of capital for the Group.

• We reviewed the fair value less costs of disposal model
prepared by management in order to calculate the
recoverable amount of the Cassidy CGU. We re-performed
the calculation of the recoverable amount. We challenged
the key assumptions applied by management, including
the revenue multiple used and the estimated costs to sell.
Together with our BDO valuations team, we determined
whether the revenue multiples used represented an
appropriate benchmark.

• We looked at the accuracy of previous forecasts compared
with actual performance and calculated the impact of
sensitising key assumptions including the discount rate
applied on the recoverable amount of the various CGUs.
• We confirmed the adequacy of disclosures in the financial

statements regarding the impairment assessment
performed by management against the requirements of
applicable accounting standards.

Key observations:
• As a result of performing the above procedures we consider

the assumptions made to be appropriate.

our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which misstatements, including omission, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and
the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

101

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

S
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G
O
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N
A
N
C
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F
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A
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A
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A
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A
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N
F
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M
A
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I
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N

Materiality measure

Purpose

Key considerations and benchmarks

Quantum (£)

Financial statement
materiality (5% profit before
tax (2019:5%))

Assessing whether the
financial statements as a
whole present a true and fair
view

Performance materiality
(75% of financial statement
materiality (2019:75%))

Lower level of materiality
applied in performance of the
audit when determining the
nature and extent of testing
applied to individual balances
and classes of transactions

Parent company financial
statement materiality
(a proportion of Group
materiality 33% (2019: 50%))

Assessing whether the
financial statements as a
whole present a true and fair
view

Significant component
materiality (a proportion of
Group materiality)

To reduce to an appropriately
low level the probability
that the aggregate of
uncorrected and undetected
misstatements in the group
financial statements exceeds
materiality for the group
financial statements as a whole

A principal consideration
for members of the Parent
company in assessing the
financial performance of the
Group
• Financial statement

materiality

• Risk and control
environment

• History of prior errors

A principal consideration
for members of the Parent
company in assessing the
financial performance of the
Parent company

A principal consideration for
members of the significant
components in assessing the
financial performance of the
Group

£410,000 (30 June 2019:
£830,000)

£310,000 (30 June 2019:
£623,000)

£134,000 (30 June 2019:
£420,000)

£130,000–£378,000 (30 June
2019: £420,000)

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £8,000 (2019:
£17,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

an overview of the scope of our audit
Our audit approach was developed by obtaining an understanding of the Group’s activities and the overall control
environment. Based on this understanding we assessed those aspects of the Group’s transactions and balances which were
most likely to give rise to a material misstatement. In order to gain appropriate audit coverage over the risks described in
the key audit matters section above and of each individually significant reporting component, full scope audits of the four
significant components were performed by the Group audit team, being BDO LLP. In respect of three other non-significant
components, which contribute 5% of Group net assets (30 June 2019: 2%), the Group audit team performed a review
over the financial information relevant to the consolidated financial statements. These procedures were performed to an
appropriate level of materiality having regard to the level of Group materiality described in the materiality section above as
well as aggregation risk. All significant components of the Group have conterminous year ends, with the exception of River
and Mercantile Asset Management LLP, which has a year end of 31 March. A full scope audit of River and Mercantile Asset
Management LLP was performed by the Group audit team for the year ended 31 March 2020 and additional audit procedures
were performed to cover the three month period to 30 June 2020, as well as the correct allocation of financial information to
the Group’s reporting period.

capability of the audit to detect irregularities, including fraud
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it
operates, and considered the risk of acts by the Group which were contrary to applicable laws and regulations, including
fraud. These included but were not limited to compliance with Companies Act 2006, IFRSs as adopted by the European Union,
the Financial Conduct Authority’s regulations and the Listing Rules.

We designed audit procedures to respond to the risk, recognising that the risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion.

We focussed on laws and regulations that could give rise to a material misstatement in the financial statements. Our tests
included, but were not limited to:
• agreement of the financial statement disclosures to underlying supporting documentation;
• enquiries of management;
•
•
•

review of correspondence with the regulator;
review of minutes of Board meetings throughout the period; and
considering the effectiveness of the control environment in monitoring compliance with laws and regulations.

102

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

independent auditoR’S RepoRt to tHe
MeMBeRS oF RiveR and MeRcantile GRoup plc

continued

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members
and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws
and regulations is from the events and transactions reflected in the financial statements, the less likely we would become
aware of it. We also addressed the risk of management override of internal controls, including testing journals and evaluating
whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

other information
The Directors are responsible for the other information. The other information comprises the information included in the
annual report and accounts, other than the financial statements and our auditor’s report thereon. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the
other information and to report as uncorrected material misstatements of the other information where we conclude that
those items meet the following conditions:
• Fair, balanced and understandable set out on page 61 – the statement given by the Directors that they consider the

annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position, performance, business model and strategy, is materially
inconsistent with our knowledge obtained in the audit; or

• audit committee reporting set out on page 64 – the section describing the work of the audit committee does not

appropriately address matters communicated by us to the audit committee; or

• directors’ statement of compliance with the uK corporate Governance code set out on page 50 – the parts of

the Directors’ statement required under the Listing Rules relating to the Company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not
properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

opinions on other matters prescribed by the companies act 2006
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with
the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:
•

the information given in the strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

•

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been

•

received from branches not visited by us; or
the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

103

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement set out on page 61, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or
have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

other matters which we are required to address
Following the recommendation of the Audit Committee, we were reappointed at the AGM on 9 December 2019 to audit the
financial statements for the year ended 30 June 2020 and subsequent financial years. The period of total uninterrupted
engagement is seven years, covering the six month period ending 30 June 2014 to 30 June 2020.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and
we remain independent of the Group and the Parent Company in conducting our audit.

Our audit opinion is consistent with the additional report to the audit committee.

use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those
matters we are required to state to them in an auditor’s 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 Parent Company and the Parent Company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.

leiGH tReacY (SenioR StatutoRY auditoR)
FOR AND ON BEHALF OF BDO LLP, STATUTORY AUDITOR
London, United Kingdom

30 October 2020

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

S
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G
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P
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G
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N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
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I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

104

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

conSolidated incoMe StateMent

Revenue
Net management fees
Advisory fees
Performance fees

total revenue

Administrative expenses
Depreciation of owned assets
Amortisation
Impairment of intangible assets

total operating expenses

Remuneration and benefits
Fixed remuneration and benefits
Variable remuneration

Total remuneration and benefits
EPSP (credit)/cost

Total remuneration and benefits including EPSP

total expenses

Gain on disposal of fair value investments
Other (losses) and gains

Profit before interest and tax

Finance income
Finance expense

Profit before tax

tax charge/(credit)
Current tax
Deferred tax

Profit for the year attributable to owners of the parent

earnings per share:
Statutory basic (pence)
Statutory diluted (pence)

Note

5
8,21
8,9
8,9

6
6,7

11
11

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

58,449
10,932
1,161

70,542

15,926
217
3,257
1,377

20,777

28,922
12,236

41,158
(17)

41,141

61,918

42
(301)

55,546
10,038
12,519

78,103

15,647
199
4,369
–

20,215

26,145
15,519

41,664
635

42,299

62,514

20
841

8,365

16,450

112
(178)

339
(1)

8,299

16,788

2,799
157

4,403
(610)

5,343

12,995

6.39
6.37

16.22
15.61

The notes to the consolidated financial statements form part of and should be read in conjunction with the financial statements.

105

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

conSolidated StateMent
OF COMPREHENSIVE INCOME

Profit for the year

Items that may be subsequently reclassified to profit or loss:
Foreign currency translation adjustments

total comprehensive income for the year attributable to owners of the parent

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

5,343

12,995

(29)

(21)

5,314

12,974

The notes to the consolidated financial statements form part of and should be read in conjunction with the financial statements.

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R
A
T
E
G
C
R
E
P
O
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T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

106

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

conSolidated StateMent
OF FINANCIAL POSITION

assets
Cash and cash equivalents
Investment management balances
Fee receivables
Other receivables
Assets held for sale
Investments held at fair value through profit or loss
Deferred tax asset
Right of use assets
Property, plant and equipment
Intangible assets

total assets

liabilities
Investment management balances
Current tax liabilities
Trade and other payables
Lease liability
Deferred tax liability

total liabilities

net assets

equity
Share capital
Share premium
Other reserves
Own shares held by EBT
Retained earnings

equity attributable to owners of the parent

30 June
2020
£’000

30 June
2019
£’000

Note

15
16
19
20
18
17
12
22
21
9

23
22
12

25
26

24,251
–
10,233
15,458
810
290
276
2,586
438
26,560

24,046
22,277
4,412
25,505
–
5,387
1,034
–
606
30,753

80,902

114,020

–
383
17,493
2,691
2,078

22,645

22,278
621
23,775
–
2,483

49,157

58,257

64,863

256
15,429
1,010
(4,255)
45,817

256
15,136
45,472
(6,251)
10,250

58,257

64,863

The notes to the consolidated financial statements form part of and should be read in conjunction with the financial statements.

JaMeS BaRHaM
GROUP CHIEF EXECUTIVE

SiMon WilSon
CHIEF FINANCIAL OFFICER

30 October 2020

107

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

conSolidated StateMent
oF caSH FloWS

Cash flow from operating activities
Profit before interest and tax

adjustments for:
Amortisation of intangible assets
Impairment of intangible assets
Depreciation of property, plant and equipment
Depreciation of right of use asset
Share-based payment expense
Other gain and losses
Disposal of investments held at fair value

Operating cash flow before movement in working capital
Decrease/(increase) in operating assets
(Decrease)/increase in operating liabilities

cash generated from operations
Tax paid

net cash generated from operating activities

Cash flow from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Interest received
Proceeds from disposal of investments held at fair value
Purchase of investments held at fair value
Purchase of investments held for sale
Proceeds of disposal in investments

net cash generated from investing activities

Cash flow from financing activities
Interest paid
Dividends paid
Purchase of own shares
Lease payments
Share issue

Net cash (used in) financing activities

net increase in cash and cash equivalents

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

Note

8,365

16,450

9
9

21
22

17
18

3,257
1,377
217
1,278
409
301
(42)

15,162
26,502
(28,555)

13,109
(3,129)

4,369
–
199
–
1,545
(841)
(394)

21,328
(11,478)
9,724

19,574
(4,685)

9,980

14,889

(385)
(45)
54
6,342
(1,523)
(810)
–

3,633

–
(196)
50
414
(10)
–
15

273

(8)
(12,135)
–
(1,503)
294

(1)
(13,869)
(1,694)
–
408

(13,352)

(15,156)

261

Cash and cash equivalents at beginning of year
Effects of exchange rate changes on cash and cash equivalents

cash and cash equivalents at end of year

24,046
(56)

24,029
11

24,251

24,046

The notes to the consolidated financial statements form part of and should be read in conjunction with the financial statements.

108

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

conSolidated StateMent oF cHanGeS
IN SHAREHOLDERS’ EQUITY

Balance as at 30 June 2018

246

14,688

49,372

(4,981)

6,670

65,995

Share
capital
£’000

Share
premium
£’000

Other
reserves
£’000

Own shares
held by EBT
£’000

Retained
earnings
£’000

Total
£’000

Comprehensive income for the year:
Profit for the year
Other comprehensive income: foreign currency translation

Total comprehensive income for the year

Transactions with owners:
Dividends
Share-based payment expense
Deferred tax on share-based payment expense
Realised tax in respect of award vesting
Share payment in respect of award vesting
Disposal of shares in respect of award vesting
Purchase of own shares by EBT
Reserves transfer upon transition to IFRS 9
Transfer to retained earnings
Shares issued in respect of award vesting
Foreign exchange adjustments

Total transactions with owners:

Balance as at 30 June 2019

Adjustment to retained earnings on transition to IFRS 16

Adjusted as at 1 July 2019

comprehensive income for the year:
Profit for the year
Other comprehensive income: foreign currency translation

total comprehensive income for the year

transactions with owners:
Dividends
Share-based payment expense
Deferred tax on share-based payment expense
Realised tax in respect of award vesting
Disposal of shares in respect of award vesting
Shares issued in respect of award vesting
Capitalisation of merger reserve and capital reduction

total transactions with owners:

Balance as at 30 June 2020

–
–

–

–
–
–
–
–
–
–
–
–
10
–

256

–

256

–
–

–

–
–
–
–
–
–
–

–

–
–

–

–
–
–
–
–
–
–
–
–
448
–

448

–
(21)

(21)

–
–
–
–
–
–
–
(12)
(3,867)
–
–

(3,879)

–
–

–

12,995
–

12,995

12,995
(21)

12,974

–
–
–
–
–
424
(1,694)
–
–
–
–

(1,270)

(13,869)
1,545
(1,350)
1,165
(369)
(424)
–
12
3,867
–
8

(13,869)
1,545
(1,350)
1,165
(369)
–
(1,694)
–
–
458
8

(9,415)

(14,106)

15,136

45,472

(6,251)

10,250

64,863

–

(189)

15,136

45,472

(6,251)

10,061

64,674

–
–

–

–
–
–
–
–
293
–

293

–
(29)

(29)

–
–

–

5,343
–

5,343

5,343
(29)

5,314

–
–
–
–
–
–
(44,433)

–
–
–
–
1,996
–
–

(12,135)
409
(202)
(96)
(1,996)
–
44,433

(12,135)
409
(202)
(96)
–
293
–

(44,433)

1,996

30,413

(11,731)

256

15,429

1,010

(4,255)

45,817

58,257

The notes to the consolidated financial statements form part of and should be read in conjunction with the financial statements.

Following approval by Shareholders at the Company’s AGM in December 2019 to undertake a reduction in capital, and with
a view to effecting this on approval from the High Court, the Company capitalised its merger reserve of £44.4m by cancelling
the deferred shares in the Company (the “Deferred Shares”) creating distributable reserves equal to the merger reserve.
The Company received High Court approval in January 2020 to effect the reduction in capital by cancellation of the Deferred
Shares, creating distributable reserves available to the Company, accordingly supporting the Company’s ability to pay future
dividends.

109

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

noteS to tHe conSolidated
FINANCIAL STATEMENTS

1. Basis of preparation
The consolidated financial statements have been prepared in accordance with IFRSs, International Accounting Standards,
International Financial Reporting Interpretation Committee interpretations, and with those parts of the Companies Act 2006
applicable to groups reporting under IFRS as issued by the International Accounting Standards Board and adopted by the
European Union that are relevant to the Group’s operations and effective for accounting periods beginning on 1 July 2019.

Going concern
The Directors have a reasonable expectation that the Group and Company have adequate resources to continue in
operational existence for the foreseeable future.

On 11 March 2020, the World Health Organisation declared the COVID-19 outbreak a pandemic. The COVID-19 pandemic is
an unprecedented event and the eventual impact on the global economy and markets will largely depend on the scale and
duration of the outbreak. The Directors have noted that financial markets have incurred increased volatility and uncertainty
since the onset of the pandemic. This has had an adverse impact on many industries; however, the asset management
sector has been reasonably protected. The rapid development and fluidity of this situation precludes any prediction as to
the ultimate longer-term adverse impact of the virus on the UK and Global economies and the ability to recover from the
shorter-term negative influence on certain financial markets. Whilst the significant fall in UK and global stock markets has had
an effect on underlying revenues, the Directors have reasonable belief that, having considered the Group and Company’s
forecasted continued profitability, positive cash flow and capital base, the Group and Company has adequate resources to
continue as a going concern for the foreseeable future. The Directors continue to monitor this situation and evaluate the
potential risks to the Group and Company.

Accordingly, the Group and Company financial statements have been prepared on a going concern basis using the historical
cost convention, except for the measurement at fair value of certain financial instruments.

Basis of consolidation
The consolidated financial statements include the Company and the entities it controls (its subsidiaries). Subsidiaries are
considered to be controlled where the Group has exposure to variable returns from the subsidiary, the power to affect those
variable returns and power over the subsidiary itself. Control is reassessed whenever facts and circumstances indicate that
there may be a change in any of these elements of control.

Subsidiaries are consolidated from the date that the Group gains control, and de-consolidated from the date that control
is lost.

If the Group controls a fund the fund is consolidated within the Group financial statements. In the case that the Group does
not control a fund for the complete reporting period, then the fund is consolidated only for the part of the reporting period
for which the Group has control over the entity.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the
Statement of Financial Position, the subsidiaries’ identifiable assets, liabilities and contingent liabilities are initially recognised
at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of
Comprehensive Income from the date on which control is obtained. The consolidated financial statements are based on the
financial statements of the individual companies drawn up using the standard Group accounting policies.

All transactions and balances between entities within the Group have been eliminated in the preparation of the consolidated
financial statements.

The EBT is included in the consolidated financial statements of the Group. The EBT purchases shares pursuant to the
non-dilutive equity awards granted to employees. These purchases and the operating costs of the EBT are funded by the
Company. The EBT is controlled by independent trustees and its assets are held separately from those of the Group.

The Consolidated Statement of Financial Position has been presented on the basis of the liquidity of assets and liabilities.

the Group’s relationship with fund entities
Effective 17 October 2019, RAMAM ceased to be the ACD of the ICVC Funds and we initiated the transfer of the ACD
responsibility to an independent third-party management company.

Prior to 17 October 2019, the Group entities acted as the investment managers to funds and segregated managed accounts,
and RAMAM was the ACD of River and Mercantile Funds ICVC (collectively ‘Investment Management Entities’ (IMEs)).

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

110

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

1. Basis of preparation continued
Considering all significant aspects of the Group’s relationship with the IMEs, the Directors are of the opinion that although
the Group manages the investment resources of the IMEs, the existence of: termination provisions in the IMAs which allow
for the removal of Group entities as the investment manager; the influence exercised by investors in the control of their IME;
the arm’s length nature of the Group’s contracts with the IMEs; and independent Boards of Directors of the IMEs, the Group
does not control the IMEs and therefore their assets, liabilities and net profit are not consolidated into the Group’s financial
statements. The exception to this is where the Group has seeded a fund and determines that it subsequently has control over
the fund, it will be consolidated accordingly.

Foreign currencies
The majority of revenues, assets, liabilities and funding are denominated in UK Pounds sterling (GBP/£), and therefore the
presentation currency of the Group is GBP. All entities within the Group have a functional currency of GBP, except for River
and Mercantile LLC which is based in the US.

Monetary items which are denominated in foreign currencies are translated at the rates prevailing at the reporting date.
All resulting exchange differences are recognised in the Income Statement. Non-monetary items are measured at the rates
prevailing on the date of the transaction and are not subsequently retranslated.

The functional currency of River and Mercantile LLC is US Dollars and is translated into the presentational currency as follows:
• Assets and liabilities are translated at the closing rate at the date of the respective Statement of Financial Position;
•
• All resulting exchange differences are recognised in other comprehensive income.

Income and expenses are translated at the daily exchange rate for the date on which they are incurred; and

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.

assets held for sale
Assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather
than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying
amount and fair value less costs to sell.

Assets classified as held for sale are presented separately from the other assets in the balance sheet and are not depreciated
or amortised while they are classified as held for sale.

An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain
is recognised for any subsequent increases in fair value less costs to sell of an asset but not in excess of any cumulative
impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current
asset is recognised at the date of derecognition.

Adoption of new standards and interpretations affecting the reported results or the financial position
This is the first set of the Group’s financial statements where IFRS 16 has been applied. This new standard was adopted from
1 July 2019 and has had a significant impact on the amounts reported in these financial statements.

Transition to IFRS 16 Leases
IFRS 16 replaces IAS 17 Leases and became effective for reporting periods beginning on or after 1 January 2019. It provides a
single accounting method for lessees, requiring the recognition of an asset and a lease liability representing the right of use of
the underlying asset over the term of a lease.

The Group has opted to apply the modified retrospective approach, where the cumulative effect of adopting IFRS 16 has been
recognised as an adjustment to the opening balance of retained earnings as at 1 July 2019. Comparative information will not
be restated.

As at 1 July 2019 the recognition of a right of use asset and lease liability increased total asset and total liabilities by
£3,823,000 and £4,024,000 respectively.

The right of use asset has been calculated as the present value of all future lease payments, including those relating to
dilapidations and costs incurred in obtaining the leases. The lease liability is measured using an appropriate discount rate for
the Group from the date of the initial application of the standard equal to the incremental borrowing rate of the Group on the
leases of 5.0%.

The adjustment to opening reserves at 1 July 2019 was £189,000 being the difference between the right of use asset and
the lease liability at the date of transition less any balances recognised under IAS 17. The lease payment expenses relating
to the Group’s property portfolio will now be split as the straight-line depreciation cost of the capitalised asset included as
office facilities costs within administrative expenses and the unwinding of the lease liability charged to finance expenses.
The weighted average lessee’s incremental borrowing rate applied to the leases on 1 July 2019 was 5.0%.

111

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

2. Significant judgements and estimates
As detailed in note 1, these financial statements are prepared in accordance with IFRS. The significant accounting policies of
the Group which include estimates are detailed below:
• Recognition of management and performance fee revenues. This involves estimates of AUM positions for the purposes

of accruing revenue, which are described in note 3.

• The accounting for UCITS V deferred remuneration involves estimates of forfeiture rates.
• Calculation of lease assets and lease liabilities.

The significant accounting policies of the Group which include judgements are detailed below:
•

Impairment of intangible assets, goodwill and investments recorded in previous acquisitions. This involves judgements
including business growth and estimates including discount rates, which are described in note 9.

• Provisions, which are recognised when the Group has a present obligation as a result of a past event, and it is probable
that the Group will be required to settle that obligation. Determining whether provisions are required and at what level,
requires both judgement and estimates.

• The accounting for share-based remuneration. This involves judgements relating to forfeiture rates and business outcomes

and estimates of future share prices for National Insurance cost, which are described in note 7.

• The accounting for the contingent consideration in respect of the acquisition of the Emerging Markets ILC team. This

involves judgements relating to the likely useful life of intangibles and estimates as to revenue and cost growth over time.

• Whether an asset should be classified as held for sale.

3. Revenue

net management fees
– Fiduciary Management
– Derivatives
– Equity Solutions – Wholesale
– Equity Solutions – Institutional

Net management fees

advisory fees
– Retainers
– Project fees

Advisory fees

total underlying revenue

performance fees
– Fiduciary Management
– Equity Solutions

total performance fees

total revenue

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

21,118
15,389
8,851
13,091

18,790
13,379
11,270
12,107

58,449

55,546

5,054
5,878

5,295
4,743

10,932

10,038

69,381

65,584

1,161
–

1,161

10,553
1,966

12,519

70,542

78,103

net management fees
Net management fees represent the fees charged pursuant to an IMA. Net management fees are reported net of rebates to
clients and are typically charged as a percentage of the client’s AUM. The fees are generally accrued based on a contractual
daily fee calculation and billed to the client either monthly or quarterly. During the year ended 30 June 2020, rebates totalling
£2,739,000 (2019: £2,835,000) were paid in respect of Equity Solutions and DAA Fund management fees.

advisory fees
Advisory fees represent fees charged under advisory agreements and are typically charged on a fixed retainer fee basis or
through a fee for the delivery of a defined project. Fees are accrued monthly and charged when the work has been completed.

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

112

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

3. Revenue continued
performance fees
Performance fees are fees paid under certain IMAs for generating excess investment performance either on an absolute
basis subject to a high-water mark, or relative to a benchmark. Performance fees are typically calculated as a percentage
of the excess investment performance generated and may be subject to deferral and continued performance objectives in
future periods. Performance fees are recognised in income when it is probable that the fee will be realised and there is a low
probability of a significant reversal in future periods. This occurs once the end of the performance period has been reached.
The client is invoiced for the performance fee at the end of the performance period which is generally annually, either on the
anniversary of their IMA or on a calendar year basis.

contract balances
The timing of client revenue recognition, billings and cash collections results in either trade receivables or accrued income on
the Statement of Financial Position. For management fees, advisory fees and performance fees, amounts are billed in arrears
pursuant to an IMA or advisory agreement with clients.

There were £30,000 (2019: £38,000) contract liabilities as at the year ended 30 June 2020.

4. divisional and geographical reporting
The business operates through four divisions, however, these are not considered to be segments for the purposes of IFRS
8 on the basis that decisions made by the Board are made at an overall Group level. The information received by the Board
supports this decision-making, with Income Statement, balance sheets, forecasts and budgets presented at a Group level.

No single client accounts for more than 10% of the revenue of the Group (2019: none).

On a geographic basis the majority of the revenues are earned in the UK. The Group has an advisory, derivatives, fiduciary
management and equity solutions business in the US and net revenue earned in the US for the year ended 30 June 2020 was
£6.3 million (2019: £6.1 million). The AUM of the US business was £1,449 million (2019: £918 million).

Non-current assets held by the US business include £1.5 million (2019: £1.5 million) of goodwill.

5. administrative expenses

Marketing
Travel and entertainment
Office facilities
Technology, market data and communications
Professional fees
Research
Governance expenses
Fund administration
Other staff costs
Insurance
Irrecoverable VAT
Other costs

total administrative expenses

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

799
427
2,517
5,593
2,064
1,331
801
1,162
251
613
215
153

883
825
2,751
5,012
1,576
1,334
570
1,290
543
555
93
215

15,926

15,647

Included within office facilities expenses in the current year is the depreciation charge on the right of use asset of £1.3 million
following the implementation of IFRS 16 (note 22). As the Group adopted IFRS 16 under the modified retrospective approach
(note 1), the prior year has not been restated. The expenses relating to the Group’s leased properties are charged as the
straight-line depreciation cost of the capitalised asset.

113

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

5. administrative expenses continued
Included within governance expenses is the remuneration of the external auditors for the following services:

Audit of the Company’s annual accounts
Audit of the Company’s subsidiaries
Audit related assurance services

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

130
114
75

319

104
99

255

6. Remuneration and benefits
Fixed remuneration represents contractual base salaries, RAMAM member drawings and employee benefits. The Group
operates a defined contribution plan under which it pays contributions to a third party.

Variable remuneration relates to discretionary bonuses, variable profit share paid to the members of RAMAM, IFRS 2 charges
in respect of share awards and associated payroll taxes and recruitment costs. Recruitments costs of £487,000 were incurred
in the year (2019: £393,000).

Variable remuneration also includes a charge of £406,000 (2019: £964,000) relating to the amortisation of the Group’s non-
dilutive share awards and a credit of £40,000 (2019: credit of £132,000) of associated social security costs.

the average number of employees (including directors) employed was:
Advisory division
Fiduciary Management division
Derivative Solutions division
Equity Solutions division
Distribution
Corporate

total average headcount

the aggregate remuneration of employees (including directors) comprised:
Wages and salaries
Social security costs
Pension costs (defined contribution)
Share-based payment expense

Total remuneration and benefits (excluding EPSP)

Fixed remuneration
Variable remuneration

epSp costs:
Share-based payment expense
Social security costs

total epSp (credit)/costs

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

68
74
28
31
15
52

69
58
28
31
14
55

268

255

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

Note

36,192
3,575
976
415

41,158

28,922
12,236

41,158

–
(17)

(17)

36,208
3,420
937
1,099

41,664

26,145
15,519

41,664

452
183

635

7
7

114

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

6. Remuneration and benefits continued
directors’ remuneration
The aggregate remuneration and fees payable to Executive and Non-Executive Directors for the year ended 30 June 2020 was
£1,042,000 (2019: £3,082,000).

Information regarding the aggregate single figure remuneration of the Executive Directors (which includes the highest paid
Director of £395,000 (2019: £2,801,000)) included in the Remuneration Committee Report.

Key management remuneration
Key management includes the Executive and Non-Executive Directors, and Executive Committee members. The remuneration
paid or payable to key management for employee services is shown below:

Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Share-based payment expense

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

5,932
7
113
141

6,193

8,316
280
101
302

8,999

7. Share-based payments
Where share-based awards are granted to employees, the fair value of the award at the date of grant is charged to the
Consolidated Income Statement over the vesting period. Non-market vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at each year-end date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of shares that eventually vest. Market vesting conditions are
factored into the fair value of the awards granted. As long as all other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition.

Where the terms and conditions of awards are modified before they vest, the change in the fair value of the award, measured
immediately before and after the modifications, is recognised in the Consolidated Income Statement over the remaining
vesting period.

executive performance Share plan
As reported in the prior year’s Annual Report, after completion of the Executive Performance Share Plan award holding
period, during the year ended 30 June 2019 the award shares vested on 26 June 2019.

performance Share plan
The Group’s Performance Share Plan and DEP (collectively PSP) allows for the grant of nil cost options, contingent share
awards or forfeitable share awards.

The fair value of the awards has been estimated using Black-Scholes modelling.

115

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

2016

2017

2018

2019

2020

1,971
100
407
–
–
585

892
45
184
–
–
265

713
–
466
–
–
950

229
–
150
–
–
304

94
–
1,622
612
155
3,586

29
–
514
196
48
1,114

5 years
4 years
4 years
n/a
n/a
5 years

4 years
n/a
4 years
n/a
n/a
4 years

4 years
n/a
4 years
3 years
4 years
4 years

1, 2 and 3 1, 2 and 3 1, 2 and 3
n/a
1
1 and 4
none
1 and 5

1 and 2
1
n/a
n/a
1 and 2

n/a
1
n/a
n/a
1 and 2

131
–
274
612
–
2,015

41
–
108
190
–
797

3 years
n/a
3 years
3 years
n/a
5 years

1 and 4
n/a
1
1 and 4
n/a
1 and 6

–
–
–
–
–
293

–
–
–
–
–
177

n/a
n/a
n/a
n/a
n/a
3 years

n/a
n/a
n/a
n/a
n/a
1

7. Share-based payments continued
The key features of the awards are:

Financial year of award

Grant date award value £’000
Scheme 1 – Employees
Scheme 2 – Employees
Scheme 3 – Employees
Scheme 4 – Employees
Scheme 5 – Employees
Scheme 6 – Executive Directors

number of shares granted ’000
Scheme 1 – Employees
Scheme 2 – Employees
Scheme 3 – Employees
Scheme 4 – Employees
Scheme 5 – Employees
Scheme 6 – Executive Directors

Maximum term at grant date
Scheme 1 – Employees
Scheme 2 – Employees
Scheme 3 – Employees
Scheme 4 – Employees
Scheme 5 – Employees
Scheme 6 – Executive Directors

vesting conditions (see key below)
Scheme 1 – Employees
Scheme 2 – Employees
Scheme 3 – Employees
Scheme 4 – Employees
Scheme 5 – Employees
Scheme 6 – Executive Directors

1. Remain employed throughout vesting period, subject to malus and good leaver provisions.

2. Achievement of specified TSR target within a range.

3. Straight-line between minimum and maximum divisional AUM and revenue targets.

4. Achievement of specified revenue targets within a range.

5. Achievement of specified adjusted underlying earnings per share targets and personal objectives.

6. Achievement of specified adjusted underlying earnings per share targets and business performance criteria.

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

116

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

7. Share-based payments continued
The following table sets out the movement in awards recognised in the income statement during the year and the key inputs
into the fair values of awards:

Financial year of award

ʼ000s

2016

2017

2018

2019

2020

Grant date award value £’000
Grant date share price £
Number of shares outstanding at 30 June 2018
Number of shares granted during the year
Number of shares forfeited during the year
Exercised during the year
Vesting profile adjustments

Number of shares outstanding at 30 June 2019

Number of shares granted during the year
Number of shares forfeited during the year
Exercised during the year
Vesting profile adjustments

number of shares outstanding at 30 June 2020

Fair value assumptions:
Exercise price
Risk free rate
Share price volatility
Dividend yield
Number of shares expected to vest ʼ000

3,063
2.21
838
–
–
(70)
–

768

–
(11)
(379)
–

378

2,130
3.12
683
–
(72)
(29)
(16)

566

–
(457)
(87)
–

668
3.14
213
–
–
(102)
(6)

105

–
–
(65)
–

1,133
3.12
363
–
(7)
(42)
–

4,268
3.22
1,325
–
(13)
–
(43)

314

1,269

–
(189)
(58)
–

–
(328)
(51)
31

921

743
3.22
–
231
(9)
–
–

222

–
(36)
–
–

2,290
2.53
–
905
–
–
–

905

–
(13)
–
–

186

892

293
1.65
–
–
–
–
–

–

177
–
–
–

177

£nil
0.94% or 1.00

£nil

£nil
£nil
1.00% 1.00% 1.00% 1.00% 1.00% 1.00% (1.04%)
27.40% 27.90% 28.20% 28.20% 28.80% 28.80% 30.83% 33.66%
5%
177

5%
284

5%
687

5%
172

5%
40

5%
67

5%
22

5%
–

£nil

The volatility for awards granted in the year has been calculated based upon the annualised daily return on the Group’s share
price from IPO to year end. All awards crystallise at the end of the vesting period subject to the approval of the Remuneration
Committee. As at the reporting date 172,000 of the shares awarded were exercisable (2019: 504,000).

The 2019 Annual Report included an estimate for 2019 awards, a certain number of which were ultimately not granted. This
has been retrospectively adjusted in the above table to show the awards granted that were outstanding at 30 June 2019.

8. depreciation and amortisation
Depreciation on owned assets charges primarily relate to IT and communications equipment, and leasehold improvements.
The property, plant and equipment, and the depreciation accounting policies are described in note 21. Depreciation on right
of use leasehold assets is included within administration expenses and detailed in note 5.

The amortisation charge primarily relates to the IMA intangibles and recognised as part of the acquisition of RAMAM and the
ILC team as described in note 9. The RAMAM and ILC team IMA intangibles are amortised over their expected useful life of
between five and ten years based on an analysis of the respective client channels. The amortisation is not deductible for tax
purposes. At the date of the RAMAM acquisition a deferred tax liability was recognised and is being charged to the income
statement tax expense in line with the amortisation of the related IMAs. At the date of the acquisition no deferred tax liability
was recognised in respect of the ILC team IMAs as the US business has brought forward tax losses.

117

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

9. intangible assets
Business combinations and goodwill
All business combinations are accounted for using the acquisition method. The cost of a business combination is the
aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed and equity instruments
issued by the acquirer. The fair value of a business combination is calculated at the acquisition date by recognising the
acquired entity’s identifiable assets, liabilities and contingent liabilities that satisfy the recognition criteria, at their fair values
at that date. The acquisition date is the date on which the acquirer effectively obtains control of the acquired entity. The cost
of a business combination in excess of fair value of net identifiable assets or liabilities acquired, including intangible assets
identified, is recognised as goodwill. Any costs incurred in relation to a business combination are expensed as incurred.

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s
interest in the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree.

Goodwill is not amortised but is reviewed for impairment annually, or more frequently when there is an indication of
impairment. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the
Group’s cash generating units (CGUs) expected to benefit from the synergies of the combination. Each CGU to which the
goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management
purposes. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated
first to reduce the carrying value of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the
basis of the carrying amount of each asset in the unit. An impairment loss recognised is not reversed in a subsequent period.

Identifiable intangible assets
Investment management agreements and customer relationships
IMAs and customer relationships acquired in a business combination are recognised separately from goodwill at their fair
value at the acquisition date. Customer relationships have an estimated useful life of twenty years and IMAs have estimated
useful lives of five to ten years. The identified intangible assets are carried at cost less accumulated amortisation calculated on
a straight-line basis, the remaining amortisation period at 30 June 2020 is 3 years and 9 months.

Internally generated software
The Group capitalises the development of internally developed software from which it expects to get future economic benefit.
Internally generated software will be recorded at cost less accumulated amortisation.

Costs incurred during the development stage are capitalised until such time that the software is substantially complete and
ready for its intended use. Amortisation is charged on a straight-line basis over the expected useful life of the software which
is currently between four and five years, but is assessed separately for each identifiable software development. Internal and
external costs incurred in connection with researching, training or maintenance of any internally generated software are
expensed as incurred.

impairment of intangible assets, excluding goodwill
At each Statement of Financial Position date or whenever there is an indication that the asset may be impaired, the Group
reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from
other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs. The recoverable amount is
the higher of the fair value less costs to sell, and the value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

118

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

9. intangible assets continued
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, an impairment loss
is recognised as an expense immediately. For assets other than goodwill, where conditions giving rise to impairment
subsequently reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any
depreciation or amortisation that would have been charged since the impairment.

cost:
At 30 June 2018
Exchange difference

At 30 June 2019
Additions
Exchange difference

at 30 June 2020

accumulated amortisation and impairment:
At 30 June 2018
Amortisation charge
Exchange difference

At 30 June 2019
Amortisation charge
Impairment
Exchange difference

at 30 June 2020

net book value:
At 30 June 2019

at 30 June 2020

Goodwill
£’000

15,595
47

15,642
–
47

Customer
lists and
IMAs
£’000

38,491
65

38,556
–
65

15,689

38,621

418
–
–

418
–
21
–

18,690
4,348
15

23,053
3,226
1,356
56

439

27,691

Software
£’000

Total
£’000

84
–

84
385
–

469

37
21
–

58
31
–
–

54,170
112

54,282
385
112

54,779

19,145
4,369
15

23,529
3,257
1,377
56

28,219

15,224

15,503

15,250

10,930

380

30,753

26,560

impairment review
Goodwill includes £13.2 million (2019: £13.2 million) in respect of RAMAM and £1.5 million (2019: £1.5 million) in respect of
Cassidy Retirement Group Inc. (Cassidy).

The Directors estimated the recoverable amount of the RAMAM goodwill based upon the value in use of the business. The
value in use was measured using internal budgets and forecasts to generate a five-year view. The key assumptions used were:
revenue based on internally approved budget in year one; an 8% revenue growth rate for the next four years; no growth after
this point; and a pre-tax discount rate of 10% (2019: 12%). Estimates were made concerning remuneration and administrative
costs, based upon current levels and expected changes.

Sensitivity analysis was performed on the key inputs of the valuation, being the growth and discount rates and future cash
flows. A fall of greater than 10% in projected revenue or a change in the discount rate to a rate in excess of 38% is required to
indicate impairment.

The Directors estimated the recoverable amount of the Cassidy goodwill using a fair value less costs of disposal. This value
was measured using the revenues of the CGU and third-party data concerning comparable revenue multiples paid for recent
acquisitions of similar businesses.

The key assumptions included in the estimate were: the costs of disposal; and the assumption that the multiples observed
in other businesses would be comparable. Sensitivity analysis was performed on the level 3 valuation under the fair value
hierarchy. A reduction in the revenue multiple of greater than 50% would be required to indicate impairment.

Included in customers lists and IMAs as at 30 June 2019 was a net book value of £1,426,000 relating to the investment
management balances of the ILC funds. The recoverable amount of the asset is assessed using its value in using a pre-tax
discount rate of 10% (2019: 12%). Due to a reduction in the AUM in these funds an impairment charge of £1,143,000 has been
recorded in the period ended 30 June 2020. Following this impairment and any accumulated amortisation charged, the net
book value of the ILC IMAs as at 30 June 2020 was £nil. Where conditions which give rise to an impairment subsequently
reverse the effect of the impairment charge is reversed as a credit to the income statement.

119

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

10. other gains and losses

Loss on disposal of fixed assets
Gain on disposal of subsidiary
Gain on purchase of UCITS
Investments held at fair value through profit or loss (FVTPL)
Fair value of contingent consideration

Total other gains and losses

Note

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

–
–
27
(435)
107

(301)

(12)
15
21
441
376

841

11. Finance income and expenses
Finance income and expense are recognised in the period to which it relates on an accruals basis.

Finance income comprises £54,000 of bank interest (2019: £50,000), £58,000 of foreign exchange gain (2019: £209,000)
and £nil of interest earned from a loan to Palisades (2019: £80,000).

Finance expense comprises of lease liability finance interest unwind £170,000 (2019: £nil) and bank charges of £8,000
(2019: £1,000).

12. current and deferred tax
The tax charge consists of current tax and deferred tax. Current tax represents the estimated tax payable on the taxable
profits for the period. Taxable profit differs from profit before tax reported in the Consolidated Income Statement because
it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are
never taxable or deductible. Deferred tax is recognised on temporary differences arising between the tax bases of assets
and liabilities, and their carrying amounts in the consolidated financial statements, and is measured using the substantively
enacted rates expected to apply when the asset or liability will be realised or settled.

Deferred tax assets and liabilities are not offset unless the Group has legal right to offset which it intends to apply. Deferred
tax assets are recognised only to the extent that the Directors consider it probable that they will be recovered.

Deferred tax is recognised in the income statement, except that a charge attributable to an item of income or expense
recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other
comprehensive income or directly in equity.

The most significant deferred tax items are the deferred tax liability established against the IMA intangible asset arising
from the acquisition of RAMAM and the deferred tax asset recognised in respect of the share-based payment expenses.
The amortisation of the IMA intangible asset is not tax deductible for corporate tax purposes therefore the deferred tax
liability is released into the Consolidated Income Statement to match the amortisation of the IMA intangible.

current tax:
Current tax on profits for the year
Adjustments in respect of prior years

total current tax
Deferred tax – origination and reversal of timing differences

total tax charge

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

2,799
–

2,799
157

2,956

4,365
38

4,403
(610)

3,793

The total tax charge assessed for the year is higher (2019: higher) than the average standard rate of corporation tax in the UK.

120

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

12. current and deferred tax continued
The differences are explained below:

Profit before tax
Profit before tax multiplied by the average rate of corporation tax in the UK of 19% (2019: 19%)

Effects of:
Expenses not deductible for tax purposes
Losses not deductible for tax purposes
Income not subject to tax
Adjustment in respect of prior years
Other reconciling differences

total tax charge

The analysis of deferred tax assets and liabilities is as follows:

deferred tax assets
At beginning of year
(Charge)/credit to the income statement:
– share-based payment expense
– movement in foreign exchange
Debit to equity:
– share-based payment expense
– recycling of deferred tax on shares vested

at end of year

deferred tax liabilities
At beginning of year
Charge/(credit) to the income statement:
– amortisation of intangibles
– re-measurement of deferred tax on intangibles for changes in expected tax rate
– movement on investments held at fair value

at end of year

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

8,299
1,577

16,788
3,190

145
972
–
–
262

10
865
(135)
(3)
(134)

2,956

3,793

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

1,034

2,443

(562)
6

(202)
–

276

(59)
–

(291)
(1,059)

1,034

2,483

3,153

(554)
233
(84)

(752)
–
82

2,078

2,483

121

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

13. earnings per share
The basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of the Company by
the weighted average number of ordinary shares of the Company in issue during the year.

The Group operates a SAYE Scheme for employees. The SAYE Scheme allows employees to contribute towards a share option
scheme over a three year period. At the end of the scheme the employees have the option to either receive shares in River
and Mercantile Group PLC or cash. The potential dilutive effect of this scheme is also considered in the calculation of diluted
earnings per share.

Additionally, in 2019 the vesting EPSP awards had a dilutive effect on the equity holders of the Company. Following the end
of the holding period 57% of EPSP Performance Condition A shares vested on 26 June 2019 and were recognised as shares in
issue.

The dilutive effect of the EPSP awards was considered in the calculation of diluted earnings per share for the year ended
30 June 2019.

Profit attributable to owners of the parent (£’000)
Weighted average number of shares in issue (’000)
Weighted average number of diluted shares (’000)

earnings per share:
Earnings per share
Basic (pence)
Diluted (pence)

Reconciliation between weighted average number of shares in issue

Weighted average number of shares in issue – basic
Dilutive effect of shares granted under SAYE
Dilutive effect of shares granted under EPSP

Weighted average number of shares in issue – diluted

Year ended
30 June
2020

Year ended
30 June
2019

5,343
83,624
83,856

12,995
80,121
83,244

6.39
6.37

16.22
15.61

Year ended
30 June
2020
’000

Year ended
30 June
2019
’000

83,624
232
–

80,121
335
2,788

83,856

83,244

Adjusted profit
The Group uses adjusted profit (pre and post-tax), adjusted underlying profit (pre and post-tax), adjusted earnings per share
and adjusted underlying earnings per share as alternative performance measures.

The alternative performance measures are used to present shareholders and analysts with a clear view of what the Board
considers to be a fair reflection of the Group’s results by excluding certain non-cash items detailed below. In the case of
underlying measures, these also exclude the impact of performance fees which are more volatile and less consistent in nature
than the Group’s other revenue sources. This enables consistent period-on-period comparison and makes it easier for users
of the accounts to identify trends.

Adjusted profit comprises adjusted underlying profit and performance fee profit.

Adjusted profit before tax is determined by adjusting statutory profit before tax for the impact of amortisation and
impairment of intangible assets (excluding software), other gains and losses, and dilutive share awards.

Adjusted underlying profit before tax is calculated by subsequently deducting any performance fee profit before tax from
adjusted profit before tax.

Performance fee profit represents performance fees, less the associated remuneration costs plus the gain or loss on disposal
of seed investments held.

122

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

13. earnings per share continued
Performance fee profit represents performance fees, less the associated remuneration costs plus the gain on disposal of
investments held at fair value.

Adjusted profit calculation:
Statutory profit before tax
adjustments:
Amortisation and impairments of intangible assets
Other gains and losses
Dilutive share awards (credits)/costs

Adjusted profit before tax
Taxes

Adjusted profit after tax

Performance fee profit calculation:
Performance fees
Less remuneration at 50% (2019: 50%)
Gains and (losses) on disposal of investments

Performance fee profit before tax
Taxes

Performance fee profit after tax

Adjusted underlying profit calculation:
Adjusted profit before tax
Less: Performance fee profit before tax

Adjusted underlying profit before tax
Taxes on adjusted profit
Add back: Taxes on performance fee profit

Adjusted underlying profit after tax

adjusted underlying pre-tax margin (calculated on total revenue excluding performance fees)

adjusted earnings per share

Adjusted profit after tax (£’000)
Adjusted underlying profit after tax (£’000)
Weighted average shares (ʼ000)
Weighted average diluted shares (ʼ000)
adjusted earnings per share:
Basic (pence)
Diluted (pence)
adjusted underlying earnings per share:
Basic (pence)
Diluted (pence)

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

8,299

16,788

4,603
301
(17)

13,186
(3,330)

4,347
(841)
635

20,929
(4,701)

9,856

16,228

1,161
(581)
42

622
(118)

504

13,186
(622)

12,564
(3,330)
118

9,352

18%

12,519
(6,260)
20

6,279
(1,194)

5,085

20,929
(6,279)

14,650
(4,701)
1,194

11,143

22%

Year ended
30 June
2020

Year ended
30 June
2019

9,856
9,352
83,624
83,856

11.79
11.75

11.18
11.15

16,228
11,143
80,121
83,244

20.26
19.50

13.91
13.39

123

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

14. dividends
The Group recognises dividends when an irrevocable commitment to pay them is incurred. In the case of interim dividends,
this is generally the payment date. In the case of final dividends, this is the date upon which the dividend is approved by
shareholders.

During the year, the following dividends were paid:

2018 second interim
2018 final
2019 first interim
2019 second interim
2019 final
2020 first interim

Ordinary
(pence)

Special
(pence)

Total
(pence)

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

4.2
3.2
4.3
3.5
2.6
3.9

1.3
2.3
2.0
1.6
2.4
0.5

5.5
5.5
6.3
5.1
5.0
4.4

–
–
–
4,269
4,188
3,678

4,422
4,424
5,023
–
–
–

12,135

13,869

15. cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits. At year end, all cash balances were held by banks
with credit ratings as detailed below.

Bank

Barclays Bank
Lloyds Bank
First Republic Bank

30 June
2020
£’000

19,305
4,384
562

30 June
2019
£’000

Credit rating

Rating body

18,728 A1/Negative Moody’s
Moody’s
5,043
Moody’s
275

Aa3
A1

total cash and cash equivalents

24,251

24,046

16. investment management balances

Investment management receivables
Investment management payables

30 June
2020
£’000

–
–

30 June
2019
£’000

22,277
22,278

Effective 17 October 2019, RAMAM ceased to be the ACD of the ICVC Funds and we initiated the transfer of the ACD
responsibility to an independent third party management company. The reduction of other receivables was a result of this
change.

As ACD of River and Mercantile Funds ICVC (the Fund), the Group was required to settle transactions between investors and
the depositary of the Fund. The Group was exposed to the short-term liquidity requirements to settle with the depositary of
the Fund before receiving payments from the investor. The credit risk associated with the investment management balances
held in the prior year is discussed in note 28.

The investment management balances were initially recognised at fair value, based upon the values given by the administrator
of the ICVC of the contractually agreed subscription or redemption values, and were subsequently recognised at amortised
cost using the effective interest method. Due to their short-term nature (typically less than a week), amortised cost closely
approximates fair value. The Group applies the IFRS 9 three stage model to measuring expected credit losses (ECLs) for
investment management balances at an amount equal to 12 months ECLs. The ECLs on investment management balances
are calculated based on actual historic credit loss experienced over the preceding three to five years on the total balance of
non-credit impaired investment management balances, and also the future likelihood of default. Taking into consideration the
Group’s historical experience, and their current credit exposures in light of future probabilities of default, the Group does not
expect to incur any credit losses and has not recognised any impairment losses in the current year under IFRS 9 (2019: £nil).

124

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

17. investments held at Fvtpl
The Group uses capital to invest in its own fund products as seed investments. The investments are recognised as a financial
asset in the Statement of Financial Position and changes to the fair value are recognised in the income statement. The fair
value of the Group’s investment in its funds is derived from the fair value of the underlying investments, some of which are
not traded in an active market and therefore the investment is classified as Level 2 under IFRS 13 Fair Value Measurement.

The movement in the carrying value of the investments is analysed below:

At 30 June 2018
Additions
Movement in FVTPL
Foreign exchange movement
Disposals

At 30 June 2019
Additions
Movement in FVTPL
Foreign exchange movement
Disposals

at 30 June 2020

Investments
held at FVTPL
£’000

5,165
10
441
165
(394)

5,387
1,523
(435)
(58)
(6,127)

290

18. assets held for sale
Where the Group seeds a fund, which meets the definition of an asset held for sale it is accounted for accordingly. These will
be held at the lower of cost or net realisable value.

The movement in the carrying value of the investments is analysed below:

At 30 June 2019
Additions

at 30 June 2020

Investments
held for sale
£’000

–
810

810

19. Fee receivables
Fee receivables are initially recorded at fair value and subsequently measured at amortised cost using the effective interest
method. The Group applies the IFRS 9 simplified approach to measuring ECLs for fee receivables at an amount equal to
lifetime ECLs. The ECLs on fee receivables are calculated based on actual historic credit loss experienced over the preceding
three to five years (which is adjusted for forward-looking estimates) on the total balance of non-credit impaired fee receivables
and also the future likelihood of default.

The Group considers a fee receivable to be credit impaired when one or more detrimental events have occurred, such as
significant financial difficulty of the client or it becoming probable that the client will enter bankruptcy or other financial
reorganisation. As the majority of fee receivables are fees deducted from the net asset value by fund administrators from
the respective funds off which they are calculated the credit risk is considered very low. Taking into consideration the Group’s
historical experience, and their current credit exposures in light of future probabilities of default, the Group does not expect
to incur any credit losses and has not recognised any impairment losses in the current year under IFRS 9 (2019: £nil). The
Directors are satisfied with the credit quality of counterparties.

Fees receivable

30 June
2020
£’000

10,233

30 June
2019
£’000

4,412

125

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

19. Fee receivables continued
As at 30 June 2020, the lifetime expected loss provision for fee receivables is as follows:

£’000

Expected loss rate
Fee receivables balance
Loss provision

Current

0%
9,376
–

30–60 days
past due

61–90 days
past due

91–365 days
past due

0%
733
–

0%
77
–

0%
47
–

More than
366 days
past due

50%
–
–

Total

10,233
–

Movements in the impairment allowance for fee receivables are as follows:

Opening provision for impairment
Increase during the year
Receivable written off during the year

closing provision for impairment

The average credit period on fee receivables is 13 days (2019: 32 days).

20. other receivables

Accrued income
Prepayments
Other debtors

30 June
2020
£’000

30 June
2019
£’000

–
–
–

–

38
7
(45)

–

30 June
2020
£’000

13,723
1,691
44

30 June
2019
£’000

18,186
1,494
5,825

15,458

25,505

In 2019, other debtors included a receivable in respect of the settlement of shares sold to cover Executive Directors’
employment taxes following the vesting of the EPSP awards of £3,693,000 and an ACD debtor of £1,083,000.

The Group applies the IFRS 9 simplified approach to measuring ECLs to other debtors. The Group does not expect to incur
any credit losses and has not recognised any impairment losses in the current year under IFRS 9 (2019: £nil).

The Group’s policy on financial instruments can be found in note 28.

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

126

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

21. property, plant and equipment
Property, plant and equipment is carried at historical cost less accumulated depreciation. Depreciation charges the cost
of the assets to the Consolidated Income Statement over their expected useful lives. Office equipment includes computer
equipment which is depreciated over three years, and fixtures, fittings and equipment which is depreciated over seven years.
Leasehold improvements are amortised over the remaining term of the leases. The depreciation period and method are
reviewed annually. Depreciation on right of use leasehold assets is included in administration expenses.

cost:
At 30 June 2018
Additions
Disposals
Exchange difference

At 30 June 2019
Additions
Exchange difference

at 30 June 2020

accumulated depreciation:
At 30 June 2018
Disposals
Depreciation charge on owned assets

At 30 June 2019
Depreciation charge on owned assets
Exchange difference

at 30 June 2020

net book value:
At 30 June 2019

at 30 June 2020

22. Right of use assets and lease liability

Right of Use Asset on Leasehold Property

cost:
At 30 June 2019
Recognition of asset on transition to IFRS 16
Additions

at 30 June 2020

accumulated depreciation:
At 30 June 2019
Recognition of depreciation charge on transition to IFRS 16
Depreciation charge

at 30 June 2020

net book value:
At 30 June 2019

at 30 June 2020

Office
equipment
£’000

Leasehold
improvements
£’000

573
64
(85)
5

557
45
5

607

365
(85)
71

351
72
2

425

206

182

415
132
–
3

550
–
2

552

22
–
128

150
145
1

296

400

256

Total
£’000

988
196
(85)
8

1,107
45
7

1,159

387
(85)
199

501
217
3

721

606

438

£’000

–
5,591
41

5,632

–
1,768
1,278

3,046

–

2,586

127

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

22. Right of use assets and lease liability continued

Lease Liability

liability:
At 30 June 2019
Recognition of liability on transition to IFRS 16
Payments made
Interest charge

at 30 June 2020

of which:
Current lease liabilities
Non-current lease liabilities

at 30 June 2020

£’000

–
4,024
(1,503)
170

2,691

1,456
1,235

2,691

From 1 July 2019, the Group’s leases relating to office accommodation with terms of more than one year are recognised as
a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. The
weighted average lessee’s incremental borrowing rate applied to the leases on 1 July 2019 was 5%. Leases with terms less
than one year will continue to be recognised as an operating lease.

The table below shows a reconciliation from the operating lease commitments disclosed at 30 June 2019 to the lease liability
recognised on implementation of IFRS 16:

Operating lease commitments at 30 June 2019
(Less): adjustments relating to leases of low value assets
Add: Adjustments as a result of different treatment of extension and termination options
(Less): discount using the lessee’s incremental borrowing rate

lease liability recognised at 1 July 2020

23. trade and other payables

Trade payables
VAT payable
Remuneration accruals
Other accruals and payables
Contract liabilities

The Group’s policy on financial instruments can be found in note 28.

Lease
Liability

4,098
(121)
332
(285)

4,024

30 June
2019
£’000

771
1,029
17,459
4,478
38

23,775

30 June
2020
£’000

195
1,110
11,570
4,588
30

17,493

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

128

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

24. Share capital
The Company had the following share capital at the reporting dates:

Allotted, called up and fully paid: Ordinary shares of £0.003 each

Number

Opening balance at 1 July 2018
Shares issued in respect of EPSP award vesting
Shares issued in respect of SAYE award vesting

Balance at 30 June 2019
Shares issued in respect of SAYE award vesting

Balance as at 30 June 2020

82,095,346
2,956,336
244,494

85,296,176
157,458

246,286
8,869
734

255,889
472

85,453,634

256,361

The ordinary shares carry the right to vote and rank pari passu for dividends.

The share premium account arises from the excess paid over the nominal value of the shares issued.

25. other reserves

Foreign exchange reserve
Capital redemption reserve
Merger reserve
Capital contribution reserve

30 June
2020
£’000

350
84
–
576

30 June
2019
£’000

379
84
44,433
576

1,010

45,472

The foreign exchange reserve represents the cumulative foreign exchange differences arising on US Dollar denominated
businesses in the Group as well as currency differences on goodwill and fair value adjustments on the acquisition of foreign
subsidiaries. Upon any disposal of the US Dollar denominated business, the associated cumulative foreign exchange
differences would be recycled through the Consolidated Income Statement.

The capital contribution reserve arose from a historical acquisition whereby the Group’s then parent settled part of the
consideration in its own shares valued at £576,000. There was a reclassification to retained earnings for a capital contribution
reserve item that arose from forgiveness of a dividend by the Group’s then parent, PSG (£3,867,000).

Following approval by Shareholders at the Company’s AGM in December 2019 to undertake a reduction in capital, and with
a view to effecting this on approval from the High Court, the Company capitalised its merger reserve of £44.4m by cancelling
the deferred shares in the Company (the “Deferred Shares”) creating distributable reserves equal to the merger reserve.
The Company received High Court approval in January 2020 to effect the reduction in capital by cancellation of the Deferred
Shares, creating distributable reserves available to the Company accordingly, supporting the Company’s ability to pay future
dividends.

26. own shares held by eBt
During the year, the Group’s EBT purchased Group shares in relation to non-dilutive share awards (note 7). The shares held
are measured at cost.

Opening balance at 1 July 2018
Acquisition of own shares by EBT
Disposal of shares in respect of award vesting

Balance at 30 June 2019
Disposal of shares in respect of award vesting

Balance as at 30 June 2020

£’000

4,981
1,694
(424)

6,251
(1,996)

4,255

129

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

27. Related party transactions
Related parties to the Group are its key management personnel (note 6).

In the prior year the Punter Southall Group (PSG) were a related party of the Group but ceased to be so in the year ended
30 June 2020 by virtue of PSG’s representative director resigning on 30 June 2019.

Significant transactions with pSG

Administrative charges from PSG:
Office facilities

total administrative charges

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

n/a

435

28. Financial instruments
Financial assets and financial liabilities are recognised in the Group’s Consolidated Statement of Financial Position when the
Group becomes party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual
rights to the cash flows from the financial asset expire or when the contractual rights to those assets are transferred. Financial
liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.

Financial assets at Fvtpl
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in the income
statement.

trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less expected credit losses. Interest income is recognised by applying the effective interest rate,
except for short-term trade and other receivables when the recognition of interest would be immaterial.

The impairment provision on financial assets measured at amortised cost (such as trade and other receivables) has been
calculated in accordance with IFRS 9’s expected credit loss model.

cash and cash equivalent balances
Cash and cash equivalents balances comprise cash in hand, cash at agents, demand deposits, and other short-term highly
liquid investments that have maturities of three months or less from inception, are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in value.

trade and other payables
Trade and other payables are initially measured at their fair value and are subsequently measured at their amortised cost
using the effective interest method. Interest expense is recognised by applying the effective interest rate, except for short-
term trade and other payables when the recognition of interest would be immaterial.

Categories of financial instruments
Financial instruments held by the Group are categorised under IFRS 9 as follows:

Financial assets
Cash and cash equivalents
Investment management balances
Fee receivables
Other receivables

Total financial assets held at amortised cost
Investments held at FVTPL

total investments held at Fvtpl

Total financial assets

Other receivables exclude prepayments.

30 June
2020
£’000

30 June
2019
£’000

24,251
–
10,233
13,767

48,251
290

290

24,046
22,277
4,412
24,011

74,746
5,387

5,387

48,541

80,133

130

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

28. Financial instruments continued

Financial liabilities
Investment management balances
Trade and other payables

Total financial liabilities at amortised cost

contingent consideration

Total financial liabilities held at fair value

Total financial liabilities

Trade and other payables exclude deferred income.

30 June
2020
£’000

30 June
2019
£’000

–
17,493

17,493

228

22,278
23,344

45,622

393

17,721

46,015

The Directors consider the carrying amounts of the loan and receivables financial assets and financial liabilities carried at
amortised cost to be a reasonable approximation to their fair values based upon their nature and the relatively short period
of time between the origination of the instruments and their expected realisation.

As reported in the prior year’s Annual Report the Group became the investment manager of the ILC funds. The contractual
agreements entered into between the parties constituted a business combination under IFRS 3. The contingent consideration
is calculated based on the percentage of revenue generated by an IMA and measured at fair value at each reporting date. The
contingent consideration balance is recognised within Trade and other payables in the consolidated Statement of Financial
Position and changes in fair value are recognised in the income statement. During the year the contingent consideration has
moved by £165,000 predominantly due to £112,000 of fair value adjustments.

Fair value of financial assets and liabilities
The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
and held as FVTPL and revalued on a recurring basis, grouped into levels 1 to 3:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or

liabilities. The Group does not hold financial instruments in this category;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are

observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The Group’s seeding
of funds is held within this category;

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs). The Group’s contingent consideration of the ILC
team is held within this category. This contingent consideration is measured at fair value at the reporting date. Based on
a discount rate of 10% and an assumed AUM growth of 10% per annum, the fair value of the contingent consideration
payable is £228,000 (2019: £393,000).

Financial assets
Financial assets held at fair value – level 2

Financial liabilities
Financial liabilities held at fair value – level 3

There have been no transfers of financial instruments between levels during the period.

30 June
2020
£’000

290

30 June
2020
£’000

228

30 June
2019
£’000

5,387

30 June
2019
£’000

393

131

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

28. Financial instruments continued
Financial risk management
The risks of the business are measured and monitored in accordance with the Board’s risk appetite, and policies and
procedures covering specific risk areas, such as: credit, market and liquidity risk.

The Group is exposed to credit risk, market risk (including interest rate and foreign currency risks) and liquidity risks from the
financial instruments identified above. This note describes the objectives, policies and processes of the Group for managing
those risks and the methods used to measure them.

credit risk management
Credit risk refers to the risk that a counterparty defaults on their contractual obligations resulting in financial loss to the
Group. The carrying amount of financial assets at amortised cost recorded in the financial statements represents the Group’s
maximum exposure to credit risk. The Group holds no collateral as security against any financial asset. Credit risk arises
principally from the Group’s fee receivables, other receivables and cash balances. The Group manages its credit risk through
monitoring the aging of receivables and the credit quality of the counterparties with which it does business. Where it is
deemed that a receivable is no longer recoverable it will be written off but will still be subject to enforcement activity.

The aging of outstanding fee receivables at the reporting date is given in note 19. There was no single fee receivable balance
at year-end that is material to the Group (2019: none).

The banks with whom the Group deposits cash and cash equivalent balances are monitored, including their credit ratings
(note 15). The Board consider both short term and long term credit ratings of its bank counterparties.

Market risk – foreign currency risk management
The Group’s foreign currency risk arises where adverse movements in foreign exchange rates impact the value of the assets
and liabilities held in currencies other than the local entities functional currency.

The carrying amount of the Group’s foreign currency exposures are shown below in GBP:

Fee receivables
Cash and cash equivalents
Payables
Other assets
Assets held for sale
Investments held at fair value

total

30 June
2020
£’000

675
1,158
(3,823)
2,785
810
240

1,845

30 June
2019
£’000

25
249
(1,026)
1,653
–
5,261

6,162

A 10% fluctuation in the exchange rate between foreign currencies and UK Pounds sterling on the outstanding foreign
currency denominated monetary items at year-end balances would result in a gain or loss of £185,000 (2019: £616,000).

Foreign exchange risk arising from transactions denominated in foreign currencies are monitored and where appropriate the
currency required to settle the transaction may be purchased ahead of the settlement date.

Market risk – interest rate risk management
The Group has minimal exposure to interest rate risk. The Group has no external borrowings, cash deposits with banks earn a
floating rate of interest and the interest income is not significant in either year.

liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. This risk relates to the
Group’s prudent liquidity risk management and implies maintaining sufficient cash reserves to meet the Group’s working
capital requirements. Management monitors forecasts of the Group’s liquidity, and cash and cash equivalents on the basis of
expected cash flow.

The Group is cash generative before the payment of dividends, and has cash and cash equivalent balances that support
the Group’s working capital requirements. The fee receivable invoicing cycle is generally quarterly; as a result cash balances
are maintained to meet the ongoing expenses of the business during the quarterly cycles. The Group’s capital expenditure
requirements have not been significant and have been limited to office and IT equipment.

Prior to significant cash outflows (or entering into commitments which would result in significant cash outflows), including
dividends, the Group undertakes liquidity and capital analysis.

132

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS CONTINUED

28. Financial instruments continued
The Group has entered into leases over its premises. The Group’s lease liability of £2,691,000 is presented on the Statement
of Financial Position.

At 30 June 2020, the Group had cash and cash equivalents of £24.3 million (2019: £24.0 million).

liquidity gap analysis
The table below presents the cash flows receivable and payable by the Group under non-derivative financial assets and
liabilities by remaining contractual maturities at the reporting date. The amounts disclosed in the table are the contractual,
undiscounted cash flows.

The net liquidity positions in the table below relate to cash flows on contractual obligations existing at the reporting date and
does not take account of any cash flows generated from profits on normal trading activities.

as at 30 June 2020
assets
Cash and cash equivalents
Fee income receivables
Other receivables

Total financial assets

liabilities
Trade and other payables

Total financial liabilities

Net liquidity surplus/(deficit)

as at 30 June 2019
assets
Cash and cash equivalents
Investment management balances
Fee income receivables
Other receivables

Total financial assets

liabilities
Investment management balances
Trade and other payables

Total financial liabilities

Net liquidity surplus/(deficit)

On demand
£’000

< 3 months
£’000

3–12 months
£’000

> 12 months
£’000

24,251
–
–

–
10,233
9,173

24,251

19,406

–

15,373

24,251

4,033

–
–
4,536

4,536

1,146

3,390

–
–
58

946

(888)

On demand
£’000

< 3 months
£’000

3–12 months
£’000

> 12 months
£’000

24,046
–
–
–

–
22,277
4,412
19,100

24,046

45,789

–
–

–

22,278
21,218

43,496

24,046

2,293

–
–
–
4,855

4,855

–
2,075

2,075

2,780

–
–
–
56

–
444

444

(388)

capital management
The Group operates its subsidiaries as self-sufficient entities which, save for activities in the US, are expected to be able to
meet their funding requirements without recourse to the parent.

The Group’s capital structure consists of equity (share capital and share premium), other reserves and its retained earnings;
capital is managed on a consolidated and individual entity basis to ensure that each entity is able to continue as a going
concern. Three of the Group’s subsidiaries are regulated entities (one in the UK, one in the US and one in both the UK and the
US). The Group scrutinises its capital adequacy using the Pillar 2 and ICAAP frameworks which are regulated by the FCA to
maintain adequate capital requirements. The Group has complied with its regulatory capital required throughout the period
covered by these financial statements.

133

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

29. ultimate controlling party and subsidiary undertakings
The Company became publicly listed on 26 June 2014 and remains publicly listed. The Directors consider that there is no
ultimate controlling party of the Group.

Subsidiary undertakings
The following subsidiaries have been included in the consolidated financial information of the Group:

Name

River and Mercantile Investments Limited1

River and Mercantile US Holdings Limited1

River and Mercantile LLC1, 2

River and Mercantile Holdings Limited

River and Mercantile Asset Management LLP1

River and Mercantile Group Services Limited1, 2

River and Mercantile Group Trustees Limited1, 2

River and Mercantile Services LLC2

River and Mercantile Group Employee

Benefit Trust

River & Mercantile International High

Alpha Fund3

Indirect holding.

1.
2. Exempt from audit requirements.
3. Fund consolidated as held for sale.

Country of
incorporation of
registration

Proportion of
voting rights/
ordinary share
capital held %

Registered office address

Nature of business

100

30 Coleman St, London,
EC2R 5AL
30 Coleman St, London,
EC2R 5AL
130 Turner St, Waltham,
MA 02453
30 Coleman St, London,
EC2R 5AL
30 Coleman St, London,
EC2R 5AL
30 Coleman St, London,
EC2R 5AL
30 Coleman St, London,
EC2R 5AL
1209 Orange St,
Wilmington, Delaware
19801
12 Castle Street, St Helier,
Jersey, JE2 3RT
100 C/O Global Trust Company
12 Gill Street, Suite 2600
Woburn US-MA US 01801

100

Investment management

Holding company for the
US business
Actuarial and consulting

Holding company

Investment management

Dormant service
company
Dormant service
company
Dormant service
company

EBT

Delaware series LLC

River and Mercantile Asset Management LLP has a non-coterminous year end, reporting at 31 March on a standalone basis.
This was the existing year-end date as at acquisition and no change is expected.

During the year River and Mercantile Services LLC was liquidated and ceased to form part of the Group.

30. events after the reporting date
Since the end of the financial year, the Directors are not aware of any other matter or circumstance not otherwise dealt with in
this report or the financial statements that has significantly or will significantly affect the operations of the Group, the results
of those operations or the state of affairs of the Group.

The Board of Directors have declared a second interim dividend of 2.81 pence per share. The second interim dividend will be
paid on 20 November 2020 to shareholders on the register as at 23 October 2020. The ex-dividend date is 22 October 2020.

The Board of Directors have also proposed a final dividend for the year ended 30 June 2020, subject to approval by
shareholders at the Group’s AGM on 14 December 2020, of 2.34 pence per share.

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

134

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

coMpanY StateMent oF Financial poSition

assets
Cash and cash equivalents
Other receivables
Deferred tax asset
Right of use assets
Property, plant and equipment
Intangible assets
Investments

total assets

liabilities
payables
Lease liability

total liabilities

net assets

equity
Share capital
Share premium
Other reserves
Retained earnings

equity attributable to owners

30 June
2020
£’000

30 June
2019
£’000

Note

2
3
4
6
5
7
8

9
6

10
11
12

13,898
3,396
126
1,620
188
380
58,901

11,104
12,947
736
–
314
26
58,762

78,509

83,889

2,697
1,578

4,275

9,254
–

9,254

74,234

74,635

256
15,428
84
58,466

74,234

256
15,136
44,517
14,726

74,635

The notes to the financial statements of River and Mercantile Group PLC (registered number 04035248) form part of and
should be read in conjunction with the financial statements.

The Company’s profit after tax for the year was £11,335,000 (2019: £15,810,000).

JaMeS BaRHaM
GROUP CHIEF EXECUTIVE

SiMon WilSon
CHIEF FINANCIAL OFFICER

30 October 2020

135

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

coMpanY StateMent oF caSH FloWS

Cash flow from operating activities
Profit before interest and tax

adjustments for:
Depreciation of property, plant and equipment
Depreciation of right of use asset
Amortisation of intangible assets
EBT funding
Share-based payment expense
Dividends from subsidiaries
Other gains and losses

Operating cash flow before movement in working capital
Decrease/(increase) in operating assets
(Decrease)/increase in operating liabilities

cash (used in) operations
Taxation received

net cash (used in) operations

Cash flow from investing activities
Purchases of property, plant and equipment
Purchase of intangible assets
Repayment of intercompany loan receivables
Interest received
Dividends received from subsidiaries

net cash generated from investing activities

Cash flow from financing activities
EBT funding settled
Dividends paid
Share issue
Lease liability payments

Net cash (used in) financing activities

net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

cash and cash equivalents at end of year

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

Year ended
30 June
2020
£’000

Year ended
30 June
2019
£’000

11,809

15,791

150
1,050
32
–
265
(16,000)
(27)

(2,721)
4,306
(6,691)

(5,106)
511

(4,595)

122
–
21
2,079
429
(23,200)
21

(4,737)
(5,230)
649

(9,318)
1,206

(8,112)

(24)
(386)
4,877
37
16,000

(190)
–
4,016
36
23,200

20,504

27,062

–
(12,135)
294
(1,274)

(2,200)
(13,869)
408
–

(13,115)

(15,661)

2,794

3,289

11,104

13,898

7,815

11,104

Repayment of intercompany loan receivables were classified as financing cash flows in the prior year. These cash flows relate
to the payment of amounts loaned to group companies so should have been classified as investing cash flows. The prior year
cash flow statement has been restated so as to reclassify the cash flows as relating to an investing activity.

136

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

coMpanY StateMent oF cHanGeS
IN SHAREHOLDERS’ EQUITY

Balance as at 30 June 2018
Comprehensive income for the year:
Profit for the year

total comprehensive income for the year

Transactions with owners:
Dividends
Share-based payment expense
Deferred tax on share-based payment expense
Realised tax in respect of award vesting
Transfer to retained earnings
Share issue in respect of award vesting

Total transactions with owners:

Balance as at 30 June 2019

Adjustment to retained earnings on transition to IFRS 16

Adjusted Balance as at 30 June 2019

comprehensive income for the year:
Profit for the year

total comprehensive income for the year

transactions with owners:
Dividends
Share-based payment expense
Deferred tax on share-based payment expense
Realised tax in respect of award vesting
Transfer to retained earnings
Share issue in respect of award vesting

total transactions with owners:

Balance as at 30 June 2020

Share
Capital
£’000

Share
Premium
£’000

Other
reserves
£’000

Retained
earnings
£’000

Total
£’000

246

14,688

48,384

7,660

70,978

–

–
–
–
–
–
10

256

–

256

–

–
–
–
–
–
–

–

–
–
–
–
–
448

448

–

15,810

–
–
–
–
(3,867)
–

(13,869)
1,450
(1,272)
1,080
3,867
–

(13,869)
1,450
(1,272)
1,080
–
458

(3,867)

(8,744)

(12,153)

15,136

44,517

14,726

74,635

–

(123)

15,136

44,517

14,603

74,512

–

–
–
–
–
–
292

292

–

11,335

–
–
–
–
(44,433)
–

(12,135)
409
(158)
(21)
44,433
–

(12,135)
409
(158)
(21)
–
292

(44,433)

32,528

(11,613)

256

15,428

58,466

74,234

The merger reserve arose on the acquisition of RAMAM in March 2014. Following approval by Shareholders at the Company’s
AGM in December 2019 to undertake a reduction in capital, and with a view to effecting this on approval from the High Court,
the Company capitalised its merger reserve of £44.4 million by paying up and issuing deferred shares in the Company (the
“Deferred Shares”) to a nominee who held such shares in trust for the shareholders. The Company received High Court
approval in January 2020 to affect the reduction in capital by cancellation of the Deferred Shares, creating distributable
reserves available to the Company.

137

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

noteS to tHe coMpanY Financial StateMentS

1. Basis of preparation
The Company’s financial statements have been prepared in accordance with IFRSs, International Accounting Standards and
interpretations, International Financial Reporting Interpretation Committee interpretations, and with those parts of the 2006
Act applicable to companies reporting under IFRS as issued by the International Accounting Standards Board as adopted by
the European Union that are relevant to its operations and effective for accounting periods beginning on 1 July 2019.

principal place of business
The Company’s principal place of business is the same as its registered office.

Result for the year
The profit after tax for the year ended 30 June 2020 was £11,335,000 (2019: £15,810,000).

In accordance with Section 408 of the Companies Act 2006 a separate income statement has not been presented for the
Company. There are no items of comprehensive income other than the result for the year and therefore no Statement of
Comprehensive income has been prepared for the Company.

Foreign currencies
To the extent that the Company undertakes transactions in currencies other than GBP, the transactions are translated
into GBP using the exchange rate prevailing at the date of the transaction. Balances denominated in foreign currencies are
translated into GBP using the exchange rate prevailing at the balance sheet date. All foreign exchange differences arising from
the settlement of transactions or the translation of balances are recognised in operating expenses in the income statement.

dividends
See note 14 of the consolidated financial statements.

2. cash and cash equivalents
Cash and cash equivalents comprise cash in hand and at bank, cash at agents, demand deposits, and other short-term highly
liquid investments that have maturities of three months or less from inception, are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in value. Below is a table detailing the credit rating of the banks with
which the Company holds its cash, and the balance held at year-end.

Bank

Barclays Bank

3. otHeR ReceivaBleS

Taxes and social security
Prepayments and accrued income
Amounts owed from Group undertakings
Other debtors

30 June
2020
£’000

30 June
2019
£’000

Credit rating

Rating body

13,898

11,104 A1/negative Moody’s

30 June
2020
£’000

327
601
2,467
1

3,396

30 June
2019
£’000

202
779
8,116
3,850

12,947

Other debtors in the prior year include a receivable in respect of the settlement of shares sold to cover Executive Directors’
employment taxes following the vesting of the EPSP awards of £nil (2019: £3,693,000).

Amounts owed from Group undertakings represent balances incurred in the course of trade and are payable on demand.

The Company applies the IFRS 9 simplified approach to measuring ECLs to accrued income and three staged model to
measuring ECLs to the remaining other receivables. The Group does not expect to incur any credit losses and has not
recognised any impairment losses in the current year under IFRS 9 (2019: £nil).

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

138

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

noteS to tHe coMpanY Financial StateMentS

continued

4. tax
The Company’s accounting policy in respect of tax is the same as that of the Group as detailed in note 12 of the consolidated
financial statements.

deferred tax assets:
At beginning of year
(Charge) to the income statement – share-based payment expense
(Charge) to equity – share-based payment expense

at year end

30 June
2020
£’000

736
(451)
(159)

126

30 June
2019
£’000

2,074
(66)
(1,272)

736

5. property plant and equipment
Property, plant and equipment is carried at historical cost less accumulated depreciation. Depreciation charges the cost of the
assets to the Income Statement over their expected useful lives.

cost:
At 30 June 2019
Additions

at 30 June 2020

accumulated depreciation:
At 30 June 2019
Depreciation charge

at 30 June 2020

net book value:
At 1 July 2019

at 30 June 2020

Office
equipment
£’000

Leasehold
improvements
£’000

Total
£’000

136
24

160

29
32

107

370
–

370

163
118

281

207

506
24

530

192
150

342

314

188

139

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

6. Right of use assets and lease liability

Right of Use Asset on Leasehold Property

cost:
At 30 June 2019
Recognition of asset on transition to IFRS 16
Additions

at 30 June 2020

accumulated depreciation:
At 30 June 2019
Recognition of depreciation charge on transition to IFRS 16
Depreciation charge

at 30 June 2020

net book value:
At 30 June 2019

at 30 June 2020

Lease Liability

liability:
At 30 June 2019
Recognition of liability on transition to IFRS 16
Payments made
Interest charge

at 30 June 2020

of which:
Current lease liabilities
Non-current lease liabilities

at 30 June 2020

£’000

–
4,066
–

4,066

–
1,396
1,050

2,446

–

1,620

£’000

–
2,739
(1,274)
113

1,578

355
1,223

1,578

From 1 July 2019, the Company’s leases relating to office accommodation with terms more than one year are recognised as
a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Company.
The weighted average lessee’s incremental borrowing rate applied to the leases on 1 July 2019 was 5%.

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

140

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

noteS to tHe coMpanY Financial StateMentS

continued

7. intangible assets
Intangible assets are carried at historical cost less accumulated amortisation and impairment. Amortisation charges the cost
of the assets to the income statement over their expected useful lives.

cost:
At 30 June 2019
Additions

at 30 June 2020

accumulated amortisation and impairment:
At 30 June 2019
Amortisation charge

at 30 June 2020

net book value:
At 1 July 2019

at 30 June 2020

8. investments in subsidiaries

At start of year
Additions – share-based payments in subsidiaries

at end of year

Software
£’000

Total
£’000

84
386

470

58
32

380

84
386

470

58
32

380

30 June
2020
£’000

58,762
139

58,901

30 June
2019
£’000

57,645
1,117

58,762

The Company’s investments in subsidiaries are stated at cost less provision for any impairment incurred. The Company has a
100% holding in River and Mercantile Holdings Limited.

9. payables

Trade payables
Amounts owed to Group undertakings
Accruals and deferred income

30 June
2020
£’000

60
19
2,618

2,697

30 June
2019
£’000

563
–
8,691

9,254

The Company also had payables of £1,578,000 in relation to its lease liabilities.

10. Share capital
Full details of the Company’s share capital can be found in note 24 of the consolidated financial statements.

11. Share premium
Full details of any movements in share premium can be found in the Company statement of changes in equity.

141

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

12. other reserves
A reconciliation of the movements in reserves can be found in the Company statement of changes in equity. Details on the
nature of the other reserves in the Company can be found in note 25 of the consolidated financial statements.

A breakdown of other reserves is detailed below.

Merger reserve
Capital redemption reserve

30 June
2020
£’000

–
84

30 June
2019
£’000

44,433
84

44,517

As at 30 June 2020, the Company had £55,038,000 of distributable reserves (2019: £10,800,000).

13. Financial instruments
A discussion of the financial risks and associated financial risk management, which applies to all of the companies in the
Group, can be found in note 28 of the consolidated financial statements, along with the Group’s accounting policy in respect
of financial instruments.

The financial assets and liabilities of the Company are categorised under IFRS 9 as follows:

Financial assets held at amortised cost
Cash and cash equivalents
Other receivables

Total financial assets held at amortised cost

Other receivables exclude prepayments.

Financial liabilities held at amortised cost
Payables

Total financial liabilities held at amortised cost

30 June
2020
£’000

30 June
2019
£’000

13,898
2,795

16,693

11,104
12,168

23,272

30 June
2020
£’000

30 June
2019
£’000

2,697

9,254

credit risk management
Credit risk refers to the risk that the counterparty defaults on their contractual obligations resulting in financial loss to the
Company. The carrying amount of financial assets at amortised cost recorded in the financial statements represents the
Company’s maximum exposure to credit risk. The Company held no collateral as security against any financial asset. Credit
risk arises principally from the Company’s intercompany and cash balances. The Company manages its credit risk through
monitoring the credit quality of the counterparties with which cash is held and the Company’s subsidiaries resources.

The bank with whom the Company deposits cash and cash equivalent balances are monitored, including its credit ratings
(note 2).

Market risk – interest rate risk management
The Company has minimal exposure to interest rate risk. The Company has no external borrowings and cash deposits with
banks earn a floating rate of interest. Interest income is not significant in either year.

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

142

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

FINANCIAL STATEMENTS

noteS to tHe coMpanY Financial StateMentS

continued

13. Financial instruments
liquidity gap analysis
The table below presents the cash flows receivable and payable by the Company under non-derivative financial assets
and liabilities by remaining contractual maturities at the balance sheet date. The amounts disclosed in the table are the
contractual, undiscounted cash flows.

The net liquidity positions in the table below relate to cash flows on contractual obligations existing at the balance sheet date
and does not take account of any cash flows generated from profits on normal trading activities.

as at 30 June 2020
assets
Cash and cash equivalents
Other receivables

Total financial assets

liabilities
Payables

Total financial liabilities

Net liquidity surplus/(deficit)

as at 30 June 2019
assets
Cash and cash equivalents
Other receivables

Total financial assets

liabilities
Payables

Total financial liabilities

Net liquidity surplus/(deficit)

On demand
£’000

< 3 months
£’000

3–12 months
£’000

> 12 months
£’000

13,898
–

13,898

–
1,977

1,977

–

2,183

13,898

(206)

–
818

818

726

–
–

–

422

(422)

On demand
£’000

< 3 months
£’000

3–12 months
£’000

> 12 months
£’000

11,104
–

11,104

–

–
6,864

6,864

8,823

–
5

374

–
5,299

5,299

11,104

(1,959)

(369)

5,242

14. Remuneration and benefits
Details on each category of remuneration are explained in note 6 of the consolidated accounts.

The Company had an average of 45 employees during the year (2019: 49).

the aggregate remuneration of employees (including directors) comprised:
Wages and salaries
Social security costs
Pension costs (defined contribution)
Share-based payment expense

Total remuneration and benefits (excluding EPSP)

Details of the individual Directors’ remuneration are shown in the Remuneration Committee Report.

Year ended
30 June 2020
£’000

Year ended
30 June 2019
£’000

5,891
820
163
276

7,150

6,921
727
148
(49)

7,747

143

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

15. Related parties
The Company entered into the following transactions with related parties:

Related party

Type of transaction

River and Mercantile Investments Limited
(subsidiary undertaking)

Management recharges
Intercompany balances

River and Mercantile LLC
(subsidiary undertaking)

Management recharges
Intercompany balances

River and Mercantile Holdings Limited
(immediate subsidiary undertaking)

Intercompany loan interest income
Intercompany balances

River and Mercantile Asset Management LLP Management recharges
Intercompany balances
(subsidiary undertaking)

Transaction recharge value

Balance owed/(owing)

30 June
2020
£’000

9,216
–

38
–

52
–

458
–

30 June
2019
£’000

8,063
–

31
–

–
–

1,195
–

30 June
2020
£’000

–
1,099

–
589

–
818

–
343

30 June
2019
£’000

–
2,498

–
449

–
4,729

–
440

River and Mercantile Group PLC is the ultimate parent undertaking, River and Mercantile LLC, River and Mercantile Asset
Management LLP and River and Mercantile Investments Limited are fellow subsidiaries and River and Mercantile Holdings
Limited is the immediate parent undertaking.

16. other information
The Company has taken the exemption under Section 408(2) of the Companies Act 2006 to not present their remuneration
separately in these financial statements.

A second interim dividend in respect of the year of 2.81 pence per share has been declared. The Directors have proposed
a final dividend in respect of the year of 2.34 pence per share, of which 0.10 pence is a special dividend relating to net
performance fees.

The Company has not entered into any significant commitments or contingent liabilities after the balance sheet date.

S
T
R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

A
D
D
I
T
I
O
N
A
L

N
F
O
R
M
A
T
I
O
N

144

RiveR and MeRcantile GRoup plc
ANNUAL REPORT AND ACCOUNTS 2020

ADDITIONAL INFORMATION

GloSSaRY

acd – Authorised Corporate Director

aGM – Annual general meeting

eSG – Environmental, social,
governance

auM – Amounts on which management
fees and performance fees are charged
across all asset classes managed by
the Group. In relation to derivatives,
AUM represents the aggregate billing
notional of the derivative contracts on
which management fees are charged

BaepS – Basic Adjusted earnings per
share

BauepS – Basic Adjusted Underlying
earnings per share

Board – the board of directors of the
Company

bps – basis points, where one basis
point represents 0.01%

Buy-out – A type of financial transfer
whereby a pension fund sponsor pays
a fixed amount in order to free itself
of any liabilities (and assets) relating to
that fund

caSS – Client Assets sourcebook

ceo – Chief Executive Officer

cFo – Chief Financial Officer

cGu – Cash generating unit

cio – Chief Investment Officer

cMa – Competition and Markets
Authority

company – River and Mercantile
Group PLC

coo – Chief Operating Officer
covid-19 or coronavirus – the
severe acute respiratory syndrome
coronavirus 2 (SARS-CoV-2)

cRM – Client Relationship Management

evp – Employee Value Proposition

Fca – Financial Conduct Authority

FRc – Financial Reporting Council

Fvoci – Fair value through other
comprehensive income

Fvtpl – Fair value through profit or
loss

pvt – Potential, value and timing. The
investment strategy employed by
the Group’s Equity Solutions division
eligible defined benefit fund members
in case of employer insolvency

RaMaM – River and Mercantile Asset
Management LLP

RaMil – River and Mercantile
Investments Limited

RFp – Request For Particulars

GReF – Global Responsible Equity Fund

Ria – regretted institutional attrition

Group – River and Mercantile Group
PLC and its subsidiaries

RWaa – Revenue weighted asset
attribution

iaS – International Accounting
Standards

icaap – Individual Capital Adequacy
Assessment Process

icvc – Investment company of variable
capital

iFRS – International Financial Reporting
Standards

ilc – Industrial life cycle

ined – Independent Non Executive
Director

it – Information Technology

iMa – Investment management
agreement

iMe – Investment Management Entities

SaaS – Software as a service

SaYe Scheme – Save-As-You-Earn
Scheme

Sid – Senior Independent Director

SMcR – Senior Managers and
Certification Regime

SRd ii – The Shareholder Rights
Directive II

tcFd – Task Force on Climate-related
Financial Disclosures

tSR – Total shareholder return

ucitS – Undertakings for the collective
investment of transferable securities.

un pRi – United Nations Principles of
Responsible Investing

ipo – Initial public offering

YoY – Year-on-year

iSa – International Standards on
Auditing (UK)

Kpi – Key performance indicator

ldi – Liability-driven investment, an
investment strategy based on the cash
flows needed to fund future liabilities

daa – Dynamic Asset Allocation

ltia – Long-term incentive awards

dB – Defined benefit

dc – Defined contribution

dep – Deferred Equity Plan

director – a director of the Company

eBt – Employee Benefit Trust

ed – Executive Director

epS – Earnings per share

epSp – Executive performance share
plan. A dilutive share plan awarded to
executives during the Group’s IPO

ltip – Long-term incentive plan

nav – Net asset value

ned – Non-Executive Director

oMS/pMS – Order Management
Solution/Portfolio Management
Solution

ppF – Pension Protection Fund, a
statutory fund established under the
provisions of the Pensions Act 2004

pSG – Punter Southall Group Limited

pSp – Performance Share Plan

SHaReHoldeR inFoRMation and adviSoRS

company number
04035248

Registered office
30 Coleman Street
London
EC2R 5AL

Tel: 020 3327 5100

Group company Secretary
Sally Buckmaster

Website
www.riverandmercantile.com

annual General Meeting
14 December 2020 at 9.00 am

dividends
Where possible, it is recommended
that dividend payments are made
directly into a bank account to
provide improved security and
faster access to funds. You may give
instruction via the Registrar’s website
www.shareview.co.uk or in writing.

Final dividend for the financial year
ended 30 June 2020:

amount
2.34 pence per ordinary share.

ex-dividend date
26 November 2020

Record date
27 November 2020

payment date
18 December 2020

Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA

Shareholder helpline
0371 384 2030
(+44 121 415 7047)
www.shareview.co.uk

auditors
BDO LLP
55 Baker Street
London
W1U 7EU

corporate broker and advisors

Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4 M7LT

Jefferies International Limited
100 Bishopsgate
London
EC2N 4JL

Share listing
River and Mercantile Group PLC‘s
ordinary shares of £0.003 are
admitted to trading on the Main
Market of the London Stock
Exchange under ticker RIV.

Information on the share price
and the Company can be accessed
via the Company’s website or at
www.londonstockexchange.com.

Bloomberg
0994474D:LN

iSin
GB00BLZH7X42

Sedol code
BLZH7X4

ticker
RIV

30 Coleman Street
London
EC2R 5AL