REG - Arbuthnot BankingSecure Trust Bank - Final Results for the year to 31 December 2015 <Origin Href="QuoteRef">ARBB.L</Origin> <Origin Href="QuoteRef">STBS.L</Origin> - Part 2
17/03/2016 07:05
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133,416
Tier 2 capital 12,865 13,479
Total capital 170,348 146,895
Core Tier 1 capital ratio (Net Core Tier 1 capital/Basel III Total Risk Exposure) 11.7% 14.0%
Total Capital Ratio (Capital/Basel III Total Risk Exposure) 12.6% 15.4%
Risks and Uncertainties
The Group regards the monitoring and controlling of risks and uncertainties as a fundamental part of the management
process. Consequently, senior management are involved in the development of risk management policies and in monitoring
their application. A detailed description of risk management and their associated policies is set out in note 6 to the
financial statements.
The principal risks inherent in the Group's business are strategic, credit, market, liquidity, operational, cyber, conduct
and regulatory.
Strategic risk
Strategic risk is the risk that may affect the Group's ability to achieve its corporate and strategic objectives. This risk
is important to the Group as it continues its growth strategy. However, the Group seeks to mitigate strategic risk by
focusing on a sustainable business model which is aligned to the Group's business strategy. Also, the Board of Directors
meets once a year to hold a two day board meeting to ensure that the Group's strategy is appropriate for the market and
economy.
Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. This risk exists in Arbuthnot
Latham & Co., Limited and Secure Trust Bank PLC, which currently have loan books of £619m and £961m respectively. The
lending portfolio in Arbuthnot Latham is extended to private banking clients, the majority of which is secured against
cash, property or other assets. The portfolios within Secure Trust are extended to retail customers and are largely
unsecured. However, the new Real Estate finance business lends mainly secured on properties. Credit risk is managed through
the Credit Committees of each bank with significant exposures also being approved by the Group Risk Committee.
Market risk
Market risk arises in relation to movements in interest rates, currencies and equity markets. The Group's treasury function
operates mainly to provide a service to clients and does not take significant unmatched positions in any market for its own
account. As a result, the Group's exposure to adverse movements in interest rates and currencies is limited to interest
earnings on its free cash and interest rate re-pricing mismatches.
Liquidity risk
Liquidity risk is the risk that the Group cannot meet its obligations as they fall due. The Group takes a conservative
approach to managing its liquidity profile. It has placed no reliance on the wholesale lending markets and is almost
entirely funded by retail customer deposits. The loan to deposit ratios are maintained at prudent levels. Following
introduction of the new liquidity regime, which came into force on 1 October 2010, the Group maintains liquidity asset
buffers which comprise high quality, unencumbered assets such as Government Securities, which can be called upon to meet
the Group's liabilities.
Operational risk
Operational risk is the risk that the Group may be exposed to financial losses from conducting its business. The Group is
exposed to operational risks from its Information Technology and Operations platforms. There are additional internal
controls in these processes that are designed to protect the Group from these risks. The Group's overall approach to
managing internal control and financial reporting is described in the Corporate Governance section of the Annual Report.
Cyber risk
An increasing risk that the Group is subject to within its operational processes is cyber risk. This is the risk that the
businesses within the Group are subject to some form of disruption arising from an interruption to its IT and data
infrastructure.
Conduct risk
As a financial services provider we face conduct risk, including selling products to customers which do not meet their
needs; failing to deal with customers' complaints effectively; not meeting customers' expectations; and exhibiting
behaviours which do not meet market or regulatory standards.
The Group adopts a zero risk appetite for any unfair customer outcomes. It maintains clear compliance guidelines and
provides ongoing training to all staff. Periodic spot checks and internal audits are performed to ensure these guidelines
are being maintained. The Group also has insurance policies in place to cover any claims that may arise.
Regulatory risk
Regulatory compliance risk is the risk that the Group will have insufficient capital resources to support the business or
does not comply with regulatory requirements. The Group adopts a conservative approach to managing the capital of the
Group. The principal regulated entities maintain capital ratios in excess of the minimum level set by the regulator.
Capital requirements are forecast as part of the annual budgeting process and these are regularly monitored. Annually, the
Group Board assesses the robustness of the capital requirements as part of the Individual Capital Adequacy Assessment
Process (ICAAP), where stringent stress tests are performed to ensure that capital resources are adequate over a three year
horizon.
Regulatory change also exists as a risk to the Group's business. Not withstanding the assessments carried out by the Group
to manage the regulatory risk, it is not possible to predict how regulatory and legislative changes may alter and impact
the business. Significant and unforeseen regulatory changes may reduce the Group competitive situation and lower its
profitability.
Macroeconomic and competitive environment
The Group is also exposed to indirect risks that may arise from the macroeconomic and competitive environment. The economic
environment is relatively stable within the UK. However, the international landscape is increasingly uncertain. The
declining performance of the economies in the EU, Russia and China may have an adverse affect on the UK. In particular this
may cause a softening of central London property prices, which may spread out further to the South East.
Over the past year the reduction in oil prices has resulted in a lowering of the interest rate yield curve and has pushed
out the time horizon for expectations of an increase in interest rates.
The Group monitors its exposure to future interest rate rises and currently has minimal lending to customers in products
that would be directly sensitive to interest rate rises. However, at the current levels of interest rates, the
affordability enjoyed by the Group's customers is beneficial.
EU Referendum
At the time of issuing this Annual Report, the date for the UK referendum on its membership of the European Union (EU) has
been set for 23 June 2016. It is currently difficult to analyse the impacts that a vote to exit may have on the Arbuthnot
Banking Group. However, our only overseas operation is in Dubai, so the vast majority of the Group's income and expenditure
is based in the UK. It is therefore anticipated that the financial impact would be minimal assuming there were to be no
significant macro economic shock on the UK.
Group Directors' Report
The Directors submit their annual report and the audited consolidated financial statements for the year ended 31 December
2015.
Principal Activities and Review
The principal activities of the Group are banking and financial services. A strategic review in accordance with Section 414
C of the Companies Act 2006 forming part of this report is set out on pages 4 to 15.
Results and Dividends
The results for the year are shown on page 26. The profit after tax for the year of £26.5m (2014: £17.0m) is included in
reserves.
The Directors recommend the payment of a final dividend of 17p on the ordinary shares which, together with the interim
dividend of 12p paid on 2 October 2015, represents total dividends for the year of 29p (2014: 27p). The final dividend, if
approved by members at the Annual General Meeting, will be paid on 13 May 2016 to shareholders on the register at close of
business on 15 April 2016.
The Board is also proposing to pay a special dividend of 25p for 2016. This dividend is dependent on the completion of the
sale of ELL, which includes regulatory approval of change of control, transferal of ownership and inclusion of the gain
within the Group's capital resources. Following completion, the Board would also review the financial position and
prospects of the Company before declaring the special dividend.
Going Concern
After making appropriate enquiries which assessed strategy, profitability, funding, risk management (see note 6) and
capital resources (see note 7), the directors are satisfied that the Company and the Group have adequate resources to
continue in operation for the foreseeable future. The financial statements are therefore prepared on the going concern
basis.
Share Capital
Shareholders will be asked to approve a Special Resolution renewing the authority of the Directors to make market purchases
of shares not exceeding 10% of the existing issued share capital. The Directors will keep the position under review in
order to maximise the Company's resources in the best interests of shareholders.
Sale of subsidiary
It was announced on 4 December 2015 that the Company's subsidiary, Secure Trust Bank PLC, has agreed the conditional sale
of its sub-prime consumer lending business, Everyday Loans Holdings Limited, to Non Standard Finance plc for £107m in cash
and £20m in ordinary shares of the purchaser. This transaction is subject to approval by Regulators and is proceeding
according to expectations and is anticipated that ownership will be transferred before 30 April 2016.
Financial Risk Management
Details of how the Group manages risk are set out in in the Strategic Report and in note 6.
Substantial Shareholders
The Company was aware at 15 March 2016 of the following substantial holdings in the ordinary shares of the Company, other
than those held by one director shown below:
Holder Ordinary Shares %
Liontrust UK Smaller Companies Fund 944,055 6.2
Prudential plc 609,688 4.0
Mr. R Paston 529,130 3.5
Directors
Sir Henry Angest Chairman & CEO
J R Cobb Finance Director
I A Dewar
J W Fleming
Ms R J Lea
P A Lynam
Sir Christopher Meyer
A A Salmon Chief Operating Officer
All are currently directors and served throughout the year except for Mr. I.A. Dewar who was appointed on 1 August 2015.
Mr. R.J.J. Wickham served as a director throughout 2015 and retired on 31 December 2015. Ms R.J. Lea will retire at the
Annual General Meeting and does not seek re-election.
Mr. Dewar, who has wide ranging experience in finance and as a senior statutory auditor, has been appointed chairman of the
Audit Committee in succession to Ms Lea and offers himself for election under Article 75 of the Articles of Association.
Sir Henry Angest and Sir Christopher Meyer retire under Article 78 of the Articles of Association and, being eligible,
offer themselves for re-election. Sir Henry Angest has a service agreement terminable on twelve months' notice. Sir
Christopher Meyer, a non-executive director who joined the Board in October 2007, does not have a service agreement.
According to the information kept under Section 3 of the Disclosure and Transparency Rules 2006, the interests of directors
and their families in the ordinary 1p shares of the Company at the dates shown were, and the percentage of the current
issued share capital held is, as follows:
Beneficial Interests 1 January 2015 31 December 2015 15 March 2016 %
Sir Henry Angest 8,200,901 8,200,901 8,200,901 53.7
J.W. Fleming 4,500 4,500 4,500 -
P.A. Lynam 10,000 10,000 10,000 0.1
A.A. Salmon 51,699 51,699 51,699 0.3
At the year end Mr. Lynam held 9,110 and Mr. Salmon held 7,500 ordinary 40p shares in Secure Trust Bank PLC, a 52%
subsidiary of the Company.
On 16 April 2013 Mr. Salmon and Mr. Cobb were granted options to subscribe between April 2016 and April 2021 for 100,000
and 50,000 ordinary 1p shares respectively in the Company at 930p. The fair value of the options at grant date was
£125,000.
On 1 April 2014 Mr. Fleming was granted an option to subscribe between April 2017 and April 2022 for 50,000 ordinary 1p
shares in the Company at 1185p. The fair value of the option at grant date was £53,000.
Mr. Lynam and Mr. Salmon continue to hold options granted to them on 2 November 2011 to subscribe for 141,667 ordinary 40p
shares in Secure Trust Bank PLC at 720p between 2 November 2016 and 2 November 2021. The fair value of the options at
grant date was £1m.
Mr. Lynam was granted phantom options on 23 March 2015 to acquire 187,500 ordinary 40p shares in Secure Trust Bank PLC at
£25 exercisable on or after 3 November 2018 when a cash payment would be made equal to any increase in value.
Apart from the interests disclosed above, no director was interested at any time in the year in the share capital of Group
companies.
No director, either during or at the end of the financial year, was materially interested in any contract with the Company
or any of its subsidiaries, which was significant in relation to the Group's business. At 31 December 2015 two directors
had loans from Arbuthnot Latham & Co., Limited amounting to £2,901,000 and one director had a loan from Secure Trust Bank
amounting to £223,000, on normal commercial terms as disclosed in note 38 to the financial statements. At 31 December 2015
five directors had deposits with Arbuthnot Latham & Co., Limited amounting to £2,321,000 and two directors had deposits
with Secure Trust Bank PLC amounting to £371,000, all on normal commercial terms as disclosed in note 38 to the financial
statements.
The Company maintains insurance to provide liability cover for directors and officers of the Company.
Board Committees
The report of the Remuneration Committee on pages 22 to 23 will be the subject of an Ordinary Resolution at the Annual
General Meeting.
Information on the Audit, Nomination, Risk and Political Donations Committees is included in the Corporate Governance
section of the Annual Report on pages 19 to 21.
Employees
The Company gives due consideration to the employment of disabled persons and is an equal opportunities employer. It also
regularly provides employees with information on matters of concern to them, consults on decisions likely to affect their
interests and encourages their involvement in the performance of the Company through share participation and in other
ways.
Political Donations
The Company made political donations of £68,000 to the Conservative Party during the year (2014: £48,000).
Branches outside of the UK
During the year the Arbuthnot Latham & Co., Ltd operated a branch in Dubai which is regulated by the Dubai Financial
Services Authority.
Events after the balance sheet date
On 15 January 2016 Arbuthnot Latham & Co., Ltd signed a contract with Oracle to replace its current banking system. The
committed cost is £2m.
Auditors
A resolution for the re-appointment of KPMG LLP as auditor will be proposed at the forthcoming Annual General Meeting at a
fee to be agreed in due course by the directors.
Statement of Disclosure of Information to Auditors
The Directors confirm that:
• so far as each director is aware, there is no relevant audit information of which the Company's auditor is unaware; and
• the Directors have taken all the steps they ought to have taken as directors to make themselves aware of any relevant
audit
information and to establish that the Company's auditor is aware of that information.
This confirmation is given and shall be interpreted in accordance with the provisions of section 418 of the Companies Act
2006.
Corporate Governance
Arbuthnot Banking Group has a strong and effective Corporate Governance framework. The Board endorses the principles of
openness, integrity and accountability, which underlie good corporate governance and take into account the provisions of
the UK Corporate Governance Code in so far as they are considered appropriate to the Group's size and circumstances.
Moreover, the Group contains subsidiaries authorised to undertake regulated business under the Financial Services and
Markets Act 2000, which are regulated by the Prudential Regulatory Authority and the Financial Conduct Authority, including
two which are authorised deposit-taking businesses. Accordingly, the Group operates to the high standards of corporate
accountability and regulatory compliance appropriate for such businesses.
Directors
The Group is led by an effective Board which comprises five executive directors and three non-executive directors. During
2015, the senior independent non-executive director, and Deputy Chairman, was Robert Wickham. Mr. Wickham retired from the
Board on 31 December 2015. Ian Dewar was appointed on 1 August 2015 as an independent non-executive director of the Company
and assigned the role of chairman of the Audit Committee in succession to Ruth Lea, who will retire from the Board at the
Annual General Meeting. The directors seeking re-election are Sir Henry Angest and Sir Christopher Meyer, who have served
on the Board for 30 years and eight years respectively. The contribution of Sir Henry Angest, who beneficially owns more
than 50% of the issued share capital, has been invaluable in the successful development of the Company. Sir Christopher
Meyer's wide-ranging experience as a diplomat has provided an important independent measure of challenge to executive
management. Accordingly, the Board fully supports the resolutions for their reappointment.
The Board
The Board held six formal meetings during the year as well as a two day strategy meeting. Substantive agenda items have
briefing papers, which are circulated in a timely manner before each meeting. The Board is satisfied that it is supplied
with all the information that it requires and requests, in a form and of a quality to enable it to discharge its duties. In
addition to ongoing matters concerning the strategy and management of the Company and of the Group, the Board has
determined certain items which are reserved for decision by itself. These matters include the acquisition and disposal of
other than minor businesses, the issue of capital by any Group company, monitoring overall regulatory requirements of its
subsidiary companies, and their adherence thereto, and any transaction by a subsidiary company that cannot be made within
its own resources or that is not in the normal course of its business.
The Company Secretary is responsible for ensuring that the Board processes and procedures are appropriately followed and
support effective decision making. All directors have access to the Company Secretary's advice and services. There is an
agreed procedure for directors to obtain independent professional advice in the course of their duties, if necessary, and
at the Company's expense.
The Board has delegated certain of its responsibilities to Committees. All Committees have written terms of reference
approved by the Board.
Audit Committee
Membership of the Audit Committee is restricted to non-executive directors and comprises Ian Dewar (as Chairman), Ruth Lea
and Sir Christopher Meyer. The Committee met four times during the year.
The Audit Committee provides a forum for discussing with the Group's external auditors their report on the annual accounts,
reviewing the scope, results and effectiveness of the internal audit work programme and considering any other matters which
might have a financial impact on the Company. These include the Group's arrangements by which staff may, in confidence,
raise concerns about possible improprieties in matters of financial reporting or other matters. The Audit Committee's
responsibilities include reviewing the Group's system of internal control, whistleblowing procedures and the process for
evaluating and monitoring risk. The Committee also reviews the appointment, terms of engagement and objectivity of the
external auditors, including the level of non-audit services provided, and ensures that there is an appropriate audit
relationship.
The present auditors have held office since 2009, but the senior statutory auditor changed in 2013. The Board is very
satisfied with the effectiveness of their audit. The Committee received a report showing the level of non-audit services
provided by the external auditors during the year and members were satisfied that this did not infringe auditor
independence.
Remuneration Committee
Information on the Remuneration Committee and details of the Directors' remuneration are set out in the separate
Remuneration Report.
Nomination Committee
The Nomination Committee is chaired by Sir Henry Angest and its other members are Sir Christopher Meyer and Ruth Lea. The
Committee met twice during the year. Before a Board appointment is made the skills, knowledge and experience required for a
particular appointment are evaluated and a recommendation made to the Board, with recruitment consultants appointed if
appropriate. The Committee has under active consideration the appointment of an additional independent non-executive
director to succeed Ruth Lea on her retirement from the Board.
Risk Committee
The Risk Committee is chaired by Sir Henry Angest and its other members are James Cobb, James Fleming, Paul Lynam and
Andrew Salmon. The Committee met six times during the year. The principal role of the Risk Committee is to approve
significant individual credits or other exposures.
Donations Committee
The Donations Committee is chaired by Sir Henry Angest and its other members are Sir Christopher Meyer and Ruth Lea. The
Committee met three times during the year. The Committee considers any political donation or expenditure as defined within
the Political Parties, Elections and Referendums Act 2000.
Shareholder Communications
The Company maintains a regular dialogue with its shareholders and makes full use of the Annual General Meeting and other
General Meetings (when held) to communicate with investors. The Company aims to present a balanced and understandable
assessment in all its reports to shareholders, its regulators, other stakeholders and the wider public. Key announcements
and other information can be found at www.arbuthnotgroup.com.
Internal Control and Financial Reporting
The Board of directors has overall responsibility for the Group's system of internal control and for reviewing its
effectiveness. Such a system is designed to manage rather than eliminate risk of failure to achieve business objectives and
can only provide reasonable but not absolute assurance against the risk of material misstatement or loss.
The Directors and senior management of the Group have formally adopted a Group Risk and Controls Policy which sets out the
Board's attitude to risk and internal control. Key risks identified by the Directors are formally reviewed and assessed at
least once a year by the Board. In addition, key business risks are identified, evaluated and managed by operating
management on an ongoing basis by means of procedures such as physical controls, credit and other authorisation limits and
segregation of duties. The Board also receives regular reports on any risk matters that need to be brought to its
attention.
Significant risks identified in connection with the development of new activities are subject to consideration by the
Board. There are well-established budgeting procedures in place and reports are presented regularly to the Board detailing
the results of each principal business unit, variances against budget and prior year, and other performance data.
The effectiveness of the internal control system is reviewed regularly by the Board and the Audit Committee, which also
receives reports of reviews undertaken by the internal audit function, which was outsourced to EY during 2015. The Audit
Committee also receives reports from the external auditors, KPMG LLP, which include details of internal control matters
that they have identified as part of the annual statutory Financial Statement audit. The ICAAP and ILAAP are considered key
issues and are considered in detail by the subsidiary Boards and their Risk Committees. The Board receives reports on these
by exception. Certain aspects of the system of internal control are also subject to regulatory supervision, the results of
which are monitored closely by the Board.
Statement of Directors' Responsibilities in Respect of the Strategic Report and the Directors' Report and the Financial
Statements
The Directors are responsible for preparing the Strategic Report and the Directors' Report and the financial statements in
accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Parent Company
financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required
to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected
to prepare the Parent Company financial statements on the same basis.
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 Parent Company and of their profit or loss for that period. In
preparing each of the Group and Parent Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the
Parent
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and
enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility
for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Remuneration Report
Remuneration Committee
Membership of the Remuneration Committee is limited to non-executive directors together with Sir Henry Angest as Chairman.
The present members of the Committee are Sir Henry Angest, Sir Christopher Meyer and Ruth Lea. The Committee met four times
during the year.
The Committee has responsibility for producing recommendations on the overall remuneration policy for directors for review
by the Board and for setting the remuneration of individual directors. Members of the Committee do not vote on their own
remuneration.
Remuneration Policy
The Remuneration Committee determines the remuneration of individual directors having regard to the size and nature of the
business; the importance of attracting, retaining and motivating management of the appropriate calibre without paying more
than is necessary for this purpose; remuneration data for comparable positions, in particular the rising remuneration
packages at other challenger banks; the need to align the interests of executives with those of shareholders; and an
appropriate balance between current remuneration and longer-term performance-related rewards. The remuneration package can
comprise a combination of basic annual salary and benefits (including pension), a discretionary annual bonus award related
to the Committee's assessment of the contribution made by the executive during the year and longer-term incentives,
including executive share options. Pension benefits take the form of annual contributions paid by the Company to individual
money purchase schemes. The Remuneration Committee reviews salary levels each year based on the performance of the Group
during the preceding financial period. This review does not necessarily lead to increases in salary levels. For the
purposes of the FCA Remuneration Code, all the provisions of which have been implemented. The Group and its subsidiaries
are all considered to be Tier 3 institutions.
Directors' Service Contracts
Sir Henry Angest, James Fleming, Paul Lynam and Andrew Salmon each have service contracts terminable at any time on 12
months' notice in writing by either party. James Cobb has a service contract terminable at any time on six months' notice
in writing by either party.
Share Option and Long Term Incentive Schemes
This part of the remuneration report is audited information.
At the Annual General Meeting in May 2015, shareholders voted by Ordinary Resolution to extend the Company's Unapproved
Executive Share Option Scheme for a further period of 10 years.
The Company has an ESOP ('the Arbuthnot ESOP Trust') under which trustees may purchase shares in the Company to satisfy the
exercise of share options by employees, including executive directors.
On 16 April 2013 Mr. Salmon and Mr. Cobb were granted options to subscribe between April 2016 and April 2021 for 100,000
and 50,000 ordinary 1p shares respectively in the Company at 930p. The fair value of the options at grant date was
£125,000.
On 1 April 2014 Mr. Fleming was granted an option to subscribe between April 2017 and April 2022 for 50,000 ordinary 1p
shares in the Company at 1185p. The fair value of the options at the grant date was £53,000.
At the date of this remuneration report, the only outstanding options to directors under the Unapproved Executive Share
Option Scheme are those in relation to 100,000 shares for Andrew Salmon and 50,000 shares each for James Cobb and James
Fleming. 150,500 shares are held in the Arbuthnot ESOP Trust.
Under the Unapproved Executive Share Option Scheme of the Company subsidiary, Secure Trust Bank PLC, established in
November 2011, Paul Lynam and Andrew Salmon were each granted options over 283,333 shares in that company. The fair value
of the options at the grant date was £1m.
On 2 November 2014 Mr. Lynam and Mr. Salmon each exercised options granted to them on 2 November 2011 to subscribe for
141,666 ordinary 40p shares in Secure Trust Bank PLC at 720p and sold the shares at a price of £25. Mr. Lynam and Mr.
Salmon continue to hold options granted to them on 2 November 2011 to subscribe for 141,667 ordinary 40p shares in Secure
Trust Bank PLC at 720p between 2 November 2016 and 2 November 2021. The fair value of the options at grant date was £0.5m.
On 23 March 2015 Mr. Lynam was granted phantom options to acquire 187,500 ordinary 40p shares in Secure Trust Bank PLC at
£25 exercisable on or after 3 November 2016 when a cash payment would be made equal to any increase in value.
Directors' Emoluments
This part of the remuneration report is audited information.
2015 2014
£000 £000
Fees (including benefits in kind) 70 98
Salary payments (including benefits in kind) 5,165 3,938
Pension contributions 140 140
Long term incentive - 5,030
5,375 9,206
Total Total
Salary Bonus Benefits Pension Fees 2015 2014
£000 £000 £000 £000 £000 £000 £000
Sir Henry Angest 900 - 87 - - 987 632
JR Cobb 450 200 16 35 - 701 526
IA Dewar 29 - - - - 29 -
JW Fleming 450 100 16 35 - 601 576
Ms RJ Lea 60 - - - 70 130 125
PA Lynam 900 500 21 35 - 1,456 3,671
Sir Christopher Meyer 55 - - - - 55 50
AA Salmon 900 400 21 35 - 1,356 3,571
RJJ Wickham 60 - - - - 60 55
3,804 1,200 161 140 70 5,375 9,206
Details of any shares or options held by directors are presented on page 17.
The emoluments of the Chairman were £987,000 (2014: £632,000). The emoluments of the highest paid director were £1,456,000
(2014: £3,671,000) including pension contributions of £35,000 (2014: £35,000).
Mr. R J J Wickham was a director of Calando Finance Limited which received an annual fee of £nil (2014: £14,000) in respect
of his services to the Group. This amount is included in the table above. Retirement benefits are accruing under money
purchase schemes for five directors who served during 2015 (2014: five directors).
Independent Auditor's Report
We have audited the financial statements of Arbuthnot Banking Group PLC for the year ended 31 December 2015 set out on
pages 26 to 102. The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the Parent Company financial
statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the 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 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 Company and the Company's members, as a body, for our audit work, for
this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibilities Statement set out on page 21, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
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
31
December 2015 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 EU;
• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU 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.
Opinion on other matters prescribed by the Companies Act 2006 and under the terms of our engagement
In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where 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 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.
Richard Gabbertas (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
16 March 2016
Company statement of financial position
At 31 December
2015 2014
Note £000 £000
ASSETS
Due from subsidiary undertakings - bank balances 12,444 19,244
Financial investments 23 125 158
Deferred tax asset 24 418 406
Intangible assets 26 - 4
Property, plant and equipment 27 204 127
Other assets 22 991 5,472
Investment in subsidiary undertakings 39 46,466 39,966
Total assets 60,648 65,377
EQUITY AND LIABILITIES
Equity
Share capital 33 153 153
Other reserves 34 (1,111) (1,111)
Retained earnings 34 46,537 50,755
Total equity 45,579 49,797
LIABILITIES
Other liabilities 30 4,235 4,132
Debt securities in issue 31 10,834 11,448
Total liabilities 15,069 15,580
Total equity and liabilities 60,648 65,377
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company
profit and loss account. The profit for the Parent Company for the year is presented in the Statement of Changes in Equity.
Consolidated statement of changes in equity
Attributable to equity holders of the Group
Share capital Revaluation reserve Capital redemption reserve Available-for-sale reserve Cash flow hedging reserve Treasury shares Retained earnings Non-controlling interests Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2015 153 98 20 (250) - (1,131) 114,641 60,038 173,569
Total comprehensive income for the period
Profit for 2015 - - - - - - 12,726 13,798 26,524
Other comprehensive income, net of tax
Revaluation reserve
Cash flow hedging reserve
Available-for-sale reserve - - - 1,297 - - - - 1,297
Total other comprehensive income - - - 1,297 - - - - 1,297
Total comprehensive income for the period - - - 1,297 - - 12,726 13,798 27,821
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Equity settled share based payment transactions - - - - - - 132 87 219
Final dividend relating to 2014 - - - - - - (2,382) (4,549) (6,931)
Interim dividend relating to 2015 - - - - - - (1,787) (1,487) (3,274)
Total contributions by and distributions to owners - - - - - - (4,037) (5,949) (9,986)
Balance at 31 December 2015 153 98 20 1,047 - (1,131) 123,330 67,887 191,404
Attributable to equity holders of the Group
Share capital Revaluation reserve Capital redemption reserve Available-for-sale reserve Cash flow hedging reserve Treasury shares Retained earnings Non-controlling interests Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2014 153 191 20 (169) (378) (1,131) 67,901 20,327 86,914
Total comprehensive income for the period
Profit for 2014 - - - - - - 8,634 8,382 17,016
Other comprehensive income, net of tax
Revaluation reserve
- Adjustment - (91) - - - - 91 - -
- Amount transferred to profit and loss - (2) - - - - - - (2)
Cash flow hedging reserve
- Adjustment - - - - 124 - (124) - -
- Net amount transferred to profit and loss - - - - 254 - - 124 378
Available-for-sale reserve - - - (81) - - - - (81)
Total other comprehensive income - (93) - (81) 378 - (33) 124 295
Total comprehensive income for the period - (93) - (81) 378 - 8,601 8,506 17,311
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Equity settled share based payment transactions - - - - - - 488 3,393 3,881
Issue of new shares Secure Trust Bank - - - - - - 23,810 24,949 48,759
Sale of shares Secure Trust Bank - - - - - - 17,712 6,615 24,327
Final dividend relating to 2013 - - - - - - (2,233) (2,426) (4,659)
Interim dividend relating to 2014 - - - - - - (1,638) (1,326) (2,964)
Total contributions by and distributions to owners - - - - - - 38,139 31,205 69,344
Balance at 31 December 2014 153 98 20 (250) - (1,131) 114,641 60,038 173,569
Company statement of changes in equity
Attributable to equity holders of the Company
Share capital Capital redemption reserve Available -for-sale reserve Treasury shares Retained earnings Total
£000 £000 £000 £000 £000 £000
Balance at 1 January 2014 153 20 81 (1,131) 31,325 30,448
Total comprehensive income for the period
Profit for 2014 - - - - 23,260 23,260
Other comprehensive income, net of income tax
Available-for-sale reserve - - (81) - - (81)
Total other comprehensive income - - (81) - - (81)
Total comprehensive income for the period - - (81) - 23,260 23,179
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Equity settled share based payment transactions -
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