REG-Rathbone Brothers Plc : 2015 Full year results <Origin Href="QuoteRef">RAT.L</Origin>

RathbonesAnnouncement

24/02/2016 07:14

Underlying profit before tax up 14.3% 
 
 This is a preliminary statement of annual results published in accordance
with FCA Listing Rule 9.7A. 
 It covers the year ended 31 December 2015. 
 
 Mark Nicholls, Chairman of Rathbone Brothers Plc, said: 
 
 "In spite of subdued investment markets, 2015 was a strong year for Rathbones
with our total funds under management growing by 7.4% to £29.2 billion (2014:
£27.2 billion). During the year we took the opportunity to raise £20.0
million of long term subordinated loan notes to support our future growth and
we have continued to pursue acquisition opportunities which will increase
shareholder value. 
 
 We look forward to completing our recently announced London office move in
early 2017, and notwithstanding an uncertain market outlook, have decided to
continue progressing our strategic initiatives." 
 
 Highlights: 
 
 * Total funds under management were £29.2 billion at 31 December 2015, up
7.4% from £27.2 billion at 31 December 2014. The FTSE 100 Index decreased by
4.9% and the FTSE WMA Balanced Index decreased by 0.2% over the same period. 
   
 * The total net annual growth rate of funds under management for Investment
Management was 5.7% (2014: 19.6%). This comprised £0.7 billion of acquired
inflows (2014: £3.2 billion including £2.6 billion in relation to the
Jupiter Asset Management and Deutsche Asset & Wealth Management transactions)
and £0.7 billion of net organic growth (2014: £0.8 billion). The underlying
rate of net organic growth was 3.0% in 2015 (2014: 4.0%). 
   
 * Unit Trusts saw gross sales of £0.9 billion in 2015 (2014: £1.0 billion),
and funds under management increase by 24.0% to £3.1 billion at 31 December
2015 (2014: £2.5 billion). 
   
 * Underlying operating income in Investment Management of £209.0 million for
the year ended 31 December 2015 (2014: £185.4 million) represents an increase
of 12.7%. The average FTSE 100 Index was 6415 on our quarterly billing dates
(2014: 6657), a decrease of 3.6%. 
   
 * Underlying operating expenses increased 14.1% to £158.8 million largely
reflecting growth of the business, higher performance-based staff costs and
salary inflation. 
   
 * Underlying profit before tax (excluding acquisition-related costs, head
office relocation costs and charges in relation to client relationships and
goodwill) increased 14.3% to £70.4 million from £61.6 million. Underlying
earnings per share increased by 14.3% to 117.0p (2014: 102.4p). 
   
 * Profit before tax was £58.6 million for the year ended 31 December 2015,
an increase of 28.2%, compared to £45.7 million in 2014. Basic earnings per
share increased 28.2% to 97.4p (2014: 76.0p). 
   
 * The board recommends a final dividend of 34p for 2015 (2014: 33p), making a
total of 55p for the year (2014: 52p), an increase of 5.8% on 2014. 
 
 
 Ends 
 Issued on 24 February 2016 
 
 
 For further information contact: 
 
  Rathbone Brothers Plc Tel: 020 7399 0000 email: shelly.chadda@rathbones.com   Philip Howell, Chief Executive Paul Stockton, Finance Director    Camarco Tel: 020 3757 4984 email: ed.gascoigne-pees@camarco.co.uk   Ed Gascoigne-Pees     
  Shelly Chadda, Investor Relations Manager                                                                                                                                                                                                   
                 
 
 Rathbone Brothers Plc 
 Rathbone Brothers Plc ("Rathbones"), through its subsidiaries, is a leading
provider of high-quality, personalised investment and wealth management
services for private clients, charities and trustees. This includes
discretionary investment management, unit trusts, tax planning, trust and
company management, pension advice and banking services. 
 
 Rathbones has over 1,000 staff in 15 UK locations and Jersey, and currently
has its headquarters in Curzon Street, London. 
 
 rathbones.com 
 
 
 Chairman's statement 
 
 Overview of 2015 
 
 In spite of subdued investment markets, 2015 was another strong year for
Rathbones. Our total funds under management grew by 7.4% over the year to
£29.2 billion (2014: £27.2 billion). In August we took the opportunity to
raise £20.0 million of long term subordinated loan notes to support our
future growth. In December, we completed the acquisition of the remaining
80.1% shareholding of Vision Independent Financial Planning Limited, an
independent network of financial advisers. Over the year, we also welcomed a
number of experienced investment managers and their clients to our business. 
 
 Profit before tax was £58.6 million in the year ended 31 December 2015, up
28.2% from the previous year as we saw the full benefit of our 2014
acquisitions (2014: £45.7 million). This translates into underlying earnings
per share of 117.0p for 2015, up 14.3% on the 102.4p last year. The board is
recommending a final dividend of 34p per share, which brings the total
dividend for the year to 55p per share, an increase of 5.8% over last year. 
 
 Our Strategy 
 
 Last year we set out our strategic plan and, although all aspects of this are
kept under review, our principal task this year has been implementation. We
have strengthened our senior management team and made significant internal and
external appointments to the executive committee. We have continued to invest
in our research capabilities and our investment process. We have combined the
distribution teams in our investment management and unit trust businesses. We
have recently integrated our advisory business into our investment management
business, thereby improving service delivery to clients. We are progressing
with our plans for a private office. 
 
 We remain well aware of the demands that the delivery of these strategic
objectives place on our people, together with the higher costs of
implementation. We will therefore continue to move ahead with care so as not
to increase risk unnecessarily nor undermine our profitability. 
 
   Governance, culture and the board 
 
 The regulatory obligations on the board continue to increase with the "senior
management regime" about to be implemented.  The board supports the need for
the individual accountability of directors but believes strongly in the
collective responsibility of the board. 
 
 Sound corporate governance is dependent on having a robust culture and we
welcome the growing emphasis of our regulators on culture. The board believes
Rathbones has a good and ethical culture that benefits our clients and all
stakeholders. We are committed to ensuring that the right values are embedded
throughout the organisation and that these values are upheld notwithstanding
the pressures of growth and change. We are working hard as a board to
determine how best to monitor and preserve our culture bearing in mind our
growth strategy. Indeed a particular responsibility of the chairman under the
senior management regime is to lead the development of the firm's culture by
the board. This will be a priority of mine. 
 
 During the year, in addition to regulatory matters, the board paid particular
attention to monitoring our progress on delivery of our strategic objectives;
to making changes to the management structure, to completing the acquisition
of the remaining shareholding in Vision, to issuing subordinated loan notes
and to planning the proposed move of our London office. We have also discussed
how we operate as a board in light of the independent assessment carried out
at the end of 2014 and considered what new skills the board requires and the
timetable for succession. Sarah Gentleman joined the board as a non-executive
director on 21 January 2015. 
 
 In January 2016, we announced that Richard Loader will be stepping down as
company secretary on 30 April 2016. The board would like to thank Richard for
his much valued contribution to the success of the group since 1990 and we
wish him well for the future. 
 
 Risks 
 
 We welcomed the arrival of Sarah Owen-Jones as chief risk officer in March
2015, who with her team, has made considerable progress in developing a new
risk management framework this year.  Sarah has worked closely with the board
to ensure we have appropriate information on a timely basis and has also
helped streamline the reporting of risk throughout the organisation. We have
decided that, following the creation of a conduct risk committee which Sarah
chairs, the conflicts of interest committee is no longer required.  
 
 We continue to believe that the most significant risks to our business are
operational risks that arise from the growth in our business and regulatory
risks that may arise from continual changes to rules and standards in our
sector. An emerging operational risk is cyber risk and we are monitoring this
carefully. The Financial Reporting Council published new risk guidance in
September 2014 which requires us to report more formally this year on the
principal risks facing the business and to provide clearer information on the
long term viability of the business. These matters are discussed in more
detail in the risk management report. 
 
 Remuneration 
 
 All executive directors have clear objectives, both corporate and personal.
Management are developing proposals for remuneration schemes throughout the
firm to reflect the changes to our business and the regulatory environment
with which we must comply. 
 
 Employees 
 
 The high quality of our employees is a major differentiator for us and they
are the biggest asset of our firm.  Our employees have worked hard in a year
of considerable change.  It was particularly pleasing to see the positive
results from our first company-wide employee satisfaction survey. 
 
 Shareholders 
 
 We are fortunate to have a number of positively engaged institutional
shareholders with a significant investment in the company.  I thank them for
their support and we intend to maintain a regular and constructive dialogue
with them. 
 
 Outlook 
 
 Whilst we remain beset by geopolitical uncertainties, we will continue to
manage the business positively. We look forward to completing our recently
announced London office move in early 2017, and continuing to take advantage
of growth opportunities in the sector. 
 
 Mark Nicholls, Chairman 
 23 February 2016 
 
 
 Chief executive's statement 
 
 2015 market environment 
 
 Investment markets started 2015 in a buoyant mood with the FTSE reaching an
all time high in April, though they subsequently proved exceptionally
challenging for our investment managers to navigate. Against this backdrop,
our private client business, Investment Management, delivered a creditable
investment performance overall and attracted net new funds under management of
£1.4 billion. Our unit trust business also proved its resilience by achieving
net inflows of £371 million, taking funds under management to a new high of
£3.1 billion at 31 December 2015. 
 
 Strategic update 
 
 In spite of market conditions, we stayed focused on delivery of the medium
term strategy that we set out in 2014. We remain confident that we are on
track to achieve our goals. 
 
 We have continued to enhance our investment management processes, and in
particular invest in additional research and risk management resources to
underpin the decisions made by our investment managers in serving our clients
on an individual basis. This is a three year programme which is well underway.
We have maintained our level of investment in the technology that supports
investment teams which we believe is a continued source of competitive
advantage for Rathbones in the market. 
 
 During the year, we reviewed our pricing structure to ensure that it remains
competitive and introduced a new 'fee only' tariff for all new private
clients. During the second half of 2015, we amended some fee schedules for
some existing private clients in order to bring these more in line with the
tariff for new clients. We hope the simplicity and transparency of our new
tariffs will convince all clients of the benefits of a clean fee approach over
time. 
 
 Net organic growth in the private client business, Investment Management, of
3.0% reflected market conditions and was at the lower end of our planned
range. However, our strategic initiatives to boost business development remain
on track, notably through our new distribution team collaborating with
independent financial advisers, legal and accountancy firms. Progress in 2015
continued, with ten strategic alliances and many more new professional
relationships established during the year. Our plan to increase our
involvement in the Charities sector has also made strong progress with funds
under management reaching £3.5 billion. Rathbones is now ranked fourth in the
Charity Finance Fund Management survey, moving up two places from sixth last
year. In parallel, our specialist ethical investment business, Rathbone
Greenbank Investment, has established itself as a market leader in its field
and now serves over 1,400 clients with £0.76 billion funds under management. 
 
 Our unit trust business continues to demonstrate strong performance and, in
contrast to many of its peers, achieved 24.0% growth to a new high in funds
under management of £3.1 billion whilst also demonstrating its intrinsic
operational leverage. Rathbone Unit Trust Management continues to play an
integral role in our overall investment strategy. 
 
 Alongside these strategic initiatives, we continue to be alert to acquisition
opportunities. Acquired growth from our new joiners in the year was very much
in line with our expectations and importantly, client retention from our two
major acquisitions in 2014 has been very strong. 
 
 In May, we launched our new office in Glasgow, welcoming 14 new colleagues,
and were very pleased to see them attract over £186 million new funds under
management by 31 December 2015. 
 
 In October, we announced our intention to purchase the remaining 80.1% stake
in Vision Independent Financial Planning Limited and Castle Investment
Solutions Limited, with the transaction formally completing on 31 December
2015. Vision will retain its independent status, but is anticipated to
contribute meaningfully to our net organic growth objectives. At the year end,
Vision had £845 million funds under advice with the discretionary fund
manager panel, along with 81 independent financial advisers and 7 mortgage
advisers operating nationally. It continues to demonstrate strong growth
momentum. 
 
 We continue to design and develop our Rathbone Private Office offering to
serve clients with £10 million of investible assets and above. We are
currently finalising arrangements with the third party platform identified to
serve clients in this segment of the wealth spectrum and in 2016 we expect to
add new private banking professionals to launch the initiative. 
 
 During 2015, we gradually introduced our new branding which is intended to
more accurately convey the progressive attributes of Rathbones whilst not
losing touch with the heritage and values that define our deep rooted culture.
The final stage for the new branding was reached with the launch of our new
website in November. 
 
 In anticipation of the growing demands upon the leadership team in delivering
our growth strategy, we were pleased to welcome Sarah Owen-Jones as chief risk
officer and promote four of our most experienced investment directors to the
executive committee; Rupert Baron, Ivo Clifton, Andrew Morris and Richard
Smeeton. 
 
 A year after launching our medium term strategy, we considered it sensible to
conduct an all staff satisfaction survey. The results were very encouraging
with an overall engagement score of 88%, substantially ahead of the financial
services benchmark of 74%. This score collates the average percentage of
responses to questions relating to pride, longevity, endeavour, advocacy, and
care.  Naturally, the survey identified aspects on which we can improve and
these have been added to the management agenda for the coming year. The survey
highlighted the strong culture that has defined Rathbones over decades, and
one which we will continue to nurture as we grow. Importantly, some of the
highest scores reflected our staff's understanding and commitment to delivery
of the strategy. 
 
 Financial performance 
 
 This year was a strong one financially as the benefits of our acquisitions
supported results in what were challenging investment markets. With this
backdrop, growth did prove more difficult, although total funds under
management at 31 December 2015 were £29.2 billion, a 7.4% increase over
2014.  Underlying profit before tax in 2015 increased 14.3% to £70.4 million
from £61.6 million in 2014, in spite of the average FTSE 100 Index on our
billing dates falling 3.6% to 6415. 
 
 Investment Management attracted £1.4 billion of net inflows in 2015
(2014:£4.0 billion), of which £0.7 billion (2014: £3.2 billion) represented
acquired growth. The net organic growth rate for the year was 3.0% (2014:
4.0%).  Charity funds under management increased to £3.5 billion from £3.3
billion in 2014, while the number of charity clients increased 5.9% to 1,213. 
 
 Our unit trust business managed £3.1 billion of funds under management at 31
December 2015 (2014: £2.5 billion). The business attracted some £371 million
of net funds in 2015; although a decrease of 33.0% on the £554 million
reported last year, a strong performance when looking at the industry sectors
in which we operate. Our unit trust business continues to exhibit strong
operating leverage, with profit margin increasing to 32.7% in the year, an
absolute increase of 6.9% over the prior year. Fund performance remains
strong. 
 
 Net interest income of £10.8 million increased by 17.4% on the £9.2 million
in 2014, reflecting larger average levels of liquidity. Our client loan book
grew 14.8% to £111.8 million from £97.4 million at the end of 2014. 
 
 The increase in underlying operating expenses to £158.8 million reflected
both the growth in the business and the costs of planned strategic
initiatives. Our underlying operating margin was stable at 30.7% in line with
a year ago.  Underlying earnings per share of 117.0p were up 14.3% on the
102.4p earned in 2014. Profit before tax of £58.6 million was up on the
£45.7 million reported last year. A full list of items excluded from
underlying results is shown in the "our performance" section. 
 
 Our consolidated Common Equity Tier 1 ratio at 31 December 2015 (including
verified profits for the year) stood at 16.4% compared to 17.7% at 31 December
2014. In August, Rathbone Investment Management Limited completed an issue of
Tier 2 capital in the form of £20.0 million of 10-year subordinated notes.
Our consolidated leverage ratio (including audited profits for the year) at 31
December 2015 was 7.7% compared with 7.3% at 31 December 2014. 
 
 Other notable events 
 
 In his Autumn Statement, the Chancellor announced a supplementary 8% tax
surcharge on banking profits to come into effect from 1 January 2016. We were
pleased to see that measures incorporated in the final version of the 2015
Finance Bill mean that as long as the accepting of deposits remains ancillary
to our asset management activities, Rathbones will be exempt from the tax
surcharge. 
 
 During the year, it became clear that we are fast reaching full capacity in
the 44,000 sq ft of our London head office. This has come somewhat earlier
than we had anticipated and is best explained by the fact that since moving
into 1 Curzon Street in 2012, our funds under management in London have grown
by 85% from £8.9 billion to £16.5 billion. Following an exhaustive search,
we are pleased to have secured a long term solution in committing to a 17 year
lease on 75,000 sq ft at 8 Finsbury Circus. This is a brand new yet elegant
building in one of the most prestigious addresses in the City, with excellent
travel links. From 2018, our annual cost for this substantially larger space
in the City will be broadly the same as what we would have been paying on our
smaller Mayfair premises. We plan to move in early 2017. 
 
 Outlook 
 
 Notwithstanding an uncertain market outlook, we have decided to continue to
progress our strategic initiatives. Whilst this may impact our operating
margin in the near term, we continue to strive for a margin of 30% in most
market conditions, and will carefully balance our longer term investment
against the near term impact of lower revenues during market downturns.  
 
 We enter 2016 with even more intense geopolitical tensions and economic risks
than last year, and nearer home, the uncertainty of Britain's future place in
Europe adds to the mix. This will require us to more frequently review the
timing and priority of projects. 
 
 We continue to be alert to accretive acquisition opportunities that fit with
our culture and investment philosophy.  Notwithstanding the prospect of
another year of market volatility, we are cautiously optimistic about our
ability to protect our clients' interests whilst maintaining our strategic
momentum. 
 
 Philip Howell, Chief Executive 
 23 February 2016 
 
 
 Our performance 
 
 Financial performance remained strong in 2015 due to continuing growth and
the full benefit of 2014 acquisitions impacting results. Total funds under
management increased 7.4% to £29.2 billion (2014: £27.2 billion). Overall,
the FTSE 100 Index ended the year 4.9% down at 6242 while the FTSE WMA
Balanced Index closed down 0.2% at 3531.  
 
 Table 1. Group's overall performance 
 
                                   2015 £m    2014* £m   
  Underlying operating income       229.2       200.8       
  Underlying operating expenses     (158.8)     (139.2)     
  Underlying profit before tax 1    70.4        61.6        
  Underlying operating margin 2     30.7%       30.7%       
  Profit before tax                 58.6        45.7        
  Effective tax rate                20.8%       21.9%       
  Taxation                          (12.2)      (10.0)      
  Profit after tax                  46.4        35.7        
  Underlying earnings per share     117.0p      102.4p      
  Earnings per share                97.4p       76.0p       
  Dividend per share 3              55p         52p         
 *     Restated following the adoption of IFRIC21, as described in note 1 
 1     A reconciliation between underlying profit before tax and profit
before tax is shown in table 2 
 2     Underlying profit before tax as a % of underlying operating income 
 3     The total interim and final dividend proposed for the financial
year 
 
 Group underlying operating income 
 
 Underlying operating income increased 14.1% to £229.2 million driven largely
by the positive impact of 2014 acquisitions and organic growth. A detailed
analysis of each component of income and a reconciliation between underlying
operating income and reported operating income is set out in the segmental
review below. 
 
 Group underlying operating expenses 
 
 Underlying operating expenses increased 14.1% to £158.8million, largely
reflecting a combination of fixed and variable staff costs as the business
grows as well as property, IT, marketing and rebranding expenditure during the
year. 
 
 Total fixed staff costs increased by 18.7% to £73.5 million in 2015,
including inflation of 3.6% and growth of 11.5% in average full time
equivalent headcount to 981 (2014: 880).  Total variable staff costs
increased by 12.8% to £39.7 million reflecting growth in profits and funds
under management.  Variable staff costs in 2015 represented 17.3% of
underlying operating income (2014: 17.5%) and 36.1% of underlying profit
before tax and variable staff costs (2014: 36.4%). 
 
 2016 will reflect the full year impact of hiring activity in 2015 in addition
to salary inflation of around 3%. 
 
 Underlying operating expenses also included £3.3 million (2014: £2.8
million) for awards payable to new investment managers for the introduction of
new clients where those managers have been in situ for more than 12 months
(see note 2). 
 
 In 2016, incremental costs of approximately £5.7 million are expected to be
incurred to support the implementation of our strategic initiatives. 
 
 Capital expenditure 
 
 As planned, capital expenditure increased by £1.2 million, largely as a
result of opening a new office in Glasgow and additional office space in
Liverpool. 
 
 Group underlying profit before tax/operating margin 
 
 Underlying profit before tax and earnings per share are considered by the
board to be a better reflection of true business performance than looking at
our results on a statutory basis only. These measures are widely used by
research analysts covering the group. Underlying results exclude income and
expenditure falling in the seven categories explained below. A full
reconciliation between underlying profit and profit attributable to
shareholders is provided in table 2. 
 
 Underlying profit before tax grew 14.3% from £61.6 million in 2014 to £70.4
million driven largely by the positive impact from 2014 acquisitions and
organic growth. The underlying operating margin, which is calculated as the
ratio of underlying profit before tax to underlying operating income, was
30.7% for the year ended 31 December 2015 (2014: 30.7%). Profit before tax
increased 28.2% to £58.6 million for the year, up from £45.7 million in
2014. 
 
 Table 2. Reconciliation of underlying profit before tax to profit before tax 
 
                                                                    2015 £m    2014* £m   
  Underlying profit before tax                                       70.4        61.6        
  Charges in relation to client relationships and goodwill           (11.0)      (8.3)       
  Head office relocation costs                                       (0.4)       -           
  Acquisition-related costs                                          (0.4)       (1.1)       
  Refund of levies for the Financial Services Compensation Scheme    -           1.0         
  Gain on disposal of financial securities                           -           6.8         
  Gain on disposal of pension administration business                -           0.7         
  Contribution to legal settlement                                   -           (15.0)      
  Profit before tax                                                  58.6        45.7        
 *        Restated following the adoption of IFRIC21, as described in
note 1 
 
 Charges in relation to client relationships and goodwill 
 
 As explained in note 2, client relationship intangible assets are created
when we acquire a business or a team of investment managers. The amortisation
charge associated with these assets represents a significant non-cash item. It
has, therefore, been excluded from underlying profit, which represents largely
cash-based earnings. Charges for amortisation of client relationship
intangibles in the year ended 31 December 2015 were £11.0 million (2014:
£8.3 million), reflecting historic acquisitions. 
 
 Head office relocation costs 
 
 On 6 January 2016, we exchanged contracts for a 17 year lease on office space
at 8 Finsbury Circus with the intention of moving the London head office to
the new premises in 2017. As a result, we have reviewed our estimates of the
useful life of assets in the current premises and the timing of dilapidations
payments due under the existing leases, resulting in total accelerated charges
of £0.4 million in 2015 (2014: £nil). 
 
 In addition to the charge in 2015, the move is also expected to result in
accounting charges of up to £9.5 million in 2016. These charges reflect the
rental costs of 8 Finsbury Circus, as well as provisions for dilapidations on
the new property and accelerated depreciation charges for 1 Curzon Street. 
 
 A non-cash charge will also be incurred when our current Curzon Street
premises are vacated, which is expected to be in the first quarter of 2017,
representing the discounted cost of the remaining lease obligations in Curzon
Street (which end in 2023) net of expected income from subletting. Based on
current assumptions, this charge could amount to approximately £8 million. 
 
 Acquisition related costs 
 
 Net costs of £0.4 million were incurred in relation to the acquisitions of
Vision Independent Financial Planning Limited ('Vision') and Castle Investment
Solutions Limited ('Castle'), which were completed on 31 December 2015.  This
includes the impact of fair value adjustments for our 19.9% holding in the
companies prior to the acquisition, the write off of the related options and
associated professional fees. 
 
 As described in note 7, deferred payments to vendors who are remaining in
employment of £10.2 million will be charged to profit or loss over the
deferral period. £6.0 million of this is expected to be charged in 2016. 
 
 In 2014, professional fees of £1.1 million were incurred in relation to the
purchase of part of Deutsche Asset & Wealth Management's London-based private
client investment management business and the acquisition of Jupiter's private
client and charity investment management business. 
 
 Refund of levies for the Financial Services Compensation Scheme 
 
 In December 2014, the Financial Services Compensation Scheme announced that
they had made recoveries of approximately £50 million in relation to the
failure of Keydata and other intermediaries.  The share of recoveries
returned to us was £1.0 million. No such amounts arose in 2015. 
 
 Gain on disposal of financial securities 
 
 During 2014, we disposed of our remaining holdings of shares in the London
Stock Exchange Group Plc and Euroclear Plc, raising £6.8 million from the
disposals.  We acquired the shares as we were a member of the London Stock
Exchange and Crest at the time of their respective listings.  No such income
arose in 2015. 
 
 Gain on disposal of pension administration business 
 
 On 31 December 2014, we disposed of our self invested personal pension (SIPP)
administration business, which was no longer considered to be a core component
of our activities. This generated net proceeds of £0.7 million. 
 
 Contribution to legal settlement 
 
 In 2014, we contributed £15.0 million to a settlement of legal proceedings
in Jersey involving a former director and employee of a former subsidiary and
in respect of legal proceedings against certain of our civil liability
(professional indemnity) insurers. No such costs were incurred in 2015. 
 
 Taxation 
 
 The tax charge for 2015 was £12.2 million (2014: £10.0 million), and
represents an effective tax rate of 20.8% (2014: 21.9%). A full reconciliation
of the income tax expense is provided in note 4. 
 
 The Finance Bill 2015, which included provisions for the UK corporation tax
rate to be reduced to 19% in April 2017 and 18% in April 2020, gained royal
assent in November 2015. Deferred tax balances have therefore been calculated
based on these reduced rates where timing differences are forecast to unwind
in future years. 
 
 The Finance Bill 2015 also introduced a banking surcharge, which adds 8% to
the effective tax rate for banks exceeding certain thresholds relating to the
scale of banking operations. However, the measures incorporated in the final
version of the 2015 Finance Bill mean that as long as the accepting of
deposits remains ancillary to our asset management activities, we will be
exempt from the tax surcharge. 
 
 Basic earnings per share 
 
 Basic earnings per share for the year ended 31 December 2015 were 97.4p, up
significantly from the 76.0p reported in 2014, which incorporated the impact
of the placing of 1,343,000 shares during that year.  On an underlying basis,
earnings per share increased by 14.3% to 117.0p in 2015. 
 
 Dividends 
 
 In light of the results for the year, the board has proposed a final dividend
for 2015 of 34p. This results in a full year dividend of 55p, an increase of
3p on 2014 (5.8%). The proposed dividend is covered 1.8 times by basic
earnings and 2.1 times by underlying earnings. 
 
 Segmental review 
 
 The group is managed through two key operating segments, Investment
Management and Unit Trusts. 
 
 The Investment Management segment includes Vision and Castle, which were
acquired on 31 December 2015 (see note 7). However, as these businesses were
not part of the group until the very end of the year, they have been excluded
from the analysis below. 
 
 Investment Management 
 
 The financial performance of Investment Management is largely driven by the
value of funds under management. Revenue margins are expressed as a basis
point return, which depends on a mix of tiered fee rates, commissions charged
for transactions undertaken on behalf of clients and the interest margin
earned on cash in client portfolios and loans to clients, as described below.
Portfolios are closely managed by investment managers, who maintain
relationships with clients that are critical to the retention of client
accounts. 
 
 Year-on-year changes in the key performance indicators for Investment
Management are shown in table 3, below. 
 
 Table 3. Investment Management - key performance indicators 
 
                                                                                            2015        2014       
  Funds under management at 31 December 1                                                    £26.1bn    £24.7bn   
  Underlying rate of net organic growth in Investment Management funds under management 1      3.0%       4.0%    
  Underlying rate of total net growth in Investment Management funds under management 1        5.7%       19.6%   
  Average net operating basis point return 2                                                 76.2 bps    77.2 bps   
  Number of Investment Management clients                                                    47,000      46,000     
  Number of investment managers                                                              260         249        
 1     See table 4 
 2     See table 7 
 
 During 2015 Investment Management has continued to attract new clients both
organically and through acquisitions. The total number of clients (or groups
of closely related clients) increased from approximately 46,000 in 2014 to
over 47,000 during the year, with the 2014 number bolstered by the addition of
some 2,800 clients joining as a result of the Deutsche Asset & Wealth
Management and Jupiter Asset Management transactions. During 2015, the total
number of investment managers increased to 260 at 31 December 2015 from 249 at
the end of 2014. 
 
 The average net operating basis point return on funds under management has
fallen slightly in 2015; although fee returns have increased, this was offset
by poorer than expected commission levels in weaker second half markets. 
 
 Funds under management 
 
 Investment Management funds under management increased by 5.7% to £26.1
billion at 31 December 2015 from £24.7 billion at the start of the year. This
increase is analysed in table 4, below. 
 
 Table 4. Investment Management - funds under management 
 
                                            2015 £bn    2014 £bn   
  As at 1 January                            24.7         20.2       
  Inflows                                    3.0          5.5        
  - organic 1                                2.3          2.3        
  - acquired 2                               0.7          3.2        
  Outflows 1                                 (1.6)        (1.5)       
  Market adjustment 3                        -            0.5        
  As at 31 December                          26.1         24.7       
  Net organic new business 4                 0.7          0.8        
  Underlying rate of net organic growth 5    3.0%         4.0%        
  Underlying rate of total net growth 6      5.7%         19.6%       
 1     Value at the date of transfer in/(out) 
 2     Value at 31 December 
 3     Represents the impact of market movements and investment
performance 
 4     Organic inflows less outflows 
 5     Net organic new business as a percentage of opening funds under
management 
 6     Net organic new business and acquired inflows as a percentage of
opening funds under management 
 
 Investment Management net organic growth of 3.0% (2014: 4.0%) was below the
targeted 5.0% organic growth across the economic cycle, largely reflecting
market conditions during the year. 
 
 All areas of Investment Management contributed to growth in 2015, with
referrals from existing clients remaining a key source of new business.
Charity funds under management continued to grow strongly and reached £3.5
billion at 31 December 2015, up 6.1% from £3.3 billion at the start of the
year.  The most recent Charity Finance survey placed the group as the fourth
largest charity investment manager in the UK by funds under management as at
30 June 2015. 
 
 Investment Management retained marketing focus on intermediaries during the
year. Funds under management in accounts linked to independent financial
advisers (IFAs) and provider panel relationships increased by £0.6 billion
during 2015, ending the year at £5.5 billion compared to £4.9 billion in
2014. Vision and Castle, which the group purchased the remainder of on 31
December 2015, represented £634 million, up from £496 million in 2014.  Net
inflows arising from those clients introduced to the group by Vision during
the year have been reported within organic growth. 
 
 Acquired inflows of £3.2 billion in 2014 included £2.6 billion from the
purchase of part of Deutsche Asset & Wealth Management's London-based private
client investment management business and the acquisition of Jupiter Asset
Management's private client and charity investment management business in June
2014 and September 2014 respectively. 
 
 In total, net organic and acquired growth added £1.4 billion to Investment
Management funds under management in 2015 (2014: £4.0 billion), representing
an underlying rate of total net growth of 5.7% (2014: 19.6%). 
 
 Average investment returns across all Investment Management clients were
positive in 2015, and at 3.5% total return, were 0.8% above the FTSE WMA
Balanced Index.  This was due in large part to sector allocations across UK
equities and in particular to Investment Management's underweight position in
the oil and mining sectors throughout the year, where the continued weakness
in the price of oil and commodities hampered these stocks.  In 2015,
Investment Management maintained a lower overseas exposure than the FTSE WMA
Indices, but stock selection was good particularly in European collectives. 
 
 Financial performance 
 
 Investment Management income is derived from: 
 
 * a tiered scale of investment management or advisory fees, which are applied
based on the value of clients' funds under management; 
 * commissions, which are levied on transactions undertaken on behalf of
clients who are not on a fee only tariff; and 
 * an interest margin earned on the cash held in clients' portfolios and on
loans to clients. 
 
 
 On 1 January 2015, Investment Management launched a revised tariff for new
clients. The new rates are intended to provide increased transparency to
clients on the overall level of charges, and are in line with the trend away
from commissions within the industry. In July, our existing private clients
who were on our old fee only or fee and commission rates, were moved onto the
new rate cards. 
 
 Table 5. Investment Management - financial performance 
 
                                                    2015 £m     2014 £m   
  Net investment management fee income 1            143.8         120.5        
  Net commission income                             43.1          43.7         
  Net interest income 2                             10.8          9.2          
  Fees from advisory services 3 and other income    11.3          11.9         
  Underlying operating income                       209.0         185.3        
  Underlying operating expenses 4                   (145. 2)      (127.8)      
  Underlying profit before tax                      63. 8         57.5         
  Underlying operating margin 5                     30. 5%        31.0%        
 1     Net investment management fee income is stated after deducting fees
and commission expenses paid to introducers 
 2     Presented net of interest expense paid on client accounts; excludes
interest on own reserves and interest payable on Tier 2 loan notes issued 
 3     Fees from advisory services includes income from trust, tax and
pensions advisory services 
 4     See table 8 
 5     Underlying profit before tax as a percentage of underlying
operating income 
 
 Net investment management fee income increased by 19.3% from £120.5 million
to £143.8 million in 2015, benefiting from the fee tariff increase during the
third quarter and a full year's income from clients subject to the
transactions with Jupiter Asset Management and Deutsche Asset & Wealth
Management. For the majority of clients, fees are calculated based on a tiered
fee scale applied to the value of funds at Investment Management's quarterly
charging dates. Average funds under management on these billing dates in 2015
were £25.7 billion, up 15.8% from 2014. 
 
 Table 6. Investment Management - average funds under management 
 
                                 2015 £bn    2014 £bn   
  Valuation dates for billing:                           
  - 5 April                       26.1         20.7        
  - 30 June                       25.6         21.6        
  - 30 September                  24.8         22.0        
  - 31 December                   26.1         24.7        
  Average                         25.7         22.2        
  Average FTSE 100 level 1        6415         6657        
 1 Based on the corresponding valuation dates for billing 
 
 In 2015, net commission income of £43.1 million was down 1.4% on £43.7
million in 2014.  This was primarily due to market sentiment, particularly in
the second half of the year, as well as the positive impact in 2014 of work to
rebalance the portfolios of new clients who joined us through our acquisitions
in that year.  The fee tariff changes in 2015 also depressed commission
income as new clients now pay a fee only rate. 
 
 Net interest income of £10.8 million in 2015 was 17.4% above the £9.2
million in 2014 as Investment Management increased the amount invested in
fixed income securities over the course of the year as conditions in
inter-bank markets improved.  Cash held at the Bank of England fell from
£727.2 million at 31 December 2014 to £583.2 million at the end of 2015. The
Investment Management loan book contributed £2.9 million to net interest
income in 2015 (2014: £2.7 million). Included in net interest income is £0.5
million of interest payable on the Tier 2 notes issued in August 2015. 
 
 Overall, we saw a slight decrease in the return earned on average funds under
management to 76.2 bps from 77.2 bps in 2014, as the reduction in commission
income offset growth in fees. 
 
 Table 7. Investment Management - revenue margin 
 
                                                 2015 bps    2014 bps   
  Basis point return 1 from:                                           
  - fee income                                    56.0        54.2       
  - commission                                    16.8        19.7       
  - interest                                      3.4         3.3        
  Basis point return on funds under management    76.2        77.2       
 1     Underlying operating income (see table 5), excluding interest on
own reserves, interest payable on Tier 2 notes issued, fees from advisory
services and other income, divided by the average funds under management on
the quarterly billing dates (see table 6) 
 
 Underlying operating expenses in Investment Management for 2015 were £145.2
million, compared to £127.8 million in 2014, an increase of 13.6%. This is
highlighted in table 8 below. 
 
 Table 8. Investment Management - underlying operating expenses 
 
                                   2015 £m    2014 £m   
  Staff costs 1                                          
  - fixed                           51.3        43.9       
  - variable                        29.4        25.8       
  Total staff costs                 80.7        69.7       
  Other operating expenses          64.5        58.1       
  Underlying operating expenses     145.2       127.8      
  Underlying cost/income ratio 2    69.5%       68.9%      
 1     Represents the costs of investment managers and teams directly
involved in client-facing activities 
 2     Underlying operating expenses as a percentage of underlying
operating income (see table 5) 
 
 
 Fixed staff costs of £51.3 million increased by 16.9% year-on-year,
principally reflecting a 14.4% increase in average headcount and growth in
pension costs due to low gilt yields at the beginning of 2015. Variable staff
costs are also higher, reflecting higher underlying profitability and growth
in funds under management.             
 
 Other operating expenses of £64.5 million include property, depreciation,
settlement, IT, finance and other central support services costs. The
year-to-year increase of £6.4 million (11.0%) reflects increased investment
in the business, recruitment and higher variable awards in line with growth in
business profitability. 
 
 Unit Trusts 
 
 Unit Trusts' financial performance is principally driven by the value and
growth of funds under management. Year-on-year changes in the key performance
indicators for Unit Trusts are shown in table 9 below. 
 
 Table 9. Unit Trusts - key performance indicators 
 
                                                                          2015        2014       
  Funds under management at 31 December 1                                  £3.1bn     £2.5bn    
  Underlying rate of net growth in Unit Trusts funds under management 1      16.0%      33.3%   
  Underlying profit before tax 2                                           £6.6m      £4.0m     
 1     See table 10 
 2     See table 12 
 
 Funds under management 
 
 The recent upward trend in the retail asset management industry's sales
stuttered in 2015 with net retail sales of £17.6 billion, down £3.2 billion
on 2014, as reported by the Investment Association (IA). The IA cited a slow
start in the first quarter because of macro economic issues, but sales growth
recovered after that and industry funds under management rose to £870 billion
by the end of the year (2014: £835 billion). Sales across the industry
remained concentrated in a relatively small number of funds. 
 
 Equity remained the best selling asset class, with net sales of £8.4 billion
in 2015, only £0.2 billion down on 2014. UK Equity Income, where Unit Trusts
have particular expertise and two strong product offerings, was again the best
selling IA sector in 2015 overall with £4.3 billion net retail sales. Global
was the second best region at £2.2 billion net retail sales. 
 
 Against this backdrop, Unit Trusts' positive momentum continued through 2015
with gross sales of over £0.9 billion (2014: £1.0 billion).  As a result,
Unit Trusts' funds under management closed the year up 24.0% at £3.1 billion
(see table 10). Net inflows of £0.4 billion (2014: £0.6 billion) continued
to be spread across the range of funds, with the Income, Global Opportunities
and Ethical Bond funds seeing particularly strong sales in the year. 
 
 Table 10. Unit Trusts - funds under management 
 
                                    2015 £bn    2014 £bn   
  As at 1 January                    2.5          1.8         
  Net inflows                        0.4          0.6         
  - inflows 1                        0.9          1.0         
  - outflows 1                       (0.5)        (0.4)       
  Market adjustments 2               0.2          0.1         
  As at 31 December                  3.1          2.5         
  Underlying rate of net growth 3    16.0%        33.3%       
 1     Valued at the date of transfer in/(out) 
 2     Impact of market movements and relative performance 
 3     Net inflows as a % of opening funds under management 
 
 
 During 2015, the range of funds maintained their strong long term performance
track record, which is critical to sales momentum. 
 
 Table 11. Unit Trusts - fund performance 
 
  2015/(2014) Quartile ranking 1 over:         1 year    3 years    5 years     
  Rathbone Blue Chip Income and Growth Fund    1 (2)     2 (2)      2 (2)       
  Rathbone Ethical Bond Fund                   1 (2)     1 (1)      1 (1)       
  Rathbone Global Opportunities Fund           1 (2)     1 (1)      1 (1)       
  Rathbone Income Fund                         1 (1)     1 (1)      1 (1)       
  Rathbone Recovery Fund                       1 (4)     1 (2)      2 (1)       
  Rathbone Strategic Bond Fund 2               2 (2)     2 (3)      n/a (n/a)   
 1     Ranking of institutional share classes at 31 December 2015 and 2014
against other funds in the same IA sector 
 2     Performance data for the Rathbone Strategic Bond Fund is not yet
available beyond three years as the fund was launched on 3 October 2011 
 
 Investors continued to switch from retail to institutional units across all
of our funds during the year. Institutional units carry a lower annual
management charge (typically half that of retail units) but do not allow for
any form of trail commission. By 31 December 2015 some 76% of holdings in Unit
Trusts' retail funds were in institutional units (31 December 2014: 60%). 
 
 Financial performance 
 
 Unit Trusts' income is primarily derived from: 
 
 * annual management charges, which are calculated on the daily value of funds
under management, net of rebates and trail commission payable to
intermediaries; and 
 * net dealing profits, which are earned on the bid-offer spread from
intra-day sales and redemptions of units and market movements on the very
small stock of units that are held on our books overnight. 
 
 
 Table 12. Unit Trusts - financial performance 
 
                                    2015 £m    2014 £m   
  Net annual management charges      17.6        13.3       
  Net dealing profits                2.2         1.9        
  Interest and other income          0.4         0.3        
  Underlying operating income        20.2        15.5       
  Underlying operating expenses 1    (13.6)      (11.5)     
  Underlying profit before tax       6.6         4.0        
  Underlying operating margin 2      32.7%       25.8%      
 1     See table 13 
 2     Underlying profit before tax divided by underlying operating income

 
 Net annual management charges increased 32.3% to £17.6 million in 2015,
driven principally by the rise in average funds under management. Net annual
management charges as a percentage of average funds under management increased
to 63 bps (2014: 60 bps) as the total income from the Rathbone Multi-Assets
Portfolio Service units are now recognised within the Unit Trusts segment
following the transfer to Unit Trusts of the fund manager, whereas 25 bps was
previously recognised in Investment Management.  Excluding the impact of this
change, the return fell marginally to 59 bps. 
 
 Net dealing profits of £2.2 million increased by 15.8% on £1.9 million in
2014 due to a higher level of redemptions in the first half of the year.
Underlying operating income as a percentage of average funds under management
grew to 72 bps in 2015 from 70 bps in 2014.  
 
 Table 13. Unit Trusts - underlying operating expenses 
 
                                   2015 £m    2014 £m   
  Staff costs:                                           
  - fixed                           3.0         3.3        
  - variable                        3.8         2.8        
  Total staff costs                 6.8         6.1        
  Other operating expenses          6.8         5.4        
  Underlying operating expenses     13.6        11.5       
  Underlying cost/income ratio 1    67.3%       74.2%      
 1     Underlying operating expenses as a % of underlying operating income
(see table 12) 
 
 Fixed staff costs of £3.0 million for the year ended 31 December 2015 were
9.1% lower than the £3.3 million recorded in 2014.  Following the
combination of the Investment Management and Unit Trusts sales teams, the cost
of the sales team is now recognised within Investment Management which
recharges the cost to Unit Trusts.  The cost of inter-segment recharges is
reported within "other operating expenses" 
 
 Variable staff costs of £3.8 million were 35.7% higher than £2.8 million in
2014 as higher profitability and growth in gross sales drove increases in
profit share and sales commissions. 
 
 Other operating expenses have increased by 25.9% to £6.8 million, reflecting
an increase in third party administration costs in line with growth in the
business, and higher inter-segment charges as noted above. 
 

 Financial position 
 
 Table 14. Group's financial position 
 
                                               2015 £m (unless stated)    2014* £m (unless stated)   
  Capital resources:                                                                                  
  - Common Equity Tier 1 ratio 1                16.4%                       17.7%                       
  - Total Own Funds ratio 2                     18.4%                       17.7%                       
  - Total equity                                300. 2                      271.3                       
  - Tier 2 subordinated loan notes              19.5                        -                           
  - Risk weighted assets                        794.1                       632.8                       
  - Return on assets 3                          2.6%                        2.5%                        
  - Leverage ratio 4                            7.7%                        7.3%                        
  Other resources:                                                                                    
  - Total assets                                1,833.6                     1,668.1                     
  - Treasury assets 5                           1,453.2                     1,317.1                     
  - Investment management loan book             111.8                       97.4                        
  - Intangible assets from acquired growth 6    164.3                       153.6                       
  - Tangible assets and software 7              17.0                        16.3                        
  Liabilities:                                                                                        
  - Due to customers 8                          1,402.9                     1,282.4                     
  - Net defined benefit liability                 4.5                      13.7                        
 * Restated following the adoption of IFRIC21, as described in note 1 
 1 Common Equity Tier 1 capital as a proportion of total risk exposure amount 
 2 Total own funds (see table 15) as a proportion of total risk exposure
amount 
 3 Profit after tax divided by average total assets 
 4 Common Equity Tier 1 capital as a percentage of total assets, excluding
intangible assets and investment in associates, plus certain off balance sheet
exposures 
 5 Balances with central banks, loans and advances to banks and investment
securities (excluding available for sale equity investments) 
 6 Net book value of acquired client relationships and goodwill 
 7 Net book value of property, plant and equipment and computer software 
 8 Total amounts of cash in client portfolios held by Rathbone Investment
Management as a bank 
 
 Regulatory capital 
 
 We are classified as a banking group under the Capital Requirements Directive
and are therefore required to operate within a wide range of restrictions on
capital resources and banking exposures that are prescribed by the Capital
Requirements Regulation, as applied in the UK by the Prudential Regulation
Authority (PRA). At 31 December 2015, the group had regulatory capital
resources of £146.1 million (2014: £111.8 million) as follows: 
 
 Table 15. Regulatory capital resources 
 
                                                 2015 £m    2014* £m   
  Share capital and share premium                 100.1       95.4        
  Reserves                                        206.3       181.4       
  Less:                                                                 
  - Own shares                                    (6.2)       (5.5)       
  - Intangible assets 1                           (170.4)     (159.5)     
  Total Common Equity Tier 1 capital resources    129.8       111.8       
  Tier 2 capital resources                        16.3        -           
  Total own funds                                 146.1       111.8       
 * Restated following the adoption of IFRIC21, as described in note 1 
 1 Net book value of goodwill, client relationship intangibles and software
are deducted directly from capital resources 
 
 The group's Pillar 3 disclosures are published annually on our website (
www.rathbones.com/investor-relations/results-and-presentations/pillar-3-disclosures
) and provide further details about regulatory capital resources and
requirements. 
 
 Our consolidated Common Equity Tier 1 ratio is higher than the banking
industry norm. This reflects the low-risk nature of our banking activity. The
Common Equity Tier 1 ratio has fallen to 16.4% from 17.7% at the previous year
end mainly due to the increase in intangible assets arising from the
acquisition of Vision and Castle as well as an increase in the value of
treasury assets invested in the money markets. 
 
 The leverage ratio was 7.7% at 31 December 2015, up from 7.3% at 31 December
2014. The leverage ratio represents our Common Equity Tier 1 capital as a
percentage of our total assets, excluding intangible assets and investment in
associates, plus certain off balance sheet exposures. 
 
 In addition to our CET1 resources, on 3 August 2015 Rathbone Investment
Management issued £20 million of 10-year Tier 2 subordinated loan notes. 
The issue of the notes introduces gearing into our balance sheet as a way of
financing future growth in a cost-effective and capital-efficient manner. 
The notes are repayable in August 2025, with a call option for the issuer in
August 2020 and annually thereafter.  Interest is payable at a fixed rate of
5.856% until the first call option date and at a fixed margin of 4.375% over
6-month LIBOR thereafter. 
 
 As required under PRA rules we perform an Internal Capital Adequacy
Assessment Process (ICAAP) and Individual Liquidity Adequacy Assessment (ILAA)
annually, which includes performing a range of stress tests to determine the
appropriate level of regulatory capital and liquidity that we need to hold. In
addition, we monitor a wide range of capital and liquidity statistics on a
daily, monthly or less frequent basis as required. Surplus capital levels are
forecast on a monthly basis, taking account of proposed dividends and
investment requirements, to ensure that appropriate buffers a