Annual Financial Report and Notice of AGM

RNS Number : 0571E

Rathbone Brothers PLC

01 April 2011

 



Rathbone Brothers Plc ("the Company")

Report and accounts 2010 and Notice of Annual General Meeting

The Company announces that in accordance with Listing Rule 9.6.1, the following documents have been submitted to the National Storage Mechanism.

·     Annual report and accounts for the year ended 31 December 2010

·     The Notice of the Annual General Meeting to be held on 11 May 2011

·     The Rules of the Rathbone Brothers Plc 2011 Long Term Incentive Plan

Copies of these documents will shortly be available for inspection at www.hemscott.com/nsm.do. 

Copies are available via the Rathbone Brothers Plc website at www.rathbones.com.  An interactive on-line version of the annual report and accounts is also available at www.rathbonesra2010.com.

The primary purpose of this announcement is to advise the market of the publication of the Rathbone Brothers Plc Annual Report and Accounts for the year ended 31 December 2010 ("the 2010 Report and Accounts").

The information below, which is extracted from the 2010 Report and accounts is included solely for the purposes of complying with DTR 6.3.5 and the requirements it imposes on issuers as to how to make public an annual financial report. It should be read in conjunction with the Company's preliminary announcement issued on 17 February 2011. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2010 Report and Accounts. Page numbers and cross references in the extracted information below refer to page numbers and cross reference in the 2010 Report and Accounts.

Principal risks and uncertainties

Risks

The Corporate governance report on page 32 outlines Rathbones' risk framework, risk governance processes and key risks that impact the business. Note 28 to the consolidated financial statements provides additional detail on financial risks.

Rathbones' income is dependent on the behaviour of investment markets and interest rates, which inherently impacts the risk of the business. Aside from market changes, this year presented a number of factors which particularly impacted our risk profile and these are outlined below.

Business risks

Negative impact of regulation

2010 was a very busy year from a regulatory perspective with a number of wide ranging FSA and EC pronouncements on banking capital, liquidity, payment services, the RDR, remuneration and client money. Responding in time to this regulation and refining system requirements and processes to ensure compliance has taken some considerable effort. Whilst regulation itself has done little to impact the risk profile of the business, the risk of not complying with new rules has certainly increased, although we have planned resources carefully to mitigate this.

The risk of unexpected additional levies being charged by the FSCS has increased significantly in 2010 as investor losses from institutions which failed in 2008/9 are assessed and quantified.

Competition risk

The RDR was the most significant competition risk event in 2010. This regulation will undoubtedly change the competitive landscape for providing financial advice, although its full effects remain uncertain. It is expected to present additional business opportunities for Rathbones.

Reputational risk

Rathbones remains a highly regarded member of the investment management industry. Operational losses arising from potential reputation issues were insignificant in 2010.

Operational risks

Inappropriate IT strategy

2010 has been a busy year for projects as noted in the operations and resources commentary on page 18. We have continued to deploy skilled project management resources where necessary to manage complex change and invest in training to ensure skills are up to date.

The pace of change shows no signs of abating as we continue to respond to significant external change and a continued desire to improve efficiency.

Accounting or regulatory reporting error

There continues to be a significant amount of new regulatory and accounting reporting requirements which increase the risk of non-compliance.

Adverse impact of a poor acquisition

Whilst we continue to acquire investment management teams, the principal acquisition related risks in 2010 were associated with the Lloyds Banking Group transaction which increased risk indicators in the operations area in the first half of 2010 as new clients were transferred. Additional controls were appropriately applied to manage the change and the acquired business was operating fully on Rathbone Investment Management systems from 30 June 2010. The amount of funds transferred was as expected.

Poor performance in Unit Trusts

The volume of unit trust sales is closely correlated to the longer term performance of unit trust funds relative to that of competitors. During 2010, investment processes have been improved and a deferred remuneration scheme revised to better align Investment Manager rewards to fund performance.

Loss of an investment management team

Investment Manager turnover has been very low historically and this has continued in 2010.

Client litigation

Complaints from clients have remained at very low levels with 22 formal complaints recorded in 2010 (2009: 39). None have resulted in litigation in the year.

Financial risks

The risk that an asset value falls or that an additional liability is incurred is sometimes dependent upon the exercise of judgement. Critical accounting judgements and the key sources of estimation and uncertainty are reported in note 2 to the consolidated financial statements.

Credit risk

Credit markets have seen a number of high profile adverse events involving banking institutions and sovereign jurisdictions in Greece, Ireland and other Eurozone countries. A volatile first half of 2010 saw cash in client portfolios rise to over £0.95 billion at 30 June 2010 returning to £0.76 billion at 31 December 2010. Credit risk capital increases or decreases directly with higher or lower cash levels respectively.

Rathbones retained its conservative treasury policy throughout the year experiencing no default issues. Credit risks associated with other investment securities did not significantly change in the year.

Liquidity risk

Rathbones remains highly cash generative with a strong liquidity profile. Liquidity was managed well within tolerances throughout the year. Rathbones has met all deadlines in respect of the FSA's Internal Liquidity Adequacy Assessment regime.

Market risk

Rathbones has maintained its conservative policy in respect of managing interest rate risk adhering to agreed tolerance limits throughout the year. Currency risks have remained minimal. The value of our equity investment securities increased by 6.9% to £3.1 million in 2010.

 Related party transactions

The remuneration of the key management personnel of the Group, who are defined as the Company's Directors, is set out in the audited part of the Remuneration report on page 38. At 31 December 2010 key management and their close family members had gross outstanding deposits of £904,000 (2009: £1,178,000) and gross outstanding loans of £490,000 (2009: £193,000), of which £490,000 (2009: £193,000) were made on normal business terms. A number of the Company's Directors and their close family members make use of the services provided by companies within the Group. Charges for such services are made at various staff rates.

One of the Group's Non-executive Directors is an executive director of Novae Group Plc, a related entity of which underwrites part of the Group's professional indemnity insurance policy.

The Group's transactions with the pension funds are described in note 25. At 31 December 2010 £4,000 was due from the pension schemes (2009: £3,000).

All amounts outstanding with related parties are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

Going concern basis

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the business review. The financial position of the Group, its cash flows, capital, liquidity position, risks and borrowing facilities are also described in the business review on page 11. In addition, notes 28 and 29 to the consolidated financial statements provide further details.

The Company is regulated by the FSA and performs annual capital adequacy assessments which include the modelling of certain extreme stress scenarios. The Company publishes Pillar III disclosures annually. Note 21 to the consolidated financial statements shows that the Company has an unsecured term loan of £3.1 million at 31 December 2010 which represents 1.7% of total equity (2009: £6.2 million). The Company is not reliant on the renewal of debt facilities to continue to finance its operations.

In 2010, the Group has continued to generate organic growth in client funds under management in spite of the recent market turmoil, and this is expected to continue. The Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic and political outlook.

As the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. In forming their view, the directors have considered the Company's prospects for a period exceeding 12 months from the date the financial statements are approved.

Responsibility statement of Directors on the annual report

The responsibility statement below has been prepared in connection with the Group's full annual report for the year ending 31 December 2010. Certain parts thereof are not included within this announcement.

We confirm that to the best of our knowledge:

·     the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·     the Directors' report, together with the information provided in the business review, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By Order of the Board

A D Pomfret
Chief Executive

16 February 2011

Legal Notice

This document contains certain forward-looking statements which were made by the directors in good faith based on the information available to them at the time of their approval of the 2010 Report and Accounts. Forward looking statements contained within the document should be treated with some caution due to the inherent uncertainties, including economic, regulatory and business risk factors, underlying any such forward looking statements.

Richard Loader

Company Secretary

020 7399 0000

1 April 2011

 

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