Interim Results

Rathbone Brothers PLC 01 September 2005 1 September 2005 Rathbone Brothers Plc Interim results for the six months to 30 June 2005 Rathbones announces solid growth in profits and funds under management Rathbone Brothers Plc, a leading provider of discretionary fund management and wealth management services for private clients and trustees, today announces its interim results for the six months to 30 June 2005 prepared under the International Financial Reporting Standards (IFRS) regime. Results for comparative periods have been restated for IFRS. Mark Powell, Chairman of Rathbone Brothers Plc, commented: 'Pre-tax profits (before one-off costs of Â£1.4m associated with our approach to Rensburg) increased by 21.1% over the first half of 2005 to Â£16.1m. Total funds under management rose by 9.1% to Â£8.4bn, including funds under management in our unit trust company which are now over Â£1bn.' Highlights â€¢ Operating profit (before one-off costs of Â£1.4m) of Â£16.1m, an increase of 21.1% (30 June 2004: Â£13.3m. Full year 2004: Â£28.5m). â€¢ Operating profit (after one-off costs) of Â£14.7m, an increase of 10.5% (30 June 2004: Â£13.3m. Full year 2004: Â£28.5m). â€¢ Total funds under management increased by 9.1% over the six months to 30 June 2005 to Â£8.4bn compared with an increase in the FTSE 100 Index of 6.2% and an increase in the FTSE APCIMS Balanced Index of 5.1% over the same period. â€¢ Funds managed by Rathbone Unit Trust Management increased by 20.2% over the period to Â£983m as at 30 June 2005 and have now risen to over Â£1bn. â€¢ Operating income increased by 14.0% to Â£53.9m (30 June 2004: Â£47.3m. Full year 2004: Â£95.5m). â€¢ Reported earnings per share have risen by 9.4% to 25.46p (30 June 2004: 23.28p) but excluding the one-off costs have risen by 19.5%. â€¢ Interim dividend is increased by 9.5% to 11.5p per share. 'The increase in funds under management is testimony to our ability to attract and retain client funds. We remain committed to providing a segregated investment management service for clients with sums in excess of Â£100,000. The Rathbone service continues to be provided on a personal basis by a qualified fund manager. Plans are well underway for an increased marketing effort in relation to SIPPs in anticipation of legislative changes next year. 'A particularly pleasing aspect of the first half has been the success of our unit trust company whose funds under management now exceed Â£1bn, compared with Â£818m at 31 December 2004, demonstrating excellent long-term investment performance and strong marketing and client service. 'World stock markets have maintained their comparative strength since 30 June 2005, despite the political and economic uncertainties which exist. Levels of new business enquiries are encouraging and we look forward with confidence.' For further information contact: Rathbone Brothers Plc Fishburn Hedges 020 7399 0000 (Switchboard) 020 7839 4321 (Switchboard) Mark Powell, Chairman Andrew Marshall Andy Pomfret, Chief Executive Sarah Frost Sue Desborough, Finance Director Emily Morris, Marketing Director CHAIRMAN'S STATEMENT A more favourable environment in world stock markets has provided the backdrop for solid progress by Rathbones during the first half of 2005. Pre-tax profits (before one-off professional advisory costs of Â£1.4m incurred in relation to the approach to Rensburg plc) for the six months to 30 June 2005 were Â£16.1m, compared with Â£13.3m in the first half of 2004 (an increase of 21.1%) and Â£28.5m for the whole of 2004. Reported earnings per share have risen by 9.4% to 25.46p, compared to 23.28p for the same period in 2004 and excluding the Rensburg-related costs, earnings per share have risen by 19.5%. The interim dividend is increased by 9.5% to 11.5p per share payable on 14 October 2005. The figures for the first six months of 2005 have been prepared under the International Financial Reporting Standards ('IFRS') regime as well as those for the first half of 2004 and the full year 2004. The effects of IFRS on our full year 2004 figures were announced at the beginning of August with the most significant impact resulting from the cessation of goodwill amortisation. Over the six months to 30 June 2005, funds under management rose by 9.1% to Â£8.4bn. During the same period the UK equity market, as measured by the FTSE 100 Index, rose by 6.2% and the FTSE APCIMS Balanced Index by 5.1%. This increase in funds under management is testimony to our ability to attract and retain client funds. We remain committed to providing a segregated investment management service for clients with sums in excess of Â£100,000. The Rathbone service continues to be provided on a personal basis by a qualified fund manager. Plans are well underway for an increased marketing effort in relation to SIPPs in anticipation of legislative changes next year. A particularly pleasing aspect of the first half has been the success of our unit trust company whose funds under management now exceed Â£1bn, compared with Â£818m at 31 December 2004, demonstrating excellent long-term investment performance and strong marketing and client service. The Rathbone range of unit trusts has been especially well suited to client demand during the last 12 months. Our Income Fund has attracted net new funds of Â£115m in the six month period. In our Trust Division, profits for the six months of the year are 25% lower than the first half of last year but some 8% higher than in the second half of 2004. Whilst the majority of the business has performed well, these results reflect some of the costs of the continuing process of refocusing and aligning certain parts of the division's activities with our clients' requirements and our corporate objectives. In the first half of this year (and as referred to above), we incurred costs of Â£1.4m in connection with an approach to Rensburg. This was based upon our strong belief in the compatibility of the two businesses and reflected Rathbones' confidence in the strength of our operating platform and the ability to handle substantially increased volumes of funds under management efficiently and cost-effectively. Our ambition remains that of becoming the leading independent provider of investment management services to private individuals and trustees in the UK. World stock markets have maintained their comparative strength since 30 June 2005, despite the political and economic uncertainties which exist. Levels of new business enquiries are encouraging and we look forward with confidence. Mark Powell Chairman 31 August 2005 CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2005 Unaudited Unaudited IFRS IFRS Unaudited Six months Six months IFRS ended ended Year ended 30 June 30 June 31 December 2005 2004 2004 Â£'000 Â£'000 Â£'000 -------------------------------- ------------ ------------ ------------ Interest and similar income 13,180 9,517 20,759 Interest expense and similar charges (7,141) (4,554) (10,477) ------------ ------------ ------------ Net interest income 6,039 4,963 10,282 ------------ ------------ ------------ Fee and commission income 49,911 43,395 86,067 Fee and commission expense (3,149) (1,984) (4,276) ------------ ------------ ------------ Net fee and commission income 46,762 41,411 81,791 ------------ ------------ ------------ Dividend income 15 12 915 Net trading income 685 454 919 Gains less losses from investment securities - - 759 Other operating income 360 418 861 ------------ ------------ ------------ Operating income 53,861 47,258 95,527 Operating expenses (39,178) (34,000) (67,035) ------------ ------------ ------------ Aborted acquisition costs (Note 4) (1,375) - - Other operating expenses (37,803) (34,000) (67,035) ------------ ------------ ------------ ------------ ------------ ------------ Profit before tax 14,683 13,258 28,492 ------------ ------------ ------------ Profit before aborted acquisition costs and tax 16,058 13,258 28,492 Aborted acquisition costs (1,375) - - ------------ ------------ ------------ Tax (4,257) (3,786) (8,540) ------------ ------------ ------------ Profit for the period attributable to equity holders of the Company 10,426 9,472 19,952 ------------ ------------ ------------ Earnings per share for profit attributable to the equity holders of the Company during the period (Note 5): - basic 25.46p 23.28p 48.99p - diluted 25.16p 23.06p 48.07p Dividend per ordinary share (Note 6) 11.5p 10.5p 27.5p Dividend (Â£'000) 4,719 4,276 11,221 CONSOLIDATED BALANCE SHEET as at 30 June 2005 Unaudited Unaudited Unaudited IFRS as at IFRS as at IFRS as at 30 June 30 June 31 December 2005 2004 2004 Â£'000 Â£'000 Â£'000 ----------------------------------- ---------- ---------- ---------- Assets Cash and balances at central banks 306 302 15,840 Settlement balances 32,939 36,473 11,199 Loans and advances to banks 141,634 39,870 57,881 Loans and advances to customers 38,465 39,292 41,226 Investment securities 6,203 6,255 7,219 - available-for-sale 403,297 385,003 381,119 - held-to-maturity Intangible assets 60,120 59,978 59,860 Property, plant and equipment 4,185 4,727 4,480 Deferred tax asset 5,042 3,672 4,379 Prepayments, accrued income and other assets 28,044 21,870 22,154 ---------- ---------- ---------- Total assets 720,235 597,442 605,357 ---------- ---------- ---------- Liabilities Deposits by banks 3,718 4,695 3,243 Settlement balances 26,630 42,528 15,238 Derivative financial instruments - 13 19 Due to customers 525,302 403,303 425,078 Debt securities in issue 170 336 286 Accruals, deferred income, provisions and other liabilities 23,360 18,268 23,003 Current tax liabilities 4,867 4,520 6,067 Retirement benefit obligations 15,603 12,998 14,983 ---------- ---------- ---------- Total liabilities 599,650 486,661 487,917 ---------- ---------- ---------- Equity Share capital 2,054 2,036 2,043 Share premium 16,220 13,988 14,766 Other reserves 53,746 53,782 54,457 Retained earnings 48,565 40,975 46,174 ---------- ---------- ---------- Total equity 120,585 110,781 117,440 ---------- ---------- ---------- Total equity and liabilities 720,235 597,442 605,357 ---------- ---------- ---------- CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 June 2005 Unaudited Unaudited IFRS IFRS Unaudited Six months Six months IFRS ended ended Year ended 30 June 30 June 31 December 2005 2004 2004 Â£'000 Â£'000 Â£'000 --------------------------------- --------- --------- --------- Cash flows from operating activities Profit before tax 14,683 13,258 28,493 Gain less losses from investment securities - - (759) Provision for bad and doubtful debts 401 121 - Profit on disposal of plant and equipment (41) (39) (131) Depreciation and amortisation 1,295 1,278 2,629 Share based payment charges 1,007 664 1,329 --------- --------- --------- 17,345 15,282 31,561 Changes in operating assets and liabilities - net (increase) in loans and advances to banks and customers (17,445) (3,756) (9,793) - net (increase)/decrease in settlement balance debtors (21,740) (22,951) 2,323 - net (increase) in prepayments, accrued income and other assets (5,930) (1,510) (1,713) - net increase in amounts due to customers and deposits by banks 101,281 36,659 56,317 - net increase in settlement balance creditors 11,393 31,152 3,862 - net increase in accruals, deferred income, provisions and other liabilities 415 3,582 8,151 - net increase in retirement benefit obligations (262) 144 284 --------- --------- --------- Cash generated from operations 85,057 58,602 90,992 Tax paid (5,534) (3,736) (7,004) --------- --------- --------- Net cash inflow from operating activities 79,523 54,866 83,988 --------- --------- --------- Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired - (169) (169) Purchase of property, equipment and intangible assets (1,273) (1,201) (2,249) Proceeds from sale of property and equipment 29 63 211 Purchase of investment securities (528,050) (654,379) (1,495,420) Proceeds from sale and redemption of securities 566,801 632,376 1,422,139 --------- --------- --------- Net cash generated from/(used in) investing activities 37,507 (23,310) (75,488) --------- --------- --------- Cash flows from financing activities Repayments of debt securities (116) (561) (611) Purchase of shares for share based schemes (980) (866) (1,266) Issue of ordinary shares 1,023 200 745 Dividends paid (6,942) (6,507) (10,780) --------- --------- --------- Net cash used in financing activities (7,015) (7,734) (11,912) --------- --------- --------- Net increase/(decrease) in cash and cash equivalents 110,015 23,822 (3,412) Cash and cash equivalents at beginning of the period 160,798 164,413 164,413 Effect of exchange rate changes on cash and cash equivalents 134 (63) (203) --------- --------- --------- Cash and cash equivalents at the end of the period (Note 7) 270,947 188,172 160,798 --------- --------- --------- CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the six months ended 30 June 2005 Unaudited Unaudited IFRS IFRS Unaudited Six months Six months IFRS ended ended Year ended 30 June 30 June 31 December 2005 2004 2004 Â£'000s Â£'000s Â£'000s ------------------------------ ---------- ---------- ---------- Profit after taxation 10,426 9,472 19,952 Exchange translation differences 36 (71) (109) Actuarial (loss)/gain on retirement benefit obligations (880) 990 (856) Revaluation of available-for-sale investment securities: -------- -------- -------- - net (loss)/gain from changes in fair value (1,016) 454 2,177 - net profit on disposal transferred to income during the period - - (759) -------- -------- -------- (1,016) 454 1,418 Deferred tax on equity items: -------- -------- -------- - available-for-sale investment securities 305 (136) (425) - retained earnings 290 (173) 759 -------- -------- -------- 595 (309) 334 -------- -------- -------- Recognised income and expense for the period 9,161 10,536 20,739 -------- -------- -------- Attributable to: Equity holders of Company 9,161 10,536 20,739 -------- -------- -------- Notes to the consolidated financial statements 1. Basis of preparation 2005 interim financial information European Union ('EU') law requires that the next annual consolidated financial statements of the Company, for the year ending 31 December 2005, be prepared in accordance with International Financial Reporting Standards ('IFRS') adopted for use in the EU ('adopted IFRS'). The 2005 interim financial information has been prepared on the basis of the recognition and measurement principles of IFRS that are endorsed by the EU and effective (or available for early adoption) at 31 December 2005. The interim information also reflects standards that are expected to be endorsed and effective (or available for early adoption) at 31 December 2005. Based on these adopted and unadopted IFRS, the Directors have made assumptions about the accounting policies expected to be applied when the first annual IFRS financial statements are prepared for the year ending 31 December 2005. In particular, the Directors have assumed that International Accounting Standard 19 'Employee benefits' issued by the International Accounting Standards Board will be adopted by the EU in sufficient time to be available for use in the annual IFRS financial statements for the year ending 31 December 2005. The accounting policies that the Directors assume will apply to the preparation of the first annual IFRS financial statements for the year ending 31 December 2005 are set out in Appendix 3 of the announcement titled 'Transition to International Financial Reporting Standards' which was released on 4 August 2005. However, the adopted IFRS that will be effective (or available for early adoption) in the annual financial statements for the year ending 31 December 2005 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period will be determined only when the annual financial statements are prepared for the year ending 31 December 2005. 2004 comparative financial information The 2004 comparative financial information included in these interim accounts is prepared under the reporting basis for statutory comparatives under IFRS for the 2004 financial year. In preparing the 2004 comparative information, the Group has adjusted amounts previously reported in financial statements under UK Generally Accepted Accounting Principles ('GAAP'). The impact of the transition from UK GAAP at 1 January 2004 and 31 December 2004 is set out and explained in the announcement titled 'Transition to International Financial Reporting Standards' which was released on 4 August 2005 and is available on the Group's website www.rathbones.com. The impact of the transition from UK GAAP to IFRS at 30 June 2004 is shown in Note 9 of these interim accounts. 2. Section 240 statement The comparative figures for the financial year ended 31 December 2004 do not constitute the Company's statutory accounts for that financial year within the meaning of section 240 of the Companies Act 1985. Those accounts, which were prepared under UK GAAP, have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 3. Segmental information (a) Business segments For management purposes, the Group is currently organised into three operating divisions: Investment Management and Banking, Unit Trusts and Trust Services. These divisions are the basis on which the Group reports its primary segment information. At 30 June 2005 Investment management and Unit Trust banking trusts services Eliminations Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ---------------- ---------- ------- -------- --------- --------- External revenues 45,453 7,641 11,057 - 64,151 Revenues from other segments 695 - 1 (696) - -------- ------- -------- ------- --------- Total revenues 46,148 7,641 11,058 (696) 64,151 -------- ------- -------- ------- --------- Segment result 13,190 1,414 1,454 16,058 -------- ------- -------- Unallocated items (1,375) --------- Profit before tax 14,683 Tax (4,257) --------- Profit for the period 10,426 --------- Segment assets 631,232 13,443 59,162 703,837 -------- ------- -------- Unallocated assets 16,398 --------- Total assets 720,235 --------- ========= Segment liabilities 557,351 10,866 22,656 590,873 -------- ------- -------- Unallocated liabilities 8,777 --------- Total liabilities 599,650 --------- Other segment items: Capital expenditure 1,043 34 234 1,311 Depreciation and amortisation 980 51 264 1,295 Other non-cash expenses 696 74 638 1,408 At 30 June 2004 Investment management Unit Trust and banking trusts services Eliminations Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ---------------- ---------- ------- -------- --------- -------- External revenues 38,028 4,819 10,949 - 53,796 Revenues from other segments 682 - - (682) - -------- ------- -------- ------- -------- Total revenues 38,710 4,819 10,949 (682) 53,796 -------- ------- -------- ------- -------- Segment result 10,787 538 1,933 13,258 -------- ------- -------- Unallocated items - -------- Profit before tax 13,258 Tax (3,786) -------- Profit for the period 9,472 -------- Segment assets 505,706 17,055 57,978 580,739 -------- ------- -------- Unallocated assets 16,703 -------- Total assets 597,442 -------- Segment liabilities 439,822 15,711 21,261 476,794 -------- ------- -------- Unallocated liabilities 9,867 -------- Total liabilities 486,661 -------- Other segment items: Capital expenditure 1,041 42 156 1,239 Depreciation 943 57 278 1,278 Other non-cash expenses 460 49 277 786 At 31 December 2004 Investment management Unit Trust and banking trusts Services Eliminations Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ---------------- ---------- ------- -------- --------- --------- External revenues 77,393 10,763 21,365 - 109,521 Revenues from other segments 1,367 - - (1,367) - -------- ------- -------- -------- --------- 78,760 10,763 21,365 (1,367) 109,521 -------- ------- -------- -------- Unallocated external revenues 759 --------- Total revenues 110,280 --------- Segment result 22,197 1,340 3,283 26,820 -------- ------- -------- Unallocated items 1,672 --------- Profit before tax 28,492 Tax (8,540) --------- Profit for the year 19,952 --------- Segment assets 515,589 9,630 55,449 580,668 -------- ------- -------- Unallocated assets 24,689 --------- Total assets 605,357 --------- Segment liabilities 447,518 8,365 21,625 477,508 -------- ------- -------- Unallocated liabilities 10,409 --------- Total liabilities 487,917 --------- Other segment items: Capital expenditure 2,396 81 414 2,891 Depreciation 1,946 115 568 2,629 Other non-cash expenses 916 99 314 1,329 (b) Geographical Segments The Group's operations are located in the United Kingdom, Jersey, Switzerland and the British Virgin Islands. The following table provides an analysis of the Group's sales by geographical market, by origin of the services: Revenue by geographical market Six months Six months Year ended ended 30 June ended 30 June 31 December 2005 2004 2004 Â£'000 Â£'000 Â£'000 -------------------------- ---------- ---------- ---------- United Kingdom 53,464 43,768 90,129 Jersey 8,581 7,976 15,897 Rest of the world 2,106 2,052 4,254 -------- -------- ------- 64,151 53,796 110,280 -------- -------- ------- The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located: Carrying amount of segment assets At 30 June At 30 June At 31 December 2005 2004 2004 Â£000 Â£000 Â£'000 -------------------------- ---------- ---------- ----------- United Kingdom 658,374 536,622 535,543 Jersey 25,959 23,458 24,203 Rest of the world 19,504 20,659 20,922 -------- ------- ------- 703,837 580,739 580,668 -------- ------- ------- Additions to property, plant and equipment and intangible assets Six months Six months Year ended ended 30 ended 30 31 December June June 2004 2005 2004 Â£'000 Â£'000 Â£'000 --------------------------- ---------- ---------- ---------- United Kingdom 1,135 1,155 2,606 Jersey 151 14 172 Rest of the world 25 70 113 ------- ------- ------- 1,311 1,239 2,891 ------- ------- ------- (c) Analysis of operating income Six months Six months Year ended ended ended 31 December 30 June 2005 30 June 2004 2004 Â£'000 Â£'000 Â£'000 ---------------------------- --------- --------- --------- Interest and similar income 13,180 9,517 20,759 Fee and commission income 49,911 43,395 86,067 Dividend income 15 12 915 Net trading income 685 454 919 Gains less losses from investment securities - - 759 Other operating income 360 418 861 --------- --------- --------- Gross operating income 64,151 53,796 110,280 Interest payable (7,141) (4,554) (10,477) Fees and commission expense (3,149) (1,984) (4,276) --------- --------- --------- Operating income 53,861 47,258 95,527 --------- --------- --------- 4. Aborted acquisition costs On 14 January 2005, the Company announced a pre-conditional offer for Rensburg plc ('Rensburg'). There were subsequently substantive discussions and exchanges of information with Rensburg, which led to a revised pre-conditional offer proposal being made on 23 February 2005 which was subsequently rejected by the board of Rensburg. On 7 April 2005, the Company announced its decision not to proceed with making an offer. As reported in the 2004 financial statements, the Company incurred professional advisory costs in 2005 in relation to the above process and, as no offer was made, those costs amounting to Â£1,375,000 have been charged to the profit and loss account in the first six months of 2005. 5. Earnings per share The calculation of basic earnings per share ('EPS') is based on profit after taxation before dividends for each period and the weighted average number of ordinary shares outstanding during the relevant period. Diluted earnings per share is the basic earnings per share, adjusted for the effect of contingently issuable shares under the Long Term Incentive Plan, employee share options remaining capable of exercise and any dilutive shares to be issued under the Share Incentive Plan, weighted for the relevant period (see table below). Six months Six months ended ended Year ended 30 June 30 June 31 December 2005 2004 2004 ---------------------------- --------- ---------- ---------- Weighted average number of ordinary shares outstanding during the period - basic 40,944,800 40,688,447 40,729,520 Effect of ordinary share options 177,882 370,666 333,709 Effect of dilutive ordinary shares issuable under the Share Incentive Plan 96,914 15,005 174,606 Effect of contingently issuable ordinary shares under the Long Term Incentive Plan 222,129 - 265,611 -------- -------- -------- Weighted average number of ordinary shares outstanding during the period - diluted 41,441,725 41,074,118 41,503,446 -------- -------- -------- 6. Dividend per share The interim dividend declared of 11.5p per share is payable on 14 October 2005 to shareholders on the register at the close of business on 21 September 2005. 7. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than three months maturity from the date of acquisition: Six months Six months Year ended ended 30 June ended 30 June 31 December 2005 2004 2004 Â£'000 Â£000 Â£'000 --------------------------- ---------- ---------- ---------- Cash and balances with central banks 306 302 15,840 Loans and advances to banks 117,634 39,870 52,881 Held-to-maturity investment securities 153,007 148,000 92,077 -------- -------- ------- 270,947 188,172 160,798 -------- -------- ------- 8. Reconciliation of changes in equity Called up Share Merger Available-for-sale Retained Total share premium reserve reserve earnings equity capital Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ------- ------- ------ ------- ------- ------- Equity at 1 January 2004 2,033 13,791 49,428 4,036 37,547 106,835 Profit for the six months ended 9,472 9,472 30 June 2004 Foreign currency translation (71) (71) Dividend relating to 2003 (final) (6,507) (6,507) Shares issued 3 197 200 Actuarial gain/(loss) 990 990 Revaluation of investment securities 454 454 Share-based payments - value of employee services 583 583 - cost of shares issued/purchas ed (866) (866) Tax on equity items (136) (173) (309) ------- ------- ------ ------- ------- ------- Equity at 30 June 2004 2,036 13,988 49,428 4,354 40,975 110,781 Profit for the six months ended 31 December 2004 10,480 10,480 Foreign currency translation (38) (38) Dividend relating to 2004 (interim) (4,273) (4,273) Shares issued 7 778 785 Actuarial gain/(loss) (1,846) (1,846) Revaluation of investment securities 964 964 Share-based payments - value of employee services 584 584 - cost of shares issued/purchased (640) (640) Tax on equity items (289) 932 643 ------- ------- ------ ------- ------- ------- Equity at 31 December 2004 2,043 14,766 49,428 5,029 46,174 117,440 Profit for the six months ended 10,426 10,426 30 June 2005 Foreign currency translation 36 36 Dividend relating to 2004 (final) (6,942) (6,942) Shares issued 11 1,454 1,465 Actuarial profit/(loss) (880) (880) Revaluation of investment securities (1,016) (1,016) Share-based payments - value of employee services 883 883 - cost of shares issued/purchas ed (1,422) (1,422) Tax on equity items 305 290 595 ------- ------- ------ ------- ------- ------- Equity at 30 June 2005 2,054 16,220 49,428 4,318 48,565 120,585 ------- ------- ------ ------- ------- ------- 9. Explanation of transition to IFRS (a) Effect of IFRS on the UK GAAP consolidated balance sheet as at 30 June 2004 UK GAAP Presentation Events Share- Employee Business 30.06.04 of Financial after based Benefits Combinations Â£'000 Statements Balance Payment (IAS 19) (IFRS 3) (IAS 1) Sheet Date (IFRS 2) Â£'000 Â£'000 Â£'000 (IAS 10) Â£'000 Â£'000 -------------------- --------- --------- --------- -------- -------- --------- Assets -------------------- --------- --------- --------- -------- -------- --------- Cash and balances at central banks 302 -------------------- --------- --------- --------- -------- -------- --------- Settlement balances 36,473 -------------------- --------- --------- --------- -------- -------- --------- Loans and advances to banks 39,870 -------------------- --------- --------- --------- -------- -------- --------- Loans and advances to customers 39,292 -------------------- --------- --------- --------- -------- -------- --------- Debt securities 385,003 (385,003) -------------------- --------- --------- --------- -------- -------- --------- Investment securities -------------------- --------- --------- --------- -------- -------- --------- - available-for- sale 35 -------------------- --------- --------- --------- -------- -------- --------- - held- to-maturity 385,003 -------------------- --------- --------- --------- -------- -------- --------- Equity shares 35 (35) -------------------- --------- --------- --------- -------- -------- --------- Intangible assets 54,754 2,962 -------------------- --------- --------- --------- -------- -------- --------- Tangible fixed assets 6,036 (6,036) -------------------- --------- --------- --------- -------- -------- --------- Property, plant and equipment 6,036 -------------------- --------- --------- --------- -------- -------- --------- Deferred income tax asset 1,243 -------------------- --------- --------- --------- -------- -------- --------- Prepayments, accrued income and other assets 22,866 (1,243) (799) -------------------- --------- --------- --------- -------- -------- --------- Total assets 584,631 (799) 2,962 -------------------- --------- --------- --------- -------- -------- --------- Liabilities -------------------- --------- --------- --------- -------- -------- --------- Deposits by banks 4,695 -------------------- --------- --------- --------- -------- -------- --------- Settlement balances 42,528 -------------------- --------- --------- --------- -------- -------- --------- Derivative financial instruments --------- --------- --------- -------- -------- --------- -------------------- Due to customers 403,303 -------------------- --------- --------- --------- -------- -------- --------- Debt securities in issue 336 -------------------- --------- --------- --------- -------- -------- --------- Accruals, deferred income, provisions and other liabilities 25,686 (4,468) (4,276) (189) -------------------- --------- --------- --------- -------- -------- --------- Current tax liability 4,468 -------------------- --------- --------- --------- -------- -------- --------- Retirement benefit obligation 12,998 -------------------- --------- --------- --------- -------- -------- --------- Total liabilities 476,548 (4,276) (189) 12,998 -------------------- --------- --------- --------- -------- -------- --------- Equity -------------------- --------- --------- --------- -------- -------- --------- Share capital 2,036 -------------------- --------- --------- --------- -------- -------- --------- Share premium 13,988 -------------------- --------- --------- --------- -------- -------- --------- Other reserves 49,428 -------------------- --------- --------- --------- -------- -------- --------- Retained earnings 42,631 4,276 189 (13,797) 2,962 -------------------- --------- --------- --------- -------- -------- --------- - brought forward 40,650 6,507 167 (14,686) -------------------- --------- --------- --------- -------- -------- --------- - currency adjustments (71) -------------------- --------- --------- --------- -------- -------- --------- - share based payments (114) (169) -------------------- --------- --------- --------- -------- -------- --------- - dividend paid/declared (4,276) (2,231) -------------------- --------- --------- --------- -------- -------- --------- - actuarial gains/losses 990 -------------------- --------- --------- --------- -------- -------- --------- - revaluation of AVS securities --------- --------- --------- -------- -------- --------- -------------------- - profit for the period 6,442 191 (101) 2,962 -------------------- --------- --------- --------- -------- -------- --------- Total equity 108,083 4,276 189 (13,797) 2,962 -------------------- --------- --------- --------- -------- -------- --------- Total equity and liabilities 584,631 - - (799) 2,962 -------------------- --------- --------- --------- -------- -------- --------- Financial Intangible Revenue Other Income Unaudited Instruments Assets (IAS 18) Â£'000 Taxes IFRS (IAS 39) (IAS 38) Â£'000 (IAS 12) 30.06.04 Â£'000 Â£'000 Â£'000 Â£'000 -------------------- --------- -------- --------- -------- -------- --------- Assets -------------------- --------- -------- --------- -------- -------- --------- Cash and balances at central banks 302 -------------------- --------- -------- --------- -------- -------- --------- Settlement balances 36,473 -------------------- --------- -------- --------- -------- -------- --------- Loans and advances to banks 39,870 -------------------- --------- -------- --------- -------- -------- --------- Loans and advances to customers 39,292 -------------------- --------- -------- --------- -------- -------- --------- Debt securities -------------------- --------- -------- --------- -------- -------- --------- Investment securities -------------------- --------- -------- --------- -------- -------- --------- - available-for- sale 6,220 6,255 -------------------- --------- -------- --------- -------- -------- --------- - held- to-maturity 385,003 -------------------- --------- -------- --------- -------- -------- --------- Equity shares -------------------- --------- -------- --------- -------- -------- --------- Intangible assets 1,623 639 59,978 -------------------- --------- -------- --------- -------- -------- --------- Tangible fixed assets -------------------- --------- -------- --------- -------- -------- --------- Property, plant and equipment (1,309) 4,727 -------------------- --------- -------- --------- -------- -------- --------- Deferred income tax asset 2,429 3,672 -------------------- --------- -------- --------- -------- -------- --------- Prepayments, accrued income and other assets 732 314 21,870 -------------------- --------- -------- --------- -------- -------- --------- Total assets 6,220 314 732 953 2,429 597,442 -------------------- --------- -------- --------- -------- -------- --------- Liabilities -------------------- --------- -------- --------- -------- -------- --------- Deposits by banks 4,695 -------------------- --------- -------- --------- -------- -------- --------- Settlement balances 42,528 -------------------- --------- -------- --------- -------- -------- --------- Derivative financial instruments 13 13 -------------------- --------- -------- --------- -------- -------- --------- Due to customers 403,303 -------------------- --------- -------- --------- -------- -------- --------- Debt securities in issue 336 -------------------- --------- -------- --------- -------- -------- --------- Accruals, deferred income, provisions and other liabilities 820 695 18,268 -------------------- --------- -------- --------- -------- -------- --------- Current tax liability 52 4,520 -------------------- --------- -------- --------- -------- -------- --------- Retirement benefit obligation 12,998 -------------------- --------- -------- --------- -------- -------- --------- Total liabilities 13 820 695 52 486,661 -------------------- --------- -------- --------- -------- -------- --------- Equity -------------------- --------- -------- --------- -------- -------- --------- Share capital 2,036 -------------------- --------- -------- --------- -------- -------- --------- Share premium 13,988 -------------------- --------- -------- --------- -------- -------- --------- Other reserves 6,220 (1,866) 53,782 -------------------- --------- -------- --------- -------- -------- --------- Retained earnings (13) 314 (88) 258 4,243 40,975 -------------------- --------- -------- --------- -------- -------- --------- - brought forward 293 (104) 275 4,445 37,547 -------------------- --------- -------- --------- -------- -------- --------- - currency adjustments (71) -------------------- --------- -------- --------- -------- -------- --------- - share based payments 124 (159) -------------------- --------- -------- --------- -------- -------- --------- - dividend paid/declared (6,507) -------------------- --------- -------- --------- -------- -------- --------- - actuarial gains/losses (297) 693 -------------------- --------- -------- --------- -------- -------- --------- - revaluation of AVS securities --------- -------- --------- -------- -------- --------- -------------------- - profit for the period (13) 21 16 (17) (29) 9,472 -------------------- --------- -------- --------- -------- -------- --------- Total equity 6,207 314 (88) 258 2,377 110,781 -------------------- --------- -------- --------- -------- -------- --------- Total equity and liabilities 6,220 314 732 953 2,429 597,442 -------------------- --------- -------- --------- -------- -------- --------- 9. Explanation of IFRS (continued) (b) Effect of IFRS on the UK GAAP consolidated income statement for the six months ended 30 June 2004 UK GAAP Presentation Share- Employee Business Financial six of Financial based Benefits Combinations Instruments months Statements Payment (IAS 19) (IFRS 3) (IAS 39) ended (IAS 1) (IFRS Â£'000 Â£'000 Â£'000 30.06.04 Â£'000 2) Â£'000 Â£'000 ------------------------ -------- -------- ------- ------- --------- -------- Interest and similar income 9,517 ------------------------ -------- -------- ------- ------- --------- -------- Interest expense and similar charges (4,554) ------------------------ -------- -------- ------- ------- --------- -------- Net interest income 4,963 ------------------------ -------- -------- ------- ------- --------- -------- Fee and commission income 42,376 1,003 ------------------------ -------- -------- ------- ------- --------- -------- Fee and commission expense (1,984) ------------------------ -------- -------- ------- ------- --------- -------- Net fee and commission income 40,392 1,003 ------------------------ -------- -------- ------- ------- --------- -------- Dividend income 12 ------------------------ -------- -------- ------- ------- --------- -------- Net trading income 467 (13) ------------------------ -------- -------- ------- ------- --------- -------- Gains less losses from investment securities -------- -------- ------- ------- --------- -------- ------------------------ Other operating income 1,888 (1,470) ------------------------ -------- -------- ------- ------- --------- -------- Operating income 47,255 (13) ------------------------ -------- -------- ------- ------- --------- -------- Operating expenses (37,056) 191 (101) 2,962 ------------------------ -------- ------- ------- --------- -------- -------- Operating profit 10,199 191 (101) 2,962 (13) ------------------------ -------- -------- ------- ------- --------- -------- Exceptional item - ------------------------ -------- -------- ------- ------- --------- -------- Profit before tax 10,199 191 (101) 2,962 (13) ------------------------ -------- -------- ------- ------- --------- -------- Tax (3,757) ------------------------ -------- -------- ------- ------- --------- -------- Profit for the year 6,442 191 (101) 2,962 (13) ------------------------ -------- -------- ------- ------- --------- -------- Earnings per share for profit attributable to the equity holders of the Company during the year: ------------------------ -------- -------- ------- ------- --------- -------- - basic 15.83p ------------------------ -------- -------- ------- ------- --------- -------- - diluted 15.68p ------------------------ -------- -------- ------- ------- --------- -------- -------------------------- --------- --------- -------- --------- --------- Intangible Revenue Other Income Unaudited Assets (IAS 18) Â£'000 Taxes IFRS (IAS 38) Â£'000 (IAS 12) six months Â£'000 Â£'000 ended 30.06.04 Â£'000 -------------------------- --------- --------- -------- --------- --------- Interest and similar income 9,517 -------------------------- --------- --------- -------- --------- --------- Interest expense and similar charges (4,554) -------------------------- --------- --------- -------- --------- --------- Net interest income 4,963 -------------------------- --------- --------- -------- --------- --------- Fee and commission income 16 43,395 -------------------------- --------- --------- -------- --------- --------- Fee and commission expense (1,984) -------------------------- --------- --------- -------- --------- --------- Net fee and commission income 16 41,411 -------------------------- --------- --------- -------- --------- --------- Dividend income 12 -------------------------- --------- --------- -------- --------- --------- Net trading income 454 -------------------------- --------- --------- -------- --------- --------- Gains less losses from investment securities --------- --------- -------- --------- --------- -------------------------- Other operating income 418 -------------------------- --------- --------- -------- --------- --------- Operating income 16 47,258 -------------------------- --------- --------- -------- --------- --------- Operating expenses 21 (17) (34,000) -------------------------- --------- --------- -------- --------- --------- Operating profit 21 16 (17) 13,258 -------------------------- --------- --------- -------- --------- --------- Exceptional item -------------------------- --------- --------- -------- --------- --------- Profit before tax 21 16 (17) 13,258 -------------------------- --------- --------- -------- --------- --------- Tax (29) (3,786) -------------------------- --------- --------- -------- --------- --------- Profit for the year 21 16 (17) (29) 9,472 -------------------------- --------- --------- -------- --------- --------- Earnings per share for profit attributable to the equity holders of the Company during the year: -------------------------- --------- --------- -------- --------- --------- - basic 23.28p -------------------------- --------- --------- -------- --------- --------- - diluted 23.06p -------------------------- --------- --------- -------- --------- --------- 9. Explanation of IFRS (continued) (c) Effect of IFRS on the cash flow statement for the six months ended 30 June 2004 The Group has prepared its cash flow statement in accordance with IAS 7. Under IAS 7, the cash flow statement shows the movement in cash and cash equivalents, being defined as cash on hand, demand deposits and short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Under UK GAAP, the Group's cash flow statement showed the movement in cash repayable on demand only and in particular, excluded short term highly liquid investments. This change in definition from cash to cash and cash equivalents results in a decrease of cash under UK GAAP of Â£10.7 million changing to an increase of in cash and cash equivalents of Â£23.8 million under IFRS, although it should be noted that for regulatory solvency purposes, the marketability of the whole portfolio of certificates of deposit is taken into account. All other adjustments made to the cash flow statement for IFRS represent reclassifications between line items and have not impacted actual cash flows. 10. Forward looking statements This announcement contains certain forward-looking statements and forecasts with respect to the financial condition, results of operations and businesses of Rathbone Brothers Plc and its subsidiaries. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast. 11. Interim report The interim report will be sent to registered shareholders. Further copies will be available to the public from the Company's registered office at 159 New Bond Street, London W1S 2UD. INDEPENDENT REVIEW REPORT TO RATHBONE BROTHERS PLC Introduction We have been engaged by the Company to review the financial information which comprises the consolidated income statement, consolidated balance sheet, consolidated cash flow statement, consolidated statement of recognised income and expense and notes 1 to 11 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this 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 for our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual financial statements except where any changes, and the reasons for them, are disclosed. As disclosed in note 1 to the financial information, the next annual financial statements of the Company will be prepared in accordance with IFRSs adopted for use in the European Union. The accounting policies that have been adopted in preparing the financial information are consistent with those that the directors currently intend to use in the next annual financial statements. There is, however, a possibility that the directors may determine that some changes to these policies are necessary when preparing the full annual financial statements for the first time in accordance with those IFRSs adopted for use by the European Union. This is because, as disclosed in note 1, the directors have anticipated that certain standards, which have yet to be formally adopted for use in the EU, will be so adopted in time to be applicable to the next annual financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 Review of interim financial information issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of company management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2005. KPMG Audit Plc Chartered Accountants London 31 August 2005 This information is provided by RNS The company news service from the London Stock Exchange

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