Final Results

RNS Number : 3634E

B.P. Marsh & Partners PLC

30 May 2012

 



Date:                   30^th May 2012

On behalf of:         B. P. Marsh & Partners Plc ("BP Marsh", "the Company", "the Group")

Embargoed until: 0700hrs

B. P. Marsh & Partners Plc

Final Results

B. P. Marsh & Partners Plc (AIM: BPM), a niche venture capital provider to early stage financial services businesses, announces its audited Group final results for the year to 31st January 2012.

The highlights of the results are:

¡  Net asset value up 7.8% to £50.1m, the first time exceeding £50m
(2011: £46.5m)

¡  Net asset value per share of 171p (2011: 159p)

¡  Share price trading at 48.2% discount to Net Asset Value (as at 28th May 2012)

¡  Consolidated profit after tax up 40.3% to £3.6m (2011: £2.6m)

¡  Dividend of 1p per share declared

¡  Annual compound growth rate of 12% achieved

¡  £3.5m of cash currently available for further investments, plus a further £4.325m Directors' loan facility available; a total of £5.5m excluding commitments to existing investments

Chairman's Statement

I am pleased to present the audited Consolidated Financial Statements of B. P. Marsh & Partners Plc for the year ended 31st January 2012.

We live and work in a world of seemingly wall-to-wall turmoil. Macro-economic news regularly drowns those of us who read it or listen to it in a sense of dismay: Europe and North America seem to stagger from one debt-ridden crisis to another, whilst our own country hovers stubbornly around a state of technical recession.

Financial Services, our particular area of operation, lies at the heart of this storm, it seems, and the media offers little cheering news from which to take heart.  

Against this background, we should be much encouraged by the fact that our small Company continues to make steady progress. Our very modest debts (which at 31st January 2012 were £1.25m) are owed, not to any rapacious outside lender, but to our own Directors, who are content enough to expose their own cash to our Company in this way.

We continue to make a profit from our activities, not a loss; and, our net asset values have again risen, this year by 7.8% to a total of £50.1m, for the first time exceeding £50m.

Of our portfolio the largest, Hyperion Insurance Group Limited ("Hyperion"), forges ahead with enviable momentum. We recently took the opportunity to sell approximately 15% of the Group's holding in Hyperion at a cash price of 380p per share. The sale proceeds, which amount to £4.5m, will allow the Company to repay the £1m outstanding Directors' Loan, provide funds for follow-on investment to promote growth and expansion within the Company's portfolio of investee companies and ensure funds are available for new opportunities. The Group has been an investor in Hyperion for 17 years and is very much looking forward to continuing to support management through the Company's remaining, and significant, 16.19% shareholding in Hyperion.

However, we are not immune to the pressures of the global financial outlook and HQB Partners Limited ("HQB"), the proxy solicitation and corporate governance advisory partnership in which the Group held a 27.72% stake, unfortunately entered into administration just before year-end, on 13th January 2012.

Financial Performance

At 31st January 2012, the net asset value of the Group was £50.1m (2011: £46.5m), after making allowance for deferred corporation tax, an increase of 7.8%. This equates to a net asset value of 171p per ordinary share as at 31st January 2012 (2011: 159p).

The Group has therefore achieved an annual compound growth rate of 12.0% after running costs, realisations, losses and distributions and having made an appropriate allowance for deferred corporation tax since the Group's establishment in 1990 (excluding £10.1m raised on flotation).

Reflecting investment portfolio movement, including the unrealised increase on revaluation of the portfolio, the consolidated profit on ordinary activities after tax for the year was £3.6m (2011: profit of £2.6m) an increase of 40.3%. However, excluding portfolio movement the Group made a pre-tax profit of £0.11m (2011: profit of £0.15m). The Group aims each year to at least break even on an underlying basis, before taking into account any portfolio movement.

Deferred Tax

The Consolidated Financial Statements to 31st January 2012 do not reflect the Government's recently announced reduction in corporation tax from 26% to 24% with effect from 6th April 2012 as this has not yet been substantively enacted. If this does become substantively enacted, it would reduce deferred tax liabilities by £0.6m based upon the portfolio valuation at 31st January 2012 and therefore increase overall net asset value by the same amount.

Shareholders

The Board believes that the Group's prospects remain good, despite the continued bleak outlook for the global economy. The Directors continue to explore all opportunities for realisations and development within the portfolio.

Summary of Developments in the Portfolio

During the financial year ended 31st January 2012, the following developments took place within the Group and its portfolio:

·        Acquisition of further 11% of Besso Insurance Group Limited ("Besso")

In April 2011, the Group acquired a further 11.29% shareholding and additional loan stock in Besso for £1.5m, taking its total equity holding in the group to 34%; £1.25m of this further investment was financed from the £4.325m Directors' loan facility that was put in place in June 2010. 

The transaction saw Michael Wade joining Besso as its new Chairman, taking a 15% stake in place of Union Hamilton Reinsurance Limited (part of the Wells Fargo corporation).

·        HQB Administration

HQB, the proxy solicitation and corporate governance advisory partnership in which the Group held a 27.72% stake, entered into administration on 13th January 2012.

By 31st January 2011, the Group had written off its investment value in HQB from an investment cost of £35,000 in February 2005. The outstanding loan of £140,000 (at 31st January 2011) was repaid in full prior to HQB entering administration.

Trading Update:

·          US Risk (UK) Limited

Acquisition of James Hampden International Insurance Brokers Limited

US Risk (UK), in which the Group invested in June 2010, acquired the specialist international reinsurance and insurance broking company James Hampden International Insurance Brokers Ltd, which is headquarted in the City of London and operates in the Lloyd's and international insurance markets. The transaction also involved the acquisition of a 75% stake in Abraxas Insurance AG, the Swiss Underwriting Agency.

The acquisition, funded by the Group's original equity investment, is in line with US Risk (UK)'s strategy for growth and development, and further adds to its capabilities as a specialist insurance intermediary in the Lloyd's and London Market.

·        Besso Insurance Group Limited

Exercise of Call Option

Under the terms of the transaction announced on 1st April 2011 and described above, the Group acquired an 11.29% stake in Besso, increasing the Group's combined holding to 34%.  As part of the transaction the Group entered into a Call Option with Besso, allowing Besso the option to buy-back the equivalent of 4% of these shares at any point during the following 24 months.

The Call Option was accordingly exercised by Besso on 16th March 2012 in respect of the full 4%. Besso cancelled these shares upon buy-back with the intention of issuing equivalent shares up to the same number to an employee incentive scheme. As a result of the Call Option being exercised, and a subsequent issue of the same amount of shares to management, the Group's overall holding in Besso stands at 30%.

The Group also agreed to provide Besso with a further £578,698 of loan funding in order to facilitate the exercise of the Call Option. This transaction therefore had no cash impact for the Group.

B.P. Marsh supports Besso's aims of aligning senior management with shareholders by the exercise of the Option and believes that this will enable Besso to optimise opportunities for strategic growth and development.

·        Hyperion Insurance Group Limited

Disposal of stake in CFC Underwriting Limited ("CFC")

In April 2012 Hyperion reached agreement to sell its majority stake in CFC to a consortium of private investors and the management team, subject to FSA approval.

Queen's Award for Enterprise 2012

Hyperion has been awarded the Queen's Award for Enterprise in International Trade for the second time. Hyperion's first Queen's Award was granted in 2007 for outstanding achievement in international trade over a three year period. At this point Hyperion had 25 offices in 13 countries, and in the three year application period its overseas earnings increased by more than £8 million. However, in this, the Jubilee year, Hyperion won the award for continuous achievement over a six year period. Hyperion now has 52 offices in 28 countries, with overseas earnings growth increasing by over 2.5 times, and therefore we believe this award has been rightly deserved in recognition of Hyperion's consistent ability to grow profitably.

Partial Sale

On the 16th May 2012, the Group sold 1,193,500 shares in Hyperion for a cash consideration of £4.54m to Murofo Investments S.L. (an existing Hyperion shareholder), representing an IRR of 40.4% on these shares since they were acquired in November 1994. BP Marsh will retain a 16.19% shareholding in Hyperion, having reduced its 18.94% stake by 2.75%. The transaction was pro-rata ex-dividend.

Directors' Loan

£1.25m of loans were used to fund the Besso acquisition in March 2011 as set out above. £0.25m was repaid in February 2012 from working capital, and the remainder will be repaid in full in June 2012 from the sale of shares in Hyperion. The £4.325m facility will remain available for drawdown for investment opportunities.

Dividend

The Directors are pleased that the Group has reached the stage in its development where they are able to recommend the payment of a dividend of 1p per share (£0.3m). The intention of the dividend payment is to reward shareholders for supporting the Group and, whilst no assurances can be given, the Directors hope to be in a position to recommend further dividend payments in future years.

Business Strategy

The Group typically invests amounts of up to £2.5m and only takes minority equity positions, normally acquiring between 15% and 45% of an investee company's total equity. Based on our current portfolio, the average investment has been held for approximately 9 years. The Group requires its investee companies to adopt certain minority shareholder protections and appoints a director to its board.  The Group's successful performance track record is based upon a number of factors that include, amongst other things, a robust investment process, the management's considerable experience of the Financial Services sector and a flexible approach towards exit-strategies.

At the year end, the Group had £0.7m in cash, plus a further £3.075m Directors' loan facility available, of which it had committed to provide a further £2.3m of loan funding for its existing investments, leaving £1.5m available for new opportunities.

Following the receipt of £4.5m from the partial sale of Hyperion, and allowing for the £1.0m repayment of the Directors' loan and a £0.3m dividend, the Group currently has £3.5m in cash, plus a further £4.325m Directors' loan facility available. As the Group had made commitments to provide a further £2.3m of funding for its existing investments, this leaves £5.5m available for new opportunities.

Investment Opportunities

Having realigned the Group's approach to seeking out new investment opportunities in early 2011, using a more targeted method and building on existing networks, the Group received a strong inflow of opportunities during the year and believes that this trend will continue.

The New Business Department gave detailed consideration to a number of these; including propositions from within the insurance intermediary and wealth management sectors. The Board will continue to pursue opportunities in the best interests of the Group's shareholders.

The Group's investment strategy remains unchanged; to take minority positions in profitable businesses with strong management teams and good growth potential. The Directors consider that the Group remains unique in its investment sector and we continue to see a large number of investment opportunities with good management and business plans that fit with our tried and tested business strategy.

Brian Marsh OBE

30^th May 2012

Final Dividend

No dividends were paid for the year (2011: £292,861).  The directors recommend a final dividend of £292,861 (1p per share) in respect of the current year, payable on 30th July 2012 to shareholders on the register at the close of business on 6th July 2012.

Investments

As at 31st January 2012 the Group's equity interests were as follows:

Amberglobe Limited

(www.amberglobe.co.uk)

In March 2008 the Group assisted in establishing Amberglobe, a business sales platform that provides valuation and negotiation services for the sale of SME businesses in the sub £3m sector.

Date of investment: March 2008

Equity stake: 49.0%

31st January 2012 valuation: £98,000

Besso Insurance Group Limited

(www.besso.co.uk)

In February 1995 the Group assisted a specialist team departing from insurance broker Jardine Lloyd Thompson Group in establishing Besso Holdings Limited. The company specialises in insurance broking for the North American wholesale market and changed its name to Besso Insurance Group Limited in June 2011.

Date of investment: February 1995

Equity stake: 34.00%

31st January 2012 valuation: £4,181,000

HQB Partners Limited

In January 2005 the Group made an investment in HQB Partners, a company which provides strategic transaction advice, proxy solicitation services, voting analysis and investor relations services. HQB entered into administration in January 2012.

Date of investment: January 2005

Equity stake: 27.72%

31st January 2012 valuation: £0

Hyperion Insurance Group Limited

(www.hyperiongrp.com)

The Group first invested in Hyperion in 1994. Hyperion owns, amongst other things, an insurance broker specialising in directors' and officers' ("D&O") and professional indemnity ("PI") insurance. A subsidiary of Hyperion became a registered Lloyd's insurance broker. In 1998 Hyperion set up an insurance managing general agency specialising in developing D&O and PI business in Europe.

Date of investment: November 1994

Equity: 19.4%, although this could dilute down to 18.3% with the Group retaining an economic interest of approx. 19.2% post-dilution. (NB: Following the partial disposal of shares the current equity holding is 16.19%, which could dilute down to 15.63%, although the Group would retain an economic interest of approx. 16.4%)

31st January 2012 valuation: £33,888,000

LEBC Holdings Limited

(www.lebc-group.com)

In April 2007 the Group invested in LEBC, an Independent Financial Advisory company providing services to individuals, corporates and partnerships, principally in employee benefits, investment and life product areas.

Date of investment: April 2007

Equity stake: 21.95%

31st January 2012 valuation: £3,075,000

Paterson Squared, LLC

(www.paterson2.com)

Paterson Squared was founded by a group of professionals from the actuarial, capital markets and reinsurance advisory sectors in conjunction with the Group. The company uses sophisticated modelling techniques to assess risk, with a view to providing counter-party risk transaction advice.

Date of investment: April 2004

Equity stake: 22.5%

31st January 2012 valuation: £0

Portfolio Design Group International Limited

(www.surrendalink.co.uk)

In March 1994 the Group invested in the Portfolio Design Group, a company which sells with-profits life endowment policies to large financial institutions. In 2002 the company diversified into investment management.

Date of investment: March 1994

Equity stake: 20.0%

31st January 2012 valuation: £1,748,000

Randall & Quilter Investment Holdings plc

(www.rqih.com)

Randall & Quilter Investment Holdings is an AIM listed run-off management service provider and acquirer of solvent insurance companies in run-off. The Group invested in Randall & Quilter in January 2010, the result of a share exchange with the Group's shareholding in JMD Specialist Insurance Services Group Limited, which Randall & Quilter have now wholly acquired.

Date of investment: January 2010

Equity stake: 1.35%

31st January 2012 valuation: £658,000

Summa Insurance Brokerage, S. L.

(www.grupo-summa.com)

In January 2005 the Group provided finance to a Spanish management team with the objective of acquiring and consolidating regional insurance brokers in Spain.

Date of investment: January 2005

Equity stake: 48.63%

31st January 2012 valuation: £4,907,000

US Risk (UK) Limited

(www.oxfordinsurancebrokers.co.uk)

In July 2010 the Group completed its investment in US Risk (UK), the parent company of Oxford Insurance Brokers Limited, a London-based Lloyd's insurance and reinsurance broker.

Date of investment: July 2010

Equity stake: 30%

31st January 2012 valuation: £2,069,000

These investments have been valued in accordance with the accounting policies on Investments set out in note 1 of the Consolidated Financial Statements.

Consolidated Financial Statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST JANUARY 2012

	Notes	2012		2011
		£'000	£'000	£'000	£'000
GAINS ON INVESTMENTS	1
Realised (losses) / gains on disposal of investments	1,12	(20)		350
Impairment of investments and loans	14	(339)		(446)
Unrealised gains on investment revaluation	12	4,592		2,971
			4,233		2,875
INCOME
Dividends	1	661		599
Income from loans and receivables	1	859		599
Fees receivable	1	594		820
			2,114		2,018
OPERATING INCOME	2		6,347		4,893
Operating expenses	2		(1,817)		(1,837)
OPERATING PROFIT			4,530		3,056
Financial income	2,4	-		2
Financial expenses	2,3	(104)		(28)
Carried interest provision	2,16	32		(7)
Exchange movements	2,8	(51)		(10)
			(123)		(43)
PROFIT ON ORDINARY ACTIVITIES BEFORE EXCEPTIONAL ITEMS			4,407		3,013
Exceptional item	5,6		(30)		-
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION	8		4,377		3,013
Taxation	9		(732)		(415)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION ATTRIBUTABLE TO EQUITY HOLDERS	20		£3,645		£2,598
Earnings per share - basic and diluted (pence)	10		12.4p		8.9p

The result for the year is wholly attributable to continuing activities.

CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION

31ST JANUARY 2012

		Group			Company
	Notes	2012	2011		2012	2011
		£'000	£'000		£'000	£'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment	11	14	33		-	-
Investments	12	50,624	47,143		39,965	36,320
Loans and receivables	13	5,983	4,403		10,155	10,155
		56,621	51,579		50,120	46,475
CURRENT ASSETS
Trade and other receivables	14	2,093	1,672		-	-
Cash and cash equivalents		666	515		1	1
TOTAL CURRENT ASSETS		2,759	2,187		1	1
TOTAL ASSETS		59,380	53,766		50,121	46,476
LIABILITIES
NON-CURRENT LIABILITIES
Loans and other payables	15	(1,250)	-		-	-
Carried interest provision	16	(299)	(331)		-	-
Deferred tax liabilities	17	(7,415)	(6,683)		-	-
TOTAL NON-CURRENT LIABILITIES		(8,964)	(7,014)		-	-
CURRENT LIABILITIES
Trade and other payables	18	(295)	(276)		-	-
TOTAL CURRENT LIABILITIES		(295)	(276)		-	-
TOTAL LIABILITIES		(9,259)	(7,290)		-	-
NET ASSETS		£50,121	£46,476		£50,121	£46,476
CAPITAL AND RESERVES - EQUITY
Called up share capital	19	2,929	2,929		2,929	2,929
Share premium account	20	9,370	9,370		9,370	9,370
Fair value reserve	20	24,656	20,883		37,821	34,176
Reverse acquisition reserve	20	393	393		-	-
Retained earnings	20	12,773	12,901		1	1
SHAREHOLDERS' FUNDS - EQUITY	20	£50,121	£46,476		£50,121	£46,476

The Financial Statements were approved by the Board of Directors and authorised for issue on 29th May 2012

and signed on its behalf by:

B.P. Marsh & J.S. Newman

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST JANUARY 2012

	Notes		2012		2011
			£'000		£'000
Cash from operating activities
Income from loans to investees			859		599
Dividends			661		599
Fees received from investment activity			594		820
Operating expenses			(1,817)		(1,837)
Exceptional item - termination payment			(30)		-
(Increase) / decrease in receivables			(95)		4
Increase / (decrease) in payables			20		(93)
Depreciation	11		23		22
Net cash from operating activities			215		114
Net cash used by investing activities
Purchase of property, plant and equipment	11		(4)		(6)
Purchase of investments	12		(735)		(1,437)
Proceeds from investments			51		18
Net cash used by investing activities			(688)		(1,425)
Net cash from / (used by) financing activities
Advances of borrowings	15		1,250		-
Net payments of loans to investee companies			(515)		(827)
Financial income	4		-		2
Financial expenses	3		(104)		(28)
Dividends paid	7		-		(293)
Net cash from / (used by) financing activities			631		(1,146)
Change in cash and cash equivalents			158		(2,457)
Cash and cash equivalents at beginning of the period			515		2,972
Exchange movement			(7)*		-*
Cash and cash equivalents at end of period			£  666		£  515

*The exchange movement as noted in the Consolidated Statement of Comprehensive Income is a loss of £51k (2011: loss of £10k).  The exchange movement in the Consolidated Statement of Cash Flows excludes an exchange loss of £44k (2011: loss of £10k) relating to the revaluation of a loan denominated in Euros as this is a non-cash movement.

COMPANY STATEMENT OF CASH FLOWS

No Company Statement of Cash Flows has been prepared as there has been no cash flow movement in the Company during the current period. The only cash flow movement in the previous period related to dividends received from a subsidiary company, which were then paid to the Company's members. Accordingly the Company's "cash and cash equivalents" balance as at 31st January 2012 is £1k (2011: £1k).

CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST JANUARY 2012

	Group		Company
	2012	2011	2012	2011
	£'000	£'000	£'000	£'000
Opening total equity	46,476	44,171	46,476	44,171
Total recognised income and expense for period	3,645	2,598	3,645	2,598
Dividends paid	-	(293)	-	(293)
TOTAL EQUITY	£50,121	£46,476	£50,121	£46,476

Refer to Note 20 for detailed analysis of the changes in the components of equity.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31ST JANUARY 2012

1.       ACCOUNTING POLICIES

Basis of preparation of financial statements

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use by the European Union ("IFRS"), and in accordance with the Companies Act 2006.

The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets and financial liabilities through profit and loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates particularly in relation to investment valuation.  It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

New standards effective during the year

None of the new standards, interpretations or amendments, which are effective for the first time in these consolidated financial statements, has had a material impact on these consolidated financial statements.

Basis of consolidation

The Group financial statements consolidate the results and net assets of the Company and all of its subsidiary undertakings. 

Business combinations

The results of subsidiary undertakings are included in the consolidated financial statements from the date that control commences until the date that control ceases.  Control exists where the Group has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.  Accounting policies of the subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. 

All business combinations are accounted for by using the acquisition accounting method. This involves recognising identifiable assets and liabilities of the acquired business at fair value. Goodwill represents the excess of the fair value of the purchase consideration for the interests in subsidiary undertakings over the fair value to the Group of the net assets and any contingent liabilities acquired.  The one exception to the use of the acquisition accounting method was in 2006 when B.P. Marsh & Partners Plc became the legal parent company of B.P. Marsh & Company Limited in a share for share exchange transaction.  This was accounted for as a reverse acquisition, such that no goodwill arose, and a merger reserve was created reflecting the difference between the book value of the shares issued by B.P. Marsh & Partners Plc as consideration for the acquisition of the share capital of B.P. Marsh & Company Limited.  This compliance with IFRS 3 also represented a departure from the Companies Act.

Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

Associates are those entities in which the Group has significant influence, but not control, over the financial and operatingpolicies. Investments that are held as part of the Group's investment portfolio are carried in the Consolidated Statement of Financial Position at fair value even though the Group may have significant influence over those companies.  This treatment is permitted by IAS 28 Investment in Associates ("IAS 28"), which requires investments held by venture capital organisations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IAS 39, with changes in fair value recognised in the profit or loss in the period of the change. The Group has no interests in associates through which it carries on its business.

Business combinations (continued)

No Statement of Comprehensive Income is prepared for the Company, as permitted by Section 408 of the Companies Act 2006.  The Company made a profit for the year of £3,644,959 (2011: profit of £2,598,106, prior to a dividend distribution of £292,861).

Investments

All investments are designated as "fair value through profit or loss" assets and are initially recognised at the fair value of the consideration.  They are measured at subsequent reporting dates at fair value.

The Board conducts the valuations of investments.  In valuing investments, the Board applies guidelines issued by the International Private Equity and Venture Capital Valuation ("IPEVCV") Committee.  The following valuation methodologies have been used in reaching the fair value of investments, some of which are in early stage companies:

a)   at cost, unless there has been a significant round of new equity finance in which case the investment is valued at the price paid by an independent third party. Where subsequent events or changes to circumstances indicate that an impairment may have occurred, the carrying value is reduced to reflect the estimated extent of impairment;

b)   by reference to underlying funds under management;

c)   by applying appropriate multiples to the earnings and revenues of the investee company; or

d)   by reference to expected future cash flow from the investment where a realisation or flotation is imminent.

Both realised and unrealised gains and losses arising from changes in fair value are taken to the Consolidated Statement of Comprehensive Income for the year.  In the Consolidated Statement of Financial Position the unrealised gains and losses arising from changes in fair value are shown within a "fair value reserve" separate from retained earnings.  Transaction costs on acquisition or disposal of investments are expensed in the Consolidated Statement of Comprehensive Income.

Income from investments

Income from investments comprises:

a)    gross interest from loans, which is taken to the Consolidated Statement of Comprehensive Income on an accruals basis;

b)    dividends from equity investments are recognised in the Consolidated Statement of Comprehensive Income when the shareholders rights to receive payment have been established; and

c)    advisory fees from management services provided to investee companies, which are recognised on an accruals basis in accordance with the substance of the relevant investment advisory agreement.

Carried interest provision

This represents the amount payable to a director in the event of a particular investment being sold and is calculated on the fair value of that investment at the end of each reporting period.

Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation.  Depreciation is provided at rates calculated to write off the property, plant and equipment cost less their estimated residual value, over their expected useful lives on the following bases:

        Furniture & equipment - 5 years

        Leasehold fixtures and fittings - over the life of the lease

Foreign currencies

Monetary assets and liabilities denominated in foreign currencies at the reporting period are translated at the exchange rate ruling at the reporting period.

Transactions in foreign currencies are translated into sterling at the foreign exchange rate ruling at the date of the transaction.

Exchange gains and losses are recognised in the Consolidated Statement of Comprehensive Income.

Taxation

The tax expense represents the sum of the tax currently payable and any deferred tax.  The tax currently payable is based on the estimated taxable profit for the year.  Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Group's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the date of the Consolidated Statement of Financial Position.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and of liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and it is accounted for using the liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each date of the Consolidated Statement of Financial Position and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.  Deferred tax is charged or credited to the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.

Pension costs

The Group operates a defined contribution scheme for some of its employees.  The contributions payable to the scheme during the period are charged to the Consolidated Statement of Comprehensive Income.

Operating leases

Rentals under operating leases are charged on a straight-line basis over the lease term.

Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight- line basis over the period until the date the rent is expected to be adjusted to the prevailing market rate.

Financial assets and liabilities

Financial instruments are recognised in the Consolidated Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument.  De-recognition occurs when rights to cash flows from a financial asset expire, or when a liability is extinguished.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They are included in current assets, except for maturities greater than 12 months after the reporting period which are classified as non-current assets. 

Loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowings. After initial recognition, these are subsequently measured at amortised cost using the effective interest method, which is the rate that exactly discounts the estimated future cash flows through the expected life of the liabilities. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

Trade and other receivables

Trade and other receivables in the Consolidated Statement of Financial Position are initially measured at original invoice amount and subsequently measured after deducting any provision for impairment.

Cash and cash equivalents

Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents comprise cash and short-term deposits as defined above and other short-term highly liquid investments that are readily convertible into cash and are subject to insignificant risk of changes in value, net of bank overdrafts.

Trade and other payables

Trade and other payables are stated based on the amounts which are considered to be payable in respect of goods or services received up to the date of the Consolidated Statement of Financial Position.

International Financial Reporting Standards in issue but not yet effective

At the date of authorisation of these consolidated financial statements, the International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC") have issued the following standards, which are effective for annual accounting periods beginning on or after the stated effective date. 

Effective for periods beginning on or after

IAS 12 - Limited Scope Amendment (Recovery of Underlying Assets)	1st January 2012
IFRS 7 - Financial Instruments: Disclosures (Amendment)	1st July 2011
IAS 1 - Presentation of Items of Other Comprehensive Income (Amendment)	1st January 2012
IFRS 10 - Consolidated Financial Statements	1st January 2013
IFRS 13 - Fair Value Measurement	1st January 2013
IFRS 9 - Financial Instruments	1st January 2015

The Group is currently assessing the impact of IFRS 13 and IFRS 9.  All other standards and interpretations are not expected to have a material impact on the consolidated financial statements.

2.       SEGMENTAL REPORTING

The Group operates in one business segment, provision of consultancy services to as well as making and trading investments in financial services businesses.

The Group identifies its reportable operating segments based on the geographical location in which each of its investments is incorporated and primarily operates.  For management purposes, the Group is organised and reports its performance by two geographic segments: UK & Channel Islands and Non-UK & Channel Islands.

If material to the Group overall (where the segment revenues, reported profit or loss or combined assets exceed the quantitative thresholds prescribed by IFRS 8 Operating Segments ("IFRS 8")), the segment information is reported separately. 

The Group allocates revenues, expenses, assets and liabilities to the operating segment where directly attributable to that segment.  All indirect items are apportioned based on the percentage proportion of revenue that the operating segment contributes to the total Group revenue (excluding any unrealised gains and losses on the Group's non-current investments).

Each reportable segment derives its revenues from three main sources.  These are described in further detail in Note 1 under 'Income from investments'.

All reportable segments derive their revenues entirely from external clients and there are no inter-segment sales.

	Geographic segment 1: UK & Channel Islands		Geographic segment 2: Non-UK & Channel Islands		Group
	2012	2011	2012	2011	2012	2011
	£'000	£'000	£'000	£'000	£'000	£'000
Operating income / (loss)	6,044	5,524	303	(631)	6,347	4,893
Operating expenses	(1,307)	(1,353)	(510)	(484)	(1,817)	(1,837)
Segment operating profit / (loss)	4,737	4,171	(207)	(1,115)	4,530	3,056
Financial income	-	2	-	-	-	2
Financial expenses	(75)	(21)	(29)	(7)	(104)	(28)
Carried interest provision	32	(7)	-	-	32	(7)
Exchange movements	(8)	-	(43)	(10)	(51)	(10)
Exceptional items	(30)	-	-	-	(30)	-
Profit / (loss) before tax	4,656	4,145	(279)	(1,132)	4,377	(3,013)
Income tax	(805)	(732)	73	317	(732)	(415)
Profit / (loss) for the year	£   3,851	£   3,413	£   (206)	£   (815)	£   3,645	£   2,598

2.       SEGMENTAL REPORTING (continued)

	Geographic segment 1: UK & Channel Islands		Geographic segment 2: Non-UK & Channel Islands		Group
	2012	2011	2012	2011	2012	2011
	£'000	£'000	£'000	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	13	29	1	4	14	33
Investments	45,717	41,207	4,907	5,936	50,624	47,143
Loans and receivables	4,833	2,952	1,150	1,451	5,983	4,403
	50,563	44,188	6,058	7,391	56,621	51,579
Current assets
Trade and other receivables	1,404	1,361	689	311	2,093	1,672
Cash and cash equivalents	666	515	-	-	666	515
Deferred tax assets	-	-	50	326	50	326
	2,070	1,876	739	637	2,809	2,513
Total assets	52,633	46,064	6,797	8,028	59,430	54,092
Non-current liabilities
Loans and other payables	(1,250)	-	-	-	(1,250)	-
Carried interest provision	(299)	(331)	-	-	(299)	(331)
Deferred tax liabilities	(7,465)	(7,009)	-	-	(7,465)	(7,009)
	(9,014)	(7,340)	-	-	(9,014)	(7,340)
Current liabilities
Trade and other payables	(295)	(276)	-	-	(295)	(276)
Total liabilities	(9,309)	(7,616)	-	-	(9,309)	(7,616)
Net assets	£   43,324	£38,448	£   6,797	£8,028	£  50,121	£46,476
Additions to property, plant and equipment	4	6	-	-	4	6
Depreciation of property, plant and equipment	21	19	2	3	23	22
Impairment of investments and loans	239	446	100	-	339	446

3.       FINANCIAL EXPENSES	2012	2011
	£'000	£'000
Other interest	£       104	£      28

4.       FINANCIAL INCOME	2012	2011
	£'000	£'000
Bank interest	-	2
Other interest	-	-
	£    -	£    2

5.       STAFF COSTS

The average number of employees, including all directors (executive and non-executive), employed by the Group during the year was 16 (2011: 16). All remuneration was paid by B. P. Marsh & Company Limited.

The related staff costs were:	2012	2011
	£'000	£'000
Wages and salaries	1,055	1,021
Social security costs	125	130
Pension costs	37	38
	£1,217	£1,189

In addition, staff were paid £Nil (2011: £60,000) out of the B. P. Marsh Employee Benefit Trust in the year (see Note 6 below). This cost was not reflected in the Consolidated Statement of Comprehensive Income in the prior year as it was funded through prior year contributions.

Included within the wages and salaries total above was a one-off compensation payment of £30,000 made to a director (see Note 6 below) who left the Group during the year.  This has been included in the Consolidated Statement of Comprehensive Income as an exceptional item.

6.       DIRECTORS' EMOLUMENTS
	2012	2011
The aggregate emoluments of the directors were:	£'000	£'000
Management services - remuneration	794	758
Fees	36	16
Pension contributions - remuneration	24	21
	£854	£    795

In addition to the above, Mr S. S. Clarke has an entitlement to a gain based on a carried interest, as outlined in Note 16.

Included within the management services total above was a one-off compensation payment of £30,000 made to a director who left the Group during the year.  This has been included in the Consolidated Statement of Comprehensive Income as an exceptional item.

	2012	2011
	£'000	£'000
Highest paid director
Emoluments	191	95
Long term incentive payments	-	200
Pension contribution	-	9
	£    191	£    304

The highest paid director disclosure for the prior year includes a payment of £60,000 out of the B. P. Marsh Employee Benefit Trust.  This cost was not reflected in the Consolidated Statement of Comprehensive Income in the prior year as it was funded through prior year contributions.

The Company contributes into its defined contribution pension scheme on behalf of certain employees and directors.  Contributions payable are charged to the Consolidated Statement of Comprehensive Income in the period to which they relate.

During the period, 4 directors (2011: 2) accrued benefits under the defined contribution pension scheme.

7.       DIVIDENDS	2012	2011
	£'000	£'000
Ordinary dividends
Final dividend paid:
1 pence each on 29,286,143 Ordinary shares	-	293
	£               -	£           293

8.       PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION	2012	2011
	£'000	£'000
The profit for the period is arrived at after charging:
Depreciation of owned tangible fixed assets	23	22
Auditors remuneration :-
Audit fees for the Company	21	23
Other services:
-Audit of subsidiaries' accounts	7	11
-Taxation	10	8
-Other advisory	30	11
Exchange loss	51	10
Operating lease rentals of land and buildings	112	115

9.       TAXATION	2012	2011
	£'000	£'000
The charge for tax comprises:
UK corporation tax charge for the year	-	-
Deferred tax charge for the year (Note 17)	732	415
	£      732	£      415

Factors affecting the charge for the year

Profit on ordinary activities before tax	4,377	3,013
Tax at 26.32% on profit on ordinary activities (2011: 28%)	1,152	844
Effects of:
Expenses not deductible for tax purposes	20	13
Non taxable net unrealised gains	(1,217)	(830)
Capital losses on disposal of investments	5	-
Other effects:
Management expenses utilised	214	141
Non-taxable income (dividends received)	(174)	(168)
Corporate tax charge for the year	£         -	£         -

There are no factors which may affect future tax charges except as set out in Note 17.

10.     EARNINGS PER SHARE FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS

	2012 £'000	2011 £'000
Earnings
Earnings for the purpose of basic and diluted earnings per share being net profit attributable to equity shareholders	3,645	2,598
Earnings per share - basic and diluted	12.4p	8.9p
Number of shares	Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per share	29,286,143	29,286,143
Number of dilutive shares under option	Nil	Nil
Weighted average number of ordinary shares for the purposes of dilutive earnings per share	29,286,143	29,286,143

11.     PROPERTY, PLANT AND EQUIPMENT	Furniture & Equipment £'000	Leasehold Fixtures & Fittings £'000	Total £'000
Group
Cost
At 1st February 2010	57	51	108
Additions	6	-	6
Disposals	-	-	-
At 31st January 2011	63	51	114
At 1st February 2011	63	51	114
Additions	4	-	4
Disposals	-	-	-
At 31st January 2012	67	51	118
Depreciation
At 1st February 2010	38	21	59
Eliminated on disposal	-	-	-
Charge for the year	6	16	22
At 31st January 2011	44	37	81
At 1st February 2011	44	37	81
Eliminated on disposal	-	-	-
Charge for the year	9	14	23
At 31st January 2012	53	51	104
Net book value
At 31st January 2012	£       14	£         -	£       14
At 31st January 2011	£       19	£       14	£       33
At 31st January 2010	£       19	£       30	£       49

12.     NON-CURRENT INVESTMENTS
Group		Shares in investee companies
		Total
		£'000
At valuation
At 1st February 2010		42,745
Additions		1,437
Disposals		(10)
Provisions		-
Unrealised gains in this period		2,971
At 31st January 2011		£47,143
At 1st February 2011		47,143
Additions		735
Disposals		(1,846)
Provisions		-
Unrealised gains in this period		4,592
At 31st January 2012		£50,624
At cost
At 1st February 2010		17,948
Additions		1,437
Disposals		(10)
Provisions		-
At 31st January 2011		£19,375
At 1st February 2011		19,375
Additions		735
Disposals		(1,846)
Provisions		-
At 31st January 2012		£18,264

The principal addition in the year relates to the acquisition on 31st March 2011 of a further 11.29% shareholding in Besso Insurance Group Limited (formerly known as Besso Holdings Limited) for £735,000, with a further consideration of £300,000 payable under certain events (Note 23).

The principal disposal in the year relates to the redemption on 31st March 2011 of the Group's £1,775,000 preferred shares (at par) in Besso Insurance Group Limited.  The subsequent subscription for £2,540,000 of 14% loan stock on the same date from Besso Insurance Group Limited is included within loans and receivables under non-current assets.

On 13th January 2012 HQB Partners Limited ("HQB"), an associated company, was placed into administration.  As at 31st January 2012 the Group had invested a total of £175,000 in HQB (£35,000 equity at cost which was held at a nil fair value and £140,000 loan financing which was repaid in full during the year).

12.     NON-CURRENT INVESTMENTS (continued)

Group (continued)

The unquoted investee companies, which are registered in England except Summa Insurance Brokerage S. L. (Spain), Preferred Asset Management Limited (Jersey), Close Horizons Limited (Isle of Man) and Paterson Squared, LLC (USA), are as follows:

		% holding		Date		Aggregate		Post tax
		of share		information		capital and		profit/(loss)
Name of company		capital		available to		reserves		for the year		Principal activity
						£		£
Amberglobe Limited		49.00		30.04.11		(738,940)		(88,008)		Business sales platform
Besso Insurance Group Limited		34.02		31.12.11		7,037,589		(1,776,321)		Investment holding company
HQB Partners Limited		27.72		31.12.10		(42,855)		(164,777)		Investor relations consultants
Hyperion Insurance    Group Limited		19.36		30.09.11		47,176,000		7,539,000		Insurance holding company
	LEBC Holdings Limited		21.94		30.09.11		220,503		(403,504)		Independent financial advisor company
Portfolio Design Group  International Limited			20.00		31.12.11		6,881,966		(460,272)		Fund managers of traded endowment policies
Morex Commercial Limited			20.00		31.12.11		402,668		(89,640)		Trading in secondary life policies
Preferred Asset    Management Limited			20.00		30.09.11		228,907		98,790		Fund management company
Close Horizons Limited			20.00		31.12.11		1,288,961		97,589		Investment holding company
	Paterson Squared, LLC		22.50		31.12.10		364,411		279,575		Independent reinsurance transaction consultants
	Summa Insurance Brokerage, S. L.		48.625		31.12.10		9,105,823		409,057		Consolidator of regional insurance brokers
	U.S. Risk (UK) Limited		30.00		31.12.11		2,697,273		(110,157)		Holding company for insurance intermediaries

In addition, as a result of the disposal of the Group's interest in JMD Specialist Insurance Services Group Limited in the year to 31st January 2010, the Group acquired an investment of £698,750 in respect of 650,000 ordinary shares in Randall & Quilter Investment Holdings Plc ("R&Q"). In June 2010 the Group acquired 40,000 additional ordinary shares in R&Q and in September 2010, as a result of a 91 for 94 share capital consolidation, the number of ordinary shares held by the Group reduced by 22,022 to 667,978.  During the year R&Q made two 'return of value' distributions to shareholders through the issue and subsequent cancellation of new shares.  The Group elected to receive these distributions (£29,725 in June 2011 and £21,375 in October 2011) as 'capital' receipts rather than the dividend (income) alternative.  The Group has treated these distributions as disposal proceeds and reduced the cost base of this investment accordingly, resulting in a £19,839 realised loss on disposal of investment which is reflected in the Consolidated Statement of Comprehensive Income for the year.  As at 31st January 2012 the Group held 1.35% of the share capital of R&Q.  R&Q is an AIM listed company.

The aggregate capital and reserves and profit / (loss) for the year shown above are extracted from the relevant local GAAP accounts of the investee companies except for those of Hyperion Insurance Group Limited which are prepared under IFRS.

Under UK GAAP the HQB Partners Limited accounts have included the Group's 27.72% interest as a long-term creditor. As this is in reality an equity investment, the aggregate capital and reserves shown have therefore been adjusted to include this as equity and the profit has been adjusted by the dividend paid out.

	Shares in
Company	group
	undertakings
	£'000
At valuation
At 1st February 2010	34,015
Additions	-
Unrealised gains in this period	2,305
At 31st January 2011	£     36,320
At 1st February 2011	36,320
Additions	-
Unrealised gains in this period	3,645
At 31st January 2012	£     39,965
At cost
At 1st February 2010	2,143
Additions	-
At 31st January 2011	£       2,143
At 1st February 2011	2,143
Additions	-
At 31st January 2012	£       2,143

Shares in group undertakings

All group undertakings are registered in England and Wales.  The details and results of group undertakings, which are extracted from the UK GAAP accounts of these companies, are as follows:

		Aggregate		Profit/(loss)
	%	capital and		for the
	Holding	reserves at		year to
	of share	31st January		31st January
Name of company	Capital	2012		2012	Principal activity
		£		£
B.P. Marsh &    Company Limited	100	47,380,300	(363,509)		Consulting services and investment holding company
Marsh Insurance    Holdings Limited	100	10,751,463	116,462		Investment holding company
B.P. Marsh & Co. Trustee    Company Limited	100	1,000	-		Dormant
Marsh Development    Capital Limited	100	1	-		Dormant

13.        LOANS AND RECEIVABLES - NON-CURRENT	Group			Company
	2012	2011		2012	2011
	£'000	£'000		£'000	£'000
Loans to investee companies (Note 25)	5,983	4,403		-	-
Amounts due from subsidiary undertakings	-	-		10,155	10,155
	£    5,983	£    4,403		£    10,155	£    10,155

See Note 25 for terms of the loans.

14.        TRADE AND OTHER RECEIVABLES - CURRENT	Group			Company
	2012	2011		2012	2011
	£'000	£'000		£'000	£'000
Trade receivables	388	221		-	-
Less provision for impairment of receivables	(123)	(68)		-	-
	265	153		-	-
Loans to investee companies (Note 25)	1,415	1,089		-	-
Other receivables	7	6		-	-
Prepayments and accrued income	406	424		-	-
	£    2,093	£    1,672		£           -	£           -

Included within trade receivables is £244,952 (2011: £153,057) owed by the Group's participating interests.

Trade receivables are provided for based on estimated irrecoverable amounts from the fees and interest charged to investee companies, determined by the Group's management based on prior experience and their assessment of the current economic environment.

Movement in the allowance for doubtful debts:

	Group			Company
	2012	2011		2012	2011
	£'000	£'000		£'000	£'000
Balance at 1st February	68	20		-	-
Increase in allowance recognised in the Statement of Comprehensive Income	55	48		-	-
Balance at 31st January	£    123	£    68		£           -	£           -

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. 

The Group's net trade receivable balance includes debtors with a carrying amount of £263,552 (2011: £153,580) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable.  The Group does not hold any collateral over these balances.

Ageing of past due but not impaired:

	Group			Company
	2012	2011		2012	2011
	£'000	£'000		£'000	£'000
0 - 30 days	63	52		-	-
31 - 60 days	65	68		-	-
61 - 90 days	12	17		-	-
More than 90 days	123	16		-	-
	£    263	£    153		£           -	£           -

£339,000 (2011: £446,000) has been provided against loans to investee companies in the year.  The total provision against loans relating to Fixed Asset Investments therefore stands at £785,000 (2011: £446,000).

See Note 25 for terms of the loans and Note 24 for further credit risk information.

15.     LOANS AND OTHER PAYABLES

During the year, the Group utilised £1,250,000 of a loan facility totalling £4,325,000, which certain directors agreed to provide to the Group during the year to 31st January 2011 (Note 25).  This draw down was used to finance the Besso Insurance Group Limited related transaction as outlined in Note 12 above.  The loan facility is secured on the assets of the Company, accrues interest at a rate of UK Base Rate + 4% (subject to a minimum of 6.5%), and is repayable in full by 9th June 2013.  As at 31st January 2012 £1,250,000 of this facility remained drawn down (2011: £Nil).

Interest on this loan facility of £103,524 (2011: £28,083) was charged to the Consolidated Statement of Comprehensive Income for the current year (Note 3).  

16.      CARRIED INTEREST PROVISION	Group			Company
	2012	2011		2012	2011
	£'000	£'000		£'000	£'000
Carried interest provision	299	331		-	-
	£    299	£    331		£           -	£           -

This carried interest provision represents S. S. Clarke's entitlement to a maximum of 20% of any gain, after deducting expenses and following the repayment of all loans, redemption of all preference shares, loan stock and equivalent finance provided by the Company, on the sale of certain agreed investments of the Company and its subsidiaries.

No amounts were paid under this contract during the year (2011: £Nil).

17.    DEFERRED TAX LIABILITIES - NON- CURRENT			Group			Company
			£'000			£'000
At 1st February 2010			6,268			-
Charged to Statement of Comprehensive Income			415			-
At 31st January 2011			£    6,683			£           -
At 1st February 2011			6,683			-
Charged to Statement of Comprehensive Income			732			-
At 31st January 2012			£    7,415			£           -

The directors estimate that, if the Group were to dispose of all its investments at the amount stated in the  Consolidated Statement of Financial Position, £7,415,000 (2011: £6,683,000) of tax on capital gains would become payable by the Group at a corporation tax rate of 26% (2011: 27%). 

The Government recently announced a reduction in the corporation tax rate from 26% to 24% with effect from 6 April 2012. As this was not substantively enacted at the year end, this rate of 24% has not been used in calculating the deferred tax liabilities arising from the unrealised gains on the revaluation of the Group's investments. This rate is expected to be used in next year's consolidated financial statements once substantively enacted.

If the lower rate of 24% had been used in these consolidated financial statements, the deferred tax liabilities would have been reduced from the current £7,415,000 to £6,845,000 resulting in an increase in net assets of £570,000.

18.    TRADE AND OTHER PAYABLES - CURRENT	Group			Company
	2012	2011		2012	2011
	£'000	£'000		£'000	£'000
Trade payables	37	37		-	-
Other taxation & social security costs	45	17		-	-
Accruals and deferred income	213	222		-	-
	£    295	£    276		£           -	£           -

19.     CALLED UP SHARE CAPITAL	2012	2011
	£'000	£'000
Allotted, called up and fully paid
29,286,143 Ordinary shares of 10p each (2011: 29,286,143)	2,929	2,929
	£  2,929	£  2,929

20.     RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

Group				Share				Reverse
		Share		premium	Fair value			acquisition	Retained
		capital		account	reserve			reserve	earnings		Total
	£'000		£'000			£'000	£'000			£'000		£'000
At 1st February 2010	2,929		9,370			18,057	393			13,422		44,171
Profit for the year	-		-			2,826	-			(228)		2,598
Dividends Paid	-		-			-	-			(293)		(293)
At 31st January 2011	£2,929		£9,370			£20,883	£   393			£12,901		£46,476

At 1st February 2011	2,929	9,370	20,883	393	12,901	46,476
Profit for the year	-	-	3,773	-	(128)	3,645
At 31st January 2012	£2,929	£9,370	£24,656	£   393	£   12,773	£50,121

20.     RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (continued)

Company		Share
	Share	premium	Fair value	Retained
	capital	account	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000
At 1st February 2010	2,929	9,370	31,871	1	44,171
Profit for the year	-	-	2,305	293	2,598
Dividends paid	-	-	-	(293)	(293)
At 31st January 2011	£2,929	£9,370	£34,176	£   1	£46,476

At 1st February 2011	2,929	9,370	34,176	1	46,476
Profit for the year	-	-	3,645	-	3,645
At 31st January 2012	£2,929	£9,370	£37,821	£   1	£50,121

21.     OPERATING LEASE COMMITMENTS

The Group and Company was committed to making the following future aggregate minimum lease payments under non‑cancellable operating leases:

	2012	2011
	Land and	Land and
	buildings	buildings
	£'000	£'000
Earlier than one year	£     84	£   119
Between two and five years	£   329	£        -

On 26th December 2011 the Group entered into a new five year lease on its current office premises.

22.      LOAN AND EQUITY COMMITMENTS

On 10th March 2008 the Group entered into an agreement to provide a loan facility of £630,000 to Amberglobe Limited, an investee company.  An additional loan facility of £65,000 was agreed on 30th November 2009 increasing the total facility to £695,000.  As at 31st January 2012 £685,000 of this facility had been drawn down.

On 1st April 2009 the Group entered into an agreement to provide a loan facility of £400,000 to LEBC Group Limited ("LEBC"), an investee company.  On 27th January 2012 the Group received notice to cancel this loan facility.  As at 31st January 2012 no amounts had been drawn down and following full settlement of the Commitment Fee due for the period to the end of the agreement (1st April 2012) on 3rd February 2012, the agreement was terminated.

On 22nd July 2010 the Group entered into an agreement to provide a loan facility of £1,950,000 to US Risk (UK) Limited, an investee company.  As at 31st January 2012 none of this facility had been drawn down.

23.      CONTINGENT LIABILITIES

On 31st March 2011 the Group entered into a Sale and Purchase Agreement with Union Hamilton Reinsurance Limited ("UHRL") to acquire a further 11.29% shareholding in Besso Insurance Group Limited ("Besso") for £735,000 (as outlined in Note 12).  Under the terms of the agreement, if the Group decided to sell all or a proportion of the shares acquired on 31st March 2011 to another party, or where a trigger event was to occur (being the sale of Besso to a specified third party), within an 18 month period from 31st March 2011, the Group would become liable to pay UHRL the cash element of any additional consideration receivable for the shares in excess of the amount originally paid by the Group, capped at £300,000.  This liability will expire on 30th September 2012.

The Group has entered into long-term incentive arrangements with certain employees and directors.  Provided they remain in employment with the Group as at specified dates in the future, the Group has agreed to pay bonuses totalling £325,000 together with the Employers' National Insurance due thereon.  £250,000 and £75,000 are due to be paid on 1st October 2012 and 1st October 2013 respectively.  No amount has been included in these financial statements as the performance conditions relating to these incentives had not been met at the year end.

24.     FINANCIAL INSTRUMENTS

The Group's financial instruments comprise loans to participating interests, cash and liquid resources and various other items, such as trade debtors, trade creditors, other debtors and creditors and loans.  These arise directly from the Group's operations.

The Group has not entered into any derivatives transactions.

It is, and has been throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken.

The main risks arising from the Group's financial instruments are price risk, credit risk, liquidity risk, interest rate cash flow risk and currency risk.  The Board reviews and agrees policies for managing each of these risks and they are summarised in the Group Report of the Directors under "Financial Risk Management".

Interest rate profile

The Group has cash balances of £666,000 (2011: £515,000), which are part of the financing arrangements of the Group.  The cash balances comprise bank current accounts and deposits placed at investment rates of interest, which ranged up to 0.1% p.a. in the period (2011: deposit rates of interest ranged between 0.1% p.a. and 0.3% p.a.).  During the period all cash balances were held in immediate access accounts (2011: maturity periods ranged between immediate access and 1 month).

Currency hedging

During the period, the Group did not engage in any form of currency hedging transaction (2011: None).

Financial liabilities

The Company had borrowings amounting to £1,250,000 as at 31st January 2012 (2011: None).  Please refer to Note 15 for further details.

Fair values

The Group has adopted the amendment to IFRS 7 for financial instruments which are measured at fair value at the reporting date. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

· Level 1: Quoted prices unadjusted in active markets for identical assets or liabilities;

· Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, observed either directly as prices or indirectly from prices; and

· Level 3: Inputs for the asset or liability that are not based on observable market data.

The following table presents the Group's assets and liabilities that are measured at fair value at 31st January 2012:

		Level 1	Level 2	Level 3	Total
		£'000	£'000	£'000	£'000
Assets
Investments designated as "fair value through profit or loss" assets		658	-	49,966	50,624
		£658	-	£49,966	£50,624

The Group's assets and liabilities that are measured at fair value at 31st January 2011 are presented in the following table:

		Level 1	Level 2	Level 3	Total
		£'000	£'000	£'000	£'000
Assets
Investments designated as "fair value through profit or loss" assets		610	-	46,533	47,143
		£610	-	£46,533	£47,143

25.     RELATED PARTY DISCLOSURES

The following loans owed by the associated companies of the Company and its subsidiaries were outstanding at the year end:

	2012	2011
	£	£
Amberglobe Ltd	685,000	670,000
Besso Holdings Ltd	2,940,000	400,000
HQB Partners Ltd	-	140,000
Hyperion Insurance Group Ltd	2,846,642	3,277,142
Paterson Squared, LLC	100,000	100,000
	€	€
Summa Insurance Brokerage S. L.	1,942,678	1,577,990

The loans are typically secured on the assets of the investee companies and an appropriate interest rate is charged based upon the risk profile of that company.

During the year, the Group utilised part of an agreed £4,325,000 loan facility with the directors, or other related parties (the "Lenders"), including Mr B. P. Marsh (£425,000 of a total £3,500,000 facility drawn down), Ms J. K. N. Dunbar (£500,000 drawn down in full), Mr P. J. Mortlock (£250,000 drawn down in full) and Mrs M. Newman (£75,000 drawn down in full) which is secured on the assets of the Company.

On 1st November 2010 the Group and the Lenders entered into a Deed of Variation to the original Loan Agreement dated 9th June 2010 whereby Brian Marsh Enterprises Limited became the new lender of the £3,500,000 proportion of the loan facility previously provided by Mr B. P. Marsh (as noted above).  Mr B. P. Marsh, the Chairman and majority shareholder of the Company is also the Chairman and majority shareholder of Brian Marsh Enterprises Limited.  Ms J. K. N. Dunbar (a director and shareholder of the Company) and Ms C. S. Kenyon (a director of the Company) are also directors and minority shareholders of Brian Marsh Enterprises Limited.

The loan accrues interest at a rate of UK Base Rate + 4%, subject to a minimum of 6.5%, and is repayable in full by 9th June 2013. Interest is payable on a quarterly basis. This rolling facility bears a charge of 1% p.a. on any undrawn amount. As at 31st January 2012 £1,250,000 of this facility had been drawn down (2011: None).

Income receivable, consisting of consultancy fees and interest on loans credited to the Consolidated Statement of Comprehensive Income in respect of the associated companies of the Company and its subsidiaries for the year were as follows:

	2012	2011
	£	£
Amberglobe Limited	46,668	58,963
Besso Insurance Group Limited	511,199	184,676
HQB Partners Limited	7,575	28,826
Hyperion Insurance Group Limited	366,618	490,591
LEBC Group Limited	98,910	80,177
Oakbridge Insurance Services, LLC	-	52,250
Paterson Squared, LLC	7,392	28,256
Portfolio Design Group International Limited	36,000	36,000
Summa Insurance Brokerage S. L.	119,545	391,510
U.S. Risk (UK) Limited and related entities	208,508	28,756

In addition, the Group made management charges of £35,000 (2011: £39,000) to Marsh Christian Trust. Mr B. P. Marsh, the Chairman and majority shareholder of the Company, is also the Trustee and Settlor of Marsh Christian Trust. 

The Group also made management charges of £15,000 (2011: £Nil) to Brian Marsh Enterprises Limited.

S. S. Clarke is entitled to a maximum of 20% of any gain, after deducting expenses and following the repayment of all loans, redemption of all preference shares, loan stock and equivalent finance provided by the Company, on the sale of certain agreed investments of the Company and its subsidiaries.  The carried interest provided for at the year end was £299,000 (2011: £331,000).

All the above transactions were conducted on an arms length basis.

Of the total dividend payments in the prior year of £292,861, £187,334 was paid to the directors and/or parties related to them (2012: £Nil).

26.     POST BALANCE SHEET EVENTS

On 24th February 2012 the Group repaid £250,000 of the £1,250,000 directors' loan outstanding as at 31st January 2012.  Following the repayment, the balance of the directors' loan stood at £1,000,000 from the total available facility of £4,325,000.  On 16th May 2012 the Group gave notice to repay the outstanding loan on 18th June 2012.

On 16th March 2012 the Group made a partial disposal of 4.02% of its total 34.02% equity interest in Besso Insurance Group Limited ("Besso") for consideration of £278,698.  The partial disposal was made from an 11.29% equity interest in Besso originally acquired on 31st March 2011 by B. P. Marsh & Company Limited, a wholly owned subsidiary of the Company, which at the time increased the Group's overall holding from 22.73% to 34.02%.  The 4.02% disposal represented the proportion of shares which were available for buy-back by Besso following the exercise of a Call Option agreement (entered into on 26th May 2011) for subsequent issue to management under a share incentive scheme.  As a result of the Call Option being exercised, the Group's overall holding in Besso currently stands at 30%.

On 19th March 2012, in order to facilitate both the exercise of the Call Option above and the upfront payment of a three year loan arrangement fee to the Group totalling £300,000, the Group agreed to provide £578,698 of further loan funding to Besso (in addition to the £400,000 loan facility already drawn down as at 31st January 2012), bringing the total amount of loans outstanding to date to £978,698, excluding £2,540,000 of loan notes.  Both the partial disposal and the provision of further loan funding had no cash impact for the Group.

On 5th April 2012 the Group entered into a Monitoring Agreement with U.S. Risk Insurance Group, Inc. (the USA-domiciled parent company of U.S. Risk (UK) Limited ("U.S. Risk"), an associated company).  Under the agreement, the Group will assist in providing certain services to U.S. Risk Insurance Group, Inc. including review, oversight and audit of certain aspects of the day to day operations of U.S. Risk and its subsidiaries, in return for an annual "Monitoring Services Fee" equivalent to the Bank of England base rate plus 4% (subject to a minimum of 11% per annum) of £1,396,417.  This fee arrangement replaces the Group's entitlement to a preference dividend of the equivalent amount (effective from 1st January 2011) as set out in the original agreements between the Group and U.S. Risk entered into in July 2010.

On 11th April 2012 Hyperion Insurance Group Limited ("Hyperion"), in which the Group had a 19.4% equity interest as at 31st January 2012, announced that it had reached agreement (subject to FSA approval) to sell its majority stake in CFC Underwriting Ltd ("CFC") to a consortium of private investors and the management team.  The net proceeds expected from the sale are £3.5m higher than the net value of CFC included within the Group's 31st January 2011 valuation of Hyperion.  This has resulted in the Group's proportionate value of Hyperion increasing by £0.7m at 31st January 2012 as a result.

On 18th April 2012, the Group subscribed to 126,833 2p voting only shares in Besso for consideration of £2,537.  The purpose of this subscription was for the Group, as a founder shareholder, to maintain its 30% voting rights in Besso.

On 17th May 2012 the Group made a disposal of 2.75% of its total 18.94% equity interest in Hyperion Insurance Group Limited ("Hyperion"). 1,193,500 shares (from a total holding of 8,222,900 shares) were sold to an existing Hyperion shareholder and co-investor, Murofo Investments S.L., for a cash consideration of £4,535,300. As at the date of this report the Group's overall holding in Hyperion stood at 16.19%. 

On 24th May 2012 the Group subscribed for a further £25,000 of 14% loan stock in Besso.  The loan stock is in addition to the £2,540,000 already held by the Group as at 31st January 2012, bringing the total held to £2,565,000 at the date of this report.

27.     ULTIMATE CONTROLLING PARTY

The directors consider Mr B. P. Marsh to be the ultimate controlling party.

Notice

The financial information set out above does not constitute B.P. Marsh & Partners Plc's statutory accounts for the year to 31st January 2012 but is derived from those accounts. The statutory accounts for the year to 31st January 2012 have not yet been delivered to the Registrar of Companies. The auditors have reported on those accounts and have given the following opinion:-

·      the financial statements give a true and fair view of the state of the Group's and of the Company's affairs as at 31st January 2012 and of the Group's profit for the year then ended;

·      the Group's financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

·      the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

·      the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Approval

The financial statements were approved by the Board of Directors on 29th May 2012 for their release on 30th May 2012.

Analyst Briefing

An analyst briefing, hosted by Brian Marsh OBE, Chairman, Jonathan Newman, Finance Director, and fellow Directors Millie Kenyon and Dan Topping will be held at 10:00 a.m., on 30th May 2012 at B. P. Marsh & Partners Plc, 2nd Floor, 36 Broadway, London SW1H 0BH.

Please contact Redleaf Polhill on 020 7566 6738 or [e-mail] if you wish to attend.

For further information:

B.P. Marsh & Partners Plc                                                       www.bpmarsh.co.uk

Brian Marsh OBE / Camilla Kenyon                                             [phone]

Nominated Adviser & Broker

Panmure Gordon

Paul Lumbis / Fred Walsh                                                            [phone]

PR to BP Marsh

Redleaf Polhill Ltd                                                                     [phone]

Emma Kane                                                                     [e-mail]

Notes to Editors:

About B.P. Marsh

B.P. Marsh's current portfolio contains nine companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk.

Over the past 20 years, the Company has assembled a management team with considerable experience both in the financial services sector and in managing private equity investments. Many of the directors have worked with each other in previous roles, and all have worked with each other for at least four years.

Prior to Brian Marsh's involvement in the Company, he spent many years in insurance broking and underwriting in Lloyd's as well as the London and overseas market. He has over 30 years' experience in building, buying and selling financial services businesses, particularly in the insurance sector.

Jonathan Newman is a Chartered Management Accountant and is the Group Director of Finance and has over 15 years' experience in the financial services industry. Jonathan advises investee companies through three non-executive board appointments and evaluates new investment opportunities.

Daniel Topping is a Member of the Chartered Institute of Securities and Investment (MCSI) and an Associate Member of the Institute of Chartered Secretaries and Administrators (ACIS) having joined the Company in 2007. Dan was appointed director in 2011 and currently holds four non-executive board appointments through which he advises investee companies and he also evaluates new investment opportunities.

Camilla Kenyon was appointed as Head of Investor Relations at B. P. Marsh in February 2009, having four years prior experience with the Company. Camilla holds two non-executive appointments, is Chair of the New Business Committee and is a Member of the Investor Relations Society.

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