Final Results

RNS Number : 8594R

Brooks Macdonald Group PLC

17 September 2014

BROOKS MACDONALD GROUP PLC

REPORT FOR THE YEAR ENDED 30 JUNE 2014

Brooks Macdonald Group plc ("Brooks Macdonald" or the "Group"), the AIM listed integrated wealth management group, today announces its results for the year ended 30 June 2014.

Financial Highlights

	Year ended 30.06.2014	Year ended 30.06.2013	Change

Pre-tax profit	£10.6m	£10.4m	2%
Adjusted pre-tax profit*	£13.3m	£13.6m	(2%)
Revenue	£69.1m	£63.2m	9%
Earnings per share	69.01p	65.88p	5%
Adjusted earnings per share*	86.24p	87.94p	(2%)
Total funds under management ("FUM")	£6.55bn	£5.11bn	28%
Proposed final dividend	19.0p	16.0p	19%
Total dividends	26.0p	22.5p	16%

*Adjustments are in respect of acquisition costs, finance costs of deferred consideration and the amortisation of client relationships

Business Highlights:

· Year on year increase of 28% in discretionary FUM to £6.55bn driven by acquisitions, performance and organic growth

· Organic growth in FUM of 14.7% (stripping out market growth and acquisitions)

· Acquisitions during the year added scale and additional skills to Brooks Macdonald International and improved the offering of our Funds division

· Brooks Macdonald Funds grew funds under management to £518m (2013: £390m)

· Property assets under administration, managed by Braemar Estates, grew 9% to £1.13bn (2013: £1.04bn)

· Third party assets under administration are now in excess of £200m (2013: £140m)

· A proposed final dividend of 19.0p (2013: 16.0p) per share payable on 28 October 2014 to shareholders on the register on 26 September 2014.

· 15% increase in dividends proposed for the year of 26.0p (2013: 22.5p)

Commenting on the results and outlook, Chris Macdonald, CEO, said:

"After the considerable changes within the industry in recent years, this has been a year where the business has continued to evolve, invest in the future and grow funds under management and administration. It's therefore particularly pleasing to report annual organic and investment growth excluding acquisitions of over £1 billion in our discretionary funds under management for the first time in our history. We have maintained profits and positioned the Group for a return to profit growth despite increased costs due to the changes and investment.

"Markets have been supportive, particularly in the first half of the calendar year and our outlook for investment returns remains cautiously optimistic. We will continue to invest in systems development and remain optimistic for new business flows. New business has started the year well and the Board remains confident for the future of the Group."

An analyst meeting will be held at 9.15 for 9.30am on 17 September at the offices of MHP Communications, 60 Great Portland Street, London, W1W 7RT. Please contact Giles Robinson on

020 3128 8788 or e-mail giles.robinson@mhpc.comfor further details.

Enquiries to:

Brooks Macdonald Group plc

Chris Macdonald, Chief Executive

Simon Jackson, Finance Director

www.brooksmacdonald.com

020 7499 6424

Peel Hunt LLP (Nominated Adviser and Broker)

Guy Wiehahn

020 7418 8900

MHP Communications

Reg Hoare / Simon Hockridge / Giles Robinson

020 3128 8100

Notes to editors

Brooks Macdonald Group plc is an AIM listed, integrated, wealth management group. The Group consists of six principal companies: Brooks Macdonald Asset Management Limited, a discretionary asset management business; Brooks Macdonald Funds Limited, a fund management business; Brooks Macdonald Financial Consulting Limited, a financial advisory and employee benefits consultancy; Brooks Macdonald Asset Management (International) Limited, a Jersey and Guernsey based provider of discretionary investment management and stockbroking; Brooks Macdonald Retirement Services (International) Limited, a Jersey and Guernsey based retirement planning services provider; and Braemar Estates (Residential) Limited, an estate management company.

CHAIRMAN'S STATEMENT

This has been a year of significant change, in which we have made large investments in the Group's future, maintained our profits and grown our discretionary funds under management.

Profit before tax has risen marginally to £10.6m, in line with expectations. Earnings per share have risen to 69.01p.

The board is recommending a final dividend of 19.0p per share which, if approved by shareholders, will result in total dividends for the year of 26.0p. This represents an increase of 16% over the total dividends paid last year of 22.5p per share. The final dividend will be paid on 28 October 2014 to shareholders who are on the register at the close of business on 26 September 2014.

Richard Price joined us as a non-executive director in August. He is a former partner in KPMG and brings us the benefit of his considerable experience and expertise in the financial services industry.

DPZ Capital Limited ('DPZ') became part of the Group in April 2014 and now forms part of Brooks Macdonald International, based in Jersey. This acquisition added £360m of discretionary funds under management and brings further scale and skill sets to our existing offshore offering. After the year end we completed the acquisition of Levitas Investment Management Services Limited ('Levitas'), further expanding our Funds business and also our exposure in the growing field of pensions fund management, largely stemming from the Government's auto enrolment initiative.

Our discretionary funds under management grew strongly over the year and as at 30 June 2014 totalled £6.55bn (2013: £5.11bn), a rise of 28%. Net of the DPZ acquisition this represents a rise of over 21%, compared to the WMA Balanced index that grew by 6.2% over the year.

As well as this increase in discretionary funds under management we also saw growth in all parts of the Group. Advisory assets increased to over £450m (2013: £348m), property assets under administration grew to £1.13bn (2013: £1.04bn) and third party assets under administration grew to £200m (2013: £140m).

In addition to the acquisitions mentioned above the Group has continued to grow organically with a combination of strong new business flow and by providing risk adjusted returns for our clients. We expect to continue to invest in the future of the business - in further development of our IT systems and in our investment and wealth management process. The strength of our brand and the professionalism of our staff, coupled with the continued investment in the business to which I have referred, enable us to look forward with confidence.

Christopher Knight

Chairman

16 September 2014

CHIEF EXECUTIVE'S REVIEW

Introduction

After the considerable changes within the industry in recent years, this has been a year where the business has continued to evolve, we have invested in the future and grown funds under management and administration. We have maintained profits and positioned the Group for a return to profit growth despite increased costs. The growth in funds and changes have only been possible with the hard work and dedication of all our staff. In addition we continue to receive considerable support from professional intermediaries both in and outside the UK and I would like to thank them for the confidence they have shown in the Group.

Funds under management

Our discretionary funds under management rose to over £6.5bn, a rise of over £1.4bn over the year. This represents an increase of 28.2% supported by the DPZ acquisition and investment markets. Investment performance across the Group accounted for 6.5% over the year (£330m), DPZ 7.0% (£360m) and net new business 14.7% (£750m).

We have seen growth in each of our investment services. Our Bespoke Portfolio Service ('BPS') is our core private client offering and is offered on and offshore with the principal source of business being referrals from professional advisors. Our Managed Portfolio Service ('MPS') is available either as a portfolio or as a unit and after a period of margin pressure I am pleased to report that pricing appears to have stabilised. This service has principally been marketed onshore but we will, post the DPZ acquisition, be marketing this to professional intermediaries offshore. Clients include private individuals, trusts and charities and both our MPS and BPS offerings are benefiting from the increasing popularity of SIPPs and other money purchase pension arrangements.

Our Funds business has grown to £518m in funds under management (2013: £390m) and continues to gain momentum.

We are now also managing over £1.1bn of discretionary assets offshore including the recently acquired DPZ funds. This has grown net of the acquisition by over £180m over the last financial year. In addition we have over £450m of advisory assets, all of which are based offshore.

Braemar Estates, our specialist property manager, continues to grow and now has property assets under management of £1.13bn (2013: £1.04bn).

Our UK Financial Planning income grew by 65% to £3.8m (2013: £2.3m).

Industry background

Eighteen months after the introduction of the Retail Distribution Review ('RDR') in the UK, it is worth commenting on the changes that the wealth management industry has undergone. The legislation was introduced, amongst other things, to improve transparency, the stability of financial institutions and competition for clients. We were and remain supportive of these objectives but RDR has led to significant industry changes. We have had to invest heavily in systems, reissue application forms to all our clients and change the pricing of our MPS proposition. The costs of regulation have risen very significantly but we have embraced these changes and are now positioned to continue to grow the business in the new regulatory environment.

Strategies for growth

We continue to focus on our core strategies for growth: organic, service and performance development and on-going investment in the business.

Our organic growth revolves around working with professional intermediaries, principally financial advisors, trust companies, and private client legal and accountancy practices. This remains a critical area for growth for the business and I am pleased to report that we now work with more than 670 professional intermediary firms covering Asset Management on and offshore, Funds and Financial Consulting. Over the last year we have also expanded our reach with professional intermediaries offshore and this will remain an area of focus during 2014 and beyond.

In addition we continue to grow our brand, recruit high quality staff and invest in our trainee programme. We have in the last year made several senior appointments including our Head of Investment Services (David Lewis-Irlam) and Head of Group Governance (Simon Broomfield) and seven new trainee appointments as well as six trainees qualifying. We now have over 80 investment managers, 30 consultants and 17 trainees.

Organic growth has been geographically well spread. With the opening of our office in Leamington Spa last year (and openings in York and Taunton in recent years) we now have a much stronger regional footprint across the UK. This allows us to provide a strong local service as well as providing a nationwide service where needed by larger firms of professional intermediaries. Linked to this is where we work closely with a number of strategic partners and I am pleased that we now have 15 (2013: 12) Strategic Alliances (which refer significant amounts of business into our discretionary offering).

We continually look to improve our service offering and performance development. Over the last year we have entered into a new partnership (North Row Capital LLP) and as result launched the IFSL North Row Liquid Property Fund; we have enabled our AIM investment service to be distributed via Professional Intermediaries; we are launching our offshore MPS proposition; we continue to invest in risk monitoring tools for investment portfolios and to expand our research capabilities. Investment performance for our clients remains strong, particularly for low, low to medium and medium risk client mandates, in which the vast majority of our clients sit. We also believe the opportunity for SIPPs and the management of pension funds to be another opportunity for the Group and this remains an area of focus onshore.

We made two acquisitions during the year. We completed the acquisition of DPZ in April and its integration into Brooks Macdonald International ('BMI') continues apace. As well as adding scale to our international presence DPZ bring specific MPS and fixed interest skill sets. I would like to take this opportunity to thank the teams in BMI and DPZ for all their hard work in making this happen.

At the end of July (post the year end) we completed the acquisition of Levitas pursuant to the purchase of the option in December 2013. Levitas has two risk rated funds specifically designed for the employee benefits market. At the time of completion Levitas funds totalled £89.4m and this dovetails with our belief in the significant opportunity around auto enrolment and the growth of personal pension provision,

We have continued to be recognised externally with a series of awards over the last year and as a people business I was delighted that we were again recognised as being in the (Sunday Times) top 100 medium sized companies to work for. I am pleased to report that the Group has been identified as the only discretionary fund manager to achieve the highest level of Defaqto (an independent, financial research company in the UK) Star and Diamond Rating in all four categories of discretionary management (MPS, Bespoke, Funds and Platforms).

Summary and outlook

The amount of change in the financial services industry has not slowed down and we have been quick to adapt where necessary. This has required investment of both capital and a huge amount of hard work for all members of staff. In a year of continued change the Group has made good progress particularly in the growth of our discretionary funds under management.

Markets have been supportive, particularly in the first half of the calendar year and our outlook for investment returns remains cautiously optimistic balancing economic recovery and the end of quantitative easing against the potential rise in UK interest rates. We will continue to invest in systems development and remain optimistic for new business flows. After a year of flat profits we expect to return to profit growth. New business has started the year well and the Board remains confident for the future of the Group.

Chris Macdonald

Chief Executive

16 September 2014

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF BROOKS MACDONALD GROUP PLC

Report on the group financial statements

Our opinion

In our opinion the financial statements, defined below:

· give a true and fair view of the state of the Group's affairs as at 30 June 2014 and of its profit and cash flows for the year then ended;

· have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

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

This opinion is to be read in the context of what we say in the remainder of this report.

What we have audited

The group financial statements (the "financial statements"), which are prepared by Brooks Macdonald Group plc, comprise:

· the Consolidated Statement of Financial Position as at 30 June 2014;

· the Consolidated Statement of Comprehensive Income for the year then ended;

· the Consolidated Statement of Cash Flows for the year then ended;

· the Consolidated Statement of Changes in Equity for the year then ended; and

· the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

What an audit of financial statements involves

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ("ISAs (UK & Ireland)"). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

· whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed;

· the reasonableness of significant accounting estimates made by the directors; and

· the overall presentation of the financial statements.

In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements.

Other matters on which we are required to report by exception

Adequacy of information and explanations received

Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.

Directors' remuneration

Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors' remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the audit

Our responsibilities and those of the directors

As explained more fully in the Statement of Directors' Responsibilities set out on page 22, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Other matter

We have reported separately on the company financial statements of Brooks Macdonald Group plc for the year ended 30 June 2014.

Marcus Hine (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

London

16 September 2014

BROOKS MACDONALD GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 June 2014

	Note	2014	2013
		£'000	£'000

Revenue	4	69,133	63,159

Administrative costs		(58,207)	(52,661)

Operating profit	5	10,926	10,498


Finance income	7	119	179
Finance costs	7	(349)	(279)
Share of results of joint venture	14	(128)	-

Profit before tax		10,568	10,398


Taxation	8	(1,512)	(2,368)

Profit for the year attributable to equity holders of the Company		9,056	8,030

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss
Revaluation of available for sale financial assets	8	(131)	(9)

Total comprehensive income for the year		8,925	8,021


Earnings per share*
Basic	27	69.01p	65.88p
Diluted	27	68.67p	65.28p

*Comparative amounts have been restated to reflect the impact of new shares issued as consideration on the acquisition of DPZ

The accompanying notes on pages 29 to 68 form an integral part of the consolidated financial statements.

BROOKS MACDONALD GROUP PLC

Consolidated Statement of Financial Position

as at 30 June 2014

	Note	2014	2013
		£'000	£'000
Assets

Non-current assets
Intangible assets	11	54,874	44,624
Property, plant and equipment	12	2,971	2,421
Available for sale financial assets	13	2,182	1,582
Investment in joint venture	14	232	-
Deferred tax assets	15	809	858
Total non-current assets		61,068	49,485

Current assets
Trade and other receivables	16	21,432	17,773
Financial assets at fair value through profit or loss	17	478	-
Cash and cash equivalents	18	18,056	18,440
Total current assets		39,966	36,213

Total assets		101,034	85,698

Liabilities

Non-current liabilities
Deferred consideration	19	(2,943)	(5,804)
Deferred tax liabilities	15	(5,117)	(4,498)
Other non-current liabilities	20	(115)	(125)
Total non-current liabilities		(8,175)	(10,427)

Current liabilities
Trade and other payables	21	(15,178)	(13,779)
Current tax liabilities		(1,076)	(1,149)
Provisions	22	(9,147)	(2,783)
Total current liabilities		(25,401)	(17,711)

Net assets		67,458	57,560

Equity
Share capital	24	135	133
Share premium account	24	35,147	31,868
Other reserves	25	4,720	3,952
Retained earnings	25	27,456	21,607
Total equity		67,458	57,560

The consolidated financial statements were approved by the Board of Directors and authorised for issue on 16 September 2014, signed on their behalf by:

C A J Macdonald S J Jackson

Chief Executive Finance Director

Company registration number: 4402058

The accompanying notes on pages 29 to 68 form an integral part of the consolidated financial statements.

BROOKS MACDONALD GROUP PLC

Consolidated Statement of Changes in Equity

as at 30 June 2014

	Share capital	Share premium account	Other reserves	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000

Balance at 1 July 2012	109	4,423	2,988	16,190	23,710

Comprehensive income
Profit for the year	-	-	-	8,030	8,030
Other comprehensive income:
Revaluation of available for sale financial asset	-	-	(9)	-	(9)
Total comprehensive income	-	-	(9)	8,030	8,021

Transactions with owners
Issue of ordinary shares	24	27,445	-	-	27,469
Share-based payments	-	-	1,111	-	1,111
Share-based payments transfer	-	-	(350)	350	-
Purchase of own shares by employee benefit trust	-	-	-	(779)	(779)
Tax on share options	-	-	212	-	212
Dividends paid (note 10)	-	-	-	(2,184)	(2,184)
Total transactions with owners	24	27,445	973	(2,613)	25,829

Balance at 30 June 2013	133	31,868	3,952	21,607	57,560

Comprehensive income
Profit for the year	-	-	-	9,056	9,056
Other comprehensive income:
Revaluation of available for sale financial asset	-	-	(131)	-	(131)
Total comprehensive income	-	-	(131)	9,056	8,925

Transactions with owners
Issue of ordinary shares	2	3,279	-	-	3,281
Share-based payments	-	-	1,288	-	1,288
Share-based payments transfer	-	-	(545)	545	-
Purchase of own shares by employee benefit trust	-	-	-	(732)	(732)
Tax on share options	-	-	156	-	156
Dividends paid (note 10)	-	-	-	(3,020)	(3,020)
Total transactions with owners	2	3,279	899	(3,207)	973

Balance at 30 June 2014	135	35,147	4,720	27,456	67,458

The accompanying notes on pages 29 to 68 form an integral part of the consolidated financial statements.

BROOKS MACDONALD GROUP PLC

Consolidated Statement of Cash Flows

for the year ended 30 June 2014

	Note	2014	2013 (restated)*
		£'000	£'000
Cash flow from operating activities
Cash generated from operations	23	13,671	13,155
Taxation paid		(2,318)	(1,661)
Net cash generated from operating activities		11,353	11,494

Cash flows from investing activities
Purchase of property, plant and equipment		(1,342)	(863)
Purchase of intangible assets		(552)	(617)
Purchase of available for sale financial assets		(750)	-
Acquisition of subsidiary companies, net of cash acquired	9	(3,340)	(20,757)
Deferred consideration paid		(1,866)	(3,637)
Interest received		119	179
Financial assets at fair value through profit or loss		(478)	-
Investment in joint venture		(360)	-
Proceeds of sale of intangible assets		-	32
Proceeds of sale of available for sale financial assets		-	63
Net cash used in investing activities		(8,569)	(25,600)

Cash flows from financing activities
Proceeds of issue of shares		584	22,020
Purchase of own shares by employee benefit trust		(732)	(779)
Dividends paid to shareholders		(3,020)	(2,184)
Net cash (used in) / generated from financing activities		(3,168)	19,057


Net (decrease) / increase in cash and cash equivalents		(384)	4,951

Cash and cash equivalents at beginning of year		18,440	13,489
Cash and cash equivalents at end of year	18	18,056	18,440

*Comparative amounts have been restated to show deferred consideration paid within cash flows from investing activities

The accompanying notes on pages 29 to 68 form an integral part of the consolidated financial statements.

Notes to the Consolidated Financial Statements

1. General information

Brooks Macdonald Group plc ('the Company') is the parent company of a group of companies ('the Group'), which offers a range of investment management services and related professional advice to private high net-worth individuals, charities, and trusts. The Group also provides financial planning as well as offshore fund management and administration services and acts as fund manager to regulated OEICs, providing specialist funds in the property and structured return sectors and managing property assets on behalf of these funds and other clients.

The Company is a public limited company, incorporated and domiciled in the United Kingdom under the Companies Act 2006 and listed on AIM. The address of its registered office is 111 Park Street, London, W1K 7JL.

2. Principal accounting policies

The general accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently to all years presented, unless otherwise stated.

a) Basis of preparation

The Group's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, IFRS IC interpretations, and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared on the historical cost basis, except for the revaluation of available for sale financial assets such that they are measured at their fair value.

At the time of approving the financial statements, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

b) Basis of consolidation

The Group's financial statements comprise a consolidation of the financial statements of the parent company (Brooks Macdonald Group plc) and its subsidiaries. The underlying financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. Subsidiaries are all entities controlled by the Company, deemed to exist where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiaries are included from the date on which control is transferred to the Group to the date that control ceases.

All intercompany transactions and balances between Group companies are eliminated on consolidation.

c) Changes in accounting policies

The Group's accounting policies applied to these financial statements are consistent with those disclosed within the financial statements for the year ended 30 June 2013, except as described below.

New accounting policies

During the year the Group entered into a joint venture (note 14) and adopted the accounting policy below:

i) Investments in joint ventures

A joint venture is an entity in which the Group holds a long-term interest and is jointly controlled by the Group and one or more third parties under a contractual agreement. Under the equity method of accounting, interests in joint ventures are initially recognised at cost in the Consolidated Statement of Financial Position and subsequently adjusted to reflect changes in the Group's share of the net assets of the entities. The Group's share of the results of joint ventures is included in the Consolidated Statement of Comprehensive Income.

If the Group's share of the losses of a joint venture equals or exceeds its investment, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture.

New accounting standards, amendments and interpretations adopted in the year

In the year ended 30 June 2014 the Group did not adopt any new standards or amendments issued by the IASB or interpretations issued by the IFRS Interpretations Committee (IFRS IC) that have had a material impact on the consolidated financial statements.

Other new standards, amendments and interpretations adopted, that have not had a material impact on the amounts reported in these financial statements but may impact the accounting for future transactions and arrangements, were:

Standard, Amendment or Interpretation	Effective date
Disclosures: offsetting financial assets and financial liabilities (amendments to IFRS 7)	1 January 2013
Annual improvements (2009-2011 cycle)	1 January 2013
Transition guidance: Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities (amendments to IFRS 10, 11 and 12)	1 January 2013
IFRS 10 'Consolidated Financial Statements'	1 January 2013
IFRS 11 'Joint Arrangements'	1 January 2013
IFRS 12 'Disclosure of Interests in Other Entities'	1 January 2013
IFRS 13 'Fair Value Measurement'	1 January 2013
IAS 27 (revised 2011) 'Separate Financial Statements'	1 January 2013
IAS 28 (revised 2011) 'Investments in Associates and Joint Ventures'	1 January 2013

New accounting standards, amendments and interpretations not yet adopted

A number of new standards, amendments and interpretations, which have not been applied in preparing these financial statements, have been issued and are effective for annual and interim periods beginning after 1 July 2013:

Standard, Amendment or Interpretation	Effective date
Consolidation of investment entities (amendments to IFRS 10, 12 and IAS 27)	1 January 2014
Offsetting financial assets and financial liabilities (amendments to IAS 32)	1 January 2014
Recoverable amount disclosures for non-financial assets (amendments to IAS 36)	1 January 2014
Novation of derivatives and continuation of hedge accounting (amendments to IAS 39)	1 January 2014
IFRIC 21 'Levies'	1 January 2014
Contributions to defined benefit plans (amendments to IAS 19)	1 July 2014
General hedge accounting (amendments to IFRS 9)	1 January 2018

These changes are currently being assessed but none are expected to have a significant impact on the Group's future consolidated financial statements.

d) Critical accounting estimates and judgements

The preparation of financial information requires the use of assumptions, estimates and judgements about future conditions. Use of currently available information and application of judgement are inherent in the formation of estimates. Actual results in the future may differ from those reported. In this regard, the directors believe that the accounting policies where judgement is necessarily applied are those that relate to the measurement of intangible assets, deferred consideration, the estimation of the fair value of share-based payments and client compensation provisions.

The underlying assumptions made are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised only if the revision affects both current and future periods.

Further information about key assumptions and sources of estimation uncertainty are set out below.

Intangible assets

The Group has acquired client relationships and the associated investment management contracts as part of business combinations (as described in note 9), through separate purchase and purchased with newly employed teams of fund managers (as described in note 11). In assessing the fair value of these assets the Group has estimated their finite life based on information about the typical length of existing client relationships. Contracts acquired with fund managers and acquired client relationship contracts are amortised on a straight line basis over their estimated useful lives, ranging from 5 to 20 years.

Goodwill recognised as part of a business combination is reviewed annually for impairment, or when a change in circumstances indicates that it might be impaired. The recoverable amounts of cash generating units are determined by value in use calculations, which require the use of estimates to derive the projected future cash flows attributable to each unit. Details of the more significant assumptions are given in note 11.

Deferred consideration

As described in note 19, the Group has a deferred consideration balance in respect of the acquisition of JPAM Limited in July 2012; Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald Retirement Services (International) Limited in November 2012; and DPZ Capital Limited in April 2014. Deferred consideration is recognised at its fair value, being an estimate of the amount that will ultimately be payable in future periods. This has been calculated allowing for estimated growth in the acquired funds, discounted by the cost of capital. The Group considers that potential changes to these assumptions would not result in a material change in the fair value of the deferred consideration.

Share-based payments

The Group operates various share-based payment schemes in respect of services received from certain employees. Estimating the fair value of these share-based payments requires the Group to apply an appropriate valuation model and determine the inputs to that model (notes 21 and 26). The charge to the Consolidated Statement of Comprehensive Income in respect of share-based payments is calculated using assumptions about the number of eligible employees that will leave the Group and the number of employees that will satisfy the relevant performance conditions. These estimates are reviewed regularly.

Provisions

In the ordinary course of business, the Group may receive complaints from clients in relation to the services provided. Complaints are assessed on a case-by-case basis and provisions are made where it is judged to be likely that compensation will be paid.

e) Exceptional items

Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the underlying financial performance of the Group. These include material items of income or expense that are shown separately due to the significance of their nature or amount.

f) Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at the fair value of the aggregate amount of the consideration transferred at the acquisition date, irrespective of the extent of any minority interest. Acquisition costs are charged to the Consolidated Statement of Comprehensive Income in the year of acquisition.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date. If the business combination is achieved in stages, the fair value of the Groups' previously held equity interest is re-measured at the acquisition date and the difference is credited or charged to the Consolidated Statement of Comprehensive Income. Identifiable assets and liabilities assumed on acquisition are recognised in the Consolidated Statement of Financial Position at their fair value at the date of acquisition.

Any contingent consideration to be paid by the Group to the vendor is recognised at its fair value at the acquisition date. Subsequent changes to the fair value of contingent consideration are recognised in accordance with IAS 39 in the Consolidated Statement of Comprehensive Income.

Goodwill is initially measured at cost, being the excess of the consideration transferred over the acquired company's net identifiable assets acquired and liabilities assumed. If the consideration is lower than the fair value of the net assets acquired, the difference is recognised as a gain on a bargain purchase in the Consolidated Statement of Comprehensive Income.

Impairment

Goodwill and other intangible assets with an indefinite life are tested annually for impairment. For the purposes of impairment testing, goodwill acquired in a business combination is allocated to each of the Group's cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquisition are assigned to those units. The carrying amount of each cash generating unit is compared to its recoverable amount, which is determined using a discounted future cash flow model.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained.

g) Fees, commissions and interest

Portfolio management and other advisory and custody services are billed in arrears but are recognised over the period the service is provided. Fees are calculated on the basis of a percentage of the value of the portfolio over the period. Dealing charges are levied at the time a deal is placed for a client. Fees are only recognised when the fee amount can be estimated reliably and it is probable that the fee will be receivable. Amounts are shown net of rebates paid to significant investors.

Performance fees are earned from some clients when contractually agreed performance levels are exceeded within specified performance measurement periods. They are only recognised, at the end of these performance periods, when a reliable estimate of the fee can be made and it is almost certain that it will be received.

Financial consulting fees are charged to clients using an hourly rate or by a fixed fee arrangement and are recognised over the period the service is provided. Commissions receivable and payable are accounted for in the period in which they are earned.

Where amounts due are conditional on the successful completion of fund raising for investment vehicles, revenue is recognised where, in the opinion of the directors, there is reasonable certainty that sufficient funds have been raised to enable the successful operation of that investment vehicle. Amounts due on an annual basis for the management of third party investment vehicles are recognised on a time apportioned basis.

Interest receivable is recognised on an accruals basis.

h) Cash and cash equivalents

Cash comprises cash in hand and call deposits held with banks. Cash equivalents comprise short-term, highly liquid investments, with a maturity of less than three months from the date of acquisition.

i) Share-based payments

Equity settled schemes

The Group engages in equity settled share-based payment transactions in respect of services received from certain employees. The fair value of the services received is measured by reference to the fair value of the shares or share options on the grant date. This cost is then recognised in the Consolidated Statement of Comprehensive Income over the vesting period, with a corresponding credit to equity.

The fair value of the options granted is determined using option pricing models, which take into account the exercise price of the option, the current share price, the risk free rate of interest, the expected volatility of the Company's share price over the life of the award and other relevant factors.

Cash settled schemes

The Group engages in cash settled share-based payment transactions in respect of services received from certain employees. On the grant date, the liability is measured at its fair value. The liability is subsequently re-measured at the end of each reporting period and on the date of settlement, with any changes in fair value recognised in the Consolidated Statement of Comprehensive Income. The cost of the services received from employees in respect of this scheme is recognised in the Consolidated Statement of Comprehensive Income with a corresponding credit to accruals.

j) Segmental reporting

The Group determines and presents operating segments based on the information that is provided internally to the Group Board of Directors, which is the Group's chief operating decision maker. The Group's reportable segments were amended in the year to include the Channel Islands as a separate segment, reflecting the way in which reporting to the Board has evolved with the continued integration of BMI and BMRSI into the Group. Comparative information for the year ended 30 June 2013 has been restated accordingly.

k) Fiduciary activities

The Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Group.

The Group holds money on behalf of some clients in accordance with the client money rules of the Financial Conduct Authority. Such monies and the corresponding liability to clients are not included within the Consolidated Statement of Financial Position as the Group is not beneficially entitled thereto.

l) Property, plant and equipment

All property, plant and equipment is included in the Consolidated Statement of Financial Position at historical cost less accumulated depreciation and impairment. Costs include the original purchase cost of the asset and the costs attributable to bringing the asset into a working condition for its intended use.

Provision is made for depreciation to write off the cost less estimated residual value of each asset, using a straight line method, over its expected useful life as follows:

Fixtures and fittings - 3 to 6.67 years

Equipment - 5 years

Leasehold improvements - over the term of the lease

Motor vehicles - 4 years

The assets' residual values and useful economic lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and losses arising on disposal are determined by comparing the proceeds with the carrying amount. These are included in the Consolidated Statement of Comprehensive Income.

m) Intangible assets

Amortisation of intangible assets is charged to administrative expenses in the Consolidated Statement of Comprehensive Income on a straight line basis over the estimated useful lives of the assets (4 to 20 years).

Acquired client relationship contracts and contracts acquired with fund managers

Intangible assets are recognised where client relationship contracts are either separately acquired or acquired with investment managers who are employed by the Group. These are initially recognised at cost and are subsequently amortised on a straight line basis over their estimated useful economic life. Separately acquired client relationship contracts are amortised over 15 years and those acquired with investment managers over 5 years. Both types of intangible asset are reviewed annually to determine whether an indicator of impairment exists.

Computer software

Computer software costs are amortised on a straight line basis over an estimated useful life of four years.

Goodwill

Goodwill arising as part of a business combination is initially measured at cost, being the excess of the fair value of the consideration transferred over the Group's interest in the net fair value of the separately identifiable assets, liabilities and contingent liabilities of the subsidiary at date of acquisition. In accordance with IFRS 3 'Business Combinations', goodwill is not amortised but is reviewed annually for impairment and is therefore stated at cost less any provision for impairment of value. Any impairment is recognised immediately in the Consolidated Statement of Comprehensive Income and is not subsequently reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. On acquisition, any goodwill acquired is allocated to cash generating units for the purposes of impairment testing. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the Consolidated Statement of Comprehensive Income.

n) Financial investments

The Group classifies financial assets in the following categories: fair value through profit or loss; available for sale; loans and receivables; and held-to-maturity. The classification is determined by management on initial recognition of the financial asset, which depends on the purpose for which it was acquired.

Fair value through profit or loss

Financial instruments are classified as fair value through profit or loss if they are either held for trading or specifically designated in this category on initial recognition. Assets in this category are initially recognised at fair value and subsequently re-measured, with gains or losses arising from changes in fair value being recognised in the Consolidated Statement of Comprehensive Income.

Available for sale

Available for sale financial assets are non-derivatives that are either specifically designated in this category or are not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Available for sale financial assets are initially recognised at fair value and are subsequently revalued based on the current bid prices of the asset as quoted in active markets.

Loans and receivables

Loans and receivables are non-derivative assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets except where they have maturities of more than 12 months after the end of the reporting period, in which case they are classified as non-current assets. The Group's loans and receivables are recognised within 'trade and other receivables'.

Held-to-maturity

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinate payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity. Held-to-maturity financial assets are measured at amortised cost.

o) Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, where it is probable that it will result in an outflow of economic benefits and can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

Client compensation

Complaints are assessed on a case-by-case basis and provisions for compensation are made where it is judged necessary.

p) Foreign currency translation

The Group's functional and presentational currency is the Pound Sterling. Foreign currency transactions are translated using the exchange rate prevailing at the transaction date. At the reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the prevailing rates on that date. Foreign exchange gains and losses resulting from settlement of such transactions and from the translation of period-end monetary assets and liabilities are recognised in the Consolidated Statement of Comprehensive Income.

q) Retirement benefit costs

Contributions in respect of the Group's defined contribution pension scheme are charged to the Consolidated Statement of Comprehensive Income as they fall due.

r) Taxation

Tax on the profit for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Group's financial statements. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled based on tax rates (and laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

s) Trade receivables

Trade receivables are initially recognised and subsequently measured at the original invoice amount less an allowance for any amounts that are expected to be uncollectable. Doubtful debts are provided for when the collection of the full amount is no longer probable, whilst bad debts are immediately written off when identified.

t) Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. These are classified as current liabilities if payment is due within 12 months or less (or in the normal operating cycle of the business if longer). Otherwise, they are presented as non-current liabilities in the Consolidated Statement of Financial Position.

Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

u) Operating lease payments

Rent payments due under operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight line basis over the term of the lease. Where leases include lease incentives such as rent-free periods, the benefit of these incentives is recognised over the lease term as a reduction in the rental expense.

v) Financial instruments

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised in the Consolidated Statement of Financial Position at fair value when the Group becomes a party to the contractual provisions of the instrument.

w) Carried interest receivable

The Group earns a performance fee, carried interest receivable, on some of the funds it manages on behalf of its investors. Carried interest receivable is recognised where, at the reporting date, the performance criteria have been met based on the valuations of the funds. Carried interest that has been earned but is not yet due for payment is discounted to its present value. This is included within current liabilities in the Consolidated Statement of Financial Position.

x) Employee Benefit Trust ('EBT')

The Company provides finance to an EBT to purchase the Company's shares on the open market in order to meet its obligation to provide shares when an employee exercises certain options or awards made under the Group's share-based payment schemes. The administration and finance costs connected with the EBT are charged to the Consolidated Statement of Comprehensive Income. The cost of the shares held by the EBT is deducted from equity. A transfer is made between other reserves and retained earnings over the vesting periods of the related share options or awards to reflect the ultimate proceeds receivable from employees on exercise. The trustees have waived their rights to receive dividends on the shares.

The EBT is considered to be a Special Purpose Entity ('SPE') where the substance of the relationship between the Group and the SPE indicates that the SPE is controlled by the Group. In substance, the activities of the trust are being conducted on behalf of the Group according to its specific business needs, in order to obtain benefits from its operation. On this basis, the assets held by the trust are consolidated into the Group's financial statements.

y) Share capital

Ordinary share capital is classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where the parent company purchases the Company's equity share capital (treasury shares) the consideration paid, including any directly incremental costs (i.e. net of income taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received (net of any directly attributable incremental transaction costs and the related income tax effects) is included within equity attributable to the Company's equity holders.

z) Dividend distribution

The dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividend is authorised and no longer at the discretion of the Company. Final dividends are recognised when approved by the Company's shareholders at the annual general meeting and interim dividends are recognised when paid.

3. Segmental information

For management purposes the Group's activities are organised into four operating divisions: investment management, financial planning, fund and property management and the Channel Islands. The Group's other activity, offering nominee and custody services to clients, is included within investment management. These divisions are the basis on which the Group reports its primary segmental information. In accordance with IFRS 8 'Operating Segments', disclosures are required to reflect the information which the Board uses internally for evaluating the performance of its operating segments and allocating resources to those segments. The information presented in this note follows the presentation for internal reporting to the Group Board of Directors.

During the year the Group identified the Channel Islands as being a separate reportable segment. This comprises the results of BMI and BMRSI along with the recently acquired DPZ. Previously, BMI and BMRSI were included within the investment management and financial planning segments respectively. The comparatives for the year ended 30 June 2013 have been restated in accordance with IFRS 8 to reflect this change.

Revenues and expenses are allocated to the business segment that originated the transaction. Revenues and expenses that are not directly originated by a particular business segment are reported as unallocated. Sales between segments are carried out at arm's length. Centrally incurred expenses are allocated to business segments on an appropriate pro-rata basis. Segmental assets and liabilities comprise operating assets and liabilities, those being the majority of the balance sheet.

	Investment management	Financial planning	Fund and property management	Channel Islands	Total
Year ended 30 June 2014	£'000	£'000	£'000	£'000	£'000

Total segment revenues	48,988	4,034	5,061	11,556	69,639
Inter segment revenues	(156)	(223)	(127)	-	(506)
External revenues	48,832	3,811	4,934	11,556	69,133

Segment result	12,324	(109)	(102)	2,376	14,489
Unallocated items					(3,921)
Profit before tax					10,568
Taxation					(1,512)
Profit for the year					9,056

	Investment management	Financial planning	Fund and property management	Channel Islands	Total
Year ended 30 June 2013 (restated)	£'000	£'000	£'000	£'000	£'000

Total segment revenues	49,581	3,633	4,636	6,626	64,476
Inter segment revenues	-	(1,317)	-	-	(1,317)
External revenues	49,581	2,316	4,636	6,626	63,159

Segment result	13,106	191	(482)	1,799	14,614
Unallocated items					(4,216)
Profit before tax					10,398
Taxation					(2,368)
Profit for the year					8,030

a) Geographic analysis

The Group's operations are located in the United Kingdom and the Channel Islands. The following table presents underlying operating income analysed by the geographical location of the Group entity providing the service.

	2014	2013
	£'000	£'000

United Kingdom	57,577	56,533
Channel Islands	11,556	6,626
Total operating income	69,133	63,159

b) Major clients

The Group is not reliant on any one client or group of connected clients for the generation of revenues.

4. Revenue

	2014	2013
	£'000	£'000

Fee income	66,394	59,431
Financial services commission	2,739	3,728
Total revenue	69,133	63,159

5. Operating profit

Operating profit is stated after charging:

	2014	2013
	£'000	£'000

Staff costs (note 6)	33,872	26,907
Acquisition costs (see below)	187	1,047
Auditors' remuneration (see below)	220	282
Financial Services Compensation Scheme Levy (see below)	351	359
Depreciation (note 12)	981	863
Amortisation (note 11)	2,212	1,865

A more detailed analysis of auditors' remuneration is provided below:

	2014	2013
	£'000	£'000

Fees payable to the Company's auditor for the audit of the consolidated group and parent company financial statements	37	44
Fees payable to the Company's auditor and its associates for other services:
- Audit of the Company's subsidiaries pursuant to legislation	145	150
- Audit-related assurance services	29	22
- Tax advisory services	-	6
- Other assurance services	-	60
- Other advisory services	9	-
Total auditors' remuneration	220	282

Acquisition costs

Administrative costs for the year ended 30 June 2014 include £187,000 (2013: £1,047,000) of directly attributable business acquisition costs: £61,000 in relation to the acquisition of DPZ Capital Limited, £46,000 incurred in the establishment of North Row Capital LLP and £80,000 in respect of the option to purchase Levitas Investment Management Services Limited (2013: £30,000 in respect of the acquisition of JPAM and £1,017,000 in respect of the acquisition of BMI and BMRSI). The Group exercised the option to purchase Levitas in July 2014, as further explained in note 34.

Financial Services Compensation Scheme levies

Administrative costs for the year ended 30 June 2014 include a charge of £351,000 (2013: £359,000) for the Financial Services Compensation Scheme ('FSCS') levy. The Group received no invoices during the year for additional levies on previous scheme years (2013: invoices totalling £119,000 were received) but a provision of £351,000 (2013: £240,000) has been made for the estimated levy by the FSCS for the 2014/15 scheme year (note 22).

6. Employee information

a) Staff costs

	2014	2013
	£'000	£'000

Wages and salaries	28,867	21,920
Social security costs	2,863	2,738
Other pension costs	1,012	625
Share-based payments	1,130	1,624
Total staff costs	33,872	26,907

Pension costs relate entirely to a defined contribution scheme.

b) Number of employees

The average monthly number of employees during the year, including directors, was as follows:

	2014	2013

Professional staff	169	156
Administrative staff	253	207
Total staff	422	363

c) Key management compensation

Key management compensation relates to the Group Board of Directors, including both the executive directors and non-executive directors for the years presented.

	2014	2013
	£'000	£'000

Short-term employee benefits	2,242	2,390
Post-employment benefits	60	79
Share-based payments	398	387
Total compensation	2,700	2,856

d) Directors' emoluments

Further details of director's emoluments are included within the Remuneration Committee Report on pages 12 to 18.

	2014	2013
	£'000	£'000

Salaries	2,075	2,238
Non-executive directors' fees	151	133
Benefits in kind	16	19
	2,242	2,390
Pension contributions	60	79
Amounts receivable under long term incentive schemes	240	278
Total directors' remuneration	2,542	2,747

The aggregate amount of gains made by directors on the exercise of share options during the year was £458,000 (2013: £301,000). Retirement benefits are accruing to six directors (2013: six) under a defined contribution pension scheme.

The remuneration of the highest paid director during the year was as follows:

	2014	2013
	£'000	£'000

Remuneration and benefits in kind	506	517
Amounts receivable under long term incentive schemes	64	64
Total remuneration	570	581

The amount of gains made by the highest paid director on the exercise of share options during the year was £6,000 (2013: £176,000).

7. Finance income and finance costs

	2014	2013
	£'000	£'000
Finance income

Bank interest on deposits	109	177
Tax repayment supplement	10	2
Total finance income	119	179

Finance costs

Finance cost of deferred consideration	349	279
Total finance costs	349	279

8. Taxation

The tax charge on profit on ordinary activities for the year was as follows:

	2014	2013
	£'000	£'000

UK Corporation Tax at 22.50% (2013: 23.75%)	2,477	2,618
(Over) / under provision in prior years	(17)	424
Total current tax	2,460	3,042
Deferred tax credit	(473)	(673)
Effect of change in tax rate on deferred tax	(475)	(1)
Income tax expense	1,512	2,368

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the time apportioned tax rate applicable to profits of the consolidated entities in the UK as follows:

	2014	2013
	£'000	£'000

Profit on ordinary activities before tax	10,568	10,398

Profit on ordinary activities multiplied by the standard rate of tax in the UK of 22.50% (2013: 23.75%)	2,378	2,469

Tax effect of:
- Lower tax rates in other countries in which the Group operates	(618)	(398)
- Disallowable expenses	77	189
- Non-taxable income	(1)	(260)
- Tax losses unutilised / (utilised) on which no deferred tax is provided	168	(55)
- Change in rate of Corporation Tax applicable to deferred tax	(475)	(1)
- (Over) / under provision in prior years	(17)	424
Tax charge for the year	1,512	2,368

The deferred tax credits totalling £948,000 (2013: £674,000) represent a credit of £122,000 (2013: £287,000) arising from the share option reserve at the balance sheet date, a credit of £10,000 (2013: £10,000) relating to accelerated capital allowances, a credit of £341,000 (2013: £377,000) arising from the amortisation of acquired client relationship contracts and a credit due to a change in tax rates of £475,000 (2013: £nil).

On 1 April 2014, the standard rate of Corporation Tax in the UK was reduced from 23% to 21%. As a result the effective rate of Corporation Tax applied to the taxable profit for the year ended 30 June 2014 is 22.50% (2013: 23.75%).

In addition to the change in the rate of UK Corporation Tax disclosed above, the Finance Act 2013 (substantively enacted on 2 July 2013) will further reduce the main rate of UK Corporation Tax to 20% with effect from 1 April 2015. Deferred tax assets and liabilities are calculated at the rate that is expected to be in force when the temporary differences unwind, but limited to the extent that such rates have been substantively enacted. Consequently the tax rate used to determine the deferred tax assets and liabilities is 20% (2013: 23%).

The tax charge relating to components of other comprehensive income is as follows:

	2014	2013
	£'000	£'000

Revaluation of available for sale financial assets	(150)	(12)
Tax credit on revaluation of available for sale financial assets	19	3
Total other comprehensive income	(131)	(9)

9. Business combinations

On 11 April 2014, the Group acquired the entire share capital of DPZ Capital Limited ('DPZ'). DPZ is a well established wealth management business based in Jersey. It manages a range of distinct investment strategies founded on its core competencies: asset allocation; manager selection; fixed interest and credit investing; and equity selection. On acquisition, DPZ had funds under management of approximately £430m, £360m of which was managed on a discretionary basis, £60m on an advisory basis and £10m on an execution only basis.

In the financial year ended 30 June 2013, the Group acquired the entire share capital of JPAM Limited, Brooks Macdonald Asset Management (International) Limited (formerly Spearpoint Limited) and Brooks Macdonald Retirement Services (International) Limited (formerly Spearpoint Retirement Services Limited). Details of these acquisitions are disclosed in note 9 of the 2013 Annual Report.

The total consideration for the acquisition of DPZ was £11,678,000, comprising of: cash of £4,155,000; the issue of 158,032 shares in Brooks Macdonald Group plc with a value of £2,697,000; and a contingent balance of £4,826,000 payable in two instalments in October 2014 and May 2016 and based on the future value of the discretionary funds under management acquired. The fair value of the liability is currently the maximum consideration that could be paid under the terms of the acquisition, assuming that there is no reduction in the level of discretionary client funds retained.

Directly attributable acquisition costs of £61,000 were incurred as a result of the acquisition and have been charged to the Consolidated Statement of Comprehensive Income.

Goodwill of £4,035,000 was recognised on acquisition in respect of expected synergies from combining the operations of DPZ with the Group's existing offshore operations, as well as intangible assets that do not qualify for separate recognition and the experience of the investment management staff employed by DPZ.

The fair values of the assets acquired are the gross contractual amounts and all are considered to be fully recoverable. The fair value of the identifiable assets and liabilities acquired, at the date of acquisition, are detailed in (a) below.

a) Net assets acquired through business combinations

	£'000	£'000

Property, plant and equipment		189
Trade and other receivables		569
Cash and cash equivalents		815
Other current assets		179
Trade and other payables		(138)
Other current liabilities		(271)
Total net assets recognised by acquired company		1,343

Fair value adjustments:
- Client relationship contracts	7,875
- Deferred tax liability on client relationship contracts	(1,575)
		6,300

Net identifiable assets		7,643
Goodwill		4,035
Total purchase consideration		11,678

b) Impact on reported results from date of acquisition

	Revenues from external customers	Profit for the year
	£'000	£'000

DPZ Capital Limited	727	161

Had DPZ Capital Limited been consolidated from 1 July 2013, the Consolidated Statement of Comprehensive Income would show Group pro-forma revenue of £71,658,000 and post-tax profit for the year of £9,193,000.

c) Net cash outflow resulting from business combinations

	£'000

Total purchase consideration (note 9a)	11,678
Less:
- Shares issued as consideration	(2,697)
- Deferred cash consideration	(4,826)
Cash paid to acquire subsidiary	4,155
Less: cash held by subsidiary acquired	(815)
Cash paid to acquire subsidiary net of cash acquired	3,340

10. Dividends

Amounts recognised as distributions to equity holders of the Company in the year were as follows:

	2014	2013
	£'000	£'000

Final dividend paid for the year ended 30 June 2013 of 16.0p (2012: 12.5p) per share	2,102	1,348
Interim dividend paid for the year ended 30 June 2014 of 7.0p (2013: 6.5p) per share	918	836
Total dividends	3,020	2,184

Final dividend proposed for the year ended 30 June 2014 of 19.0p (2013: 16.0p) per share	2,535	2,102

The interim dividend of 7.0p (2013: 6.5p) per share was paid on 17 April 2014.

A final dividend for the year ended 30 June 2014 of 19.0p (2013: 16.0p) per share was declared by the Board of Directors on 16 September 2014 and is subject to approval by the shareholders at the Company's annual general meeting. It will be paid on 28 October 2014 to shareholders who are on the register at the close of business on 26 September 2014. In accordance with IAS 10 'Events After the Reporting Period', this dividend has not been included as a liability in these financial statements.

11. Intangible assets

	Goodwill	Computer software	Acquired client relationship contracts	Contracts acquired with fund managers	Total
	£'000	£'000	£'000	£'000	£'000
Cost

At 1 July 2012	3,550	90	6,867	1,973	12,480
Additions	17,208	243	18,037	601	36,089
Disposals	-	-	(32)	-	(32)
At 30 June 2013	20,758	333	24,872	2,574	48,537
Additions	-	78	-	474	552
Additions on acquisition of subsidiaries at fair value	4,035	-	7,875	-	11,910
At 30 June 2014	24,793	411	32,747	3,048	60,999

Accumulated amortisation

At 1 July 2012	-	46	536	1,466	2,048
Amortisation charge	-	113	1,477	275	1,865
At 30 June 2013	-	159	2,013	1,741	3,913
Amortisation charge	-	110	1,758	344	2,212
At 30 June 2014	-	269	3,771	2,085	6,125

Net book value

At 1 July 2012	3,550	44	6,331	507	10,432
At 30 June 2013	20,758	174	22,859	833	44,624
At 30 June 2014	24,793	142	28,976	963	54,874

a) Goodwill

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units ('CGUs') that are expected to benefit from that business combination. The carrying amount of goodwill at 30 June 2014 comprises £3,550,000 in respect of the Braemar Group Limited ('Braemar') CGU, £17,208,000 in respect of the Brooks Macdonald Asset Management (International) Limited and Brooks Macdonald Retirement Services (International) Limited (collectively 'Brooks Macdonald International') CGU and £4,035,000 in respect of the DPZ Capital Limited ('DPZ') CGU.

Goodwill is reviewed annually for impairment and its recoverability has been assessed at 30 June 2014 by comparing the carrying amount of the CGUs to their expected recoverable amount, estimated on a value-in-use basis. The value-in-use of each CGU has been calculated using pre-tax discounted cash flow projections based on the most recent budgets approved by the Board, covering a period of up to five years. Cash flows are then extrapolated beyond the forecast period using an expected long-term growth rate.

Based on the value-in-use calculation, at 30 June 2014 the calculated recoverable amount of the Brooks Macdonald International CGU was £26,520,000, indicating that there is no impairment. The key underlying assumptions of the calculation are the discount rate, the short-term growth in earnings and the long-term growth rate of the business. A pre-tax discount rate of 10% has been used, based on the Group's assessment of the risk-free rate of interest and specific risks relating to Brooks Macdonald International. Annual earnings growth rates of 7% and 5% respectively are forecast in the next two financial years, the period covered by the most recent forecasts, which reflect historic actual growth and are considered to be achievable given current market and industry trends. The 2% long-term growth rate applied is considered prudent in the context of the long-term average growth rate for the funds, investment management and financial planning industries in which the CGU operates.

The key assumptions inherent in the value-in-use calculations for the Braemar and DPZ CGUs were similarly a pre-tax discount rate of 10%, annual revenue growth rates ranging from 10% to 27% and a long-term growth rate of up to 2%. Significant headroom exists in the calculations of the respective recoverable amounts of these CGUs over the carrying amounts of the goodwill allocated to them. On this basis, the directors have concluded that there is no impairment.

The directors consider that no reasonably foreseeable change in any of the key assumptions would result in an impairment of goodwill, given the margin by which the estimated recoverable amounts of the CGUs exceed the carrying amounts of the goodwill allocated to each.

b) Computer software

Software costs are amortised over an estimated useful life of four years on a straight line basis.

c) Acquired client relationship contracts

This asset represents the fair value of future benefits accruing to the Group from acquired client relationship contracts. The amortisation of client relationships is charged to the Consolidated Statement of Comprehensive Income on a straight line basis over their estimated useful lives (15 to 20 years).

During the year ended 30 June 2014, the Group acquired client relationship contracts totalling £7,875,000 (2013: £18,037,000), as part of business combinations (note 9), which were recognised as separately identifiable intangible assets in the Consolidated Statement of Financial Position. These related to the acquisition of DPZ.

d) Contracts acquired with fund managers

This asset represents the fair value of the future benefits accruing to the Group from contracts acquired with fund managers. Payments made to acquire such contracts are stated at cost and amortised on a straight line basis over an estimated useful life of five years.

12. Property, plant and equipment

	Motor vehicles	Fixtures and fittings	Equipment and leasehold improvements	Total
	£'000	£'000	£'000	£'000
Cost

At 1 July 2012	-	1,417	4,071	5,488
Additions	35	151	677	863
Additions on acquisition of subsidiaries	-	54	-	54
At 30 June 2013	35	1,622	4,748	6,405
Additions	-	276	1,066	1,342
Additions on acquisition of subsidiaries	-	189	-	189
At 30 June 2014	35	2,087	5,814	7,936

Accumulated depreciation

At 1 July 2012	-	434	2,687	3,121
Depreciation charge	4	234	625	863
At 30 June 2013	4	668	3,312	3,984
Depreciation charge	9	291	681	981
At 30 June 2014	13	959	3,993	4,965

Net book value

At 1 July 2012	-	983	1,384	2,367
At 30 June 2013	31	954	1,436	2,421
At 30 June 2014	22	1,128	1,821	2,971

13. Available for sale financial assets

The Group holds an investment of 1,426,793.64 B shares in Braemar Group PCC Limited Student Accommodation Cell. The fund is promoted by Brooks Macdonald Funds Limited, a subsidiary of the Group. Although trading is currently suspended on this fund, the fund manager continues to publish a price based on the fair value of the underlying assets of the fund. At 30 June 2014, based on the most recent valuation, the fair value of the investment was £1,432,000 (2013: £1,582,000). The loss of £150,000 (2013: loss of £12,000) has been recognised in other comprehensive income in the Consolidated Statement of Comprehensive Income.

During the year the Group made an investment of £750,000 in Sancus Holdings Limited ('Sancus'), an unlisted company incorporated in the Channel Islands. Sancus is a Peer-to-Peer ('P2P') secured lender, concentrating on traditional P2P transactions and focused on working with entrepreneurs and businesses. The business helps clients to lend or borrow directly, to or from fellow entrepreneurs and professionals, to assist the real economy. In the opinion of the directors, the market value of the investment at 30 June 2014 remains £750,000 based on the most recent transaction price.

During the year ended 30 June 2013, a £50,000 investment in UK Farming plc was de-recognised as the entity is now considered to be controlled by the Group and its assets and liabilities have been consolidated accordingly.

The Group disposed of no investments in the current year (2013: £nil).

	2014	2013
	£'000	£'000

At beginning of year	1,582	1,657
Additions	750	-
Disposals	-	(13)
De-recognised on consolidation of former investment	-	(50)
Loss from changes in fair value	(150)	(12)
At end of year	2,182	1,582

The table below provides an analysis of the financial instruments that, subsequent to initial recognition, are measured at fair value. These are grouped into the following levels within the fair value hierarchy, based on the degree to which the inputs used to determine the fair value are observable:

· Level 1 - derived from quoted prices in active markets for identical assets or liabilities at the measurement date;

· Level 2 - derived from inputs other than quoted prices included within level 1 that are observable, either directly or indirectly; and

· Level 3 - derived from inputs that are not based on observable market data.

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000

Braemar Group PCC Limited Student Accommodation Cell	-	1,432	-	1,432
Sancus Holdings Limited	-	-	750	750
Total	-	1,432	750	2,182

There has been no movement between any of the levels during the year.

14. Investment in joint venture

During the year Brooks Macdonald Funds Limited, a subsidiary of the Group, entered into a new partnership, North Row Capital LLP, in which it holds a 60% interest and has joint control. The balance is owned by two individual partners who developed the investment approach behind the IFSL North Row Liquid Property Fund, which was launched in February 2014. The fund offers investors liquid exposure to global real estate markets by investing predominantly in property derivatives, as well as property equity and debt, to gain exposure to the direct property markets.

The establishment of the partnership and the fund required an initial investment of approximately £135,000 by Brooks Macdonald Funds and additional working capital of £225,000 in the year ended 30 June 2014. The Group's share of the loss for the year reported by North Row Capital LLP was £128,000, which has been recognised in the Consolidated Statement of Comprehensive Income with a corresponding reduction in the investment in joint venture recognised in the Consolidated Statement of Financial Position.

15. Deferred income tax

Deferred income tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. An analysis of the Group's deferred assets and deferred tax liabilities is shown below.

	2014	2013
	£'000	£'000
Deferred tax assets

Deferred tax assets to be settled after more than 12 months	204	234
Deferred tax assets to be settled within 12 months	605	624
Total deferred tax assets	809	858

Deferred tax liabilities

Deferred tax liabilities to be settled after more than 12 months	(5,115)	(4,468)
Deferred tax liabilities to be settled within 12 months	(2)	(30)
Total deferred tax liabilities	(5,117)	(4,498)

The gross movement on the deferred income tax account during the year was as follows:

	2014	2013
	£'000	£'000

At 1 July	(3,640)	(25)
Credit to the Statement of Comprehensive Income (note 8)	948	674
Credit recognised in other comprehensive income	19	3
Charge recognised in equity	(60)	(97)
Additions on acquisition of subsidiaries	(1,575)	(4,195)
At 30 June	(4,308)	(3,640)

The change in deferred income tax assets and liabilities during the year was as follows:

	Share-based payments
	£'000
Deferred tax assets

At 1 July 2012	668
Charge to the Statement of Comprehensive Income	287
Charge to equity	(97)
At 30 June 2013	858
Credit to the Statement of Comprehensive Income	11
Charge to equity	(60)
At 30 June 2014	809

The carrying amount of the deferred tax asset is reviewed at each reporting date and is only recognised to the extent that it is probable that future taxable profits of the Group will allow the asset to be recovered.

	Accelerated capital allowances	Available for sale financial assets	Intangible asset amortisation	Total
	£'000	£'000	£'000	£'000
Deferred tax liabilities

At 1 July 2012	22	22	649	693
Additions on acquisition of subsidiaries	-	-	4,195	4,195
Credit to the Statement of Comprehensive Income	(10)	-	(377)	(387)
Charge to other comprehensive income	-	(3)	-	(3)
At 30 June 2013	12	19	4,467	4,498
Additions on acquisition of subsidiaries	-	-	1,575	1,575
Credit to the Statement of Comprehensive Income	(10)	-	(927)	(937)
Charge to other comprehensive income	-	(19)	-	(19)
At 30 June 2014	2	-	5,115	5,117

16. Trade and other receivables

	2014	2013
	£'000	£'000

Trade receivables	9,653	5,158
Other receivables	1,299	766
Prepayments and accrued income	10,480	11,849
Total trade and other receivables	21,432	17,773

17. Financial assets at fair value through profit or loss

During the year the Group acquired equity shareholding investments. The cost of these investments was £478,000 and their market value at 30 June 2014 was £478,000. These investments are classified as Level 1 as defined in note 13.

18. Cash and cash equivalents

	2014	2013
	£'000	£'000

Cash at bank	17,994	18,420
Cash held in employee benefit trust	62	20
Total cash and cash equivalents	18,056	18,440

Cash and cash equivalents are distributed across a range of financial institutions with high credit ratings in accordance with the Group's treasury policy. Cash at bank comprises current accounts and immediately accessible deposit accounts.

19. Deferred consideration

Deferred consideration, which is also included within provisions in current liabilities to the extent that it is due to be paid within one year of the reporting date (note 22), relates to the directors' best estimate of amounts payable in the future in respect of certain client relationships and subsidiary undertakings that were acquired by the Group. Deferred consideration is measured at its fair value based on the discounted expected future cash flows. The movements in the deferred consideration balance during the year were as follows:

	2014	2013
	£'000	£'000

At 1 July	7,927	2,309
Added on acquisitions during the year	4,826	8,976
Interest accrued	349	279
Payments made during the year	(1,866)	(3,637)
At 30 June	11,236	7,927

Analysed as:

Amounts falling due within one year	8,293	2,123
Amounts falling due after more than one year	2,943	5,804
Total deferred consideration	11,236	7,927

Deferred consideration of £4,826,000 (2013: £8,976,000) was recognised during the year (note 9), relating to the acquisition of DPZ Capital Limited. Payments of £1,866,000 (2013: £3,637,000) were made during the year, representing £981,000 to the vendors of JPAM and £885,000 to Clarke Willmott LLP.

Amounts falling due after more than one year from the reporting date are presented in non-current liabilities as shown below:

	2014	2013
	£'000	£'000

At 1 July	5,804	959
Added on acquisitions during the year	2,435	5,597
Interest accrued	26	207
Transfer to current liabilities	(5,322)	(959)
At 30 June	2,943	5,804

The amount payable in respect of acquisitions during the year of £2,435,000 (2013: £5,597,000) is the deferred consideration relating to the acquisition of DPZ Capital Limited (note 9). An amount of £5,322,000 (2013: £959,000), representing the deferred consideration of £4,482,000 payable in respect of the acquired client relationships of BMI and BMRSI and £840,000 relating to the acquisition of JPAM Limited, was transferred to provisions within current liabilities.

A range of final outcomes for the expected total deferred consideration payable cannot be estimated as the future value of the funds under management is dependent on several unpredictable variables, including client retention and market movements.

20. Other non-current liabilities

Other non-current liabilities relate to employer's National Insurance contributions arising from share option awards under the LTIS scheme. An additional liability of £82,000 (2013: £90,000) was recognised during the year in respect of existing awards, granted in previous years, which are expected to vest in the future. During the year, an amount of £92,000 (2013: £383,000) was transferred to current liabilities, reflecting awards that will vest within the next 12 months.

21. Trade and other payables

	2014	2013
	£'000	£'000

Trade payables	2,134	2,631
Other taxes and social security	1,712	1,394
Other payables	1,319	2,621
Accruals and deferred income	10,013	7,133
Total trade and other payables	15,178	13,779

Included within accruals and deferred income is an accrual of £310,000 (2013: £837,000) in respect of the Phantom Share Option Schemes granted in October 2008 and October 2009 and employer's National Insurance contributions arising from share option awards under the LTIS (note 26b). The schemes are cash settled and payments are made to participants in respect of their awards by the Group's subsidiary undertakings. The options are awarded at no cost to the participants. The amount that is ultimately payable to participants of the scheme is equal to the increase in market value of the Company's ordinary shares over a three year vesting period. The award will vest after three years to the extent that the performance conditions are satisfied and will be forfeited in total if performance fails to meet the minimum criteria.

The options have been valued using a Black Scholes model based on the market price of the Company's shares at the grant date (note 26). The total charge to the Consolidated Statement of Comprehensive Income for the year for all Phantom Share Option Schemes and employer's National Insurance contributions arising from share option awards under the LTIS (note 26b) was £150,000 (2013: £423,000). The number of Phantom Share Options outstanding at 30 June 2014 was as follows:

		2014		2013
	Number of options	Weighted average base price (£)	Number of options	Weighted average base price (£)

At 1 July	37,103	9.415	133,103	6.875
Forfeited in the year	-	-	(45,000)	7.750
Exercised in the year	(37,103)	9.415	(51,000)	4.255
At 30 June	-	-	37,103	9.415

22. Provisions

	Client compensation	Deferred consideration	FSCS levy	Total
	£'000	£'000	£'000	£'000

At 1 July 2012	339	1,350	-	1,689
Charge to the Statement of Comprehensive Income	246	-	240	486
Added on acquisitions during the year	-	3,379	-	3,379
Interest accrued	-	72	-	72
Transfer from non-current liabilities	-	959	-	959
Utilised during the year	(165)	(3,637)	-	(3,802)
At 30 June 2013	420	2,123	240	2,783
Charge to the Statement of Comprehensive Income	233	-	351	584
Added on acquisitions during the year	-	2,367	-	2,367
Interest accrued	-	321	-	321
Transfer from non-current liabilities	-	5,348	-	5,348
Utilised during the year	(150)	(1,866)	(240)	(2,256)
At 30 June 2014	503	8,293	351	9,147

a) Client compensation

Client compensation provisions relate to the potential liability arising from client complaints against the Group. Complaints are assessed on a case by case basis and provisions for compensation are made where judged necessary.

b) Deferred consideration

Deferred consideration has been included within provisions as a current liability to the extent that it is due to be paid within one year of the reporting date.

Deferred consideration payable within one year of £2,367,000 (2013: £3,379,000) was recognised during the year. An amount of £5,348,000 (2013: £959,000) was transferred from non-current liabilities, representing a payment to the vendor of JPAM Limited and the final tranche of deferred consideration paid to Clarke Willmott LLP in November 2013 in respect of client relationships acquired in October 2011. Provisions of £1,866,000 (2013: £3,637,000) were utilised during the year on payment of £981,000 to the vendors of JPAM and £885,000 to Clarke Willmott LLP.

c) FSCS levy

Following confirmation by the FSCS in April 2014 of its proposed 2014/15 annual industry levy, the Group has made a provision of £351,000 (2013: £240,000) for its estimated share.

23. Reconciliation of operating profit to net cash inflow from operating activities

	2014	2013 (restated)*
	£'000	£'000

Operating profit	10,926	10,498

Adjustments for:
Depreciation of property, plant and equipment	981	863
Amortisation of intangible assets	2,212	1,865
(Increase) / decrease in receivables	(2,910)	91
Increase / (decrease) in payables	990	(1,301)
Increase in provisions	194	321
Decrease in non-current liabilities	(10)	(293)
Share-based payments	1,288	1,111
Net cash inflow from operating activities	13,671	13,155

*Comparative amounts have been restated to show deferred consideration paid within cash flows from investing activities

In the year ended 30 June 2014, the Group obtained control of DPZ. The net cash outflow resulting from this business combination is presented in note 9(c).

24. Share capital and share premium account

The movements in share capital and share premium during the year were as follows:

	Number of shares	Exercise price	Share capital	Share premium account	Total
		p	£'000	£'000	£'000

At 1 July 2012	10,927,496		109	4,423	4,532
Shares issued:
- on placing	2,288,193	1,150.0 - 1,301.9	23	26,927	26,950
- on exercise of options	73,100	140.0 - 290.5	1	327	328
- to Sharesave Scheme	59,185	240.0 - 578.0	-	191	191
At 30 June 2013	13,347,974		133	31,868	32,001
Shares issued:
- as consideration	158,032	1,706.4	2	2,696	2,698
- on exercise of options	29,500	215.0 - 290.5	-	72	72
- to Sharesave Scheme	56,669	578.0 - 916.0	-	511	511
At 30 June 2014	13,592,175		135	35,147	35,282

The total number of ordinary shares, issued and fully paid at 30 June 2014 was 13,592,175 (2013: 13,347,974) with a par value of 1p per share.

On 12 April 2014, the Company issued 158,032 ordinary shares with a market value of £2,696,658 as part consideration for the acquisition of DPZ by Brooks Macdonald Asset Management (International) Limited.

Shares issued on exercise of options and to Sharesave Scheme members are shown as a having a £nil impact on share capital in the year ended 30 June 2014 due to rounding (2013: £1,000 and £nil respectively).

Employee Benefit Trust

The Group established an Employee Benefit Trust ('EBT') on 3 December 2010 to acquire ordinary shares in the Company to satisfy awards under the Group's Long Term Incentive Scheme ('LTIS') and other share-based payment schemes (note 26). At 30 June 2014, the EBT held 249,696 (2013: 212,172) 1p ordinary shares in the Company, acquired for a total consideration of £3,168,000 (2013: £2,544,000) with a market value of £3,906,000 (2013: £3,045,000). They are classified as treasury shares in the consolidated financial statements and their cost has been deducted from retained earnings within shareholders' equity.

25. Other reserves and retained earnings

Other reserves are comprised of the following balances:

	2014	2013
	£'000	£'000

Share option reserve	4,596	3,697
Merger reserve	192	192
Available for sale reserve	(68)	63
Total other reserves	4,720	3,952

The movements in other reserves during the year were as follows:

	2014	2013
	£'000	£'000
Share option reserve

At beginning of the year	3,697	2,724
Share-based payments	1,288	1,111
Transfer to retained earnings	(545)	(350)
Tax on share-based payments	156	212
At end of the year	4,596	3,697


Merger reserve

At beginning of the year	192	192
At end of the year	192	192


Available for sale reserve

At beginning of the year	63	72
Revaluation of available for sale financial assets	(131)	(9)
At end of the year	(68)	63

The movements in retained earnings during the year were as follows:

	2014	2013
	£'000	£'000

At beginning of the year	21,607	16,190
Profit for the financial year	9,056	8,030
Purchase of own shares by Employee Benefit Trust	(732)	(779)
Transfer from share option reserve	545	350
Dividends paid	(3,020)	(2,184)
At end of the year	27,456	21,607

26. Equity settled share-based payments

All share options granted to employees under the Group's equity settled share-based payment schemes are valued using a Black Scholes model, based on the market price of the Company's shares at the grant date and volatility ranging from 15% to 50% on an historic price, covering the period to the end of the contractual life. Volatility has been estimated on the basis of the Company's historical share price subsequent to flotation. The risk-free annual rate of interest is deemed to be the yield on a gilt edged security with a maturity term of 10 years, ranging from 0.34% to 2.00%.

For options granted during the year, the Black Scholes model was based on the market price of the Company's shares at each respective grant date and volatility of 50% with no dividend yield, an expected vesting period of three years and a risk-free annual rate of interest of 0.34%.

The share options issued under the various equity settled share-based payment schemes have been valued at prices ranging from £nil to £14.64 per share. The charge to the Consolidated Statement of Comprehensive Income for the year in respect of these was £1,288,000 (2013: £1,111,000). The weighted average remaining contractual life of all equity settled share-based payment schemes at 30 June 2014 was 2.08 years (2013: 2.61 years). The weighted average share price of all options exercised during the year was £15.79 (2013: £13.75). The total charge to the Consolidated Statement of Comprehensive Income for the year for all share-based payment schemes was £1,130,000 (2013: £1,624,000).

The exercise price and fair value of share options granted during the year was as follows:

	Exercise price	Fair value
	p	p

Long Term Incentive Scheme	nil	1,464
Employee Sharesave Scheme	1,386	428

No options were granted under the EMI Scheme during the year.

a) Enterprise Management Incentive Scheme ('EMI')

Under the approved EMI Scheme, certain employees hold options to subscribe for shares in the Company at prices ranging from 140p to 775p. Options are conditional on the employee completing three years' service (the vesting period) and are exercisable three years from the grant date. The options have a contractual option term of seven years from the date they become exercisable. The Group has no legal or constructive obligation to repurchase or settle the options in cash.

		2014		2013
	Number of options	Weighted average exercise price £	Number of options	Weighted average exercise price £

At 1 July	98,753	2.77	182,657	3.00
Forfeited in the year	-	-	(10,804)	7.75
Exercised in the year	(29,500)	2.47	(73,100	2.61
At 30 June	69,253	2.90	98,753	2.77

The number of share options outstanding at the reporting date was as follows:

Scheme year (grant date)	Exercise price	Vesting period	2014	2013
	p		Number of options	Number of options


2005	155.5	2008 - 2015	25,000	25,000
2006	215.0	2009 - 2016	6,500	23,500
2007	290.5	2010 - 2017	29,650	42,150
2010	775.0	2013 - 2020	8,103	8,103
All years			69,253	98,753

b) Long Term Incentive Scheme ('LTIS')

The Company has made annual awards under the LTIS to executive directors and other senior executives. The conditional awards, which vest three years after the grant date, are subject to the satisfaction of specified performance criteria, measured over a three year performance period. All such conditional awards are made at the discretion of the Remuneration Committee.

	2014	2013
	Number of options	Number of options

At 1 July	205,613	128,343
Granted in the year	45,068	78,954
Exercised in the year	(11,376)	-
Forfeited in the year	(5,809)	(1,684)
At 30 June	233,496	205,613

The number of share options outstanding at the reporting date was as follows:

Scheme year (grant date)	Exercise price	Vesting period	2014	2013
	p		Number of options	Number of options

2010	nil	2013	22,962	33,848
2011	nil	2014	91,554	92,811
2012	nil	2015	74,937	78,954
2013	nil	2016	44,043	-
All years			233,496	205,613

c) Employee Benefit Trust ('EBT')

Brooks Macdonald Group plc established an Employee Benefit Trust ('the Trust') on 3 December 2010. The Trust was established to acquire ordinary shares in the Company to satisfy rights to purchase shares on the exercise of options awarded under the LTIS. All finance costs and administration expenses connected with the Trust are charged to Consolidated Statement of Comprehensive Income as they accrue. The Trust has waived its rights to dividends. The following table shows the number of shares held by the Trust that have not yet vested unconditionally.

	2014	2013
	Number of shares	Number of shares

At 1 July	212,172	151,139
Acquired in the year	48,900	61,033
Exercised in the year	(11,376)	-
At 30 June	249,696	212,172

d) Company Share Option Plan ('CSOP')

The Company has established a Company Share Option Plan ('CSOP'), which was approved by HMRC in November 2013. The CSOP is a discretionary scheme whereby employees or directors are granted an option to purchase the Company's shares in the future at a price set on the date of the grant. The maximum award under the terms of the scheme is a total market value of £30,000 per recipient. The performance conditions attached to the scheme require an increase in the diluted earnings per share of the Company of 2% more than the increase in the RPI over the three years starting with the financial year in which the option is granted.

The number of share options outstanding at the reporting date was as follows:

		2014		2013
	Number of options	Weighted average exercise price £	Number of options	Weighted average exercise price £

At 1 July	-	-	-	-
Granted in the year	21,361	14.52	-	-
Lapsed in the year	(345)	14.52	-	-
At 30 June	21,016	14.52	-	-

e) Employee Sharesave Scheme

Under the scheme, employees can contribute up to £500 a month over a three year period to acquire shares in the Company. At the end of the savings period, employees can elect to receive shares or receive their savings in cash.

		2014		2013
	Number of options	Weighted average exercise price £	Number of options	Weighted average exercise price £

At 1 July	147,323	10.23	180,566	8.33
Granted in the year	149,083	13.86	39,489	11.72
Forfeited in the year	(8,265)	10.52	(13,547)	9.54
Exercised in the year	(56,669)	9.04	(59,185)	5.54
At 30 June	231,472	12.85	147,323	10.23

The number of share options outstanding at 30 June 2014 was as follows:

Scheme year (grant date)	Exercise price	Vesting period	2014	2013
	p		Number of options	Number of options


2010	578.0	2013	-	2,040
2011	916.0	2014	1,654	58,536
2012	1,054.0	2015	44,512	48,332
2013	1,172.0	2016	36,612	38,415
2014	1,386.0	2017	148,694	-
All years			231,472	147,323

27. Earnings per share

The directors believe that adjusted earnings per share provide a truer reflection of the Group's underlying performance in the year. Adjusted earnings per share are calculated based on 'adjusted earnings', that is earnings before acquisition costs, finance costs of deferred consideration and amortisation of intangible non-current assets. The tax effect of these adjustments has also been considered.

	2014	2013
	£'000	£'000

Earnings attributable to ordinary shareholders	9,056	8,030
Acquisition costs (note 5)	187	1,047
Finance cost of deferred consideration (note 7)	349	279
Amortisation (note 11)	2,212	1,865
Tax impact of adjustments	(486)	(502)
Adjusted earnings attributable to ordinary shareholders	11,318	10,719

The weighted average number of shares in issue during the year was as follows:

	2014	2013
	Number of shares	Number of shares

Weighted average number of shares in issue*	13,145,314	12,210,418
Adjustment for issue of shares on acquisition of DPZ	(21,680)	(20,834)
Weighted average number of shares in issue^†	13,123,634	12,189,584
Effect of dilutive potential shares issuable on exercise of employee share options	64,289	111,793
Diluted weighted average number of shares in issue^†	13,187,923	12,301,377

*2013 comparative as previously reported ^†2013 comparative as restated

The comparative weighted average number of shares in issue and therefore the comparatives for basic earnings per share and diluted earnings per share have been restated to take account of shares issued at a premium to their market value as part of the DPZ acquisition.

	2014	2013
	p	p
Based on reported earnings^†:
Basic earnings per share	69.01	65.88
Diluted earnings per share	68.67	65.28

Based on adjusted earnings^†:
Basic earnings per share	86.24	87.94
Diluted earnings per share	85.82	87.14

^†2013 comparative as restated

28. Lease commitments

The Group leases various office premises under non-cancellable operating lease arrangements. The future aggregate minimum lease payments under these leases are as follows:

	2014	2013
	£'000	£'000

Within one year	1,373	1,162
Second to fifth years inclusive	1,882	2,240
After five years	46	38

29. Discretionary funds under management

The Group holds client money and assets on behalf of clients in accordance with the client money rules of the Financial Conduct Authority. Such money and the corresponding liabilities to clients are not shown in the Consolidated Statement of Financial Position as the Group is not beneficially entitled thereto. The total market value of client money and assets held is shown below:

	2014	2013
	£'000	£'000

Client money bank accounts	573,204	595,365
Client assets under management	5,976,796	4,514,635
Total client funds under management	6,550,000	5,110,000

30. Financial risk management

The Group has identified the financial risks arising from its activities and has established policies and procedures as part of a formal structure for managing risk, including establishing risk lines, reporting lines, mandates and other control procedures. The structure is reviewed regularly. The Group does not use derivative financial instruments for risk management purposes.

a) Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due.

The primary objective of the Group's treasury policy is to manage short-term liquidity requirements and to ensure that the Group maintains a surplus of immediately realisable assets over its liabilities, such that all known and potential cash obligations can be met.

The table below shows the cash inflows and outflows from the Group under non-derivative financial assets and liabilities, together with cash and bank balances available on demand.

	On demand	Not more than 3 months	After 3 months but not more than 1 year	After 1 year but not more than 5 years	Financial assets with no fixed repayment date	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 30 June 2014

Cash flows from financial assets
Available for sale financial assets	-	-	-	-	2,182	2,182
Financial assets at fair value through profit or loss	-	-	-	-	478	478
Cash and balances at bank	18,056	-	-	-	-	18,056
Trade receivables	-	9,653	-	-	-	9,653
Other receivables	-	-	132	-	-	132
	18,056	9,653	132	-	2,660	30,501

Cash flows from financial liabilities
Trade payables	-	2,134	-	-	-	2,134
Other financial liabilities	-	12,588	7,891	3,058	-	23,537
	-	14,722	7,891	3,058	-	25,671

Net liquidity gap	18,056	(5,069)	(7,759)	(3,058)	2,660	4,830


At 30 June 2013

Cash flows from financial assets
Available for sale financial assets	-	-	-	-	1,582	1,582
Cash and balances at bank	18,440	-	-	-	-	18,440
Trade receivables	-	5,158	-	-	-	5,158
Other receivables	-	-	107	-	-	107
	18,440	5,158	107	-	1,582	25,287

Cash flows from financial liabilities
Trade payables	-	2,631	-	-	-	2,631
Other financial liabilities	-	10,609	1,928	5,929	-	18,466
	-	13,240	1,928	5,929	-	21,097

Net liquidity gap	18,440	(8,082)	(1,821)	(5,929)	1,582	4,190

b) Market risk

Interest rate risk

The Group may elect to invest surplus cash balances in short-term cash deposits with maturity dates not exceeding three months. Consequently, the Group has a limited exposure to interest rate risk due to fluctuations in the prevailing level of market interest rates.

A 1% fall in the average monthly interest rate receivable on the Group's cash and cash equivalents would have the impact of reducing interest receivable and therefore profit before taxation by £180,000 (2013: £184,000). An increase of 1% would have an equal and opposite effect.

Foreign exchange risk

The Group does not have any material exposure to transactional foreign currency risk and therefore no analysis of foreign exchange risk is provided.

Price risk

Price risk is the risk that the fair value of the future cash flows from financial instruments will fluctuate due to changes in market prices (other than those arising from interest rate risk or currency risk). The Group is exposed to price risk through its holdings of equity securities and other financial assets, which are measured at fair value in the Consolidated Statement of Financial Position (notes 13 and 17). A 1% fall in the value of these financial instruments would have the impact of reducing other comprehensive income by £22,000 (2013: £12,000) and profit before tax by £5,000 (2013: £nil). An increase of 1% would have an equal and opposite effect.

c) Credit risk

The Group may elect to invest surplus cash balances in highly liquid money market instruments with maturity dates not exceeding three months. The difference between the fair value and the net book value of these instruments is not material. To reduce the risk of a counterparty default, the Group deposits the rest of its funds in approved, high quality banks. At 30 June 2014 there was no significant concentration of credit risk in any particular counterparty (2013: none).

Assets exposed to credit risk recognised on the Consolidated Statement of Financial Position total £18,056,000 (2013: £18,440,000), being the Group's total cash and cash equivalents.

Trade receivables with a carrying amount of £9,653,000 (2013: £5,158,000) are neither past due nor impaired. Trade receivables have no external credit rating as they relate to individual clients, although the value of investments held in each individual client's portfolio is always in excess of the total value of the receivable. All trade receivables fall due within three months (2013: all).

31. Capital management

Capital is defined as the total of share capital, share premium, retained earnings and other reserves of the Company. Total capital at 30 June 2014 was £67,458,000 (2013: £57,560,000). Regulatory capital is derived from the Group Internal Capital Adequacy Assessment Process (ICAAP), which is a requirement of the Capital Requirements Directive. The ICAAP draws on the Group's risk management process which is embedded within the individual businesses, function heads and executive committees within the Group.

The Group's objectives when managing capital are to comply with the capital requirements set by the Financial Conduct Authority, to safeguard the Group's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the business.

Capital adequacy and the use of regulatory capital are monitored daily by the Group's management. The Group's 2014 ICAAP was approved in August 2014. There have been no capital requirement breaches during the year. Brooks Macdonald Group plc's Pillar III disclosure is presented on our website at www.brooksmacdonald.com.

32. Guarantees and contingent liabilities

The Company has an agreement with the Royal Bank of Scotland plc to guarantee settlement for trading with CREST stock on behalf of clients. The Group holds client assets to fund such trading activity.

Additional levies by the Financial Services Compensation Scheme may give rise to further obligations based on the Group's income in the current or previous years. Nevertheless, the ultimate cost to the Group of these levies remains uncertain and is dependent upon future claims resulting from institutional failures.

33. Related party transactions

Certain directors have taken advantage of the Group's interest-free season ticket loan facility which is available to all employees. The directors who have such loans are as follows:

	Loan balance		Maximum amount
	2014	2013	2014	2013
	£'000	£'000	£'000	£'000

N I Holmes	-	1	-	2
S J Jackson	5	5	10	10

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. The Company's individual financial statements include the amounts attributable to subsidiaries. These amounts have been disclosed in aggregate in the relevant company financial statements and in detail in the following table:

	Amounts owed by related parties		Amounts owed to related parties
	2014	2013	2014	2013
	£'000	£'000	£'000	£'000

Braemar Group Limited	2,350	2,150	-	-
Brooks Macdonald Financial Consulting Limited	311	955	-	-
Brooks Macdonald Asset Management Limited	-	-	14,724	17,018
Brooks Macdonald Nominees Limited	-	-	2,583	2,727

All of the above amounts are interest-free and, with the exception of the subordinated loan to Braemar Group Limited, are repayable on demand.

The Group manages a number of collective investment funds that are considered related parties. Available for sale financial assets include an investment of 1,426,793.64 B shares in Braemar Group PCC Limited Student Accommodation Cell (note 13). This transaction was conducted on an arms length basis at market value.

In the year ended 30 June 2014 Brooks Macdonald Funds Limited, a subsidiary of the Group, entered into a new partnership, North Row Capital LLP, in which it holds a 60% interest and has joint control. The balance is owned by two individual partners who developed the investment approach behind the IFSL North Row Liquid Property Fund, which was launched in February 2014. The fund offers investors liquid exposure to global real estate markets by investing predominantly in property derivatives, as well as property equity and debt, to gain exposure to the direct property markets.

The establishment of the partnership and the fund required an initial capital contribution of £135,000 by Brooks Macdonald Funds, with a further investment of £225,000. The Group's share of the loss for the period reported by North Row Capital LLP was £128,000, which has been recognised in the Consolidated Statement of Comprehensive Income with a corresponding reduction in the investment in joint venture recognised in the Consolidated Statement of Financial Position.

34. Events since the end of the year

On 31 July 2014, the Company exercised its option to acquire 100% of the share capital of Levitas Investment Management Services Limited ('Levitas'). Levitas is the sponsor of two funds known as TM Levitas A and TM Levitas B, to which Brooks Macdonald Asset Management Limited acts as the investment adviser. The funds were launched in July 2012 and aggregate assets under management on completion of the acquisition were £89,353,000. The Levitas investment proposition uses a blend of the two funds to match investments to a client's specific risk rating, thus simplifying the investment and rebalancing processes while keeping down costs.

The consideration payable by the Group will be based on 3% of Levitas' funds under management, calculated at agreed milestones up to 1 November 2018. The maximum consideration payable by the Group will be £24,000,000 and is subject to reduction if the growth in funds under management fails to meet the agreed targets. Payment of the consideration will be made by the Group in cash in a series of instalments, with the final payment date being on or around 8 November 2020.

The acquisition will be accounted for as a business combination under IFRS 3 and it is anticipated that goodwill will be recognised. The goodwill represents the Levitas concept; the relationship with Aspira, the principal intermediary and vendor; and growth potential of the assets under management of the two funds in generating future fee income for Levitas. Transaction costs of £80,000 were incurred in the year ended 30 June 2014 and are included within administrative costs in the Consolidated Statement of Comprehensive Income.

Due to the acquisition occurring after the end of the financial year and the proximity to the date of issuing the Annual Report and Accounts, the directors are unable to provide the full disclosures required under IFRS 3 regarding acquisitions after the end of the reporting period but before the financial statements are due for issue. Specifically, an assessment of the acquisition date fair value of the consideration and identifiable assets and liabilities has not yet been completed as the required information is not currently available. This will be finalised in the 12 months following the acquisition and full disclosures will be provided in the Half Yearly Financial Report for the six months ending 31 December 2014.

This information is provided by RNS

The company news service from the London Stock Exchange

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