Final Results

Rathbone Brothers PLC 08 March 2006 8 March 2006 Rathbone Brothers Plc Preliminary results for the 12 months to 31 December 2005 Rathbones sees strong growth in profits and funds under management, and announces two new non-executive appointments Rathbone Brothers Plc, a leading provider of discretionary fund management and wealth management services for private clients and trustees, announces its preliminary results for the year ended 31 December 2005, prepared under International Financial Reporting Standards. Highlights: • Operating income increased by 18.5% to £113.2 million (2004: £95.5 million). • Profits before tax, aborted acquisition costs and LSE-related profits, were £34.4 million, an increase of 28.4% (2004: £26.8 million). • Profits before tax were £35.3 million, an increase of 23.9% (2004: £28.5 million). • Funds under management growth has continued post the year end and on 2 March 2006, total funds under management were £10 billion. • Unit trust profits increased by 182.4% to £3.8 million (2004: £1.3 million). • Basic earnings per share rose by 22.7% to 60.13p (2004: 48.99p). • Recommended final dividend is 18.5p, making a total of 30.0p (2004: 27.5p) for the year - an overall increase of 9.1%. • Two new non-executives appointed: Oliver Corbett, group finance director of SVB Holdings PLC, and Mark Robertshaw, chief financial officer and chief operating officer of The Morgan Crucible Company plc. • Acquisition of Dexia's UK private banking business subject to approval by the Court - hearing scheduled for 23 March 2006. Mark Powell, chairman of Rathbone Brothers Plc, commented: 'As announced on 13 January 2006, funds under management across the board rose by 23.4% to £9.5 billion over the course of 2005. Particularly noteworthy is the achievement of Rathbone Unit Trust Management where funds under management over the year increased by 46.5% to £1.2 billion. The value of segregated portfolios under management within Rathbone Investment Management rose by 20.6% to £8.3 billion. 'This growth in funds under management has continued since the year end with total funds under management as at 2 March 2006 standing at £10 billion, including £1.3 billion managed by Rathbone Unit Trust Management. 'These are record results for Rathbones. We are busy and face the future in all three of our activities with enthusiasm and confidence.' For further information contact: Rathbone Brothers Plc 020 7399 0000 (Switchboard) Mark Powell, Chairman Andy Pomfret, Chief Executive Emily Morris, Marketing Director Smithfield Reg Hoare/Katie Hunt 020 7360 4900 Notes for editors: Rathbone Brothers Plc Rathbone Brothers Plc specialises in providing, through its subsidiaries, personalised investment management and wealth management services for private clients and trustees, including discretionary asset management, tax planning, trust and company management, and banking services. It manages £10 billion of funds, including £1.3 billion managed by Rathbone Unit Trust Management Limited (as at 2 March 2006). Chairman's statement I have great pleasure in presenting our results for the year ended 31 December 2005, the first in respect of which our accounts are presented under International Financial Reporting Standards. 2005 has proved to be a year of considerable growth in UK and overseas stock markets. This has provided the backdrop for an increase in the rates of organic growth within Rathbones and has helped us to make real progress. Profits before tax for the year to 31 December 2005, before one-off professional advisory costs of £1.4m incurred in relation to an approach to Rensburg plc and profits of £2.3m arising from a part disposal of, and dividends from, your Company's investment in London Stock Exchange plc ('LSE'), were £34.4 million compared with £26.8 million in 2004 - an increase of 28.4%. Total profits before tax were £35.3 million compared with £28.5 million for 2004, an increase of 23.9%. Reported earnings per share have risen by 22.7% to 60.13p, compared to 48.99p in 2004. Excluding the Rensburg-related costs and LSE-related profits, earnings per share have risen from 45.44p to 59.50p, an increase of 30.9%. It is recommended that the final dividend be increased to 18.5p, making a total of 30.0p for the year, an increase of 9.1% over the total in respect of 2004. During the year the FTSE 100 Index rose by 16.7% and the FTSE/APCIMS Balanced Index, which more closely reflects the spread of investments held by our clients, rose by 14.9%. As previously announced, funds under management in Rathbones as a whole rose by 23.4% to £9.5 billion at the year end. Particularly noteworthy is the achievement of Rathbone Unit Trust Management where funds under management over the year rose by 46.5% to £1.2 billion. The value of segregated portfolios under management within Rathbone Investment Management rose by 20.6% to £8.3 billion. At 2 March 2006, total funds under management reached £10 billion. These figures reflect a combination of sound investment performance and an increased focus on marketing generally and marketing to financial intermediaries in particular. We have continued to develop and enhance our investment processes which are concerned with asset allocation as well as stock selection. Features of the year have been the increasing use of collective investments, the greater use of funds of alternative assets and the use of structured products. The FTSE 100 Index has now risen by over 75% since its low point in 2003 and during 2005 there was clear evidence of increased volatility in equity markets. Yields on Government stocks have fallen, a trend which has been exacerbated by the desire of pension funds to match liabilities with their investment assets. These market conditions underline the value to private investors, in particular, of an investment management service which embraces carefully considered and balanced investment processes. Our strategic ambitions continue to centre on the provision of investment management services to private investors and trustees, on the management of a range of unit trusts and on the provision of trust and tax services in the UK and offshore. We seek to establish ourselves as the leading independent UK provider of discretionary investment management services to private investors and to achieve this by a combination of organic growth and selective acquisition. 2005 has seen progress in all these three aspects of our business. Profits from Rathbone Investment Management, which provides segregated investment management and is an authorised bank under the Financial Services and Markets Act, have grown by 23.4% and in Rathbone Unit Trust Management they have grown by 182.4%. While both of these areas have benefited from rising and active stock markets, they have also shown their continuing ability to attract and retain client funds under management. The trust division benefits less from increasing asset valuations but has made further progress. The Jersey trust company continues to perform very well and we expect to move from our three existing locations in Jersey into a new purpose-built office in St Helier in September 2006. Our Geneva office is attracting an encouraging flow of new clients and in the UK we continue to focus on providing trust, tax planning and tax compliance services of the very highest quality from our offices in London, Liverpool and Winchester. For many years Rathbones has sought to supplement organic growth by selective recruitment and acquisition. This reflects our strategic objective of becoming the leading independent provider of discretionary investment management services for private investors and trustees in the UK. Our belief is that this sector of the investment management market will consolidate and that a small number of nationally respected organisations will increasingly gain market share. Since the year-end we have announced the acquisition, subject to regulatory approvals, of Dexia's UK investment management and private banking business. We have also been able to attract five experienced investment managers to join us in London from other investment management houses. These developments are consistent with our view that acquisitions and recruitments should involve people joining us who share our views about discretionary investment management and that such developments should be earnings-enhancing within an acceptable timeframe. We look forward to our new colleagues joining us once the legal formalities connected with the acquisition are complete. We welcome the Government's clarification of the asset classes that will be able to be held in self-invested personal pension plans (SIPPs). Rathbones has been a SIPP provider since 1993 and we already manage £300 million of SIPP funds for clients. During 2005, we have been preparing for the implementation of the new pensions simplification regulation and regard the management of SIPP accounts as an area of particular growth potential for us. 2005 saw two important changes in the composition of our Board. In January, Peter Pearson Lund, who heads up Rathbone Unit Trust Management, was appointed to the Board of Rathbone Brothers Plc. Peter first joined Rathbones in 1999, following our decision to re-brand and grow our unit trust activities. Under his leadership, the value of unit trust funds under management has risen from under £100 million to over £1.2 billion. This remarkable growth has resulted from the carefully managed combination of a distinguished investment performance record and energetic and innovative marketing. At the end of the year, Paul Egerton-Vernon stepped down from the Board but we are delighted that he is to remain chairman of Rathbone Trust Company Jersey and devote a substantial amount of his time to client affairs, as well as to the development of our international trust business. Paul originally joined the Board in 2001, following the acquisition of Nigel Harris & Partners. He has contributed greatly to the Board during this time, particularly in the areas where his considerable legal and international experience has been invaluable. Subsequent to the end of the year we have appointed Oliver Corbett, group finance director of SVB Holdings PLC, and Mark Robertshaw of The Morgan Crucible Company plc, who is currently chief operating officer and chief financial officer, and will become chief executive later this year, to our Board as additional independent non-executives. Both bring with them wide ranging experience in the financial sector and elsewhere, as well as keen intellects. We are greatly looking forward to their participation in our affairs. The achievement made in Rathbones during 2005 has only been possible because of the unremitting commitment, hard work and goodwill of all our staff, to whom we owe a great debt of gratitude. These are record results for Rathbones. We are busy and face the future in all three of our activities with enthusiasm and confidence. Mark Powell Chairman 7 March 2006 Consolidated income statement for the year ended 31 December 2005 ------------------------------ ------- --------- --------- Note 2005 2004 £'000 £'000 ------------------------------ ------- --------- --------- Interest and similar income 27,472 20,759 ------------------------------ ------- --------- --------- Interest expense and similar charges (15,029) (10,477) ------------------------------ ------- --------- --------- Net interest income 12,443 10,282 ------------------------------ ------- --------- --------- Fee and commission income 102,869 86,067 ------------------------------ ------- --------- --------- Fee and commission expense (6,850) (4,276) ------------------------------ ------- --------- --------- Net fee and commission income 96,019 81,791 ------------------------------ ------- --------- --------- Dividend income 78 915 ------------------------------ ------- --------- --------- Net trading income 1,409 919 ------------------------------ ------- --------- --------- Net income from sale of available for sale investment 2,261 759 securities ------- --------- --------- ------------------------------ Other operating income 975 861 ------------------------------ ------- --------- --------- Operating income 113,185 95,527 ------------------------------ ------- --------- --------- Operating expenses (77,887) (67,035) ------------------------------ ------- --------- --------- Aborted acquisition costs (1,381) - Other operating expenses (76,506) (67,035) ------------------------------ ------- --------- --------- Profit before tax 35,298 28,492 ------------------------------ ------- --------- --------- Profit before aborted acquisition costs and tax 36,679 28,492 Aborted acquisition costs (1,381) - ------------------------------ ------- --------- --------- Income tax expense 4 (10,617) (8,540) ------------------------------ ------- --------- --------- Profit for the year attributable to equity holders of 24,681 19,952 the company ------- --------- --------- ------------------------------ ------------------------------ ------- --------- --------- Earnings per share for the year attributable to equity holders of the company: ------- --------- --------- ------------------------------ Basic 6 60.13p 48.99p ------------------------------ ------- --------- --------- Diluted 6 58.84p 48.07p ------------------------------ ------- --------- --------- ------------------------------ ------- --------- --------- Dividends paid and proposed for the year per ordinary 5 30.00p 27.50p share ------- --------- --------- ------------------------------ Dividends (£'000) 12,351 11,221 ------------------------------ ------- --------- --------- Consolidated balance sheet as at 31 December 2005 ------------------------------ ------- --------- --------- Note 2005 2004 £'000 £'000 ------------------------------ ------- --------- --------- Assets ------------------------------ ------- --------- --------- Cash and balances at central banks 511 15,840 ------------------------------ ------- --------- --------- Settlement balances 14,017 11,199 ------------------------------ ------- --------- --------- Loans and advances to banks 144,975 57,881 ------------------------------ ------- --------- --------- Loans and advances to customers 37,520 41,226 ------------------------------ ------- --------- --------- Investment securities ------------------------------ ------- --------- --------- - available for sale 5,157 7,219 ------------------------------ ------- --------- --------- - held to maturity 396,000 381,119 ------------------------------ ------- --------- --------- Intangible assets 60,101 59,860 ------------------------------ ------- --------- --------- Property, plant and equipment 4,295 4,480 ------------------------------ ------- --------- --------- Deferred tax asset 8,599 4,379 ------------------------------ ------- --------- --------- Prepayments, accrued income and other assets 25,093 22,154 ------------------------------ ------- --------- --------- Total assets 696,268 605,357 ------------------------------ ------- --------- --------- Liabilities ------------------------------ ------- --------- --------- Deposits by banks 1,853 3,243 ------------------------------ ------- --------- --------- Settlement balances 16,133 15,238 ------------------------------ ------- --------- --------- Derivative financial instruments 7 19 ------------------------------ ------- --------- --------- Due to customers 493,612 425,078 ------------------------------ ------- --------- --------- Debt securities in issue 141 286 ------------------------------ ------- --------- --------- Accruals, deferred income and other liabilities 27,526 23,003 ------------------------------ ------- --------- --------- Current tax liabilities 7,869 6,067 ------------------------------ ------- --------- --------- Retirement benefit obligations 8 18,710 14,983 ------------------------------ ------- --------- --------- Total liabilities 565,851 487,917 ------------------------------ ------- --------- --------- Equity ------------------------------ ------- --------- --------- Share capital 2,063 2,043 ------------------------------ ------- --------- --------- Share premium 9 17,487 14,766 ------------------------------ ------- --------- --------- Other reserves 9 53,013 54,457 ------------------------------ ------- --------- --------- Retained earnings 9 57,854 46,174 ------------------------------ ------- --------- --------- Total equity 130,417 117,440 ------------------------------ ------- --------- --------- Total equity and liabilities 696,268 605,357 ------------------------------ ------- --------- --------- Consolidated cash flow statement for the year ended 31 December 2005 ------------------------------ ------- --------- --------- Note 2005 2004 £'000 £'000 ------------------------------ ------- --------- --------- Cash flows from operating activities ------------------------------ ------- --------- --------- Profit before tax 35,298 28,492 ------------------------------ ------- --------- --------- Net income from sale of available for sale investment securities (2,261) (759) ------------------------------ ------- --------- --------- Movement in fair value of derivative financial instruments (12) 19 ------------------------------ ------- --------- --------- Impairment losses on loans and advances 386 (15) ------------------------------ ------- --------- --------- Profit on disposal of plant and equipment (160) (135) ------------------------------ ------- --------- --------- Depreciation and amortisation 2,497 2,629 ------------------------------ ------- --------- --------- Defined benefit pension scheme charges 2,920 2,645 ------------------------------ ------- --------- --------- Share based payment charges 1,971 1,329 ------------------------------ ------- --------- --------- 40,639 34,205 ------------------------------ ------- --------- --------- Changes in operating assets and liabilities ------------------------------ ------- --------- --------- - net (increase) in loans and advances to banks and customers (18,490) (9,793) ------------------------------ ------- --------- --------- - net (increase)/decrease in settlement balance debtors (2,818) 2,323 ------------------------------ ------- --------- --------- - net (increase) in prepayments, accrued income and other assets (2,963) (1,713) ------------------------------ ------- --------- --------- - net increase in amounts due to customers and deposits by banks 67,509 56,317 ------------------------------ ------- --------- --------- - net increase in settlement balance creditors 894 3,862 ------------------------------ ------- --------- --------- - net increase in accruals, deferred income, provisions and other liabilities 4,587 8,151 ------------------------------ ------- --------- --------- Cash generated from operations 89,358 93,352 ------------------------------ ------- --------- --------- Defined benefit pension contributions paid (3,359) (2,362) ------------------------------ ------- --------- --------- Tax paid (10,246) (7,002) ------------------------------ ------- --------- --------- Net cash inflow from operating activities 75,753 83,988 ------------------------------ ------- --------- --------- Cash flows from investing activities ------------------------------ ------- --------- --------- Acquisition of businesses, net of cash acquired - (169) ------------------------------ ------- --------- --------- Purchase of property, equipment and intangible assets (2,602) (2,249) ------------------------------ ------- --------- --------- Proceeds from sale of property and equipment 205 211 ------------------------------ ------- --------- --------- Purchase of investment securities (1,229,307) (1,495,420) ------------------------------ ------- --------- --------- Proceeds from sale and redemption of investment securities 1,240,609 1,422,139 ------------------------------ ------- --------- --------- Net cash generated from/(used in) investing activities 8,905 (75,488) ------------------------------ ------- --------- --------- Cash flows from financing activities ------------------------------ ------- --------- --------- Repayments of debt securities (146) (611) ------------------------------ ------- --------- --------- Purchase of shares for share based schemes (293) (1,266) ------------------------------ ------- --------- --------- Issue of ordinary shares 11 1,586 745 ------------------------------ ------- --------- --------- Dividends paid (11,660) (10,780) ------------------------------ ------- --------- --------- Net cash used in financing activities (10,513) (11,912) ------------------------------ ------- --------- --------- Net increase/(decrease) in cash and cash equivalents 74,145 (3,412) ------------------------------ ------- --------- --------- Cash and cash equivalents at the beginning of the year 160,517 164,132 ------------------------------ ------- --------- --------- Effect of exchange rate changes on cash and cash equivalents 221 (203) ------------------------------ ------- --------- --------- Cash and cash equivalents at the end of the year 11 234,883 160,517 ------------------------------ ------- --------- --------- Consolidated statement of recognised income and expense for the year ended 31 December 2005 ------------------------------ --------- --------- 2005 2004 £'000 £'000 ------------------------------ --------- --------- Profit after taxation 24,681 19,952 ------------------------------ --------- --------- Exchange translation differences 120 (109) ------------------------------ --------- --------- Actuarial loss on retirement benefit obligation (4,166) (856) ------------------------------ --------- --------- Revaluation of available for sale investment securities: ------------------------------ --------- --------- - net gain from changes in fair value 199 2,177 - net profit on disposal transferred to income during the period (2,261) (759) ------------------------------ --------- --------- (2,062) 1,418 ------------------------------ --------- --------- Deferred tax on equity items: ------------------------------ --------- --------- - available for sale investment securities 619 (425) - actuarial gains and losses 1,250 257 ------------------------------ --------- --------- 1,869 (168) ------------------------------ --------- --------- Net (expense)/income recognised directly in equity (4,239) 285 ------------------------------ --------- --------- Recognised income and expense for the period attributable to 20,442 20,237 equity holders of the company --------- --------- ------------------------------ Notes 1. Accounting policies In preparing the financial information included in this statement the Group has applied policies which are in accordance with International Financial Reporting Standards as adopted by the European Commission at 31 December 2005. Full details of the Group's accounting policies can be found in Appendix 3 of the Transition to International Financial Reporting Standards press release dated 4 August 2005, which is available on our website (http://www.rathbones.com/rat/ investor/rns/). 2. Critical accounting judgements and key sources of estimation and uncertainty The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Retirement benefit obligations The Group makes estimates about a range of long term trends and market conditions to determine the value of the deficit on its retirement benefit schemes, based on the Group's expectations of the future and advice taken from qualified actuaries. The principal assumptions underlying the reported deficit of £18,710,000 are given in note 8. Long term forecasts and estimates are necessarily highly judgemental and subject to risk that actual events may be significantly different to those forecast. If actual events deviate from the assumptions made by the Group then the reported surplus or deficit in respect of retirement benefit obligations may be materially different. Share based payments In determining the fair value of equity settled share based awards and the related charge to the income statement, the Group makes assumptions about future events and market conditions. In particular, judgements must be formed as to the likely number of shares that will vest, and the fair value of each award granted. The fair value of awards is determined using a valuation model which is dependent on further estimates, including the Group's future dividend policy, employee turnover, the timing with which options will be exercised and future volatility in the price of the Group's shares. Such assumptions are based on publicly available information and reflect market expectations and advice taken from qualified actuaries. Different assumptions about these factors to those made by the Group could materially affect the reported value of share based payments. Impairment of goodwill The Group makes estimates in relation to the value in use of the cash generating units to which goodwill has been allocated in determining whether goodwill is impaired. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was £57,739,000. 3. Segmental information (a) Business segments For management purposes, the Group is currently organised into three operating divisions: Investment Management and Banking, Unit Trusts and Trust Services. These divisions are the basis on which the Group reports its primary segment information. Transactions between the business segments are on normal commercial terms and conditions. Intra-segment income constitutes trail commission. Revenues and expenses are allocated to the business segment that originated the transaction. Centrally incurred expenses are allocated to business segments on an appropriate pro-rata basis. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet, but exclude items such as taxation and borrowings. --------------- -------- -------- -------- -------- -------- Investment Unit Trust Eliminations Total management and trusts services banking At 31 December £'000 £'000 £'000 £'000 £'000 2005 -------- -------- -------- -------- -------- --------------- External revenues 93,927 16,600 22,221 - 132,748 --------------- -------- -------- -------- -------- -------- Revenues from other segments 1,199 - - (1,199) - --------------- -------- -------- -------- -------- -------- 95,126 16,600 22,221 (1,199) 132,748 --------------- -------- -------- -------- -------- -------- Unallocated external revenues 2,316 --------------- -------- -------- -------- -------- -------- Total revenues 135,064 --------------- -------- -------- -------- -------- -------- Segment result 27,383 3,784 3,194 34,361 --------------- -------- -------- -------- -------- -------- Unallocated items 937 --------------- -------- -------- -------- -------- -------- Profit before tax 35,298 --------------- -------- -------- -------- -------- -------- Tax (10,617) --------------- -------- -------- -------- -------- -------- Profit for the year 24,681 --------------- -------- -------- -------- -------- -------- Segment assets 601,607 11,374 53,617 666,598 --------------- -------- -------- -------- -------- -------- Unallocated assets 29,670 --------------- -------- -------- -------- -------- -------- Total assets 696,268 --------------- -------- -------- -------- -------- -------- Segment liabilities 511,966 7,985 17,589 537,540 --------------- -------- -------- -------- -------- -------- Unallocated liabilities 28,311 --------------- -------- -------- -------- -------- -------- Total liabilities 565,851 --------------- -------- -------- -------- -------- -------- Other segment items: -------- -------- -------- -------- -------- --------------- Capital expenditure 1,816 93 693 2,602 --------------- -------- -------- -------- -------- -------- Depreciation and amortisation 1,891 138 467 2,496 --------------- -------- -------- -------- -------- -------- Other non-cash expenses 1,498 208 785 2,491 --------------- -------- -------- -------- -------- -------- Provisions --------------- -------- -------- -------- -------- -------- - recognised in the year 1,819 - 704 2,523 --------------- -------- -------- -------- -------- -------- - utilised/rever sed in the year 230 - 339 569 --------------- -------- -------- -------- -------- -------- --------------- -------- -------- -------- -------- -------- -------- At 31 December Investment Unit Trust Eliminations Total 2004 management and trusts services banking £'000 £'000 £'000 £'000 £'000 --------------- -------- -------- -------- -------- -------- -------- External revenues 76,480 10,763 21,365 - 108,608 --------------- -------- -------- -------- -------- -------- Revenues from other segments 1,367 - - (1,367) - --------------- -------- -------- -------- -------- -------- 77,847 10,763 21,365 (1,367) 108,608 --------------- -------- -------- -------- -------- -------- Unallocated external revenues 1,672 --------------- -------- -------- -------- -------- -------- Total revenues 110,280 --------------- -------- -------- -------- -------- -------- Segment result 22,197 1,340 3,283 26,820 --------------- -------- -------- -------- -------- -------- Unallocated items 1,672 --------------- -------- -------- -------- -------- -------- Profit before tax 28,492 --------------- -------- -------- -------- -------- -------- Tax (8,540) --------------- -------- -------- -------- -------- -------- Profit for the year 19,952 --------------- -------- -------- -------- -------- -------- Segment assets 515,589 9,630 55,449 580,668 --------------- -------- -------- -------- -------- -------- Unallocated assets 24,689 --------------- -------- -------- -------- -------- -------- Total assets 605,357 --------------- -------- -------- -------- -------- -------- Segment liabilities 447,518 8,365 21,625 477,508 --------------- -------- -------- -------- -------- -------- Unallocated liabilities 10,409 --------------- -------- -------- -------- -------- -------- Total liabilities 487,917 --------------- -------- -------- -------- -------- -------- Other segment items: -------- -------- -------- -------- -------- --------------- Capital expenditure 2,398 81 414 2,893 --------------- -------- -------- -------- -------- -------- Depreciation and amortisation 2,050 115 568 2,733 --------------- -------- -------- -------- -------- -------- Other non-cash expenses 916 99 314 1,329 --------------- -------- -------- -------- -------- -------- Provisions --------------- -------- -------- -------- -------- -------- - recognised in the year - - 370 370 --------------- -------- -------- -------- -------- -------- - utilised/rever sed in the year 167 - 77 244 --------------- -------- -------- -------- -------- -------- (b) Geographical Segments The Group's operations are located in the United Kingdom, Jersey, Switzerland and the British Virgin Islands. The following table provides an analysis of the Group's revenues by geographical market, by origin of the services: External revenue by geographical market ------------------------ ----------- ---------- 2005 2004 £'000 £'000 ------------------------ ----------- ---------- United Kingdom 113,146 90,129 ------------------------ ----------- ---------- Jersey 17,579 15,897 ------------------------ ----------- ---------- Rest of the world 4,339 4,254 ------------------------ ----------- ---------- 135,064 110,280 ------------------------ ----------- ---------- The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located: Carrying amount of segment assets ------------------------ ----------- ---------- 2005 2004 £'000 £'000 ------------------------ ----------- ---------- United Kingdom 622,115 535,543 ------------------------ ----------- ---------- Jersey 24,132 24,203 ------------------------ ----------- ---------- Rest of the world 20,351 20,922 ------------------------ ----------- ---------- 666,598 580,668 ------------------------ ----------- ---------- Additions to property, plant and equipment and intangible assets ------------------------ -------- ----------- ---------- 2005 2004 £'000 £'000 ------------------------ -------- ----------- ---------- United Kingdom 2,022 2,608 ------------------------ -------- ----------- ---------- Jersey 444 172 ------------------------ -------- ----------- ---------- Rest of the world 136 113 ------------------------ -------- ----------- ---------- 2,602 2,893 ------------------------ -------- ----------- ---------- (c) Total revenues Total revenue constitutes the following: ------------------------ ----------- ---------- 2005 2004 £'000 £'000 ------------------------ ----------- ---------- Interest and similar income 27,472 20,759 ------------------------ ----------- ---------- Fee and commission income 102,869 86,067 ------------------------ ----------- ---------- Dividend income 78 915 ------------------------ ----------- ---------- Net trading income 1,409 919 ------------------------ ----------- ---------- Gains less losses from investment securities 2,261 759 ------------------------ ----------- ---------- Other operating income 975 861 ------------------------ ----------- ---------- Total revenue 135,064 110,280 ------------------------ ----------- ---------- Interest payable (15,029) (10,477) ------------------------ ----------- ---------- Fees and commission expense (6,850) (4,276) ------------------------ ----------- ---------- Operating income 113,185 95,527 ------------------------ ----------- ---------- 4. Income tax expense ------------------------ ----------- ---------- 2005 2004 £'000 £'000 ------------------------ ----------- ---------- Current tax 11,649 8,576 ------------------------ ----------- ---------- Adjustments in respect of previous years 387 51 ------------------------ ----------- ---------- Deferred tax (1,419) (87) ------------------------ ----------- ---------- 10,617 8,540 ------------------------ ----------- ---------- The tax charge for the year is higher than the standard rate of corporation tax in the UK of 30% (2004: 30%). The differences are explained below: ----------------------------- ----------- ---------- 2005 2004 £'000 £'000 ----------------------------- ----------- ---------- Tax on ordinary activities at the standard rate of 30% (2004 10,590 8,548 - 30%) ----------------------------- ----------- ---------- Effects of: ----------------------------- ----------- ---------- UK dividend income (17) (271) ----------------------------- ----------- ---------- Irrecoverable trading losses 70 - ----------------------------- ----------- ---------- Disallowable expenses 639 208 ----------------------------- ----------- ---------- Share based payments (101) (124) ----------------------------- ----------- ---------- UK tax on overseas subsidiary dividends 63 (9) ----------------------------- ----------- ---------- Tax relief on purchased goodwill (73) (99) ----------------------------- ----------- ---------- Withholding tax suffered 3 2 ----------------------------- ----------- ---------- Lower tax rates on overseas earnings (36) (71) ----------------------------- ----------- ---------- (Over)/under provision for tax in previous years (521) 356 ----------------------------- ----------- ---------- Income tax expense 10,617 8,540 ----------------------------- ----------- ---------- In addition to the amount charged to the income statement, deferred tax relating to actuarial gains and losses, share based payments and gains and losses arising on available for sale investment securities amounting to £2,801,000 has been credited directly to equity (2004: £334,000). 5. Dividends ----------------------------- ----------- ---------- 2005 2004 £000 £000 ----------------------------- ----------- ---------- Amounts recognised as distributions to equity holders in the year: ----------- ---------- ----------------------------- - final dividend for the year ended 31 December 2004 (2003) of 17p (2003: 16p) per share 6,948 6,507 ----------------------------- ----------- ---------- - adjustment to 2004 final dividend of 17p per share on 31,991 shares in respect of dividends waived (5) - ----------------------------- ----------- ---------- - interim dividend for the year ended 31 December 2005 (2004) of 11.5p (2004: 10.5p) per share 4,724 4,276 ----------------------------- ----------- ---------- - adjustment to 2004 interim dividend of 10.5p per share on 31,065 shares in respect of dividends waived - (3) ----------------------------- ----------- ---------- - adjustment to 2005 interim dividend of 11.5p per share on 59,435 shares in respect of dividends waived (7) - ----------------------------- ----------- ---------- 11,660 10,780 ----------------------------- ----------- ---------- Proposed final dividend for the year ended 31 December 2005 (2004) of 18.5p (2004: 17p) per share 7,634 6,948 ----------------------------- ----------- ---------- The interim dividend of 11.5p per share was paid on 14 October 2005 to shareholders on the register at the close of business on 23 September 2005. The final dividend declared of 18.5p per share is payable on 11 May 2006 to shareholders on the register at the close of business on 18 April 2006. The final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 6. Earnings per share Basic earnings per share has been calculated by dividing the profits attributable to shareholders of £24,681,000 (2004: £19,952,000) by the weighted average number of shares in issue throughout the year of 41,046,753 (2004: 40,729,520). Diluted earnings per share is the basic earnings per share, adjusted for the effect of contingently issuable shares under the Long Term Incentive Plan, employee share options remaining capable of exercise and any dilutive shares to be issued under the Share Incentive Plan, weighted for the relevant period (see table below). 2005 2004 ----------------------------- ----------- ---------- Weighted average number of ordinary shares in issue during the year - basic 41,046,753 40,729,520 ----------------------------- ----------- ---------- Effect of ordinary share options 385,312 333,709 ----------------------------- ----------- ---------- Effect of dilutive shares issuable under the Share Incentive Plan 163,556 174,606 ----------------------------- ----------- ---------- Effect of contingently issuable ordinary shares under the Long Term Incentive Plan 354,242 265,611 ----------------------------- ----------- ---------- Diluted ordinary shares 41,949,863 41,503,446 ----------------------------- ----------- ---------- 7. Provisions ------------------ ---------- ---------- --------- --------- -------- Deferred contingent Client Litigation Total consideration compensation related £'000 £'000 £'000 £'000 ------------------ ---------- ---------- --------- --------- -------- At 1 January 2005 157 321 392 870 ------------------ ---------- --------- --------- -------- Exchange adjustments - - (13) (13) ------------------ ---------- --------- --------- -------- Charged to the income statement - 1,991 532 2,523 ------------------ ---------- --------- --------- -------- Utilised during the year - (212) (329) (541) ------------------ ---------- --------- --------- -------- Unused amount reversed - (28) - (28) ------------------ ---------- --------- --------- -------- 157 2,072 582 2,811 ------------------ ---------- --------- --------- -------- A total amount of £594,000 has been included in 'Other debtors' representing an estimate of insurance recoveries in relation to a number of the provisions above. The charge to the income statement net of estimated insurance recoveries is as follows: ------------------------- --------- --------- -------- Client compensation Litigation related Total £'000 £'000 £'000 ------------------------- --------- --------- -------- Gross charge to income statement 1,991 532 2,523 ------------------------- --------- --------- -------- Estimated insurance recoveries (562) (32) (594) ------------------------- --------- --------- -------- Net charge to income statement 1,429 500 1,929 ------------------------- --------- --------- -------- Deferred contingent consideration relates to an agreement in relation to the introduction of investment management clients. The amount of the consideration is contingent on the value of funds transferred and is payable in shares and/or loan notes. In the ordinary course of business, the Group receives complaints from clients in relation to the services provided. Complaints are assessed on a case by case basis and provisions for compensation are made where judged necessary. Provisions have also been made in relation to a number of cases where legal proceedings have been or are expected to be initiated, either by companies within the Group or against companies within the Group. Litigation related provisions include an amount relating to a dispute with a third party in relation to a transfer of business agreement dated November 1999. During the year, the third party initiated legal proceedings against the Group. The Group strongly refutes the claim and has submitted a robust defence and a counterclaim to the Court. Further details on litigation related provisions have not been provided on the basis that the directors consider that this would be prejudicial to the Group's interests. 8. Retirement benefit obligations The Group operates a defined contribution group personal pension scheme and contributes to various other personal pension arrangements for certain directors and employees. The total of contributions made to this scheme during the year was £370,000 (2004: £306,000). The Group also operates defined contribution schemes for overseas employees, for which the total contributions were £450,000 (2004: £503,000). The Group operates two pension schemes providing benefits based on final pensionable pay for executive directors and staff employed by the Company (the Rathbone 1987 Scheme and the Laurence Keen Scheme). The schemes are currently both clients of Rathbone Investment Management Limited, with investments managed on a discretionary basis. Scheme assets are held separately from those of the Group. The scheme operated by Rathbone Stockbrokers Limited (the Laurence Keen Scheme) was closed to new entrants and future pension accrual for the current membership with effect from 1 October 1999. As from that date all the active members of the Laurence Keen Scheme were included under the Rathbone 1987 Scheme for accrual of retirement benefits for further service. The Rathbone 1987 Scheme was closed to new entrants with effect from 31 March 2002. Both schemes continue on a closed basis with the existing assets remaining invested thereunder. The schemes are valued by independent actuaries every three years using the projected unit credit method which looks at the value of benefits accruing over the years following the valuation date based on projected salary to date of termination of services. The valuations are updated at each balance sheet date in between full valuations. The latest full actuarial valuations were carried out as at: Latest full actuarial valuation as at: --------------------- ------------------ Rathbone 1987 Scheme 31 December 2004 --------------------- ------------------ Laurence Keen Scheme 31 December 2002 --------------------- ------------------ The assumptions used by the actuaries are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. The principal actuarial assumptions used, which reflect the different membership profiles of the schemes, were: Laurence Keen Scheme Rathbone 1987 Scheme -------------------- -------- --------- -------- --------- 2005 2004 2005 2004 -------------------- -------- --------- -------- --------- Rate of increase in salaries 4.05% 3.65% 4.05% 3.65% -------------------- -------- --------- -------- --------- Rate of increase in pensions in payment *2.80% *2.70% *2.80% *2.70% -------------------- -------- --------- -------- --------- Rate of increase of deferred pensions 2.80% 2.90% 2.80% 2.90% -------------------- -------- --------- -------- --------- Discount rate 4.90% 5.50% 4.90% 5.50% -------------------- -------- --------- -------- --------- Expected return on scheme assets 5.99% 6.18% 7.06% 7.29% -------------------- -------- --------- -------- --------- Inflation assumption 2.80% 2.90% 2.80% 2.90% -------------------- -------- --------- -------- --------- *5% for service prior to April 2001 The amount included in the balance sheet arising from the Group's obligations in respect of the schemes is as follows: 2005 2004 ----------------- ------- ------- ------- ------- ------- ------- Laurence Rathbone Total Laurence Rathbone Total Keen 1987 Keen 1987 Scheme Scheme Scheme Scheme £'000 £'000 £'000 £'000 £'000 £'000 ----------------- ------- ------- ------- ------- ------- ------- Present value of defined benefit obligations (11,697) (50,501) (62,198) (9,552) (38,214) (47,766) ----------------- ------- ------- ------- ------- ------- ------- Fair value of scheme assets 8,118 35,370 43,488 6,836 25,947 32,783 ----------------- ------- ------- ------- ------- ------- ------- Deficit in scheme (3,579) (15,131) (18,710) (2,716) (12,267) (14,983) ----------------- ------- ------- ------- ------- ------- ------- The amounts recognised in the income statement, within operating expenses, are as follows: 2005 2004 ----------------- ------- ------- ------- ------- ------- ------- Laurence Rathbone Total Laurence Rathbone Total Keen 1987 Keen 1987 Scheme Scheme Scheme Scheme £'000 £'000 £'000 £'000 £'000 £'000 ----------------- ------- ------- ------- ------- ------- ------- Current service cost - 2,585 2,585 - 2,280 2,280 ----------------- ------- ------- ------- ------- ------- ------- Interest cost 519 2,182 2,701 489 1,861 2,350 ----------------- ------- ------- ------- ------- ------- ------- Expected return on scheme assets (419) (1,947) (2,366) (369) (1,616) (1,985) ----------------- ------- ------- ------- ------- ------- ------- 100 2,820 2,920 120 2,525 2,645 ----------------- ------- ------- ------- ------- ------- ------- Actuarial gains and losses have been reported in the statement of recognised income and expense. The actual return on scheme assets was £958,000 (2004: £728,000) for the Laurence Keen Scheme and £6,244,000 (2004: £2,748,000) for the Rathbone 1987 Scheme. Movements in the present value of defined benefit obligations were as follows: 2005 2004 ----------------- ------- ------- ------- ------- ------- ------- Laurence Rathbone Total Laurence Rathbone Total Keen 1987 Keen 1987 Scheme Scheme Scheme Scheme £'000 £'000 £'000 £'000 £'000 £'000 ----------------- ------- ------- ------- ------- ------- ------- At 1 January 9,552 38,214 47,766 8,868 32,009 40,877 ----------------- ------- ------- ------- ------- ------- ------- Service cost (employer's part) - 2,585 2,585 - 2,280 2,280 ----------------- ------- ------- ------- ------- ------- ------- Interest cost 519 2,182 2,701 489 1,861 2,350 ----------------- ------- ------- ------- ------- ------- ------- Contributions from members - 778 778 - 776 776 ----------------- ------- ------- ------- ------- ------- ------- Actuarial gains and losses 1,864 7,138 9,002 466 1,881 2,347 ----------------- ------- ------- ------- ------- ------- ------- Benefits paid (238) (396) (634) (271) (593) (864) ----------------- ------- ------- ------- ------- ------- ------- 11,697 50,501 62,198 9,552 38,214 47,766 ----------------- ------- ------- ------- ------- ------- ------- Movements in the fair value of the schemes' assets were as follows: 2005 2004 ----------------- ------- ------- ------- ------- ------- ------- Laurence Rathbone Total Laurence Rathbone Total Keen 1987 Keen 1987 Scheme Scheme Scheme Scheme £'000 £'000 £'000 £'000 £'000 £'000 ----------------- ------- ------- ------- ------- ------- ------- At 1 January 6,836 25,947 32,783 5,817 21,216 27,033 ----------------- ------- ------- ------- ------- ------- ------- Expected return on scheme assets 419 1,947 2,366 369 1,616 1,985 ----------------- ------- ------- ------- ------- ------- ------- Actuarial gains and losses 539 4,297 4,836 359 1,132 1,491 ----------------- ------- ------- ------- ------- ------- ------- Contributions from the sponsoring companies 562 2,797 3,359 562 1,800 2,362 ----------------- ------- ------- ------- ------- ------- ------- Contributions from scheme members - 778 778 - 776 776 ----------------- ------- ------- ------- ------- ------- ------- Benefits paid (238) (396) (634) (271) (593) (864) ----------------- ------- ------- ------- ------- ------- ------- 8,118 35,370 43,488 6,836 25,947 32,783 ----------------- ------- ------- ------- ------- ------- ------- The analysis of the schemes' assets at the balance sheet date, measured at bid prices, and expected rates of return on those assets was as follows: Laurence Keen Scheme Expected return Fair Value Current allocation ------------- ----- ----- ----- ----- ----- ----- 1.1.05 1.1.04 2005 2004 2005 2004 % % £'000 £'000 % % ------------- ----- ----- ----- ----- ----- ----- Equity instruments 7.50 7.70 4,302 3,257 53 48 ------------- ----- ----- ----- ----- ----- ----- Debt instruments 4.60 4.80 3,342 3,258 41 48 ------------- ----- ----- ----- ----- ----- ----- Cash 4.50 4.60 474 321 6 4 ------------- ----- ----- ----- ----- ----- ----- 8,118 6,836 ------------- ----- ----- ----- ----- ----- ----- Rathbone 1987 Scheme Expected return Fair Value Current allocation ------------- ----- ----- ----- ----- ----- ----- 1.1.05 1.1.04 2005 2004 2005 2004 % % £'000 £'000 % % ------------- ----- ----- ----- ----- ----- ----- Equity instruments 7.50 7.70 27,504 20,856 78 80 ------------- ----- ----- ----- ----- ----- ----- Debt instruments 5.50 5.60 7,045 4,258 20 16 ------------- ----- ----- ----- ----- ----- ----- Cash 4.50 4.60 821 833 2 4 ------------- ----- ----- ----- ----- ----- ----- 35,370 25,947 ------------- ----- ----- ----- ----- ----- ----- The expected return on equities was assumed to be 3.0% above the return on long dated Gilts. The expected rate of return on debt instruments is based on long term yields at the start of the year, with an adjustment for the risk of default and future downgrade in relation to corporate bonds. Cash has been assumed to generate a similar return to short dated bonds. The history of experience adjustments is as follows: Laurence Keen Scheme 2005 2004 ----------------------------- ----------- ---------- Present value of defined benefit obligations (£'000) (11,697) (9,552) ----------------------------- ----------- ---------- Fair value of scheme assets (£'000) 8,118 6,836 ----------------------------- ----------- ---------- Surplus/(deficit) in the scheme (£'000) (3,579) (2,716) ----------------------------- ----------- ---------- Experience adjustments on scheme liabilities: ----------------------------- ----------- ---------- - amount (£'000) 1,864 466 ----------------------------- ----------- ---------- - percentage of scheme liabilities (%) 16% 5% ----------------------------- ----------- ---------- Experience adjustments on scheme assets: ----------------------------- ----------- ---------- - amount (£'000) 539 359 ----------------------------- ----------- ---------- - percentage of scheme assets (%) 7% 5% ----------------------------- ----------- ---------- Rathbone 1987 Scheme 2005 2004 ----------------------------- ----------- ---------- Present value of defined benefit obligations (£'000) (50,501) (38,214) ----------------------------- ----------- ---------- Fair value of scheme assets (£'000) 35,370 25,947 ----------------------------- ----------- ---------- Surplus/(deficit) in the scheme (£'000) (15,131) (12,267) ----------------------------- ----------- ---------- Experience adjustments on scheme liabilities: ----------------------------- ----------- ---------- - amount (£'000) 7,138 1,881 ----------------------------- ----------- ---------- - percentage of scheme liabilities (%) 14% 5% ----------------------------- ----------- ---------- Experience adjustments on scheme assets: ----------------------------- ----------- ---------- - amount (£'000) 4,297 1,132 ----------------------------- ----------- ---------- - percentage of scheme assets (%) 12% 4% ----------------------------- ----------- ---------- The total regular contributions made by the Group to The Rathbone 1987 Scheme during the year were £1,802,000 (2004: £1,800,000) based on 11.5% of pensionable salary. Additional lump sum contributions amounting to £1,000,000 were also paid in 2005 (2004: £nil). With effect from 1 January 2006, employer contributions to the Rathbone 1987 Scheme have been increased to a rate of 15.5% of pensionable salaries. With effect from 1 April 2006, each active member of the scheme will be required to elect either to maintain their current rate of contributions but receive a lower benefit accrual rate or to pay a higher rate of contributions whilst maintaining their current benefit accrual rate. The Group has committed to make additional payments to reduce significantly the current funding deficit and it is expected that these payments will be made during the course of 2006 and 2007. Given that after 31 March 2002 the Rathbone 1987 Scheme was closed to new entrants, the current pension cost will increase as the members of the scheme approach retirement. The total contributions made by the Group to the Laurence Keen Scheme during the year were £562,000 (2004: 562,000). Employer contributions of £562,000 p.a. will be paid to the Scheme for ten years from 2004. As the Scheme was closed to new entrants with effect from 1 October 1999, the current pension cost will increase as the members of the Scheme approach retirement. 9. Reserves and retained earnings ---------------------- ------- ------- ------- -------- ------- Share Merger Available for Translation Retained premium reserve sale reserve reserve earnings £'000 £'000 £'000 £'000 £'000 ---------------------- ------- ------- ------- -------- ------- At 1 January 2004 13,791 49,428 4,036 - 37,547 ---------------------- ------- ------- ------- -------- ------- Retained profit for the year 19,952 ---------------------- ------- ------- ------- -------- ------- Foreign currency translation (109) ---------------------- ------- ------- ------- -------- ------- Dividends paid (10,780) ---------------------- ------- ------- ------- -------- ------- Shares issued 975 ---------------------- ------- ------- ------- -------- ------- Actuarial gains and losses (856) ---------------------- ------- ------- ------- -------- ------- Revaluation of investment securities 2,177 ---------------------- ------- ------- ------- -------- ------- Net gains transferred to net profit on disposal of available for sale investment securities (759) ---------------------- ------- ------- ------- -------- ------- Share based payments ---------------------- ------- ------- ------- -------- ------- - value of employee services 1,167 ---------------------- ------- ------- ------- -------- ------- - cost of shares issued/purchas ed (1,506) ---------------------- ------- ------- ------- -------- ------- Tax on equity items (425) 759 ---------------------- ------- ------- ------- -------- ------- At 1 January 2005 14,766 49,428 5,029 (109) 46,283 ---------------------- ------- ------- ------- -------- ------- Retained profit for the year 24,681 ---------------------- ------- ------- ------- -------- ------- Foreign currency translation 120 ---------------------- ------- ------- ------- -------- ------- Dividends paid (11,660) ---------------------- ------- ------- ------- -------- ------- Shares issued 2,721 ---------------------- ------- ------- ------- -------- ------- Actuarial gains and losses (4,166) ---------------------- ------- ------- ------- -------- ------- Revaluation of investment securities 199 ---------------------- ------- ------- ------- -------- ------- Net gains transferred to net profit on disposal of available for sale investment securities (2,261) ---------------------- ------- ------- ------- -------- ------- Share based payments ---------------------- ------- ------- ------- -------- ------- - value of employee services 1,971 ---------------------- ------- ------- ------- -------- ------- - cost of shares issued/purchas ed (1,448) ---------------------- ------- ------- ------- -------- ------- Tax on equity items 618 2,182 ---------------------- ------- ------- ------- -------- ------- At 31 December 2005 17,487 49,428 3,585 11 57,843 ---------------------- ------- ------- ------- -------- ------- 10. Contingent liabilities and commitments (a) The Group is currently carrying out a review of its Rathbone Self Invested Personal Pension ('Rathbone SIPP') business. The principal aim of the review is to ascertain whether any of the Rathbone SIPPs arranged for clients were unsuitable. The review was initiated by the Group in 2004; the Group's regulator has been consulted in relation to the approach being adopted. To date, the review has identified a small number of cases involving the transfer of clients' existing pension policies into Rathbone SIPPs where the case files do not contain conclusive evidence of suitability and a provision has been made in relation to these (see note 7). There remain 30 cases requiring further investigation and, at this stage, it is not practicable to determine what, if any, financial effect there will be for the Group in respect of those remaining cases. (b) Indemnities are provided to a number of directors and employees in our Trust Division in connection with them acting as Directors on client structures in the normal course of business. (c) Capital expenditure authorised and contracted for at 31 December 2005 but not provided in the accounts amounted to £1,363,000 (2004: £286,000). (d) The contractual amounts of the Group's off balance sheet financial instruments that commit it to extend credit to its clients are as follows: -------------------------- ----------- ---------- 2005 2004 £'000 £'000 -------------------------- ----------- ---------- Guarantees 1,679 902 -------------------------- ----------- ---------- Undrawn commitments to lend of 1 year or less 4,990 3,253 -------------------------- ----------- ---------- 6,669 4,155 -------------------------- ----------- ---------- (e) At 31 December 2005, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: ------------------------- ----------- ----------- 2005 2004 £'000 £'000 ------------------------- ----------- ----------- No later than 1 year 3,147 2,981 ------------------------- ----------- ----------- Later than 1 year and no later than 5 years 12,120 9,957 ------------------------- ----------- ----------- Later than 5 years 6,687 2,003 ------------------------- ----------- ----------- 21,954 14,941 ------------------------- ----------- ----------- Minimum lease payments under operating leases recognised in income for the year were £3,221,000 (2004: £3,133,000) 11. Consolidated cash flow statement For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than three months maturity from the date of acquisition. ---------------------------- ----------- ----------- 2005 2004 £'000 £'000 ---------------------------- ----------- ----------- Cash and balances at central banks 197 15,559 ---------------------------- ----------- ----------- Loans and advances to banks 118,686 52,881 ---------------------------- ----------- ----------- Debt instruments 116,000 92,077 ---------------------------- ----------- ----------- 234,883 160,517 ---------------------------- ----------- ----------- Cash flows arising from issue of ordinary shares comprise: ------------------------------ ---------- ----------- 2005 2004 £'000 £'000 ------------------------------ ---------- ----------- Cash inflow - share capital 20 10 ------------------------------ ---------- ----------- Cash inflow - share premium 2,721 975 ------------------------------ ---------- ----------- Cash outflow - financing of shares in relation to share based schemes (1,155) (240) ------------------------------ ---------- ----------- 1,586 745 ------------------------------ ---------- ----------- 12. Events after the balance sheet date On 12 January 2006, the Group agreed to acquire the investment management and private banking business of Dexia Banque Internationale a Luxembourg S.A., London Branch. The business will be transferred to Rathbone Investment Management Limited by way of a Court order sanctioning a banking business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000. The acquisition is subject to regulatory and Court approval. The Court hearing is scheduled for 23 March 2006 and it is expected that completion will take place during April 2006. The business to be acquired consists of approximately £50 million in loans and £20 million of deposits (in addition to uninvested capital balances from client portfolios of approximately £30 million); and is being purchased at book value. The consideration payable, made up of initial and deferred amounts, will be a maximum amount of £14 million and is ultimately dependent on the value of the funds under management transferred. 13. Financial information The financial information set out in this preliminary announcement has been extracted from the Group's accounts which have been approved by the Board of Directors. The financial information set out above does not constitute the Company's statutory accounts for the year ended 31st December 2005 or 2004. Statutory accounts for 2004, which were drawn up in accordance with generally accepted accounting practice in the UK and not International Financial Reporting Standards, have been delivered to the Registrar of Companies. Statutory accounts for 2005 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on both the 2004 and 2005 accounts. Their reports were unqualified and did not draw attention to any matters by way of emphasis. They also did not contain statements under section 237(2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange

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