B.p Marsh Regulatory News (BPM)

Date: 3rd June 2014

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

Embargoed until: 0700hrs

B. P. Marsh & Partners Plc

Final Results

FINAL RESULTS FOR THE YEAR TO 31.01.14

B.P. Marsh & Partners PLC, the niche venture capital provider to early stage businesses, announces its audited Group final results for the year to 31st January 2014.

The highlights of the results are:

· Sale of 80% of its holding in Hyperion Insurance Group Limited for £29.2m, whilst retaining a 2.79% stake

· Increase in the value of the remaining Portfolio of 14%

· Three new investments made during the period, one in the UK and two separate operations in Australia

· Consolidated profit after tax of £3.8m

· Interim Dividend of 1.25p per share paid; increased and Final Dividend of 2.75p per share declared, reflecting the Group's confidence in the current portfolio and capital position of the Company

· Net Asset Value increase to 202p per share

Chairman's Statement

I am pleased to present the audited Consolidated Financial Statements of B. P. Marsh & Partners Plc for the year ended 31st January 2014.

It has been a busy year for us. During the year we concluded the sale of 80% of our stake in Hyperion Insurance Group Limited ("Hyperion") for £29.2m, retaining a 2.79% stake. The sale of the bulk of this investment, after a partnership of 20 years, has enabled the Group to enter a new phase in its development.

Having successfully navigated the bleak years of the financial downturn, we now find ourselves in the position of having adequate cash in hand to make new investments and reward our shareholders. To this end we have declared, for the first time, an increased dividend for the year, with the aspiration that we will continue to pay a final dividend of at least 2.75p per share in the coming two years.

In addition, in this the Group's 24th year of operation, I am pleased to report that there has again been a steady increase in our Net Asset Value during the year. The Group has achieved an annual compound Net Asset Value growth rate of 11.6% after running costs, realisations, losses and distributions and having made an appropriate allowance for deferred corporation tax since the Group's establishment in 1990 (excluding £10.1m raised on flotation).

I am also pleased to report that during the year there has been an increase of 14% within our ongoing equity Portfolio of Investments and that we have achieved a consolidated profit after tax of £3.8m, post the sale of Hyperion. Our current higher than normal cash position has, however, reduced overall profitability on a year-on-year comparison while the business reinvests the Hyperion proceeds and returns funds to shareholders. As the Group deploys the capital the overall performance of the Portfolio's Net Asset Value will be expected to improve accordingly.

We have in the year made three new investments, totalling approximately £2.7m in equity financing and £2.0m of follow-on loan funding, all of which fall within our heartland of insurance intermediaries, in Walsingham Motor Insurance Limited in London, plus Sterling Insurance PTY Limited and MB Prestige Holdings PTY Limited, which are both separately based in Sydney, Australia.

Within our existing Portfolio, the Group made a further investment in LEBC Holdings Limited, acquiring an additional 12.02%. We also subscribed for our entitlement in the Randall & Quilter share placing in May 2013, increasing our holding from 667,978 to 948,831 shares, to retain its 1.33% stake.

Subsequent to the year-end we successfully realised our holding in the PDGI businesses, which will inject a further net £1m into our cash reserves after costs. It is an exciting time in the market, with a returning appetite for risk-taking and with good opportunities to invest in interesting businesses with capable management teams who are confident in their prospects.

Business Update

Financial Performance

The Group sold 80% of its shareholding in Hyperion for £29.2m in cash, which delivered the majority of the £20.1m increase in retained earnings for the year. The sale enabled the Group to provide net £15.1m in new financing during the year, of which £4.5m (30%) was utilised to fund new investments.

The net asset value of the Group increased by 6.3% over the year to £58.9m, or 202p/share (2013: £55.5m or 190p/share). Consolidated profit after tax was £3.8m (2013: £6.2m) which was mainly as a result of revaluing the investment portfolio in line with current market conditions. The Group's strategy is to cover expenses from the portfolio yield, and on an underlying basis (excluding portfolio movement) this was achieved with a pre-tax profit of £0.2m for the year (2013: £0.06m).

In 2013 the Group's investment in Hyperion was valued at £35.5m which accounted for 67.3% of the Group's equity portfolio. Despite the realisation of 80% of this holding for cash at the 2013 carrying value, the equity portfolio overall increased at a greater rate than compared to 2013 with a 14% increase for the year (2013: increase of 13.3%). The sale was an excellent achievement for the Group, but converting such a significant holding into cash has led to a short-term impact on overall profitability on a year-on-year comparison as the Group deploys capital into new investment opportunities.

Income from investments increased by 8% from 2013 as the cash from the sale of Hyperion was reinvested into new and existing opportunities. Fees receivable reduced by £0.4m compared to 2013 but was offset by loan arrangement fees being levied on new loans granted such that overall total income from fees and loans receivables was £1.9m for the year, up 6% on 2013 (£1.8m).

Operating expenses, including costs of making new investments, were 1% lower during the year at £1.99m (2013: £2.01m).

The Group paid a 1.25p/share dividend during the year, 25% greater than the previous year (2013: 1p/share). Total shareholder return for the year was therefore 6.9%, excluding the 2.75p/share final dividend declared to be paid in July 2014. The Group has delivered an annual compound growth rate of 11.6% in net asset value after all costs, realisations, losses, distributions and deferred tax since 1990 (excluding the £10.1m raised on flotation).

Summary of Developments in the Portfolio

During the financial year ended 31st January 2014, the following developments took place within the Group and its portfolio:-

New Investments

Sterling Insurance Pty Ltd ("Sterling")

The Group acquired an effective 19.7% stake in Sterling, through a joint venture enterprise alongside Besso Insurance Group Limited ("Besso") on 5th June 2013. Sterling is a specialist underwriting agency offering a range of insurance solutions within the Liability sector specialising in niche markets including hard-to-place and complex risks, with offices in Sydney, Perth and Brisbane. Besso has had a commercial relationship with Sterling since 2004.

Since its MBO from International Underwriting Services Pty Limited in 2008, Sterling has grown revenues from AU$2.7m, to AU$5.8m and operating profit of AU$0.5m to a post-tax profit of AU$1.2m as at its year-end position at 31st December 2012.

Neutral Bay Investments Limited ("Neutral Bay"), the joint venture entity (of which the Group owns 49.9%, the remaining majority stake owned by Besso) purchased a 39.47% shareholding in Sterling from Sterling's founder George Condell for AU$6.2m, with George Condell retaining a reduced stake going forwards. Daniel Topping has been appointed to the boards of both Neutral Bay and Sterling, as the Group's nominee director.

The Group funded Besso's proportion of this investment by way of a secured £2m loan facility, repayable over the next four years. This investment is in line with Besso's ambitions to expand internationally and acquire businesses which are complementary to Besso's growth strategy, and the Group is pleased that it is able to assist in making this possible by providing additional investment capital commitments.

Walsingham Motor Insurance Ltd ("Walsingham")

The Group acquired a 30% stake in Walsingham, a new specialist UK Managing General Agency ("MGA") operating in niche motor insurance markets, for a consideration of £0.3m on 3rd December 2013.

The management team has a proven track record in starting and growing MGA businesses. The team also has considerable underwriting expertise, along with long-term experience of the motor insurance sector. Walsingham commenced trading in July 2013 having secured primary capacity from Calpe, a subsidiary of TransRe, a leading international reinsurer.

In addition to the equity investment, the Group has to date provided loan funding of £1.2m.

MB Prestige Holdings PTY Ltd ("MB Group")

The Group acquired a 40% equity position in MB Group on 17th December 2013 for AU$0.8m.

MB Group is an MGA headquartered in Sydney, Australia and is recognised as a market leader in respect of prestige motor vehicle insurance in Australia.

The Group partnered with MB Group's management team to buy out an existing shareholder, delivering a 60% shareholding to MB Group's management team and 40% to the Group. In addition to the equity investment, the Group provided loan funding of AU$1.4m.

Disposals

Hyperion Insurance Group Limited ("Hyperion") - sale of 80%

The transaction to sell 80% of the Group's holding in Hyperion to the global growth equity firm General Atlantic Hawthorn B.V. ("General Atlantic") completed on 8th July 2013 and cash consideration of £29.2m (equating to £5.20 per A Ordinary Share of Hyperion) was received.

The Company retained a 2.79% stake in Hyperion subject to a Call Option arrangement which will allow General Atlantic to purchase this stake at £5.20 per share. The Call Option will expire and fall away on 8th July 2016 or upon Hyperion undertaking an Initial Public Offering ("IPO"), whichever is the earlier. Under the Call Option the Group would receive a further £7.3m in cash and the Group is valuing this holding at this amount.

The Group agreed to provide to Hyperion a loan of £6m at an interest rate of Bank of England Base rate + 5%, minimum 7.5% for a minimum term of 12 months to refinance existing shareholder loans (including £2.9m that the Group had previously provided to Hyperion). As such £3.1m in cash from the sale of shares has been used to finance this loan. Unless repaid early, the loan will be repayable on an IPO or a change of control of Hyperion or on 3rd October 2017, whichever is the earlier.

Portfolio Developments

Besso Insurance Group Ltd ("Besso")

Turkey

In May 2013 Besso bought a specialist aviation intermediary, HSB Sigorta ve Reasurans Brokerligi ("HSB"), to add to its platform in the Turkish market. Now known as Besso Sigorta ve Reasurans, the Company was established in 2007 and is already assisting Besso in developing its participation in the fast growing Turkish insurance market.

Australia

In June 2013, Besso, alongside the Group, invested in Neutral Bay Investments Limited, an investment vehicle established to acquire a 39.5% shareholding in Sterling, as mentioned above. For a number of years Besso has been the London Market broker for this operation and has helped in its development since Sterling's management buy-out, which was conducted in 2008.

LEBC Holdings Limited ("LEBC")

Additional Investment

On 31st January 2014 the Group acquired an additional 12.02% stake in LEBC from an exiting shareholder for a cash consideration of £1m. LEBC's Employee Benefit Trust also acquired a further 12.02% for a cash consideration of £1m, provided by the Group by means of a loan facility for the entire amount. The Group's stake in LEBC increased from 22.89% to 34.91%.

Year-End Results as at 30th September 2013

LEBC Group Limited, the trading subsidiary of LEBC, has recently announced its year-end results, as at 30th September 2013, namely an 8% increase in turnover, to £11.3m from £10.4m in 2012. The Edinburgh-headquartered firm, which has 14 branches throughout the UK, also reported a 28% increase in Operating Profit (c. £0.7m in 2013 compared to c. £0.5m in 2012) and has also had a positive start to the new financial year, with continued strong revenue and profit growth.

Sterling

On 8th August 2013, Steadfast Group Limited acquired a 39.5% shareholding in Sterling, for the consideration of AU$6.2m. Steadfast is Australia's largest network of insurance brokers, with more than 430 offices across Australia and New Zealand, and annually generates around AU$4.1 billion in insurance sales.

Summa Insurance Brokerage, S.L ("Summa")

Despite the ongoing economic difficulties in Spain, Summa continue to generate solid cash flows and repay debt. During the year the Group assisted in sourcing a new CFO to further improve the infrastructure for growth within this investment.

US Risk (UK) Limited ("US Risk")

US Risk appointed Mike Lobb as CEO in August 2013. Previously Mr Lobb held the role of Managing Director at Howden Insurance Brokers (part of the broking subsidiary of Hyperion).

Post Balance Sheet Events

PDGI Sale

The Group announced the sale, to its fellow shareholders, of its respective stakes in Portfolio Design Group International Limited, Morex Commercial Limited, Preferred Asset Management Limited and New Horizons Nominees Limited (together the "PDGI Businesses") for a combined total of £1.25m in cash on 1st May 2014.

This realisation reflects the Company's current valuation of the PDGI Businesses and the Board is confident that this opportunity was well-timed and in keeping with the Company's strategy, delivering an internal rate of return of 24.5% per annum, including all income received.

This divestment also delivered cash to the Group to enable it to pursue new opportunities, and allowed the PDGI Businesses to restructure their shareholder base and pursue new opportunities as they see fit.

Business Strategy

The Group typically invests amounts of up to £3m and only takes minority equity positions, normally acquiring between 15% and 45% of an investee company's total equity. Based on our current portfolio, the average investment has been held for approximately 8 years. The Group requires its investee companies to adopt certain minority shareholder protections and appoint a director to its board. The Group's successful track record is based on a number of factors that includes a robust investment process, management's considerable sector experience and a flexible approach to exit.

At year end, the Group had £14.8m in cash and treasury funds, of which £9.0m was available for new investment opportunities after commitments. Currently the Group has £8.7m available for new investment opportunities after such commitments.

Dividend

The Group declared an interim dividend of 1.25p per share on 22nd July 2013, paid in August 2013.

A final dividend of 2.75p per share was declared on 24th March 2014 and, subject to Shareholder approval at the next AGM, will be paid in July 2014.

This shift towards a regular dividend stream is announced in recognition of the steady growth and consolidation of the Group's investment portfolio and demonstrates that the Group is an attractive capital and income investment. The Management team remains positive about the Company's ability to generate long term returns from the existing investment portfolio, alongside an interesting pipeline of new investment opportunities.

It is the Board's aspiration to maintain a final dividend of at least this level for the years ending 31st January 2015 and 31st January 2016, subject to ongoing review and approval by the Board and the Shareholders.

Investment Opportunities

The Group's well-respected contacts within the insurance intermediary sector ensure access to a wide variety of new investment opportunities and for enabling discussions on these to be initiated at an early stage. At the current time, at a point in the cycle when valuations are high, the Group's sector knowledge and experience, coupled with its reputation within the market, enables it to uncover and move on opportunities judiciously.

The Group received 61 relevant new investment proposals during the year, of which we took 25% to the confidentiality stage, 16% warranted continued detailed investigation, 8% proceeded to Heads of Terms stage and 5% (3 new investments) were completed.

Of the proposals, 52% fell within the insurance sector, the area of the Group's specialism. The opportunities have ranged from start-ups to investments in established businesses and innovative approaches to applying Software as a Service within the sector.

The IFA sector meanwhile continues consolidation in a more measured manner than in the years directly leading up to the major changes in regulations affecting the IFA sector, with 10% of the proposals being from the IFA segment.

Summary

In the Group's 25th year we have cash in hand to make new investments and reward shareholders. We have achieved annual compound growth of 11.6% and our Net Asset Value per share has increased to 202p. The Group looks forward to the year ahead with confidence and this is reflected in our aspiration to pay a dividend of at least 2.75p per share in the coming two years.

Brian Marsh OBE

2nd June 2014

Investments

As at 31st January 2014 the Group's equity interests were as follows:

Besso Insurance Group Limited

(www.besso.co.uk)

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

Date of investment: February 1995

Equity stake: 37.94%

31st January 2014 valuation: £7,190,000

The Broucour Group Limited

(www.amberglobe.co.uk)

(www.turnerbutler.co.uk)

In March 2008 the Group assisted in establishing Amberglobe, a business sales platform that provides valuation and negotiation services for the sale of SME businesses in the sub £3m sector. In July 2012 Broucour was formed as a new holding company for Amberglobe, and the Group financed the acquisition of Turner Butler.

Date of investment: March 2008

Equity stake: 49.0%

31st January 2014 valuation: £349,000

Hyperion Insurance Group Limited

(www.hyperiongrp.com)

The Group first invested in Hyperion in 1994. Hyperion owns, amongst other things, an insurance broker specialising in directors' and officers' ("D&O") and professional indemnity ("PI") insurance. In 1998 Hyperion set up an insurance managing general agency specialising in developing D&O and PI business in Europe. The Group sold 80% of its holding to General Atlantic in July 2013, with the remaining holding being valued at the agreed option price.

Date of investment: November 1994

Equity: 2.79%

31st January 2014 valuation: £7,310,000

LEBC Holdings Limited

(www.lebc-group.com)

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

Date of investment: April 2007

Equity stake: 34.91%

31st January 2014 valuation: £5,682,000

MB Prestige Holdings PTY Limited

(www.mbinsurance.com.au)

In December 2013 the Group invested in MB Prestige Holdings PTY Ltd, the parent Company of MB Insurance Group PTY a Managing General Agent, headquartered in Sydney, Australia. MB Group is recognised as a market leader in respect of prestige motor vehicle insurance in all mainland states of Australia.

Date of investment: December 2013

Equity stake: 40.0%

31st January 2014 valuation: £819,000

Portfolio Design Group International Limited

(www.surrendalink.co.uk)

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

Date of investment: March 1994

Equity stake: 20.0%

31st January 2014 valuation: £1,238,000

Randall & Quilter Investment Holdings plc

(www.rqih.com)

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

Date of investment: January 2010

Equity stake: 1.33%

31st January 2014 valuation: £1,708,000

Sterling Insurance PTY Limited

(www.sterlinginsurance.com.au)

In June 2013, in a joint venture enterprise alongside Besso, the Group invested in Sterling Insurance PTY Limited, an Australian specialist underwriting agency offering a range of insurance solutions within the Liability sector, specialising in niche markets including mining, construction and demolition.

Date of investment: June 2013

Equity stake: 19.70%

31st January 2014valuation: £2,266,000

Summa Insurance Brokerage, S. L.

(www.grupo-summa.com)

In January 2005 the Group provided finance to a Madrid-based Spanish management team with the objective of acquiring and consolidating regional insurance brokers in Spain. Through acquisition Summa is able to achieve synergistic savings, economies of scale and greater collective bargaining thereby increasing overall value.

Date of investment: January 2005

Equity stake: 48.63%

31st January 2014 valuation: £2,636,000

US Risk (UK) Limited

(www.oxfordinsurancebrokers.co.uk)

(jhinternational.co.uk)

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

Date of investment: July 2010

Equity stake: 29.3%

31st January 2014 valuation: £2,212,000

Walsingham Motor Insurance Limited

(www.walsinghamunderwriting.com)

In December 2013 the Group invested in Walsingham Motor Insurance Limited, a new niche UK Motor Managing General Agency. Walsingham was established in August 2012 and commenced trading in July 2013 having secured primary capacity from Calpe.

Date of investment: December 2013

Equity stake: 30.0%

31st January 2014 valuation: £300,000

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

Consolidated Financial Statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST JANUARY 2014

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

CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION

31ST JANUARY 2014

(Company Number: 05674962)

The Financial Statements were approved by the Board of Directors and authorised for issue on 2nd June 2014

and signed on its behalf by:

B.P. Marsh & J.S. Newman

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST JANUARY 2014

1The financial income as noted in the Consolidated Statement of Comprehensive Income is £138k (2013: £5k). The financial income in the Consolidated Statement of Cash Flows excludes realised and unrealised income of £78k (2013: £nil) arising from the Group's treasury investments as this is a non-cash movement.

2The financial expenses as noted in the Consolidated Statement of Comprehensive Income are £78k (2013: £65k). The financial expenses in the Consolidated Statement of Cash Flows excludes treasury management costs of £12k (2013: £nil) as this is a non-cash movement.

3The exchange movement as noted in the Consolidated Statement of Comprehensive Income is a loss of £(108)k (2013: gain of £37k). The exchange movement in the Consolidated Statement of Cash Flows excludes an exchange loss of £(108)k (2013: gain of £46k) relating to the revaluation of loans denominated in Euros and Australian Dollars as this is a non-cash movement.

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST JANUARY 2014

No Company Statement of Cash Flows has been prepared as there has been no cash flow movement in the Company during the current and previous period, other than dividends received from B.P. Marsh & Company Limited ("BPMCL"), a subsidiary company, which were settled via an intercompany adjustment. The ordinary dividend payment to the Company's members during the year was physically made by BPMCL and reflected in the Company through an intercompany adjustment. Accordingly the Company's "cash and cash equivalents" balance as at 31st January 2014 is £1k (2013: £1k).

CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST JANUARY 2014

Refer to Note 22 for detailed analysis of the changes in the components of equity.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31ST JANUARY 2014

1. ACCOUNTING POLICIES

Basis of preparation of financial statements

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

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

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

New standards effective during the year

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

Basis of consolidation

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

Business combinations

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

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

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

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

No Statement of Comprehensive Income is prepared for the Company, as permitted by Section 408 of the Companies Act 2006. The Company made a profit for the year of £3,833,449, prior to a dividend distribution of £365,375 (2013: profit of £5,676,742 prior to a dividend distribution of £292,861).

Investments - equity portfolio

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

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

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

b) by reference to underlying funds under management;

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

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

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

Income from equity portfolio investments

Income from equity portfolio investments comprises:

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

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

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

Investments - treasury portfolio

All treasury portfolio investments are designated as "fair value through profit or loss" assets and are initially recognised at the fair value of the consideration. They are measured at subsequent reporting dates at fair market value as determined from the valuation reports provided by the fund investment manager.

Both realised and unrealised gains and losses arising from changes in fair market value are taken to the Consolidated Statement of Comprehensive Income for the year. In the Consolidated Statement of Financial Position the unrealised gains and losses arising from changes in fair value are shown within the retained earnings reserve as these investments are deemed as being easily convertible into cash. Costs associated with the management of these investments are expensed in the Consolidated Statement of Comprehensive Income.

Income from treasury portfolio investments

Income from treasury portfolio investments comprises of dividends receivable which are either directly reinvested into the funds or received as cash.

Carried interest provision

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

Property, plant and equipment

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

Furniture & equipment - 5 years

Leasehold fixtures and fittings - over the life of the lease

Foreign currencies

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

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

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

Taxation

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

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

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

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

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

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

Pension costs

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

Operating leases

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

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

Financial assets and liabilities

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

Loans and receivables

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

Loans and borrowings

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

Trade and other receivables

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

Cash and cash equivalents

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

Trade and other payables

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

International Financial Reporting Standards in issue but not yet effective

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

The Group is currently assessing the impact of IFRS 10 "Investment Entities (Amendments)". All other standards and interpretations are not expected to have a material impact on the consolidated financial statements.

As the Group prepares its financial statements in accordance with IFRS as adopted by the European Union, the application of new standards and interpretations will be subject to their having been endorsed for use in the EU via the EU Endorsement mechanism. In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts the Group's discretion to early adopt standards.

2. SEGMENTAL REPORTING

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

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

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

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

Each reportable segment derives its revenues from three main sources from equity portfolio investments as described in further detail in Note 1 under 'Income from equity portfolio investments' and also from treasury portfolio investments as described in Note 1 under 'Income from treasury portfolio investments'.

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

Included within the operating income reported above are the following amounts requiring separate disclosure owing to the fact that they are derived from a single investee company and the total revenues attributable to that investee company are 10% or more of the total realised income generated by the Group during the period:

2. SEGMENTAL REPORTING (continued)

5. STAFF COSTS

The average number of employees, including all directors (executive and non-executive), employed by the Group during the year was 16 (2013: 16). All remuneration was paid by B.P. Marsh & Company Limited.

In addition to the above, Mr S.S. Clarke has an entitlement to a gain based on a carried interest, as outlined in Note 18.

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

During the period, 4 directors (2013: 3) accrued benefits under the defined contribution pension scheme.

Factors affecting the charge for the year

There are no factors which may affect future tax charges except as set out in Note 19.

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

In the prior year the Company repurchased 56,143 ordinary shares at a price of 89 pence per ordinary share. These shares were immediately cancelled upon purchase, resulting in a reduction in the number of ordinary shares in issue from 29,286,143 to 29,230,000.

12. NON-CURRENT INVESTMENTS - EQUITY PORTFOLIO

The principal additions relate to the following transactions in the year:

On 13th May 2013 the Group subscribed to its pro-rata proportion of a £25m placing of new shares by Randall & Quilter Investment Holdings Limited ("R&Q") (formerly known as Randall & Quilter Investment Holdings plc, prior to its re-domicile to Bermuda in July 2013) increasing its shareholding from 667,978 to 948,830 shares, but maintaining its overall percentage holding in R&Q. Total consideration paid for the shares amounted to £337,022 (£1.20 per share). As at 31st January 2014 the Group's overall holding in R&Q was 1.33%.

On 5th June 2013 the Group acquired an effective 19.7% stake in Sterling Insurance Pty Ltd ("Sterling"), a specialist underwriting agency based in Australia. This investment was conducted through Neutral Bay Investments Limited ("Neutral Bay"), alongside Besso. Neutral Bay purchased a 39.47% shareholding in Sterling from its founder George Condell for AU$6,159,571 (£3,898,619). As at 31st January 2014 the Group owned 49.9% of Neutral Bay with the remaining 50.1% majority stake owned by Besso. Total consideration payable for the Group's 49.9% investment in Neutral Bay was £1,945,411 and comprised of 99,800 Ordinary £1 shares and 1,845,611 Redeemable Preferred £1 shares. As at 31st January 2014 the Group had made no future capital commitment in respect of Neutral Bay.

On 25th October 2013 the Group acquired 1.25% (1.46% economic rights) in Besso Insurance Group Limited ("Besso") from Brian Marsh Enterprises Limited for total consideration of £209,485. The purchase price was in line with the Group's valuation of Besso's shares as at 31st January 2013 and increased the Group's holding in Besso from 36.71% as at 31st January 2013 to 37.96% as at 31st January 2014 (economic holding increased from 36.48% to 37.94%).

On 3rd December 2013 the Group acquired a 30% equity stake in Walsingham Motor Insurance Limited ("Walsingham"), a new specialist UK Motor Managing General Agency ("MGA") operating in niche markets, for consideration of £300,000.

On 17th December 2013 the Group acquired a 40% equity stake in MB Prestige Holdings PTY Limited ("MB Group") for consideration of AUD 873,066 (£479,707). MB Group is a MGA headquartered in Sydney, Australia and is recognised as a market leader in respect of prestige motor vehicle insurance in all mainland states of Australia.

On 31st January 2014 the Group acquired a further 12.02% equity stake in LEBC Holdings Limited ("LEBC") from an exiting former employee shareholder for consideration of £1,000,000. Following the acquisition the Group's total holding in LEBC increased from 22.89% to 34.91%.

The principal disposal in the year relates to the following transaction:

On 8th July 2013 the Group completed the sale of 5,623,520 shares (80% of its total holding of 7,029,400 shares) in Hyperion Insurance Group Limited ("Hyperion") to the global growth equity firm General Atlantic for a cash consideration of £29,242,304 (£5.20 per A Ordinary share), or a net cash consideration of £29,028,604 after the deduction of related disposal costs (Note 14). The Group's remaining 1,405,880 A Ordinary shares in Hyperion (2.79% as at 31st January 2014) is subject to a Call Option arrangement which will allow General Atlantic to purchase these remaining shares at £5.20 per share. The Call Option will expire and fall away on 8th July 2016 or upon Hyperion undertaking an Initial Public Offering ("IPO"), whichever is the earlier. Under the Call Option the Group could receive a further £7,310,576 in cash if exercised.

The Share Purchase Agreement includes an anti-embarrassment provision which provides that if Hyperion undertakes an IPO by 8th July 2014, at a price at or in excess of £6.25 per A Ordinary share, there will be an additional amount payable to the Group, up to a maximum of £0.30 per A Ordinary share. This provision could result in a maximum additional amount of £2,108,820 in consideration becoming payable to the Group; however Hyperion's value would need to have increased to £6.60 per A Ordinary Share, or above, within the following 12 months and the right market conditions would need to be in place for a successful IPO, for this maximum additional consideration to become payable. As at the date of this report the Directors consider this additional consideration to be unlikely.

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

In addition, as at 31st January 2014 the Group held 1.33% of the share capital of Randall & Quilter Investment Holdings Limited ("R&Q"). R&Q is an AIM listed company. 

Close Horizons Limited ("Close Horizons") is a 100% owned trading subsidiary of New Horizons Nominees Limited ("New Horizons"), a non-trading investment holding company in which the Group owns 20% of the share capital. The results shown above are therefore reflective of the Group's effective 20% ownership in Close Horizons.

On 25th February 2014, following a period of run-off (which commenced in 2011), Paterson Squared, LLC ("Paterson Squared") was formally dissolved. By 31st January 2012 the Group's 22.5% investment valuation had been fully written down and a full provision had been made against the outstanding £100,000 loan due. The directors considered that recovery of any outstanding balances at 31st January 2014 was highly unlikely without further investment in legal costs and on the basis of the subsequent confirmation of the company's dissolution, Paterson Squared has been removed from the Group's ongoing investments.

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