RIV.L Regulatory News (RIV)

5 November 2021

LEI: 2138005C7REHURGWHW31

River and Mercantile Group PLC

Final Results

Year ended 30 June 2021

River and Mercantile Group PLC today publishes its audited results for the year ended 30 June 2021

Fee earning AUM increased by 8% to £47.6bn

Performance fees increased by 448% to £6.4m

Proposed total dividend for the year increased by 23% to 11.69 pence

Jonathan Dawson, Chairman, said:

"This has been another period of strong performance for the Group, with a significant improvement in profitability which enables us to pay an attractive dividend, including a special dividend driven by performance fees. The proposed sale of our Solutions business to Schroders will enable us to focus on the transformation of the remaining business into a specialist asset manager, where we see significant potential for further value creation for shareholders."

James Barham, Group Chief Executive said:

"The investments we have made in Wholesale and Institutional distribution, alongside the deepening and broadening of our investment capabilities have delivered earlier than anticipated. We have once again grown our AUM, by £3.4 billion during the period, the seventh year in a row we have done so, and this is a testimony to the quality of our offering, where 92% of funds and strategies by AUM have outperformed their relevant benchmarks over the last 12 months. Wholesale distribution improved strongly with net flow increase of £554 million compared to the previous year and we have had a successful CMA retendering process retaining 90% of relevant clients' assets through the process and winning 12 new clients during the period, delivering an additional £4.9 billion of Fiduciary and Derivative AUM and assets and transition. This, combined with our strong investment performance, positions the Group very well for continued growth over the coming years."

"The recent announcement of the sale of our Solutions Division to Schroders is an excellent outcome for all stakeholders and I am excited by the strength of this combination and the continuity and opportunity it provides for our clients and our people. Schroders will be an excellent owner of the business and for the long term future growth in an exciting and dynamic market."

Financial Highlights

· Fee earning AUM1 increased by 8% to £47.6 billion (2020: £44.2 billion) representing the seventh consecutive year of AUM growth;

· Underlying revenue2 down 2% to £67.9 million (2020: £69.4 million)

· Performance fees increased to £6.4 million (2020: £1.2 million);

· Statutory profit before tax increased 31% to £10.9 million (2020: £8.3 million);

· Adjusted underlying profit before tax3 down 3% to £12.2 million (2020: £12.6 million);

· Adjusted profit before tax4 increased 14% to £15.0 million (2020: £13.2 million);

· Adjusted basic EPS5 and statutory basic EPS increased to 13.96 pence (2020: 11.79 pence) and 9.79 pence (2020: 6.39 pence) per share respectively; and

· Total dividend for the year of 11.69 pence per share up 23%.

Operating Highlights

· The business has performed strongly and is responding well to the investments made;

· Excellent investment performance across the business with 92% of funds and strategies by AUM outperforming relevant benchmarks over the last 12 months;

· 90% of Fiduciary AUM retained through the CMA process;

· An improvement in our RFP and pitch success rate and as a result a growing pipeline of opportunities;

· This has led to 12 new Fiduciary clients wins during the year, delivering an additional £4.9 billion of Fiduciary and Derivative AUM and assets in transition, which have subsequently transitioned and are now fee earning;

· Wholesale gross sales have grown by 180% over the last twelve months with an improvement in net flows of £554 million from the previous year;

· Wholesale pipeline is building strongly and is well positioned for the coming period;

· European fund launched and as of 5 November 2021 is in excess of £200 million; and

· Infrastructure team recruited and Infrastructure Equity Income fund readied for launch.

Proposed sale of Solutions to Schroders

· Post the year end, we announced on 26th October 2021 the proposed sale of our Solutions Division to Schroders for an enterprise value of £230 million. Solutions' Assets Under Management as at 30 September 2021 amounted to £42 billion;

· Sales price represents a premium of 28.2% over RMG's undisturbed market capitalisation on 9 August 2021, the day prior to the announcement by RMG that it had received a number of expressions of interest in Solutions;

· Enterprise value to EBITDA multiple of 13.4x based on Solutions' EBITDA for the year ended June 2021;

· Subject to and conditional on completion of the Sale, RMG's CEO, James Barham, will transfer with the Sale to lead this business and also to play a broader management role at Schroders. Until completion he will remain CEO of RMG;

· Alex Hoctor-Duncan will succeed James Barham as CEO of RMG following completion, and will join the Board on 29 November 2021 as previously announced;

· The Board will enter into a consultation with Shareholders on the use of the proceeds. It intends to return the majority of proceeds to Shareholders while retaining sufficient funds both to ensure that its existing business remains well capitalised and to facilitate its plans for the development of the asset management business;

· The Board plans to develop the ongoing asset management business to create and offer a broader range of high quality and value-added equity products, and in-demand alternatives and private market products, building on the Group's existing offering. It will initially focus this expanded offering through its existing distribution channels in UK wholesale and institutional markets, however it also intends to extend distribution to expand its addressable market;

· The Board will develop its detailed post-sale strategic plan over the coming months and will update shareholders on this plan as part of a full strategy, capital allocation and dividend policy update in the Spring of 2022.

Electronic copy

A PDF version of this announcement is available through the link on RNS, and from the Group's website www.riverandmercantile.com.

Notes:

1Assets Under Management (AUM) represents amounts on which management fees and performance fees are charged across all asset classes managed by the Group. In relation to Derivatives, AUM represents the aggregate billing notional of the derivative contracts on which management fees are charged. There has been no change to the basis of measurement of AUM and the reported data is comparable on a like for like basis with that reported in prior periods.

2 Underlying revenue is total revenue less performance fees.

3 Adjusted underlying profit before tax comprises statutory profit before tax adjusted for amortisation and impairment of intangible assets, dilutive share awards, other gains and losses, performance fees net of associated remuneration and deal related professional fees. See note 13 of the consolidated financial statements for a reconciliation to statutory profit.

4 Adjusted profit before tax comprises statutory profit before tax adjusted for amortisation and impairment of intangible assets, dilutive share awards, other gains and losses and deal related professional fees. See note 13 of the consolidated financial statements for a reconciliation to statutory profit.

5 Adjusted basic EPS is the adjusted profit after tax divided by the weighted average number of shares outstanding in the period.

The financial information set out in these preliminary results do not constitute the Group's statutory accounts for the year ended 30 June 2021 or 2020. Statutory accounts for the year ended 30 June 2020 have been delivered to the Registrar of Companies. The auditor's report for 2021 and 2020 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The financial information for the year ended 30 June 2021 is extracted from the audited accounts. The statutory accounts for the year ended 30 June 2021 will be delivered to the Registrar following the Group's AGM on 13 December 2021. The 2021 Annual Report and Accounts will be published in November 2021 and a copy will be available to view on the Group's website from Monday 8 November 2021.

This RNS has been approved on behalf of the Board.

Forward Looking Statements

This announcement contains certain forward looking statements with respect to the financial condition, results of operations and businesses of River and Mercantile Group PLC. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report. However, such statements should be treated with caution as they involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future.

There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements. 

For further information please contact:

Montfort Communications

Chairman's Statement

Although the announcement of the conditional sale of River and Mercantile Investments Limited (RAMIL, Solutions) which holds our Fiduciary Management and Derivatives business to Schroders was made in October, the preparatory work for the sale reflects detailed consideration by the Board of our strategy in the first half of 2021. The extensive preparations and the sale process itself have been time consuming and demanding. The resulting transaction, which is subject to the approval of shareholders at a general meeting to be called in December, is a clear demonstration of the Board's commitment to deliver proper value for shareholders, with a vital contribution made by James Barham our Group Chief Executive to the success of the exercise. The price achieved for RAMIL of £230 million, represented a premium of 28.2 per cent. over the Group's undisturbed market capitalisation on 9 August (the day prior to the announcement that the Group had received a number of expressions of interest in the Solutions business). This is a clear illustration of the discount that the market had applied to our Group and a spur to us to ensure that our shareholders received full value. The sale, if approved, is likely to be completed in the first quarter of next year. The Board intends to return the majority of proceeds to Shareholders following completion of the sale and will engage with Shareholders regarding the amount to be returned. Sufficient funds will be retained both to ensure that its existing business remains well capitalised and to facilitate its plans for the development of the asset management business.

The sale of RAMIL, and its attractiveness to a number of serious industry leaders, was underpinned by its robust performance in the retendering exercise for fiduciary managed pension assets required by the Competition and Markets Authority (CMA) following the latter's enquiry into the sector which was closed in June 2019. The outcome of the retendering for the Fiduciary Management business has been discussed in more detail in the Group Chief Executive's report. This is a tribute to our people in the business, to their focus on achieving great performance and great service for our clients, and to their energy in pitching for new opportunities arising from the sector-wide retendering. We believe that our retendering success is market leading.

Our equities business, River and Mercantile Asset Management LLP (RAMAM) has had a very strong year's performance. RAMAM has benefited from a sectoral shift towards 'value', which has played to the strengths and consistency of our team. The Board is very pleased to note that 11 of our 14 equities strategies are ahead of their respective benchmarks since inception - a remarkable achievement. Included in this is the European Fund which has exceeded its benchmark by in excess of 7.5 per cent. since its launch earlier this financial year.

In January, we announced that Ian Berry and a team of experienced infrastructure investment professionals had joined the Group and that we were planning to launch a new infrastructure fund. We hope to reach first close within the next two months. We have very high hopes for our investment in this space; it is clearly a key area for yield- seeking pension funds and other investors with critical income requirements.

Financial performance

Total revenues were up 5 per cent. (£3.7 million) following the achievement of material performance fees from both Solutions and Asset Management. Statutory profits before tax increased by 31 per cent. to £10.9 million and adjusted profits before tax increased by 14 per cent. to £15.0 million. The Directors have declared a second interim dividend of 4.48 pence per share and are recommending a final dividend of 3.32 pence per share. This amounts to a total dividend of 11.69 pence per share for the period, representing an increase in the total dividend for the year of 23 per cent.

We recognise the importance of dividends to our shareholders. against the background of the sale of RAMIL and in order to provide Shareholders with some certainty for the year ending 30 June 2022, the Board confirms that it intends to pay at least the same cash ordinary dividend per share as for the year ended 30 June 2021.

Board changes

In January we announced the appointment of Martin Gilbert to the Board as Deputy Chairman and an independent non-executive director. Martin has an outstanding record in the asset management sector and the Group is most fortunate in having his expertise and strategic wisdom to help us in our discussions.

In May we announced the appointment of Alex Hoctor-Duncan as an Executive Director with responsibility for strategic development. Alex will join the Board on 29 November at the expiry of his 'garden leave' and will set to work on developing new areas for our long-term growth, building on the Group's strong foundations. Alex has had a distinguished career in asset management largely at Blackrock and its UK precursor companies. Most recently he has been Global Head of Aberdeen Standard Investments, part of abrdn plc. As announced, James Barham will be leaving the Group to join Schroders as part of the sale of RAMIL and he will be succeeded as CEO by Alex Hoctor-Duncan.

Our people and culture

This has been a hard year in which many important and necessary strategic decisions have been taken and executed. It has been all the harder against the background of restrictions arising from the COVID pandemic and the associate disruption. On behalf of the Board, I pay tribute to the determination of all of the Group's people to ensure that our client service and support remained robust, and that our 'client first' instincts were able to be maintained: thank you! I particularly want to single out James Barham for his thoughtful leadership of our people through the last 20 COVID-impacted months. This has helped maintain the strong team spirit and culture in the Group.

Outlook

Looking ahead, we are working hard towards the completion of the sale of RAMIL in the first quarter of 2022, the proposed return of capital to shareholders, and the launch of our new strategic plan built around our asset management capabilities.

There is a lot of work to be done to execute our plans effectively, and no doubt we will also have to contend with the economic headwinds which are already being felt this year. However, I firmly believe that the Group will be able to continue to deliver good returns to shareholders through:-

• continuing to achieve strong performance for our investment clients;

• bearing down on costs as we right size the business; and

• investing in future strategic growth opportunities.

I therefore feel we can look ahead with optimism for the future of River and Mercantile.

Jonathan Dawson

Chairman

Group Chief Executive's Statement

Introduction

We have recently announced the sale of our UK Solutions business and before I address this, I would like to set out our work leading up to this and to place this corporate action into context.

I wrote in my report last year a clear strategic plan to transform the dynamics of the Group, invest in the key elements of our business and drive shareholder value. The strategic plan had a series of core deliverables; a significant investment in Distribution and in particular an overhaul of the Wholesale Distribution function, investment in deepening and broadening our investment capabilities and the development of an integrated operational infrastructure. These investments were a core part of the transformation of our business to deliver on the enormous potential embedded within the organisation. I will detail the actions we took over the last year and the impact this has had on our business which has led to some strong returns from within the business and the seventh consecutive year of consecutive AUM growth.

I also laid out my vision and leadership beliefs and a recognition that the ability to adapt to changing market conditions is crucial. The Fiduciary market has been undergoing significant change, an industry in which we are the longest established manager with a robust and growing client base, excellent investment performance and high-quality people throughout the organisation. This has contributed to the many industry awards our Solutions business has won over the last few years.

The Group has supported the growth and strategic development of both its Solutions and Asset Management divisions since the merger of P-Solve and River and Mercantile Asset Management and the subsequent listing in 2014. However, it has been increasingly clear given the continued undervaluation of our business, we needed to adapt our strategy to ensure that we were able to accelerate returns for shareholders and at the same time deliver the optimal environment for our Solutions business to grow and continue to deliver excellent outcomes to our clients.

We announced on the 26 October 2021 the sale of our UK Solutions Division to Schroders. We see this as a positive move for all stakeholders of the Group, our shareholders, our people, and our clients as we combine the UK's largest listed asset manager with the UK's longest established Solutions manager. We are creating, we believe, the most complete major proposition in a rapidly growing and exciting industry that continues to consolidate, whilst at the same time enabling the remaining business to focus on developing our specialist asset management capabilities.

The combination with Schroders ensures that we maintain the distinct characteristics of our Solutions business, our investment philosophy and process, our clear strategic thinking, and our integrated implementation, whilst benefiting from the scale of our combined operations and so continue to be a market leader and winner in this fast-growing and dynamic market.

As we will set out in the associated circular, we will utilise the proceeds of this sale to return the majority of the net proceeds to shareholders and to invest the balance in accelerating the growth of the remaining businesses through both organic and acquisition-led strategies to broaden and diversify the River and Mercantile business.

Solutions

Our Solutions business is a strong and attractive business which has continued to perform strongly over recent years. The initial element of the CMA order concluded on 9 June 2021 and it is clear that we fared well in an unprecedented period for the Fiduciary industry, we have retendered almost the entirety of our relevant AUM in a relatively short period. Since the beginning of the retendering process, we retained nearly 90 per cent. of relevant AUM compared to the average retention in the market of circa 73 per cent, and in addition we have won a significant number of new clients during the period and in spite of the corporate developments, the pipeline of new opportunities is strong.

We are clearly delighted with the vote of confidence we received from our clients through this process, and I would like to take this opportunity to reiterate our absolute commitment to deliver the investment returns and outcomes that they require.

We recognise that for some of our competitors the initial retendering process will continue for some time for a variety of reasons. We are confident of our ability to take advantage of this ongoing CMA related activity to increase market share, and at the same time continue to win new fiduciary mandates as the underlying market continues to grow with fund consolidation forecast to drive further activity.

Strategic Plan

I set out in my last report the strategic plan focused on the core elements, investing in distribution, a deepening and broadening of our investment capabilities and, operationally the development of a single target operating model across the Group. I have set out below an update on these elements over the last year.

Distribution: We have continued to invest in our distribution capabilities; overhauling our underperforming Wholesale distribution and implementing a technically strong and centralised Solutions sales capability alongside our Institutional distribution function.

The business delivered an increase in AUM of £3.4 billion during the year. We have seen a significant recovery in our Wholesale business following the investments we made in the distribution team this time last year. Wholesale gross sales have grown by 180 per cent. over the last twelve months with an improvement in net positive sales of £554 million from the previous year. I am especially pleased with the speed at which the restructured team has turned this part of our business around. The investment has repaired the underperformance that we had seen from this distribution channel over the last few years and looking forward, we expect Wholesale to continue to grow strongly.

Our institutional business continues to face some headwinds in the UK and particularly in Australia where recent regulatory changes has impacted investment behaviour of some of our clients. We have confidence in both markets and we have an extremely talented and well regarded institutional team and combined with a growing array of relevant products and solutions for this market, will lead to a recovery in this area and a return to growth.

The investment we have made in our Solutions distribution has equally delivered a clear transformation and all stages of our pipeline have been enhanced over the last 12-18 months. We announced that following the year end, we had an additional £2.1 billion of assets at various stages of the transition process, including £1.4 billion of assets where agreements have been signed however assets have not yet transferred.

Our pipeline has responded to the investment in sales and reflects our activities at each stage of the sales process. Our success rate at RFP and pitch has continued to improve and evidences the strong investment and client proposition that has been developed over time. There has been some short term disruptions in the Solutions pipeline, however, with the confirmation of the sale of our Solutions business to Schroders we believe progress will continue to improve and accelerate under their ownership.

Investment: We have invested in deepening existing investment capabilities in our Equities business to support the continued growth and expansion of this team. We have launched the European Fund, which is performing very strongly, and at the time of writing has just exceeded over £200 million and is receiving broad support from across the market. We are also continuing to design and develop relevant product for the market, and we are in the process of bringing SFDR Article 8 and Article 9 strategies to the market across both UK, European and Global strategies. We will launch these strategies on our Irish ICAV platform and as UCITS they support distribution into a range of global markets.

We are broadening our investment capabilities with the recruitment of a highly regarded physical Sustainable Infrastructure business led by Ian Berry, formerly Head of Infrastructure Equity at Aviva Investors. We also recruited a team with whom he used to work, and we are in the process of launching our first strategy, the Infrastructure Equity Income Fund where we are seeing strong support from across the market.

Operations: We undertook all the planning and preparation for the implementation of a new target operating model consolidating our operational capabilities across the Group onto a modern, flexible solution supported by a single data architecture designed to deliver operational leverage and enhanced client experience. This has been placed on hold temporarily as we deal with the sale of our Solutions business and we will review our needs once this process is complete.

2021 Group Performance

The Group has performed well over the period and total AUM has grown by 8 per cent. to £47.6 billion. The net flow ratio was +3.2 per cent. and investment performance was positive, contributing an additional 4.5 per cent. Total revenue rose by 5.3 per cent. to £74.3 million with statutory profit before tax increasing 31 per cent. to £10.9 million and adjusted profit before tax was £15.0 million, an increase of 14 per cent. The business has performed robustly and a combination of strong cost control and improving performance fees has delivered a positive outcome. The investments we have made in distribution and our investment capabilities have begun to deliver the outcomes we expected.

Investment Performance

Our investment performance has been impressive through the year across the business. Our equity portfolios performed well and the return to value toward the back end of the last calendar year has ensured that we recovered all the underperformance of the previous years. Performance against benchmarks and in absolute terms has been resilient and whilst some of our very specialist portfolios have struggled on a relative performance basis, over 75 per cent. of our strategies outperformed their relative benchmarks during the period.

Our Solutions performance is built on a long-established track record of outperformance. The team has delivered circa 10 per cent. p.a. absolute return since 2004 and this is a record that stands us out in the competitive Fiduciary market.

The last year was no exception, and we have continued to deliver with average portfolios outperforming their benchmarks by 9.8 per cent. This excellent performance along with an improved rate environment has ensured that our ability to deliver a growing level of performance fees is significantly enhanced.

Performance fees

These investment returns have led to a return of healthy performance fees from both our Solutions and Equities business. The pre-tax contribution was £2.8 million (performance fee profit excluding seed gains for the year) which compares favourably to a contribution in our last financial year of £0.6 million.

Outlook

The business is undergoing a significant transition which will leave the business as a specialist Asset Management business with a foundation in two key elements: Equities and Infrastructure. We will look to build out these capabilities and add teams and businesses where appropriate and continue the process of diversification that I set out in my original strategy. Alex Hoctor-Duncan joins our business as Head of Strategy at the end of November and I would like to take this opportunity to welcome him to our business. He will succeed me as Group Chief Executive subject to and conditional on completion of the sale of our Solutions business as I will transfer with the Solutions sale to lead this business and play a broader management role at Schroders.

As I have highlighted earlier in my statement, I believe this transaction with Schroders delivers a positive outcome for all stakeholders. In particular it ensures that the culture and values that nurture our people are protected and the distinct factors and characteristics of our Fiduciary and Derivatives solutions that have delivered so successfully for our clients will be enhanced within the Schroders family.

The remaining business operates in exciting growth markets and the development and launch of new products and structures over the coming months ensure that the business is well positioned, and I am excited by the opportunities available.

I took over as Group Chief Executive in 2019, having founded River and Mercantile Asset Management in 2006 and being its Chief Executive up to the merger with P-Solve in 2014. It has been a great honour to lead a simply fantastic business and to work with such incredibly talented people. As you know we are a people led business and it is the strength of those people that defines the strength of an organisation and we have been sustained in all that we do by loyal and enthusiastic clients.

As this is my last report as Group Chief Executive, I would like to take this opportunity to thank all our shareholders, our clients, and our people for their support. I am very proud of what has been achieved for both businesses and I am confident that River and Mercantile will continue to thrive and grow under Alex's leadership.

This has been a challenging year with the combination of the on-going COVID-19 backdrop alongside the corporate shift that has taken place and our people have continued to deliver exceptional results and a strong service for our clients. Our people and their support and hard work have ensured that the foundations of the business continue to stand out in crowded and competitive markets.

James Barham

Group Chief Executive

Chief Financial Officer's Review

Overview

Last year the Group reported its sixth consecutive year of AUM growth and this year we are pleased to report our seventh. This was achieved during a period of intense retendering as we completed the CMA review for the vast majority of our Fiduciary clients. The following key factors impacted the financial performance of the business during the year:

· As previously reported, the CMA retender process together with the impact of COVID has delayed the level of new business activity in Solutions to towards the end of the year. The fee margin compression as a result of the retendering process has to some extent been offset by investment performance, the net result being flat Fiduciary management fee revenue for the year;

· Derivatives AUM has grown at a stable fee margin, resulting in good management fee growth of 9 per cent. year on year;

· Our Equities business generated positive Wholesale net sales, a significant reversal versus prior year as highlighted in the CEO's statement. This together with strong investment performance more than offset the redemptions in our Institutional business. Management fee revenue for Equities as a whole, however, declined by 11 per cent. as we went into the year with lower AUM than the prior year average and our inflows were skewed towards the second half;

· The year saw a welcome return of material performance fees for the Group totalling £6.4 million, with strong outperformance in both Solutions and Equities;

· Staff costs increased during the year, both fixed and variable. This reflects the full year impact of initiatives commenced in the prior year, namely: investment in distribution, new initiatives such as Infrastructure further strengthening in our sustainable investment proposition and an associated increase in variable remuneration, also in part due to higher performance fee remuneration;

· There has been an increased focus during the year on cost saving initiatives with administration costs flat year on year and slightly down on an adjusted basis notwithstanding the Group's growth initiatives

Outlook

With good asset growth in Solutions and Wholesale towards the end of last year both of these businesses have higher in-force revenue than was generated during FY21, as detailed further below. With our retendering completed in all material respects, we have retained nearly 90 per cent. of relevant AUM and do not anticipate any further material fee margin attrition in relation to our existing Solutions clients. Margin's may vary as our average Solutions client size mix changes; however, as the Fiduciary market continues to grow strongly and evolve, we continue to focus on all client sizes from the large (over £1 billion) and medium, to smaller clients where the development and growth of our small schemes' solution is ongoing. How our client mix evolves over time will depend on a number of factors, but it is not expected to result in a material change in fee margins in the short to medium term.

Our strong relative investment performance in Fiduciary during the year is expected to continue to generate performance fees for FY22 as the three year deferral structure means we will continue to earn fees this year unless there is significant underperformance. If our relative performance against benchmarks remains flat this year then we would expect to generate higher performance fees than in FY21 as the release of the FY22 element of last year's performance deferral will take more of our clients above their high water mark into fee earning territory.

Our Infrastructure business is close to launching its first fund and we believe has a very exciting future. Successful growth will materially change the financial profile of the Group and we will keep our shareholders abreast of developments and expectations.

Finally, the announcement of the sale of the Solutions business to Schroders marks the Group's most significant development since its IPO in 2014. The financial shape of the business will change after completion and the Group's post sale strategic plan to be presented in Spring 2022 will obviously influence this. Until the transaction completes, the Group will broadly continue to operate as it currently does.

As part of the sale the Group has entered into a transition services agreement (TSA) with Schroders to facilitate the orderly transfer of the business and to temporarily provide certain group services to its new owner following completion. This will require a material level of group resource for a period post completion. Leading up to and following expiry of the TSA the Group will need to reduce its cost base to a level appropriate for the remaining business and to execute its new strategy. Given the expected timing of the disposal, the Group will own Solutions for the majority of the financial year ending 30 June 2022 and is therefore expected to be profitable for this financial year as a whole. Immediately following the sale, the Group will experience moderate and temporary run rate operating losses as it transitions to become a specialist asset manager. The Board's target is for the Group to achieve monthly run rate profitability by the end of the first full financial year following completion of the sale. Guidance on the Group's cost base and route to profitability will be given at the time of presentation of the Group's new strategy next year.

AUM grew by £3.4 billion (+7.7 per cent.) during the year comprising £1.4 billion of net flows and £2.0 billion of positive investment performance. Equity Wholesale had a strong year in respect of both net sales of £0.2 billion and investment performance of £0.4 billion. Fiduciary Management and Derivatives performed well with positive net flows across all activities.

AUM Movements Since the Period End

As a result of the announcement on 10 August in relation to approaches the Company had received, the Solutions business has not won any material new business which is normal and expected in these circumstances. It is anticipated that following the announcement of the sale of the Solutions business to Schroders and the removal of the uncertainty around its future ownership, we should see a return to pitching for and winning new business.

Assets under management for the three months ended 30 September 2021 increased by a modest 0.4 per cent. This was primarily driven by £0.5 billion of positive Fiduciary net flows offset by £0.4 billion of Institutional Equity net outflows. Wholesale continues to generate consistent positive net flows.

During the three months to 30 September 2021 two Fiduciary Management clients gave notice of their intention to redeem for transition after September. As a result a total of £97 million of Fiduciary Management AUM and £290 million of Derivative AUM will be redeemed in the coming months.

In addition an Equity Solutions Institutional client notified their intention to redeem £265 million of their holdings in October 2021.

Positively, two new Derivative Solutions clients signalled their intention to fund £35 million of Structured Equity and £130 million of LDI in the coming months.

Financial highlights

Note: adjusted and adjusted underlying results are alternative performance measures which are reconciled to statutory profit in note 13 of the consolidated financial statements.

Management fee margins

Fee margins during the year were broadly in line with our previous medium-term guidance. The in-force margin for Fiduciary at the year end was 13.4 basis points and 12.8 basis points at the end of September 2021. We have reduced our guidance on Fiduciary to reflect transitions and final adjustments as a result of retenders which will reduce the year end in-force margin. Our medium-term guidance for the remainder of the business remains unchanged.

Revenue Weighted Asset Attribution (RWAA)

The revenues of traditional asset management firms have a high correlation to equity markets. However, the relative diversification of the Group's revenue streams compared to many of our peers mean they display greater stability and resilience to negative equity market movements.

RWAA classifies our underlying revenues by the underlying asset class on which the management fees are charged. Net management fees from Equity Solutions are related to the variability of the underlying equity markets. In Fiduciary Management the management fees are based on the client's portfolio which will include equities, bonds and government securities. The management fee revenue is attributed in proportion to the composition of the underlying portfolio between credit instruments, equities and government securities. The Equities - "Non-Discretionary" category represents the minimum level of equity exposure we are required to hold in client portfolios, where this is specified. In Derivative Solutions the underlying revenue is linked to the contractual notional amount of the derivative instrument used to hedge interest rates, inflation and equities. As a result, these revenues are also considered "Independent" or cash- like in their characteristics. The "Other" category includes property and alternatives.

Advisory revenues are based on retainers or specific projects and are not directly linked to asset classes and are therefore classified as being "Independent".

Performance fees

Performance fees for the period of £6.4 million (prior year: £1.2 million) were principally earned during the second half of the year. Our macro views and tactical approach generated significant outperformance within Fiduciary and the outlook for 2022 is good as explained earlier in this review. Performance fees from Equities were earned primarily from the Micro Cap strategy which has potential to generate further performance fees in the current year.

Administrative expenses remained flat at £16.0 million year on year. A continued focus on cost savings and efficiencies has meant no increase in total expenditure notwithstanding the Group's growth initiatives, new business areas and higher staff numbers.

The impact of COVID-19 restricted our ability, like everyone's, to travel and visit clients. Travel and entertainment cost will increase in 2022, however we do not anticipate this will yet fully return to levels seen pre pandemic in this current year.

Market data continues to increase at a material rate as a result of flexible working practices and higher data requirements as our investment into ESG analysis and client reporting continues. We expect this growth to slow in the current year.

Included within professional fees is £0.3 million in relation to the sale of the Solutions business and is an adjusting item which is deducted when deriving adjusted profit (see note 13). Professional fees also includes £0.4 million relating to the target operating model (TOM) project that was paused.

The sale of the Solutions business has resulted in incurring significant professional fees post year end which will be set out in the circular to shareholders.

Remuneration

Fixed remuneration costs increased by £0.8 million (3 per cent.) to £29.7 million reflecting, in the main, the full year effect of additional hires across the Group in the investment and distribution teams in FY21, new initiatives such as Infrastructure and further strengthening of our sustainable investment proposition.

Variable remuneration increased by £1.2 million (10 per cent.) due to higher staff numbers and higher performance fees earned, offset by lower levels within Asset Management reflecting the reduced level of profitability from the prior year. In the FY20 Annual Report we anticipated that remuneration would range between 58 per cent. and 60 per cent. of underlying revenue for the year before any impact of any performance fees. The actual underlying remuneration ratio was 58.0 per cent. excluding the IFRS 2 charge for dilutive share awards.

Performance fee remuneration was 60 per cent. of revenues in FY21 compared to prior years of 50 per cent., increased to reflect the positive client retention results following the completion of the CMA review retenders. Total remuneration costs as a percentage of total revenue remained at 58.1 per cent.

Two new dilutive share awards schemes were introduced during the year being the Executive Director Value Transformation Plan ("VTP") and the Senior Management Share Plan ("SMSP"). As set out in last year's annual report and this year's interim results, the vesting of these awards is conditional on achieving a total shareholder return in excess of 12 per cent. per annum over the relevant measurement periods and the value of the awards is dependent on the level of return above this hurdle. As the awards have market-based conditions, under IFRS 2 the annual charge will remain the same irrespective of whether the awards vest or not, save for any adjustment to reflect a change in expectation of staff leaving over the vesting period. The charge is based on the fair market value of the award spread over the award period (in the case of the VTP) or vesting period (in the case of the SMSP). The charge for the part year was £0.9 million (prior year nil) and a full annual charge of £1.6 million. As a dilutive non-cash award, it is treated as an adjusting item to Adjusted Profit consistent with previous dilutive awards the Company has made.

Divisional analysis (unaudited)

The Group is not required to segmentally report as its different business activities are not considered to be segments for the purposes of IFRS 8 on the basis that decisions made by the Board are made at an overall Group level (see note 4 of the financial statements).

Notwithstanding this, due to the announced conditional sale of the Solutions business and to provide additional transparency to shareholders, this year the Group is providing a divisional analysis. The below has not been audited. It represents one method of separating the Group's results based on the following assumptions:

a) Investment Solutions includes Fiduciary, Derivatives and Advisory activities, split between UK and US;

b) Asset Management includes Equities and Infrastructure split between UK and US (Equities only);

c) The four investment categories include all directly attributable costs. In relation to staff costs, in most cases any staff member who spends 75 per cent. or more of their time is included within the relevant category, primarily being investment, distribution and operations staff;

d) Central corporate and PLC costs are not allocated to the investment categories to minimise the level of judgement and estimation;

e) Corporate administration expenses predominantly comprise UK property costs, Group IT platform costs external audit, marketing and certain professional fees;

f) Corporate remuneration includes Executive Directors, Group heads of Distribution and Operations and Central Legal and Compliance, Risk, Marketing, Finance and HR staff;

g) PLC costs include Non-Executive Director fees, internal audit and other governance costs;

h) All costs are on an adjusted basis (see note 13 of the financial statements)

Liquidity and regulatory capital

Cash and cash equivalents increased to £29.6 million as at 30 June 2021. The Group prudently manages its regulatory capital position and maintains a significant surplus of regulatory capital resources over its capital requirement. At the year-end that surplus, after allowing for dividends to be paid in respect of the year, was £14.0 million and our regulatory capital resources represented just over 180 per cent. of the Group's current regulatory capital requirement.

Taxation

As previously reported, the Group's high effective tax rate is a result of it being unable to offset its US losses against its profitable UK activities. The effective tax rate on adjusted underlying profit was 23 per cent. for the year ended 30 June 2021 (2020: 26 per cent.) reflecting reduced levels of losses in the US. The statutory profit effective tax rate was 25 per cent. for the year ended 30 June 2021 (2020: 36 per cent.).

Distributable reserves

As at 30 June 2021, the Company had £53.7 million of distributable reserves (2020: £55.0 million).

Dividends

On 15 April 2021 an interim dividend of 3.89 pence was paid. The Directors have declared a second interim dividend of 4.48 pence per share to be paid on 10 December to shareholders on the register as at 19 November. The ex-dividend date will be 18 November 2021. The Directors are proposing to shareholders a final dividend of 3.32 pence per share which will take total dividends per share paid, declared and proposed for the year ended 30 June 2021 to 11.69 pence per share representing 80 per cent. of adjusted underlying profit after tax and 100 per cent. of performance fee profit after tax. The final dividend will be paid on 31 December 2021 to shareholders on the register as at 10 December 2021. The ex-dividend date will be 9 December 2021.

Simon Wilson

Chief Financial Officer

Our Strategy and Business Model

Our strategy as we develop the Group is for it to have the following key characteristics:

A diversified and responsible investment capability

A broad range of highly relevant products and solutions designed to meet clients' needs where responsible investing and ESG are central to our beliefs.

Distribution driving profitable growth

Growth delivered through strength in distribution across our core markets (UK, US, and Australia) and distribution partnerships in target geographies. Supporting this growth with a targeted business and investment team acquisition policy.

A robust and scalable operational platform

Investing to enhance our operational infrastructure to support this growth and deliver increasing efficiencies.

An embedded client service culture

Providing our clients with exceptional service supported by high quality reporting. We will invest in broadening our online and digital presence.

A strong understanding of our human capital and a clear Employee Value Proposition

Our people are our greatest strength, and we will continue to invest in training and development. The provision of a strong Employee Value Proposition will ensure that River and Mercantile is regarded as a forward thinking, diverse and technically strong workforce.

Background

Our objective has been to identify more as an asset management business, managing and advising a broad range of strategies and clients on their assets. The recent announcement of the sale of our Solutions business will position the business as a more recognisable as a specialist asset management company built around our current core competencies of Equities and Infrastructure.

River and Mercantile in 2026

This shift in our strategy undertaken over the last twelve months will ensure that by 2026 we are an investment led asset manager with products at its heart. This commercial direction of travel will accelerate as we continue to take investment intellectual property and apply it to our strategies. As already highlighted, we see this as our core competence - the ability to link client needs to investment R&D to product design and distribution.

We want our business to reflect all that is positive about managers with demonstrable skill with the following core characteristics:

• We aspire to a high percentage of our products and strategies being ahead of their respective benchmarks since inception whilst offering value for money;

• Products must all meet identifiable client needs and be structured in a format that is appropriate to the underlying liquidity available;

• We distribute these investment products in scale to a broad range of clients where demand characteristics are common. This is as much an investment challenge as a distribution one and the two key parts of our business have to be able to work in tandem to achieve this objective; and

• We will have a modern and scalable operational platform to support this growth.

We have already set out the additional investment capabilities that we would like to develop over the next few years, not simply to meet our base aspirations but also to provide diversified sources of revenue in the event of underperformance in one or more of our underlying strategies. We do not want the success or otherwise of this Group strategy to be dependent on one investment strategy. The concept of picking "two funds" and committing the resources of the business to these strategies alone is naïve. We expose our business to too much execution and demand risk. Equally we are not suggesting we should launch a fund a month and move down the product proliferation route in a similar way to some of our peers over the last decade.

We will deliver this based on the following strategic business model set out on the next few pages.

Investment manufacturing

We have a high quality and relevant investment capability providing products and services meeting client needs across a range of audience groups. This is currently set out across our Fiduciary and Advisory investment team, our Equities teams managing UK, European, Emerging Market and Global equities, our Derivatives team managing Liability Driven Investment (LDI) including gilt collateral management and structured equity solutions and our recently launched Infrastructure business. We have also announced that we are selling our Solutions business to Schroders and the Group will focus on our asset management capabilities in Equities and Infrastructure

We will continue to invest in our Equities team and Infrastructure team and add new teams where appropriate. We have already highlighted that we are seeking additional capabilities. We have also continued to invest in our existing investment teams. For example, James Sym, a highly rated European value manager, joined the Equities PVT team from Schroders last year and we have recently added additional analyst resource. As at the date of writing, James Sym's European Fund has raised over £200m AUM, which is a testament both to his investment expertise and our strong distribution capability.

Earlier this year we announced that a highly rated Sustainable Infrastructure team had joined the Group and we will be launching their flagship fund imminently. This is a key area for yield-seeking pension funds and other investors with income requirements.

We are also continuing to design and develop relevant product for the market, and we are in the process of bringing SFDR Article 8 and Article 9 strategies to the market across UK, European and Global strategies. We will continue to make these additions to the investment teams across the business to make sure that we continue to deliver for our investors and develop innovative products to meet their needs.

Distribution

We have invested heavily in our distribution capabilities and the business delivered an increase in AUM of £3.4 billion during the year. Our Wholesale distribution was overhauled, and we have seen a significant recovery in this distribution channel following the investments made in the area. As reported in the Group Chief Executive's statement, Wholesale gross sales have grown by 180 per cent. over the past 12 months and we expect Wholesale to continue to grow strongly.

In the main we will own our distribution network as at scale this model generates the highest margin and return on investment due to the overall institutional flavour of the assets which we seek to raise in large one to one relationships. Our own network will be concentrated in our home markets of the UK and Europe, North America and Australia. These are large institutional and sophisticated wholesale markets where our existing and planned product line-up is well aligned with the deepest asset pools. Without the addition of other channels, the right sales strategy, with a quality distribution team and continued product strength, these markets are capable of delivering significant assets in our higher margin products, whether performance or market trend driven. We will also continue to review alternative emerging platforms that will allow our clients to access our investment thinking in the most optimal manner.

We will also selectively seek distribution partnerships in markets and channels where the complexity and cost of having our presence is beyond what we are prepared to accept. This will be mainly accessing retail markets where our product set has a good fit, but we do not want the cost burdens that retail selling registrations bring with local regulators, nor the huge and constant volume of product and client service activities that require large internal and external teams. In effect we continue to follow our mantra of one-to-one high value relationships.

Operational

This is the glue that binds our investment manufacturing and client facing functions and ensures that we can deliver high quality and seamless support to our clients. We have begun a programme of investment in our operational infrastructure to ensure that we can provide the support to the business as we scale up over the coming years. This support will be increasingly centralised, and this ensures that as we bring on more investors to this platform we are able to extract greater operational leverage.

As noted in the Group Chief Executive's statement, we undertook the planning and preparation of the implementation of a new target operating model but have temporarily placed the implementation of this project on hold as we deal with sale of the Solutions business. We will re- visit this once the sale is complete in terms of the scale and need of any model enhancement required for the remaining business.

Our strategic objectives are ambitious over the coming years and we expect to see a transformation in the business as we continue this programme of investment in key parts of the Group. The delivery of high quality investment products to our clients and investors is paramount and the changes we are making we believe will deliver equally strong and growing returns for our shareholders.

The Board intends to refocus the Group as a specialist asset manager, positioned to grow through a diversification of its existing product offering and client base. The Board has confirmed that it will develop a detailed post-sale strategic plan over the coming months and update Shareholders on this plan as part of a full strategy, capital allocation and dividend policy update in the Spring of 2022.

Consolidated Income Statement

Year ended 30 June 2021

The notes to the consolidated financial statements form part of and should be read in conjunction with these financial statements.

Consolidated Statement of Comprehensive Income

Year ended 30 June 2021

The notes to the consolidated financial statements form part of and should be read in conjunction with these financial statements.

Consolidated Statement of Financial Position

Year ended 30 June 2021

The notes to the consolidated financial statements form part of and should be read in conjunction with these financial statements. The financial statements were approved by the Board on 4 November 2021.

Consolidated Statement of Cash Flows

Year ended 30 June 2021

The notes to the consolidated financial statements form part of and should be read in conjunction with these financial statements.

Consolidated Statement of Changes in Shareholders' Equity

Year ended 30 June 2021

The notes to the consolidated financial statements form part of and should be read in conjunction with these financial statements.

Notes to the Consolidated Financial Statements

Year ended 30 June 2021

1. BASIS OF PREPARATION

The Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and have been properly prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (IFRS).

Going concern

The Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future.

Accordingly, the Group and Company financial statements have been prepared on a going concern basis using the historical cost convention, except for the measurement at fair value of certain financial instruments that are held at fair value.

Basis of consolidation

The consolidated financial statements include the Company and the entities it controls (its subsidiaries). Subsidiaries are considered to be controlled where the Group has exposure to variable returns from the subsidiary, the power to affect those variable returns and power over the subsidiary itself. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

Subsidiaries are consolidated from the date that the Group gains control, and de-consolidated from the date that control is lost.

If the Group controls a fund, the fund is consolidated within the Group financial statements. Such funds are consolidated either on a line-by-line basis, or if the fund meets the definition of an asset held for sale it is classified and accounted for on that basis (see note 17). In the case that the Group does not control a fund for the complete reporting period, then the fund is consolidated only for the part of the reporting period for which the Group has control over the entity.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the subsidiaries' identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. The consolidated financial statements are based on the financial statements of the individual companies drawn up using the standard Group accounting policies.

All transactions and balances between entities within the Group have been eliminated in the preparation of the consolidated financial statements.

The Employee Benefit Trust (EBT) is included in the consolidated financial statements of the Group. The trust purchases shares pursuant to the non-dilutive equity awards granted to employees. These purchases and the operating costs of the trust are funded by the Company. The trust is controlled by independent trustees and its assets are held separately from those of the Group.

The consolidated statement of financial position has been presented on the basis of the liquidity of assets and liabilities.

The Group's relationship with fund entities

Considering all significant aspects of the Group's relationship with the Investment Management Entities ("IMEs"), the Directors are of the opinion that although the Group manages the investment resources of the IMEs, with the exception of where the Group demonstrates control of an IME that it has seeded, the Group does not control the IMEs and therefore their assets, liabilities and net profit are not consolidated into the Group's financial statements. Contributing factors include; the existence of termination provisions in the Investment Management Agreements (IMAs) which allow for the removal of Group entities as the investment manager; the influence exercised by investors in the control of their IME; the arm's length nature of the Group's contracts with the IMEs; and independent Boards of Directors of the IMEs.

Leases

The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. A lease is identified if; there is an identified asset, the group obtains substantially all the economic benefits from use of the asset and the Group has the right to direct use of the asset.

The Group initially records a lease liability in the Group's consolidated statement of financial position reflecting the present value of the future contractual cash flows to be made over the lease term, discounted using the Group's incremental borrowing rate. This is the rate that we would have to pay for a loan of a similar term, and with similar security to obtain an asset of similar value. A right of use (ROU) asset is also recorded at the value of the lease liability. Interest is accrued on the lease liability using the effective interest method to give a constant rate of return over the life of the lease whilst the balance is reduced as lease payments are made. The ROU asset is depreciated from commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term as the benefit of the asset is consumed. Increases or decreases that occur at contractually agreed market rent review dates are included in the lease liability once revised market rents have been agreed.

Foreign currencies

The majority of revenues, assets, liabilities and funding are denominated in UK Pounds sterling (GBP/£), and therefore the presentation currency of the Group is GBP. All entities within the Group have a functional currency of GBP, except for River and Mercantile LLC which is based in the US.

Monetary items which are denominated in foreign currencies are translated at the rates prevailing at the reporting date. All resulting exchange differences are recognised in the income statement. Non-monetary items are measured at the rates prevailing on the date of the transaction and are not subsequently retranslated.

The functional currency of River and Mercantile LLC is US Dollars and is translated into the presentational currency as follows:

assets and liabilities are translated at the closing rate at the date of the respective statement of financial position;

income and expenses are translated at the daily exchange rate for the date on which they are incurred; and

all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.

Adoption of new standards and interpretations affecting the reported results or the financial position

There have been no new or revised standards or interpretations which have become effective or been early adopted in the period.

2. SIGNIFICANT JUDGEMENTS AND ESTIMATES

The significant accounting estimates of the Group are detailed below:

• The accounting for UCITS V deferred remuneration awards involves estimates of forfeiture rates

• Inputs and vesting assumptions for certain share awards including estimates for the expectation of whether the performance conditions will be met at the vesting date

• The valuation of client lists included within intangible assets includes estimates for appropriate multiples and disposal in calculating the net realisable value

The significant accounting judgements of the Group are detailed below:

• Inputs and vesting assumptions for certain share awards

• Impairment of intangible assets, goodwill and investments recorded in previous acquisitions. Depending upon the asset, this can involve judgements which include business growth and estimates including discount rates, comparable revenue multiples and comparable earnings multiples. During the period, the basis of assessment for impairment of certain investment management contracts was changed from a value in use method, to fair value less costs to sell

• Where the Group seeds a fund it is launching, judgement is required to determine whether the Group has control over the fund and therefore if the fund should be consolidated within the Group's results

• The Group incurs costs on behalf of a fund it is launching which will ultimately be recovered from the fund vehicle and drawings relating to the members of River and Mercantile Infrastructure LLP (RAMI LLP) which are held on the balance sheet until there are accumulated profits to distribute. Judgment is required to assess the likelihood of fund launch and the recovery of those costs (at the reporting date the Group had £1.2 million (2020 £nil) of costs receivable on its balance sheet).

Net management fees

Net management fees represent the fees charged pursuant to an IMA. Net management fees are reported net of rebates to clients and are typically charged as a percentage of the client's AUM or NUM. The fees are generally accrued based on a contractual daily fee calculation and billed to the client either monthly or quarterly. During the year ended 30 June 2021, rebates totalling £2,026,000 (2020: £2,739,000) were paid in respect of Equity Solutions and the Dynamic Asset Allocation Fund management fees.

Advisory fees

Advisory fees represent fees charged under advisory agreements and are typically charged on a fixed retainer fee basis or through a fee for the delivery of a defined project. Fees are accrued monthly and charged when the work has been completed.

Performance fees

Performance fees are fees paid under certain IMAs for generating excess investment performance either on an absolute basis subject to a high-water mark, or relative to a benchmark. Performance fees are typically calculated as a percentage of the excess investment performance generated. Performance fees are recognised in income when it is probable that the fee will be realised and there is a low probability of a significant reversal in future periods. This occurs once the end of the performance period has been reached. The client is invoiced for the performance fee at the end of the performance period, which is generally annually, either on the anniversary of their IMA or on a calendar year basis.

Contract balances

The timing of client revenue recognition, billings and cash collections results in either trade receivables or accrued income on the Statement of Financial Position. For management fees, advisory fees and performance fees, amounts are billed in arrears pursuant to an IMA or advisory agreement with clients.

There were £11,000 (2020: £30,000) contract liabilities as at the year ended 30 June 2021.

4. DIVISIONAL AND GEOGRAPHICAL REPORTING

The business operates through two divisions, however, these are not considered to be segments for the purposes of IFRS 8 on the basis that decisions made by the Board are made at an overall Group level. The information received by the Board supports this decision-making, with income statements, balance sheets, forecasts and budgets presented at a Group level.

No single client accounts for more than 10 per cent. of the revenue of the Group (2020: none).

On a geographic basis the majority of the revenues are earned in the UK. The Group has an advisory, derivatives, fiduciary management and equity solutions business in the US and net revenue earned in the US for the year ended 30 June 2021 was £6.9 million (2020: £6.3 million). The AUM of the US business was £1,432 million (2020: £1,449 million). Non-current assets held by the US business include £1.3 million (2020: £1.5 million) of goodwill.

Included within office facilities expenses in the current year is the depreciation charge on the right of use asset of £1.3 million (2020: £1.3 million). The expenses relating to the Group's leased properties are charged as the straight-line depreciation cost of the capitalised asset.

Administrative expenses include the remuneration of the external auditors of £330,000, however the total charge in relation to the year for all audit related services is detailed below. The additional audit fees will be expensed in the following year.

6. REMUNERATION AND BENEFITS

Fixed remuneration represents contractual base salaries, RAMAM member drawings, employee benefits and recruitment costs. The Group operates a defined contribution plan under which it pays contributions to a third party. In the year the Group established a subsidiary, RAMI LLP, drawings relating to members of this partnership are only accounted for as an expense to the extent there are accumulated profits to distribute. At the year end all drawings relating to the members of RAMI LLP were held on the balance sheet of the Group (£293,000).

Variable remuneration relates to discretionary bonuses, variable profit share paid to the members of RAMAM, IFRS 2 charges in respect of share awards, associated payroll taxes and recruitment costs. Recruitment costs of £288,000 (2020: £393,000) were incurred in the year.

Variable remuneration also includes a charge of £193,000 (2020: £406,000) relating to the Group's non-dilutive share awards and credit of £6,000 (2020: credit of £40,000) of associated social security costs.

The Group has modified the classification of its headcount analysis to better reflect its operational structure, the prior year has been restated to reflect the updated classifications.

Directors' remuneration

The aggregate remuneration and fees payable to Executive and Non-Executive Directors for the year ended 30 June 2021 was

£1,988,000 (2020: £1,042,000).

Information regarding the aggregate single figure remuneration of the Executive Directors (which includes the highest paid Director of £954,000 (2020: £395,000)) is included in the Remuneration Committee Report.

Key management remuneration

Key management includes the Executive and Non-Executive Directors, and Executive Committee members. The remuneration paid or payable to key management for employee services is shown below:

Details of share awards granted to Executive Directors for future performance periods are included in the Remuneration Committee Report in the Annual Report.

7. SHARE-BASED PAYMENTS

Where share-based awards are granted to employees, the fair value of the award at the date of grant is charged to the consolidated income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each year-end date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of shares that eventually vest. Market vesting conditions are factored into the fair value of the awards granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of awards are modified before they vest, the change in the fair value of the award, measured immediately before and after the modifications, is recognised in the consolidated income statement over the remaining vesting period.

The key features of the awards are:

1. Remain employed throughout vesting period, subject to malus and good leaver provisions

2. Achievement of specified total shareholder return target within a range

3. Straight-line between minimum and maximum divisional AUM and revenue targets

4. Achievement of specified revenue targets within a range

5. Achievement of specified adjusted underlying EPS targets and personal objectives

6. Achievement of specified adjusted underlying EPS targets and business performance criteria

The following table sets out the movement in awards recognised in the income statement during the year and the key inputs into the fair values of awards: