RIV.L Regulatory News (RIV)

23 April 2018

River and Mercantile Group PLC

Third quarter trading update

31 March 2018

River and Mercantile Group PLC (R&M), the investment solutions business today provides a trading update for the three and nine months ended 31 March 2018.

Highlights for the three months ended 31 March 2018:

· Fee earning AUM/NUM increased by 1% to £33.0bn.

· Sales for the period were £2.0bn which included a £1.2bn structured equity mandate for a Local Government Pension Scheme.

· Redemptions in the quarter were £1.2bn, including £0.3bn of maturing structured equity transactions, and £165m and £158m from the UK Smaller Companies Fund and the UK Dynamic Fund, respectively.

· Net inflows for the quarter were £0.8bn, equivalent to 2.4% of opening AUM/NUM.

· Investment performance was negative £0.4bn, primarily from allocations to equities.

Highlights for the nine months ended 31 March 2018:

· Fee earning AUM/NUM increased by 6% to £33.0bn.

· Sales for the period were £4.6bn, including £1.1bn from Equity Solutions and £3.1bn from Derivative Solutions.

· Redemptions in the period were £4.0bn, including £1.5bn of maturing structured equity transactions from a single client which had met its objectives.

· Net inflows for the nine months were £1.5bn, equivalent to 5% of opening AUM/NUM.

· Investment performance generated £0.4bn and was positive across all divisions.

· Performance fees earned in the nine months ended 31 March 2018 are estimated to be £7.8m, of which £5.4m relates to the Fiduciary Management division with the balance from Equity Solutions.

· Net advisory fees earned for the nine months ended 31 March 2018 are estimated to be £7.4m.

Mike Faulkner, CEO of River and Mercantile, said:

"Over the period we have seen weakness in equity markets and a consequent rise in volatility. We believe this is consistent with what we would consider to be an apprehension phase in the market cycle. As expected, our AUM has been negatively affected by the investment return in our equities business, but the effect was more muted in Fiduciary Management due to our defensive positioning.

Derivative Solutions is not directly exposed to market movements. As a result, the impact of negative equity market returns has been significantly reduced at a total firm level by the diversified nature of our business.

We had previously guided that in these conditions we generally expect to see strong interest for our equity and structured equity mandates, and indeed this is what we have seen during the quarter, with strong flows in particular coming in Derivatives.

It is worth specifically highlighting that we executed a significant structured equity mandate for a UK local authority. Local authorities are an exciting new client base for our outcome-led approach to investing. We continue to see institutional demand for our global and international equity offerings across all regions. In Australia and the US we are expanding our fund offerings in order to target pension, endowment and family offices where we see opportunity to deliver strong outperformance for clients.

Our view is that, in the near term, we may be moving into a more challenging phase of the market cycle. We have therefore been helping clients to prepare to defend market weakness. Consistent with this view, in February we launched and seeded the River and Mercantile Global Macro Fund, which combines our strong intellectual thinking in macro asset allocation with our derivatives trading expertise. We believe that this strategy will deliver significant returns over a full cycle, whilst being designed to defend a downturn effectively.

Overall, our level of intellectual research and development has continued to expand and as a result we are well positioned to continue our growth by assisting our clients in what could be difficult market conditions in the near term."

Assets Under Management (AUM) and Notional Under Management (NUM)

AUM/NUM for the three months ended 31 March 2018.

At 13 April 2018, AUM was £0.7bn for the UK Smaller Companies Fund and £0.2bn for the UK Dynamic Fund.

AUM/NUM for the nine months ended 31 March 2018.

Performance fees

Performance fees earned in the nine months ended 31 March 2018 are estimated to be £7.8m, of which £5.4m relates to the Fiduciary Management division with the balance from Equity Solutions.

Based on the current performance of Fiduciary Management, we do not anticipate recognising any further performance fees in the fourth quarter. At 0% outperformance against benchmark, performance fees from Fiduciary Management for the year ended June 2019 are estimated to be £10m.

Notes to editors:

River and Mercantile Group PLC (R&M) is an investment solutions business with a broad range of services, from consulting and advisory, to fully delegated fiduciary management and asset management.

R&M is focussed on creating investment solutions for institutional pension schemes, insurance and financial intermediaries and operates through four divisions: Investment Solutions encompassing both advisory and fiduciary management, Derivatives Solutions providing structured equity and Liability Driven Investing (LDI), Equity Solutions providing UK and global equity strategies and Multi Asset Solutions, providing dynamic asset allocation and other multi asset based solutions.

For further information please contact:

River & Mercantile Group PLC +44 (0)20 3327 5100

Chris Rutt, Deputy Chief Financial Officer and Investor Relations

Forward-looking statements

This announcement contains forward-looking statements with respect to the financial conditions, results and business of the Group. By their nature, forward looking statements involve risk and uncertainty because they relate to events, and depend on circumstances that will occur in the future. River and Mercantile Group's actual results may differ materially from the results expressed or implied in these forward looking statements. Nothing in this announcement should be construed as a profit forecast.

Notes:

Assets Under Management (AUM) represents the assets over which we act either as a discretionary investment manager on a partial or fully delegated basis in accordance with an investment management agreement.

Notional Under Management (NUM) represents the aggregate billing notional of derivative contracts and is the basis on which management fees are charged.

Net rebalance and transfers represents the net change in billing notional values of Derivatives (including Gilts) from existing client mandates and can increase or decrease based on changes in the underlying hedging strategies.

The category also represents transfers of client assets between divisions. The different billing structures between divisions, including the use of AUM or NUM, means that transfers will not net to zero. The acquisition of AUM as part of the Credit Suisse ILC Co-operation agreement has also been recognised on this line.

Fee earning AUM/NUM represents amounts on which management fees and performance fees are charged.

Mandates in transition represent the AUM/NUM of mandates which have been awarded by clients at the period-end date and will transition into fee earning assets. The timing, and ultimate amount transitioned is determined by the client. We report an estimated AUM/NUM for those mandates where there is a high likelihood of the amount being transitioned within the next three months.

Redemptions in transition are redemptions which have been notified by the client at the period-end date, but where the AUM/NUM is included in fee earning assets at period end. We report an estimated AUM/NUM for those mandates where there is a high likelihood of the amount being redeemed within the next three months.