Final Results

CHARLES STANLEY GROUP PLC

RESULTS FOR THE YEAR ENDED 31 MARCH 2014

Charles Stanley is one of the UK's leading independently owned, full service stockbroking and investment management groups. Today it announces its preliminary results for the year ended 31 March 2014 in accordance with FCA Listing Rule 9.7A.

Highlights:

· Total funds £20.1 billion (2013: £17.7 billion) 14% increase

· Discretionary funds £8.2 billion (2013: £6.4 billion) 28% increase

· Revenue £149.0 million (2013: £127.6 million) 17% increase

· Fees £90.6 million (2013: £76.9 million) 18% increase

· Reported profit before tax £6.1 million (2013: £9.1 million) 33% decrease

· Underlying profit before tax £13.5 million (2013: £13.5 million) no change

· Reported earnings per share 10.51p (2013: 14.93p) 30% decrease

· Underlying earnings per share 23.00p (2013: 22.38p) 3% increase

· Total dividend 12.25p (2013: 11.75p) 4% increase

· New Leicester office opened in October 2013

· Acquisition of Evercore Pan Asset Capital Management Limited in December 2013

Commenting on the results for the latest year, Sir David Howard, Chairman, said:

"The increase in revenue and in our funds under management and administration is very pleasing. But this has been a year of significant cost and investment in our future, which has impacted on our profit. This pace of development is likely to continue over the year ahead, but the changes that are in place already should, all things being equal, deliver an improvement in our profitability. Nevertheless there are too many uncertainties at this early stage of the year to make any reliable predictions. So once again I approach the future with a degree of caution."

For further information please contact:

CHAIRMAN'S STATEMENT

Charles Stanley Group is pleased to announce that its revenue for the year ended 31 March 2014 reached a new record of £149.0 million, an increase of 17% compared to £127.6 million in the previous year, and that funds under management and administration increased by 14% to £20.1 billion.

The steady improvement in the UK economy, and benign conditions in our investment market, coupled with continuing low inflation and interest rates, all contributed to the upturn in our revenue.

This has been a year of significant cost and investment in our future. In particular our profitability has been impacted by the acquisition of further teams of high-quality investment managers, the continuing roll-out of our direct-to-client web-based service Charles Stanley Direct, and a major programme of up-grading the quality of service of our principal business of discretionary and advisory investment management. Our underlying profit for the year, before tax, which excludes a number of adjusting items, was £13.5 million, the same as last year's figure of £13.5 million. When the adjusting items are deducted the reported profit before tax has decreased by 33% from £9.1 million (in 2012-13) to £6.1 million.

Although domestic economic conditions have become increasingly benign during the past year, the overall effect on the stock market has been marginal. The FTSE-100 Index climbed by just 2.9% over the year to 31 March 2014. The more UK-orientated WMA Stock Market Balanced Index rose by even less, at 2.6%. This compares with the increase, as above, of 14% in our clients' funds under management and administration. Within this figure the funds under discretionary management rose by 28% from £6.4 billion to £8.2 billion. Clients' discretionary funds now represent 73% of total funds under management, up from 69% last year and 64% the year before.

Our transaction income performed strongly, too. With transaction volumes some 12% higher than in 2012-13, and with an increase in the average transaction value, our commission income, at £58.4 million, remained at 39% of the increased total revenue.

Towards the end of the year we successfully implemented a comprehensive programme of revising our charges, which have recently begun to work through to our revenue. We are now about to implement a very detailed programme of changes in our costs, with the emphasis on improving our margins.

As anticipated in my statement last year, we were joined during the year by a substantial team of investment managers in Leicester, and the new branch has got off to a promising start. Just at the year end, on 1 April 2014, we opened an office in Cardiff, and this, too, has started well. Throughout the year we have welcomed a number of individual investment managers and teams at our London office and throughout the country, which has inevitably adversely affected our overall margins in their start-up phase.

A competitor company has taken well-publicised legal action against us in relation to staff who chose to leave them and join us. We have lodged what we believe to be a strong defence.

In our interim report we commented on the progress of Charles Stanley Direct and its innovative "clean priced" offering. I am pleased to report that we now have over 16,000 clients with in excess of £840 million of assets under administration. We will continue to develop and promote this important area of our business.

I am also pleased to report that Charles Stanley Securities enjoyed an excellent second half of the year with revenues nearly doubling to £14.6 million compared with £7.7 million in 2013.

In December 2013 we purchased a fund management group, Evercore Pan Asset Capital Management Limited, for a partly deferred payment of up to £2 million. Pan manages in excess of £500 million on behalf of pension funds, charities, and corporate and private clients. It specialises in providing passive investment management within market sectors which it actively selects, and this brings a new dimension to our investment management expertise and to the range of investment opportunities available to our own client base.

For much of the past year the management of the Company has been heavily engaged in a major programme of upgrading our systems and our record-keeping to meet rising regulatory expectations which are being applied across our area of the financial services sector.

DIVIDEND

The directors are recommending an increase in the final dividend of 2.8%, from 9.00p to 9.25p net per share. Taken together with the increase of 9.1% in the interim dividend from 2.75p to 3.00p net per share this will represent an increase of 4.25% in the total dividend for the year, at 12.25p (2012-13: 11.75p). The final dividend will be paid on 8 August 2014 to shareholders registered on 11 July 2014.

THE BOARD

This has been a busy year for the Board. The contribution of our two Non-executive Directors to our discussions has been particularly helpful. Their input has been challenging but always supportive. We are going through a period of considerable change in our business, and change, too, in the expectations of how our Board and management operate. We have spent much time, for example, refining our strategy and our strategic priorities. But at heart we remain committed to our traditional ethos of building long-term relationships with our clients and delivering a high quality of service to them.

There were no changes in the Board during the year, but just after the year end, on 9 April 2014, we were delighted to announce the appointment of our Head of Investment Management, Anthony Scott, as a Director. We are very pleased to welcome him to the Board.

I should like to thank all our Directors, and all those on our subsidiary boards, for their sterling support over the past year, and for all that they have achieved.

THE CHARLES STANLEY TEAM

In the same vein I commend everyone within the Charles Stanley Group to the shareholders for their contribution to the Company in what has been a very challenging year. The Directors think we have a great team, and you will find a small selection of details of what some of them do in the Corporate Social Responsibility section of this report. As always, we really are very appreciative.

OUTLOOK

After an unusually long period of domestic recession and then stagnation, the recent steady improvement in the UK economy has been very welcome indeed. Much of the rest of the EU is still struggling, but the liquidity crises in several member states have abated. Global economic recovery still seems fragile, but the UK looks set fair for a continuation of the upturn, for the time being at least.

Your company has undergone dramatic transformation in recent years, partly in response to the changing aspirations of our clients and partly due to the changing climate of regulation. Economic and market conditions at home look set to continue improving, though questions remain about the timing of interest rate increases, the wind-down of quantitative easing, and the uncertainty and potential economic impact of the Scottish referendum. But regulatory change remains near the top of our agenda.

This has been a year for us of significant, and expensive, development. This pace of change is likely to continue over the year ahead, but the changes that are in place already should, all things being equal, deliver an improvement in our profitability. Nevertheless there are too many uncertainties at this early stage of the year to make any reliable predictions. So once again I approach the future with a degree of caution.

Sir David Howard

Chairman

19 June 2014

STRATEGIC REPORT

· Our business

· Our market

· Our objectives and strategy

· Review of the year

· Risks and uncertainties

· Future developments

OUR BUSINESS

Who we are

As one of the UK's leading independently-owned private client investment management firms Charles Stanley can trace its origins directly back to 1792 and we have been a member firm of the Stock Exchange under the "Charles Stanley" name since the 1850s. Over the years we have grown both organically and by absorbing numerous competitor firms. The hallmark for our firm over many generations of clients remains our overriding commitment to excellent client care.

We look after the assets of approximately 95,000 clients with a total of £20 billion funds under management and administration ("FUMA"). We employ over 1,000 people equally divided between London and the regions.

What we do

We provide bespoke portfolio management to mainly private clients, delivered by over 400 professionals located in 33 offices throughout the UK. We operate in--house administration and custody for investment portfolios, SIPPs and ISAs and have developed Charles Stanley Direct, a state of the art direct to customer, execution only dealing platform for equities and funds.

We operate a number of complementary financial services businesses which are available to our core investment management clients. These businesses offer financial planning services, employee benefits consultancy and fund management. We also provide institutional broking and corporate finance advice to small and medium sized companies.

Our core service is active management of investment portfolios, using a full range of UK and overseas investments, which is delivered in the form of personalised portfolios, predominantly held in our own nominee account. Our managed clients generally invest between £100,000 and £5 million, or from £30,000 within Charles Stanley Direct or the Collectives Portfolio Service ("CPS"), and comprise mostly UK--resident private individuals and families. We also manage money for charities, trusts and Court of Protection awardees. Clients' portfolios are managed on a discretionary or advisory basis, subject to client needs and the scale of their investments. We also provide execution only and advisory dealing services.

Our culture

We place our clients' interests at the heart of everything we do, blending our centuries--old heritage with modern business practice and technology to deliver high quality, personalised and relationship--driven services. Our behaviour towards our clients and colleagues is driven by integrity, conservatism and professionalism; the trust these values engender has resulted in frequent cases of us managing some families' investments for three generations or more. Lasting client relationships are the bedrock of our business and we monitor our clients' satisfaction to ensure we are meeting their expectations.

We believe that locating our investment teams close to where our clients live is the optimal way to deliver outstanding service and outcomes in line with our clients' mandates and expectations. This local service model is increasingly underpinned by new ways for our clients to engage with us as we progressively deploy new technologies to give access to services, accounts and market information across a broader range of media, from home or the workplace and at times convenient to them.

Many of our employees have been part of the Charles Stanley business for a long time. We create long-term career opportunities for our employees as a foundation for delivering high quality service for our clients over the long term. Since our business is driven by our clients' financial interests, we align the incentives of our employees accordingly, within a framework of controls to ensure the suitability of advice we provide to clients.

Our responsibilities

Ours is a service business that wholly depends on generating and fulfilling the trust of clients who entrust us to preserve and grow assets that are critical to their security and wellbeing. We seek to achieve this in a personal, cost--effective and tax efficient manner. This fiduciary relationship drives our endeavours to provide clients with fair returns and suitable advice which we believe in turn drives our ability to provide sustainable shareholder returns.

We do our utmost to provide a stimulating, stable and enjoyable place of work in which long term delivery of our clients' and shareholders' objectives is fairly rewarded. We also strive to protect the environment, under the guidance of our Corporate and Social Responsibility committee, and to manage our business in a fair and ethical manner.

Through the combination of a growing and satisfied client base serviced by a professional and motivated work force, we seek to reward our shareholders with a rising dividend income and, as the business grows, an appreciating capital value.

OUR MARKET

Charles Stanley operates within the UK's wealth management industry. Compeer Limited, a specialist in business performance benchmarking within the industry, produces a number of regular reports. According to their latest quarterly update, at December 2013 the industry managed £628.6 billion of investment assets with new highs recorded by both wealth managers (£515.3 billion) and execution only stockbrokers (£113.3 billion).

Charles Stanley has identified a number of firms that it considers to be its peer group within its sector of the wealth management industry. These are listed below.

Figures based on latest audited accounts and other publicly available information

The wealth management industry is subject to the macro effects of volatile markets and economic conditions. In addition there are two primary drivers of change within our sector of the industry.

On the demand side, customer needs and behaviours are evolving and presenting both opportunities and challenges. Demographic trends and wealth creation continue to grow asset pools, notably pension assets in the baby boomer retirement wave, which together with increasingly complex taxation is accentuating demand for wealth management services.

Datamonitor Financial (a company that provides data and analysis across the financial sector) estimate that there are 9.1 million individuals in the UK with more than £50,000 in liquid assets (realisable within six months). The number is forecast to increase by more than 1.5 million people over the next five years.

Less obvious are the challenges presented by changes in customer behaviours which have themselves been exacerbated by two other drivers, namely customer trust and regulation. World economies may be gradually recovering from the global financial crisis, but the impact of the 2008 crash on clients' trust of the wealth management industry should not be underestimated. In addition, UK conduct regulation, by increasing transparency of fees and services will, over the long term, raise levels of customer engagement and in turn sophistication. As a result, customers are becoming less accepting and more demanding, a trend enabled and accelerated by technology.

The second strand of regulatory change is more stringent capital adequacy requirements following the banking crisis. One of the effects of these drivers will be margin compression which in turn is driving much industry behaviour. On the one hand, customers will in the long run become more engaged, proactive and discerning in their choice and use of investment management and advice providers. They will be more ready to use several types of service simultaneously, e.g. execution only for part of their portfolio, Discretionary Fund Management ("DFM") for another and advice paid for on a transactional basis.

More immediately though, the combination of drivers described above will make the provision of financial advice and personal investment services more costly to deliver. The increasing cost will make advice-led service inappropriate for clients with smaller portfolios. Faced with more demanding customers and conduct regulation focused on securing the quality of customer outcomes, firms' business models, culture and governance must become more explicitly customer--centric and demonstrably recognise the customer as a third stakeholder alongside shareholders and employees.

We believe margin compression will also cause our sector to develop increasingly integrated business models to protect margins: vertical integration to access more value across the supply chain and horizontal integration, to offer a wider set of services.

In uncertain and confused markets, having the capital and competence to manage the implementation of, and compliance with, an ongoing flow of regulatory change will bring competitive advantage in itself. Wealth management remains attractive to capital investors, certainly in comparison to other more capital--intensive and higher risk sectors. We expect consolidation will continue as firms seek scale and scope economies, funded both by institutional and private equity capital. Minimum efficient scale will rise and distribution of wealth management services will become more concentrated.

We strongly believe business models offering a composite proposition, namely a set of complementary services designed to serve most of a client's investment management and advisory needs, will become prevalent over time. As in other industries and to the Regulator's satisfaction, firms will measure their performance less in terms of asset gathering and more in terms of long-term customer value.

OUR OBJECTIVES AND STRATEGY

Fundamental objective

Our fundamental objective remains to build Charles Stanley over the longer term, to provide an optimal return to our shareholders. Our central strategy to deliver this fundamental objective is to place the interests of our clients at the heart of the decisions we take in relation to our operations and the development of our business. We believe that producing a sound return for our clients and providing an excellent service at a fair price are the right foundations from which to execute our central strategy and deliver our fundamental objective.

Our operational focus

During the course of the year the management of Charles Stanley began a process of reviewing and formalising the Group's operational strategy. This review identified two key areas of priority and focus:

· Maintaining and improving the quality and breadth of the services available to our clients; and

· Adapting measurable financial objectives to evaluate our progress.

Our client service proposition

We will continue to improve our position as a leading provider of investment management and wealth management services to our clients. We believe this improvement will be provided by allowing clients a broad choice of investment management solutions from a traditional, fully discretionary service to the direct to client, online execution only service provided in Charles Stanley Direct. We take ever increasing care in forming a detailed understanding of our clients' financial position, their financial hopes and objectives and attitude towards investment before using our experience to guide them to an appropriate service. By investing our time and effort in promoting the depth and quality of our client relationships, we can build our business for the longer term and ensure that the needs of our clients are at the heart of our service proposition.

We aspire to be a "trusted adviser" and to offer clients a suite of products and services that are designed to meet our clients' needs. We remain committed to the principle that the adoption of these services remain a client choice and have no plans to regard them as a mandatory addition to our core investment management proposition. However, we believe that the investment we are making in our financial planning capability will provide a compelling proposition for clients and will lead us to increasingly provide a holistic wealth management proposition.

We will strive to offer a truly value-for-money solution for our clients by ensuring our charging structure is reflective of the quality and complexity of our services. We will encourage our clients to determine our value by reference to the outcomes they achieve from their investments we manage or the advice we provide, and also in relation to the quality of their interaction with us as seen in our client communications and the efficiency with which we deal with the assets they commit to our care. We will continue to invest in our business to ensure we retain the ability to improve our performance across all areas.

Our management review has reaffirmed the values of client care upon which our business has been built. An increased focus on delivering to clients the outcomes they expect from our services is the key operational priority for the group and the centre of our development strategy.

Adopting measurable financial objectives

The management review identified that our historic culture of client service has led to our charges, expressed as a return on total client assets under management and administration being amongst the lowest in our industry peer group. In order that we can improve the returns we provide to our shareholders, we have begun a process to align more equitably the quality of service with our pricing policy. In line with this exercise we aim to increase efficiency in order to move our operating margin into line with industry averages. To this end we shall aim to achieve an operating margin of 10%+ (adjusted for the FSCS levy) by 2017. We shall also continue our policy of providing a rising dividend income to our shareholders. We would expect to increase our dividend broadly in line with our earnings (adjusted for FSCS levy).

REVIEW OF THE YEAR

Client funds

Steady markets throughout the year helped the Group improve net organic fund inflows which, together with acquired businesses, resulted in an increase of 13.6% in total FUMA from £17.7 billion at 31 March 2013 to a record £20.1 billion at 31 March 2014. The split between managed and administered funds is shown below.

The strong performance of Discretionary and Execution only services has been influenced by the continuing migration by many clients away from Advisory services. Further details are given in the divisional reviews below.

Results for the year

The increase in client funds has driven the trend of increasing total fee income - some 17.8% higher compared with last year. The higher fees also reflect improved contributions from our Financial Services and Charles Stanley Securities divisions - with increases in income of 13.7% and 90.9% respectively. In addition, commission income increased by 15.2% to £58.4 million compared with £50.7 million for last year.

As a result of these increases revenues reached a record high of £149.0 million for the year. However, this has been a year of significant cost and investment in the future of the business. In particular profitability has been hit by the continuing roll-out of our direct-to-client web-based service Charles Stanley Direct, the acquisition of further teams of high quality investment managers and a major programme of upgrading the quality of service of our core business. In addition, during the year there has been an ongoing programme of upgrading the systems and processes used for deepening our understanding of our clients, which was driven by rising regulatory expectations across the financial services industry. We have responded readily to this increased expectation on the understanding that it will improve our existing high quality service to clients.

These industry changes do mean, however, an increase in the cost of serving our clients. An impact of this is that the thresholds at which we accept clients into the different levels of service offered across the Group have been raised, and our fee structure has been revised.

Our business is founded on the personal relationships that we have built with our clients over many years and often many generations, and because of this we are implementing these changes successfully. Whilst this has required an enormous effort from our Investment Managers to achieve, it is expected that this investment in time spent with our clients will lead to an even better level of service to our loyal client base.

Due to this increased expenditure during the year profit before tax was down by 33% at £6.1 million against £9.1 million.

The Directors believe that a more accurate reflection of the Group's performance is given by the measure of underlying profit before tax. This measure is also followed by the analyst community as a benchmark of the Group's ongoing performance. The following table reconciles underlying profit before tax with reported profit before tax as shown in the consolidated income statement on page 22. Underlying profits are arrived at by excluding Charles Stanley Direct and other investment one-off costs, Financial Services Compensation Scheme levy, amortisation of customer relationships and one-off costs relating to , the opening of a new office in Leicester and other acquisitions.

Despite the increase in revenue this year there has been no change in the underlying profit which stands at £13.5 million compared with £13.5 million last year. This has been due to a number of factors. Excluding adjusting items, underlying costs increased by £21.4 million (18.7%) and reflect a combination of business growth, resulting in increased sharing and bonus payments, and investment in the future of the business.

Variable staff costs related to revenue growth increased by £9.0 million.

The average number of employees has risen by 5.4% to 872 from 827. This includes new offices opened and the acquisition of a subsidiary during the year. We have also taken on more staff in operational, risk and compliance roles in line with a growing business. In addition, salary inflation amounted to 2.8%. As a result fixed staff costs have increased by £5.4 million (11.1%).

During the year the Group acquired a freehold property and carried out an extensive re-furbishment of its London offices to provide a better working environment for its staff and improve its business continuity programme. Together with the opening of new offices this resulted in an increase in infrastructure costs of £2.5 million.

The tax charge for 2014 was £1.4 million (2013 £2.3 million) and represents an effective tax rate of 22.3% (2013: 25.5%). The effective tax rate is lower the UK standard rate of corporation tax of 23% due to disallowable expenses and investment in tangible assets not eligible for capital allowances, offset by an increase in the tax deduction available for share-based awards driven by a higher share price. A full reconciliation of the tax expense is shown in note 9 to the consolidated financial statements on page 32.

The Finance Bill 2013, which includes provisions for the UK corporation tax rate to be reduced to 20% over the next two years, was passed by the House of Commons on 2 July 2013 and the reductions are therefore deemed to be substantively enacted. Deferred tax balances have therefore been calculated based on the reduced rates where timing differences are forecast to unwind in future years.

* Adjusted for the FSCS levy

6

Investment Management Services

The core of our business is our Investment Management Services division, accounting for 88.2% of total funds and 79.1% of Group revenue. This division provides investment services to private investors, trusts and charities from 33 offices.

The services provide our clients with a choice of:

Managed

■ Discretionary portfolio management; and

■ Advisory portfolio management.

Administered

■ Advisory share dealing; and

■ Execution only share dealing (excluding online services).

We charge for these services in three main ways:

■ Investment management fees based on a percentage of funds;

■ Administration fees based on a combination of fixed fees and percentage of funds; and

■ Commission on transactions undertaken on behalf of clients.

Funds managed and administered for our Investment Management Service clients and the movements during the year are analysed below:

During the year, the underlying positive drivers of profitability in the business were the increase in customer assets and improving investment markets, with only a moderate initial impact from our re-pricing and the improvement in business mix seen in this period. Commission income also increased in more buoyant markets. To offset these improvements, variable staff compensation increased with rising revenues and fixed staff costs rose reflecting growth in the firm's footprint and further investment in our business. In addition to new office openings in Leicester and post year-end in Cardiff, a number of investment managers and support staff have chosen to join us in London and across our regional network. Further headwinds included trail commission income which shrank as expected in the new post-RDR regulatory environment and very low interest rates which remain unhelpful.

The mix of a new allocation of ongoing ICT costs, one-off costs in the period resulting from acquisition of teams, and taking the appropriate share of a higher quantum of regulatory and legal costs, accounts for the gross contribution in this division falling from £31.4 million to £26.4 million rather than to the £31.2 million delivered on a comparable basis. It is inevitable that greater customer and regulatory scrutiny will remain a feature of our industry, requiring us to invest in more sophisticated ways to understand and control the business and investment risks inherent in managing our client portfolios. That said, we expect a proportion of these costs to moderate in future years and so expect over time to see higher levels of reported divisional profitability as a result.

We are pleased to report that our charitable funds under management and administration as at 31 March 2014 were in excess of £1 billion, which represents a 19.0% improvement on the previous year. This growth has come from a mixture of new client mandates, increased business as a result of attracting new investment managers and teams to join Charles Stanley, and, encouragingly, additional funds from existing clients. We believe this is a significant milestone in the development of our charities business and we will continue with our efforts in this area, both in terms of the level of support we provide for all of our existing charitable clients and in continuing to grow FUMA in this important area.

Revenues in our Managed business have grown by 19.9%, while the Administered business has decreased by 3.8%.

The combined revenues of this division of £117.8 million have shown overall growth of 12.2%. Costs within the Investment Management Services division have increased by 24.2%, resulting in a 15.9% fall in operating contribution for the year to £26.4 million.

Fees earned on managed funds increased by 19.1% in line with a 17.7% increase in average funds held. Together with the recovery in transaction volumes this has resulted in an improved revenue margin up from 87 to 89 basis points.

Revenue from administered clients is analysed below. The drop in fees reflects a reduction in net interest earned as a result of lower rates on deposits and a decline in trail income. This has been partly offset by the increase in transaction volumes over the same period.

FINANCIAL SERVICES

The contribution of the division is broadly flat on a year on year basis. Total income for the division grew appreciably by 13.7% to £13.3 million from £11.7 million. However, this pleasing revenue growth has been offset by increasing costs with the major contributor being additional recruitment of personnel in the Financial Planning area in order to further expand our holistic wealth management proposition. Nevertheless, the division has delivered an improvement in profitability from £0.5 million in 2013 to £0.6 million for 2014 despite a one-off write-off of £0.25 million. The division is poised to see the benefit of our investment going forward. We have seen a particularly strong contribution from our Matterley Fund Management business and see further potential for growth in this area.

Financial planning and wealth management

The financial planning and wealth management business recorded another steady year with gross revenue increasing to £4.6 million from £4.5 million. We have continued to invest in our offering with increased personnel, in line with our objective of strengthening the reach of our holistic wealth management proposition. During the year Jobson James was absorbed within the division and we have reallocated the smaller employment benefit division to Charles Stanley Financial Solutions for the year 2014/15.

EBS Management PLC

EBS Management PLC had a pleasing year with a growth in SIPPs under administration of 6.0% to 6,270 compared with 5,894 at 31 March 2013. Revenue for the year to 31 March 2014 remained static at £2.3 million due to a reduction in interest turn.

Charles Stanley Financial Solutions Limited

Revenue decreased slightly from £3.6 million to £3.5 million as a result of the removal of legacy contracts from the core employee benefits business. Auto-enrolment has delivered significant client growth at the end of the financial year but this was not enough to offset other losses of income. We expect progress in the business as the continued changes in pension auto-enrolment offer opportunities.

Charles Stanley Pan Asset Capital Management Limited

In December 2013 we completed the purchase of Evercore Pan Asset Capital Management Limited, which we have subsequently re-branded as Charles Stanley Pan Asset Capital Management Limited. This acquisition has provided us with an enhanced ability to offer passive index tracking models, which are of increasing interest to our clients. This business offers a range of model portfolios, constructed on an "active passive" basis which, when coupled with our existing actively managed Collectives Portfolio Service, will enable us to offer a comprehensive suite of model-based investment management solutions.

Matterley

Our fund management business has enjoyed a strong performance with funds under management rising 28.1% from £203 million to £260 million and income increasing to £2.3 million from £1.3 million.

Matterley continues to be an important part of our strategy going forward to offer a vertically integrated solution to the smaller client.

CHARLES STANLEY DIRECT

This division provides a direct-to-client investment service and was created by combining our existing online dealing service, Fastrade, with our discount intermediary business, Garrison. The proposition has been received well by the market with over 15,000 accounts using the service at the year end. During the year, we opened more than 8,000 new accounts to Charles Stanley Group and, in addition, we have seen over 1,500 Charles Stanley Group clients (including Garrison) moving to Charles Stanley Direct. Since the year end, a further 1,000 clients have been acquired and assets under administration stand at just over £840 million. Funds held within the division (including Garrison) at the year end stood at £1.4 billion compared with £1.1 billion at 31 March 2013 - an increase of 27.3%. During this launch period migrating clients received an introductory offer of no charge for platform or custody fees, during the initial six month period.

Over the same period costs have increased resulting in a negative contribution of £1.0 million (2013: £0.2 million) from the division. This increase in costs was due to one-off costs associated with the launch of the division of £0.5 million and an increase in staff numbers of 28.1%.

CHARLES STANLEY SECURITIES

Charles Stanley Securities, the Group's equity capital markets business, is focused on providing advisory, broking and research services to the small and midcap sector. It also conducts agency bond trading. The division has experienced improving trading conditions in the current year with corporate fee revenues more than doubling and secondary commissions broadly flat on last year. Charles Stanley Securities had 49 retained clients at the year end. Since 1 April 2013, the division has acted for clients on three IPOs plus a number of secondary fundraisings and public and private M&A transactions and continues to have an encouraging pipeline of new business opportunities. At the year end the arrangement with WG Partners was mutually terminated and WG Partners have established themselves on an independent basis.

The increase in revenues and tight control of costs resulted in an operating contribution of £3.2 million for 2014 compared with a loss of £0.7 million for the prior year. If the arrangement with WG had not been in place during the financial year, this operating contribution would be £0.25 million less than the figure reported. Charles Stanley Securities continues to focus on developing its corporate client base, whilst maintaining the quality of its levels of service and capital markets advice to its corporate clients and execution services to our institutional clients.

FINANCIAL POSITION

Regulatory capital

Up to December 2013 Charles Stanley & Co. Limited ("CSC") was a Limited Activity firm. In December 2013 CSC applied for a waiver of permissions. This was granted in February 2014 and CSC became an IFPRU 125K Limited Licence firm. At 31 March 2014, the Group had regulatory capital resources of £48.1 million as shown in the table below:

The Group monitors a range of capital and liquidity statistics on a daily, weekly or monthly basis. Surplus capital levels are forecast to ensure that the capital levels do not fall below 125% of the capital requirement.

As required under FCA rules the Group performs an Internal Capital Adequacy Assessment Process ("ICAAP") annually, which includes performing a range of stress tests to determine the appropriate level of regulatory capital and liquidity that the Group needs to hold. The last review was held in February 2014.

The Group's Pillar III disclosures are published annually on our website (www.charles-stanley.co.uk/investor-relations/pillar-3-disclosure) and provide further details about regulatory capital resources and requirements.

Intangible assets

Intangible assets arise principally from acquired funds under management and are categorised as client relationships. Goodwill arises on consolidation. At 31 March 2014, the total carrying value of intangible assets was £35.3 million (2013: £33.7 million). During the year £3.6 million in customer relationships were acquired, which includes £1.4 million relating to the acquisition of Evercore Pan Asset Capital Management Limited. No goodwill was acquired during the year or in 2013.

Client relationship intangibles are amortised over the estimated useful life of the client relationship - 4 - 7 years.

Goodwill arising from business combinations is not amortised, but is subject to an annual impairment test. No goodwill has been impaired during the year or in 2013.

Further details on the Group's intangibles are provided in note 10.

Capital expenditure

During the year the Group has continued to invest in its infrastructure, through the refurbishment of our offices (£3.3 million) and the purchase of a building to be the new disaster recovery site (£4.4 million). Improving the systems continues to be a focus of the Group, whether through improving existing systems or investing in new ones. Capital expenditure on systems in 2014 remained at the same level as in 2013.

Further details on the Group's capital expenditure are provided in note 11.

Defined benefit pension scheme

The Group operates one defined benefit pension scheme, which has been closed to new members for several years. Each year actuarial valuations are carried out based on the position at 31 March 2014.

Growth in asset prices during the year helped reduce the scheme's deficit at 31 March 2014 from £8.9 million in 2013 to £6.9 million at 31 March 2014.

Cash at bank

Risk targets have been set to help the Group monitor the bank balances.  Bank balances are monitored daily to ensure they do not fall below £25 million.

RISKS AND UNCERTAINTIES

During the year the Group has reviewed its governance structures concerning risk management and has made a number of key changes. Last year the Group established a separate risk committee comprising three Directors of Charles Stanley Group PLC, three Directors of Charles Stanley & Co. Limited and other relevant risk management personnel. In the second half of the year, with the help of external consultants, the Board initiated a complete review of the risk management process within Charles Stanley. As a result the existing risk committee was re-named the enterprise risk management ("ERM") committee to better reflect the committee's responsibilities. In May 2014 a risk committee was established comprising Bridget Guerin and David Pusinelli - the two Non-executive Directors.

Also part of this review was to formally define and develop a risk appetite statement ("RAS") which has been approved by the Board. The RAS is a core component to the Group's risk management framework and was developed taking into consideration the Group's strategic objectives, strategy and business plans. This new level of RAS articulation is driving the implementation of a more robust risk monitoring and risk reporting process, which continues to evolve. As the Group implements these processes, the Board will periodically review the RAS to ensure that it continues to reflect the risk appetite of the Group.

The RAS sets out the Group's tolerance to various types of risk and includes both quantitative and qualitative measures against which management and Board monitor risk on a periodic basis.

Set out below are the key risks relevant to the Group's long term performance.

FUTURE DEVELOPMENTS

We will continue the management review of our operations commenced last year and will strive to identify areas in which our service to clients can be improved and our business can be developed profitably for the benefit of our shareholders.

Development of our investment management proposition

We recently appointed Anthony Scott to our Board as Head of Investment Management to add momentum to our ongoing process of improving our client proposition in this area and to provide additional support for our investment managers. We are deepening our understanding of our clients both in terms of their financial position and investment objectives. This will enhance our capability to place the needs of our clients at the centre of our business. We will build on our reputation for the quality of our service and ensure that our commitment to prudence and long term relationships is augmented by increased operational efficiency in the manner in which we manage and administer our clients' assets.

We are increasing the support we offer to our investment managers by embarking on a fundamental review of our investment process, our asset allocation methodology and our in-house research function whilst still offering a truly bespoke service. Our newly appointed Chief Investment Officer is leading this review and that its product will be a comprehensive and sophisticated guidance system, providing the intellectual bedrock from which our investment managers can drive investment performance.

Broadening our business

We intend to refine and develop our activities to provide a fairly priced and comprehensive service-offering to our existing clients and to make Charles Stanley an obvious choice for those consumers of financial services with whom we do not enjoy a relationship at present. We shall continue to develop our Charles Stanley Direct business, as increasing numbers of people determine upon a self-directed course for the management of their financial affairs. We intend to grow our relationships within the professional intermediary market and especially within the IFA community by offering a suite of investment solutions to cater for the needs of their client base. To this end we will complete the integration of our Charles Stanley Pan Asset business which, when coupled with our existing Collectives Portfolio Service, will round out our offering in the model based investment solution market.

We will endeavour to enhance the quality of our financial planning service and to develop our holistic Wealth Management proposition. Although we will preserve the philosophy that such a service must remain an option for our clients we will nevertheless look to increase the instances in which we have a multi-faceted, trusted adviser relationship with our clients.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

YEAR ENDED 31 MARCH 2014

Earnings per share

The notes on pages 26 to 36 are an integral part of these condensed consolidated financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 MARCH 2014

The notes on pages 26 to 36 are an integral part of these condensed consolidated financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 MARCH 2014

* See note 9.

The notes on pages 26 to 36 are an integral part of these condensed consolidated financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

AT 31 MARCH 2014

The notes on pages 26 to 36 are an integral part of these condensed consolidated financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 MARCH 2014

The notes on pages 26 to 36 are an integral part of these condensed consolidated financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 MARCH 2014