Preliminary Results Announcement

4 September 2014

River and Mercantile Group PLC

Preliminary Period End Results Announcement

Six months ended 30 June 2014

River and Mercantile Group PLC (R&M or the Group), the advisory and investment management business, today releases its Preliminary Results (unaudited) for the 6 month period ending 30 June 2014, having listed on the main market of the London Stock Exchange on 26 June 2014. The Group changed its reporting period end to 30 June, effective 30 June 2014.

The Preliminary Results include the results of River and Mercantile Asset Management LLP (RAMAM) for the three months from the date of merger (27 March 2014) to 30 June 2014.

Paul Bradshaw, Chairman of River and Mercantile said:

We are encouraged by the continued solid performance of the Group as demonstrated by the positive asset flows and the strong pipeline of mandates. The business results, after adjusting for the cost of the Listing, continue to show strong underlying profit growth. The Board of Directors is proposing a final dividend of 2.3 pence per share, representing 60% of the "Adjusted Profits after tax" (see footnote 1) for the 3 month period ending 30 June 2014, in accordance with the Group's dividend policy. This includes 1 pence per share in respect of the net performance fees in that period. The dividend will be paid on 7 November 2014 to shareholders registered at the close of business on 10 October 2014.

 Highlights (unaudited):

· Aggregated Mandated AUM/NUM was £18.1 billion at 30 June 2014, (including AUM of £2.4 billion from RAMAM) an increase of 29% over 31 December 2013.

· Statutory net profit after tax before discontinued operations (unaudited) was a loss of £1.4 million, after charging £4.6 million of expenses arising from the IPO and restructuring in June 2014 (CY 2013 £6.0 million)

· Adjusted net profit after taxes was £4.5 million for the 6 months ended 30 June 2014, compared to £6.0 million for CY 2013. Adjusted pre-tax margin was 28% (2013: 26%). Statutory Earnings Per Share, before discontinued operations (unaudited) was a loss of 2.44 pence per share for the 6 months ended 30 June 2014 compared to a profit of 17.01 pence per share for CY 2013. Adjusted diluted EPS was 7.69 pence per share for the 6 months end June 2014, compared with 17.05 pence for CY 2013.

Mike Faulkner, CEO of River and Mercantile said:

We have previously reported our AUM/NUM flows which continue to reflect the progress we have made in delivering outcome-oriented investment performance for our clients. We continue to grow our assets through positive outcome oriented investment performance.

This week we have launched and seeded with £5 million, the Dynamic Asset Allocation Fund, consistent with the significant levels of investor interest in these funds. This Fund will draw on the asset allocation process in the Fiduciary Management Division and our equity management capabilities from the Equity Solutions Division. This combination provides us with a good opportunity to deliver strong investment performance to clients.

Footnote 1

As described in the listing prospectus, the dividend for the period ended 30 June 2014 is based on the Adjusted Profits after tax calculated as the net profit after tax for the 3 months ended 30 June 2014, adjusted to add back the amortisation of intangible assets and the expenses arising from the IPO.

Footnote 2

Adjusted net profit after tax represents net profit after tax, before discontinued operations, adjusted to add back the amortisation of intangible assets and expenses arising from the IPO, net of taxes.

Footnote 3

Expenses arising from the IPO include expenses associated with the initial public offering and the expenses associated with the corporate reorganisation and integration.

About River and Mercantile Group PLC.

River and Mercantile Group (R&M) is an advisory and investment management business, managing £18bn of client assets at 30 June 2014. The business operates through four divisions, specialist advisory , fiduciary management , derivative solutions and equity solutions.

R&M listed on the main market of the London Stock Exchange in June 2014 under the symbol 'RIV'.

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 relate to events and circumstances that could occur in the future and therefore involve the risk and uncertainty that the Group's actual results may differ materially from the results expressed or implied in the forward looking statements. Nothing in this announcement should be construed as a profit forecast.

Enquiries:

Kevin Hayes

Chief Financial Officer

+44 (0)20 3327 5100

Paul Bradshaw, Chairman of River and Mercantile, said:

It is a very real pleasure to welcome all our new shareholders and to introduce the maiden set of results for the merged businesses of River and Mercantile Group PLC, our first as a public company.

We were admitted to the London Stock Exchange on 26 June 2014 and, with these results following the listing prospectus so closely, there are no surprises from the position described there.

In line with our commitments we are proposing to shareholders a final dividend of 2.3 pence per share, of which is 1.0 pence relates to net performance fees.

I would also like to highlight that, whilst undergoing the challenges and distractions of a merger and listing, we were still able to report total mandates in transition as at 30 June of £854 million. I believe that speaks volumes for the application and commitment of our whole team as well as, of course, the fundamental attraction of our proposition to our clients.

Personally, I am particularly delighted by the strength of both our executive and non executive Board. Very importantly, my independent colleagues bring a wealth of experience and wisdom from diverse backgrounds.

Peter Warry, our Senior Independent Director with such a breadth of public and private experience, has already charmed and challenged all of us with both his incisive analysis and ready humour. His engineering pedigree is particularly appropriate for our outcomes focused business. His willingness to join the Board is due in no small measure to his personal experience and satisfaction as a former company chairman and pension fund trustee of one of our clients.

Angela Crawford-Ingle has over 20 years' investment management experience, including leadership of PwC's Insurance and Investment Management Division. Angela's experience allows her to bring real challenge to our audit and risk committee on both technical and commercial issues.

Robin Minter Kemp, the chair of the Remuneration Committee, has over 25 years' experience in the fund management industry, no doubt seeing challenging times as well as the tremendous success he latterly enjoyed at Cazenove Capital Management as they multiplied their funds by a factor of 20.

All of the independent directors have, in a short time, come to appreciate the depth of wisdom and maturity that emanates from our shareholder directors who have experienced the lifetime of both our core businesses from their inception. Jonathan Punter, Angus Samuels and Mark Johnson each also bring considerable experience in disciplines ranging from actuarial science to investment management.

We operate in a huge, competitive but strongly growing industry. A recent report from PwC (Asset Management 2020) sees global assets under management rising from $63.9 trillion today to $101.7 trillion by 2020, a CAGR of 6%.

We are a sophisticated business with a total client focus. It is my personal conviction that the future winners in this huge market will be those with an unwavering commitment to generating the outcomes desired by clients. The capability of delivering this commitment sits at the heart of the original merger of P-Solve Ltd and River and Mercantile Asset Management LLP, which we believe created a business well positioned to take advantage of these shifting industry dynamics.

I believe that we have the team throughout the business to meet the needs of all our current stakeholders and very significantly grow our business. The challenge over the next few years will be to deliver results for all our clients and owners that fully utilise and exploit the people and skills we have today. We all anticipate the journey with relish.

Finally, I would like to thank all of my colleagues. We have undergone significant change over the last year and the professionalism and dedication of all have been exemplary. It will be a privilege to work with you over the coming months and years.

Chief Executive Statement

Improving your outcome

This is my first report to you since River and Mercantile listed on the London Stock Exchange in June this year. We are proud to have brought back one of the great investment names to the market, but in a very different form. The IPO followed the merger earlier in the year of P-Solve Ltd and River and Mercantile Asset Management LLP (RAMAM), creating River and Mercantile Group (R&M). As the IPO is relatively recent, and we do not have a full year's financial results, it makes sense that I focus my report this year on the future.

The Group comprises four business lines - Advisory, Fiduciary management, Derivatives and Equities - through which we report our revenue. During the IPO process, a number of questions emerged about why we merged P-Solve and RAMAM , bringing these business lines together. I therefore want to address in this report what we are trying to do with the company and why we are so excited about its potential. This starts with the idea of delivering to our clients' outcomes.

We are focused first on delivering to our clients' outcomes

The investment industry is undergoing significant change. Many of these changes are occurring as a result of clients and their advisers defining much more explicitly what they are trying to achieve. Three trends in particular are influencing the way clients want to engage with investment houses such as R&M.

Historically, the industry has typically defined the products it wants to offer. These are not necessarily what the client or customer actually needs. Outperforming a global equity market index by 5% may not be helpful if that market has fallen 20%. Clients have now realised that their outcomes may not be met by these products. They are now spending more time understanding and defining the financial outcomes they require, and then requiring investment houses to deliver on them. This move towards outcome-oriented management is the first key trend.

This is the reason why we are seeing strong growth in fiduciary management and the use of derivatives (to hedge both liability-related risks and equity exposure). Separately, the industry has often found it difficult to explain to clients whether or not the work they are doing for them is going well. Many successful investment strategies work very well over a full market cycle, but clients are not able to ignore the quality of the journey on the way to long term success. They are therefore evaluating more frequently and in more detail whether the investment strategies they are using are effective, or if there is cause for concern. They are also considering more carefully what role they want in the investment decision-making process. This intensifying of standards by which investment buyers are governing their assets is the second key trend.

The trend for clients to define their requirements more exactly is leading to the asset management service being broadened. Whilst at the core of the service the need to receive and invest money remains, clients are increasingly requiring other services too. The precise nature of these services depends on the client, but they often include a variety of advisory services, analytical support, risk evaluation services, or investment views that do not relate specifically to the mandate in question. The third key trend is therefore the move by clients to require the provision of other services alongside the pure asset management service.

These trends are at different stages of development. They by no means yet dominate the industry, but they are likely to continue because they are logical and in the interests of clients. It is rational for a client to want an investment manager to deliver on the client's desired outcome. It's rational for a client to define a basis for governing assets that does not lead them to stay with an underperforming manager for years, and it's rational for a client to secure a broader range of services within the same fee - this shifting and evolving behaviour is the normal course of events in other industries. The ability to adapt to these trends successfully will prove to be a competitive requirement.

Meeting these trends means a new business model, with more skills

These trends imply that the successful investment house will need five skill disciplines to deliver on client mandates, summarised below.

This is why R&M's business model brings together a range of advisory and asset management services. Generally, detailed understanding of client outcomes and governance knowledge are more the domain of advisory businesses, and we are no different. Our advisers deliver the second and fourth disciplines above, and also the fifth where necessary.

Portfolio engineering often requires derivatives to hedge certain risks that may come with a more traditional asset management product. Asset allocation skills are often useful in adjusting the weighting to various alpha sources, depending on the prevailing risks they bring. Hence the asset allocation skills within the fiduciary management business and the derivative skills are required to execute effectively on portfolio engineering.

Our equity solutions products are clearly a strong alpha source, but we are also delivering alpha from the fiduciary management and derivatives businesses. Further, we can make use of alpha sources from other organisations where it is appropriate to do so.

Our business model brings together the advisory skills required for three of the above skill areas, with the investment management and engineering skills required for the other two. Our primary objective is to use them to deliver strong outcomes for clients.

Our business model gives us a powerful growth story

Our growth story is simple and consistent with the evolving industry trends. It has three elements:

· Continued strong growth through positioning

In client outcome-led markets and services, we are experiencing strong demand from DB, DC and insurance for our advisory and fiduciary management services. We have also experienced strong growth from our UK retail activities within equity solutions.

· Growth synergies

This relates mainly to our derivatives and equities businesses, where the benefits of the merger should be felt most strongly.

· New product launches

We are launching new products in outcome-led space, with the first being a Dynamic Asset Allocation strategy where there is strong demand in a number of markets. The business has longstanding strength in this area, having developed some of the earliest DAA mandates and managed multi-asset class mandates since 2003.

It is worth spending some time on where we see the growth synergies. From a revenue perspective, we see two immediate synergies:

· Development of derivatives.

To date, our derivatives business has been built through direct relationships, into one of the largest players in the UK by number of clients, for both LDI and equity hedging activities. The growth in the derivatives market within the industry is strong, so working directly with consultancies advising on these strategies is critical. The ability to leverage the skills within the legacy RAMAM business in engaging with consultancies will allow us to demonstrate the strength of the derivatives business and the value it can add. This should allow us to accelerate the growth of this business line.

· Outcome-led equity mandates.

Our strong active equity management skills have historically been delivered through index-relative mandates. No doubt these mandates will continue to be in demand, but we also see strong initial demand from larger clients to consider more outcome-led mandates within equities, often with a significantly lower risk profile. Delivery to these mandates will often require us to combine some of the component parts of our business; active equity management skills with derivatives and/or asset allocation skills. We see this type of mandate as an important opportunity for growth.

While we are seeking growth in a range of markets, the UK defined benefit industry is currently a significant part of our business. Further, the strong success we are experiencing in the market means it will likely remain significant for some time. A number of commentators are expressing the view that the UK defined benefit market is contracting, which might lead some to question why we continue to focus on growth within this market.

There are two elements to the answer - the first, more simplistic, is that even if the market is contracting, the demand will be more for risk management services and therefore we are well positioned to grow our share (currently very small) in a very large market. The second element, which is longer, is that we challenge the basic premise that the market is contracting currently. We think it is likely to grow for some years yet.

Why UK DB is still a growth market for now

Given that DB schemes have progressively been closing to new entrants, the number of members has been contracting and therefore the expectation is that this is leading to a contraction in the assets within the DB market. While in the long term this is likely to be the case, we believe the market will still grow in the coming years.

The reason for this is that the number of members is not the only factor driving the size of the liability attached to each member. What we are concerned about in a DB scheme is meeting the overall liability, not a fixed amount per member. The average liability per member has grown significantly for four key reasons:

· Some members have continued to accrue additional benefits as they continue in active service (an extra year's service might give them, for example, 1/60 of their salary at retirement in pension)

· The life expectancy of members has increased, which in turn increases the length of time a pension is expected to be paid, and therefore the liability grows

· The fall in bond yields, as liability valuations are referenced to these, has led to a significant rise in liabilities

· As the liability gets closer (which it will do for a closed scheme) the liability grows by the discount rate.

These factors have led the average liability per member to grow significantly, more than offsetting the effect of reducing membership. The overall value of DB liabilities has therefore risen, which ultimately need to be backed by assets.

Currently assets do not meet liabilities (when liabilities are valued on a true economic basis). This deficit will need to be removed for each scheme over their recovery period. The result will be net positive contributions into the UK DB pension industry for some time yet, primarily driven by deficit recovery contributions.

Our message - the DB industry is here to stay for some time yet and is growing.

Overall summary

We set out below our key areas of growth and focus:

These are our primary areas of focus, and define where we see the strongest opportunities to grow the business.

It is likely that our growth will be relatively lumpy across all of these lines except UK wholesale. This is because institutional mandates tend to be relatively significant in size, so the profile of growth is influenced by the timing of these mandates transitioning. For example, we indicated in our interim management statement that we had won net AUM of around £500 million in Fiduciary Management, transitioning during the third quarter. This is significantly more than the previous quarter, and mainly a function of a number of mandates closing at the same time. For now, institutional business is the majority if not all of each business line, and therefore this lumpiness of flows may be a feature of each.

Overall, we are expecting growth in the business and our pipeline of opportunities is very healthy.

On behalf of all the directors and employees of R&M, I would like to take this opportunity to thank all our clients for their support during the last year, and our partners and employees for their continued loyalty and hard work. This has been a significant year for our business and we are indebted to everyone who has supported us. We aim to reward your support through positive investment and shareholder returns.

Chief Financial Officer's Report

Description of River and Mercantile Group PLC

Prior to the listing as a public company, P-Solve Limited was a wholly owned subsidiary of Punter Southall Group Limited (PSG). On 27 March 2014 (Acquisition Date) P-Solve Limited acquired River and Mercantile Asset Management LLP (RAMAM) in a share for Partner interest exchange from the Partners of RAMAM LLP, including Pacific Investment. The RAMAM business has been consolidated as a wholly owned subsidiary from 27 March 2014 and is reported as the Equity Solutions Division. The legacy P-Solve business is reported under the Advisory, Fiduciary Management and Derivative Solutions Divisions. P-Solve changed its name to River and Mercantile Group Limited on 9 April 2014. The P-Solve name has been retained as a brand for the Advisory and Fiduciary Management divisions.

Reporting Periods

The accounting reference date of P-Solve Limited and RAMAM had historically been 31 December and 31 March, respectively. The Board of Directors decided that the reporting periods should be aligned for both entities to 30 June.

Comparability of Reported Results 

The statutory financial statements presented comprise the 6 months ended 30 June, 2014 of the Group,with the comparative period being the 12 months ended 31 December, 2013. The Group completed the merger with RAMAM on 27 March 2014, and therefore the statutory financial statements include the results of RAMAM for the 3 months period from the date of the acquisition to 30 June 2014. 

Financial Highlights (unaudited)

The following highlights are based on the unaudited statutory financial statements. Decreases in the results as compared against the comparative period are generally the result of the shortened financial period.

· Aggregated Mandated AUM/NUM was £18.1 billion, including AUM of £2.5 billion from the acquisition of RAMAM, an increase of 29% over 2013.

· Fee-earning AUM/NUM was £17.4 billion, including £2.4 billion of AUM from the acquisition of RAMAM, an increase of 23% over 2013.

· Net Management fees were £12.3 million and Net Advisory Fees were £5.2 million for the 6ME 2014 (including £3.3 million from RAMAM from Acquisition Date), compared to £15.7 million and £11.1 million respectively for CY 2013.

· AUM/NUM net management fee margins have remained stable.

· Performance fees were £2.4 million for the 6ME June 2014 (no performance fees were recorded from RAMAM for the period from the date of the acquisition), compared to £3.8 million for CY 2013.

Statutory and Adjusted: Pre-tax Profit, Net Profit and Earnings Per Share

· Statutory pre-tax profit was £11,000 for the 6ME June 2014 (including £1.1 million from RAMAM for the period from Acquisition Date) primarily as a result of reporting £4.6 million of expenses arising from the IPO and £1.09 million of intangible amortization relating to the acquisition of RAMAM. Pre-tax profit was £7.8 million for CY2013.

· Statutory net profit after taxes was a loss of £1.4 million for the 6ME June 2014 (including £0.9 million from RAMAM for the period from Acquisition Date), compared to £6 million for CY 2013.

· Adjusted net profit after taxes was £4.5 million for the 6 months ended 30 June 2014, compared to £6.0 million for CY 2013. Adjusted pre-tax margin was 28% (2013: 26%).

· Statutory Earnings Per Share, before discontinued operations (unaudited) was a loss of 2.44 pence per share for the 6 months ended 30 June 2014 compared to a profit of 17.01 pence per share for CY 2013. Adjusted diluted EPS was 7.69 pence per share for the 6 months end June 2014, compared with 17.05 pence for CY 2013.

Capital and Liquidity

· At 30 June 2014 the Group had net assets of £64 million. The acquisition of RAMAM resulted in an increase in assets of £44 million supported by a merger reserve in shareholders' equity of £44 million.

· The new capital raised in the IPO has increased shareholders' funds by £15 million and liquidity by £10 million.

· The Group operates through three regulated entities, each of which maintains excess capital over the regulatory requirement. There are no significant regulatory changes anticipated affecting the Group's regulatory capital requirements.

Dividends

· As outlined in the Chairman's Report, the Board of Directors have proposed a final dividend of 2.3 pence per share representing 60% of the Adjusted Profits for 3 months ended 30 June 2014. Adjusted Profits was calculated as the net profit after tax for the 3 months ended 30 June 2014, adjusted for the amortisation of intangibles and the expenses arising from the IPO.

Commentary on the unaudited Statutory Financial Statements of the Group

The following is a review of the unaudited statutory financial statements for the 6ME June 2014 and the CY 2013. The results for the 6ME June 2014 include the results of RAMAM from the Acquisition Date.

Revenues

For the 6ME June 2014 total revenues were £20.2 million, compared to £30.6 million for CY2013. The performance fees for the 6ME June 2014 were £2.4 million compared to £3.8 million of CY2013, reflecting the continued strong performance from TIGS. Other revenues comprise the gain on the sale of the equity interest in Manolete.

For the 6ME June 2014 total revenues from the P-Solve business comprising the Fiduciary Management, Derivative Solutions and the Advisory business were £16.6 million compared to £30.6 million for CY 2013 reflecting both the growth in AUM/NUM and increased performance fees. The RAMAM business (described as the Equity Solutions Division above) recorded revenues of £3.3 million from the Acquisition Date.

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Administrative Expenses

Administrative expenses were £9.3 million for the 6ME June 2014 including £4.6 million of expenses arising from the IPO and £1.09 million of amortization. Administrative expenses for CY 2013 were £5.5 million. Adjusting for the RAMAM expenses, the expenses base has increased by approximately £300,000 on an annualised basis from 31 December 2013 as a result of increased IT and professional fees.

Approximately 65% of Administration Expenses (excluding amortization) are generally fixed in nature and includes office facilities, IT and communications, Transition Services and professional fees. Marketing, travel and entertainment expenses are generally variable with the volume of client activity. We anticipate that our operating expenses will remain stable in the near term as we have scalability in our infrastructure and operating leverage as we grow AUM/NUM and revenue.

Administrative expenses include charges for services provided by PSG. These services are now provided under a Transition Services Agreement (TSA) with PSG and will be transitioned to the Group or alternative supplier arrangements within the next 18 months. As these services are transitioned into the Group additional headcount resources may be required. It is anticipated that in aggregate the cost after the transition will be in line with the expense currently incurred.

Office facilities include rental and other related charges, primarily from PSG relating to the operating lease of the London headquarters and other facilities occupied by the business in London.

Fund Administration includes custodial and fund accounting costs that cannot be recovered from Equity Solutions Clients. The Fund administration expense can increase due to additional costs to close funds or to subsidise new fund launches until the AUM is at a target level to support the total expense charges.

The IPO expenses of £4.12 million were incurred to undertake the premium listing of the Group on the London Stock Exchange. These costs include the book runners, lawyers, reporting accountants, consultants and advisors and irrecoverable VAT. The IPO costs are not deductible for corporate tax purposes. The direct placing commission of £360k associated with the £15 million of new capital raised in the IPO is charged directly to Shareholders' Equity. In addition we incurred £507,000 of expenses relating to activities to reorganise the Group resulting from the IPO and to integrate the business after the merger of RAMAM, including rebranding. Both the expenses relating to the IPO and the expenses relating to the reorganisation and integration will be treated as Adjusting items.

Identifiable intangible assets of £36.1 million, representing the fair value of the Investment Management Agreements was recorded in the RAMAM acquisition (RAMAM IMAs). The value of these contracts is being amortised into income over a period of between 5 to 10 years. The annual amortisation expense is approximately £4.3 million. In the Consolidated Financial Statements (Note 37) describes the allocation of the purchase price to identifiable and intangible assets, and goodwill. The amortisation is a non cash expense and is not deductible for corporate tax purposes. A deferred tax liability was recognised at the date of the acquisition and is being charged to taxes in line with the amortisation of the RAMAM IMAs. The amortisation of the RAMAM IMAs is treated as an adjusting Item.

Remuneration

Remuneration expense includes fixed base salaries, benefits and variable bonus compensation, including drawings and performance profit share paid to the Partners of RAMAM LLP. Total variable remuneration includes contractual arrangements linked to the performance of the Divisions or specific portfolios. For the 6ME June 2014 approximately 50% of variable remuneration was discretionary.

Remuneration expense is £10.8 million for the 6ME June 2014 compared to £17.3 million for CY2013. The percentage of remuneration to total revenue for the 6ME June 2014 was 54% and CY 2013 was 56%. The business has operating scale and through increased total revenue, the level of remuneration to total revenues is targeted at between 45-50%, to be achieved in the next 3 years.

The P-Solve business has historically paid employees in a combination of cash and deferred payments in the form of performance shares. The intention is to pay a portion of employees' remuneration in the form of performance shares with vesting based on achieving specific performance targets. Vested performance shares issued under the Performance Share Plan will be exchanged for shares in the Group through the Employee Benefit Trust. It is not intended that Performance shares issued under the PSP will be dilutive.

Governance Costs

The on-going costs of the Non Executive Directors, advisors and the legal fees relating to the governance framework of the Group as a public listed company have been classified in the Income Statement as Governance Costs. For the 6ME June 2014, these costs totalled £70,000 and for the year ending 30 June 2015 the governance costs are expected to be approximately £500,000.

Pre-tax and net profit

Pre-tax profit was £11,000 for the 6ME June 2014 (CY13 £7.8 million) and included pre-tax profit of £1.1 million from RAMAM. The reduction in pre tax profit was caused by the expenses for the IPO and reorganisation and the amortisation of the RAMAM IMAs.

Net loss after taxes for the 6ME June 2014 was £1.4 million and included net profit of £0.9 million from RAMAM. For CY 2013 net profit before discontinued operations was £6 million. The tax charge for the 6 months ended 30 June 2014 includes the deferred taxes relating the non tax deductible amortisation of RAMAM IMAs.

Adjusted pre-tax and net profit

Adjusted pre-tax profit , which excludes adjusting items, was £5.7 million for the 6ME June 2014 and included pre-tax profits of £1.1 million from RAMAM. The Adjusted pre-tax margin for the 6ME June 2014 was 28%. For CY 2013 there were no adjusting items and pre tax net profit was £7.8 million. The Pre-tax margin CY 2013 was 26%. The increase in the adjusted pre- tax profit was the result of increased AUM/NUM and the associated revenue and the inclusion of the results of RAMAM from Acquisition Date.

Adjusted net profit after tax, for the 6ME June 2014 was £4.5 million and included net profit of £0.9 million from RAMAM. For CY 2013 there were no adjusting items and net profit after taxes was £6 million. The increase in the underlying net profit after taxes is the result of increased AUM/NUM and associated revenue, and the inclusion of the results of RAMAM from Acquisition Date.

Assets and Notional Amounts under Management

Assets Under Management (AUM) and Notional Amounts Under Management (NUM) are the basis on which management fees are charged and in aggregate are reported as Fee Earning AUM/NUM.

AUM and NUM represent the assets or derivatives contracts over which the Group acts either as a discretionary investment manager on a partial or fully delegated basis in accordance with an investment management agreement ("IMA").

In addition, we report Mandates in Transition and Redemptions in Transition which represent the AUM/NUM of mandates which have been awarded by clients or for which we have been notified are to redeem and will transition into or from fee-earning AUM/NUM.

The growth in mandated AUM/NUM is the driver for the growth of net management fee revenue. Positive net flows are an indication of both our ability to retain previously mandated assets and our ability to win new mandates and increase allocation from existing client mandates.

The following table shows the AUM/NUM for the six month period ending 30 June 2014 with the AUM of RAMAM shown as the Equity Solutions Division, from 1 January 2014.

At June 2014 Fee-earning AUM/NUM was £17.4 billion, an increase of 7% from December 2013. Aggregate mandated AUM/NUM was £18.1 billion, an increase of 12% from December 2013.

For the 6 ME June 2014 all Divisions have positive net flows. Mandated Sales to opening AUM/NUM were 13% for the 6 ME June 2014 compared to 18% for the CY2013. Attrition to opening AUM/NUM was 4% for the 6 ME June 2014 compared to 9% for CY2013.

Investment performance added £219 million, primarily from strong performance from the TIGS strategy for Fiduciary Management clients. Net rebalancing in Derivative Solutions added £198 million during the period due to clients increasing their interest rate and inflation hedges.

Consolidated Financial Statements of River and Mercantile Group plc (unaudited)

Directors' responsibilities

The directors are responsible for preparing the preliminary announcement in accordance with applicable law and regulations.

In preparing the preliminary announcement, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements;

· prepare the preliminary announcement on the going concern basis unless it is inappropriate to presume that the company will continue in business;

The financial information set out below does not constitute the company's statutory accounts for 2013 or 2014. The Statutory accounts that were prepared on an unconsolidated basis for the year 31 December 2013 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2013 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 results for 2014 are unaudited. Statutory accounts for the period ended 30 June 2014 will be finalised based on the information presented in this announcement. The Independent Auditors' Report will be based on those statutory accounts once they are complete.

Statutory accounts for the year ended 31 December 2013 have been filed with the Registrar of Companies. The statutory accounts for the period ended 30 June 2014, prepared under IFRS, will be delivered to the Registrar in due course.

Introduction

On 27 March 2014, the acquisition of RAMAM was completed in a share for share exchange by P-Solve Limited. The results of operations of RAMAM have been consolidated as a 100 percent owned entity from the date of acquisition. P-Solve Limited ('P-Solve') changed its name to River and Mercantile Group Limited (R&M) on 9 April 2014 and registered as a public limited company on 2 June 2014. On 26 June 2014 the Group was admitted to the London Stock Exchange as a public listed company.

P-Solve's accounting reference date was previously 31 December whilst RAMAM had an accounting reference date of 31 March. R&M changed its accounting reference date to 30 June. Accordingly, the Group's consolidated financial statements include the results of operations for the six-month period ending 30 June 2014 with RAMAM for the 3 month period from the date of the acquisition to 30 June 2014.

The statutory financial statements presented comprise the 6 months ended 30 June, 2014 of the Group,with the comparative period being the 12 months ended 31 December, 2013. The CFO Report gives an explanation of the financial information contained in the financial statements together with information regarding AUM/NUM, revenue margins and non-statutory measures which are helpful to the reader to understand the performance of the business.

Notes to the Consolidated Financial Statements of River and Mercantile Group plc

The basis on which the consolidated financial statements are prepared

1. Accounting Standards

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards, International Accounting Standards and interpretations (collectively, "IFRS"), International Financial Reporting Interpretation Committee ("IFRIC") interpretations, and with those parts of the 2006 Act applicable to groups reporting under IFRS as issued by the International Accounting Standards Board ("IASB") as adopted by the European Union ("IFRS as adopted by the EU") that are relevant to its operations and effective for accounting periods beginning on 1 January 2014.

IFRS was adopted effective for the period commencing 1 January 2013, the comparative consolidated statement of financial position as at 31 December 2012 have been prepared in accordance with IFRS.

The impact of new accounting standards and amendments applicable to Group's 6 month period ended 30 June 2014, that are not yet effective is not expected to be material to the consolidated financial statements.

2. The business is considered as a going concern

The directors have concluded that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly the consolidated financial statements of the Group have been prepared on a going concern basis under the historical cost convention.

3. Consolidated financial Statements of the Group

The consolidated financial statements include the Company and entities controlled by the Group (its subsidiaries). River and Mercantile Asset Management LLP was acquired on 27 March 2014 and is consolidated from that date. Note 41 describes the acquisition accounting for RAMAM. CAMRADATA was sold to Punter Southall Group Limited on 20 December 2013 and is shown as discontinued in the consolidated financial statements for year ended 31 December 2013 and in the statement of financial position as at 31 December 2012 is treated as held for sale, Note 26 contains details the financial result and net assets for the years presented.

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

The Consolidated Statement of financial position has been presented on the basis of the liquidity of the assets and liabilities presented.

4. R&M relationship with Fund Entities

The Group entities act as the investment manager to funds, segregated managed accounts, and the Authorised Corporate Director ("ACD") of River and Mercantile Funds ICVC (collectively; 'Investment Management Entities (IME). Considering all significant aspects of the Group's relationship with the IMEs, the directors are of the opinion that although R&M manages the investment resources of the IMEs, the existence of: termination provisions in the investment management agreements which allow for the removal of the Group as the investment manager; the influence exercised by investors in the control of their IME and the arm's length nature of the Group's contracts with the IME; and independent boards of directors of the IME. R&M does not control the IME and therefore the assets; liabilities and net profit are not consolidated into the Group's financial statements.

5. Significant accounting policies

A description of the accounting policies used in the preparation of the consolidated financial statements is included in the relevant notes to the financial statement items and are referenced from the relevant financial statements. The significant accounting policies are:

Accounting for business acquisitions, described in note 37

Impairment of intangible assets and goodwill recorded in previous acquisitions, described in Note 37,38,39.

Recognition of management fee and performance fee revenues, described in Notes 9 to 11

Disclosure of related party transactions with the significant shareholders of the Group, described in Note 45.

The accounting for performance share based remuneration, described in Note 21 and 22.

6. Foreign Currencies

The majority of revenues, assets, liabilities and funding are denominated in UK Pound Sterling (GBP/£), and therefore the functional and presentation currency of the Group is GBP.

Non-monetary items carried at fair value which are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items which are measured in terms of historical cost in a foreign currency are not retranslated.

The functional currency of the US based business entities is US dollars and is translated into the presentational currency as follows:

(i) assets and liabilities are translated at the closing rate at the date of the respective balance sheet;

(ii) income and expenses for each period presented are translated at the average exchange rate for that period presented; and

(iii) 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.

7. Segmental Reporting

Management information regarding asset flows, revenues and investment performance relating to clients and products are reviewed by the Board and the executive management. A central resources function supports the overall business and the operating costs are not allocated to the individual product lines. As a result, resources are allocated and performance is assessed by the Board and the executive management on the basis of the asset management business as a whole. Accordingly the Group operates and reports as a single segment asset management business, together with relevant information regarding asset flows, and revenues to allow for the analysis of the direct contribution of the business lines.

8. Judgmental areas and accounting estimates

The Group is required to use judgments in making estimates and assumptions regarding the recorded values of assets and liabilities and the recognition of income and expenses in the preparation of the consolidated financial statements. These estimates and assumptions could give rise to the risk of a material adjustment. The Report of the Audit and Risk Committee discusses the involvement of the Committee in considering the appropriateness of the estimates and assumptions made.

The following areas are considered critical accounting estimates, assumptions and judgments, together with the reference to notes in the financial statements:

· The determination of the fair value of consideration exchanged in the acquisition of RAMAM (Note 41).

· Fair value of the investment management agreements (IMAs) identifiable intangible in the acquisition accounting for RAMAM, including the discount rate used and the period over which the IMA intangible will be amortized (Note 41).

· Consideration of whether previously recorded goodwill is impaired, including the goodwill arising from the acquisition of RAMAM (Note 41).

· The revenue recognition of performance fees. (Note 11)

9. Net management fee revenue

Net management fee revenue represents the fees charged pursuant to an investment management agreement with clients. Fees are reported net of rebates paid to intermediaries and are charged as a percentage of the client's Assets under Management (AUM) or Notional Amounts under Management (NUM). The fees are generally accrued on a daily basis and charged to the client either monthly or quarterly.

10. Net Advisory Fees

Advisory revenues represent fees charged under Investment Advisory Agreements ("IAA") and are typically charged on a fixed retainer fee basis or through a fee for the delivery of a defined consulting or advisory project.  Approximately one half of the revenue is from fixed retainers. Advisory revenue is reported net of revenue share arrangements with other advisory partners. During the 6 months ended 30 June 2014 £158k (2013: £281k) was paid to a subsidiary of PSG under a revenue sharing arrangement. Fees are accrued monthly and changes when the project has been completed.

11. Performance fees

Performance fees are fees paid under the IMAs for generating investment performance either on an absolute basis, subject to a high water mark or relative to a benchmark. Performance fees are calculated as a percentage of the investment performance and may be subject to deferral and continued performance in future periods. Performance fees are recognized in income when the quantum of the fee can be estimated reliably and it is probable that the fee will realised . The client is invoiced for the performance fees at the end of the performance period which is generally annually either on the anniversary of their IMA or on a calendar year basis.

12. Other income

Other income includes the gain on the sale of the equity investment in Manolete which was sold for £300,000 generating a net gain of £292,500.

13. Geographic Information

As noted under Note 7, the Group reports as a single segment. On a geographic basis the majority of the revenues is earned in the UK. The Group has an advisory and fiduciary business in the US and net revenue earned in the US for the 6 month period ended 30 June 2014 were £2.4 million (2013: £4.2 million). The net AUM of the US business is £575 million (2013: £434 million).

14. Administrative Expenses

The majority of Administrative expenses are generally variable with headcount and comprise our office facilities, IT and communications costs. Included in Administrative expenses are the following allocated charges from PSG for administrative and support services:

15. Governance Expense

Governance costs represent the remuneration of the Non Executive Directors' and the costs of advisors and legal fees relating to the governance framework of being a public listed company. Non Executives Directors' remuneration was £35,000 and annual report and AGM expenses were £35,000.

16. Fund Administration

Fund Administration includes custodial and fund accounting costs that cannot be recovered from the Funds or clients. The Fund administration cost can increase on new fund launches until the AUM is at a viable level to support the total expense charges.

17. Expenses associated with the initial public offering

On 26 June 2014 the Company was admitted on the main market of the London Stock Exchange. The costs to undertake the IPO included fees and expenses paid to lawyers, reporting accountants, brokers, consultants and advisors. These costs are not deductible for corporate tax purposes. Included in these costs is £600k paid to a subsidiary of PSG for advisory services relating to the IPO. Only the costs directly associated with the new capital raised in the IPO can be charged directly to share premium. An amount of £360k, relating to underwriting commission has been charged to the share premium account in the Statement of Shareholders Equity.

18. Expenses associated with reorganization and integration

Prior to the acquisition of RAMAM and the IPO, a number of steps were taken to reorganize the capital structure of the Group pending the completion of the acquisition of RAMAM including establishing a group structure for the two regulated entities. After the completion of the acquisition of RAMAM costs were incurred relating to rebranding of the business under the River and Mercantile name and the merger of technology infrastructure including the web sites. As a result of the completion of the IPO costs were also incurred to establish a separate facilities arrangements, transition service agreements and a new performance share plan, as a consequence of the separation from PSG. The merger costs associated with undertaking the acquisition of RAMAM were paid directly by PSG and were not recharged to the Group.

19. Depreciation changes in contingent consideration and Amortisation

Depreciation charges primarily relate to IT and communications equipment. The fixed assets and the depreciation accounting policy are described in Note 33.

The change in the value of contingent consideration in 2013 and the impairment of goodwill relates to the acquisition of Meridian described in Note 38.

The amortisation charge relates to the investment management contracts (IMA) recorded in the acquisition of RAMAM and described in Note 41. The RAMAM IMA intangibles are amortized over their expected useful life of between 5 to 10 years based on an analysis of the respective client channels. The amortization is not deductible for tax purposes. At the date of the acquisition a deferred tax liability was recognized and is being charged to taxes in line with the amortization of the related RAMAM IMAs (refer to Deferred Tax Note 25).

20. Remuneration

The level of remuneration is variable with the level of revenues, in particular performance fee revenue.

Variable remuneration relates to discretionary bonuses, profit share paid to the Partners of RAMAM LLP and associated taxes.

Variable remuneration expenses include a charge of £16k (2013: £25k) relating to the amortization of previously issued performance share awards. Included in 2014 is a charge of £96k relating to the vesting of the performance share awards upon the acquisition of RAMAM, which was a trigger event under the Plan

21. Share-Based Payments

The Group has historically operated a share based remuneration scheme for employees, in which participation was at the discretion of the Directors. Shares granted had performance conditions linked to the growth of the adjusted enterprise value of P-Solve and its subsidiaries over a 2-3 year period. Each vested performance share was exchanged for shares in Punter Southall Group Limited. The determination of the growth of the company and its subsidiaries and the number of shares to be vested at the valuation date was determined by the Directors of PSG. PSG had the option to acquire the performance shares, if an individual ceased employment before the valuation date.

During the year ended 31 December 2013, the Group issued a total of 3,000,000 "D" class performance shares at 3.54 p per share and 1,000,000 "E" class performance shares at 3.63p per share. The fair value of each "D" performance share issued during the year was 5.91p and of each "E" performance share was 6.13p, respectively.

The fair value of shares granted under the equity-based remuneration scheme is based on a Black-Scholes model using and expected volatility of 20% and a risk fee rate of 1%. The fair value of the performance shares, net of the price paid for them by the employees was amortized over the period from their date of grant to the end of the vesting period.

The total expense recognised in the consolidated income statement for the performance shares granted in the year ended 31 December, 2013 was £21k.

The Performance Share Plan was modified on 20 December 2013 to provide that performance shares could at the option of PSG, convert either into PSG shares or P-Solve shares and any unconverted performance shares would, automatically convert on the occurrence of a corporate transaction. On 27 March 2014 upon the completion of the acquisition of RAMAM all performance shares were converted, at an equivalent fair value, into P-Solve B ordinary shares and ultimately, as a result of the corporate reorganization, the deferred shares were cancelled and the B ordinary shares were converted into ordinary shares in the Group. At that date the remaining unamortized fair value of all performances shares of £96,000 was charged to remuneration expense.

22. Executive Performance Share Plan

Prior to Admission, the Board of Directors established the Executive Performance Share Plan (EPSP) to grant the Executive Directors and certain members of senior management performance shares. At the date of admission two classes of performance shares were awarded: Performance Condition A Awards and Performance Condition B Awards. The aggregate number of Performance Condition A Awards and Performance Condition B Awards which may be issued under the EPSP is limited to 10 per cent of the issued ordinary share capital of the Company on Admission. The aggregate ordinary shares of the Company that could be issued under Performance Condition A Award is 5,746,674 and 2,462,860 under Performance Condition B Award.

The vesting of Performance Condition A Award is conditional on achieving a total shareholder return of at least 12 per cent compounded over the four-year performance period. Vesting starts at 12 per cent Compound Annual Total Shareholder Return and 100 per cent vests at 24 per cent Compound Annual Total Shareholder Return over the four-year period. Vesting will be prorated on a straight line basis between 12 per cent and 24 per cent Compound Annual Total Shareholder Return.

The vesting of Performance Condition B Awards is conditional on achieving a total shareholder return of at least 25 per cent compounded measured over the four-year performance period. Vesting starts at 25 per cent Compound Annual Total Shareholder Return and 100 per cent vesting at 30 per cent Compound Annual Total Shareholder Return over the four-year period. Vesting will be pro-rated on a straight line basis between 25 per cent and 30 per cent Compound Annual Total Shareholder Return. Performance Condition A and B Awards are not eligible for dividends during the vesting period.

Any shares which vest are subject to a holding period of 12 months following the vesting date. Shares which do not vest will be forfeited. The vesting is also subject to the participant's continued employment by the Group during the vesting and hold period or if employment ceases, being classified as a good leaver at the discretion of the Remuneration Committee.

The fair value of the Performance A shares was determined by an independent valuation undertaken by Ernst & Young LLP on behalf of the Remuneration Committee of the Board. This fair value was based on a Monte Carlo simulations of possible outcomes based on the returns and volatility characteristics of comparable publicly listed investment management business in the FTSE. The aggregate fair value of the Performance A shares is 38 pence and the Performance B shares 17 pence. The fair value of Performance Condition A Award is estimated at £2.18 million and Performance Condition B Award at £0.42 million. The fair value will be amortized into variable remuneration expense over the vesting period. The annual charge is approximately £650,000. Any shares that vest may be subject to applicable employment taxes at the date of vesting.

The Performance Share Plan (PSP) was also established prior to admission. The Plan allows for the grant of: Nil Cost Options, Contingent Share Awards or Forfeitable Share Awards. As at 30 June 2014 no grants had been made under the PSP. The Board of Directors have stated an intention that grants of performance shares under the PSP would not be dilutive on shareholders.

At the date of Admission the Group established an Employee Benefit Trust to hold unvested shares on behalf of the employees and to purchase shares to meet the future obligation to deliver share upon vesting. At 30 June 2014 the EBT did not hold any ordinary shares of the Company.

23. Directors' remuneration

Full details of directors' remuneration will be given in the directors' remuneration report.

24. Finance Income and Finance Expense 

Interest income includes £2,000 (2013: £41,000) from deposits with PSG and £12,000 (2013: £19,000) relating to the unwind of discounts on contingent consideration from previous acquisitions. Interest expense in 2013 included £96,000 paid to PSG under the intercompany loan arrangement.

25. Current and deferred tax

 Current tax

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using the statutory tax rates at the balance sheet date.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit. The most significant deferred tax item is the deferred tax liability established against the IMA intangible asset arising from the acquisition of RAMAM. The amortization is not tax deductible for corporate tax purposes therefore the deferred tax liability is released into the Consolidated Income Statement to match the tax credit on amortization of the IMA intangibles.

The tax assessed for the years is lower than the average standard rate of corporation tax in the UK. The differences are explained below:

For information on deferred tax balances, see note 32.

26. Discontinued operations

CAMRADATA Analytical Services Limited was sold to Punter Southall Group Limited on 20 December 2013 for cash consideration of £1.1 million. The results of operations of CAMRADATA for the period from 1 January 2013 to 20 December 2013, were a loss of £70,000 which, together with the gain on the sale £1,231,000, net of tax, have been classified as discontinued operations in the financial statements of the Group for the year ended 31 December 2013.

27. Earnings per share

The basic and diluted earnings per share are calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of ordinary shares of the Group in issue during the period.

To the extent that any of the EPSP Performance Shares (Note 22) vest they will have a dilutive effect on the equity holders of the Group. The potential dilution effect of the EPSP Performance shares will be considered in the calculation of diluted earnings per shares. The compound return to shareholders based on share price and dividends received by shareholders from the date of grant until the reporting date will be compared against the respective performance criteria of the Performance shares to determine if the shares are dilutive as of the reporting date. No dividends have been paid to shareholders between the date of grant and the reporting period end. Based on the Group's share price at 30 June 2014 none of the EPSP Performance shares would have met the vesting criteria and were therefore not considered dilutive for purposes of calculating diluted earnings per share.

Earnings Per Share

Adjusted Net Profit after tax before discontinued operations

Adjusted net profit after tax represents net profit after tax, before discontinued operations, adjusted to add back the amortization of intangible assets and the expenses arising from the IPO, net of taxes.

28. Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits. At period end all cash balances were held by banks with credit ratings of at least single A.

29. Fee receivables

Fee receivables are recorded initially at the invoiced value, which is the estimated fair value of the receivables. The collectability of the fee receivables is reviewed periodically and if there is evidence to indicate that that amount may not be collectible a specific provision is established against the receivable. At 30 June 2014 and 31 December 2013, a provision of £114,000 and £nil, respectively had been established against doubtful receivable balances. On confirmation that the fee receivables will not be collectable, the gross carrying value of the asset is written off against the associated provision.

The average credit period on fees is 47 days (2013: 52 days). The Directors believe that the carrying value of fee receivables, net of the provision for doubtful receivables balances, represents their fair value and is the maximum credit risk value.

30. Investment management business balances

As Authorised Corporate Director ("ACD") of River and Mercantile Funds ICVC (the "Fund") the Group is required to settle transactions between investors and the depositary of the Fund. The Group is exposed to the short-term liquidity requirements to settle with the depositary of the Fund before receiving funds from the investor and mitigates this risk by holding cash in its ACD account. The Group has credit risk if an investor defaults on a contract. Under such a default, the Group is required to settle the investor's contract with the depositary of the Fund. The Group is then able to redeem the shares in the Fund. The Group bears the risk that the price of the shares may vary between the initial settlement and redemption of the shares.

Accrued income relates to management fees that have been earned but are invoiced to clients in arrears on a quarterly basis. Loans to PSG include free cash balances transferred to PSG.

32. Deferred tax liabilities

In the acquisition accounting for RAMAM, the purchase price was allocated between identifiable assets and goodwill. The existing investment management agreements (IMA) were recorded as identifiable intangible assets and will be amortized into income over the useful life. This amortization is not deductible for tax purposes. A deferred tax liability is recorded and will be charged to the tax line to match the tax effect of this amortization. The deferred tax is calculated at the tax rates that are expected to apply to the period when the liability is settled based upon tax rates that have been enacted at period end.

Deferred tax liabilities

Deferred tax asset

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying

amounts of assets and liabilities in the financial information and the corresponding tax bases used in

the computation of taxable profit, and is accounted for using the balance sheet liability method.

Deferred tax liabilities are recognised to the extent that it is probable that taxable profits will be

available against which deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date

and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered

33. Fixed Assets and Leasehold Improvements

Property, plant and equipment is stated at historical cost less accumulated depreciation. Depreciation charges the cost of the assets over the expected useful lives of the assets concerned. Computer equipment is depreciated over 3 years and fixtures, fitting and equipment over 7 years. The assets from the acquisition of RAMAM are recorded at their fair value and are depreciated over their expected remaining lives. Leasehold improvements are amortised over the remaining term of the leases.

Included in the office facilities charges from PSG are operating expenses related to leasehold improvements and other costs that are charged by PSG on a periodic basis.

34. Operating leases

Office facilities are leased under operating leases. The rental is charged to the consolidated income statement on a straight-line basis over the lease term. Rent rebates are accounted for over the period of the lease term. The Group entered into a non-cancellable operating lease on 26 June 2014 with PSG for the Group's primary office facilities in London until December 2021. The Group receives a rent rebate from PSG aggregating £131,000, payable monthly until 2016. The future aggregate minimum lease payments under all non-cancellable operating leases, net of rent rebates are as follows:

35. Creditors

Details of contingent consideration are disclosed in note 38 and 39.

36. Borrowing Facility 

On 29 November 2013 the Group agreed an unsecured borrowing facility with Punter Southall Group Limited of £10,520,000 and drew down the full amount immediately. The facility had an interest rate of LIBOR plus 2.99%. The Group repaid £869,000 of the principal and interest by 31 December 2013 and a further £5.82 million during the period. The balance of the facility was forgiven by Punter Southall Group Limited on 27 March 2014 and the amount was recorded as a capital contribution to the Group. The following table shows the movements in the borrowings:

37. Business combinations

The Group applies the acquisition method of accounting to account for business combinations.

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group's interest in the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree.

Goodwill is not amortised but is reviewed for impairment annually or more frequently when there is an indication that the unit may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Group's cash generating units, ("CGUs") expected to benefit from the synergies of the combination. Each unit to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying value of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised is not reversed in a subsequent period.

Identifiable Intangible Assets

Investment management agreements and Customer Relationships

Investment management agreements and Customer relationships acquired in a business combination are recognised separately from goodwill at their fair value at the acquisition date. Customer relationships have an estimated useful life of 20 year and investment management agreements estimated useful lives of five to ten years. The identified intangible assets are carried at cost less accumulated amortization calculated on a straight line basis.

Impairment of tangible and intangible assets, excluding goodwill

At each statement of financial position date or whenever there is an indication that the asset may be impaired, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of: fair value less costs to sell, and the value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, an impairment loss is recognised as an expense immediately. For assets other than goodwill, where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the statement of comprehensive income, net of any depreciation or amortisation that would have been charged since the impairment.

Contingent consideration payable for business combinations

A portion of payments for business acquisitions can be contingent on the future revenue and/or profits achieved by the acquired business. On acquisition date, estimates are made of the expected future revenue and profit based on forecasts made by management. These estimates are re-assessed at each reporting date and adjustments are made to the fair value of the contingent consideration where necessary. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised either in profit or loss or as a change to other comprehensive income.

If contingent consideration is payable after more than one year from the statement of position date the expected amounts of contingent consideration are discounted using discount rates that reflect the current market assessment of the time value of money and the risks specific to the acquired business.

38. Meridian Performance Services

On 19 September 2011 the Group acquired the trade and assets of Meridian Performance Services Limited. The purchase consideration for the acquisition included amounts payable to the former owners which was contingent on the continued performance of the business. The initial goodwill of £395,000 arising from the acquisition consisted largely of the synergies and the increase in revenue expected from incorporating the business of Meridian Performance Services Limited into the Group. The contingent consideration arrangement required the Group to pay, in cash, to the former owners of Meridian a share of the revenue generated from the business for three years from 2012 to 2014. At the date of the acquisition the estimated fair value of the contingent consideration by applying the income approach was £733,000. In the subsequent periods the business did not generate expected levels of additional revenue which led to the impairment of the carrying amount of goodwill and a reduction in the fair value of the contingent consideration payable to the sellers. During 2013 the remaining goodwill of £262,000 was impaired. The fair value of contingent consideration was reduced to £107,000 at December 31, 2013. As at 30 June 2014 the fair value of the contingent consideration payable is £48,000. All of the goodwill recognised was deductible for corporation tax purposes.

39. Cassidy Retirement Group Inc.

On 1 February 2012 the Group acquired Cassidy Retirement Group Inc. in the US. The consideration transferred for the acquisition consisted of 133,552 shares of Punter Southall Group Limited valued at £3.14 per share and represent a capital contribution to the Group. In addition the Group was to pay, a mixture of cash and shares to the former owners based on a share of the revenue generated from the business for one year post acquisition. The fair value of the contingent consideration arrangement was estimated at £419,000 by applying the income approach. A total of £229,000 has been paid to the former owners and as at 30 June 2014 no further payments are required to be made. The goodwill of £1,218,000 arising from the acquisition consisted largely of the synergies and the increase in revenue expected from incorporating the business of Cassidy Retirement Group, Inc. into the Group. All of the goodwill recognised is expected to be deductible for corporation tax purposes.

40. Palisades Capital Advisors LLC

On 11 March 2013 the Group acquired the trade and assets of Palisades Capital Advisors LLC for cash consideration of £169,763 resulting in goodwill on acquisition of £169,763. All of the goodwill recognised is expected to be deductible for corporation tax purposes. Due to the full integration of the business into the Group it is not practicable to determine the post-acquisition results to the end of the reporting periods.

41. River and Mercantile Asset Management LLP (RAMAM)

On 27 March 2014, the Company completed the acquisition of RAMAM whereby the membership interests of RAMAM were transferred to the Company in return for a 31% shareholding in the capital of the Company. In aggregate a total of 7,636,191 new Ordinary Shares were issued at nominal value to RAMAM members. At the date of the acquisition the shares in P-Solve Limited did not have a readily determined market value. The fair value of the shares was determined using assumptions and judgments regarding the value of the combined Group after the acquisition. The combined business was valued based on the projected earnings and valuation multiples observable in the public markets. The value calculated was discounted to reflect the private company status of the combined business. The net value of the Group was determined to be £141.6 million, representing a fair value of the consideration transferred for the purchase as £44.43 million.

A merger reserve was established of £44.433 million that represents the difference between the nominal value and the fair value of the new shares issued by the Company to the members of RAMAM as consideration for the acquisition of RAMAM, in accordance with Section 612 of the Companies Act 2006.

The identifiable assets include the fair value of the investment management agreements (IMA) acquired. The expected future cash flows are based on assumption and estimates including the level of future sales, redemptions, and investment performance. Costs associated with the IMA are also estimated. The after tax net cash flows were discounted to the current period using a discount rate that reflects the risk associated with the net cash flows streams. The resulting intangible asset will be amortized over the useful life of the contracts ranging from 5 to 10 years, depending on the nature of the distribution channel. The amortization will not be deductible for corporate tax purposes and therefore a deferred tax liability has been established on the value of the intangible assets.

The provisional values for the acquired business at the date of the acquisition are as set out in the table below.

The consideration for the acquisition is a non cash item.

RAMAM Goodwill

The excess of the consideration over the provisional fair value of the identifiable net assets acquired represents goodwill of £13.2 million arising from the acquisition. The goodwill consisted largely of the synergies and the increase in revenue expected from incorporating the business of RAMAM into the Group.

As the initial accounting for a business combination can be determined only provisionally by the end of the reporting period, the business combination has been accounted for using provisional amounts.

As the RAMAM acquisition was completed on 27 March 2014, a full evaluation of the goodwill of RAMAM to determine if the goodwill is impaired is not required, unless factors subsequent to the acquisition indicate that impairment may have occurred. The strategic rationale for the acquisition and expectations of revenue synergies are still valid. In particular, all the portfolio manager teams are still in place and the key institutional and retail distribution relationships have been maintained. The Directors therefore consider there is no indication that an impairment has occurred.

The post-tax results for the period since the acquisition date are £0.9 million. If the Acquisition had taken place at the beginning of the financial year, the post tax results would have been £1.65 million. This result does not include any benefit from revenue synergies.

From a capital management perspective all the acquisition intangibles, net of the deferred tax, and amounts recorded as goodwill are supported by the merger reserve in shareholders' equity. This approach is consistent with our regulatory capital treatment.

42. Goodwill and investment management agreements

43. Notes to consolidated cash flow statement 

Net Cash Generated from Operations for the 6 months ended 30 June 2014 was £1.20 million, (2013: £7.5 million) compared to a net loss after tax of £1.36 million (2013: £6.0 million). The primary difference between the pre tax net profit and cash flows from operations relates to the non-cash amortization of IMA intangibles acquired in the acquisition of RAMAM.

Cash flows from investing activities for the 6 months ended 30 June 2014 were £4.17 million, (2013: £7.02 million). The acquisition of RAMAM involved a non cash share for partner interest exchange with a fair value of £44 million. The cash from investing activities is primarily the cash balance in RAMAM at the date of the acquisition. For the year ended 31 December 2013, the proceeds of the sale of CAMRADATA is £1.1 million, are partially offset by the payment of contingent consideration for the Meridian acquisition.

Cash flows generated from financing activities for the 6 months ended 30 June 2014 were £8.82 million (2013: cash used £10.64 million) reflecting the cash raised in the IPO, net of the underwriting fees, partially offset by the repayment of the intercompany loan from Punter Southall Group Limited ("PSG"). PSG forgave a balance of £3.87 million on the intercompany borrowing facility that had been established during 2013. The amount was recorded as a capital contribution to the Group and is not reflected in investing activity as it is a non cash item. For the year ended 31 December 2013 cash from financing activities reflects the borrowing from PSG of £10.5 million and the payment of £20.4 million in dividends to PSG.

Consolidated Statement of Changes in Shareholders Equity for the 6 months period ended 30 June 2014, and the year ended 31 December 2013