Trading Statement

River and Mercantile Group PLC

Trading Update

River and Mercantile Group PLC (R&M), the advisory and investment management business today provides a trading update. This comprises Assets under Management (AUM) and Notional under Management (NUM) for the two and eleven months ended 31 May 2016, and commentary on trading in broad terms during June 2016.

Summary:

· The business was relatively unaffected during the second quarter of 2016 by the significant economic, political and market uncertainty;

· R&M delivered AUM/NUM growth of £0.7bn in the two months to May in difficult conditions and growth of £3.3bn for the eleven month period;

· Strong macro decision making and asset diversification has led to positive returns, both in absolute terms and against objective within Fiduciary Management;

· Post-Brexit flows remain normal with only minimal net negative flows in the Wholesale Equities business.

Mike Faulkner, CEO of River and Mercantile, said:

In light of the extreme market conditions we felt it was appropriate to update the market and our shareholders on current trading. We therefore include a trading update to the end of May and further background on how the business performed during June, including the actions we took on behalf of investors in the run-up to the referendum and thereafter.

Performance to May

Our business model is deliberately constructed to bring together a series of revenue lines that diversify each other - they perform differently at different times. This is illustrated well during the first two months of the quarter. In difficult conditions, we produced positive net flows and positive investment performance. This resulted in AUM/NUM growing by £0.7bn (3%) in the two month period and £3.3bn (16%) in the eleven month period. The strongest contribution to flows was from the Derivatives business - unsurprising given the prevailing levels of uncertainty. Investment performance was dominated by Fiduciary Management, on which there is more background below.

Trading during June

The above numbers obviously do not cover the most significant event in the quarter. These results will be set out more fully in our July trading update, but given the conditions we felt it worthwhile to explain our experience of the business through June.

While the month ended on a more positive note, in market return terms at least, there were clearly significant concerns in the immediate aftermath of the Brexit vote and substantial losses in the share prices of many financial services companies, including River and Mercantile. For investment firms, this appears to be focused in part on the potential for the vote to have a negative impact on financial performance and flows.

Our expectation is that the only Brexit-related negative flows will be in our Wholesale Equity Solutions business, with only minimal net outflows in the days immediately following Brexit, representing less than 1% of the £1.3bn Wholesale AUM at the end of May. Otherwise, our flows are normal and we have experienced no outflows in our other business lines as a result of the referendum. While it appears likely investment performance (in absolute terms) for the Equity Solutions business will be negative, we are expecting investment performance in Fiduciary Management to be positive, both against objectives and also in absolute asset value terms. This is a result of the macro investment decisions taken within these portfolios.

Investment activity within Fiduciary Management portfolios

Earlier in the quarter we had been increasing our allocations to return seeking assets, given our expectations that equity markets would rise. However, as the quarter progressed and markets did indeed rise, we became more concerned about prospective returns, particularly with risks around the referendum looming. Given these risks, we moved return seeking portfolios to be more defensive. This included relatively high interest and inflation rate hedge levels.

On 24 June, as markets responded to the Leave result, the fall in equity markets and corresponding rise in defensive bond markets gave us the opportunity to sell the latter and buy equities early in the day. This proved to add significant value to client accounts. The effect of these decisions is we are expecting strong positive returns from Fiduciary Management for the quarter. It is also worth noting that all these investment decisions (other than the interest and inflation hedging) were also reflected in our Dynamic Asset Allocation Fund.

Client Reaction

We have had a number of conversations with key clients and the general mood is that clients are very happy with the positioning they had going into the referendum, and the actions we have taken since. Our clients share our view that we are in very uncertain times and appreciate our ability to be able to work with them in a more nimble way to navigate and where appropriate, take advantage of the conditions in pursuit of their objectives.

Looking forward

The overall result is we expect the business to have performed solidly in the quarter ended June 2016 in delivering asset growth as a result of the macro decision-making in the business and the diversification benefits of the business lines we operate.

Our business model and approach will remain unchanged going forward. In addition, we continue to have a strong pipeline of new business opportunities and relatively low levels of attrition. We do not have any passported European business that would be affected by a change in rules.

I hope this provides reassurance to our investors that the business model continues to deliver and has the attributes to offer resilience in the event of difficult market conditions. Equally, we obviously live in uncertain times, and we cannot rule out circumstances in which we will find it more difficult. We will keep shareholders updated as conditions evolve from here, and it may be that we take the opportunity in these trading updates to say more about what we are doing within the business to grow our ability to address new challenges as they emerge. However, R&M's diversification across a variety of business lines, with an emphasis on long term capital, should help in navigating the significant economic, political and market risks we all face.

Highlights for the two months ended 31 May 2016:

· Fee earning AUM/NUM increased by 3% to £24.3bn.

· All Divisions had positive net flow which aggregated £0.6bn in the period. In addition, at period end Mandates in Transition were £0.1bn.

· Investment performance added £0.1bn, with strong performance in Fiduciary Management in the period.

Highlights for the eleven months ended 31 May 2016:

· Fee earning AUM/NUM increased by 16% from 30 June 2015, to £24.3bn.

· All Divisions had positive net flows which aggregated £2.9bn in the period, with net sales of £2.2bn and positive rebalancing flows in Derivative Solutions of £0.7bn.

· Investment performance added £0.3bn, in a very challenging market environment.

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

AUM/NUM for the two months ended 31 May 2016.

AUM/NUM for the eleven months ended 31 May 2016.

For the two months ended 31 May 2016 there were no performance fees (nine months to March 2016: £1.53 million).

Next trading update:

The next trading update containing AUM/NUM as at the end of June 2016 will be published in July.

Notes to editors:

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

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

The Group has £24.3bn under management, including £13.4bn of Derivatives and advises on assets in excess of £30bn.

For further information please contact:

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

Kevin Hayes, Chief Financial Officer

Chris Rutt, Deputy Chief Financial Officer and Investor Relations

Forward-looking statements

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

Notes:

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

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

Net rebalance in the Derivative Solutions division represents the net change in billing notional values of Derivatives from existing client mandates and can increase or decrease based on changes in the underlying hedging strategies.

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

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

Redemptions in transition are redemptions which have been notified by the client at the period-end date, but where the AUM/NUM is included in fee earning assets at period end. The redemptions will be included in a future period.