Rathbone Brothers Plc Report and accounts 2016 Building for the future Contents Strategic report Rathbone Brothers Plc, through its 1 Highlights of the year 2 Our business at a glance subsidiaries, is a leading provider 4 Our business model 6 Chairman’s statement of high-quality, personalised 8 Chief executive’s review 11 Our market and opportunity investment and wealth management 12 Our strategy 13 Strategy and key performance indicators services for private clients, charities 18 Risk management and trustees. Our services include 26 Our performance 27 Group performance discretionary investment 31 Segmental review 37 Financial position management, unit trusts, banking 41 Liquidity and cash flow 42 Corporate responsibility report and loan services, financial planning, Governance unitised portfolio services and UK 53 Corporate governance report 54 Governance at a glance trust, legal, estate and tax advice. 55 Board summary 58 Directors 60 Remuneration committee report As at 31 December 2016, Rathbone 80 Group risk committee report 82 Audit committee report Brothers Plc managed £34.2 billion 86 Nomination committee report 88 Executive committee report of client funds, of which £30.2 billion 90 Directors’ report 94 Statement of directors’ responsibilities in were managed by our Investment respect of the report and accounts Management segment. Financial statements 96 Independent auditor’s report to the members of Rathbone Brothers Plc The strategic report contains certain forward-looking 100 Consolidated financial statements statements, which are made by the directors in good faith 104 Notes to the consolidated financial based on the information available to them at the time of their statements approval of this annual report. Statements contained within 157 Company financial statements the strategic report should be treated with some caution due to 160 Notes to the company financial statements the inherent uncertainties (including but not limited to those arising from economic, regulatory and business risk factors) Further information underlying any such forward-looking statements. The strategic 176 Five year record report has been prepared by Rathbone Brothers Plc to provide 176 Corporate information information to its shareholders and should not be relied upon 177 Our offices for any other purpose. Pages 1 to 51 constitute the strategic report, which was approved by the board and signed on its behalf by: Philip Howell Paul Stockton Chief Executive Finance Director 22 February 2017 Highlights of the year Financial highlights Operational highlights report Strategic Funds under management (£bn) — Announced the intention to .bn move our London head office from 1 Curzon Street to 8 Finsbury 342 Circus, which was completed in 272 292 February 2017 220 — Advanced development of the 180 Rathbone Private Office through an external asset manager agreement with Credit Suisse to offer a range of specialist private banking 12 13 14 15 16 products and services to clients 1 Prot before tax (m) Underlying prot before tax (£m) — Raised £36.9 million net of placement costs via a share placing .m .m with institutional investors to fund 749 586 704 the expected near-term higher 501 capital requirement associated with 616 457 442 our planned closure of the defined 505 385 benefit pension schemes and to 448 provide a measure of additional financial flexibility — Funds under management in Rathbone Unit Trust Management passed £4.0 billion 12 13 14 15 16 12 13 14 15 16 — Awarded Institutional Private Client Basic earnings per share (p) Underlying1 earnings per share (p) Asset Manager of the Year by Citywealth and Investment Week’s .p .p Gold Standard Award for 1221 974 Discretionary Portfolio 1170 Management in addition to 1024 789 761 760 receiving both the Citywealth and 867 665 Charity Times awards for Charity 774 Investment Manager of the Year 12 13 14 15 16 12 13 14 15 16 Underlying operating Dividends paid and proposed margin2 per share 29.8% 57.0p 2016 2015 2016 2015 29.8% 30.7% 57.0p 55.0p 1. Profit before tax and earnings per share include the impact of additional costs relating to the acquisition of the Vision businesses in 2015 and the planned London head office move to 8 Finsbury Circus and charges in relation to client relationships and goodwill; underlying results exclude these items. A full reconciliation between the underlying results and the statutory presentation is given on page 28 2. Underlying profit before tax as a percentage of underlying operating income Rathbone Brothers Plc Report and accounts 2016 1 Our business at a glance Rathbones today Rathbone Brothers Plc, through its subsidiaries, is a leading provider of high-quality, personalised investment and wealth management services for private clients, charities and trustees. Our services include discretionary investment management, unit trusts, banking and loan services, financial planning, unitised portfolio services and UK trust, legal, estate and tax advice. We employ over 1,100 staff including 287 investment professionals in 16 locations across the UK and Jersey Total funds under Group underlying management increased operating income by 17.1% to £34.2 billion increased by 9.6% to during 2016 £251.3m during 2016 Investment Management £302bn Investment Management £2263m Unit Trusts £40bn Unit Trusts £250m Group Total underlying funds under operating management income £34.2 bn £251.3m We are a FTSE 250 company listed on the London Stock Exchange 2 Rathbone Brothers Plc Report and accounts 2016 Our services report Strategic Investment Management Complementary services Through Rathbone Investment Management, we provide Rathbone Investment Management also provides: personal discretionary investment management solutions Banking and loan services to private clients with investible assets of £100,000 upwards. We also manage £4.1 billion for charities and Rathbone As a licensed deposit taker, we are able to offer our clients loans Greenbank Investments manages £863 million in ethical and directly secured against their investment portfolios. socially responsible investment portfolios. We have also recently Financial planning established the Rathbone Private Office, which will provide a We offer in-house financial planning, which provides ‘whole of range of independent investment and financing solutions to market’ advice to clients. super high net worth clients. Our offshore discretionary investment services are provided by Rathbone Investment Unitised Portfolio Service Management International. Using the Rathbone Multi Asset Portfolios funds, we offer clients with fewer investible assets (£25,000 or more) model-based Investment Management funds discretionary investment management services. under management have We also operate the following additional entities: Rathbone Trust Company increased by 104.6% to £30.2bn Rathbone Trust Company provides UK trust and some legal, over the past five years estate and tax advice to clients. Vision Independent Financial Planning 48,000 clients in our Investment An independent IFA network providing financial advisory Management business solutions to UK private clients. Client account type by value Private clients 381% ISAs 157% Unit Trusts Charities 133% Trusts 118% Pensions 117% Other 94% Rathbone Unit Trust Management is a leading UK fund manager providing a range of actively managed specialist and multi asset unit trusts that are designed to meet core investment needs in the retail client market. These funds are distributed mainly through independent financial advisers in the UK. Multi asset funds provide an investment solution for clients with Size of client relationship by value smaller investment portfolios (from £1,000 to invest) and are the building blocks for the collective investment management solution for smaller private clients delivered via the Rathbone <£250000 82% £250000–£500000 126% Unitised Portfolio Service. £500000–£750000 98% £750000–£15m 177% Unit Trusts funds under £15m–£5m 232% £5m–£10m 93% >£10m 192% management have increased by 267.0% to £4.0bn over the past five years Rathbone Brothers Plc Report and accounts 2016 3 Our business model The Rathbones difference Through a personalised approach to investment management, we offer investors a compelling and attractive way to build value. What we do What makes us different Our vision is to be the UK’s leading independently-owned provider of investment and wealth management services to private clients, charities and trustees. — 287 trained investment professionals Scale and We have two main areas of operation as well as several — £34.2 billion funds under management complementary services: expertise — A broad range of investment solutions — Rathbone Investment Management, which offers personal discretionary investment management solutions — Rathbone Unit Trust Management, which provides unit trust and multi asset fund products — Established brand — Complementary services including: Brand and — Local presence and consistent delivery — banking and loan services reputation — Reliable systems and infrastructure — in-house financial planning advice — Accredited performance reporting — a unitised portfolio service — UK trust, legal, estate and tax advice — Vision Independent Financial Planning — Listed on the London Stock Exchange Independent with a market capitalisation of approximately ownership £1 billion at 31 December 2016 — High standards of corporate governance 4 Rathbone Brothers Plc Report and accounts 2016 Strategic report Strategic How we do it Value creation for the