Annual report and accounts to 30 June 2021

ANNUAL REPORT AND ACCOUNTS 2021

STRATEGIC REPORT

3 Chairman's Statement

1. Group Chief Executive's Statement

1. Key Performance Indicators

1. Group Investment Performance
2. Chief Financial Officer's Review

1. Our Strategy and Business Model

1. Our People

1. Sustainability and Corporate Social Responsibility

1. Risk Management

1. Viability Statement

GOVERNANCE

39 Board of Directors

1. Corporate Governance Report

1. Directors' Report

1. Directors' Responsibilities

1. Our Stakeholders: Section 172 Statement

1. Nomination Committee Report

1. Audit Committee Report

1. Risk Committee Report

1. Investment Committee Report
2. Remuneration Committee Report

FINANCIAL STATEMENTS

1. Independent Auditor's Report

1. Consolidated Income Statement
2. Consolidated Statement of Comprehensive Income
3. Consolidated Statement of Financial Position
4. Consolidated Statement of Cash Flows
5. Consolidated Statement of Changes in Shareholders' Equity
6. Notes to the Consolidated Financial Statements

1. Company Statement of Financial Position
2. Company Statement of Cash Flows
3. Company Statement of Changes in Shareholders' Equity
4. Notes to the Company Financial Statements

ADDITIONAL INFORMATION

1. Glossary
2. Shareholder Information and Advisors

Forward looking statements

This document contains certain forward looking statements with respect to the financial condition, results of operations and businesses of River and Mercantile Group PLC. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report. However, such statements should be treated with caution as they involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future.

There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements. The continuing uncertainty in the global economic outlook inevitably increases the economic and business risks to which the Group is exposed.

River and Mercantile is a client focused asset management and investment advisory specialist working closely with clients in the UK, Europe, USA, Australia and New Zealand.

Clients

Our clients include institutional pension

schemes, wholesale financial intermediaries,

insurance companies, state and local

government funds, charitable institutions and family offices. Understanding clients' complex investment requirements and, where relevant, their financial liabilities profile is the key to our success.

Investment

We design, build, manage and distribute specialist investment products designed to meet specific client needs which have broad client application across our target audience groups. We work with our clients

as partners to ensure their needs, and the resultant solutions and products, are clearly understood and implemented.

Innovation

We have developed a rewarding,

diverse and open environment to allow innovation and investment expertise to flourish where environmental, social and governance (ESG) considerations are at the forefront of our thinking.

Highlights

2021

OVERVIEW

Fee earning AUM £47.6bn 8% increase

Statutory profit before tax £10.9m 31% increase

Total revenue£74.3m 5% increase

Adjusted profit before tax £15.0m 14% increase

Dividend per share	11.69p 23% increase

Operational Highlights

	2021	2020	Change
Fee earning AUM	£47.6bn	£44.2bn	8%
Net management and advisory fees	£67.9m	£69.4m	(2%)
Performance fees	£6.4m	£1.2m	448%
Statutory profit before tax	£10.9m	£8.3m	31%
Statutory earnings per share	9.79p	6.39p	53%
Adjusted profit before tax1	£15.0m	£13.2m	14%
Adjusted underlying profit before tax1	£12.2m	£12.6m	(3%)
Basic adjusted underlying EPS	11.30p	11.18p	2%
Total dividend for the year2	11.69p	9.54p	23%

1. Adjusted profit and adjusted underlying profit are alternative performance measures (APM) , see note 13 of the consolidated financial statements for a reconciliation to statutory profit.
2. Including 4.48 pence second interim dividend and 3.32 pence proposed final dividend.

Overview

Report Strategic

Governance

Statements Financial

1

Strategic report

3 Chairman's Statement

1. Group Chief Executive's Statement

1. Key Performance Indicators

1. Group Investment Performance Table
2. Chief Financial Officer's Review

1. Our Strategy and Business Model

1. Our People

1. Sustainability and Corporate Social Responsibility

1. Risk Management

1. Viability Statement

2

Chairman's Statement

JONATHAN DAWSON

CHAIRMAN OF THE BOARD

Although the announcement of the conditional sale of River and Mercantile Investments Limited (RAMIL, Solutions) which holds our Fiduciary Management and Derivatives business to Schroders was made in October, the preparatory work for the sale reflects detailed consideration by the Board of our strategy in the first half of 2021. The extensive preparations and the sale process itself have been time consuming and demanding. The resulting transaction, which is subject to the approval of shareholders at a general meeting to be called in December, is

a clear demonstration of the Board's commitment to deliver proper value for shareholders, with a vital contribution made by James Barham our Group Chief Executive to the success of the exercise. The price achieved for RAMIL of £230 million, represented a premium of 28.2 per cent. over the Group's undisturbed market capitalisation on 9 August, (the day prior to the announcement that the Group had received a number of expressions of interest in the Solutions business). This is a clear illustration of the discount that the market had applied to our Group and a spur to us to ensure that our shareholders received full value. The sale, if approved, is likely to be completed in the first quarter of next year. The Board intends to return the majority of proceeds to Shareholders following completion of the sale and will engage with Shareholders regarding the amount to be returned. Sufficient funds will be retained both to ensure that its existing business remains well capitalised and to facilitate its plans for the development of the asset management business.

The sale of RAMIL, and its attractiveness to a number of serious industry leaders, was underpinned by its robust performance in the retendering exercise for fiduciary managed pension assets required by

the Competition and Markets Authority (CMA) following the latter's enquiry into the sector which was closed in June 2019. The outcome of the retendering for the Fiduciary Management business has been discussed in more detail in the Group Chief Executive's report. This is a tribute to our people in the business, to their focus on achieving great performance and great service for our clients, and to their energy in pitching for new opportunities arising from the sector-wide retendering. We believe that our retendering success is market leading.

Our equities business, River and Mercantile Asset Management LLP (RAMAM) has had a very strong year's performance. RAMAM has benefited from a sectoral shift towards 'value', which has played to the strengths and consistency of our team. The Board

is very pleased to note that 11 of our

14 equities strategies are ahead of their respective benchmarks since inception - a remarkable achievement. Included in this is the European Fund which has exceeded its benchmark by in excess of 7.5 per cent. since its launch earlier this financial year.

In January, we announced that Ian Berry and a team of experienced infrastructure investment professionals had joined the Group and that we were planning to launch a new infrastructure fund. We hope to reach first close within the next two months. We have very high hopes for our investment in this space; it is clearly a key area for yield- seeking pension funds and other investors with critical income requirements.

Financial performance

Total revenues were up 5 per cent. (£3.7 million) following the achievement of material performance fees from both Solutions and Asset Management. Statutory profits before tax increased by 31 per cent. to £10.9 million and adjusted profits before tax increased by 14 per cent. to £15.0 million. The Directors have declared a second interim dividend of 4.48

pence per share and are recommending a final dividend of 3.32 pence per share. This amounts to a total dividend of 11.69 pence per share for the period, representing an increase in the total dividend for the year of 23 per cent.

We recognise the importance of dividends to our shareholders against the background of the sale of RAMIL and in order to provide Shareholders with some certainty for the year ending 30 June 2022, the Board confirms that it intends to pay at least the same cash ordinary dividend per share as for the year ended 30 June 2021.

Board changes

In January we announced the appointment of Martin Gilbert to the Board as Deputy Chairman and an independent non-executive director. Martin has

an outstanding record in the asset management sector and the Group is most fortunate in having his expertise and strategic wisdom to help us in our discussions.

In May we announced the appointment of Alex Hoctor-Duncan as an Executive Director with responsibility for strategic development. Alex will join the Board on 29 November at the expiry of his 'garden leave' and will set to work on developing new areas for our long-term growth, building on the Group's strong foundations. Alex has had a distinguished career in asset management largely at Blackrock and its UK precursor companies. Most recently he has been Global Head of Aberdeen Standard Investments, part of abrdn plc. As announced, James Barham will be leaving the Group to join Schroders as part of the sale of RAMIL and he will be succeeded as CEO by Alex Hoctor-Duncan.

Our people and culture

This has been a hard year in which many important and necessary strategic decisions have been taken and executed. It has been all the harder against the background of restrictions arising from the COVID pandemic and the associated disruption. On behalf of the Board, I pay tribute to the determination of all of the Group's people to ensure that our client service and support remained robust, and

Overview

Report Strategic

Governance

Statements Financial

3