Stanley R/A 09 7th proof 23/6 · Report and Accounts 2009 3 Charles Stanley – the personal...

ANNUAL REPORTAND ACCOUNTS 2009

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CHARLES STANLEY – THE PERSONAL INVESTMENT SERVICE

Throughout the remainder of 2009, CharlesStanley’s corporate branding and image ischanging. Alongside a new logo and colourscheme, one of the most noticeable changes is that we have dropped the ‘stockbrokers’ title from our logo as well as all other subtitles. Our new corporate straplines ‘The personalinvestment service’ and ‘Made for You’ betterconvey the bespoke nature of our relationshipswith clients, both private and corporate.

The new Charles Stanley website has beendesigned with the client experience (both existingand potential) very much in mind. It is remarkablyeasy to navigate and most services are simply oneclick away from the homepage.

As you can see in the thumbnails above, our newbrochures (and indeed website and marketingmaterials) sport some striking imagery. Employeesof Charles Stanley hand-selected a small numberof premium craftsmen known for the exceptionalquality of their products and the designers thenarranged photo shoots around the country whilstCharles Stanley maintains links with the individualcraftsmen concerned.

Overall, it is the same consistent Charles Stanleymessage of carefully-crafted personal service, butwe are focussing on this in a smart, modern andforward-looking way. We think that the rebrandingis therefore a key to our continued success andcompetitiveness in the marketplace. To date, theresponse from our clients and from within the firmhas been extremely positive and we do hope thatyou like the changes. In an age of ever-increasingscrutiny by our clients of what it is that we offer,we are constantly striving to raise the level of ourservice. We believe that the rebranding delivers on all counts.

Sir David Howard

MADE FOR YOU

Charles Stanley Group PLCReport and Accounts 20091


2

FINANCIAL HIGHLIGHTS

Revenue for the year £101.8 million (2008: £105.6 million) 3.6% decrease

Underlying profit before tax £9.3 million (2008: £12.3 million) 24.4% decrease

Underlying profit before tax and one-off costs£10.8 million (2008: £16.7 million) 35.3% decrease

Funds under management or administration£9.0 billion (2008: £11.0 billion)

Private client income up 0.8% to £84.5 million(2008: £83.8 million)

Earnings per share before amortisation of client lists and one-off costs 20.00p (2008: 29.05p)

Earnings per share before one-off costs 17.30p(2008: 27.99p)

Earnings per share after one-off costs 14.65p(2008: 20.89p)

Dividend increased to 8.75p up 1.7% (2008: 8.60p)

Acquisition of Griffiths & Armour (Financial Services) Ltd

CONTENTS


Charles Stanley – the personal investment service 1

Financial highlights 2

Chairman’s statement 4

Directors’ reports

Business review 6

Operating and financial review 10

Corporate social responsibility report 18

Directors and Company information 22

Report of the Directors 24

Directors’ remuneration report 26

Corporate governance 30

Statement of Directors’ responsibilities 30

Independent audit report to the members 34

Financial statements 36

Directors of Charles Stanley Group PLC 75

Directors of Charles Stanley & Co. Ltd 75

Notice of meeting 76

Our offices 82


4

CHAIRMAN’S STATEMENT

Despite some of the most difficult economicconditions that any of us can remember Charles Stanley is pleased to report that ourrevenue for the year ended 31 March 2009 has held up at 96% of the previous year’s record figure.The small decline in revenue from the record levelsof 2008 was due almost wholly to a difficult year for the securities division which, despite the mostadverse conditions, nevertheless produced a healthy profit thanks to our wide diversity of business and an excellent year from our CS Sutherlands bond team.

During the course of this year we have acquiredGriffiths & Armour (Financial Services) Ltd andmade a number of additions of small teams acrossthe Group. These acquisitions have helped tomaintain our revenue levels. But our margins,throughout the Group, have been unable to avoidthe pressure of market conditions. Consequentlyour reported profit before tax, at £9.2 million, issome 25.8% lower than the figure of £12.4 million in 2008. After adjustment to eliminate the effect of investment disposals and one-off acquisition costs our profit before tax is £10.8 million comparedwith £16.7 million in 2008. We regard this as a solidresult in the light of the current climate.

Inevitably the decline in markets has also impactedon the funds which we manage or administer forclients. As at 31 March 2009 the total stood at £9.0 billion, some 18.2% lower than the figure at 31 March 2008 of £11.0 billion. The closestcomparator to our mix of client funds is the APCIMS Balanced Portfolio Index, which fell by20.4% over the same period. Within these figuresthe funds which we manage on a discretionary basis for clients have fallen by 12.9%, from £3.1 billion to £2.7 billion. As at 31 May 2009 I am pleased to report that total funds undermanagement and administration stood at £10.0 billion.

In October 2008 we acquired Griffiths & Armour(Financial Services) Ltd, a benefits consultancybusiness previously owned by the leading insurancebrokers Griffiths & Armour, based in Liverpool. This is a significant addition to our expandingbenefits consultancy business based in London,Plymouth and Southampton.

Despite paying for acquisitions from our ownresources our cash balances stood at £36.0 millionat 31 March 2009 compared to £32.5 million at 31 March 2008. This reflects the particularlyvigorous attention that we have paid to our workingcapital during these turbulent conditions and ourenhanced focus on credit risk management in thisperiod of heightened market uncertainty.

In the light of these results we propose increasingthe final dividend from 6.50p per share to 6.65p.Taken together with the interim dividend of 2.10pthis will make a total dividend for the year of 8.75p,an increase of 1.7% on last year’s total dividend of8.60p. The dividend will be paid on 4 August 2009to shareholders registered on 19 June 2009. We arealso offering shareholders the opportunity to chooseto receive part or all of their dividends in the formof shares rather than in cash.

DIVISIONAL REVIEWCharles Stanley provides a comprehensive range of investment, wealth management and financialplanning services to retail, institutional andcorporate clients. A detailed review of the businessin respect of the past year follows this statement.

THE QUALITY OF OUR SERVICECharles Stanley continues to grow. During 2008-09we have been joined by many new clients, bybusinesses that we have acquired and by furtherexcellent staff. Our focus, as always, remains on the quality of our service.

I am delighted to welcome all those who have joinedus during the past 12 months and I offer my thanksto our committed and enthusiastic brokers and stafffor their hard work in producing another set ofsound results.

CHANGES TO OUR ARTICLES OF ASSOCIATIONIn recent years we have sought your approval fromtime to time for amendments to our Articles ofAssociation, to keep them in line with changinglegislation. A number of further changes are neededthis year and we are taking the opportunity to reviseour Articles comprehensively. Full details are set out in a separate circular accompanying this reportand I invite you to support the relevant resolution at the forthcoming Annual General Meeting.


CHAIRMAN’S STATEMENT

OUTLOOKIt was clear this time twelve months ago that 2008-09 was going to be another dreadful year for the global economy. The blunders of the Bushadministration had plunged the world into a crisisfrom which it has still to emerge. By and large theshort-term problems which this has created can, I am sure, be alleviated and possibly resolved by the sweeping measures taken both in Britain andelsewhere. But the deeper causes of the crisis, the global imbalances between producing andconsuming nations, call for a more profound solution which still evades us.

Another imbalance has been the stark differencebetween the heavy regulation of retail business,which has posed little or no systemic risk, and thethinner regulation of over-extended wholesalebusinesses, which are the immediate cause of the systemic collapse. We share the view that, in all of our interests, controls must be tightened.But this needs to be proportionate and rather more accurately focussed.

The stock market has held up very well, in thecircumstances, and there are increasing signs ofrecovery. But it is too early to say if this is a short-lived bounce or if the gathering momentum is thebeginning of a cyclical upturn. I veer to the latterview, but to be sure of this we need rather moreevidence.

In the meantime Charles Stanley has demonstratedits resilience even in the harshest conditions. We are well placed if these continue, and wellplaced, equally, to move forward when the economyrecovers. For the moment I remain cautious, but Ihave some optimism about the outlook for theGroup on a six to twelve month view.

Sir David HowardChairman

11 June 2009

BUSINESS REVIEW


6

OBJECTIVEOur objective is to build Charles Stanley over the longer term and thereby maximise the return to shareholders, while paying proper regard to the interests of all our stakeholders and to thesurrounding community.

STRATEGYWe seek to achieve this through a combination of both organic growth and carefully selectedacquisitions which either reinforce the Group’sexisting activities or diversify into complementarybusiness lines. Allied to that is the Group’s longstanding focus and proven levels of clientsatisfaction to develop the business for the future.We have a commitment to providing individuallytailored and exceptionally responsive investmentservices for clients and ensuring that our servicesare of outstanding quality, efficient and innovative.

RESOURCESThe Group sees its people as one of its keyresources. We pride ourselves on being able toattract and retain high calibre staff. Our levels of staff turnover are among the lowest in theindustry. Its conservative approach to cashmanagement means that it is well positioned to cope both with a current economic downturn and subsequent recovery.

REVIEW OF BUSINESSThe Group has reorganised its primarysegmentation. The Group is managed by operating division: Private Clients, FinancialServices and Charles Stanley Securities.

PRIVATE CLIENTSTotal funds under management and administration are shown below:

2009 2008£ billion £ billion

Discretionary funds under managementIn Group’s nominee or Euroclear UK and Ireland (“EUI”)personal membership 2.7 3.1

Advisory managed fundsIn Group’s nominee or EUI personal membership 1.7 2.4Not held in Group’s nominee 0.2 0.5

1.9 2.9

Total managed funds 4.6 6.0

Advisory dealing fundsIn Group’s nominee or EUI personal membership 2.0 2.2Execution only fundsIn Group’s nominee or EUI personal membership 2.4 2.8

Total administered funds 4.4 5.0

Total funds under management and administration 9.0 11.0


BUSINESS REVIEW

The Private Client division provides services forcharities and trusts in addition to individual clients.

The Private Client division has seen a resilientperformance in challenging market conditions. Total income has risen by 0.8% whilst like for likeincome has fallen by 1.0%. Income for the yearcomprises commission income from trades on behalf of clients, management fees for those clientsfor whom we provide discretionary or advisorymanaged services, administration fees and interestturn.

At 31 March 2009, the Group held £9.0 billion of funds under management and administration, a decrease of 18.2% on the 2008 figure of £11.0 billion. This compares with a drop of 20.4% in the APCIMS Balanced Portfolio Index over the same period.

While we seek to increase the managed oradministered funds in each category we placehigher emphasis on securing discretionary funds. In the latest year the proportion of discretionaryfunds rose from 28.2% to 30.0% of the total asshown in the charts below:

Discretionary funds under management havedecreased by 12.9% during the year to £2.7 billionat 31 March 2009 (2008: £3.1 billion).

Our transaction numbers have declined by 5.0%from 2008 and this has led to lower commissionincome of £46.0 million for 2009, compared with£48.6 million in the previous year. The division did see increased activity during the second half of the year due to the volatility of markets.

This decrease in commission income is more thanoffset by the increase in fees for managed clientsfrom £35.2 million to £38.5 million.

The ratio of Private Client revenue comprises 45.6% fee income and 54.4% commission income (42.0% and 58.0% for 2008 respectively).

The division generated the following income byclient type:

2009 2008£m £m

Managed clientsCommission 21.8 23.6Fee 23.4 20.8

Total managed clients 45.2 44.4

Non-managed clientsCommission 24.2 25.0Fees and charges 15.1 14.4

Total non-managed clients 39.3 39.4

Total 84.5 83.8

Funds under management and administration 2009

Execution Only27%

AdvisoryDealing

22%

Discretionary30%

AdvisoryPortfolio

21%

Funds under management and administration 2008

Execution Only25%

AdvisoryDealing

20%

Discretionary28%

AdvisoryPortfolio

27%

Private Client division revenue

2005

20

0

£m 40

60

80

2006 2007 2008 2009

COMMISSION FEES

BUSINESS REVIEW


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The division has made two significant acquisitionsduring the year, the business of Truro Stockbrokersand the UK private client business of Insinger deBeaufort. The former increases the geographiccoverage in the west of England, building onexisting operations in that region, and the latter has strengthened the London based assetmanagement activities. Both acquisitions havesettled in well and are performing strongly.

Market conditions continue to be difficult and itremains to be seen whether the trading activity and increase in FTSE values since the end of March represent a false dawn or the start of a new bull market. The division is also confronting thechallenges of the Retail Distribution Review by the FSA and other regulatory pressures. We arealways on the lookout for suitably pricedacquisitions where they can add value to theGroup’s activities and to shareholders. Marketturbulence over the last few months has createdopportunities for winning new clients.

Michael Clark Director of Private Client Stockbroking

Peter HurstFinance Director

FINANCIAL SERVICESUp to 31 March 2008 the Financial Servicesoperations of the Group were integrated within the Private Client division. During the year theGroup decided to recognise this area of the business as a separate division as a result of the key acquisition, in October 2008, of Griffiths & Armour (Financial Services) Ltd. The Financial Services division comprises EBS Management PLC (“EBS”) (a SIPPadministration services provider), GarrisonInvestment Analysis Ltd (“Garrison”) (a discount financial intermediary) and Griffiths & Armour (Financial Services) Ltd, an employee benefits provider together with the existing Charles Stanley employee benefits,financial planning and wealth management areas.

Total income has increased by 13.8% during 2009though on a like for like basis the income fell by5.2%. Income within the division is shown below:

2009 2008£m £m

Financial Planning 2.1 2.1EBS 1.7 1.6Garrison 1.7 2.1Griffiths & Armour (Financial Services) Ltd 1.1 —

Total 6.6 5.8

Griffiths & Armour (Financial Services) Ltd hastraded well since acquisition in October 2008 andthis has allowed the Group to strengthen its benefitconsulting services and enhance its proposition tocorporate clients. The employee benefits business isin the process of reorganisation and this is expectedto be completed during the year ending 31 March 2010.

EBS has performed consistently over 2009 withtotal income of £1.7 million (2008: £1.6 million). It has been a good year when considering theturbulence in the stock market. During the year we took on 364 new SIPPs and 10 new SSASs, but unfortunately the consolidation of the SSASportfolio has continued with the loss of 22. Althoughthe fixed income we receive from these clients isgrowing, the time-costed income is reducing, withfewer clients undertaking activities which enable usto raise additional fees.

BUSINESS REVIEW


9

Garrison has seen a fall in income to £1.7 million(2008: £2.1 million), reflecting the wider falls inmarket values since April 2008. Garrison hascontinued to attract new investors and is wellpositioned for a subsequent recovery in equitymarkets.

The financial planning and wealth management areahas put in a consistent performance throughout theyear with further gains on the wealth managementside together with several new hires.

Michael LilwallDirector

CHARLES STANLEY SECURITIESCS Securities, the Group’s advisory, broking andcorporate finance arm for smaller and mid cap UK listed companies, has seen very challengingconditions in its primary markets, with equityfundraisings and corporate transactions atsignificantly lower levels. This reflects the widerdifficulties in the corporate market. Revenues suchas retainer fees have held up well and the divisionhas 49 retained clients (2008: 51 retained clients).

On a like for like basis the division generated £10.7 million of income, a decrease of 32.7% from2008. Income within the division is shown below:

2009 2008£m £m

Commission 8.0 10.2Fees 2.7 5.7

Total 10.7 15.9

The division has sought to enhance its researchcoverage during 2009 by selective recruitment. It has recently strengthened the management teamto expand its institutional relationships throughresearch product and sales efforts.

The division’s institutional bond trading arm, CS Sutherlands, has enjoyed a strong performancearising from increased investor interest in thissector as equities have struggled. The division hasrecently added to its public coverage of the sectorand anticipates continued heightened investorinterest in bond markets as the impacts of gilt issues and of quantitative easing are felt.

Current primary market conditions continue to be challenging and new equity fundraising is still at a very low level. Nevertheless the securitiesdivision is well positioned to benefit from improvedcorporate confidence.

Michael LilwallDirector

OPERATING AND FINANCIAL REVIEW


10

This review has been prepared solely to provideadditional information to shareholders to assess the Group’s strategies and the potential for thosestrategies to succeed. It should not be relied on by any other party or for any other purpose.

The review contains several forward-lookingstatements made by the Directors in good faithbased on the information available to them up to the time of their approval of this report. Thesestatements should be treated with caution due to the inherent uncertainties, including both economicand business risk factors, underlying such forward-looking information.

The Directors have prepared this review inaccordance with the Accounting Standards BoardReporting Statement: Operating and FinancialReview.

The review has been prepared for the Group as awhole and therefore gives greater emphasis to thosematters which are significant to Charles StanleyGroup PLC and its subsidiary undertakings whenviewed as a whole.

The review covers the following areas:

■ Nature, aim, strategy and objectives of the business;

■ Results for the 2009 financial year and financial position;

■ Future outlook;

■ Risks and uncertainties; and

■ Relationships.

Group policies and other information relating to environmental matters, employees and social and community issues are set out in a separatecorporate social responsibility report on pages 18 to 21.

NATURE, AIM, STRATEGY AND OBJECTIVES OF THE BUSINESSCharles Stanley Group PLC has four tradingcompanies, Charles Stanley & Co. Ltd (“CharlesStanley”), EBS Management PLC (“EBS”) Garrison Investment Analysis Ltd (“Garrison”)and Griffiths & Armour (Financial Services) Ltd. Charles Stanley provides full service stockbroking,financial planning and benefit consultancy and smalland mid-cap advisory and institutional broking. EBSprovides specialist pensions administration services.Garrison markets unit trusts, open-endedinvestment company units and packaged financialproducts to private clients, both directly and inwrappers such as ISAs and pensions. Griffiths &Armour (Financial Services) Ltd is an employeebenefits provider. All four companies are regulatedby the Financial Services Authority. The Group has 32 offices around the United Kingdom, and all revenue is earned in the United Kingdom. These offices are listed on page 82.

Our strategy and objectives are discussed in ourbusiness review on pages 6 to 9.


11


We monitor our performance against our financial objectives by using the following key performanceindicators:

Indicator Description 2009 2008 % change

Ratio of operating profit before Operating profit before 9.3% 14.0% (33.6%)one off costs to revenue one off costs as a

percentage of income

Ratio of reported profit before Underlying profit before 10.6% 15.8% (32.9%)one off costs to revenue one off costs as a

percentage of income

Basic earnings per share Underlying earnings 17.30p 27.99p (38.2%)before one off costs before one off costs

divided by weighted average number of shares in issue during the year

Funds under management Valuation of client £9.0 bn £11.0 bn (18.2%)and administration assets at the year end

Discretionary funds Valuation of £2.7 bn £3.1 bn (12.9%)under management discretionary client

assets at the year end

APCIMS Balanced Portfolio Index As at period end 2,230 2,802 (20.4%)

Staff turnover Ratio of staff leavers 8% 11% 27.3%to average staff during the year

Fees growth Value of non-commission £38.5 m £35.2 m 9.4%income for Private Clients


12


RESULTS FOR 2009 FINANCIAL YEAR AND FINANCIAL POSITIONDuring 2009 total revenue for the Group fell by 3.6% to £101.8 million from £105.6 million. Reported profitfor the year of £9.2 million includes losses on disposal and revaluation of available for sale investments andone-off costs of £1.5 million (£4.4 million) relating to new investment teams.The results for the year are summarised on table 1:

2009 2008 Change£m £m £m %

Revenue 101.8 105.6 (3.8) (3.6%)Administrative expenses (93.8) (95.3) 1.5 1.6%

Operating profit 8.0 10.3 (2.3)Net interest 1.3 2.0 (0.7)

Underlying profit before tax 9.3 12.3 (3.0) (24.4%)

(Loss)/profit on sale of investments (0.1) 0.1 (0.2)

Reported profit 9.2 12.4 (3.2) (25.8%)

Ratio to revenue 9.0% 11.7%

Add back loss/(profit) on sale of investments 0.1 (0.1)Add back one-off costs 1.5 4.4

Underlying profit before one-off costs 10.8 16.7 (5.9) (35.3%)

Ratio to revenue 10.6% 15.8%

Revenue for the year is summarised in table 2:

2009 2008 Change£m £m £m %

Private Clients 84.5 83.8 0.7 0.8%Financial Services 6.6 5.8 0.8 13.8%Charles Stanley Securities 10.7 15.9 (5.2) (32.7%)Other income — 0.1 (0.1)

Total 101.8 105.6 (3.8) (3.6%)

A detailed analysis of the divisional performance is shown in the business review on pages 6 to 9.

The Group seeks, over time, to alter the balance between commission and fee income increasingly in favourof fees. In 2008-09 the proportion of fee income (excluding corporate finance fees) to the total was 45.4%compared to 40.9% in 2007-08 and 39.1% the previous year.


13


ADMINISTRATIVE EXPENSESAdministrative expenses are summarised in table 3:

2009 2008 Change£m £m £m %

Staff costs 41.5 41.9 0.4 1.0%Depreciation 2.7 2.3 (0.4) (17.4%)Amortisation of intangible assets 1.7 0.6 (1.1) (183.3%)Other costs 46.4 46.1 (0.3) (0.6 %)

Total before one-off costs 92.3 90.9 (1.4) (1.5%)One-off costs relating to new teams 1.5 4.4 2.9 65.9%

Total 93.8 95.3 1.5 1.6%

Allocated to:Private Client division 52.1 53.3 1.2 2.3%Financial Services 6.3 5.2 (1.1) (21.2%)Charles Stanley Securities 10.0 13.0 3.0 23.1%

Total allocated to divisions and other income 68.4 71.5 3.1 4.3%

Unallocated 25.4 23.8 (1.6) (6.7%)

Total costs have decreased by 1.6% from £95.3 million to £93.8 million. Staff costs are analysed in note 3 on page 47. These have decreased by 1.0% to £41.5 million from £41.9 million and represent 44.2% of ourtotal costs (2008: 44.0%). Employee numbers have risen by 8.6% to 679 from 625.

For management purposes costs are allocated to divisions by direct attribution and this is shown in note 2on page 46.

Due to acquisitions front office salary costs have risen and the ratio of the number of times front officesalaries are covered by revenue has changed.

2009 2008 Change£m £m £m %

Front office fixed salary cost 18.8 17.2 1.6 9.3%Total income to salary ratio 5.4 6.1

Given the reduction in revenue, non-salary fixed costs have risen relative to revenue as follows:

2009 2008£m £m

Business support costs as % of revenue 18.3% 15.9%Overhead costs as % of revenue 14.4% 12.5%

Total general fixed costs as % of income 32.7% 28.4%


14


The Group has incurred costs of £1.5 million in respect of new investment teams (2008: £4.4 million). When excluding these one-off costs, total expenses have increased by 1.5% to £92.3 million from £90.9 million.

Costs also include depreciation of £2.7 million(2008: £2.3 million) and amortisation of intangibleassets of £1.7 million (2008: £0.6 million). Furtherdetails are shown in notes 11 and 12 to the financialstatements on pages 50 and 51. Amortisationincludes a full year’s charge on intangible assetsacquired during the year to March 2008. In 2009the proportion of our total costs which are fixedincreased to 67% from 59%. Consequently theproportion of fixed costs which is covered by feeshas fallen from 86% to 77%.

Interest receivable of £1.4 million (2008: £2.1 million) includes interest on bank deposits and interest earned from interest bearinginvestments available for sale. The Group’s cash balances stood at £36.0 million as at 31 March 2009 (2008: £32.5 million).

The tax charge of £2.7 million is analysed in note 6to the financial statements on page 48. Thisrepresents 29.3% of the Group’s profit before tax of £9.2 million (2008: 28.2% of 12.4 million). The effective rate is higher than the UK standardrate of 28% due to differences between accountingand taxation treatment of certain items.

Earnings per share for the year after one-off costswere 14.65p (2008: 20.89p). There was no dilutionat 31 March 2009 of earnings. Further details onearnings per share are explained in note 9 on page 49 of the financial statements.

As indicated in the Chairman’s statement the final dividend for the year is recommended to beincreased by 0.15p to 6.65p giving a total dividendfor the year of 8.75p (2008: 8.60p) at a cost of £3.9 million. Shareholders will, subject to approvalat the Annual General Meeting, be offered a scripalternative.

At 31 March 2009 the Group had net assets of £72.2 million (2008: £71.1 million) equivalent to£1.64 per share (2008: £1.61).

FUTURE OUTLOOKThe future outlook of the Group is discussed in theChairman’s statement on pages 4 to 5.

Dividends per share

2005

2

0Pe

nce

4

6

8

10

2006 2007 2008 2009

Net assets

2005

20

0

£m 40

60

80

2006 2007 2008 2009


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RISKS AND UNCERTAINTIESThere are a number of potential risks anduncertainties which could have a material impact on the Group’s long term performance:

Credit riskThis represents the risk of loss through default bycounterparty. The most significant risk to the Groupis either a client or market counterparty not settlinga trade. Given the wide range of retail clients of theGroup it is not considered that a material default byconnected counterparties would arise. Other creditrisks, such as free delivery of stock or cash, are not deemed to be significant as the Group has aneffective credit control department to recover anymonies or stock owed through default.

The credit control department monitors both thecollateral requirements of individual client accounts,as well as any debit balances that occur if stockpurchases are not settled on due date, or that aredue to losses that have been incurred during clienttrading activity, on a daily basis.

Shares are only delivered free of payment to a clientor their agents once settlement has been achievedand there is no outstanding debit balance on theaccount. In the event of an error, it will again bemade immediately apparent the next day when both the debit balances and collateral requirementsof clients accounts are monitored.

On occasion delivery of stock to a recognisedprofessional counterparty may take place free ofpayment via an electronic settlement system, butonly on prior confirmation from their custodiansthat the required funds in settlement will be wired to our appropriate bank account. There have been no instances where this has created an irrecoverable loss.

Exposures for trades that are outstanding beyondthe contractual settlement date are monitored on a daily basis.

Since the onset of the banking crisis, from midSeptember 2008 the Group has established a market risk working group (comprising three Charles Stanley Group PLC Directors, ComplianceDirector, other Charles Stanley & Co. Ltd Directorsas deemed necessary and the risk manager) thatmeets daily to review exposures to marketcounterparties and banks. The committee also sets exposure limits to individual marketcounterparties.

Market riskThis is the risk that arises from fluctuations invalues of, or income from, assets or in interest orexchange rates. Whilst the Group engages in limitedprincipal dealing this is primarily on a matched basis(back to back trades). The Group operates strictlimits for genuine own account trading, in terms ofoverall portfolio exposure and exposure toindividual stocks.

All position limits are monitored daily in accordancewith policies determined by the Board. The Groupoperates limits for own account trading in terms of overall portfolio and individual stock exposure.Since 1 April 2009 the Group has ceased all ownaccount trading other than for execution of clientorders or for positions arising from dealing errors.

The Group has small currency exposures. We runpositions in a variety of currencies, principally theUS dollar, to support clients’ dealing activities.Policy requires any significant net exposures to be hedged using forward currency contracts as soon as a commitment is made.

The Group does not conduct derivative business on its own account. Client deals have to betransacted by the Group as principal, under therules of LIFFE, but these are always matching, back to back transactions. In all cases where suchtransactions place the client or the Group at risksuitable collateral is held. This normally takes theform of a lien over the customer’s assets giving aclaim on these assets for both existing and futureliabilities.

Operational riskThis is defined as the risk of loss resulting frominadequate or failed internal processes, people andsystems or from external events, including legalrisk.

The Group’s risk matrix uses the Basel II frameworkfor operational risk and the framework for riskassessment, and management, is monitored by theGroup’s risk and regulatory review group.

The Group’s risk management system is reviewednot only through internal procedures but also byuse of external auditors, who report to the Directorsof Charles Stanley Group PLC. Whilst the auditorsdo not conduct a full review of all the internalcontrols operating in the Group they do report on any significant weaknesses. The auditors’ reporton the financial statements is shown on pages 34and 35.


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Liquidity riskThis is the risk that the Group, although solvent,either does not have available sufficient financialresources to enable it to meet its obligations as they fall due, or can secure such resources only at excessive cost.

The Group maintains a mixture of cash and cashequivalents that is designed to meet the Group’soperational and trading activities. The Group doesnot use the wholesale markets for any funding andis confident that it has sufficient liquidity for theforeseeable future. At 31 March 2009 the Group had £36.0 million in bank accounts and accordingly a high degree of liquidity.

The Group’s liquidity risk is overwhelmingly shortterm in nature and arises from the settlement oftrades within the stockbroking business.

The treasury function operates within strict policiesand procedures approved by the Board, whichinclude strict controls on the use of financialinstruments in managing the Group’s risk. A policyof using a combination of high credit rated banks is used to deposit client money. This was done toguard against the risk of only using one bank.

The Group’s financial instruments compriseborrowings, cash and liquid resources, and variousitems including trade debtors and trade creditorsthat arise directly from its operations. We reviewthe credit quality of counterparties and we limitaggregate credit exposures accordingly.

The majority of the short term creditors arise fromsettlement of clients’ trading activities, and it is thepolicy to pay stockbroking creditors on settlementday or when the stock is delivered, whichever islater. The policy is also to pay suppliers inaccordance with their payment terms.

Business riskThis is defined (in a narrow sense) as the risk that income falls or is volatile relative to the costbase of the Group. It is also defined in a broadersense as exposure to macro economic, geopolitical,industrial, regulatory and other external risks.Regulatory risk is assessed separately below.

Risk is assessed by use of stress and scenariotesting performed by the finance department. The risks are set in the framework of the risk matrixand any capital is allocated on a judgemental basisaccordingly.

The Group operates in a highly competitive marketwith significant product innovations. It is subject tothe threat of competitors launching new products inour markets; however it continues to be responsiveto market demand.

Within a wider context, it is assumed that the Groupcontinues to operate primarily within the UK retailstockbroking market and that its attitude to riskmitigation will enable it to continue trading during a recession.

Regulatory riskThe Group operates in a heavily regulated financialservices sector. The Group monitors developmentsin regulation, assesses the impact on the business,and implements any changes that will be necessary to meet these requirements.

The Group’s current level of capital remains well inexcess of our regulatory requirements. We play anactive role in industry groups which are closelyinvolved in preparing for the Basel II requirements.The Group is not aware of any planned significantregulatory changes (as with MiFID and the CRDduring 2006-2008) although it continues to monitorFSA announcements and works closely withrelevant trade bodies such as APCIMS.

Reputational riskThe Group has built a reputation as a high qualityprovider of investment management and clientservices. This has been carefully developed overmany years and there is a risk that reputationaldamage could lead to a loss of our existing clientbase, which could possibly lead to financial loss.

This risk is monitored and managed by ouremphasis on compliance with all aspects of relevantregulation including those of the Financial ServicesAuthority.



17

RELATIONSHIPSRegulatorsThe Group’s investment activities are authorised and regulated by the Financial Services Authority.The Group has a forward looking agenda withregard to the requirements that that we will need to implement for future changes.

ClientsWe seek to set a high standard of service to ourclients. We have conducted an extensive survey to ensure that we provide the type and level ofservice that our clients appreciate, and believe that this has chimed well with the FSA’s majorinitiative to promote “Treating the Customer Fairly”,to which we are strongly committed. We are one of the founding signatories of the seven ethicalprinciples propounded by the Securities andInvestment Institute, and we seek at all times tooffer our service in an ethical and professionalmanner.

Suppliers, contractors and creditorsWe maintain professional relationships with oursuppliers and ensure that payments are madeaccording to the terms of the contract.

StaffThe Group’s relationship with its staff is set out inmore detail in our corporate social responsibilityreport on pages 18 to 21.

Peter HurstFinance Director

11 June 2009

CORPORATE SOCIAL RESPONSIBILITY REPORT


18

This is the third corporate social responsibility(“CSR”) report for the Group. The implementationand management of the CSR policy is recognisedas a Group-wide responsibility and the progressmade over the last 12 months is evidence of theongoing commitment to CSR at all levels of thebusiness.

As a financial services organisation, our primaryresponsibility is to maximise investment returns to our clients in accordance with our contractualrelationships. However, we continue to recognisethe non-financial considerations that must betaken into account in the running of our business.For this reason, the Board and senior managerswithin the Group are committed to ensuring theGroup interacts responsibly with its employees,clients, shareholders and the wider environment.

Each year we aim to develop our CSR policy and practices in our four key areas: businessintegrity; our people; the environment; and, the community. The CSR committee meets on a quarterly basis to review progress in each of these areas.

BUSINESS INTEGRITYCorporate governanceWe follow the corporate governance guidelinescontained in the Combined Code on CorporateGovernance issued by the Financial ReportingCouncil and annexed to the Listing Rules of the UK Listing Authority.

We ensure that the Group companies comply withthe Combined Code or, where they have not doneso, explain why this is the case. We compete fairlyin the markets in which we operate and believe inthe concept of business transparency and ethicalbehaviour.

Client careWe are committed to the highest standard ofclient care and support the FSA’s TreatingCustomers Fairly regulatory framework. We work with our clients to ensure ourrelationships deliver investment performance,protection from inappropriate risk andcommunications that are clear, fair and notmisleading. In 2008 Charles Stanley was voted to be Best Discretionary Broker by Shares Magazine and this serves as evidence ofour dedication and success to client care.

DisclosureAll Charles Stanley staff are expected to conductbusiness in such a way so as to enhance theGroup’s reputation and to safeguard against unfairor unethical business practices. Our disclosurepolicy (concerning instances of whistleblowing) is monitored and enforced where necessary. Fraud and other corrupt practices are recognisedas bad for business and for stakeholders and wetake strict measures to prevent such practices.

All business is conducted in accordance with thelaws and regulations of the United Kingdom andthe directives of the European Union.

PEOPLEThe Group acknowledges that the reputation and success of Charles Stanley is due to theservice provided to clients by highly qualified and committed staff. Our staff are one of the key assets of the organisation and it is our policy to attract and retain the best people.

Employee involvementCharles Stanley understands the importance of providing its staff systematically withinformation on matters of concern to them and, where appropriate, consulting with them so their views can be taken into account whenmaking decisions that are likely to affect theirinterests. In addition to the usual informalstructures, there are a number of regular forumswhere staff and senior management meet, alongwith a formal appraisal system that operates toprovide all staff an opportunity to formally meetwith their line manager.

To enable staff to become involved in the financialperformance of the Group, participation in theCharles Stanley Save As You Earn Scheme and/orthe Share Incentive Plan (SIP) is encouraged.These schemes are open to all employees (with the exception of Sir David Howard) and the level of take up for both schemes is high. SIP membership for 2009 was 28% (2008: 29%).


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TrainingThe Group continues to meet its businessobjectives by having a highly trained andprofessional workforce. We have a dedicatedlearning and development adviser who ensuresthat our training policy, designed to invest in staff,provide for career development and allow forsuccession planning, is enforced. Staff arerequired to gain appropriate professionalqualifications for their roles and to undertakesufficient, relevant continuing professionaldevelopment to ensure their skills are up to date.Further, our interactive training portal providesgreater access to materials and enables staff to logand monitor their own achievements and learning.

BenefitsFurther benefits for our employees includeinterest-free season ticket loans, above averagecontributions to pensions, private medicalinsurance that extends to direct family membersof employees, permanent health insurance anddeath in service benefits.

To ensure the health and wellbeing of ourworkforce we also provide subsidised gymmembership in London and a Ride 2 Work Schemethat allows employees to purchase bicycles atreduced cost for the purpose of commuting. We also provide access to dedicated medicalfacilities in the London offices including annualhealth screening.

Disabled employeesApplications for employment made by disabledpersons are given full and fair consideration,having regard to the particular aptitudes andabilities of the applicant. In the event ofemployees becoming disabled, the Group makesevery effort to ensure the individuals’ continuingemployment within the Group through theprovision of suitable equipment and arrangingappropriate training as necessary. The Groupensures that, so far as is possible, the training,career development and promotion of disabledemployees is identical to that of other staffmembers.

Health and safetyThe Group is committed to ensuring a workingenvironment that meets and exceeds the requiredhealth and safety standards.

Over the past year the Group has engaged the services of an external health and safetyconsultancy company to review our currentarrangements and, where necessary, assist inimproving our policies and processes.

EthosCharles Stanley believes in supporting thework/life balance of all of our employees. We do not expect our employees to workexcessive or unnecessary hours and we providechildcare vouchers to support those employeeswith young children.

In addition to the above we also have policies inplace to ensure that all employees can expect aworking environment free from discrimination andharassment. We believe in informing and involvingemployees, and our retention rates are evidence of the loyalty of our employees. Staff losses were8% for 2009 (2008: 11%) with gains of 15% (2008: 18%). Our turnover rate of 8% in 2009 is significantly less than the average figure of 17%released by the CIPD (Source: CIPD AnnualSurvey Report June 2008).

COMMUNITYThe Group continues to foster strong relationshipswith the communities in which we are based andwe have links with local businesses, primaryschools and charities. We are a socially responsibleemployer and aim to make a positive contributionboth locally and internationally.


20


SchoolsOne of our stronger community links is withLawdale Primary School and is coordinated by theTower Hamlets Business Education Partnership. A group of London based employees volunteer tovisit the school on a weekly basis to assist thechildren with their reading. Charles Stanley alsohas fundraising activities for Lawdale School withthe proceeds raised being used to arrangeextracurricular activities for the children.

CharitiesHeadway: The Brain Injury Association waschosen by a vote of all staff to be the annualcharity of Charles Stanley for 2009 and thefundraising activities included quiz and gamesnights, book and cake sales, and a number of stafftook part in a sponsored bike ride from London toParis. £12,500 was raised by staff during the yearand matched by the Group. The annual charity for 2010 chosen by popular vote is LeukaemiaResearch: The Riley Cameron Forget-Me-NotFund.

In addition to our Charity of the Year weundertake a number of other charitable activities,including the donation of redundant computers to the Katete Boarding School in Zambia.

BusinessCharles Stanley also has strong links with otherCity firms that are established either through work or, more often than not, through sport. The Group frequently sponsors sporting eventsranging from golf to rugby and racing at Sandown.Our employees also participate in inter-firmcompetitions including 5 a-side footballtournaments, cricket and the Stock ExchangeSailing Club.

ENVIRONMENTThe Group continues to recognise its impact onthe environment and takes steps to minimise it.Although our activities have only a comparativelysmall impact, Charles Stanley is aware thatenvironmental risks and uncertainties impact to some extent on all companies.

InitiativeOver the past year refurbishment has taken placeat a number of our offices and measures havebeen introduced wherever possible to increaseenergy efficiency and reduce energy consumption.Within our London offices the average electricityconsumption per head during 2009 was 146kWhper month (2008: 155kWh) and the average gasconsumption per head during 2009 was 15kWhper month (2008: 18kWh).

We have also developed a number of initiatives to save costs and increase efficiency through

A greeting card sent to the Company from the childrensponsored in Sri Lanka.

Charles Stanley sponsors a variety of events includinghorse racing at Sandown.

Mark Quilter, the sponsor for Headway, handing over a cheque for £25,000 following a year of fundraising.


21

reducing and managing resource use, for example we source re-use programmes for surplus equipment and we review our supplypartners to ensure their policies are in line withours. We currently use paper from sustainablesources for our main marketing and other publicly available documentation, and we aim to procure a greater proportion of recycled paper for photocopying and printing purposes in the future.

CommitmentFollowing a change in supplier for our recyclingservices in March 2008, the amount of recycling is no longer measured by weight but by volume.During the period March 2008 to March 2009,7,965 sacks of paper were recycled. This is the equivalent of 17 trees and has resulted in a donation of in excess of £2,000 to The Castle Howard Arboretum Trust on behalf of Charles Stanley. We recognise that the business saves costs and increases efficiencythrough reducing and managing resource use.

We run a Ride 2 Work Scheme on an annual basisand this not only promotes a healthier lifestyle forour employees but also reduces the environmentalimpact of the journey to work for those employeeswho take part in the scheme. There were 12 newentrants to the Ride 2 Work Scheme in 2009(2008: 12).

InvestmentFinally, whilst the overall investment policy of theGroup is concerned solely with obtaining the bestreturn for clients, we also endeavour to constructportfolios which take into account the personalpreferences of our clients in relation toenvironmental and ethical matters.



22

Charles Stanley Group PLC was incorporated on 16 July 1896. The business had been established on 2 January 1792 and Charles Stanley was firstrecorded as a member of the London StockExchange in 1852.

DIRECTORSSir David Howard Bt. MA, DSc, FSI (Hon)Chairman and Managing DirectorSir David is 63. He joined Charles Stanley in 1967.He became Managing Partner in 1971, ManagingDirector (on incorporation of the partnership) in 1988, and Chairman in 1999. He was LordMayor of London in 2000-2001. He has served on Stock Exchange, CREST and LIFFE committeesand as a director of the Financial Services SkillsCouncil and as Chairman of the Council of City University, is an alternate member of theTakeover Panel and serves on the CRESTSettlements Appeals Panel. He is a Director of APCIMS (the private client stockbrokers’ tradeassociation) and the Securities and InvestmentInstitute and chairs the IFSL Education, Trainingand Qualifications Group and the Securities andInvestment Institute Examinations Board and is President of the Chartered ManagementInstitute.

Peter A Hurst FCA, ACIB, MSIFinance DirectorPeter Hurst is 60 and joined Charles Stanley in1987. His main areas of responsibility are finance,information technology, premises, branches,health and safety and ecommerce. He is a member of the compliance and risk monitoringand corporate finance approvals committees. Prior to joining Charles Stanley he had worked in banking for ten years having previously been in audit practice.

E Michael Clark FSIMichael Clark is 62 and became a member of the Stock Exchange in 1970. He joined Charles Stanley & Co in 1976, became a partner in 1982 and a Director (on incorporationof the partnership) in 1988. He is responsible for London private client brokers, dealing andresearch.

Michael R I Lilwall BSc, FSI (Dip)Michael Lilwall is 51 and joined Charles Stanley as a Director in 1997. He is responsible for Charles Stanley Securities and the Financial Services division and takes an active role in business development for the Group. Previously he was Chief Executive of Shaw & Co.Limited, whose business was acquired by CharlesStanley in 1997. Prior to that he was a Director of Seymour Pierce Butterfield and Brewin Dolphin& Co. Limited.

DIRECTORS AND COMPANY INFORMATION


23

SecretaryGary Teper LLB (Hons), MSc, MSI

Company registration number48796 (England and Wales)

Registered office25 Luke Street, London, EC2A 4AR

Websiteswww.charlesstanleyplc.co.uk - Investor relations

www.charles-stanley.co.uk- Corporate

www.fastrade.co.uk- Internet trading

www.csysecurities.co.uk- Institutional salesand corporate broking

www.ebsmanagement.co.uk- SIPP and SSAS consultancyand SIPP administration

www.garrison.co.ukwww.fundchoice.co.uk- Funds supermarket

www.griffithsandarmour.com- Corporate benefits and employee wealthmanagement services

RegistrarsCapita Registrars PlcNorthern House, Woodsome Park, Fenay Bridge,Huddersfield HD8 0LA

Principal bankersBank of ScotlandNew Uberior House, 11 Earl Grey Street,Edinburgh EH3 9BN

AuditorsSaffery ChampnessChartered AccountantsLion House, Red Lion Street,London, WC1R 4GB

BrokersCanaccord AdamsCardinal Place, 7th Floor,80 Victoria Street,London, SW1E 5JL

Oriel Securities Ltd125 Wood Street,London, EC2V 7AN

DIRECTORS AND COMPANY INFORMATION


24

The Directors submit their report and financialstatements for the year ended 31 March 2009.

PRINCIPAL ACTIVITIES AND BUSINESS REVIEWThe Company and its Group undertakings operateas investment companies and providestockbroking, corporate finance, investmentservices and pensions administration.

A review of the business is set out on pages 6 to 17.

DIVIDENDSThe Directors have declared and now recommendthe following dividends in respect of the yearended 31 March 2009:

2009 2008£ £

Interim dividend paid on23 December 2008 of 2.10p (2008: 2.10p) 926,997 893,860Final dividend proposed of 6.65p (2008: 6.50p) 2,935,491 2,867,652

3,862,488 3,761,512

The final dividend will be paid on 4 August 2009to shareholders on the Company’s register at closeof business on 19 June 2009.

CHANGE OF CONTROLThe Company does not have agreements with any Director or Officer that would providecompensation for loss of office or employmentresulting from a change of control following atakeover bid, except that the provisions of theCompany’s share plans may cause options andawards granted under such schemes to vest on a takeover.

All of the Company’s share schemes containprovisions relating to a change of control.Outstanding options and awards would normallyvest and become exercisable for a limited periodof time upon change of control following atakeover, reconstruction or winding up of theCompany (not being an internal organisation),subject at that time to rules concerning thesatisfaction of any conditions.

SHARE CAPITALAs at 31 March 2009, 44,142,718 fully paidordinary shares of 25 pence were in issue andlisted on the London Stock Exchange. The rightsand obligations attaching to the Company’sordinary shares, as well as the powers of theCompany’s directors, are set out in the Company’sArticles of Association, copies of which can beobtained from Companies House or by writing tothe Company Secretary. There are no restrictionson the voting rights attaching to the Company’sordinary shares or on the transfer of securities inthe Company. No person holds securities in theCompany carrying special rights with regard tocontrol of the Company. The Company is notaware of any agreements between holders ofsecurities that may result in restrictions on the transfer of securities or on voting rights. The Company’s Article of Association may beamended by a special resolution of the Company’sshareholders.

During the year ended 31 March 2009, optionswere exercised pursuant to the Company’s shareoption schemes, resulting in the allotment of25,000 new ordinary shares. Details of sharesissued during the year are set out in note 21 on page 58 of the financial statements.

The Directors propose (Resolution 7 in the Notice of Meeting) to renew the authority grantedto them at the Annual General Meeting held in2008 to allot equity securities up to an aggregatenominal value of £3,680,000 (the ‘section 80authority’). If approved at the forthcoming Annual General Meeting, the authority will expireno later than 15 months from the date on whichthe resolution is passed, or at the conclusion ofthe Annual General Meeting to be held in 2010,whichever is the sooner.

The limited power granted to the Directors at last year’s Annual General Meeting to allot equityshares for cash other than pro rata to existingshareholders expires no later than 30 October2009. Subject to the terms of the section 80authority, the Directors recommend (Resolution 8in the Notice of Meeting) that this authorityshould be renewed so as to give them the ability,until the Annual General Meeting to be held in2010, to issue ordinary shares for cash, other thanpro rata to existing shareholders, in connectionwith a rights issue or up to a limit of 5 per cent of the ordinary share capital issued at the date ofthis report. The Directors recommend that youvote in favour of Resolutions 7 and 8 to maintainthe Company’s flexibility in relation to futureshare issues.

REPORT OF THE DIRECTORS


25

A Special Resolution will also be proposed(Resolution 9 in the Notice of Meeting) to renewthe Directors’ limited authority last granted in2008 to repurchase the Company’s ordinary sharesin the market. The authority will be limited to a maximum of 4,414,000 ordinary shares (being 10 per cent of the Company’s issued share capital at the date of this report) and also sets the minimum and maximum prices which may be paid. The authority will enable the Directors to respond promptly should circumstances arise in which they consider such a purchase wouldresult in an increase in earnings per share andwould be in the best interests of the Company.

DIRECTORSThe Directors named on page 75 servedthroughout the year. Their biographies are set out on page 22. Mr Michael Clark and Mr Michael R I Lilwall retire by rotation at the Annual General Meeting and, being eligible,offer themselves for re-election by the members.

Directors’ interests in the shares of Charles Stanley Group PLC are disclosed in the Directors’ remuneration report on page 29.

At 31 March 2009, the Directors had the authorityto purchase 4,411,000 of ordinary shares in thecapital of the Company. This authority was notexercised during the year. The Directors confirmthat there are procedures in place to deal withdirectors’ conflicts and they have operatedeffectively.

TAXATION STATUSAs far as the Directors are aware, the Company is not a close company for taxation purposes.

PAYMENTS TO CREDITORSIt is the Group’s policy to pay stockbrokingcreditors on settlement day or when stock hasbeen delivered, whichever is later, and to paysuppliers in accordance with their payment terms.Amounts due to suppliers at the balance sheetdate represent approximately 28 days’ credit based on the total amounts of goods and services invoiced by them during the year.

CHARITABLE AND POLITICAL DONATIONSCharitable donations during the year amounted to£7,198.

No political donations were made during the year.

SUBSTANTIAL SHARE INTERESTSThe Directors are aware of substantial interests in the shares of Charles Stanley Group PLC asoutlined below:

No. of shares11.6.09 31.3.09

John L S Howard 5,153,192 5,159,192Schroders PLC and its associated companies 2,821,794 2,821,794

Lady Valerie Howard 2,500,000 2,500,000Queen Street Securities Limited (a company ofwhich Sir David Howard is a director) 1,940,000 1,940,000

Aberforth Partners 3,042,920 2,998,220Legal and General 1,483,076 1,567,544Aberdeen Asset Managers 1,786,500 1,783,500Mrs Caroline P S Dore 1,330,000 1,386,000

ESSENTIAL BUSINESS CONTRACTSThere are no persons with whom the Group hascontractual or other arrangements that areconsidered essential to the business of the Group.

AUDITORSThe Company’s auditors, Saffery Champness, arewilling to continue in office, and a resolutionproposing their re-appointment and authorisingthe Directors to determine their remuneration will be put to the Annual General Meeting.

In accordance with Section 234ZA Companies Act1985, the Directors confirm that, in the case ofeach of the persons who are Directors at the time when this report is approved, as far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware ofany relevant audit information and to establishthat the Company’s auditors are aware of that information.

By Order of the BoardGary Teper Secretary

11 June 2009

REPORT OF THE DIRECTORS


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The Company is required by the Companies Act1985 to prepare a Directors’ remuneration reportfor the year ended 31 March 2009 and to put thatreport to a shareholder vote. A resolution toapprove this report will be proposed at the Annual General Meeting of the Company to be held on 28 July 2009.

The auditors are required to report on theauditable part of the Directors’ remunerationreport and to state whether, in their opinion, that part of the report has been properly preparedin accordance with the Companies Act 1985. The report has, therefore, been divided intoseparate sections for unaudited and auditedinformation.

UNAUDITED INFORMATIONDirectors’ remunerationThe pay and benefits for executive Directors are determined by Sir David Howard, Mr E Michael Clark, Mr Peter A Hurst and Mr Michael R I Lilwall, taking into accountindividual performance and market conditions.

The basic salaries of the Directors are reviewedannually and when a change of responsibilityoccurs.

Directors (excluding Sir David Howard) areentitled to participate in the profit related pay and Save As You Earn schemes which are open to all employees after a certain period ofemployment with the Company. The Directors(excluding Sir David Howard) participate in the Charles Stanley Share Incentive Plan.

In addition, Directors are entitled to certain otherbenefits such as vehicles, telephones and privatehealth insurance consistent with the industrynorm.

Details of entitlements to share options andpension arrangements are disclosed below.

Policy on Directors’ remunerationIt is the policy of the Board that the Directors areremunerated in a broadly similar fashion to Groupemployees generally; that is to say remunerationconsists predominantly of fixed salaries which arereviewed annually by the Board, with the additionof occasional non-contractual bonuses which are not formula-based but which broadly reflectindividual performance and the profitability of the Group.

In fixing the remuneration packages for currentand future financial years the Directors have thefollowing in mind:

■ The need to attract, retain and motivate Directors of the quality required;

■ What comparable companies are paying, taking into account relative performance; and

■ Pay and employment conditions elsewhere in the Group.

The Board has given full consideration toSchedule A of the Combined Code on Directors’remuneration in framing its remuneration policy.

In addition to basic salary, the Directors receiveother benefits, some of which are performancerelated. Those that are related to performance arethe occasional non-formula-linked discretionarybonuses paid to Directors. Those that are notrelated to performance are entitlements toexercise any options granted under the CharlesStanley Save As You Earn Scheme, healthinsurance, vehicle running costs, telephoneexpenses and pension entitlements. It is theBoard’s view that those elements of remunerationand benefits that are profit related are in the caseof each of the Directors sufficiently important toincentivise the Director concerned to improve theperformance of the Group.

PensionsThree of the Directors are members of the Group’s defined benefit pension scheme which has a normal retirement age of 65. Each Directoris entitled to a pension equal to 1/60th of finalsalary for each year of pensionable service up to a maximum of 40/60ths.

In the event of death in service, a lump sumbenefit equal to four times the Director’s basicannual salary at the date of death is payable.

The pension arrangements for the Directorsensure that benefits provided are consistent withthose provided by other companies in the marketplace. The expected cost of providing retirementbenefits to the Directors is assessed in accordancewith the advice of independent qualified actuaries.

One Director has a money purchase scheme.Contributions to this scheme may be taken assalary at the option of the Director.

DIRECTORS’ REMUNERATION REPORT


27

Share optionsThe Company currently does not operateExecutive Option Schemes or Long-TermIncentive Plans. All option schemes currently in operation are open to all employees andDirectors, except Sir David Howard, once theyhave met the necessary service requirements.Charles Stanley currently operates one Save AsYou Earn Scheme (2008). Options were offered at a discount of 10% to the average of the mid-market closing price for the three days priorto the offer and are exercisable for a period of six months commencing three years after thesaving contract commencement date. In commonwith similar schemes, the exercise of optionsunder this scheme is not subject to anyperformance conditions.

Directors’ contractsEach of the Directors has a service contractexcept for Sir David Howard who has no service contract. No Director has a service contract for aduration of more than one year’s duration except Mr Peter A Hurst who has a service contractwhich provides for one year’s notice to be given in October of any year. This contract has been inplace since 1987 and the Directors wish to leavethis unchanged. They take the view that it wouldbe disadvantageous to shareholders to negotiate a shorter notice period.

Performance graphsThe following graphs show the Company’s shareprice performance (measured in pence) over thelast five years and ten years compared with the performance of the FTSE Small Cap Index.This index has been selected as being appropriatein giving a broad equity view and the Company isa constituent of the index.


2004100

150

200

250

300

350

400

450

2005 2006 2007 2008 2009

CHARLES STANLEY GROUP – TOT RETURN IND FTSE ALL SMALL EX INV. TRUSTS – TOT RETURN IND

19990

2000

100

200

300

400

500

600

700

800

900

1000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Pen

ceP

ence


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AUDITED INFORMATION

Benefits Total TotalFees Salary Bonus in kind 2009 2008

£ £ £ £ £ £EmolumentsSir David Howard

(Chairman and Managing Director) 5,250 278,000 78,400 29,161 390,811 439,757

Peter A Hurst(Finance Director) — 250,000 78,400 16,583 344,983 391,498E Michael Clark — 276,000 78,400 16,196 370,596 417,660Michael R I Lilwall — 310,000 78,400 10,927 399,327 447,084

5,250 1,114,000 313,600 72,867 1,505,717 1,695,999

2008 5,250 1,097,000 521,600 72,149 1,695,999

Employee savings related share option schemesAt 31 March 2008 and 31 March 2009

Exercise NumberPeriod of option price granted

Peter A Hurst February 2008 to February 2011 248p 1,887E Michael Clark February 2008 to February 2011 248p 1,887Michael R I Lilwall February 2008 to February 2011 248p 1,887

5,661

The market price of the ordinary shares at 31 March 2009 was 161p (2008: 220p) and the range during theyear was 153p to 243p (2008: 190p to 384p).

Pension schemesRetirement benefits were accruing to three Directors under a defined benefit scheme and one Directorunder a money purchase scheme. During the year no contributions were made to the money purchasescheme.

Increase Transfer Transfer Increase/in accrued value of value of (decrease)pension Transfer Accrued Accrued accrued accrued in value of

excluding value of pension pension pension pension Directors’inflation increase 2009 2008 2009 2008 benefits

£ £ £ £ £ £ £

Sir David Howard 2,800 39,643 97,300 90,000 1,457,650 1,443,398 14,252E Michael Clark 2,341 31,034 119,982 112,039 1,705,293 1,684,090 21,203Peter A Hurst 2,766 33,251 89,583 82,683 1,184,851 1,131,395 53,456



29

Directors’ interests in ordinary sharesThe interests of the Directors and of their connected persons in the share capital of the Group Companieswere:

Beneficially Held Otherwise held11.6.09 31.3.09 1.4.08 11.6.09 31.3.09 1.4.08

Charles Stanley Group PLC

Sir David Howard 12,440,000 12,237,038 13,615,058 215,000 887,000 887,000

Peter A Hurst 167,681 167,551 166,672 215,000 215,000 215,000

E Michael Clark 746,070 745,940 754,950 — — —

Michael R I Lilwall 73,070 72,940 72,061 — — —

Gryphon Investments PLC

Sir David Howard 15,000 15,000 15,000 — — —

Related party transactionsThe Directors undertake transactions in stocks and shares in the ordinary course of the Group’s businessfor their own accounts. No amounts were owed by the Directors to the Group as at 31 March 2009. There were no material contracts between the Group and Directors.

APPROVALThis report was approved by the board of Directors and signed on its behalf by

Gary TeperSecretary

11 June 2009



30

The benefits of good corporate governancecontinue to be recognised by Charles Stanley. The Directors remain committed to maintainingcorporate governance standards and achieve this by compliance, wherever possible, with the best practice provisions of the FinancialReporting Council’s Combined Code on Corporate Governance (the “Combined Code”) published in June 2006 which can be accessed at(www.frc.org.uk/corporate/combinedcode.cfm).

The Combined Code governs the relationshipbetween the constituent parts of the Company,namely the board and its committees; relations with shareholders; and, accountabilityand audit. The current position of the Group ineach of these areas is explained in the paragraphsbelow, together with the report of the Directorsand the Directors’ remuneration report on pages26 to 29, describing how the principles are appliedwithin the Group.

The Directors are aware of their responsibilities as a listed company under the Combined Codeand where the principles of the Code have beenapplied, will either confirm that the provisions of the Code have been complied with or, where it is felt that departure from the provisions isappropriate, an explanation will be provided. The Company will continue to consider and,where necessary, respond to corporate governance developments.

The Directors believe that the most importantfactor for a company is the protection of themembers’ interests and they maintain that thecurrent management structure does provide the best approach for running Charles StanleyGroup PLC.

STATEMENT OF DIRECTORS’ RESPONSIBILITIESThe following statement is made for the purposes of clarifying for members the collectiveresponsibilities of the Directors in the preparationof the financial statements.

Company law requires the Directors to preparefinancial statements for each financial year whichgive a true and fair view of the state of the affairsof the Company and the Group at the end of thefinancial year and of the Group’s profit or loss forthe financial year. In preparing these financialstatements the Directors are required to use theappropriate accounting policies, consistentlyapplied and supported by reasonable and prudent

judgements and estimates, and confirm that allapplicable accounting standards have beenfollowed. The Directors are required to preparethe financial statements on a going concern basisunless it is inappropriate to presume that theGroup will continue in business.

The Directors are responsible for keeping proper accounting records which disclose, withreasonable accuracy at any time, the financialposition of the Group and enable them to ensurethat the financial statements comply with theCompanies Acts 1985. They are also responsiblefor safeguarding the assets of the Group andhence for taking reasonable steps for theprevention and detection of fraud and otherirregularities.

THE BOARD AND ITS COMMITTEESThe boardThe Group continues to use a managementstructure typical of a professional firm andoperates a two-tier board structure comprising the board of the parent company Charles StanleyGroup PLC (“the Company Board”), and the boardof its primary operating subsidiary, Charles Stanley & Co. Limited. Collectively these boards are known as the “Combined Board”.

The Company Board comprises four executiveDirectors, and a short biography of each can befound on page 22. The Company currently has no non-executive Directors (Combined CodeA.3.1, A.3.2, A.3.3 and A.6.1) and whilst theCompany recognises that non-executive Directorscan add value, it is felt that the currentcomposition of the Company Board enables it tooperate flexibly. This dynamic approach is deemedto be the most appropriate for the business andwe believe it promotes the interests of theshareholders as a whole.

The four Directors of the Company also serve on the Combined Board, together with eightfurther executive Directors. This structure isdesigned so that responsibilities are correctlyallocated between strategic and operationalmatters and provides a diversity of skills andopinions which ensures decisions areconstructively challenged and proposals areeffectively developed. Charles Stanley & Co.Limited is regulated by the Financial ServicesAuthority and accordingly is responsible in its own right for meeting regulatory requirements.

CORPORATE GOVERNANCE


31

The Company Board is headed by a combinedChairman and Chief Executive. Although this is not recommended practice as set out inCombined Code A.2, the balance of power is akin to that of a partnership with no oneindividual exercising unfettered decision makingpowers. The current management structureprovides stability for the Company and ensuresdecisions are made promptly and in accordancewith the best interests of the Company.

A formal schedule of matters is reserved to the Company Board which includes setting the strategic direction of the Group, reviewingoperational and financial performance andensuring there is a reasonable discourse withshareholders. Operational matters such asensuring the Group complies with its legal and regulatory obligations and ensuring theintegrity of the Company’s internal control andmanagement systems are usually handled by the Combined Board.

The Combined Board is assisted by the CompanySecretary who is responsible for ensuringcompliance in relation to legal practices andcorporate governance, together with the flow of good information within the Combined Boardand its committees. All Directors have access tothe advice and services of the Company Secretary,whose appointment and removal is a matter forthe Company Board.

The Articles of Association require one third of the Company’s Directors to retire by rotationeach year. It is the policy of the Company that no Director should serve for more than threeyears without seeking re-election.

One of the overall objectives of the Group is to maintain and enhance professional standards as required by the Financial Services AuthorityTraining and Competence rules. Directors andstaff are required to carry out continuousprofessional development throughout the year to ensure our staff meet the high professionalstandards expected by the Group.

Board meetingsThe Combined Board meets each month(excluding August) with ad hoc meetings alsoheld when required. In respect of certain businessreserved to the Company Board the four Directorsof the Company meet on the same date.

There were 13 Combined Board meetings during the year and attendance was as follows: David Howard 13; Peter Hurst 13; Michael Clark 12; Michael Lilwall 12.

All Directors receive appropriate and timelyinformation to enable them to discharge theirduties, and briefing papers are distributed to allDirectors in advance. Presentations are made tothe Combined Board by senior executives orexternal advisers as appropriate.

The Combined Board recognises and adopts theduties of directors as codified by the CompaniesAct 2006 and ensures they are taken into accountfor every matter under consideration.

Board committeesThe Company Board has established an auditcommittee with the role and responsibilitiesdescribed in the Combined Code C.3.2.Membership of the committee comprises Gordon Montgomery FCA (independent non-executive chairman), Michael Clark, Michael Lilwall and Gary Teper. There are no independent non-executive Directors on the committee. The committee is satisfied that Gordon Montgomery has recent and relevant financial experience as required byCombined Code C.3.1. The committee meets on a quarterly basis. On invitation, seniormanagement and external auditors attend the meetings to assist the committee in fulfilling its duties.

The committee is responsible for monitoring and reviewing the effectiveness of the Group’sinternal audit function and considering reportsfrom internal audit on internal controls and riskmanagement. It is also responsible for ensuring an objective and professional relationship ismaintained with the Group’s external auditors.



32

The role of the audit committee includesreviewing the independence and the nature of non-audit services supplied and non-audit feelevels relative to the audit fee. The committee is satisfied that the independence of the auditorshas not been impaired by providing these services.Details of the auditors’ fees are shown in note 4 onpage 47.

There were four meetings during the year andeach meeting was fully attended.

The Company does not have a formalremuneration committee (B.2) or a formalnomination committee (A.4). Decisions onremuneration and appointments to the Board are made by the Company Board.

SHAREHOLDER RELATIONSThe Directors communicate regularly with theCompany’s institutional shareholders. Allregulatory news announcements, press releases and financial reports are available on the Company’s website(www.charlesstanleyplc.co.uk).

All shareholders have the opportunity to meetDirectors at the Annual General Meeting. The Company Board welcomes questions andcomments from shareholders during and at theend of the meeting. Votes are taken on a show of hands unless a poll is requested, and full detailsof proxy voting figures are disclosed after the vote and on the website. In its annual and interim reports, results presentations and City announcements generally, the Companyendeavours to present an accurate, objective and balanced picture in a style and format whichis appropriate for the intended audience.

RISK MANAGEMENT AND INTERNAL CONTROLThe Company Board has overall responsibility for the Group’s system of internal controls, the objectives of which are the safeguarding of the Group’s assets, the maintenance of properaccounting records, and the availability of reliablefinancial information for use within the businessand for publication. This system of internalcontrols is also designed to provide reasonable,albeit not absolute, assurance against materialmisstatement and to prevent and detect fraud and other irregularities.

The Combined Board regularly reviews theeffectiveness of the Group’s internal controlsystem. There is an ongoing process foridentifying, evaluating and managing significantrisks which was in place throughout the year. This process meets the Turnbull Guidance.

The Group’s system of internal control includesappropriate levels of authorisation and segregationof duties. Financial reports are presented to theCombined Board monthly detailing the results,variances against forecast and other performancedata.

The Group has an internal audit department andan audit plan. The results of these audits arereported to the audit committee at the quarterlymeetings. The suitability and effectiveness of theGroup’s internal controls and risk management arediscussed, together with the ongoing monitoringof compliance, financial and operational controlsand risk management. This information is reportedto the Combined Board which is able to conclude,with reasonable assurance, that the appropriateinternal control systems have been maintainedthroughout the year.



33

INSURANCEThe Company maintains appropriate insurancecover in respect of litigation against the Directorsand Officers of the Company.

GOING CONCERNThe Directors have satisfied themselves that the Company and the Group have adequateresources to continue in business for theforeseeable future and that it is thereforeappropriate for the financial statements for the year ended 31 March 2009 to have beenprepared on a going concern basis.

COMPLIANCE WITH THE COMBINED CODEIn relation to the Combined Code it is confirmedthat:

■ The Group is headed by a combined Chairman and Chief Executive Officer (A.2). It is felt that this dual role provides stability whilst the partnership-style of decision making ensures that no one individual has unfettered decision making powers.

■ The Company does not have any non-executive Directors on the Board (A.3) as it believes the current two-tier structure of the Group Board works effectively to best promote the interests of the shareholders as a whole.

■ The Company has no nomination committee (A.4) as there are no non-executive Directors.

■ The board and its committees do not undergo annual evaluations of their performance (A.6), instead performance is assessed on a continuous basis.

■ Performance-related elements do not form a significant proportion of the total remuneration package of executive Directors (B.1). However, the Company gives full consideration to Schedule A of the Combined Code when forming its remuneration policy.

■ The Company does not have a formal remuneration committee (B.2) but the emoluments of Directors are the subject of appraisal by the Chairman and the Directors and take into account individual performance and market conditions.

■ Whilst the Company has established an audit committee with the roles and responsibilities described in Combined Code C.3.2 which is chaired by an independent, non-executive Chairman, and includes members with recent and relevant financial experience as described in Combined Code C.3.1, the committee comprises mainly executive Directors (with the exception of the committee Chairman) and has no independent non-executive Directors as members, as prescribed by the Combined Code C.3.1. In all other respects it does however perform the functions of an audit committee as set out in the Combined Code.



34

We have audited the financial statements ofCharles Stanley Group PLC for the year ended 31 March 2009 which comprise the consolidatedincome statement, the consolidated and Companybalance sheet, the consolidated statement ofrecognised income and expense, the consolidatedand Company cash flow statement and relatednotes. These financial statements have beenprepared under the accounting policies set outtherein. We have also audited the information in the Directors' remuneration report that isdescribed as having been audited.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORSThe Directors' responsibilities for preparing theAnnual Report, the Directors' remuneration reportand the financial statements in accordance withapplicable law and International FinancialReporting Standards (IFRSs) as adopted for use in the European Union are set out in theStatement of Directors' responsibilities.

Our responsibility is to audit the financialstatements and the part of the Directors'remuneration report to be audited in accordancewith relevant legal and regulatory requirements, and International Standards on Auditing (UK and Ireland).

This report is made solely to the Company'smembers, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors’ report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assume responsibility toanyone other than the Company and theCompany's members as a body, for our audit work, for this report, or for the opinions we have formed.

We report to you our opinion as to whether thefinancial statements give a true and fair view andwhether the financial statements and the part of the Directors' remuneration report to be auditedhave been properly prepared in accordance withthe Companies Act 1985 and Article 4 of the IASRegulation and whether in our opinion theinformation given in the Directors' report isconsistent with the financial statements.

The information given in the Directors' reportincludes the specific information presented in the operating and financial review that is crossreferenced from the business review section of the Directors' report. We also report to you if, in our opinion, the Company has not kept properaccounting records, if we have not received all theinformation and explanations we require for ouraudit, or if information specified by law regardingdirectors' remuneration and other transactions isnot disclosed.

We review whether the corporate governancestatement reflects the Company's compliance withthe nine provisions of the 2006 FRC CombinedCode specified for our review by the Listing Rulesof the Financial Services Authority, and we reportif it does not. We are not required to considerwhether the Board's statements on internalcontrol cover all risks and controls, or form an opinion on the effectiveness of the Group'scorporate governance procedures or its risk andcontrol procedures.

We read the other information contained in theAnnual Report which consists of the Chairman’sstatement, the operating and financial review, theDirectors’ report and the Directors’ remunerationreport and consider whether it is consistent withthe audited financial statements. We consider theimplications for our report if we become aware of any apparent misstatements or materialinconsistencies with the financial statements. Our responsibilities do not extend to any otherinformation.

INDEPENDENT AUDIT REPORT TO THE MEMBERS


35

BASIS OF AUDIT OPINIONWe conducted our audit in accordance withInternational Standards on Auditing (UK andIreland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts anddisclosures in the financial statements and the part of the Directors' remuneration report to be audited. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financialstatements, and of whether the accounting policiesare appropriate to the Group's and Company'scircumstances, consistently applied andadequately disclosed.

We planned and performed our audit so as toobtain all the information and explanations whichwe considered necessary in order to provide uswith sufficient evidence to give reasonableassurance that the financial statements and thepart of the Directors' remuneration report to beaudited are free from material misstatement,whether caused by fraud or other irregularity orerror. In forming our opinion we also evaluated the overall adequacy of the presentation ofinformation in the financial statements and thepart of the Directors' remuneration report to beaudited.

OPINIONIn our opinion:

■ The Group financial statements give a true and fair view, in accordance with IFRSs as adopted for use in the European Union, of the state of the Group's affairs as at 31 March 2009 and of its profit for the year then ended;

■ The parent Company financial statements give a true and fair view, in accordance with IFRSs as adopted for use in the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the Company's affairs as at 31 March 2009;

■ The financial statements and the part of the Directors' remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985 and, as regards the Group financial statements, Article 4 of the IAS Regulation; and

■ The information given in the Directors' report is consistent with the financial statements.

Saffery ChampnessChartered AccountantsRegistered AuditorsLondon

11 June 2009

INDEPENDENT AUDIT REPORT TO THE MEMBERS


36

Consolidated financial statements

Consolidated income statement 37

Statement of recognised income and expense 38

Consolidated balance sheet 39

Consolidated cash flow statement 40

Notes to the consolidated financial statements 41

Parent company financial statements

Parent company balance sheet 67

Parent company cash flow statement 68

Notes to the parent company financial statements 69

FINANCIAL STATEMENTSCONTENTS

2009 2008Notes £’000 £’000

Continuing operationsRevenue 2 101,765 105,564Administrative expenses (93,834) (95,225)

Operating profit 4 7,931 10,339

Interest receivable 5 1,445 2,078Interest payable and similar charges 5 (106) (100)

Underlying profit before tax 9,270 12,317

(Loss)/profit on disposal of available for sale investments 5 (56) 80

Profit before tax 9,214 12,397

Taxation 6 (2,746) (3,459)

Profit for the year attributable to equity shareholders 6,468 8,938

Earnings per shareBased on reported profit for the yearBasic 9 14.65p 20.89p

Diluted 9 14.65p 20.21p

The notes on pages 41 to 74 form part of these financial statements.


37

CONSOLIDATED INCOME STATEMENTYEAR ENDED 31 MARCH 2009


38

2009 2008£’000 £’000

Profit for the year 6,468 8,938

Revaluation of available for sale investments taken to income statement on disposal 201 (26)Revaluation of available for sale investments (581) 332Deferred tax on revaluation of available for sale investments 166 (86)Retirement benefit scheme actuarial deficit (2,048) (578)Deferred tax on retirement benefit scheme actuarial deficit 545 162

Net expense recognised directly in equity (1,717) (196)

Total recognised income for the year attributable to equity shareholders 4,751 8,742


STATEMENT OF RECOGNISED INCOME AND EXPENSEYEAR ENDED 31 MARCH 2009

2009 2008Notes £’000 £’000 £’000 £’000

AssetsNon-current assets

Goodwill 10 25,450 23,238Intangible assets 11 11,197 5,561Property, plant and equipment 12 7,747 7,420Deferred tax asset 19 587 —Available for sale investments 13 6,200 4,907

51,181 41,126

Current assetsTrade and other receivables 14 257,187 299,052Held for trading investments 15 163 2,575Cash and cash equivalents 16 35,951 32,527

293,301 334,154

LiabilitiesCurrent liabilities

Financial liabilities 17 (1,749) (519)Trade and other payables 18 (264,363) (297,341)Current tax liabilities (574) (798)

(266,686) (298,658)

Net current assets 26,615 35,496

Non-current liabilitiesFinancial liabilities 17 (28) (1,404)Retirement benefit liability 27 (3,894) (1,952)Deferred tax liabilities 19 — (195)Other non-current liabilities 18 (1,724) (1,992)

(5,646) (5,543)

Net assets 72,150 71,079

Shareholders’ equityOrdinary shares 21 11,035 11,029Share premium 22 1,873 1,855Revaluation reserve 22 2,295 2,509Retained earnings 22 56,850 55,589

Total shareholders’ equity 72,053 70,982Minority interest in equity 97 97

Total equity 72,150 71,079

Approved by the Board on 11 June 2009Sir David Howard Peter Hurst DirectorsThe notes on pages 41 to 74 form part of these financial statements.


39

CONSOLIDATED BALANCE SHEETAT 31 MARCH 2009


40

2009 2008Notes £’000 £’000

Cash flow from operating activitiesCash generated from operations 23 20,791 10,027Interest received 1,445 2,078Interest paid (106) (100)Tax paid (3,029) (5,672)

Net cash from operating activities 19,101 6,333

Cash flows from investing activitiesAcquisition of subsidiaries and other businesses (1,471) (5,032)Proceeds from sale of subsidiaries — 100Acquisition of intangible assets (5,295) (5,045)Purchase of property, plant and equipment (3,118) (3,314)Proceeds from sale of available for sale investments 445 534Purchase of available for sale investments (2,398) (1,408)Dividends received 79 83

Net cash used in investing activities (11,758) (14,082)

Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 24 1,584Cash outflow from change in debt and lease financing (147) (62)Dividends paid to shareholders (3,796) (3,551)

Net cash used in financing activities (3,919) (2,029)

Net increase/(decrease) in cash and cash equivalents 3,424 (9,778)Cash and cash equivalents at start of year 32,527 42,305

Cash and cash equivalents at end of year 35,951 32,527


CONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 31 MARCH 2009

The financial information for the year ended 31 March 2009 has been prepared under International Accounting Standards

(“IAS") and International Financial Reporting Standards (“IFRS") as adopted by the EU and under the historical cost

convention unless indicated below.

1 ACCOUNTING POLICIESBasis of consolidation

The consolidated financial statements combine the financial statements of Charles Stanley Group PLC and all its

subsidiaries, drawn up to 31 March 2009. For the purposes of these accounts, uniform accounting policies have been

followed by the Group. All significant intercompany transactions and balances between Group entities are eliminated

on consolidation.

Revenue

The Group follows the principles of IAS 18, “Revenue Recognition”, in determining appropriate revenue recognition policies.

In principle, therefore, revenue is recognised to the extent that it is probable that the economic benefits associated with the

transaction will flow into the Group and can be reliably measured.

Revenue comprises stockbroking commission, investment management fees, administration fees, corporate finance fees,

and the profit or loss arising on held for trading securities. Commission income is recognised on a trade date basis. Fee

income is recognised when earned.

Commission expenses are recognised on a trade date basis as with commission income, for both third parties and

employees.

Dividends are credited to the income statement in the year in which they are receivable and are shown exclusive of

tax credits. Stockbroking commission and fees are stated gross but exclude value added tax.

Interest income and expense for all interest-bearing financial instruments, except for those classified as held for trading

or designated at fair value through profit or loss, are recognised within “interest income” and “interest expense” using

the effective interest method.

The Group does not analyse performance by geographic segments internally as the Group’s operations are entirely within

the UK.

Foreign currencies

Foreign currency monetary items have been translated into sterling at the rate of exchange ruling at the balance sheet date.

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken

to the income statement.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value

of the identifiable assets, liabilities and contingent liabilities of a subsidiary at the date of acquisition.

Goodwill is recognised as an asset and is reviewed for impairment at least annually, or on such other occasions where

changes in circumstances indicate that it might be impaired. Any impairment is recognised immediately in the income

statement and is not subsequently reversed. Goodwill arising on acquisition is allocated to cash-generating units for the

purposes of impairment testing.

Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amount

and was subject to an impairment review at the date of transition.

Future anticipated payments in respect of earnouts are based on the Directors’ best estimate of the obligations, which are

dependent on future performance of the interests required.


41

NOTES TO THE FINANCIAL STATEMENTSYEAR ENDED 31 MARCH 2009


42

1 ACCOUNTING POLICIES (CONTINUED)Intangible assets

Intangible assets comprise customer lists. These assets are stated at cost less amortisation and provisions for impairment,

if any, and are amortised on a straight-line basis over their useful lives of 7 to 10 years.

Impairment

The Group reviews the carrying amounts of its tangible and intangible assets with finite lives to determine whether there

is any indication that those assets have suffered an impairment loss on an annual basis. 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. An intangible asset with an indefinite

useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

The recoverable amounts of goodwill allocated to the Cash Generating Units (“CGU”) are determined from value in use

calculations. CGUs are the lowest level at which management monitors the performance of the business. The key

assumptions for the value in use calculations are the performance of each CGU to date against management's expectations

at the date of acquisition. Value in use calculations are typically prepared over a five year period.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of

the asset (CGU) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately,

unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation

decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (CGU) is increased to

the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying

amount that would have been determined had no impairment loss been recognised for the asset (CGU) in prior years.

A reversal of the impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued

amount, in which case the reversal of the impairment loss is treated as a revaluation increase. However, impairment

losses relating to goodwill may not be reversed.

Property, plant and equipment

Property, plant and equipment are included in the balance sheet at cost less accumulated depreciation and any provisions

for impairment.

Freehold land is not depreciated. Other property, plant and equipment are depreciated on a straight-line basis at rates

sufficient to write off the cost less estimated residual values of individual assets over their estimated useful lives.

The depreciation periods of the principal categories of assets are as follows:

Freehold buildings and leasehold properties up to 50 years

Office equipment and motor vehicles three to ten years


43

1 ACCOUNTING POLICIES (CONTINUED)Leased assets and obligations

Where assets are financed by leasing agreements that give rights approximating to ownership (“finance leases”),

the assets are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum

lease payments payable during the lease term. The corresponding leasing commitments are shown as obligations to the

lessor. Lease payments are treated as consisting of capital and interest elements, and the interest is charged to the income

statement using the annuity method. Depreciation on the relevant assets is charged to the income statement.

All other leases are “operating leases”, and the annual rentals are charged to the income statement on a straight line

basis over the lease term.

Investments

Investments in securities are recognised and derecognised on trade date. Such investments are initially measured at cost,

inclusive of transaction costs.

Available for sale investments comprise listed and unlisted investments. Listed investments are valued using market values

and unlisted investments by Directors' valuation.

After initial recognition, investments which are classified as held for trading or available for sale are measured at fair value.

Gains or losses on investments held for trading are recognised in the profit and loss for the period. Gains or losses on

available for sale investments are recognised directly as a separate component of equity until the investment is sold,

or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or

loss previously reported in equity is included in the profit or loss for the period.

Available for sale and held for trading investments are reviewed at the balance sheet date for evidence of impairment.

Any loss arising from impairment of investments is recognised directly in the profit and loss for the period.

Investments are classified as held to maturity when they are non-derivatives with fixed or determinable payments and a

fixed maturity that the Group has a positive intention and ability to hold to maturity. Investments intended to be held for

an undefined period are not included in this classification.

For investments that are actively traded in organised financial markets, fair value is determined by reference to quoted bid

and offer prices at the close of business on the balance sheet date. For investments where there is no quoted market price,

fair value is determined by reference to the current market value of another instrument which is substantially the same.

Alternatively, it is calculated based on the expected cash flows of the underlying net asset base of the investment.

Investments in subsidiaries are carried at cost less any impairment.

Segregated funds

Segregated funds are held in trust by the Group on behalf of clients in accordance with the Client Asset rules of the

Financial Services Authority and the corresponding liability to the clients is not shown on the face of the balance sheet.

The amount held on behalf of clients is disclosed in note 16.



44

1 ACCOUNTING POLICIES (CONTINUED)Trade receivables

Trade receivables are measured on initial recognition at fair value. When objective evidence exists that the asset is impaired

the estimated irrecoverable amount is written off to the income statement.

Trade payables

Trade payables are measured on initial recognition at fair value and subsequently at amortised cost using the effective

interest method.

Retirement benefit costs

The cost of providing benefits under defined benefit plans is determined using the projected unit credit method,

with actuarial valuations being carried out on an annual basis.

Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the

income statement and are presented in the statement of recognised income and expense. Past service cost is recognised

immediately to the extent that the benefits are already vested. The amount recognised in the balance sheet represents

the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised

past service cost, and reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the

unrecognised actuarial losses and past service cost, plus the present value of available refunds and reductions in future

contributions to the plan.

Significant estimates and assumptions

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities, and profits and

losses. Evaluation is based on historical experience as well as future expectations.

Retirement benefit obligations – In conjunction with our actuarial advisers the Group makes estimates about long term

trends, including life expectancy and investment performance. These estimates are governed by rules in IAS 19.

The detailed assumptions are set out in note 27.

Impairment of goodwill – The Group values goodwill based on the valuation of individual cash generating units making up

the total goodwill. This is normally based on the expected future income levels.

Valuation of investment in Euroclear plc – The fair value of the Group's investment in Euroclear plc is based on the Group's

share of net assets, dividend yield and the prices of similar companies discounted for illiquidity.


45

1 ACCOUNTING POLICIES (CONTINUED)Taxation

Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted

or substantively enacted by the balance sheet date.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the

income statement because it excludes items of income or expense that are taxable or deductible in other periods and it

further excludes items that are never taxable or deductible.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet

date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the

future have occurred at the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences between the

carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation

of taxable profit. Deferred tax liabilities are recognised for all temporary differences and deferred tax assets are recognised

to the extent that it is probable that taxable profits will be available against which deductible temporary differences may

be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial

recognition (other than in a business combination) of other assets and liabilities in a transaction that affect neither the tax

profit nor the accounting profit.

Future changes to accounting policies

Certain changes to IAS and IFRS will be applicable for the Group’s accounts in future years. To the extent that the Group has

not adopted these early in the accounts to 31 March 2009, they will not affect the Group’s reported profit or equity but they

will affect disclosures.

At the date of authorisation of these financial statements, the following standards and interpretations, relevant to the

Group's activities, which have not been applied in these financial statements were in issue but not yet effective:

IAS 23 (Amendment) – Borrowing costs

IFRS 8 – Operating segments

IFRS 3 (Revised) – Business combinations

IFRS 2 (Amendment) – Share-based payment

IAS 39 (Amendment) – Financial instruments: recognition and measurement

IFRS 7 (Amendment) – Financial instruments: disclosure

The Group expects that the adoption of these standards in the future will have no material impact on the results

for the Group.


harles Stanley Group PLCReport and Accounts 2009

46

2 REVENUECharles

Private Financial StanleyClients Services Securities Other Total

£’000 £’000 £’000 £’000 £’000

Year ended 31 March 2009Commission 46,038 28 8,020 — 54,086

FeesInvestment management 17,252 155 — — 17,407Administration 21,200 6,404 — — 27,604Corporate finance — — 2,655 — 2,655

38,452 6,559 2,655 — 47,666Other income — — — 13 13

Total for year ended 31 March 2009 84,490 6,587 10,675 13 101,765Allocated administrative expenses (52,052) (6,346) (9,964) — (68,362)

32,438 241 711 13 33,403

Unallocated administrative expenses (25,472)

Operating profit 7,931

Year ended 31 March 2008Commission 48,541 37 10,199 — 58,777

FeesInvestment management 15,987 188 — — 16,175Administration 19,227 5,568 — — 24,795Corporate finance — — 5,734 — 5,734

35,214 5,756 5,734 — 46,704Other income — — — 83 83

Total for year ended 31 March 2008 83,755 5,793 15,933 83 105,564Allocated administrative expenses (53,234) (5,193) (12,965) — (71,392)

30,521 600 2,968 83 34,172

Unallocated administrative expenses (23,833)

Operating profit 10,339

For management purposes, the Group is divided into three business segments: Private Clients, Financial Services and Charles Stanley Securities. All operations are carried out in the United Kingdom.

Operating assets and liabilities are not directly attributable to segments, nor can they be allocated to income streams on a reasonable basis.

3 PARTICULARS OF STAFF

The average number of persons employed (including Directors) during the year was 679 (2008: 625).

2009 2008£’000 £’000

Staff costs:Wages and salaries 34,810 34,933Social security costs 3,601 4,140Other pension costs 3,102 2,794

41,513 41,867

4 OPERATING PROFIT

2009 2008£’000 £’000

The following items have been included in arriving at operating profit:Depreciation of property, plant and equipment:

Owned assets 2,726 2,234Assets held under finance leases 33 39

Amortisation of intangible assets 1,659 653Auditors’ remuneration:

Audit of the Company’s annual accounts 15 15Audit of the Company’s subsidiaries 167 95Other services pursuant to legislation — 18Services relating to taxation 79 67All other services 13 3

Operating lease rentals 1,741 1,541One-off revenue costs relating to new investment teams 1,564 4,418Foreign exchange gains (388) (475)

Fees paid to the Group’s auditor includes all fees in their capacity as such. In addition, the Group’s auditor was paid £5,875 (2008: £5,875) in respect of the audit of the Charles Stanley Retirement Benefit Scheme.


47



48

5 FINANCE INCOME – NET

2009 2008£’000 £’000

Interest income 1,445 2,078

Interest expenseInterest payable on bank borrowings (29) (3)Interest payable on other loans (69) (85)Interest payable on finance leases (8) (12)

Interest and similar charges payable (106) (100)

(Loss)/profit on disposal of available for sale investments (56) 80

Finance income – net 1,283 2,058

6 TAXATION

2009 2008£’000 £’000

Analysis of charge in periodCurrent taxContinuing operations 2,821 3,353Adjustment in respect of prior periods — (89)

Deferred taxContinuing operations (75) 195

2,746 3,459

The tax charge for the year is higher than the standard rate of corporation tax in the UK of 28% (2008: 30%). The differences are explained below.

2009 2008£’000 £’000

Profit before tax 9,214 12,397

Profit multiplied by rate of corporation tax in the UK of 28% (2008: 30%) 2,580 3,719

Effects ofOther items not allowable for tax purposes 144 173Adjustments in respect of previous periods — (89)Other adjustments 22 (344)

166 (260)

Tax charge for the year 2,746 3,459


49

7 PROFIT FOR THE YEARAs permitted by section 230 of the Companies Act 1985 the parent undertaking has not presented its own income statement in these financial statements.The consolidated profit for the year of £6,468,000 (2008: £8,938,000) includes a loss of £2,930,000 (2008: £3,864,000) which is dealt with in the accounts of the parent undertaking.

8 DIVIDENDS PAID2009 2008

£’000 £’000

Final paid of 6.50p per share (2008: 6.25p) 2,869 2,657Interim paid of 2.10p per share (2008: 2.10p) 927 894

3,796 3,551

In addition, the Directors are proposing a final dividend in respect of the year ended 31 March 2009 of 6.65p per sharewhich will absorb an estimated £2.94 million of shareholders’ funds. It will be paid on 4 August 2009 to shareholderswho are on the register of members on 19 June 2009.

9 EARNINGS PER SHARE2009 2008

No. No.000’s 000’s

Weighted average number of shares in issue in the year 44,136 42,788Dilution — 1,437

44,136 44,225

The Directors believe that a truer reflection of the performance of the Group's on-going business is given by a number of different measures of earnings per share (“EPS”). “Underlying earnings” represent operating profit plus net interest but excludes losses/profits on the disposal of available for sale (“AFS”) investments. “Underlyingearnings before one-off costs” represent underlying earnings before one-off revenues costs relating to new investmentteams. “Adjusted earnings” represent underlying earnings before one-off costs and amortisation of client lists. These measures are also followed by the analyst community as benchmarks of the Group's on-going performance.

2009 2008Earnings Basic EPS Diluted EPS Earnings Basic EPS Diluted EPS

£’000 pence pence £’000 pence pence

Reported earnings and EPS 6,468 14.65 14.65 8,938 20.89 20.21Loss/(profit) on disposal of

AFS investments net of tax 40 0.10 0.10 (56) (0.13) (0.13)

Underlying earnings attributable to ordinary shareholders 6,508 14.75 14.75 8,882 20.76 20.08

One-off costs net of tax 1,126 2.55 2.55 3,093 7.23 7.00

Underlying earnings before one-off costs 7,634 17.30 17.30 11,975 27.99 27.08

Amortisation of client list net of tax 1,194 2.70 2.70 457 1.06 1.03

Adjusted earnings and EPS 8,828 20.00 20.00 12,432 29.05 28.11



50

10 GOODWILL

£’000

1 April 2008 23,238Acquisitions (note 24) 2,420Adjustment to deferred consideration (208)

31 March 2009 25,450

Private Client division 10,618Financial Services division 13,308Charles Stanley Securities 1,524

25,450

As stated in the accounting policies, the recoverable amounts of goodwill allocated to the Cash Generating Units (“CGUs”) are determined from value in use calculations. Management estimates discount rates using pre-tax rates that reflect currentmarket assessments of the time value of money and risks specific to the CGUs. Management also estimates growth ratesthat are based on industry growth forecasts. No intangible assets other than goodwill were separately identified in theseacquisitions.

11 INTANGIBLE ASSETS

Customer Brandlists costs Total

£’000 £’000 £’000

Cost1 April 2008 6,031 183 6,214

Acquisitions 7,295 — 7,295

31 March 2009 13,326 183 13,509

Amortisation1 April 2008 616 37 653

Amortisation during year 1,513 146 1,659

31 March 2009 2,129 183 2,312

Net book value31 March 2009 11,197 — 11,197

31 March 2008 5,415 146 5,561


51

12 PROPERTY, PLANT AND EQUIPMENT

OfficeLong Short equipment

Freehold leasehold leasehold and motorpremises premises premises vehicles Total

£’000 £’000 £’000 £’000 £’000

Cost1 April 2008 474 1,984 4,585 10,510 17,553

Additions — 18 666 2,434 3,118Disposals — — — (3,290) (3,290)

31 March 2009 474 2,002 5,251 9,654 17,381

Depreciation1 April 2008 31 1,600 2,280 6,222 10,133

Charge for the year 9 27 411 2,312 2,759Disposals — — — (3,258) (3,258)

31 March 2009 40 1,627 2,691 5,276 9,634

Net book value31 March 2009 434 375 2,560 4,378 7,747

31 March 2008 443 384 2,305 4,288 7,420

The net book value of tangible fixed assets includes £135,000 (2008: £131,000) in respect of assets held under financeleases and hire purchase contracts.

Fixed assets include fully depreciated assets costing £3.4 million.



52

13 AVAILABLE FOR SALE INVESTMENTS

Listed Unlistedinvestments investments Total

£’000 £’000 £’000

Fair value1 April 2008 1,515 3,392 4,907Additions 2,398 — 2,398Disposals (472) — (472)Revaluation in year (633) — (633)

Fair value at 31 March 2009 2,808 3,392 6,200

Unlisted investments include the Group’s holding of 6,030 shares in Euroclear plc. The Directors have valued thisholding at £3.3 million as at 31 March 2009 (£3.3 million at 31 March 2008). This valuation reflects the Group’s estimate of the fair value of this investment and is calculated at a discount to the net asset value of Euroclear plc’smost recent published financial statements. The Group does not intend to dispose of this holding.

14 TRADE AND OTHER RECEIVABLES

2009 2008£’000 £’000

CurrentTrade receivables 253,086 295,772Other receivables 780 668Prepayments and accrued income 3,321 2,612

257,187 299,052


53


15 HELD FOR TRADING INVESTMENTS

2009 2008£’000 £’000

CurrentListed investments 163 2,575

16 CASH AND CASH EQUIVALENTS

Cash at bank 35,951 32,527

At the balance sheet date there were also deposits for clients, not included in the consolidated balance sheet, which were held in trust in segregated bank accounts amounting to £916 million (2008: £996 million).

17 FINANCIAL LIABILITIES

2009 2008£’000 £’000

CurrentBank of England base rate redeemable loan 157 1574.5% convertible redeemable loan note 2011 201 311Bank of England base rate unsecured loan note 1,336 —Obligations under finance leases 55 51

1,749 519

Non-currentBank of England base rate unsecured loan note — 1,336Obligations under finance leases 28 68

28 1,404

The Bank of England base rate redeemable loan note is redeemable on demand.

The 4.5% fixed rate convertible redeemable unsecured loan note 2011 is convertible into fully paid ordinary shares at £2.48 per share at the holders’ discretion, or redeemable on expiry in 2011.


54

18 TRADE AND OTHER PAYABLES

2009 2008£’000 £’000

CurrentTrade payables 248,848 286,180Other taxes and social security 2,628 2,788Other payables 8,047 1,984Accruals and deferred income 4,840 6,389

264,363 297,341

Non currentOther payables – deferred consideration 1,724 1,992

19 DEFERRED TAX (ASSET)/LIABILITIES

Retirement OtherRevaluation benefit differences Total

£’000 £’000 £’000 £’000

1 April 2008 984 (547) (242) 195

Revaluation of financial assets (167) — — (167)Movement in retirement benefit liability — (545) — (545)Movement in other differences — — (70) (70)

31 March 2009 817 (1,092) (312) (587)

20 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Through its normal operations the Group is exposed to a number of risks, the most significant of which are market,credit and liquidity risks. A full qualitative description of the Group’s risk management framework is given in theoperating and financial review on pages 10 to 17.

Market riskEquity riskThe Group is exposed to equity market risk through its equity holdings. These comprise: i) available for sale financial investments, ii) trading portfolio assets and liabilities that arise from trading as principal and iii) the impact on investment management fees.

In common with the stress tests referred to in the operating and financial review on pages 10 to 17 the Group has performed sensitivity analysis assessing the impact of a 10% increase or decrease in underlying equity prices. The results shown below are indicative of the impact at the year end.


55


20 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

i) Available for sale investmentsNote 13 summarises the available for sale investments held at the year end date, and the disposals and fair valuemovements made in the year.

The majority of the Group’s available for sale investments are unlisted. Accordingly a rise or fall of 10% does not havean immediate impact on the Group’s equity reserves. A similar increase/decrease on the Group’s listed investmentswould have an impact on reserves of £280,000 (2008: £84,000).

ii) Held for trading assets and liabilitiesThe Group’s exposure to market risk on its held for trading positions is monitored daily and reported to the appropriateDirectors and senior management. Positions are monitored against limits set down by the risk and regulatory reviewgroup/compliance committee. Any breaches of the limits are notified immediately to the Compliance Director.

A 10% increase/decrease in equity prices on trading assets and liabilities would increase/decrease profit in theIncome statement by £18,000 (2008: £12,000).

iii) Investment Management feesA 10% increase/decrease in equity prices would increase/decrease profit on investment management fees in theIncome statement by £1.4 million (2008: £1.3 million).

The Group does not hold derivatives on its own account.

Foreign exchange riskThe table below summarises the Group’s currency exposure arising from unmatched monetary assets or liabilities not denominated in the Group’s functional currency:

2009 2008£’000 £’000

Net assetsEuros 748 451US Dollars 1,438 787Other currencies 447 644

2,633 1,882

The Group’s activities are primarily denominated in sterling and it does not enter into forward exchange contracts for hedging anticipated transactions. The risk of adverse currency movements for settlement of non-GBP trades onbehalf of clients is not borne by the Group. The Group is exposed to currency risk for settlement of non-GBP tradesuppliers and miscellaneous income streams. At 31 March 2009 these totalled £11,000.


56


Interest rate riskThe Group has interest bearing assets, principally in cash and cash deposits, and liabilities including loan notesaccruing interest at Bank of England base rate. The Group views such exposure to interest rate fluctuations asimmaterial. If interest rates had been 200 basis points higher/lower profit for the year would have been £709,000higher/lower (2008: £701,000).

Credit riskTrade receivables represent monies due from clients and market counterparties. The risk department undertakesreviews of new accounts and periodically reviews all counterparties.

Cash and cash equivalents are held with top tier regulated financial institutions. The list of approved banks is reviewedat least annually by the treasury committee. The Group has no concerns over the credit quality of these institutions.

The following table of financial assets analyses amounts by ageing:

As at 31 March 2009Neitherdue nor 0-3 3-6 6-12 Over 1 Carrying

impaired months months months year value£’000 £’000 £’000 £’000 £’000 £’000

Trade receivables 230,932 13,828 11,484 758 185 257,187AFS investments 6,200 — — — — 6,200HFT investments 163 — — — — 163Cash and cash equivalents 35,951 — — — — 35,951

As at 31 March 2008

Trade receivables 262,465 33,560 2,584 251 192 299,052AFS investments 4,907 — — — — 4,907HFT investments 2,575 — — — — 2,575Cash and cash equivalents 32,527 — — — — 32,527

A provision for impairment of receivables existed at 31 March 2009 of £114,000 (31 March 2008: £242,000).


57



Management of liquidity riskThe tables below analyse the Group’s future cash outflows based on the remaining period to the contractual maturity date. The amounts shown are contractual undiscounted cash flows.

As at 31 March 2009 Lessthan 1 1-2 2-5 Over 5 Carrying

year years years years value£’000 £’000 £’000 £’000 £’000

Trade payables 248,848 — — — 248,848Other taxes and social security 2,628 — — — 2,628Other payables 8,047 — — — 8,047Accruals and deferred income 4,804 — — — 4,840Financial liabilities 1,749 28 — — 1,777Current tax liabilities 574 — — — 574Other non-current liabilities — 1,724 — — 1,724

As at 31 March 2008

Trade payables 286,180 — — — 286,180Other taxes and social security 2,788 — — — 2,788Other payables 1,984 — — — 1,984Accruals and deferred income 6,389 — — — 6,389Financial liabilities 519 1,390 14 — 1,923Current tax liabilities 798 — — — 798Other non-current liabilities — 1,992 — — 1,992

Capital risk management

The Group has an internal capital adequacy assessment process, as required by the Financial Services Authority,which it uses to manage capital. This assessment is Group wide and covers current capital requirements as well as projected capital requirements. The Group is satisfied that there is and will be sufficient capital to meet theserequirements.

The process, which has been approved by the board of Directors, includes both qualitative and quantitative analyses ofthe requirements as calculated using both Pillar 1 and Pillar 2 methodologies. Any changes to the Group’s businessactivities is considered within this framework.

As at 31 March 2009 the total available regulatory capital was £33.1 million, calculated under Pillar 1 of the CapitalRequirements Directive. The relevant balance for 2008 was £44.7 million.

The Group uses the simplified approach for Credit Risk and standardised approach for Operational Risk to determineits Pillar 1 requirements.

Capital adequacy is monitored daily by the Group’s management for all regulated companies within the Group.Compliance with FSA regulatory requirements was maintained during the year.

Fair value of financial instrumentsThe carrying value of financial assets not held at fair value (cash and cash equivalents, trade receivables, other receivables, and trade and other payables) is not significantly different from the fair value.


58

21 CALLED UP SHARE CAPITAL

2009 2008£’000 £’000

Authorised80,000,000 ordinary shares of 25p each 20,000 20,000

Allotted and fully paid44,142,718 (2008: 44,117,718) ordinary shares of 25p each 11,035 11,029

During the year 25,000 ordinary shares were issued fully paid for cash at 96p each following the exercise of options byemployees. These shares had a nominal value of £6,250 and a total consideration value of £24,000.

Share options and share based paymentAt 31 March 2009 the following options have been granted and remain outstanding in respect of ordinary shares of 25p in the Company under the Company's Save As You Earn Scheme.

Date of grant 19 Dec 2007Exercisable during the six months commencing 1 Feb 2011Number of shares 397,367Exercise price per share £2.48Expected fair value per share £0.56

The fair value of the options has been calculated using a Black-Scholes model with the following inputs. Expected volatility is based on the historical share price volatility.

Share price at date of grant £2.74Expected life 3.0 yearsExpected volatility 22.62%Risk free rate 4.63%Expected dividend yield 2.96%

The Group recognised total expenses of £92,000 (2008: £49,000) related to equity-settled share-based paymenttransactions.

The following table reconciles outstanding share options at the beginning and end of the financial year.

2009 2008Weighted Weighted

Number average Number averageof exercise of exercise

shares price shares price

1 April 452,598 £2.40 1,632,315 £0.97Granted — — 427,598 £2.48Exercised (25,000) £0.96 (1,599,149) £1.00Forfeited (30,231) £2.48 (8,166) £0.96

31 March 397,367 £2.48 452,598 £2.40

Exercisable — — 25,000 £0.96


59


21 CALLED UP SHARE CAPITAL (CONTINUED)

The following share options granted under the Company’s Save As You Earn Scheme were exercised during the year:

Year ended 31 March 2009 Shareprice at

Number Exercise exerciseGrant date exercised date date

2 January 2003 25,000 10 Jul 08 £1.88

The weighted average share price at the date of exercise of share options was £1.88 (2008: £2.52).

Year ended 31 March 2008

Pre November 2002 4,703 01 May 07 £3.612 January 2003 2,318 05 Jun 07 £3.802 January 2003 2,318 15 Jun 07 £3.712 January 2003 11,041 31 Aug 07 £3.292 January 2003 11,458 10 Sep 07 £3.322 January 2003 11,875 25 Oct 07 £3.292 January 2003 2,493 20 Nov 07 £2.732 January 2003 2,581 15 Jan 08 £2.422 January 2003 1,532,237 01 Feb 08 £2.502 January 2003 5,250 10 Feb 08 £2.562 January 2003 5,125 10 Feb 08 £2.562 January 2003 2,625 14 Mar 08 £2.222 January 2003 5,125 14 Mar 08 £2.22

1,599,149 £2.52


60

22 RESERVES AND STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Share Share Revaluation Retainedcapital premium reserve earnings Total

£’000 £’000 £’000 £’000 £’000

1 April 2007 10,592 379 2,289 50,569 63,829

Net profit — — — 8,938 8,938Dividends paid — — — (3,551) (3,551)Revaluation of available for

sale investments — — 332 — 332Deferred tax on revaluation of

available for sale investments — — (86) — (86)Transfer of realised revaluation surplus — — (26) — (26)Retirement benefits scheme

actuarial deficit — — — (578) (578)Deferred tax on retirement scheme

actuarial deficit — — — 162 162Share options – value of employee services — — — 49 49

– Issue of shares 400 1,144 — — 1,544Conversion of convertible notes 37 332 — — 369

31 March 2008 11,029 1,855 2,509 55,589 70,982

Net profit — — — 6,468 6,468Dividends paid — — — (3,796) (3,796)Revaluation of available for

sale investments — — (581) — (581)Deferred tax on revaluation of

available for sale investments — — 167 — 167Transfer of realised revaluation surplus — — 200 — 200Retirement benefits scheme

actuarial deficit — — — (2,048) (2,048)Deferred tax on retirement scheme

actuarial deficit — — — 545 545Share options – value of employee services — — — 92 92

– Issue of shares 6 18 — — 24

31 March 2009 11,035 1,873 2,295 56,850 72,053


61


23 RECONCILIATION OF NET PROFIT TO NET CASH GENERATED FROM OPERATIONS

2009 2008£’000 £’000

Net profit 9,214 12,397Adjustments for

Depreciation 2,759 2,273Amortisation of intangibles 1,659 653Share options – value of employee services 92 49Dividend income (79) (83)Interest income (1,445) (2,078)Interest expense 106 100Loss on disposal of fixed assets 25 —Loss/(profit) on disposal of available for sale investments 56 (80)Financial assets acquired in lieu of fees — (50)

Changes in working capitalDecrease/(increase) in held for trading investments 2,411 (1,341)Decrease/(increase) in debtors 42,152 (29,941)(Decrease)/increase in creditors (36,159) 28,128

Net cash inflow from operations 20,791 10,027

24 ACQUISITIONS

On 1 October 2008, the Group acquired Griffiths & Armour (Financial Services) Ltd. The purchase consideration of just over £3 million was satisfied by cash payable on the completion date amounting to £1.4 million. The balance is payable in twoequal instalments of £0.8 million on 30 September 2009 and 30 September 2010 respectively. No material adjustments were made to the book value of Griffiths & Armour (Financial Services) Ltd’s net assets before acquisition. Post acquisitionlosses to 31 March 2009 were £41,000.

The assets and liabilities of Griffiths & Armour (Financial Services) Ltd at acquisition date were as follows:£’000

Office equipment and motor vehicles 40Current assets 812Current liabilities (197)

Net assets acquired 655Goodwill acquired 2,420

Total cost of acquisition 3,075

Satisfied by:Cash 1,471Deferred consideration 1,604

Total consideration 3,075


62

25 LEASE COMMITMENTS

Operating leases2009 2008

£’000 £’000

Total commitments under leases at 31 March were:Operating leases - land and buildings

Not later than one year 1,773 1,093Later than one but not later than five years 5,944 3,440Later than five years 3,485 2,747

11,202 7,280

Finance leasesPresent value of

Minimum lease minimum leasepayments payments

2009 2008 2009 2008£’000 £’000 £’000 £’000

Not later than one year 60 64 55 51Later than one but not later than five years 29 105 28 68Later than five years — — — —

89 169 83 119Less future finance charges (6) (50) — —

Present value of minimum lease payments 83 119 83 119

Included in the financial statements as:

Current liabilities (note 17) 55 51Non-current liabilities (note 17) 28 68

83 119

26 CAPITAL COMMITMENTS

2009 2008£’000 £’000

Authorised but not contracted for — 1,020


63


27 PENSION COSTS

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in independently administered funds.

The Group also sponsors the Charles Stanley & Co. Limited Retirement Benefits Scheme (“the Scheme"), which is a wholly funded defined benefit arrangement. The last full actuarial valuation of the Scheme was carried out by an independent qualified actuary as at 13 May 2005 and updated on an approximate basis to 31 March 2009.

The contributions made by the employer over the financial year have been £957,960, equivalent to 23.2% ofpensionable pay. This contribution rate is to continue until reviewed following the next triennial valuation of the Scheme.

It is the policy of the Group to recognise all actuarial gains and losses in the year in which they occur outside theincome statement and in the statement of recognised income and expense.

Assets2009 2008

£’000 £’000

Equities 7,671 9,142Bonds 7,528 2,921Other 964 5,893

Fair value of plan assets 16,163 17,956

Present value of defined benefit obligation 20,057 19,908

Deficit in scheme 3,894 1,952

Reconciliation of opening and closing balances of the fair value of plan assets2009 2008

£’000 £’000

Fair value of assets at start of year 17,956 18,672Expected return on assets 1,123 1,124Actuarial loss (3,741) (2,803)Contributions by employer 958 958Contributions by plan participants 90 94Benefits paid, death in service insurance premiums and expenses (223) (89)

Fair value of assets at end of year 16,163 17,956

The fair value of the assets shown above include £510,625 of shares in Charles Stanley Group PLC.


64

27 PENSION COSTS (CONTINUED)

Reconciliation of opening and closing balances of the present value of the defined benefit obligation

2009 2008£’000 £’000

Defined benefit obligation at start of year 19,908 20,193Total employer current service cost 694 752Interest cost 1,281 1,133Employee contributions 90 94Actuarial gain (1,693) (2,225)Benefits paid, death in service insurance premiums and expenses (223) (89)Past service costs — 50

Defined benefit obligation at end of year 20,057 19,908

Total expense recognised in the income statement

2009 2008£’000 £’000

Current service cost 694 752Interest on pension scheme liabilities 1,281 1,133Expected return on pension scheme assets (1,123) (1,124)Past service costs — 50

Total expense 852 811

Gains/(losses) recognised in statement of recognised income and expense

2009 2008 2007 2006Difference between expected and actual return

on scheme assets:Amount (£'000) (3,741) (2,803) 1,105 343Percentage of scheme assets (23%) (16%) 6% 2%

Experience gains and losses arising on the scheme liabilities:Amount (£'000) 410 37 (304) (832)Percentage of present value of scheme liabilities 2% 0% (2%) (5%)

Effects of changes in the demographic and financial assumptions underlying the present value of the scheme liabilities:Amount (£'000) 1,283 2,188 24 (1,795)Percentage of present value of scheme liabilities 6% 12% 0% (10%)

Total amount recognised in statement of recognised income and expense:Amount (£'000) (2,048) (578) 825 (2,284)Percentage of present value of scheme liabilities (10%) (3%) 4% (12%)

The cumulative amount of actuarial losses recognised in the statement of recognised income and expense sinceadoption of IAS19 is £3.8 million (2008: £2.3 million).


65


27 PENSION COSTS (CONTINUED)

History of scheme assets and obligations2009 2008 2007 2006 2005

£’000 £’000 £’000 £’000 £’000

Fair value of assets 16,163 17,956 18,672 15,852 14,029Present value of obligation 20,057 19,908 20,193 18,281 14,140

Deficit in scheme (3,894) (1,952) (1,521) (2,429) (111)

Assumptions2009 2008 2007

% per annum % per annum % per annum

Inflation 3.10 3.70 3.30Salary increases 3.00 3.00 3.50Rate of discount 6.50 6.35 5.50Allowance for pension in payment increases of RPI or 5% p.a. if less 3.05 3.65 3.30Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less 3.10 3.70 3.30

Expected long term rates of returnThe expected return on bonds is determined by reference to UK long dated gilt and bond yields at the balance sheetdate. The expected rate of return on equities has been determined by setting an appropriate risk premium abovegilt/bond yields having regard to market conditions at the balance sheet date.

The expected long term rates of return are as follows:

2009 2008 2007% per annum % per annum % per annum

Equities 6.75 7.25 6.75Bonds 4.75 6.35 5.50Cash 4.00 4.25 4.00Overall for scheme 5.65 6.12 5.75

As all actuarial gains and assets are recognised, the deficits shown are those recognised in the balance sheet.

The best estimate of contributions (employer and employee) to be paid to the plan for the year ending 31 March 2010 is £960,000.

The mortality assumptions adopted at 31 March 2009 imply the following life expectations at age 65:

Male currently aged 40: 23 yearsFemale currently aged 40: 26 yearsMale currently aged 65: 22 yearsFemale currently aged 65: 25 years


66

28 RELATED PARTY TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidationand are accordingly not disclosed.

The financial statements of the parent Company include amounts attributable to subsidiaries. These amounts have beendisclosed in aggregate in the relevant notes to the financial statements and in detail in the following table:

Amounts owed Amounts owedby related parties to related parties

2009 2008 2009 2008£’000 £’000 £’000 £’000

Charles Stanley & Co. Limited — — 18,939 7,277EBS Management PLC 852 852 — —EBS Pensioneer Trustees Limited — — 2 2Gryphon Investments PLC — — 924 924Robson Cotterell Limited — — 250 250Sutherlands Group Limited — — 265 249

852 852 20,380 8,702

The only effect of related party transactions on the income statement was in respect of dividends and managementcharges.

The parent company received dividends totalling nil (2008: £2,750,000) from Charles Stanley & Co. Limited, nil (2008: £653,173) from Sutherlands Group Limited and £540,945 (2008: nil) from Garrison Investment Analysis Limited.

The parent Company received a management charge from Charles Stanley & Co. Limited of £1,500,000 (2008: £650,000)during the year and Charles Stanley & Co. Limited received a management charge from Garrison Investment AnalysisLimited of £65,000 (2008: £65,000).

Key management compensationThe compensation paid to key management is detailed below. Key management has been determined as the Directors ofthe trading Companies within the Group.

2009 2008£’000 £’000

Salaries and short-term employee benefits 3,564 3,484Social security costs 462 409

4,026 3,893

29 EVENTS AFTER THE BALANCE SHEET DATE

There were no material adjusting events or events requiring disclosure after the balance sheet date.


67

2009 2008Notes £’000 £’000 £’000 £’000

AssetsNon-current assets

Goodwill 30 10,027 10,236Intangible assets 31 11,197 2,952Available for sale investments 32 508 589Investments in subsidiaries 33 36,328 36,089

58,060 49,866

Current assetsTrade and other receivables 34 852 852Cash and cash equivalents 35 249 224

1,101 1,076

LiabilitiesCurrent liabilities

Financial liabilities 36 (1,749) (519)Trade and other payables 37 (24,669) (9,373)

(26,418) (9,892)

Net current liabilities (25,317) (8,816)

Non-current liabilitiesFinancial liabilities 36 (28) (1,404)Deferred tax liabilities 38 — (16)Other non-current liabilities 37 (1,724) (1,992)

(1,752) (3,412)

Net assets 30,991 37,638

Shareholders’ equityOrdinary shares 21 11,035 11,029Share premium 39 1,873 1,855Revaluation reserve 39 — 37Retained earnings 39 18,083 24,717

Total equity 30,991 37,638

Approved by the Board on 11 June 2009

Sir David Howard Peter Hurst Directors


PARENT COMPANY BALANCE SHEETAT 31 MARCH 2009


68

2009 2008Notes £’000 £’000

Cash flow from operating activitiesCash generated from operations 40 10,796 9,432Interest received 9 12Interest paid (76) (65)

Net cash from operating activities 10,729 9,379

Cash flows from investing activitiesAcquisition of subsidiaries and other businesses (1,471) (5,210)Purchase of intangible assets (5,294) (2,119)Proceeds from sale of investments 445 66Purchase of investments (477) (67)Dividends received 12 14

Net cash used in investing activities (6,785) (7,316)

Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 24 1,544Cash outflow from change in debt and lease financing (147) (21)Dividends paid to shareholders (3,796) (3,551)

Net cash used in financing activities (3,919) (2,028)

Net increase in cash and cash equivalents 25 35Cash and cash equivalents at start of year 224 189

Cash and cash equivalents at end of year 249 224


PARENT COMPANY CASH FLOW STATEMENTYEAR ENDED 31 MARCH 2009


69

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTSYEAR ENDED 31 MARCH 2009

30 GOODWILL

£’0001 April 2008 10,236

Adjustment to deferred consideration (209)

31 March 2009 10,027

Private client division 8,317Financial services division 1,710

10,027

As stated in the accounting policies, the recoverable amounts of goodwill allocated to the Cash Generating Units (“CGUs”) are determined from value in use calculations. Management estimates discount rates using pre-tax rates that reflect currentmarket assessments of the time value of money and risks specific to the CGUs. Management also estimates growth ratesthat are based on industry growth forecasts. No intangible assets other than goodwill were separately identified in theseacquisitions.

31 INTANGIBLE ASSETSCustomer Brand

lists costs Total£’000 £’000 £’000

Cost1 April 2008 3,105 183 3,288

Transfer from subsidiary 2,926 — 2,926Acquisitions 7,294 — 7,294

31 March 2009 13,325 183 13,508

Amortisation1 April 2008 299 37 336

Transfer from subsidiary 316 — 316Amortisation during year 1,513 146 1,659

31 March 2009 2,128 183 2,311

Net book value31 March 2009 11,197 — 11,197

31 March 2008 2,806 146 2,952


70

32 AVAILABLE FOR SALE INVESTMENTS

Listed Unlistedinvestments investments Total

£’000 £’000 £’000

Fair value1 April 2008 560 29 589Additions 477 — 477Disposals (496) — (496)Revaluation in year (62) — (62)

Fair value at 31 March 2009 479 29 508


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33 INVESTMENTS IN SUBSIDIARIES

Total£’000

Cost1 April 2008 52,190

Additions 3,075

31 March 2009 55,265

Impairment1 April 2008 16,101

Impairment during the year 2,834

31 March 2009 18,935

Net book value31 March 2009 36,328

31 March 2008 36,089

The percentage of issued capital of Group undertakings held is:

Name of company Activity Note Ordinary shares

Gryphon Investments PLC Investment company 95%Charles Stanley & Co. Limited Stockbrokers (1) (2) 100%Rock (Nominees) Limited Nominee company (3) 100%Exempt Nominees Limited Nominee company (3) 100%Robson Cotterell Limited Dormant 100%EBS Management Plc Pension Fund Administrator (2) 100%EBS Pensioneer Trustees Limited Pensioneer Trustee Services 100%EBS Self-Administered Personal Pension

Plan Trustees Limited Pensioneer Trustee Services 100%Sutherlands Group Limited Holding company (6) 100%Sutherlands Research Limited Dormant (4) (6) 89%Alpha Trustees Limited Dormant 100%Garrison Investment Analysis Limited Financial Intermediary (2) 75%Griffiths & Armour (Financial Services) Limited Financial Intermediary (2) 100%Griffiths & Armour (Trustees) Limited Nominee company (5) 100%

Note1 Member of The London Stock Exchange and the London International Financial Futures and Options Exchange.2 Regulated by The Financial Services Authority.3 Shares held by Charles Stanley & Co. Limited.4 Shares held by Sutherlands Group Limited.5 Shares held by Griffiths & Armour (Financial Services) Limited.6 Incorporated in Scotland.

Impairment testTo determine whether impairment exists, the carrying value of the investment is compared with the investment’srecoverable amount on an annual basis at the balance sheet date.



72

34 TRADE AND OTHER RECEIVABLES

2009 2008£’000 £’000

CurrentAmounts due from Group undertakings 852 852

35 CASH AND CASH EQUIVALENTS

Cash at bank 249 224

36 FINANCIAL LIABILITIES

2009 2008£’000 £’000

CurrentBank of England base rate redeemable loan 157 1574.5% convertible redeemable loan note 201 311Bank of England base rate unsecured loan note 1,336 —Obligations under finance leases 55 51

1,749 519

Non-currentBank of England base rate unsecured loan note — 1,336Obligations under finance leases 28 68

28 1,404

The Bank of England base rate redeemable loan note is redeemable on demand.

The 4.5% fixed rate convertible redeemable unsecured loan note 2011 is convertible into fully paid ordinary shares at £2.48 per share at the holders’ discretion, or redeemable on expiry in 2011.


73


37 TRADE AND OTHER PAYABLES

2009 2008£’000 £’000

CurrentAmounts owed to Group undertakings 20,380 8,702Other payables 4,245 577Accruals and deferred income 44 94

24,669 9,373

Non currentOther payables – deferred consideration 1,724 1,992

38 DEFERRED TAX LIABILITIES

Revaluation£’000

1 April 2008 16

Revaluation of financial assets (16)

31 March 2009 —


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39 RESERVES AND STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Share Share Revaluation Retainedcapital premium reserve earnings Total

£’000 £’000 £’000 £’000 £’000

1 April 2007 10,592 379 71 32,083 43,125

Net loss — — — (3,864) (3,864)Dividends paid — — — (3,551) (3,551)Revaluation of available for sale investments — — (34) — (34)Share options – value of employee services — — — 49 49

– Issue of shares 400 1,144 — — 1,544Conversion of convertible notes 37 332 — — 369

31 March 2008 11,029 1,855 37 24,717 37,638

Net loss — — — (2,930) (2,930)Dividends paid — — — (3,796) (3,796)Revaluation of available for sale investments — — (62) — (62)Transfer of realised revaluation surplus — — 25 — 25Share options – value of employee services — — — 92 92

– Issue of shares 6 18 — — 24

31 March 2009 11,035 1,873 — 18,083 30,991

40 RECONCILIATION OF NET PROFIT TO NET CASH GENERATED FROM OPERATIONS

2009 2008£’000 £’000

Net loss (3,117) (3,861)Adjustments for

Impairment of investment in subsidiaries 2,835 7,211Amortisation of intangibles 1,659 336Share option cost 92 49Dividend income (12) (14)Interest income (9) (12)Interest expense 72 94Loss/(profit) on disposal of available for sale investments 62 (4)

Changes in working capitalIncrease in creditors 9,214 5,633

Net cash inflow from operations 10,796 9,432


75

Sir David Howard, Bt

Peter A Hurst

E Michael Clark

Michael R I Lilwall

Name

Stephen C King

Martina M Murphy

Philip C Nathan, MBE

J Andrew Butcher

Macgregor Anderson

Venetia J Malpas

Gary Teper

Michael G Bennett

together with the Directors of

Charles Stanley Group PLC.

Responsibility

Head of Human Resources

Financial Control

Dealing

Chief Operating Officer

Internal Audit

Compliance

Legal Services and Human Resources

Information and Communications

Technology

11 June 2009

17 June 2009

19 June 2009

28 July 2009

4 August 2009

November 2009

Results announced

Ex-dividend date for final dividend

Record date for final dividend

Annual General Meeting

Final dividend paid

Interim results announced

DIRECTORS OF CHARLES STANLEY GROUP PLC

DIRECTORS OF CHARLES STANLEY & CO. LIMITED

FINANCIAL CALENDAR


76

NOTICE IS HEREBY GIVEN that the 109th Annual General Meeting of Charles Stanley Group PLC will be held at 131 Finsbury Pavement, London EC2A 1NT on 28 July 2009 at 11.00am, for the following purposes:

Ordinary business1. To receive and adopt the Accounts for the year ended 31 March 2009 with the reports of the Directors

and Auditors.

2. To declare a final dividend.

3. To approve the Directors’ remuneration report as set out on pages 26 to 29 of the Annual Report and Accounts.

4. To re-elect E Michael Clark as a Director.

5. To re-elect Michael R I Lilwall as a Director.

6. To re-appoint Saffery Champness as Auditors and to authorise the Directors to determine their remuneration.

Special businessAs special business to consider and, if thought fit, to pass the following resolutions, resolutions 7 and 11 being proposed asordinary resolutions and resolutions 8, 9 and 10 as special resolutions.

Ordinary resolutionResolution 7THAT pursuant to section 80(1) of the Companies Act 1985 (“the 1985 Act”)

(a) the Directors shall have general and unconditional authority to exercise for the purposes of section 80 all of the powers of the Company to allot, grant options over, grant rights to subscribe for, or convert securities into shares, or otherwise deal with or dispose of any relevant securities (as defined in section 80(2) of the 1985 Act) of the Company to such persons, at such times and generally on such terms and conditions as the Directors may determine

PROVIDED THAT:

(i) the authority hereby conferred shall, subject to section 80(7) of the 1985 Act, be for a period expiring on the earlier of 15 months from the date of this resolution and the end of the 2010 Annual General Meeting of the Company unless renewed, varied or revoked by the Company in general meeting; and

(ii) the maximum nominal amount of relevant securities as aforesaid which may be allotted pursuant to such authority shall be £3,680,000.

(b) the Directors shall be entitled under the authority conferred hereby, or under any renewal thereof, to make at any time prior to the expiry of such authority, any offer or agreement which would or might require relevant securities as aforesaid to be allotted after the expiry of such authority and to allot relevant securities accordingly; and

(c) the authority given by this resolution shall supersede and revoke any earlier authority given in respect of relevant securities as aforesaid.

Special resolutionsResolution 8THAT the Directors be and are hereby empowered pursuant to section 95 of the 1985 Act to allot equity securities (within themeaning of section 94 of the 1985 Act) pursuant to the authority conferred by resolution number 7 in the Notice of Meeting as if section 89(1) of the 1985 did not apply to any such allotment provided that this power shall be limited:

(a) to the allotment (otherwise than pursuant to sub-paragraph (b) below) of equity securities, which are, or are to be, wholly paid up in cash up to an aggregate nominal amount of £552,000; and

(b) to the allotment of equity securities for cash in connection with a rights or other issue, which:

(i) is open for a period fixed by the Directors;

(ii) is made to the holders of the ordinary shares and (if in accordance with their rights or the Directors so determine) other equity securities of any class on the register on a fixed record date;

(iii) is in proportion to their then holdings of ordinary shares or (as the case may be) other equity securities of the class concerned (but so that any offer to holders of other equity securities of any class shall be on the basis of their rights to receive such offer failing which as if their holdings had been converted into or they had subscribed for shares on the basis then applicable); and

NOTICE OF MEETING

NOTICE OF MEETING


77

(iv) save that the Directors may aggregate and sell for the benefit of the Company fractions arising on the apportionment of securities offered, is otherwise made subject to such exclusions or other arrangements as the Directors may deem expedient in relation to legal or practical problems under the laws of or the requirements of any recognised body or stock exchange in any territory,

and shall expire at the earlier of 15 months from the date of this resolution and the end of the 2010 Annual General Meeting ofthe Company, provided that the Company may before such expiry make an offer or agreement which would or might requireequity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer oragreement as if the power hereby conferred had not expired.

Resolution 9THAT the Directors be and are hereby generally and unconditionally authorised for the purposes of section 166 of the 1985 Act to make market purchases (within the meaning of section 163(3) of the 1985 Act) of ordinary shares of 25p each in the capital of the Company provided that:

(a) the maximum number of ordinary shares hereby authorised to be purchased is 4,414,000;

(b) the minimum price which may be paid for such shares is 25p;

(c) the maximum price (exclusive of expenses) which may be paid for any such share will not be more than 5% above the average of the middle market quotation for such shares as derived from the Daily Official List of the London StockExchange LSE for the ten business days in respect of which the Daily Official List is published immediately preceding the day on which the share is to be purchased;

(d) the authority hereby conferred shall expire at the earlier of 15 months from the date of this resolution and the end of the 2010 Annual General Meeting of the Company;

(e) the Company may make a contract to purchase its own shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry date of such authority and may makepurchases of its own shares in pursuance of any such contract as if the authority conferred hereby had not expired.

Resolution 10THAT the Articles of Association, in the form produced to the meeting and signed by the chairman for the purposes ofidentification, be and are hereby adopted as the Articles of Association of the Company in substitution for and to the exclusion of the existing Articles of Association.

Resolution 11THAT:

(a) the Board be and is hereby generally and unconditionally authorised, in accordance with the Articles of Association of the Company (the “Articles”), to make and implement an offer to ordinary shareholders of the Company (excluding any shareholder of the Company holding ordinary shares as treasury shares) to the extent and in the manner determined by the Board, to elect to receive new, fully paid, ordinary shares in the Company instead of cash in respect of the whole (or part, as determined by the Board) of any interim or final dividend declared and/or paid before 28 July 2014; and

(b) for the purposes of any offer made pursuant to paragraph (a) of the resolution, the Board be, and is hereby generally and unconditionally authorised to capitalise such amount standing to the credit of the Company’s reserves or funds available for capitalisation (including the share premium account, any capital redemption reserve and the profit and loss account or retained earnings) as may be necessary and apply the same in paying up and allotting and issuing new ordinary shares in the Company to the ordinary shareholders who have validly accepted such an offer in accordance with their respective entitlements.

By Order of the BoardGary TeperSecretary

11 June 2009


78

Notes1. Members are entitled to appoint a proxy to exercise all or any of their rights and to attend and to speak and vote on their

behalf at the Meeting. A shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company. A proxy form which may be used to make such appointment and give proxy instructions accompanies this notice. If you do not have a proxy form and believe that you should have one, or if you require additional forms, please contact Gary Teper on 020 7739 8200.

2. To be valid any proxy form or other instrument appointing a proxy must be received by post or (during normal business hours only) by hand at 25 Luke Street, London, EC2A 4AR no later than 11.00am on Friday, 24 July. Submitting a completed form of proxy or other such instrument does not prevent a shareholder attending the meeting and voting in person.

3. Any person to whom this Notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (“a Nominated Person”) may, under and agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.

4. The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 2 above does not apply to Nominated Persons. The rights described in these paragraphs can only be exercised by the shareholders of the Company.

5. To be entitled to attend and vote at the Annual General Meeting (and for the purposes of the determination by the Company of the votes they may cast), shareholders must be registered in the Register of Members of the Company at 11.00am on Friday, 24 July 2009 (or, in the event of any adjournment, 11.00am on the date which is two days before the time of the adjourned meeting). Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.

6. As at 10 June 2009 (being the last business day prior to the publication of this Notice) the Company’s issued share capital consists of 44,142,718 ordinary shares carrying one vote each. Therefore, the total voting rights in the Company as at 10 June 2009 are 44,142,718.

7. Copies of the Directors’ service agreements and a statement of Directors’ transactions in shares of the Company are available for inspection at the Company’s Registered Office during usual business hours on any business day from today until the conclusion of the Annual General Meeting. Copies will also be available for inspection at the place of the Annual General Meeting for at least 15 minutes prior to and during the meeting.

8. Shareholders should note that it is possible that, pursuant to requests made by shareholders of the Company under section 527 of the Companies Act 2006, the Company may be required to publish on a website a statement setting out any matter relating to (i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstances connected with an auditor of the Company ceasing to hold office since the previous Meeting at which annual accounts or reports were laid in accordance with section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under section 527 of the Companies Act 2006 to publish on a website.

9. In order to facilitate voting by corporate representatives at the Meeting, arrangements will be put in place at the Meeting so that (i) if a corporate shareholder has appointed the Chairman of the Meeting as its corporate representative to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the Meeting, then on a poll those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if more than one corporate representative for the same corporate shareholder attends the Meeting but the corporate shareholder has not appointed the Chairman of the Meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives (www.icsa.org.uk) for further details on this procedure. The guidance includes a sample form of appointment letter if the Chairman is being appointed as described in (i) above.

NOTICE OF MEETING


79

10. At this year’s Annual General Meeting, there are ten resolutions which the members are asked to approve. An explanation of these resolutions is given below.

Resolution 1The Directors will present the Report of the Directors, the Auditors' Report and the Accounts of the Company for the year ended 31 March 2009.

Resolution 2The Directors will propose a final dividend of 6.65p.

Resolution 3The Directors' remuneration report is included in the Annual Report and Accounts on pages 26 to 29.

Resolutions 4 and 5In accordance with the Company’s Articles of Association, Mr E Michael Clark and Mr Michael R I Lilwall retire and are eligible for, and are seeking re-appointment as Directors. Short biographical details of Mr Clark and Mr Lilwall are set out on page 22 of the Annual Report and Accounts.

Resolution 6Saffery Champness have expressed their willingness to continue to act as auditors of the Company and resolution 6 proposes the re-appointment of that firm as the Company's auditors and to authorise the Directors to determine the auditors' remuneration.

Resolution 7 and 8At the Annual General Meeting last year, as in previous years, shareholders passed resolutions giving the Directors authorisation, subject to a cap, to allot shares for cash or otherwise and further for limited disapplication of section 89 of the Companies Act 1985, empowering them to allot shares for cash or otherwise in accordance with statutory pre-emption rights in certain limited circumstances.

The renewed powers will expire at the conclusion of next year’s Annual General Meeting.

Resolution 9Resolution 9 seeks authority for the Company to make market purchases of its own ordinary shares, which would otherwise be prohibited by the Companies Act 1985. The Directors believe that there may be times when it would be desirable to manage the Company’s capital by buying back shares. However, the Directors only intend to use the authority if they believe such purchases would be in the best interests of shareholders generally and would result in an increase in earnings per share. The resolution specifies the maximum number of shares that can be acquired (approximately 10% of the issued ordinary share capital of the Company as at 10 June 2009) and the minimum and maximum prices at which they may be bought. Any shares purchased under the authority granted by the resolution will either be cancelled or may be held as treasury shares.

Resolution 10Proposes the adoption of new Articles of Association of the Company in substitution for and to the exclusion of the existing Articles of Association. Please see the letter and document entitled ‘Principal changes included in the New Articles’ annexed to this Notice for further details.

Resolution 11The Board is proposing to offer a Scrip alternative in respect of any dividend declared and/or paid by the Company on or before 28 July 2014, including the final dividend to be declared at this year’s Annual General Meeting. The Scrip will give shareholders the opportunity to receive new ordinary shares instead of the relevant cash dividend to which they would otherwise have been entitled. This resolution seeks to authorise the Board to make such an offer in accordance with the Company’s proposed Articles of Association and is therefore subject to the passing of resolution 10.


80

NOTES

NOTES


81


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CHARLES STANLEYOFFICES

BATH26 Queen SquareBath BA1 2HX 01225 335616

BEDFORD11 Grove PlaceBedfordMK40 3JJ 01234 718888

BIRMINGHAMCivic House156 Great Charles StreetBirmingham B3 3HN 0121 234 6700

BOURNEMOUTH2 Westover RoadBournemouth BH1 2BY 01202 317788

BRIGHTON & HOVE24A Wilbury GroveEaton Road HoveEast Sussex BN3 3JQ 01273 229880

BRISTOL58 Royal York CrescentCliftonBristolBS8 4JP 0117 974 6565

CAMBRIDGERichmond House16-20 Regent StreetCambridgeCB2 1DB 01223 316726

DORCHESTER1 Colliton WalkDorchesterDorset DT1 1TZ 01305 251155

EASTBOURNE14 Hyde GardensEastbourne East SussexBN21 4PR 01323 437440

EDINBURGH2 Multrees WalkSt Andrew SquareEdinburgh EH1 3DQ 0131 550 1200

EXETERBroadwalk HouseSouthernhay West Exeter EX1 1TS01392 453600

GUILDFORD70-72 Chertsey StreetGuildfordSurreyGU1 4HL 01483 230810

IPSWICH16 Northgate StreetIpswich IP1 3DB 01473 297700

ISLE OF WIGHT1 Langley CourtPyle StNewportIsle of Wight PO30 1LA 01983 520922

LEEDS14 King StreetLeeds LS1 2HL0113 200 5230

MANCHESTER2nd FloorSunlight HouseQuay StreetManchesterM3 3JZ 0161 828 0200

MILTON KEYNESWitan Court305 Upper Fourth Street Central Milton Keynes MK9 1EH 01908 691681

NEWBURY4 The PentanglePark Street Newbury RG14 1EA 01635 553700

NORWICH3 St Andrew's HillNorwichNR2 1AD 01603 665990

NOTTINGHAMParliament House42-46 Upper Parliament StreetNottinghamNG1 2AG0115 958 0200

OXFORDAbbey House121 St AldatesOxfordOX1 1EA01865 320000

PLYMOUTH1A The CrescentPlymouthDevonPL1 3AB01752 666661 (Benefit Consultants) 01752 502800

READINGDukesbridge Chambers1 Duke StreetReadingRG1 4SA 0118 902 2800

SOUTHAMPTONLatimer House5-7 Cumberland PlaceSouthamptonSO15 2BH 023 8038 1800

SOUTHEND-ON-SEAHamilton House12 Nelson StreetSouthend-on-SeaEssex SS1 1EF 01702 221700

TRURO65 Lemon StreetTruroCornwall,TR1 2PN 01872 263131

TUNBRIDGE WELLS43 Dudley RoadTunbridge WellsKent TN1 1LE01892 557100

WIMBORNECrown Court6b The SquareDorsetBH21 1JA01202 882 820

LONDON25 Luke StreetLondon EC2A 4AR 020 7739 8200

EBS Management Plc

LONDON25 Luke StreetLondonEC2A 4AR0207 149 6560

Garrison Investment AnalysisLimited

BEVERLEY5-7 Landress LaneBeverleyYorkshireHU17 8HA01482 861455

Griffiths & Armour (Financial Services) Limited

LIVERPOOLDrury House19 Water StreetLiverpoolL2 0SE 0151 255 2662

WATFORD34 Clarendon RoadWatfordWD17 1JJ01923 804911

Charles Stanley & Co. Limited, EBS Management PLC, Garrison Investment Analysis Limitedand Griffiths & Armour (Financial Services) Limited are authorised and regulated by theFinancial Services Authority and are wholly owned subsidiaries of Charles Stanley Group PLC.

© Charles Stanley Group PLC11.0

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