EFTA01112925

N M Rothschild & Sons Limited Annual Report 2012 On ROTHSCHILD EFTA01112925 EFTA01112926 Contents Directors 5 Chairman's statement 6 Business review 7 Report of the Directors 18 Committees 20 Statement of Directors' responsibilities 21 Independent auditor's report 22 Financial statements 23 Consolidated income statement 24 Consolidated statement of comprehensive income 25 Consolidated balance sheet 26 Consolidated statement of changes in equity 27 Company balance sheet 28 Company statement of changes in equity 29 Cash flow statements 30 Notes to the financial statements 31 Group directory 91 N M Rothschid & Sons Limited I Registered Number 925279 EFTA01112927 World presence The Rothschild banking group has 57 offices in 45 countries and employs over 2.800 people around the world.Through its network of subsidiaries and affiliates. the Group provides global financial advisory. banking and treasury. merchant banking. and wealth management services to governments. corporations and individuals worldwide. North America Europe and The Middle East Calgary Abu Dhabi Doha Lisbon Prague Mexico City Amsterdam Dubai London Rome Montreal Athens Frankfurt Lorembourg Sofia New York Barcelona Geneva Madrid Stockholm Toronto Bermingham Guernsey Manchester Tel Aviv Washington Brussels Istanbul Milan Warsaw Bucharest Kiev Moscow Zurich Budapest Leeds Paris ....,.‘..... S h t, South America Africa Asia Pacific Santiago Harare Auckland Mumbai Sao Paulo Johannesburg Beijing New Delhi Hanoi Seoul Hong Kong Shanghai Jakarta Singapore Kuala Lumpur Sydney Manila Tokyo Melbourne Wellington Pagel I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112928 Directors Chairman David de Rothschild Deputy Chairman Executive Directors Andrew Didham Anthony Salz Non-Executive Directors Daniel Bouton Eric de Rothschild Peter Smith Mark Evans N M RothccPM & Sorts Limited I Registered Number 925279 I Page 5 EFTA01112929 Chairman's statement Last year I commented that it was very difficult to state with any degree of certainty that the economic crisis is behind us Unfortunately I was correctThe encouraging signs that were seen in the frst half of 2011 were soon replaced with further concerns aver the impact of the eurozone troubles on the global economy. These concerns have continued into 2012 and the economic outlook for the eurozone in particular. remains uncertain. While the economic climate has impacted the resifts of the Group we coatnue to perform well and have been less affected than many in oil sectcr.We continue to improve our market position. which with the continued maintenance of high levels of liquidity and capital strength stands us 'in good stead for the future. In early April 2012 I announced that Paris Orleans. the holding company of the Rothschild group. was reorganising and simplifying its structure.The reorganisation was approved by Paris Orleans shareholders in june.As a result Paris Orleans acquired all the shares 'in the Paris business of Rothschild & Cie Banque not currently owned and brought under its ownership substantially all the shares in Rothschilds Continuation Holdings AG (N M Rothschild & Sons Limited's ("NMR") Swiss parent company). At the same time. Paris Orleans converted 'into a French limited partnership which ensures the commitment and control of the our business was reflected in our decision in 2007 to develop Rothschild family over the long term both cornerstones of the our new London head office building.The new building at "New Group's culture and competitive positioning, Court". which has become something of a landmark in the City To achieve this significant change to our structure in the ctrrent of London. was occupied in mid 201 1 on time and on budget It climate highlights the degree of support that exists from both the is providing much improved client meeting facilities and working Rothschild family and the non-family shareholdersThese changes conditions for our staff provide a simplified organisational structure that will foster I have to report with great sadness that my cousin Leopold de increased operational efficiency in the Group's businesses.They Rothschild passed away in April this year. Leo was a wonderful. also provide a significantly enhanced group regulatory capital generous man who contributed to NMR and to other position in the face of stringent Basel Ill regulatory requirements. organisations 'in so many ways. induding sitting as a director These changes provide a strong base for the Group to of the Bank of England. His life spans an era of extraordinary move forward.This includes the NMR group which. in 201 1. change at NMR: he was one of very few people to have worked continued to develop its fund management activities through in three 'incarnations of New Court Leo was heavily involved the acquisition of Elgin Capital. an established CLO manager. in establishing our South American offices as well as bening bringing the amount of assets under the Group's management together a number of continental firms with links to Rothschild. to some L2 billion.The Banking business continues to build the He was always very committed to the welfare of our staff. and his Five Arrows Leasing business which unfailingly delivers a robust dedication to our pensioners over the years has been unfailing. performance with good margin income and continuing low This is his diamond jubilee year at NMR levels of impairmentThe commercial loan business. primarily in Finally.I should like to thank my fellow directors and all our staff commercial property and leveraged finance sectors. continues for their hard work and professionalism over the last year in to contract as part of our planned and long term withdrawal what are testing times. from this part of the Banking business. Our Global Financial Advisory business has not been immune from the world's economic troubles but continues to prove that its model is the right one of providing impartial. expert advice David de Rothschild to corporations. governments. institutions and individuals.We 24 July 2012 consistently deliver the highest quality advice with discretion. integrity and insight in the areas of M&A and strategic advisory along with financing advisory.This formula continues to win over clients - globally in 201 1 we ranked sixth by number of completed deals (up from seventh in 2010) and achieved top ten positions in most of our key markets. The confidence we have always had in the long term future of Page 6 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112930 Business review EFTA01112931 Business review Financial review Expenses N M Rothschild & Sons Limited has been a leading name in the Total operating expenses fell L23.6 million (7%) to C320.3 million. London financial markets since 1798. providing a comprehensive Staff costs account for C251.9 million (79%) of total operating range of advisory services to its clients alongside debt fund expenses (201 1: C274.8 million or 80%) and include profit share management and specialised lending.The Company is the payments which have fallen reflecting the performance of the largest entity within the Rothschild banking group. which has a Group's businessesThis continues to provide a significant degree presence in 45 countries around the world and continues to be of flexibility in the cost base. Administrative expenses were controlled by the Rothschild family via Paris Orleans. the French marginally down on the prior year which reflects the on-going listed holding company focus on cost control. The principal subsidiaries consolidated by the N M Rothschild & Sons Limited Group are Rothschild Europe BV and Rothschild Australia Limited. which provide financial advisory services overseas. and Five Arrows Finance. a UK-based asset Tax financing group. The Group's tax charge fa the year was LI 0.3 million. compared with a charge of L15.6 million in the price year. Results overview Balance sheet The latter part of 201 I was again an extremely turbulent time as markets focussed on the troubles in the eurozone. In the light 'total assets of the Group were L2.285.0 million at 31 March of market ccoditions. the Group's profit after tax for the year of 2012.a reduction of L539.6 million (19%) compared to the L24.6 million was satisfactory. prior year end.This is due to further reductions in the legacy commercial loan book, following the strategic decision to reduce commercial lending exposures. Alongside this. the Group has repaid E350 million of MTN's and part of the first Rothschild Income Reserve term retail deposit offering. Total fee and commission income earned from dients fell by Total shareholders' equity attributable to ordinary shareholders 8% to C355.0 million as would be expected given the reduction reduced by C68.5 million (16%). to L353.6 million. largely due in global deal activity. M&A fees were marginally up on the to actuarial losses on defined benefit pension schemes through year at L259.8 million (2011:L254.1 million). However other reserves of L49.9 million (after tax) and dividends paid of financial advisory fees. which include fees from debt advisory L18.0 million. In common with most defined benefit pension and restructuring and equity advisory. declined to L75.4 million schemes, the increased deficit was driven by falling gilt yields. (201 1: L109.7 million).The revenue mix of the Global Financial A reconciliation of movements in total shareholders' equity is Advisory business continues to be well diversified by sector with provided in the consolidated accounts on page 27. no dependence on a small number of engagements or clients. Net interest income decreased marginally to L17.4 million. reflecting the continued reduction in legacy commercial lending. Other operating income. which includes operating lease income. rental income and dividend income. increased by 20% to LI9.9 million. largely as a result of gains on the disposal of available-for- sale securities. Impairment losses of LI 2.8 million were up compared to the prior year. as would be expected given the market conditions in the latter part of the year Page 8 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112932 Business review (continued) Asset quality, funding Regulatory capital and liquidity and liquidity Since the onset of the crisis in financial markets in 2007. the Summarised balance sheet Group has continued to focus on conservatively managing its 2012 2011 liquidity and capital The risk asset ratio was 20.3% at 31 March Cm Cm 2012 (3 I March 2011:20.7%) and the overall leverage ratio of Assets assets (excluding liquid assets) to equity is only 3 times. Prime liquid assets 686 852 The Company is in full compliance with the FSA's requirements. Funding and liquidity policies are based on the Basel 3 approach Other liquid assets 222 552 and reflect the Group's low appetite for liquidity riskThe Group Total liquid assets 908 1.404 remained significantly in surplus to regulatory and internal Customer loans 818 881 liquidity guidelines throughout the year. Other assets 559 540 Total assets 2.285 2.825 Liabilities Bank deposits 178 176 Customer deposits 1.086 1.235 Debt securities in issue 142 461 Other liabilities 382 388 Total liabilities 1.788 2.260 Equity 497 565 Total equity and liabilities 2,285 2.825 During the year total loans and advances to customers reduced by 7% to £818 million.The portfolio of loan assets. which is secured on a wide range of collateral types and well diversified by sector. includes commercial property finance. leveraged finance, natural resarces. niche asset finance and private client lending.The Banking team continues to perform a rigorous process of credit analysis for each individual exposure at inception and in subsequent monitoring. Impaired loans at 31 March 2012 represented 18% of loans and advances (2011: 1 1%) with provision coverage of 48% (201 I: 68%). The Group's exposure to credit risk is further analysed in note 22 to the financial statements. The Group continues to employ a conservative approach to liquidity management Around 40% of total assets are held in liquid form, with the majority of this held with the Bank of England or in UK Government Securities.The Group has no exposure to the weaker Eurozone governments. Raiding is focused on the highly successful Rothschild Reserve retail deposit programme. augmented by relationship deposits from corporate, institutional and other depositors to ensure sufficient diversity Customer deposits were [1.086 million at 31 March 2012. representing 48% of total equity and liabilities. The Group's loans to customers are entirely funded by customer deposits. N M Ftottischad & Sons Limited I Registered Number 925279 I Page 9 EFTA01112933 Business review (continued) Our values are at the root of our culture and define our client Operating Divisions offering We distinguish ourselves from our competitors in the following respects: • Focused on clients - Nothing gets in the way of our Global Financial Advisory* impartial advice for each and every client.We sell nothing but the best advice and execution capabilities. Overview • Expert - Senior bankers lead every assignment from start Our Global Financial Advisory business provides impartial. to finish. We advise on more deals than any other adviser. evert advice to corporations. governments. institutions including many of the most complex and transformational and individuals. assignments in the world. All Rothschild clients benefit from our collective intellectual capital. specialist sector and We deliver the highest quality advice with discretion. integrity product expertise and wealth of experience. and insight in the areas of M&A and strategic advisory and financing advisory. Informed - We combine global scale with deep local networks,With approaching 1.000 advisers on the ground With approaching 1.000 advisers based in over 40 countries. around the world. we are well placed to help clients. our scale. reach. intellectual capital and local knowledge enable wherever their business takes them. us to develop relationships and deliver effective solutions to support our clients. wherever their business takes them. During Long term - As a family controlled business. we are the year we have made a number of significant hires at Board unconstrained by short-term thir*ing and quarterly level. senior adviser level and across the divisions. reporting.We can take a long-term view to deliver each client's interests. Despite the tout business environment and continuing economic uncertainty we have continued to remain resilient • Trusted & independent - We know that long-lasting and advised on around 500 transactions globally in 201 1. with a relationships depend on the quality of our advice: we care value totalling over US$400bn. about our clients' success as much as they doThe scale of our business means that we are not dependent on the outcome of any one transaction.VVe are only as good as our last Rothschild's objectivity, its global assignment: this has been true for more than 200 years. network, and its commitment to a relationship-driven approach, combine to create value for our clients; building value through stability, integrity, and creativity Capital structure. access to funding and liquidity remain high priorities for our clients in the current environment.We continue to strengthen our position across the financing advisory spectrum to support this need. We are uniquely positioned to leverage opportunities in the market with our global network. spread of businesses and reputation for giving robust impartial advice. •Are Global FinanciafAdvisory business is managed on a global basis and hence the commentary refers to the global business. However, references to specific deals are only those that have been undertaken by the Company or its subsidiaries. Page 10 I N N Rothschild & Sons Limited I Registered Number 925279 EFTA01112934 Business review (continued) M&A and strategic advisory Rothschild M&A 201 1 league table review of the year rankings by geography Rothschild provides the highest quality M&A advice and Rank by Rank by execution expertise. CountryfRegion number value We are adviser of choke to both large and mid-cap corporates. Worldwide 11 governments. families and individuals worldwide.We are also Worldwide Cross Border 9 one of the leading advisers to financial sponsors worldwide, forming long-term relationships to understand their needs. Europe 6 We have an unparalleled track record, advising on more deals UK 4 than any other adviser in Europe for the past ten years. France 2 We have built this global success through: Germany 2 6 • Our unbiased, objective advice. free from conflicts and Italy 20 cross-selling Spain 10 13 • Our trusted partnerships with client, using our global Central & Eastern Europe 2 6 perspective and depth of industry expertise to help achieve their long-term objectives United States 14 12 • Our global presence, bringing in-depth insight to complex Latin America 8 12 cross-border transactions across world market, and India 3 superior expertise in domestic markets Asia (ex. Japan) 9 • Our integrated global network of industry sector specialists. pooling knowledge from across local markets Australia II • Our extensive experience in bid defences, joint ventures Middle East & Africa 16 and strategic affiances, de-mergers and spin-offs. and Completed deals fairness opinions Source:Thomson Reuters We also have specialists in areas including corporate governance, privatisation programmes, pension funds and board committee advice. Globally in 2011 we ranked sMth by number of completed deals. and achieved top ten positions in most of our key markets. We held top S positions for M&A advice in the consumer products, hotels & leisure, infrastructure, property. media. telecoms, transport and utilities sectors. N M Rothschild & Sons Limited I Registered Number 9252791 Page I I EFTA01112935 Business review (continued) During the financial year we advised on some of the largest and We also continued to receive industry recognition: highest profile deals of the year including Cairn Energy (2011) The Banker Investment Banking awards (2011) • US$6.Obn disposal of a 40% stake ri • Most innovative Investmem Bank for M&A • Cairn Inda to Vedanta Resources Real Deals Private Equity awards (2012) Extract Resources (2012) • UK Deal of the Year and Grand Prix Deal of extrusci • Advisor in relation toA$2.2bn takeover offer the Year: by CGNPC-URC and CADFund ISIS/Wiggle Iceland Iceland management and co-investors (2012) Private Equity News Europe (2011) • LI .SSbn acquisition of Iceland Foods • Financial Sponsors Coverage Team of the Year EDP (Current) The Banker Investment Banking awards (2011) 0 • €2.7tri sale of a 21.35% stake by the Fbrtuguese State & Strategic Partnership • Most innovative Investment Bank for with the acquirer. Chna Three Gorges Growth Companies VOLKSWAGEN Prima ins Financial News Europe awards (2011) Volkswagen (2011) • €3.7tri public tender offer for al shares • European Independent Adviser of the Year outstanding of MAN SE FT & meigermarket European awards (2007-2011) EWES SA Polkomtel (2011) • Mid-market Financial Adviser of the Year Pu • Disposal of the company to Spartan Capital Holdngs for E4.5bn Anadolu Efes (2012) 0 • Adviser to Anadcdu Efes on the formation of a strategic aliance with SABMiller n Twice% Russia and Central Asia (2 Rots-Royce Rolls-Royce (2011) • €3.13tn public tender offer forTogrum effected via a IV between Rolls-Royce and Daimler El Domedc EQT (2011) • E1.4tri acqusitton of Dcmetic Group from a consortium of lenders. board directors and employees Walmad Walmart (2011) • Acquisition of a controlling Merest in Massmart for an aggregate consideration of c.US$2.Sbn Queensland Government (2011) I • Chair of the Lead Adviser Consortium on A$I6to nfrastructure assets sales programme \HI AREA Property Partners & Delancey (2011) • Potential acquisition of Minerva PLC for L 1.1bn Page 12 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112936 Business review (continued) Financing advisory review EMEA Restr actur rng US$bn No Debt advisory and restructuring fl il! . .L: the largest and most experienced independent 2 Houlihan Lokey 35.5 13 debt advisory and restructuring teams, with breadth and depth 3 Goldman Sachs 26.5 8 of experience. the broadest client base. the widest range of 4 Blackstone 23.0 8 pricing and leverage sources, and a proven track record of delivering deals. 5 Gleacher & Co 13.8 3 We have an unsurpassed deal flow and expertise in structuring 6 Lazard 13.2 13 deals for today's markets. 7 PwC 1 1.4 6 Our debt advisory expertise encompasses all financing markets 8 Alvarez 24 Marshal 9.0 2 including banks, bonds, ratings, derivatives and hedging, 9 Moelis & Co 7.8 3 Our restructuring experience includes lender negotiations, recapitalisations. capital raising exchange offers. distressed 10 Leonardo & Co 6.2 3 M&A, in-court and out-of-court transactions and creditor Announced deals by value (1 January to 31 December 201 1) representation. Source Thomson Reuters January 2012 We provide our clients with: • Objective, independent client-focused advice, free from the conflicts of interest faced by balance sheet banks • Capital structure advice that optimises both terms and 2 Lazard 70.0 49 sources of debt financings, refinancings and restructuring 3 Houlihan Lokey 62.1 35 • Innovative advice to companies, creditors, governments and private equity houses on financing strategy raising debt and 4 Blackstone 46.8 27 ratings, and hedging strategies 5 Moelis & Co 38.5 22 • A creative and resourceful approach, bringing innovative 6 Goldman Sachs 31.2 13 solutions to maximise value and options for our clients 7 Alvarez & Marshal 19.3 9 We are in constant dialogue with banks. investors and rating agencies allowing us to understand the real picture. 8 PwC 13.8 9 Rothschild has advised on US$850bn of debt advisory and 9 Ffl Consulting 9.8 5 restructuring assignments since January 2009. 10 KPMG 8.8 7 Rothschild's debt advisory business advised on over 140 Annouiced deals by value (1 January to 31 December 201 1) transactions across the credit spectrum valued at c.US$95bn Source Thomson Reuters January 2012 in 201 1. Rothschild ranked No.1 in EMEA and Global restructuring league tables for 201 1 and held top 5 positions in the US and Asia & Pacific. N M Rothschild & Sons Limited I Regjstercd Number 9252791 Page 13 EFTA01112937 Business review (continued) Our ability to complete complex projects for both corporate Private Equity News Europe (2011) clients and state/government organisations was reflected in the • Turnaround and Restructuring Adviser of following landmark transactions and industry awards: the Year IFR (2011) Iceland Iceland Foods (2012) • Debt advice on raisng [8.135m of senior • EMEA Restructuring of theYear: facilities backing management's buyout of Truvo Iceland Foods The Banker (2012) Alibaba Group Holding Limited (2012) • Middle East Restructuring of theYear: • US$3.0bn debt finanong for the privausation Nakheel of Akbaba.com from the Hong Kong Stock Exchange and corporate purposes Equity advisory Nakheel (2011) Rothschild offers independent advice to clients on a wide range 6 • Restructuring of US$' Sbn external liabilities and US$7.3bn new money contribution of equity capital raising transactionsWith teams on the ground in key markets around the world. we have an unparalleled global footprint and deeper resources than any other adviser in this Miter for Finance of the Republic of Ireland (2011) area. Our expertise includes IPOs. secondary offerings. block • E30bn restructunng of State-owned Anzio trades. spin-offs and convertible instruments.We have advised Irish Bank on over 100 transactions in 21 countries with a combined • Financial Adviser deal value of US$270bn since January 2009. more than any of De Beers (2011) Our competitors. DE BEERS • Debt advice on the signing of a new US$2bn Rothschild is the leading adviser in equity transactions muhicurrency Credit Facility worldwide with equity advisory specialists in London. Paris. Associated British Ports (2011) Frankfurt. Milan. Moscow. Hong Kong. Sydney and New York ASP Assanted ••M Farb • Debt and derivatp.es advice on comprehensive Our Mitt volume of assignment enables us to gain a detailed refinancing of the grow through a 624bn underStaning of investor behaviour: optimal deal structu'e. secured coporate programme performance of key market participants and the latest market regime Pamplona Capital Management (2011) trends. As a result. Our teams can provide dients with unique • Advice to Sponsor on US$2. Ibn finanoal insights into the execution of recent offerings and the track record restrucuring of KCA Deutag of bookrumers. and equip dients with the latest deal technology. AlYell Yell Group plc Our pure advisory business model enables us to focus solely on • Debt advice on covenant reset and achieving the best possible result for our clients and minimising other amendments to its existing 63.11:n their execution risk. providing bank facilities • Honest. strategic views of what is achievable in prevailing Dubai World markets Debate at, • US$31.8bn financing to Dubai World on • Rigorous analysis support for issuers in negotiations. and Itabilfty management tactical judgements DSSmith Plc DS Smith Plc (2012) • Coordination of bookrunners to maximise value for our • Debt advice on new E700m acquisition finance facility to support proposed acquisition clients bringing discipline and precision to the execution of of SCA Packaging equity offerings AnkCowp,-. APA Group (2011) • Arrangement of the A$310m non-recourse bank debt as pan of the 80% equity sell down n Allgas Grainger (2011) 9rain9er • Debt advice on a L840rn Forward Start Facility due 2014-2020 Page 14 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112938 Business review (continued) We have advised on some of the world's largest equity capital manager:with over E I.3 billion of senior debt arrently under markets transactions during the past year.These include: management_This acquisition has provided both critical mass and additional expertise to our existing business, creating a MOINEIMMEI Porsche SE (2011) platform from which we can latch future debt based funds. • E5.0b1tights issue In 2009 we launched Rothschild Reserve. a deposit-taking • Financial adviser to PorscheAurornotil Haldrig SE business, which compkincriu the wealth management activities samsente Royal Bank of Scotland (2011) of the Rothschild Group.There have been five highly successful • USSI 25bn IPO of Samsonite on the Rothschild Reserve deposit offers to date and further products Hong Kong Stock Exchange are planned. • Adviser to Shareholder NORMA Group (2011) • EIBfirn IPO of NORMA Group Risk Management • Adviser to Company and its shareholders The Chief Risk Officer co-ordinates risk policy and promotes BC Partners & CInven (201I) the development and maintenance of effective procedures • ES70rn Accelerated Bock Build throughout the Group. Our internal audit team reviews our • Adviser to BC Partners & Onven internal control framework and reports its findings to the Audit Committee. Lenzing (2011) The responsibilities and membership of the Board Committees • E620m re-IPO on Austrian Stock Exchange invoked in the oversight of risk management are set out on • Adviser to the Company and its Shareholders page 20. 0 Bilfinger Berger (2011) latIllIGIR ItIGIII • 12I 2m IPO of Bilfinger Berger Global Credit Risk Infrastructure Find Credit risk arises from lending and trading activities.The Credit Committee sets limits, reviews concentrations, monitors exceptions and makes recommendations on credit decisions to Banking the Group Assets and Liabilities Committee. The Rothschild Barking business is focused on the growth Credit risk arising from treasury dealing activities is measured on activities of Debt Fuld Management. Private Client Lending and a real-tine basis whereby all exposures relating to a particular Asset Finance. As planned, there has been a further reduction counterparty are aggregated and monitored against lit Credit in the commercial loan books during the year and whilst risk on derivative transactions is measured by summing the impairment levels have increased compared to last year, this current exposure with an allowance for potential future exposure. reflects a cautious approach in the fight of the current uncertain Details of credit exposures, including risk concenaations, are set economic outlook out in note 22 The commercial loan books are primarily in the Commercial Property and Leveraged Finance sectors.The Commercial Market Risk Property loan portfolio is focused on mid market property Market risk arises as a result of activities in arrency, interest rate, companies secured on commercial properties throughout debt and equity markets-During the year, evasive to market risk the UK.The Leveraged Finance loan portfolio is senior and has continued to be small in relation to capital, as trading activities mezzanine debt in the larger European leveraged buy-outs. have been focused on managing the Group's exposure to interest RothscNId's banking activities include the FiveArrows Leasing rate and [Latency risk Limits on market risk exposure are set by businesses, which provide a range of specialist asset finance the Group Assets and Liabilities Committee. facilities to UK companies. Specific niches include print finance, broadcast asset based lending and vehicles to local authorities. Details of market risk exposures are disclosed in note 2.3. The understanding of these sectors has resulted in the businesses delivering a robust performance throughout the year. based upon good margin income and continuing low levels of impairment Rothschild continues to develop its Debt Fund Management activities. In addition to managing c.E300 million of existing senior debt and mezzanine funds. during the year the business completed the acquisition of Elgin Capital, an established CLO N M Rothschild & Sons Limited I Registered Number 925279 I Page 15 EFTA01112939 Business review (continued) Liquidity Risk Liquidity risk arises from the funding of our lending and trading activities.The Group Assets and Liabilities Committee recommends policies and procedures for the management of liquidity risk. Liquidity is measured in accordance with regulatory guidelines on a behaviourally adjusted basis and on a stressed basis.The results are monitored against limits which have been approved try tie Group Assets and Liabilities Committee. Operational Risk Operational risk, which is inherent in all business activities, is the risk of loss resulting from inadequate or failed internal processes. people and systems or from external events. Key to management of operational risk is the maintenance of a strong framework of internal controls.These are subject to regular independent review by the internal audit department, whose findings are reported to the Group Audit Committee which monitors the implementation of any recommendations. Operational risk encompasses reputational risk, which is particularly relevant to the business. Reputational risk is managed through formal approval processes for new clients and new products. In addition, operational procedures for the conduct of business are subject to continual monitoring.The Group maintains insurance policies to mitigate loss in the event of certain operational risk events. Other Material Risks Other risks which are, or may be, material arise in the normal conduct of business. Such risks, which include concentration risk pension fund risk and residual risk are identified and managed as part of the overall risk controls and are taken into account in the Board's periodic assessment of capital adequacy. Loss of key personnel is a material risk to the business.The Group mitigates this risk through its training, career development and remuneration policies. Page 16 IN M Rothschild & Sons Limited I Registered Number 925279 EFTA01112940 Report of the Directors Committees Statement of Directors' responsibilities Independent auditor's report EFTA01112941 Report of the Directors The Directors present their Directors' report and financial Typical beneficiaries continue to indude organisations statements for the year ended 31 March 2012. concerned with elderly people. healthcare, social welfare and education. Requests for support from staff in respect of charitable causes with which they are associated, or have an involvement are actively encouraged. Principal Activities and Business Review N M Rothschild & Sons Limited (the Company') and its Rothschild in the Community subsidiary undertakings (together with the Company:the Through the Rothschild in the Community programme we Group'). provide a range of banking and financial services. encourage our people to volunteer their time for community The Company's principal place of business is at New Court, initiatives that make a real difference to people's lives. In St. Swithin's Lane. London. EC4N 8AL A review of the activities 201 1/12 40% of NMR's London staff took part in our of the Group for the year, including an indication of likely future volunteering programme. developments, is contained in the Chairman's statement on page 6 and the Business review on pages 7 to 16. Education Vsk work in partnership with three schools in economically deprived areas dose to our offices Bow School of Maths and Results and Dividends Computhg, Old Palace Primary School and South Camden Community Schod. Ow volunteers partiopate in literacy The profit for the financial year attributable to shareholders support programmes, careers mentoring. employability events, after tax and non-controlling interests was £8,732,000 work experience and support for children in transition from (20 1 1:t17,156,000).The profit attributable to shareholders primary to secondary school.Through all of this we aim to has been dealt with as follows: develop students' confidence, broaden their horizons and help 2012 2011 them on the path towards achieving social mobility.We also C000 C000 believe there is a role for us to play in supporting the schods' Oninary dividends paid 18.000 25.000 leadership teams as they work to drive up standards, and we are represented on the governing bodies of all three schools. Transfer (from) reserves (9.268) (7241) We are delighted that our Business in the Commisiity 'Sign& 8,732 17.156 first awarded in 2010 in recognition of our work with schools, has been reaccredited in 2012, indicating that our partnerships have developed and continue to make a positive impact Corporate and Social Community development We support community organisations working to combat the Responsibility effects of deprivation in the areas in which our partner schools The Group is committed to supporting the principle of equal are based.Volunteers have this year supported the Bromley by Bow Centre, City Gateway, Providence Row and the London opportunities and opposes all forms of unlawful or unfair VVildlife Trust, amongst others, volunteering on behalf of isolated discrimination on the grounds of colour, race, nationality, ethnic origin, gender, marital status disability, religion, age or sexual elderly people, young people in vocational training, London's orientation.The Group's aim is to recruit, train and promote the homeless and our environment best person for the job and to create a working environment free from unlawful discrimination, victimisation and harassment and in which all employees are treated with dignity and respect. The Group is committed to supporting charities both in the areas in which it operates and in the wider community.The Charities Committee was established in 1975 to consider the hundreds of requests received every year from charities seeking financial support.The sum of £544.000 (20I I: £546,000) was charged against the profits of the Group during the year in respect of gifts for charitable purposes. No political contributions were made during the year. Page 181 N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112942 Report of the Directors Rothschild and the Environment Supplier Payment Policy We understand that the Group's day to day operations have an The Grog) does not currently follow any code or standard on impact on the environment and we are committed to reducing payment practice.It is the Group's policy to confirm the terms that impact, promoting environmental awareness among our of payment with suppliers when agreeing the terms of each people, and to achieving continuous improvement in our transaction to ensure that those suppliers are made aware of the environmental performance. Environmental stewardship is the terms of payment and to abide by the terms of payment Included responsibility of the Environment Committee. within liabilities is the amount due to trade creditors which. at 31 March 20 1 2. represented 34 days purchases cutstandog. Energy use Our greatest environmental priority is to keep reducing our use of energy, particularly electricity and in recent years we have achieved considerable success in this. Having moved into Directors our new building we are now in the process of establishing The names of the present Directors of the Company are shown a new baseline energy footprint and beginning to map the on page 5- opportunities for future improvements. k is with much regret that the Directors record the death, on 19 April 2012, of Mr Leopold de Rothschild. Business travel Air travel and the ability to meet our clients face to face is an important part of our business, and a significant contributor to our overall COI emissions.We monitor our air travel and Financial Risk Management measure the associated carbon emissions by cabin class.We The financial risk management objectives and policies of the operate a 'Green Flights' scheme to make staff aware of the Company and the Group in respect of the use of financial greater level of emissions associated with flying Business Class instrument.. together with analyses of evosures to credit and offer them the opportunity to choose a lower cabin class in risk market risk and liquidity risk, are set out in note 2 to the return for a donation to the charity of their choice. financial statements. Responsible use of resources We promote a policy of reducing waste, reusing what we or others can, and recycling as much as possible. In London the Auditor unused food from our kitchens is composted and converted KPMG Audit Plc have indicated their willingness to continue in into fertiliser, and any other waste which is not recycled is sent office and a resolution to re-appoint them and to authorise the for incineration with energy captrre, thus diverting it from Directors to determine their remuneration will be proposed at landfill.We purchase recycled paper and our printers are set to the Annual General Meeting, in accordance with Section 485 of print double-sided as defauttWe use mugs instead of disposable the Companies Act 2006. coffee cups where possible. and filtered tap water in place of bottled water in meeting rooms.We have been awarded Gold fort years running in the Clean City Awards. Audit Information The Directors who held office at the date of approval of this report confirm that so far as they are each aware. there is no Staff relevant audit information of which the Company's auditors During the year the Group continued with its long-established are unaware, and each Director has taken all the steps that he policy of providing employees with information on matters of ought to have taken as a Director to make himself aware of any concern to them and on developments within the Group by relevant audit information and to establish that the Company's a series of notices to staff The Group encourages staff to put auditors are aware of that information. forward their views through a staff consultative committee.The By Order of the Board interest of all staff in the performance of the Group is realised through the Group's profit sharing scheme in Which staff at all levels participate. The recruitment, training, career development and promotion of disabled persons is fully and fairly considered having regard Anne-Marie Seer to the aptitudes and abilities of each individual. Efforts are made New Court, St Swithin's Lane. London EC4N 8AL to enable employees who become disabled during employment to continue their career with the Group and. if necessary 24 July 2012 appropriate training is provided. N M Rothschild & Sons Limited I Regjstercd Number 925279 I Page 19 EFTA01112943 Committees To facilitate the efficient administration of the Company's and the Group's affairs. certain functions and responsibilities have New Client Acceptance been delegated by the Board to the following committees, the terms of reference and membership of which are Committee regularly reviewed. This committee approves, from a reputational, money laundering and due diligence perspective, all new dients to be accepted by the Global Financial Advisory business. Group Management Membership: Crispin Wright (Chairman). Sarah Blornfield.Adam Greenbury Dominic Hollamby Nicholas Ivey Axel Stafflage. Committee Albrecht Stewen Maurice Topiol, Stuart Vincent William Wells, Jonathan Westcott Adam Young. The Group Management Committee reports to the Board of Rothschilds Continuation Holdings AG. an intermediate parent company. Its purpose is to formulate strategy for the Rothschild Group's businesses. to assess the delivery of that strategy, Group Audit Committee to ensure the proper and effective functioning of Group This committee of the Board of Rothschilds Continuation governance structures, operating policies and procedures, to Holdings AG supervises and reviews the Group's internal audit define the Group's risk appetite and to be responsible for the arrangements, liaises with the Group's external auditors and management of risk monitors the overall system and standards of internal control. Membership: Nigel Higgins (Chairman), Alexandre de Rothschild. Membership: Peter Smith (Chairman), Sytvain Hefes. Paul Barry, Mark CrumpAndrew Didham, Marc-Olivier Laurent, Bernard Myers, Judith Sprieser. Robert Leitio.Veit de Maddalena, Richard Martin, Olivier PecouxionathanWestcott Group Remuneration and Group Assets and Nominations Committee Liabilities Committee This committee sets remmeration policies for the Group, oversees the annual remuneration review and approves This committee reports to the Group Management proposals for promotion. Committee. It is responsible for ensuring that the Group has prudent funding and liquidity strategies, for the Membership: Sylvain Hefes (Chairman), David de Rothschild, efficient management and deployment of capital resources Eric de Rothschild, Mark Evans. Peter Smith. within regulatory constraints, and for the oversight of the management of the Group's other financial strategies and policies set by the Group Management Committee. Membership:Anthony Alt (Chairman), Peter Barbaro. Christopher Coleman Paul Copsey, Mark Crump,Andrew Didham, Denis FallecAdam Greenbury, Richard Martin, Matthias Montani,AlexanderTroschelionathan Westcott Philip Yeates. Credit Committee This committee authorises and reviews all credit exposure to new and existing counterparties. Exposures exceeding certain limits are subject to ratification by the Group Assets and Liabilities Committee. Membership:Andrew Didham (Chairman), Christopher Coleman Michael Clancy, Paul Copsey Adam Greenbry, Peter Griggs, Debra Lewis, Paul Thompson, Philip Yeates. Page 20 IN M Rothschild & Sons Limited I Registered Number 925279 EFTA01112944 Statement of Directors' responsibilities in relation to the report of the Directors and the financial statements The Directors are responsible for preparing the Report of the Directors and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law the Directors have elected to prepare both the Group and the Parent Company financial statements in accordance with IFRS as adopted by the EU and applicable law. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group and Parent Company for that period. In preparing each of the Group and the Parent Company financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent • state whether they have been prepared in accordance with IFRS as adopted by the EU: and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that the financial statements comply with the Companies Act 2006.They have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. N M Rothschild & Sons Limited I Registered Number 925279 1 Page 21 EFTA01112945 Independent auditor's report to the members of N M Rothschild & Sons Limited We have audited the Group and Parent Company financial Opinion on Other Matters Prescribed by the statements (the"financial statements") of N M Rothschild & Sons Limited for the year ended 31 March 2012 set out on pages 23 Companies Act 2006 to 90.The financial reporting framework that has been applied In our opinion the information given in the Directors' report in their preparation is applicable law and International Financial for the financial year for which the financial statements are Reporting Standards ("IFRS") as adopted by the EU and. as prepared is consistent with the financial statements. regards the Parent Company financial statements. as applied in accordance with the provisions of the Companies Act 2006. Matters on Which we are Required to Report This report is made solely to the Company's members. by Exception as a body. in accordance with Chapter 3 of Pan 16 of the We have nothing to report in respect of the following matters Companies Act 2006. Our audit work has been undertaken so where the Companies Act 2006 requires us to report to you if. that we mitt state to the Company's members those matters in our opinion: we are required to state to them in an auditor's report and for no other purpose.To the fullest extent permitted by law. we do • adequate accounting records have not been kept. Of returns not accept of assume responsibility to anyone other than the adequate for our audit have not been received from Company and the Company's members. as a body for our audit branches not visited by us: or work for this report.. or for the opinions we have formed. • the financial statements are not in agreement with the accounting records and returns: or Respective Responsibilities of Directors • certain disclosures of Directors' remuneration specified by and Auditor law are not made: or As explained more fully in the Statement of Directors' • we have not received all the information and explanations responsibilities on page 21. the Directors are responsible for the we require for our audit. preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsbility is to audit and express an opinion on. the financial statements in accordance with applicable law and International Standards on Auditing (UK and keland).Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors. Karim K Haji (Senior Statutory Auditor) Scope of the Audit of the Financial Statements For and on behalf of KPMG Audit Plc. Statutory Auditor A description of the scope of an audit of financial statements is Chartered Accountants provided on the APB's web-site at 15 Canada Square www.frc.crg.uktapb/scopetprivate.cfm. Canary Wharf London Opinion on Financial Statements El4 5GL In our opinion: • the financial statements give a true and fair view of the 24 July 2012 state of the Group's and of the Parent Company's affairs as at 31 March 2012 and of the Group's profit for the year then ended: • the Group financial statements have been properly prepared in accordance with IFRS as adopted by the EU: • the Parent Company financial statements have been properly prepared in accordance with IFRS as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006: and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Page 22 I N N Rothschild & Sons Limited I Registered Number 925279 EFTA01112946 Financial statements EFTA01112947 Consolidated income statement For the year ended 31 March 2012 2012 2011 Note 0000 0000 Interest and similar income 4 76354 82.277 Interest expense and similar charges 4 (58.958) (63.957) Net interest income 17,396 18.320 Fee and commission income 354.991 384.1 18 Fee and commission expense (22.951) (24.776) Net fee and commission income 332.040 359,342 Net trading income 6 2.958 2.216 Other operate% income 7 19.939 16.612 Total operating income 372.333 396.490 Impairment losses 12,13 (12.770) (2.190) Net operating income 359,563 394,300 Operating expenses 8.9 (320.313) (343.945) Depreciation and amortisation 18.19 (7.842) (6.420) Share of profit n associates 16 3314 1.920 Profit before income tax 34,922 45255 Tax 10 (10,291) (15,593) Profit for the year* 24,63 I 30262 Of the 024,631,000 (201 I: £30,262,000) profit for the year. £8.732,000 (201 I:LI 7.I 56.CCO) is attributable to ordinary shareholders of the parent company. L9.007.CCO (20 I I: C8.5 I 4.000) is attributable to holders of perpetual instruments and £6.892000 (20 I I: £4,592,000) is attributable to other non-controlling interests. The notes en pates 31 to 90 form an ntegral part of these rnanoal statements Page 24 1 N M Rothschild & Sons Limited 1 Registered Number 925279 EFTA01112948 Consolidated statement of comprehensive income For the year ended 31 March 2012 2012 2011 Note 0000 0000 Profit for the financial year 24,631 30,262 Other comprehensive income Available-for-sale investments Change in far value of assets classified as available-for-sale (14205) 33.827 Net change in fair value of available-for-sale financial assets b-ansferred to income statement (526) (2.220) Amortisation of fair value of reclassified assets 12 5.037 5.987 Cash flow hedges Effective portion of changes in fair value of cash flow hedges 2.156 2.384 Other items recognised directly in entity Actuarial (losses)lgains on defined benefit pension funds (62221) 27.725 Exchange differences on translation of foreign operations (3570) 88 Income tax on other comprehensive ncome 10 12.969 (22.803) Other comprehensive income for the financial year. net of income tax (60,363) 44.988 Total comprehensive income for the financial year (35,732) 75.250 Attributable to - Ordnary shareholders of the parent (50.463) 63.142 - Holders of perpetual instruments 9.007 8514 - Other non-controlling interests 5.724 3.594 (35,732) naso The notes on pages 31 to 90 (cm, an integral port of these financial statements N M Rothschild & Sons Limited 1 Registered Number 925279 1 Page 25 EFTA01112949 Consolidated balance sheet At 31 March 2012 2012 2011 Note C000 C000 Assets Cash and balances at central banks 543.038 646.535 Loans and advances to banks 12 156.273 375.066 Loans and advances to customers 12 817.664 881.106 Avadablefor-sale financial assets 13 372.677 575.657 Denvatives 14 25.1 17 17.144 Other assets 15 145.281 151.697 Current tax assets 2.479 1.665 Investments in associates 16 38.510 40.121 Intangible assets 18 22.631 11.903 Property. plant and equipment 19 63.136 31.729 Deferred tax assets 22 98.214 85.971 Total assets 2.285.020 2..824,594 Liabilities Deposits by banks 178.139 176.362 Customer deposits 1.085.832 1.235.300 Reprchase agreements 41.708 Denvauves 14 4.366 11.575 Debt securities in issue 20 141.720 460.751 Other iabithes 21 139.1 10 129.008 Current tax liabilities 4.985 6.367 Accruals and deferred income 234.293 195.940 Total liabilities 1.788,445 1260O11 Equity Share captal 30 57.655 57.655 Share prerrum account 97.936 97.936 Retained earnings 229.376 288.458 Other reserves (31.320) (21939) Total shareholders equity attributable to ordinary shareholders 353.647 422.110 Non-controlling interests 29 18.593 18.138 perpetual instruments 31 124.335 124.335 Total equity 496.575 564.583 Total equity and liabilities 2.285.020 2.824.594 The accounts on pages 23 to 90 were approved by the Board of Directors and were signed on its behalf by: Andrew Dictum. Director 24 July 2012 The notes on pages 31 to 90 form an ntev-al part of these reianoal statements Page 26 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112950 Consolidated statement of changes in equity For the year ended 31 March 2012 Available- Non- Share Share Retained Translation for-sale Hedging Perpetual controlling capital premium earnings reserve reserve reserve instruments interests Total equity 0000 0000 £000 0000 0000 £000 0000 0000 0000 At I April 2011 57.655 97.936 288.458 15.719 (38.027) 369 124.335 18.138 564.583 Total comprehensive ncome for the period - (11.082) (2.452) (8.577) 1.648 9.007 5.724 (35.732) Dividends - (18.030) - - - (5.269) (23.269) Interest on perpetual instruments - - - (12.172) - (12.172) -Tax thereon - - - - 1165 - 3.165 At 31 March 2012 57.655 97.936 229.376 13.267 (46.604) 2,017 124.335 18.593 496.575 At I April 2010 57.655 97.936 278.804 14.647 (63.717) (1.357) 124.335 28.354 536.657 Tota1comprehens".e ncome .1or the period - 34.654 1.072 25.690 1.726 8.514 3.594 75250 Dividends - (25.030) - - (13.810) (38.810) hterest on perpetual instruments (11.825) - (11.825) -Tax thereon 3.31 1 - 3.311 At 31 March 2011 57.655 97.936 288,458 15.719 (38,027) 369 124.335 18,138 564,583 The notes on pages 31 to 90 form an integral part of these (Mandril statements N M Rothschild & Sons Limited 1 Registered Number 9252791 Page 27 EFTA01112951 Company balance sheet At 31 March 2012 2012 2011 Note 0000 0000 Assets Cash and balances at central banks 543.025 616523 Loans and advances to banks 12 91.834 292.357 Loans and advances to customers 12 784.680 817.455 Avadablefor-sale financial assets 13 371.114 573.004 Derivatives 14 25.117 17.114 Other assets 15 104.294 1 11999 Current tax assets 317 900 Shares in subsidiary undertakings 32 43.517 13.517 Investments in associates 16 36.611 39.208 Investments in pint ventures 17 5375 5.375 Property. plant and equpment 19 51.562 19.271 Deferred tax assets 22 88.140 72.625 Total assets 2.145.676 2.669.408 Liabilities Deposits by banks 178.139 176.195 Customer deposits 1.160.315 1.616552 Repschase agreements 11.708 Derivatives 14 4.366 14.538 Debt securities in issue 20 83.365 93.413 Other habites 21 1 12.010 109.811 Accruals and deferred income 178.246 122.957 Total liabilities 1.716.471 2.175.174 Equity Share capital 30 57.655 57.655 Share prerrum account 97.936 97936 Perpetual instriments 31 124.335 124.335 Retained earnings 195.460 253.140 Other reserves (46.181) (38.832) Total equity 429.205 494.234 Total equity and liabilities 2.145.676 2.669.408 The accounts on pages 23 to 90 were approved by the Board of Directors and were signed on its behalf by: Andrew Dictum. Director 24 July 2012 The notes on pages 31 to 90 form an ntegral part of these rnanoal statements Page 28 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112952 Company statement of changes in equity For the year ended 31 March 2012 Available- Share Retained for-sale Hedging Perpetual Total Share capital premium earnings reserve reserve instruments equity £000 f000 1'000 E°000 £000 £000 £000 At I April 2011 57,655 97.936 253.140 (39.201) 369 124,335 494,234 Profit for the financial year - - 10.092 - - 9.007 19.099 Other comprehensive income Available-for-sale investments Change in far value of assets classified as available-for-sale - - - (11.492) - - (14.492) Net change in fair value of available-for-sale fnancial assets transferred to income statement (526) (526) Amortisation of fair value of reclassfied financial assets - - 5.037 - - 5.037 Cash flow hedges Effective portion of changes in fair value of cash flow hedges - - - 2.156 - 2.156 Other items Actuarial losses on defined benefit pension kinds - (62.222) - - - (62.222) hcome tax on other comprehensive ncome - 12.450 984 (508) - 12.926 Dividends - (18.000) - - - (18.000) hterest on perpetual instruments - - - (12.172) (12.172) -Tax thereon - - - - 3.165 3.165 At 31 March 2012 57,655 97.936 195.460 (48.198) 2,017 124.335 429.205 At I April 2010 57,655 97.936 238,690 (64,741) (1,357) 124,335 452.518 Profit for the financial year - - 21.922 - - 8.514 30.436 Other comprehensive income Available-for-sale investments Change in far value of assets classified as available-for-sale - - 33.662 - - 33.662 Net change in fair value of available-for-sale fnancial assets transferred to income statement - - (2220) _ - (2.220) Amortisation of fair value of reciassfied financial assets - - 5.987 - - 5.987 Cash flow hedges Effective portion of changes in far value of cash flow hedges - - - 2.384 - 2.384 Other items Actuarial sans on defined benefit pension funds - 27.795 - - - 27.795 hcome tax on other comprehensive ncome - - (10.267) (11.8B9) (658) - (22.811) Dividends - - (25.000) - - (25.000) hterest on perpetual instruments - - (11.825) (11.825) -Tax thereon - - - - 3.311 3.311 At 31 March 2011 57,655 97.936 253.140 (39,201) 369 124,335 494,234 The notes on pages 31 to 90 form an integral part of these 6nanoal statements N M Rothschild & Sons Limited 1 Registered Number 925279 I Page 29 EFTA01112953 Cash flow statements For the year ended 31 March 2012 2012 2012 2011 2011 Group Company Group Company Note £000 £000 £000 O000 Cash flow from operating activities Profit before income tax for the financial year 34.922 18.407 45.855 37.748 Adjustments to reconcile net profit to cash flow from operating activities Non-cash items included in net profit and other adjustments Depreciation and amortisation 7.842 3.611 6.420 2.785 Dividends from subsidiaries and associates - (20.809) - (23.650) Share of operating profit of associates (3.514) — (1.920) - Impairment of financial and other assets (net of recovery) 12.770 15.083 2.190 3.753 Unreaksed exchange gains - non-operating assets (2.616) - (824) - (Profityloss on deposal of evadable-for-sale assets (2.510) (2.510) 107 136 Profit on disposal of subsickaries (546) - - - Profit on disposal of fixed assets (130) (7) (563) - 11296 (4.629) 5.410 (16,976) Net decrease/(increase) in operating assets Net due to/from banks (excluding cash equivalents) 1.903 1.944 (96.029) (101.761) Derivatives (7.973) (7.973) 3 3 Available-for-sale financial assets 193.895 193.067 219.277 219.874 Loans and advances to customers 51.991 49.014 207.905 255.540 Accrued income. prepaid expenses and other assets 6.733 1705 29.555 (33.084) 246.552 243.757 360.711 340.572 Net (decreaseyincrease in operating liabilities Customer deposits (149.468) (456,207) (1.190) (62.056) Repurchase agreements (41.708) (11.708) (166.670) (166.670) Derivatives (8.053) (8.016) (3.782) (3.723) Debt securities in issue (319.031) (10.018) (5.158) 4.322 Accrued expenses and other kataties (19.651) (4.734) (111595) (72.802) Income taxes (paidyrecened (6.004) 1.821 (14.690) (1.375) (543,915) (518,892) (309.085) (302,304) Net cash flow (used in)ffrom operating activities* (251,145) (261,357) 102,891 59.040 Cash flow (used in)ffrom investing activities AcquenionIncrease n stake of arm:dunes. associates and joint ventures (3.314) (906) (2.420) (2.043) Dividends received from subsidiaries and associates 2509 20.809 1.496 23.650 Proceeds from disposal of subsidianes and associates 4.049 3.503 527 787 Purchase of fixed assets (39.866) (35.905) (18.778) (14.271) Deposal of fixed assets 1,044 7 1.402 2 Net cash flow (used in)/from investing activities (35.578) (12.492) (17.773) 8.125 Cash flow used in financing activities D.vidends paid (18.000) (18.000) (25.000) (25.0O0) Interest paid on perpetual instruments (12.172) (12.172) (1 1.825) (11.825) Detnbutions to non-controing interests (5.269) - (11810) — Net cash flow used in financing activities (35,441) (30,172) (50.635) (36,825) Net (decreaseyincrease in cash and ash equivalents (322,164) (304.021) 34,483 30.340 Cash and cash equvalents at I April 1,016932 938.880 982.449 908.540 Cash and cash equivalents at 31 March 27 694.768 634.859 1.016.932 938.880 • Group: cash paid and received for interest during 2012 was (60.333.000 (201 1: 059.450.000) and (73.967.000 (201 I: 082056.000) respectively. Company: cash paid and received for interest cluing 2012 was L58.314.000 (2011: L55.719.000) and L61.323.000 (201 1: 070.228.000) respectively. The rotes en pages 31 to 90 form an ntegral part of these tnanoal statements Page 30 I N M Rothschild & Sons Limited 1 Registered Number 925279 EFTA01112954 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of significant accounting policies N M Rothschild & Sons Limited ('the Company") is a company incorporated in the United Kingdom.The Group financial statements consolidate those of the Company and its subsidiaries and jointly-controlled entities (together referred to as 'The Group") and equity account for the Group's interests in associates.The Parent Company financial statements present information about the Company as a separate entity and not about its group.The accounting policies of the Group set out in this note also apply to the Parent Company financial statements unless otherwise stated. Developments in reporting standards and interpretations Standards affecting the financial statements In the current year, the only new or revised Standard that has affected the amounts reported in these financial statements is the amendments to IFRS 7 'Financial Instruments: Disclosure that was implemented as part of Improvements to IFRSs (20I 0). Part of the amendment requires additional disclosure of the financial effect of collateral held as security in respect of financial instruments and this is shown as part of note 22 on page 45 of the financial statements. Standards not affecting the reported results or the financial position The following new and revised Standards and Interpretations have been adopted in the current year.Their adoption has not had any significant impact on the amounts reported in these financial statements but may impact the accenting for false transactions and arrangements: • IFRIC 19 'Extinguishing Financial Liabilities with Equity Instruments' • tAS 24 'Related Party Disclosures (Revised 2009)' The following amendments were made as part of Improvements to IFRSs (2010): • Amendment to IFRS I 'First-time Adoption of International Financial Reporting Standards • Amendment to IFRS 3 'Business Combinations • Amendment to IAS I 'Presentation of Financial Statements' • Amendment to IAS 27 'Consolidated and Separate Financial Statements' • Amendment to IFRIC 13 'Customer Loyalty Programmes N M Rothschild & Sons Limited I Regjstered Number 925279 I Page 31 EFTA01112955 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of significant accounting policies (continued) New Standards and interpretations A number of new standards, amendments to standards and interpretations are effective for annual periods begiming after I April 201 1 and therefore have not been applied in preparing these consolidated financial statementsThe Group is currently reviewing these new standards to determine their effects on the Group's financial reporting.Those that may have a significant effect on the consolidated financial statements of the Group are: Accounting standards first effective in the Group's 2014 consolidated financial statements IFRS 10 Consolidated Financial Statements replaces IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities.The new standard introduces a single model of assessing control. Control exists where an investor has the power to direct the activities of another entity in order to influence the returns to the investor. IFRS 1 1 Joint Arrangements replaces IAS 31 Interests in jointVentures.The new standard requires all joint ventures to be equity accounted whereas. currently. the Group accounts for joint ventures by proportional consolidation. IFRS 12 Disclosure of Interests in Other Entities sets out new disclosure requirements in respect of interests in subsidiaries. joint arrangements and associates. It also introduces new requirements for unconsolidated structured entities. IAS 19 Employee Benefits (revised) makes significant changes to the recognition and measurement of defined benefit expenses recognised in the income statement. Accounting standards first effective in the Group's 2016 consolidated financial statements IFRS 9 Financial Instrunents replaces certain elements of IAS 39 Financial Instruments Recognition and Measurement in respect of the classification and measurement of financial assets and liabilities. Basis of preparation Both the Parent Company and the Group financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRJC') interpretations endorsed by the European Union ("EU") and with those requirements of the Companies Act 2006 applicable to companies reporting under IFRS.The financial statements are prepared under the historical cost convention. except that available-for-sale investments. financial assets held for trading and all derivative contracts are stated at their fair value. The principal accounting policies set out below have been consistently applied in the presentation of the Group financial statements. Basis of consolidation The financial statements of the Group are made up to 31 March 2012 and consolidate the audited financial statements of the Company and its subsidiary undertakings. Subsidiary undertakings Subsidiary undertakings are all entities (including special purpose entities "SPEs") over which the Group has the power to govern the financial and operating policies. generally as a result of a shareholding of more than one half of the voting rights. so as to obtain benefits from the activities of the entity. In assessing control. potential voting rights that are currently exercisable or convertible are taken into account SPEs are consolidated when the substance of the relationship between the Group and the SPE indicates control by the Group. Potential indicators of control include an assessment of the risks and benefits relating to the SPE's activities. Subsidiary undertakings are fully consolidated from the date on which the Group acquires control. and cease to be consolidated from the date that control ceases. The Group uses the purchase method of accounting for the acquisition of subsidiary undertakings.The cost of an acquisition is measured as the fair value of the assets given as consideration. shares issued or liabilities undertaken at the date of acquisition plus. for acquisitions prior to the adoption of the arnendrnent to IFRS 3. any costs directly attributable to the acquisition. Since the adoption of the amendment to IFRS 3. any costs attributable to the acquisition are expensed through the Income Statement The excess of the cost of acquisition over the fair value of the net identifiable assets and fair value of contingent liabilities of the subsidiary undertaking acquired is recorded as rodwill.All inter-company transactions. balances and unrealised surpluses and deficits on transactions between group companies are eliminated on consolidation.The accounting policies used by subsidiary undertakings are consistent with the policies adopted by the Group. The financial statements of the Group's subsidiary undertakings are made up to a date not earlier than three months before the balance sheet date and are adjusted. where necessary. for any material transactions or events that occur between the two dates. In the Parent Company financial statements. investments in subsidiary undertakings are carried at cost less any impairment losses. Page 32 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112956 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of Significant Accounting Policies (continued) Basis of consolidation (continued) Associated undertakings An associated undertaking is an entity in which the Group has significant influence, but not control, over the operating and financial management policy decisionsThis is generally demonstrated by the Group holding in excess of 20 per cent, but no more than 50 per cent, of the voting rights. The Group's investments in associated undertakings are initially recorded at cost. Subsequently they are increased or decreased by the Group's share of the post-acquisition profit or loss, or by other movements reflected directly in the equity of the associated undertakings.When the Group's share of losses in an associated undertaking equals or exceeds its interest in the associated undertaking the Group does not recognise further losses. unless it has incurred obligations or made payments on behalf of the associated undertaking. Positive goodwill arising on the acquisition of an associated undertaking is included in the cost of the investment (net of any accumulated impairment loss). The Group's share of the post-tax results of associated undertakings is based on financial statements made up to a date not earlier than three months before the balance sheet date, adjusted to conform with the accounting policies of the Group and for any material transactions or events that occur between the two dates. In the Parent Company financial statements, investments in associated undertakings are carried at cost. Joint ventures A jointly controlled entity is a joint venture that involves the establishment of an entity in which each venturer has an interest Jointly controlled entities are consolidated using the proportional consolidation method under which the Group's financial statements include its share of the joint venture's assets, liabilities, income and expenses on a line-by-line basis. Proportional consolidation is discontinued when the Group no longer exercises joint control over the entity. In the Parent Company financial statements, investments in joint ventures are carried at cost Going concern The Group has considerable resources and continues to generate new profitable business.It is well placed to manage its business risk for the forseeable future despite an uncertain economic outlook and. therefore. the financial statements have been prepared on a going concern basis. Foreign exchange The consolidated financial statements are presented in sterling, which is the Company's functional currency and the Group's reporting currency. Items included in the financial statements of each of the Group's entities are measured using their functional currency.The tinctional currency is the currency of the primary economic environment in which the entity operates. Income statements and cashflows of foreign operations are translated into the Group's reporting arrency at average exchange rates for the period where this rate approximates to the foreign exchange rates ruling at the date of the transactions and their balance sheets are translated at the exchange rate at the end of the period. Exchange differences arising from the translation of the net investment in foreign subsidiary and associated tridertakings and joint ventures are taken to shareholders equity. On disposal of a foreign operation these translation differences are recognised in the income statement as part of the gain or loss on sale. Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transaction. Gains and losses resulting from the settlement of such transactions, and from the translation at period end exchange rates of monetary items that are denominated in foreign currencies. are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at the dates when the fair value was determined. Translation differences on equities classified as at fair value through profit or loss are reported as part of the fair value gain or loss in the income statementTranslation differences on equities classified as available-for-sale are included in the available-for-sale reserve in equity. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate. N M Rothschild & Sons Limited I Registered Number 925279 l Page 33 EFTA01112957 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of Significant Accounting Policies (continued) Derivative financial instruments and hedge accounting Derivatives Derivatives are entered into for trading and risk management purposes. Derivatives used for risk management are accounted for as hedges where they qualify as such under IAS 39. Derivatives are initially recognised at fair value and are subsequently measured at fair value with changes in fair value recognised in the income statement except that where derivatives qualify for hedge accounting, recognition of any gain or loss depends on the nature of the item being hedged. Hedge accounting The Group may apply either fair value or cash flow hedge accounting when transactions meet the criteria for hedge accounting treatment set out in IAS 39.At the inception of the hedge. the Group assesses whether the hedging derivatives meet the effectiveness criteria of IAS 39 in offsetting changes in the fair value or cashflows of the hedged items.The Group then documents the relationship between the hedging instrument and the hedged item.It also records its risk management objectives. its strategy for undertaking the hedge transaction and the methods used to assess the effectiveness of the hedging relationship. After inception. effectiveness is tested on an on-going basis. Hedge accounting is discontinued when it is determined that a derivative has ceased to be highly effective. or when the derivative or the hedged item is derecognised. or when the forecast transaction is no longer expected to occur. Fair value hedge accounting Changes in value of fair value hedge derivatives are recorded in the income statement together with fair value changes to the underlying hedged item in respect of the risk being hedged. If the hedge no longer meets the criteria for hedge accounting. the difference between the carrying value of the hedged item on termination of the hedging relationship and the value at which it would have been carried had the hedge never existed is amortised to the income statement over the residual period to maturity based on a recalculated effective interest rate. Cash flow hedge accounting Changes in the fair value of the effective portion of derivatives designated as cash flow hedges are recognised in equity.The gain or loss relating to the ineffective portion is recognised in the income statementArnounts accumulated in equity are recycled to the income statement when the item being hedged impacts profit or loss. When hedge accounting is discontinued. any cumulative gain or loss in equity remains in equity and is only recognised in the income statement when the forecast transaction is recognised in the income statement.When the forecast transaction is no longer expected to occur. the cumulative balance in equity is immediately transferred to the income statement Embedded derivatives Some hybrid contracts contain both a derivative and a non-derivative component. In such cases. the derivative component is termed an embedded derivative.Where the economic characteristics and risks of embedded derivatives are not closely related to those of the host contract and where the hybrid contract itself is not carried at fair value through profit or loss. the embedded derivative is separated and recorded at fair value with gains and losses being recognised in the income statement The Group's investments in collateralised debt obligations ("CODs) which take credit exposure in the form of credit derivatives are treated as containing embedded derivatives that are not closely related to the host CDO contractThe change in fair value of these "synthetic" CDO contracts attributable to the credit derivatives is recognised in the income statement as part of trading 'income. Page 34 I N N Rothschild & Sons Limited I Registered Number 925279 EFTA01112958 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of Significant Accounting Policies (continued) Interest income and expense Interest income and expense represents interest arising out of banking activities. including lending and deposit-taking business. interest on related hedging transactions and interest on debt securities. Net interest arising from interest rate instruments held for trading are included in trading income. Interest income and expense is recognised in the income statement using the effective interest rate method. The effective interest rate is the rate that exactly discounts the estimated future cashflows of a financial instrument to its net carrying amount It is used to calculate the amortised cost of a financial asset or a financial liability and to allocate the interest over the relevant period (usually the expected life of the instrument).When calculating the effective interest rate. the Group considers all contractual terms of the financial instrument (for example. prepayment options) but does not consider future credit losses.The calculation includes any premiums or discount. as well as all fees and transaction costs that are an integral part of the financial asset_ Fee and commission income The Group earns fee and commission income from services provided to clients. Fee income from advisory and other services can be divided into two broad categories: fees earned from services that are provided over a period of time. which are recognised over the period in which the service is provided: and fees that are earned on completion of a significant act or on the occurrence of an event such as the completion of a transaction. which are recognised when the act is completed or the event occurs. Fees and commissions that are an integral part of a loan. and loan commitment fees for loans that are likely to be drawn down. are deferred (together with related direct costs) and recognised over the life of the loan as an adjustment to the effective interest rate. Trading income Trading income arises from movements in the fair value of financial assets held for trading and financial assets designated at fair value through profit or loss. Financial assets and liabilities Financial assets and liabilities are recognised on trade date and derecognised on either trade date. if applicable. or on maturity or repayment On initial recognition. IAS 39 requires that financial assets be classified into the following categccies at fair value through profit or loss. loans and advances held-to-maturity investments or available-for-sale.The Group does not hold any assets that are classified as held-to-maturity investments. Financial assets at fair value through profit or loss This category comprises financial assets held for trading (i.e. primarily acquired for the purpose of selling in the short term) and derivatives that are not designated as cashffow or net investment hedges.These financial assets are initially recognised at fair value. with transaction costs recorded immediately in the income statement and are subsequently measured at fair value. Gains and losses arising from changes in fair value or on derecognition are recognised in the income statement as net trading income. Interest and dividend income from financial assets at fair value through profit or loss is recognised in trading income. Loans and advances Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans which are intended to be sold in the short term are classified as held for trading and are recorded at fair value through profit or loss. Loans and advances are initially recorded at fair value. including any directly attributable transaction costs. and are subsequently measured at amortised cost using the effective interest rate method. Gains and losses arising on derecognition of loans and receivables are recognised in other operating income. Financial assets that have been reclassified as loans and advances out of the available-for-sale category are reclassified at fair value on the date of reclassification and are subsequently measured at amortised cost using the effective interest rate method.Any gain or loss recognised in equity prior to reclassification is amortised to the income statement over the remaining maturity of the financial asset_ N M Rothschild & Sons Limited I Registered Number 925279 I Page 35 EFTA01112959 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of Significant Accounting Policies (continued) Financial assets and liabilities (continued) Available-for-sale investments Available-for-sale investments comprise non-derivative financial assets that are either designated as available-for-sale on initial recognition or are not classified into the categories described above. Available-for-sale investments are initially recognised at fair value, including direct and incremental transaction costs, and are subsequently measured at fair value. Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in equity until the financial asset is sold, at which time the cumulative gain or loss is transferred to the income statement. Interest (determined using the effective interest rate method). impairment losses and translation differences on monetary items are recognised in the income statement as they arise. Dividends on available-for-sale equity instruments are recognised in the income statement when the Group's right to receive payment is established. Financial liabilities Except for derivatives, which are classified as at fair value through profit or loss on initial recognition, all financial liabilities are carried at amortised cost using the effective interest rate method. Financial guarantee contracts Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Financial guarantee liabilities are initially recognised at fair value, and the initial fair value is amortised over the life of the guarantee.The guarantee liability is subsequently carried at the higher of the amortised amount and the expected present value of any expected payment (when a payment under the guarantee has become probable). Where one Group company enters into financial guarantee contracts to guarantee the indebtedness of other companies within the Group, that company considers these to be insurance arrangements and accounts for them as such. In this respect, the Group company treats the guarantee contract as a contingent liability until such time as it becomes probable that it will be required to make a payment under the guarantee. Dcrccognition I ne Group derecognises a financial asset when: i. the contractual rights to cashflows arising from the financial asset have expired; or ii. it transfers the financial asset including substantially all of the risks and rewards of the ownership of the asset; or iii. it transfers the financial asset, neither retaining nor transferring substantially all the risks and rewards of the asset but no longer retains control of the asset Determination of fair value The fair value of quoted investments in active markets is based on current bid prices. For other financial assets. the Group establishes fair value by using appropriate valuation techniques.These include the use of recent arm's length transactions, discounted cashflaw analysis. option pricing models and other valuation methods commonly used by market participants. For certain investments, the valuation may be derived from quotations received from various sources. Where the market is illiquid, the quotations may not be supported by prices from actual market transactions.The fair value of short term debtors and creditors is materially the same as invoice value. Sale and repurchase agreements When securities are sold subject to a commitment to repurchase them at a predetermined price, they remain on the balance sheet and a liability is recorded in respect of the consideration received.The difference between the sale and repurchase price is treated as interest and recognised over the life of the agreement_ Securities acquired in a reverse sale and repurchase agreement are not recognised and the consideration is recorded in loans and advances on the balance sheet Page 36 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112960 Notes to the Financial Statements (forming part of the Financial Statements) Summary of Significant Accounting Policies (continued) Financial assets and liabilities (continued) Securitisation transactions The Group may enter into funding arrangements with lenders in order to finance specific financial assets. In general. both the assets and the related liabilities from these transactions are held on the Group's balance sheet However to the extent that the risks and returns associated with the financial instruments have been transferred to a third party the assets and liabilities are derecognised in whole or in part Interests in securitised financial assets may be retained or taken in the form of senior a subordinated [ranches of debt securities. or other residual interests. Such retained interests are primarily recorded as available-for-sale assets. Impairment of financial assets Assets are assessed at each balance sheet date to determine whether there is objective evidence that a financial asset or group of financial assets is impaired. Impairment losses are incurred if there is objective evidence of impairment as a result of one or more events occurring after initial recognition of the asset (a 'loss event') and that loss event has an impact on the estimated future cashflows of the financial asset or group of financial assets that can be reliably estimated. Objective evidence that a financial asset or group of assets is impaired includes observable data about the following loss events: i. significant financial difficulty of the issuer: ii. a breach of contract such as a default or delinquency in interest or principal repayment: iii. granting to the borrower a concession. for economic a legal reasons relating to the borrower's financial difficulty that the lender would not otherwise consider: H. it becoming probable that the borrower will enter bankruptcy or other financial reorganisation. Impairment of loans and advances lhe Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant and individually CW collectively for financial assets that are not individually significant. Impairment losses are calculated on a collective basis in respect of losses that have been incurred but not yet identified on loans that are subject to individual assessment for impairment and for homogeneous groups of loans that are not considered individually significant If no objective evidence of impairment exists for an individually assessed financial asset it is included in a collective assessment for impairment with other assets with similar risk characteristics. If there is objective evidence that an impairment loss has been incurred. the amount of the loss is measured as the difference between the asset's carrying amount and the present value of expected future cashflows discounted at the financial asset's original effective interest rate.The carrying amount of the asset is reduced. the loss being recognised in the income statement. The calculation of the present value of the estimated future cashflows of a financial asset reflects the cashflows that may result from scheduled interest payments. principal repayments. or other payments due. including liquidation of collateral where available. In estimating these cashflows. management makes judgements about a counterparty's financial situation and the fair value of any underlying collateral or guarantees in the Group's favour. Each impaired asset is assessed on its merits. and the workout strategy and estimate of cashflows considered recoverable are reviewed by the Credit Committee on a quarterly basis.The methodology and assumptions used for estimating both the amount and the timing of future cashflows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. Collectively assessed credit risk allowances cover credit losses inherent in portfolios of financial assets with similar economic characteristics where there is objective evidence to suggest that they contain impaired assets but the individual impaired items cannot yet be identified. For the purposes of a collective evaluation of impairment. financial assets are grouped on the basis of similar credit risk characteristics. Future cashflows are estimated on the basis of historical loss experience.These estimates are subject to regular review and adjusted to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. N M Rothschild & Sons Limited I Registered Number 925279 I Page 37 EFTA01112961 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of Significant Accounting Policies (continued) Impairment of financial assets (continued) Once a financial asset or a 'oup of similar financial assets has been written down as a result of an impairment loss. interest income is recognised using the original effective interest rate which was used to discount the future cashflows for the purpose of measuring the impairment loss. If. in a subsequent period. the amount of the impairment loss decreases and the decrease can be related to an objective event occurring after the impairment was recognised (for example. being awarded a new contract that materially enhances future cashflows). the previously recognised impairment loss is reversed by adjusting the allowance for loan impairmentThe amount of the reversal is recognised in the income statement When a loan is deemed uncollectable. it is written off against the related allowance for loan impairment Recoveries received in respect of loans previously written off are recorded as a decrease in the impairment losses on loans and advances and are recorded in the income statement in the year in which the recovery was made. Loans subject to individual impairment assessment whose terms have been renegotiated. and which would have been past due or impaired had they not been renegotiated. are reviewed to determine whether they are impaired or past due. Impairment of available-for-sale assets Available-for-sale assets are assessed at each balance sheet date to determine whether there is objective evidence that a financial asset or group of financial assets is impaired. which requires judgement by management For equity shares classified as available-for-sale. a significant or prolonged decline in the fair value of the security below its cost is considered evidence of impairment If any such evidence exists. the cumulative loss is removed from equity and recognised in the income statement If. in a subsequent period. the fair value on an equity share classified as available-for-sale increases. the impairment loss is not reversed through the income statement but remains recorded in equity. Impairment of available-for-sale debt securities is based on the same criteria as for all other financial assets.If in a subsequent period the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement the impairment loss is reversed through the income statement The loss recognised in the income statement is the difference between the acquisition cost and current fair value. less any impairment loss on that financial asset previously recognised in the income statement Debt/equity classification Under IFRS the critical feature in differentiating a debt instrument from an equity instrument is the existence of a contractual obligation of the Group to deliver cash (or another financial asset) to another entity.Where there is no such contractual obligation. the Group will classify the financial instrument as equity. otherwise it will be classified as a liability and carried at amortised cost. Under IFRS the contractual terms of the transaction takes precedence over its economic substance in determining how it should be classified.The terms of the perpetual debt instruments issued by the Group permit interest payments to be waived unless the Company has paid a dividend in the previous six months and are therefore considered to be equity. Goodwill and intangible assets i. Goodwill in a subsidiary or an associated undertaking represents the excess. at the date of acquisition. of an acquisition's cost over the fair value of the Group's share of net identifiable assets acquired. Identifiable intangible assets are those which can be sold separately or which arise from legal rights regardless of whether those rights are separate. When the Group increases its stake in an entity which it already controls. any difference between the price paid for the additional stake and the increase in the net assets acquired by the Group is recognised directly in equity. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is tested annually for impairment or more frequently when circumstances indicate that its carrying amount is too high. Goodwill is allocated to cash-generating units for the purposes of impairment testing. If the net present values of the cash-generating units' forecast cashflows are insufficient to support their carrying value. then the goodwill is impaired. Impairment losses on goodwill are recognised in the income statement and are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Negative goodwill in an associated or subsidiary undertaking represents the excess of net identifiable assets acquired over the acquisition cost and is recognised immediately in the income statement Page 38 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112962 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of Significant Accounting Policies (continued) Goodwill and intangible assets (continued) ii. Intangible assets comprise acquired intellectual property rights and future servicing rights. which are carried at cost less accumulated amortisation and impairment losses.The intellectual property rights are amortised on the basis of an estimated useful life of 10 years.The future servicing rights are amortised over the servicing period as the fees from servicing are recognised. Intangible assets are reviewed at each reporting date to determine whether there is any objective evidence of impairment. If such evidence exists. an impairment test is performed and. if necessary. an impairment charge is recognised in the income statement Property, plant and equipment All property. plant and equipment is stated at cost. Cost includes expenditure that is directly attributable to the acquisition of the asset including, in respect of leasehold improvements, costs incurred in preparing the property for occupation (this includes rent paid whilst the preparation wor* is undertaken). Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to write down the cost of assets to their residual values over their estimated useful lives. as follows: Computer equipment 2-5 years Cars 3-5 years Fixtures and fittings 3-10 years Leasehold improvements 4-24 years The assets' residual values and useful lives are reviewed, and adjusted if appropriate. at each balance sheet date. Gains and losses on disposals are determined by comparing proceeds with carrying amounts.These gains and losses are recognised in the income statement Impairment of property. plant and equipment At each balance :heel date. Of more frequently where events or changes in circumstances dictate. property. plant and equipment is assessed for indications of impairment If such indications are present these assets are subject to an impairment review.If impaired. the carrying values of assets are written down by the amount of any impairment and the loss is recognised in the income statement in the period in which it occurs. A previously recognised impairment loss relating to a fixed asset may be reversed when a change in circumstances leads to a change in the estimates used to determine the fixed asset's recoverable arnount.The carrying amount of the fixed asset is only increased up to the amount that it would have been had the original impairment not been recognised. Finance and operating leases Where the Group is the lessor Finance leases When assets are held subject to a finance lease. the present value of the lease payments is recognised as a receivable.The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised in interest income over the term of the lease using the net investment method (before tax). which reflects a constant periodic rate of return. Operating leases Assets acquired for use by customers under operating lease agreements. including initial direct costs incurred in negotiating an operating lease. are capitalised and included in the relevant category of fixed assets. Depreciation is charged on a straight-line basis to write the value of the asset down to the expected residual value over a period consistent with other assets of a similar type. Operating lease income and the initial direct costs are recognised in other operating income on a straight-line basis over the period of the lease. Where the Group is the lessee .1he Group has entered into operating leases in respect of office premises.The total payments made under operating leases are charged to the income statement as operating expenses. N M Rothschild & Sons Limited I Registered Number 925279 I Page 39 EFTA01112963 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of Significant Accounting Policies (continued) Cash and cash equivalents Cash and cash equivalents comprise balances with original maturities of three months or less. including cash and non-restricted balances with central banks, certificates of deposit and loans and advances to banks. Pensions The Group's post-retirement benefit arrangements are described in note 23.The Group operates a number of pension and other post-retirement benefit schemes. both funded and unfunded. of the defined benefit and defined contribution types. For defined contribution schemes. the contribution payable in respect of the accounting period is recognised in the income statement. The defined benefit schemes are accounted for using the option permitted by the amendment made to IAS 19 Employee Benefits whereby actuarial gains and losses are recognised outside the income statement and presented in the statement of comprehensive income.The amount recognised in the balance sheet in respect of defined benefit schemes is the difference between the present value of the defined benefit obligation at the balance sheet date and the fair value of the plan's assets. if any.The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.The principal assumptions are set out in note 23.The present value of the obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liabilities. Long term employee benefits The Group operates long term profit share schemes for the benefit of employees:file costs of such schemes are recognised in the income statement over the period in which the services are rendered that give rise to the obligation.Where the payment of profit share is deferred until the end of a specified vesting period. the deferred amount is recognised in the income statement over the period up to the date of payment. The Group has entered into cash-settled share-based payment transactions as part of the long term profit share schemes.The fair value of such awards are measured at the date they are made and remeasured at each reporting date. Such awards are recognised in the income statement over the vesting period until payment Taxation Tax payable on profits and deferred tax are recognised in the income statement except to the extent that they relate to items that are recognised in equity. in which case the tax is also recognised in equity. Deferred tax is provided in full. using the balance sheet liability method. on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. Deferred tax is determined using tax rates and laws that are expected to apply when a deferred tax asset is realised. or when a deferred tax liability is settled. The principal temporary differences arise from depreciation of property. plant and equipment deferred profit share arrangements. revaluation of certain financial instruments including derivative contracts and available-for-sale securities. provisions for post- retirement benefits and tax losses carried forward. Deferred tax assets. including the tax effects of income tax losses available for carry forward. are only recognised where it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is not provided on temporary differences arising from investments in subsidiary undertakings and associated undertakings. unless the timing of the reversal of the temporary difference is controlled by a third party or it is probable that the difference will reverse in the foreseeable future. Dividends Dividends on ordinary shares are recognised in equity in the period in which they are declared by the Company's shareholders at the Annual General Meeting oc if earlier. when they are paid. Provisions and contingencies Provisions are recognised only when the Group has a present obligation (legal or constructive) as a result of past events. In addition. it must be probable that a transfer of economic benefits will be required to settle the obligation. and it must also be possible to make a reliable estimate of the amount of the obligation. Page 10 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112964 Notes to the Financial Statements (forming part of the Financial Statements) I. Summary of Significant Accounting Policies (continued) Provisions and contingencies (continued) The Group recognises provisions in respect of onerous contracts when the expected benefits to be derived from a contract are less than the wavoidable costs of meeting the obligations under the contract Contingent liabilities are possible obligations arising from past events whose existence will be confirmed by one or more uncertain future events not wholly within the Group's control, or present obligations that are not recognised either because it is not probable that an outflow of resources will be required to settle the obligation or the amount of the obligation cannot be reliably estimated Contingent liabilities are disclosed unless the possibility of a transfer of economic benefits is remote. Accounting judgements and estimates The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the accounting policies. Valuation of financial assets and liabilities Fair value is the amount for which an asset could be exchanged, or a liability settled. between knowledgeable, willing parties in an arm's length transaction. For financial instruments carried at fair value. market prices or rates are used to determine fair value where an active market exists (such as a recognised exchange), as it is the best evidence of the fair value of a financial instrument Market prices are not, however, available for certain financial assets and liabilities held or issued by the Group.Where no active market price or rate is available, fair values are estimated using present value or other valuation techniques. using inputs based on market conditions existing at the balance sheet date. A description of the valuation techniques used, analysis of assets and liabilities carried at fair value by valuation hierarchy. and a sensitivity anahsis of valuations not primarily based on observable market data, is provided in note 3 to the financial statements. Impairment of financial assets Assets are assessed at each balance sheet date to determine whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is such objective evidence, and that this has a negative effect on the estimated future cashflows from the asset, then an impairment loss is incurred.The amount of the loss is measured as the difference between the asset's carrying amount and the present value of expected future cashflows discounted at the asset's original effective interest rate. Portfolios of financial assets with similar economic characteristics where there is objective evidence to suggest that they contain impaired assets but the individually impaired items cannot yet be identified, are collectively assessed for impairment.The collectively assessed impairment allowance is calculated on the basis of future cashflows that are estimated based on historical loss experience. The accuracy of the allowances made depends on how accurately the Group estimates future cashflows for specific counterparty allowances and provisions and the model assumptions and parameters used in determining collective allowances. While this necessarily invokes judgement the Group believes that its allowances and provisions are reasonable and supportable. Pensions The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method and the principal assumptions used are set out in note 23.The assumptions that have the greatest impact on the measurement of the pension fund liability are those related to retail price inflation and the discount rate used. For example a 03% fall in the discount rate used would result in a L59 million increase in the measurement of the pension fund liabilities. Similarly, a 03% increase in the forecast rate of retail price inflation would result in a L42 million increase in pension fund liabilities. Deferred tax Deferred tax assets, including those in relation to tax losses carried forward, are only recognised where it is probable that future taxable profits will be available against which the temporary differences can be utilised.After reviewing medium term profit forecasts, as adjusted for tax purposes, the Group considers that there will be sufficient future profits against which these deferred tax assets can be utilised. Goodwill Goodwill is assessed at each balance sheet date to determine whether it is impaired.The assessment includes management assumptions on future income flows and judgements and on appropriate discount rates. Management performs sensitivity analysis of these assumptions to support the valuation. N M Rothschild & Sons Limited I Regjstercd Number 925279 1 Page 41 EFTA01112965 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management 2.1 Strategy in using financial instruments The use of financial instruments is fundamental to the Group's banking and treasury activities.The Group provides a range of lending products to its clients and funds these activities by means of deposit-taking, medium term note issuance and other borrowings and uses derivatives principally to manage its exposure to interest rate and currency risk. Further information on derivative contracts and the Group's hedging strategies is set out in note I 4.The key risks arising from the Group's activities involving financial instruments are as follows: • Credit risk - the risk of loss arising from client or counterparty default • Market risk - exposure to changes in market variables such as interest rates. currency exchange rates equity and debt prices. • Liquidity and funding risk - the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset 2.2 Credit risk Credit risk arises from all exposures to clients and counterparties relating to the Group's lending. trading and investment activities. Limits on credit risk are set by the Group Management Committee and by the Credit Committee.The Credit Committee reviews concentrations and makes recommendations on credit decisions to the Group Assets and Liabilities Committee. Credit risk limits are set where appropriate. in respect of exposures to individual clients or counterparties. to industry sectors and to countries. Exposure to credit risk is managed by detailed analysis of client and counterparty creditworthiness prior to entering into an exposure. and by continued monitoring thereaftecA significant proportion of the Group's lending exposures is secured on property or other assets: the Group monitors the value of any collateral obtained.The Group also uses netting agreements to restrict credit exposure to counterparties. For internal monitoring purposes. credit exposure on loans and debt securities is measured as the principal amount outstanding plus accrued interest Credit exposure on derivatives is measured as the current replacement value plus an allowance for the potential change in replacement value. The Credit Committee reviews credit exposures on loans and debt securities on a quarterly basis and for this purpose they are classified as follows: Category I Exposures where the payment of interest or principal is not in doubt and which are not designated categories 2 to 5. Category 2 Exposures where the payment of interest or principal is not in doubt. but which require closer observation than usual due to some deterioration in the position of the client for example: poor trading results: difficult conditions in the client's market sector: competitive or regulatory threats: or the potential impact from currency a other factors. Category 3 Exposures where there has been further deterioration in the position of the client.Although the exposure is not considered to be impaired the relationship requires close monitoring by the front office team. Past due but not impaired Exposures that have failed to make a scheduled interest or principal repayment although kill recovery is expected. Category 4 Exposures that are considered to be impaired and which carry a provision against part of the loan. Some recovery is expected to be made. Category 5 Exposures that are considered to be impaired and which carry a kill provision. No significant recovery of value is expected. Page 12 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112966 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.2 Credit risk (continued) a. Credit risk exposure The tables below disclose the maximum exposure to credit risk at the reporting date for financial assets with significant exposure to credit risk without taking account of collateral held or other credit risk mitigation.Accounts receivable are treated as past due when more than 90 days has elapsed since the invoice was issued. Past due Category Category Category but not Categories Impairment Total I 2 3 impaired 4 and 5 allowance (net) Group C•000 C000 C000 C000 C000 0000 0000 At 31 Mardi 2012 Cash and balances at central banks 543.038 513.038 Derivatives 25.117 - - - 25.1 17 Loans and advances to banks 156.273 - - - - - 156.273 Loans and advances to customers 491.873 103.721 126386 12.259 158.829 (75.804) 817.664 Available-for-sale financial assets - debt secisities 264.008 125 - 10.891 (10.891) 264.133 Commitments and guarantees 49.826 1.013 4308 - 1.206 - 56.753 Accounts receivable 99.688 - I1 3.725 4.161 (3.420) 104.165 Total 1,629,823 104.859 131.505 15.984 175.087 (90.115) 1.967.143 At 31 Mardi 2011 Cash and balances at central banks 646.535 - - - - - 646.535 Derivatives 17.144 - - - 17.114 Loans and advances to banks 375.066 - - - - - 375.066 Loans and advances to customers 575.061 106.526 121.728 44.716 102.113 (69.038) 881.106 Available-for-sale financial assets - debt securities 448.393 2.040 1.100 34.0,15 (29.044) 459.534 Commitments and guarantees 21.123 7.979 1.075 21 - 33.498 Accounts receivable 101.888 7 - 3.510 5.772 (3.306) 107.871 Total 2,185,510 116,552 129.903 48,226 141.951 (101.388) 2,520.754 The table below analyses amounts past due but not impaired: Past due by Past due by ,c 6 months a 6 months Total Group 0000 0000 0000 At 31 Mardi 2012 Loans and advances to customers 4.098 8.161 12.259 Accounts receivable 799 2.926 3.725 Total 4.897 11.087 15,984 At 31 March 2011 Loans and advances to customers 14.536 30.180 44.716 Accounts receivable 1.427 2.083 3510 Total 15.963 32.263 48.226 N M Rothschild & Sons Limited I Registered Number 925279 I Page 43 EFTA01112967 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.2 Credit risk (continued) Past due Category Category Category but not Categories Impairment Total 1 2 3 impaired 4 and 5 allowance (net) Company 0000 C000 0000 C000 0000 0000 0000 At 31 March 2012 Cash and balances at central banks 513.025 513.025 Derivatives 25.117 25.1 17 Loans and advances to banks 91.831 - - - 91.831 Loans and advances to customers 459.401 103.721 126.786 7.334 159.999 (72561) 784.680 Avadablefor-sak financial assets — debt securities 263.883 125 — — 10.891 (10.891) 264.008 Commitments and guarantees 217.481 1.013 1.708 - 1,206 - 254.408 Accounts receivable 76.572 - - 1.721 3.700 (2.959) 79,031 Total 1.707.313 104.859 131,494 9,055 175,796 (86.411) 2.042.106 At 31 March 2011 Cash and balances at central banks 646.523 - - 646523 Derivatives 17.141 - 17.114 Loans and advances to banks 292.357 - - - - - 292.357 Loans and advances to customers 551,330 106.526 121,728 35.510 98.330 (65.969) 817.455 Avadablefor-sale financial assets - debt securities 448393 2.040 1.100 34.045 (29.041) 459.534 Commitments and guarantees 551.966 7.979 4.075 21 - 564.011 Accounts receivable 83.178 7 1,679 1,881 (1.574) 85.171 Total 2,590.891 116,552 129,903 37,189 134.277 (96387) 2.912.225 The table below analyses amounts past due but not impaired: Past due by Past due by < 6 months > 6 months Total Company C000 C000 C000 At 31 March 2012 Loans and advances to customers 292 7.042 7.331 Accounts receivable 747 974 1,721 Total 1.039 8,016 9.055 At 31 March 2011 Loans and advances to customers 6413 29.097 35.510 Accounts receivable 1.189 490 1,679 Total 7.602 29,587 37.189 Page 44 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112968 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.2 Credit risk (continued) b. Collateral The Group holds collateral against loans and advances to customers and debt securities. Al non-group commercial lending is secured. Collateral is split by type, as either specific or general. Specific collateral is readily identifiable. the majority of which will be charges over property or plant and equipment If necessary there is a realistic possibility of both taking possession of and realising the collateral. General collateral will be more difficult to both identify and realise. It will usually be a general floating charge over the assets of a business, and is typically attached to leveraged finance assets. It is not practicable to ascribe a specific value to this collateral. Unimpaired loans (levels I to 3) are covered by both specific and general collateral. Unimpaired amounts covered by specific collateral includes property lending of £275 million, of which over 90% has specific collateral in excess of the amount advanced and asset based lending of £122 million which is fully collaterasedVVhere a loan is deemed to be impaired (level 4 and 5 assets), the level of the impairment charge is primarily driven by any expected shortfall in the collateral value, although it is also influenced by the ability of the borrower to service the debt Collateral is valued independently at the time the loan is made and periodically thereafter on a rolling basis. Management are able to roll forward a valuation for reporting purposes via a combination of specific knowledge of the property and the application of general property indices. The table below gives an estimate of the fair value of collateral that could be realised by the Group as security against exposures to customers that are individually impaired and past due but not impaired. Past due Past due but not Individually but not Individually impaired impaired impaired impaired 2012 2012 2011 2011 O000 0000 O000 O000 Group Property 3.317 79.439 25.484 32.263 Debt and equity securities - 2.000 - 5.494 Commercial vehicles and other equpment 3.673 1.951 6.020 7.038 Guarantees and fixed or floating charges 5.212 22.797 13.981 11545 Other - 1.545 - 2.269 Collateral held 12202 107.732 45.485 61,609 Amount of exposures collateralised (net of specific provisions) 12.259 112,835 44,716 67.691 Company Property 2.065 71.941 21.529 35.323 Debt and equity securities 2.000 5.494 Con-rnercial vehicles and other equpment 115 2.271 Guarantees and fixed or floating charges 5212 22.797 13.981 11545 Other 1.545 2.269 Collateral held 7.277 101,401 35,510 59.902 Amount of exposures collateralised (net of specific provisions) 7.334 106,504 35,510 65,995 N M Rothschild & Sons Limited I Registered Number 925279 IPage 45 EFTA01112969 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.2 Credit risk (continued) c. Forbearance As refinancing and sale options are currently limited. it is generally in the lender's and borrower's interest to extend certain facilities at maturity and not to foreclose on the security. This assumes there are no underlying issues regarding the bortoner's ability to continue to service the loan and the level of collateral is expected to be of sufficient quality to secure the principal. Unimpaired loans extended in this manner are not categorised as either past due or as renegotiated.As at 31 March 2012, loans with a carrying value of L2283m had been extended (2011: £293.1), all of which were property loans. There are a small number of loans which are overdue but not impaired pending an extension of maturity. As at 31 March 2012 these amounted to L7.3m. Some loans were renegotiated on substantially different terms than before.Typically these loans will indude revised covenants and higher margins to reflect higher credit risk as well as having extended maturities. But for these renegotiations the loans would have been deemed to have been impairedAs at 31 March 2012 the carry value of all loans renegotiated was L 104.6m I 1 I.6m). d. Credit risk concentrations The Group monitors concentrations of credit risk by geographic location and by industry sector.The following tables show an analysis of credit risk by location and by sector.The location for loans and advances is determined by reference to the location of the borrower, and debt securities are recorded based on the location of the issuer of the security. In the current climate, exposures to the weaker eurozone economies are closely monitored by senior management and the Group has no sovereign debt exposure to peripheral eurozone economies. Within "other Europe" available-for-sale financial assets are L53 million of assets with exposure to the weaker eurozone countries. Of this, L40 million relates to a portfolio of residential mortgage backed securities. Each asset is top tier in its respective structure, benefiting from substantial credit support from the subordination of junior notes and excess reserve balances.The remaining LI 3 million relates to collateralised loan obligations, which have some exposure to the weaker economies. Loans to customers include L24 million of loans to the weaker eurozone economies. all of which have been subject to close review. The Group expects to realise the carrying value of these loans. The sector analysis is based on Global Industry Classification Standards and includes derivatives. loans and advances to banks loans and advances to customers, debt securities commitments and guarantees. Page 461N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112970 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.2 Credit risk (continued) UK and Channel Other US and Islands Europe Canada Other Total Credit risk by location 0000 C000 C000 C000 0000 Group At 31 March 2012 Cash and balances at central banks 543.025 13 - 543.038 Derivatives 13.422 11.671 24 - 25.117 Loans and advances to banks 53.076 69.061 8.252 25.884 156273 Loans and advances to customers 601.981 187.131 15.063 13.186 817.664 Available-for-sale financial assets - debt securities 138.265 1 13.951 10.077 1.837 264.133 Commitments and guarantees 43.473 13.280 - - 56.753 Accounts receivable 53.714 31.018 6.198 13.235 104.165 Total 1.446.956 426.131 39.614 54.442 1.967.143 At 31 March 2011 Cash and balances at central banks 646323 12 646,535 Denvatives 11.383 5.761 - - 17.141 Loans and advances to banks 83.11 1 254.912 25 37.018 375.066 Loans and advances to customers 601.967 211.424 21.356 13.359 881.106 Available-for-sale financial assets - debt securities 342.665 87.820 23.354 5.695 459331 Commitments and guarantees 10.596 17.089 777 5.036 33.198 Accounts receivable 55.239 37.975 4.487 10.170 107.871 Total 1.754.484 644.993 49.999 71.278 2.520.754 Company At 31 March 2012 Cash and balances at central banks 543.025 - - 543.025 Derivatives 13.422 11.671 24 - 25.117 Loans and advances to banks 49.616 33.390 8.252 576 91.831 Loans and advances to customers 567.956 188.175 15.063 13.486 781.680 Available-for-sale financial assets - debt securities 138.265 1 13.829 10.077 1.837 261.008 Commitments and guarantees 241.045 13.363 - 254.108 Accounts receivable 49.268 17.217 5.010 7.539 79.03,1 Total 1.602397 377.645 38.426 23.438 2.042.106 At 31 March 2011 Cash and balances at central banks 646323 646,523 Derivatives 11.383 5.761 17.141 Loans and advances to banks 79.975 211.866 25 491 292.357 Loans and advances to customers 570.341 212.396 21.356 13.359 847.455 Available-for-sale financial assets - debt securities 342.665 87.820 23.354 5.695 459.531 Commitments and guarantees 541.051 17.177 777 5.036 564.041 Accounts receivable 50.867 27.458 4.425 2.121 85.171 Total 2.242.808 592.478 49.937 27.002 2.912.225 N M Rothschild & Sons Limited I Registered Number 925279 I Page 47 EFTA01112971 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.2 Credit risk (continued) 2012 2011 Credit risk by industry sector 0000 0000 Group Energy - 6.715 Materials 60.739 90.309 lndustnals 89.187 97.763 Consumer discretionary 96.128 105.282 Consumer staples 70.410 13.137 Health care 15.378 15996 Financial (see below) 348.020 618.581 Real estate (see below) 373.121 423.682 IT and telecoms 21.200 11.856 Utilities - 3.639 Governments and Central Banks 698.935 868.771 Private persons 21.988 22.466 Related party loans. commitments and guarantees 67.872 74,650 Total 1.862.978 2.412.883 Company Energy - 6.715 Materials 56.743 86955 lndustnals 39.030 53.016 Consumer discretionary 52.676 66.673 Consumer staples 55.052 11.466 Health care 9.514 9989 Financial (see below) 283.454 535931 Real estate (see below) 371.963 421.492 IT and telecoms 21.200 11.856 Utilities - 3.639 Governments and Central Banks 686.393 851.669 Private persons 21.988 22.466 Related party loans, commitments and guarantees 365.059 685.151 Total 1.963.072 2.827.054 Page 18 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112972 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.2 Credit risk (continued) Financial and real estate sector exposures may be analysed as follows: Group Company 2012 2011 2012 2011 Financial sector O000 (000 O000 O000 Short teen interbank exposures 156.273 375.066 91.834 292357 lwestment grade securities 55.758 182.398 55.758 182.398 Cash/investment backed lending 75.503 - 75.503 - Finance companies 9.170 16.688 9.170 16.688 Other 51316 44.432 51.189 44.491 Total 348,020 618.584 283,454 535,934 Short term interbank lending and investment grade securities are held for liquidity management purposes. Group Company 2012 2011 2012 2011 Real estate sector O000 O000 O000 (000 Senior loans 305.638 348.115 304.480 345925 SubordinatecYmetranine loans 67.483 75.567 67.483 75.567 Total 373,121 423,682 371,963 421.492 Real estate exposures are generally supported by income generated by a large number of tenants from a wide variety of industry sectors. Exposures are broadly evenly split between the major property types (retail, office and industrial) and are located predominantly within the UKThere are no material exposures to loans with elements of development financing. 2.3 Market risk Market risk arises as a result of the Group's activities in interest rate, currency and equity markets and comprises interest rate. foreign exchange and equity price risk During the year, exposure to market risk has continued to be small in relation to capital, as trading activities have been focused on servicing client requirements rather than on proprietary risk-taking. Market risk arising in the Company's subsidiary undertakings is immaterial. Limits on market risk exposure are set by the Group Assets and Liabilities Committee. Monitoring of market risk limits and determination of trading profits are undertaken daily, independently of the dealing area. Risk limits are complemented by other measures and controls. including stress testing to estimate the losses that could occur when markets behave in unusually volatile ways and with little fiquidity. Market risks associated with treasury and equity positions are described below with a description of risk management and the levels of risk N M Rothschild & Sons Limited I Registered Number 925279 1 Page 49 EFTA01112973 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.3 Market risk (continued) Treasury Market risk in treasury activities arises from interest rate and foreign exchange positions. Foreign exchange and interest rate contracts are predominantly used for hedging purposes. Risk is monitored daily using a sensitivity-based value at risk approach, which determines the effect of changes in market price factors, including arrency prices. interest rates and volatilities. on positions. Shifts in market price factors and correlations are calculated weekly. or more frequently in turbulent markets, using the industry standard of 99 per cent probability over a ten day holding period for all risks except currency position risk, which is measured using a 99 per cent probability over a one day holding period.The market risk figures below are derived from weekly figures. 12 months to 31 March 2012 12 months CO 31 March 2011 Avenge High Low Average High Low Company C000 C000 C000 0000 C000 0000 Interest rate risk 2.006 191 480 91.1 246 Foreign exchange risk 19 85 1 18 /9 2 Total value at risk 493 2.091 192 498 991 248 The main assumption used in the calculation is that price factors are normally distributed.This is a common assumption in value at risk calculations but is known to be tenuous. particularly for interest rates and volatilities. and is one of the reasons for the use of a high probability over a long holding period. Equities The Group has exposure to equity price risk through holdings of equity investments. Each position is approved by senior management and is monitored on an individual basis.The table below shows the Group's equity price risk by location. UK and Channel Other US and Islands Europe Canada Total Equity price risk by location 0000 0000 0000 £000 Group At 31 March 2012 Eq_ety investments 53.512 54.431 601 108344 At 31 March 2011 Ecuty iryestments 54.023 59.563 2337 116.123 Company At 31 March 2012 Eq_rty investments 52.104 54.431 601 107.136 At 31 March 2011 Eq_rty investments 52.190 58.743 2337 113.470 The equity exposure to other Europe consists principally of minority investments held in other Rothschild Group companies. Page 501N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112974 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.3 Market risk (continued) If the price of all the equities were to fall by 5 per cent.then for the Group there would be a post-tax charge to the income statement of Lnil and a charge to equity of L4.125.000 (201 1: Lnil and L4.297.000 respectively). and for the Company there would be a post-tax charge to the income statement of Lnil and a charge to equity of L4.071.000 (201 1: Lnil and L4.198.000 respectively). Similarly. if the price of all the equities and of those equities on which derivative instruments are dependent were to rise by 5 per cent. then for the Group there would be a post-tax credit to the income statement of Lnil and a credit to equity of L4.125.000 (201 1: Lnil and L4.297000 respectively). and for the Company there would be a post-tax credit to the income statement of Lnil and a credit to the equity of L4.071.000 (201 1: Lnil and £4. '98.000 respectively). Currency risk The table below summarises net exposure to foreign currency exchange rate risk measured by reference to the foreign currency exposures of monetary assets and liabilities after taking account of positions in derivatives. Group Company Longl(Short) Long/(Short) 2012 2011 2012 201 1 O000 C000 O000 C000 USS 6.624 21.366 (587) (22) Euro 1,821 (1.019) 1.821 (1.314) Other 6,233 10531 (1.515) 325 If the value of these currencies fell by 5 per cent against sterling. then for the Group there would be a post-tax charge to the income statement of L558.000 (2011:L1.252.000) and for the Company there would be a post-tax gain to the income statement of LI 1.000 (201 1: L37.000). If the value of these currencies rose by 5 per cent against sterling, then for the Group there would be a post-tax credit to the income statement of L558.000 (201 1: LI.252.000) and for the Company there would be a post-tax charge to the income statement of LI 1.000 (201 1: L37.000). N M Rothschild & Sons Limited I Registered Number 925279 I Page 51 EFTA01112975 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.3 Market risk (continued) Interest rate risk The following table summarises exposure to interest rate risk by showing the impact on the fair value of interest-bearing assets and liabilities, and of interest rate derivatives, if base interest rates in each currency shown moved up or down by I per centThis table includes all interest rate risk, including that within the treasury and banking businesses and also the structural interest rate exposure that arose from the reinvestment of shareholders' funds. Group Company Euro US$ f Euro US$ O000 C000 C000 O000 O000 O000 Ac 31 March 2012 1% (673) 645 329 (483) 645 329 -I% 673 (653) (333) 483 (653) (333) At 31 March 201 1 1% (3.412) 1.717 407 (3.258) 1.717 407 -I% 3.460 (1.727) (4 la) 3.306 (1.727) (4B) 2.4 Liquidity risk Liquidity risk is defined as the risk that an entity cannot meet its cash obligations as they fall due. Liquidity risk arises principally from the mismatch of contractual maturities of assets and liabilities inherent in the business, including contingent liabilities. The Group is subject to both an internal liquidity policy, which has been reviewed and approved by the Group Assets and Liabilities Committee, and external regulatory requirements. Liquidity is measured on a behaviourally adjusted basis and on a stressed basis.The stressed behaviour of assets and liabilities can, in certain scenarios, be more adverse than their contractual maturity (for example, loans advanced to customers may not be repaid on their contractual maturity dates). Liquidity is monitored daily independently of the front office Treasury staff responsible for day-to-day liquidity management The Group measures its liquidity risk quantitatively against a Liquidity Coverage Ratio ("LCR') limit in line with the requirements of the ESA's liquidity regime.The LCR considers the Group's eligible "Buffer assets against the cumulative net cash flows payable under its most severe stress test Only those assets of the highest quality can be treated as eligible (or inclusion in the LCR. The Group's internal liquidity policy requires it to keep an LCR in excess of l00% at the 1 -month lime horizon.At 31 March 2012, the LCR was significantly in excess of this internal as well as FSA regulatory requirements. The tables below analyse the Group's financial assets and liabilities based on contractual maturity. Page 521N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112976 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.4 Liquidity risk (continued) Demand( No fixed next day 2 days -3m 3m-1yr > I yr maturity Total Group £000 £000 E'000 E'000 £000 £000 At 31 March 2012 Cash and balances at central banks 513.038 - - - - 543.038 Loans and advances to banks 110.330 11.400 652 3.891 - 156273 Derivatives 1.369 1.227 3.878 18.643 - 25.117 Loans and advances to customers 34.520 202.031 198.866 112.058 (29.81 1) 817.661 Available-for-sale financial assets — 121.211 871 142.051 108.544 372677 Other 1.793 100.687 1.613 72 - 101.165 Total 691.050 466.556 205.880 576.715 78,733 2,018,934 Deposits by banks 160.787 8.516 8.836 - - 178.139 Customer deposits 71.640 213.078 90.317 707.767 1.085.832 Derivatives - 1.258 614 2.494 - 1.366 Debt sods-dies in issue 83.365 58.355 - - - 141.720 Other 1.634 11.292 - 12.926 Total 320.426 292.499 99.797 710.261 1,422,983 At 31 March 2011 Cash and balances at central banks 616.535 - 646535 Loans and advances to banks 126.740 243.656 752 3.918 - 375.066 Denvatives 8 5.998 6.954 4.184 - 17.141 Loans and advances to customers 29.423 87.824 270.626 523.021 (29.788) 881.106 Available-for-sale financial assets 5.002 122.833 194.653 137.046 116.123 575.657 Other - 94.081 13.790 - - 107.871 Total 807.708 554.392 486.775 668.169 86.335 2.603.379 Deposits by banks 159.338 5.000 4.175 7.819 - l76.362 Repurchase agreements - 41.708 - - - 41.708 Customer deposits 137978 165.380 529.076 402.866 - 1.235.300 Derivatives 13 2.439 2.524 9.599 - 11575 Debt soda-does n issue - - 310.449 150.302 - 460.751 Other - 54.503 - - 51503 Total 297.329 269.030 846.224 570,616 1,983,199 N M Rothschild & Sons Limited I Registered Number 925279 I Page 53 EFTA01112977 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.4 Liquidity risk (continued) Demand/ No fixed next day 2 days -3m 3m-I yr > lyr maturity Total Company 0000 £000 £000 £000 0000 £000 At 31 March 2012 Cash and balances at central banks 543.025 - 513.025 Loans and advances to banks 58.188 33.346 - 91.834 Derivatives 1.369 1.227 3.878 18.643 - 25.1 17 Loans and advances to customers 31.520 187.322 176.515 115.099 (28.806) 784.680 Avadablefonsale financial assets - 121.21 1 871 141.926 107.136 371.111 Other 1.667 77.367 - 79.031 Total 639.069 420.473 181.294 575.668 78.330 1.894.834 Deposits by baits 160.787 8.516 8.836 - 178.139 Customer deposits 90.799 271933 90.316 707.767 1.160.315 Denvatives - 1.258 614 2.494 4.366 Debt securities in issue 83.365 83.365 Other 1.634 11.235 12.869 Total 336.585 292.442 99.796 710.261 1.439.084 At 31 March 2011 Cash and balances at central banks 646.523 - - 616323 Loans and advances to banks 82.823 209334 - - 292.357 Derivatives 8 5.998 6.954 4.184 - 17.144 Loans and advances to customers 29.571 74.992 243.578 528.120 (28.806) 817.455 Avadatk-for-sale financial assets 5.002 122.833 194.653 137.046 113.470 573.001 Other — 85.171 — — 85.171 Total 763.927 498328 445.185 669.350 84.664 2.461.654 Deposits by barks 159.171 5.000 4.175 7.849 176.195 Reece-chase agreements 11.708 - 11.708 Customer deposits 151.897 165.377 834.523 464.755 1.616.552 Dens/awes 13 2.419 2.507 9.599 14.538 Debt securities in issue - - 5.000 88.413 93.413 Other 51.446 - - 54.416 Total 311.081 268.950 846.205 570.616 1.996.852 Page 54 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112978 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.5 Maturity of financial liabilities The following tab show undiscounted contractual cash flows. including interest payable by the Group and the Company on financial liabilities, analysed by remaining contractual maturity at the balance sheet date. Loan commitments and guarantees are included at the earliest date they can be drawn down or called upon.This table does not reflect the liquidity position of the Group or Company. Demand/ next thy 2 days -3m 3m- lyr 1yr-Syr > 5r Tool Group (000 0000 L'000 I'000 I'000 L'000 At 31 March 2012 Deposits by banks 160.800 8.571 9.149 92 - 178.615 Customer deposits 74.891 219.921 106.930 729.278 40.322 1.171.345 Debt securdoes n issue 86.120 58.612 - - - 144.732 Other liabilities 1.631 1 1.292 - - - 12.926 Total 323,445 298.402 116,079 729,370 40,322 1,507,618 Loan commitments and guarantees 56.753 56,753 At 31 March 2011 Deposits by banks 159.339 5.035 4.223 7.947 176541 Repurchase agreements - 41.755 - - - 41.755 Customer deposits 138.272 173513 551.602 417.830 33.739 1.311.956 Debt securdoes in issue — 1.058 311.567 154310 — 466.935 Other liabilities — 54503 - - - 54.503 Total 297,611 275.864 867,392 580,087 33,739 2,054493 Loan commitments and guarantees 33.498 33,498 Company At 31 Mardi 2012 Deposits by banks 160.800 8.5741 9.149 92 - 178.615 Customer deposits 91.070 278.536 106930 729.278 40.322 1.246.136 Debt sew-does n issue 86,120 - - - - 86.120 Other liabilities 1.634 11.235 - - - 12.869 Total 339.624 298.345 116.079 729370 40,322 1,523,740 Loan commitments and guarantees 254.408 254.408 At 31 March 2011 Deposits by banks 159.172 5.035 4.223 7.947 176.377 Repurchase agreements - 11.755 - - 41.755 Customer deposits 152.196 174.568 858.108 480.822 33.739 1.699.433 Debt seordies n issue - - 5.060 91.319 - 96.379 Other liabilities - 54.446 - 54.446 Total 311.368 275.804 867.391 580.088 33.739 2,068.390 Loan commitments and guarantees 564.041 564.041 N M Rothschild & Sons Limited I Registered Number 925279 I Page 55 EFTA01112979 Notes to the Financial Statements (forming part of the Financial Statements) 2. Financial Risk Management (continued) 2.6 Capital management The Company's capital management policy is to ensure that it is strongly capitalised and compliant with regulatory requirements. The Company's regulator is the FSA who sets and monitors capital requirements for UK regulated financial institutions.A firm's minimum regulatory capital is derived from a combination of the requirements from Pillar I and Pillar 2 rules. Pillar I sets out the minimum capital requirements required to meet credit, market and operational risk Pillar 2 lays down a supervisory review process to evaluate an institution's own internal process to assess its own capital needs including capital for risks not covered by Pillar I. The credit risk capital requirement that the Company, and certain other subsidiaries which are part of its solo-consolidated group, are required to hold is largely determined by their balance sheets and off-balance sheet positions weighted according to the credit rating and type of exposure to comterparties. Processes are in place to ensure compliance with the minimum capital requirements set by the FSA. An annual Internal Capital AdequacyAssessment Process ("ICAAP'). which is subject to ESA review, is also undertaken to review the risks and capital requirements of the business.The Group's risk management processes are designed to ensure that all risks are identified and that they are covered by capital or other appropriate measures. The table below summarises the composition of regulatory capital for the solo -consolidated group at 31 March, as reported to the FSA: 2012 2011 Em Cm Tier I capital Called up share capital 57.7 57.7 Share premium account 97.9 97.9 Retained earnings and other reserves 224.8 259.0 Iknsion find valuation adjustrnem 29.6 59.4 Deductions from tier I capital (4.7) (4.8) Total tier I capital 405.3 469.2 Tier 2 capital Perpetual subordinated notes 124.3 1243 Collective provisions 29.7 29S Other items 0.3 5.1 Deductions from tier 2 capital (6.3) Total tier 2 capital 154.3 152.9 Total tier I & 2 capital 559.6 622.1 Deductions from total of tier 1 and tie- 2 capital• (164.4) (168.0) Capital Resources 395.2 454.1 • Deductions from total bey 1 and bet 2 capital anse (tern equty or loan investments Sto subsiduries or other related parties Page 561N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112980 Notes to the Financial Statements (forming part of the Financial Statements) 3. Fair Value of Financial Assets and Liabilities Fair value is the amount for which an asset could be exchanged, or a liability settled. between knowledgeable, willing parties in an arm's length transaction. For financial instruments carried at fair value, market prices or rates are used to determine that fair value where an active market exists (such as a recognised exchange). as it is the best evidence of the fair value of a financial instrument Market prices are not however. available for certain financial assets and liabilities held or issued by the Group.Where no active market price or rate is available. fair values are estimated using present value or other valuation techniques, using inputs based on market conditions existing at the balance sheet date.The valuation may be derived from quotations received from various sources. Where the market is illiquid. the quotations may not be supported by prices from actual market transactions. Valuation techniques are generally applied to over the counter derivative transactions and unlisted debt and equity securities. The most frequently applied pricing models and valuation techniques include discounted cashflow techniques and option valuation modelsThe values derived from applying these techniques are significantly affected by judgements made on the choice of valuation model used and the assumptions made concerning factors such as the amounts and timing of future cashflows. discount rates. volatility, and credit quality. The methods adopted to determine the fair value of each type of financial asset or liability are summarised below: • Cash and balances at central banks, loans and advances to banks and deposits by banks.The fair values of these instruments are materially the same as their carrying values due to their short term nature. • Loans and advances to customers have been reviewed and their terms and pricing compared to recent similar transactions. Where a material difference in terms and/or pricing has been observed, or where there is any other indication that the fair value of the asset differs materially from its carrying value, the disclosed fair value has been adjusted accordingly. • Repurchase agreements and amounts due to customers. The fair values of these instruments are determined by discounting the future cashflows at market interest rates adjusted for the appropriate credit spread. • Debt securities in Issue. Fair value is determined using quoted market prices where available, or by discounting the future cashflows at market interest rates adjusted for the appropriate credit spread. • Other financial assets and liabilities. Fair value is considered to be the same as carrying value for these assets. • Derivatives and available-for-sale financial assets are carried in the balance sheet at fair value, usually determined using market prices or valuations provided by third parties. Debt securities or unlisted equity securities for which no price is available are valued by discounting expected future cashflows at market interest rates adjusted for appropriate credit spreads. N M Rothschild & Sons Limited I Registered Number 9252791 Page 57 EFTA01112981 Notes to the Financial Statements (forming part of the Financial Statements) 3. Fair Value of Financial Assets and Liabilities (continued) Financial assets and liabilities carried at amortised cost Carrying Fair Carrying Fair value value value value 2012 2012 201 1 2011 Group C000 C000 C00 C'00 Financial assets Loans arid advances to custorres 812.667 759.193 881.106 799.134 Financial liabilities Deposits by barks 178.139 178.139 176.362 176.362 Reps-chose agreements — 41.708 41.708 Due to customers 1.085.832 1.092.585 1.235.303 1.240.826 Debt securities in issue 141.720 141.734 160.751 459.847 Other financial liabilities 7.612 7.612 54.503 54.503 Company Financial assets Loans and advances to customers 779.683 727.834 847.155 765.483 Financial liabilities Deposits by barks 178.139 178.139 176.195 176.195 Reptrchase agreements - - 41.708 41708 Due to customers 1.160.345 1.167.098 1.616.552 1.622.078 Debt securities in issue 83.365 81.179 93.113 93.415 Financial assets and liabilities carried at fair value Carrying value Measured equal to using fair value Level I Level 2 Level 3 Group 0000 C000 0000 £000 At 31 March 2012 Financial assets Financial assets held for trading 1.069 financial assets held for risk management purposes 23.045 2.3.01S Available-for-sale financial assets 372.677 239.098 52.155 81.424 Total 402,791 239.145 82,222 81,424 Financial liabilities financial liabilities held foetrading 2.220 2.220 Financial liabilities held for risk management purposes 2.146 2.146 Other financial liabilities 5,314 5.314 Total 9,680 9.680 Page 581N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112982 Notes to the Financial Statements (forming part of the Financial Statements) 3. Fair Value of Financial Assets and Liabilities (continued) Carrying value Measured equal co using fair value Level I Level 2 Level 3 0000 0000 0000 C000 Az 31 March 20 II Financial assets Financial assets held for trading 3.549 17 3.532 Financial assets held for risk management pa-poses 13595 13.595 Available-for-sale financial assets 575.657 424.759 70.149 80.449 Total 592.801 424.776 87,576 80,449 Financial liabilities Financial liabilities held for trading 2.798 2.798 Financial liabilities held for risk management purposes 11.777 11.777 Total 14.575 14,575 Company At 31 March 2012 Financial assets Financial assets herd for trading 7.069 47 7.022 Financial assets held for risk management purposes 23.045 23.045 Available-for-sale financial assets 371.144 237.565 52.155 81.424 Total 401.258 237.612 82,222 81,424 Financial liabilities Financial liabilities held for trading 2.220 2220 Financial liabilities held for risk management purposes 2.146 2.146 Total 4)66 4,366 At 31 March 2011 Financial assets Financial assets held for trading 3549 17 3.532 Financial assets held for risk management purposes 13595 13.595 Available-for-sale financial assets 573.004 422.106 70.449 80.449 Total 590.148 422.123 87,576 80,449 Financial liabilities Financial liabilities held for trading 2.798 2.798 Financial liabilities held for risk management pis-poses 11.740 I 1.740 Total 14.538 14,538 N M Rothschild & Sons Limited I Registered Number 925279 1 Page 59 EFTA01112983 Notes to the Financial Statements (forming part of the Financial Statements) 3. Fair Value of Financial Assets and Liabilities (continued) Level I: Quoted pnces (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level I that are observable for the asset or liability either directly (ie as prices) or indirectly (ie derived from market data to a significant extent).An example would be an instrument valued using a price/ earnings multiple of a comparable quoted company. Level 3: Inputs for the asset or liability that are not based primarily on observable market data (unobservable inputs).Typically this will be used for instruments with uncertain cashflows and the valuation will therefore depend upon the expected cashflows. estimated maturity and the discount factor used Assets measured at fair value based on Level 3 There were no significant transfers between assets valued at Level I and at Level 2 in the yearThe movements in assets valued using Level 3 valuation are as follows: Group and Company 2012 201 1 Available-for-sale financial assets C000 C000 At I April 80.449 77.946 Total gains and (losses) - in income statement (196) (85) - through other comprehensive income 1.202 2.505 Settlements (119) (202) Exchange movements 88 285 At 31 March 81.424 80.449 Total losses of CI96.000 (201 1: L85.000) were included in the income statement in respect of assets held at the end of the reporting period. A sensitivity analysis has been performed on the cashflows of the assets valued with a Level 3 methodology. These have been flexed to assume that either 10 per cent more or 10 per cent less cash is uniformly received over the life of the investment.The effect that these variations would have on the fair value of the assets is summarised below: 2012 2011 Group and Company C000 O000 Current (air value 81.424 80.449 Cashfkiw +10V addition to far value 8.143 8.043 Cashfkviv - reduction in far value 8.143 8.043 Page 60 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112984 Notes to the Financial Statements (forming part of the Financial Statements) 4. Net Interest Income 2012 2011 0000 0000 Interest and similar income Loans and advances 71.8W 74.694 Available-for-sale financial assets 4.514 7.578 Other 10 5 76354 82,277 Interest expense and similar charges Amounts due to banks and customers 17.131 53.165 Debt seat-nes n issue 11.827 10.792 58.958 63,957 Included within interest income is t5.083.000 (2011: f3,802,000) in respect of interest income accrued on impaired financial assets. S. Net Fee and Commission Income 2012 2011 C000 £000 Fee and commission income Bankrrg and credit-related fees and commissions 3.332 3.381 Fees for advisory work and other services 335.215 371.070 Other fees 16.144 9.667 354,991 384.118 Fee and commission expense Global financial advisory fees payable 22.497 24.563 Other fees payable 154 213 22.951 24,776 Global financial advisory fees payable represent fees paid to other members of the Rothschild group where the Company has worked in collaboration with another group company in a transaction. or fees paid to any subcontracted parties outside the Rothschild group. N M Rothschild & Sons Limited I Regjstered Number 925279 I Page 61 EFTA01112985 Notes to the Financial Statements (forming part of the Financial Statements) 6. Net Trading Income 2012 2011 £000 C000 Foreign exchange gains 1.362 1.717 Interest rate instruments - trading 334 56 Interest rate instruments - hedgpng (219) (90) Fair value movements 1.178 397 Equities 3 136 2,958 2216 Net trading income arises from movements in the fair value of financial assets held for trading and from hedging strategies.The following activities give rise to net trading income: • Trading in foreigp exchange spot. forward and option contracts. loans. interest rate futures. swaps and forward rate agreements. • Holding equities for trading purposes. Fair value movements represent the changes in the fair value of synthetic CDO investments attributable to embedded credit derivatives. Gains and losses on the ineffective portion of designated hedging relationships are also recognised in net trading income. 7. Other Operating Income 2012 2011 £000 croon Operating lease income 6.992 7.055 Rental income 105 4,750 Dmdend income 1.800 1.724 Gain on dsposal of fixed assets 130 563 Profit cn disposal of subsidiaries 546 — Gains less losses from available-for-sale financial assets 2.510 (107) Other 7.856 2.627 19,939 16.612 Page 62 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112986 Notes to the Financial Statements (forming part of the Financial Statements) 8. Operating Expenses 2012 2011 Note 0000 0000 Staff costs 9 251.942 271.752 Administrative expenses 68.371 69.193 320.313 343.945 The auditor's remuneration was as follows: 2012 2011 0000 £000 Audit fees relating to the Company 241 235 Audit fees relating to subsidary undertakngs 557 526 798 761 Remuneration payable to the auditor and its associates for non-audit work was as follows: 2012 2011 0000 £000 Non-audit services pursuant to legislation including interim reviews 43 43 Tax servces 90 176 Accounting advice 65 32 Other work II — 209 251 9. Staff Costs 2012 2012 201 1 201 1 Group Company Group Company Note C000 C000 C000 0000 Salaries (excluding profit share) 106.503 62.225 95910 55.847 Social security costs 12.072 7558 9.772 6.115 Staff benefits and other staff costs 23.904 16.269 16268 12.240 Pension costs — Defined benefit plans 23 2.636 2.487 2.681 2530 — Defined contribution plans 23 4.094 2.059 4.467 2.735 Post-retirement benefits 943 928 877 862 Staff costs (excluding profit share) 150,152 91,526 129.975 80.629 Directors' and employees' annual profit share 82.912 46251 123.033 71.075 Long term profit share schemes 18.878 18197 21.744 21206 Direttors* and employees' profit share 101,790 64.751 144.777 92.381 Total staff cops 251.942 156.277 274.752 173.010 N M Rothschild & Sons Limited I Registered Number 9252791 Page 63 EFTA01112987 Notes to the Financial Statements (forming part of the Financial Statements) 9. Staff Costs (continued) The number of persons employed as at 31 March was as follows: 2012 2012 201 1 2011 Group Company Group Company Global Financial Achnsory 617 390 748 435 Banking 209 52 221 60 Support and other 239 239 216 216 1.125 681 1.185 711 The average number of persons employed during the year ended 31 March was as follows: 2012 2012 2011 2011 Group Company Group Company Global Financial AdAsory 718 412 747 434 Banking 219 54 218 59 Support and other 233 233 220 220 1.170 699 1.185 713 Long term incentive schemes As part of its variable pay strategy. the Group operates long term incentive schemes for the benefit of employees.These schemes consist of deferred cash bonuses and. for certain key staff. deferred bonuses based on the share value of Rothschild Continuation Holdings AG ("RCH"). a parent of the Company. The cash awards are paid one. two and three years after the year of the award. and the expense is recognised over the two. three and four year periods !rem the start of the year of the award to the date of payment.These awards are paid on the condition that the recipient is still an employee of the Group. For certain key staff in positions of control within the Company. the deferred award is partly based on the future value of a fixed number of RCH shares.The objective is to link their reward with the performance of the Group. In addition to the requirement to remain employed by the Group. these awards may also be cancelled if: • There is reasonable evidence of employee misbehaviour or material error: or • The Company or the relevant business unit suffers a material downturn in financial performance: or • The Company or the relevant business unit suffers a material failure of risk management or • Reasonable evidence comes to light which calls into question the basis on which the original award was made. Deferred pay based on the value of RCH shares is accounted for as a cash-settled share based payment award.The fair value of the shares awarded as at 31 March 2012 was L2.810.000. and the value of this is being spread over the service period using the same principles as the other deferred awards and is booked in the income statement as part of the charge for long term profit share. RCH shares are not quoted. but their value is determined each six months by an independent valuation. A commitment to employees exists in connection to deferred remuneration. Some of this has not yet been accrued because it relates to future service period.The amount of potential future payments that have not yet accrued is L15.227.000. Page 64 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112988 Notes to the Financial Statements (forming part of the Financial Statements) 10. Tax lax charged to the income statement 2012 2011 E*000 0000 Current tax Current penod 5.136 4.507 - Prior year adjustments (1.652) (647) Total current tax charge 3.484 3.860 Deferred tax - Origination and reversal of timing differences 8.206 10.966 - Prior year adjustments (1.399) 767 Total deferred tax charge 6.807 11.733 Total tax charged to income statement 10.291 15.593 Tax on items (credited)lcharged to other comprehensive income: 2012 2011 C000 0000 Deferred tax on available-for-sale financial assets (151) 3249 Current tax on available-for-sale financial assets (967) 8.655 Deferred tax on cash flow hedges 508 658 Deferred tax on actuaral gains and losses on defined benefit pension schemes (12359) 10.241 Total tax (credited)/charged to other comprehensive income (12.969) 22.803 Tax on items credited to equity 2012 2011 0000 0000 Current tax on distributions to holders of perpetual instrumems 3.165 3.311 The tax charged on income differs from the theoretical amount that would arise using the standard tax rate as follows: 2012 2011 E'000 0000 Profit before tax 34,922 45.855 Tax cakulated at the UK corporation tax rate of 26% (2011 28%) 9080 12.839 Adjustment to tax charge n respect of prior years (3.051) 120 hcome from associate recorded net of tax in profit before tax (567) (214) Non tax deductible expenses 1032 1.085 Impact on deferred tax of corporation tax rate change 2.514 2.022 Effect of different tax rates n other countries 1.111 (862) hcome not subject to tax (186) (589) Previously u-recorded deferred tax now recognised 812 352 Other (154) 870 Total tax charged to income statement 10.291 15,593 Further information about deferred tax is presented in note 22. N M Rothschild & Sons Limited I Registered Number 925279 I Page 65 EFTA01112989 Notes to the Financial Statements (forming part of the Financial Statements) II. Group Profit Dealt with in the Financial Statements of the Company L10.092.000 (201 I: L21,922,000) of the Group profit attributable to ordinary shareholders has been dealt with in the accounts of the Ccmpany.As permitted by Section 408 of the Companies Act 2006. the income statement of the Company has not been presented separately 12. Loans and Advances 2012 2012 2011 2011 Group Company Group Company C000 C000 £000 0000 Loans and advances to banks: Included in cash and cash equivalents• 151.730 91.831 370.397 292.357 Other 4.543 4.669 156.273 91.834 375.066 292.357 •Loans and advances to banks includes reverse repurchase agreements of L75.029.000 (201 1: Lnil). Loans and advances to customers: Loans and advances to customers - at amortised cost 888.171 852241 950.141 913.424 Loans and advances to customers held (or trading - at far value 1.997 1.997 - - Allowance for credt losses (75.804) (72.561) (69.038) (65.969) 817.664 784.680 881.106 847.455 Loans and advances to customers include finance lease receivables as follows: 2012 2011 Group 0000 C000 Gross investment in finance leases, receivable: I year or less 52.861 14.026 5 years or less but over 1 year 81.499 66,668 Over 5 years 3.828 1.206 138.188 11 1.900 Unearned future fnance income on finance leases (22399) (18.228) Net invesunent in finance leases 115.789 93.672 The net investment in finance leases may be analysed as follows: 2012 2011 Group C000 £'000 I year or less 11.287 36,874 S years or less but over 1 year 68.101 55.691 Cher 5 years 3.401 1.107 115.789 93.672 Page 66 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112990 Notes to the Financial Statements (forming part of the Financial Statements) 12. Loans and Advances (continued) The movement in the allowance for credit losses on loans and advances to customers is as follows: Group Company Specific Collective Total Specific Collective Total C000 E*000 C0® O000 O000 C000 At I April 2011 39.250 29.788 69.038 37.163 28.806 65,969 Charge to income statement 1 1.125 23 11.418 13.761 13.761 Amounts written off (7.203) - (7.203) (6.866) (6.866) Recoveries 1218 - 3.218 391 - 394 Exchange movements (697) - (697) (697) - (697) At 31 March 2012 45,993 29,811 75.804 43.755 28.806 72,561 At I April 2010 55.740 34.418 90.158 52.206 33.806 86.012 Charge/(credit) to income statement 3.154 (4.630) (1.1/6) 5.387 (5.000) 387 Amounts vmtten off (228/2) (22.872) (20.300) (20.300) Recoveries 3.129 3.129 71 71 Exchange movements (201) - (201) (201) - (201) At 31 March 2011 39,250 29.788 69.038 37.163 28.806 65.969 Following the amendments to 1AS 39 and IFRS 7."Reclassification of Financial Assets-. on 1 July 2008 the Company transferred from available-for-sale financial assets to loans and advances those financial assets to which the definition of loans and advances would apply on the reclassification date. On the reclassification date and on 31 March 2012 the Group had the financial capacity to keep the loans concerned to their maturity date or for the foreseeable future.The movements in the carrying value and fair value of the financial assets reclassified are as follows: 2012 2011 Group and Company E'000 £'000 Carrying value of assets reclassified at I April 216,921 268,726 Impairments after reclassification (3.675) (2.912) Sale and redemptions (53.605) (54.159) (Repaymem)/drawdown of revoking credit (acaties (1.553) 743 Amortisation of frozen available-for-sale reserve 5.037 5.987 Exchange and other movements (7.373) (1.464) Carrying value of assets reclassified at 31 March 155.752 216.921 N M Rothschild & Sons Limited I Registered Number 925279 I Page 67 EFTA01112991 Notes to the Financial Statements (forming part of the Financial Statements) 12. Loans and Advances (continued) 2012 2011 Group and Company O000 CTKI0 Fair value of assets redassified at I April 212.466 249.699 Sale and redemptions (53.605) (50.615) (Repayment)ldrawdown of revolving credit facilities (1.553) 743 Fair value movements in the period (1.829) 14.132 Exchange and other movements (7.361) (1.193) Fair value of assets reclassified at 31 March 148,118 212.466 As of the reclassification date, the net effective interest rates, after associated funding costs, on reclassified financial assets was 2.25 per cent A revaluation gain of C1,846,000 would have been recognised in other comprehensive income in the year to 31 March 2012 had the assets not been reclassified (201 I: revaluation gain of £20.404.000). After reclassification, the reclassified financial assets contributed the following amount, after associated funding costs, to profit before tax 2012 2011 O000 C000 Net interest ncome 2.188 3.077 Impairment losses (3.675) (2.912) Loss on disposals '2/5, (1.674) Loss before tax on reclassified financial assets (1,762) (1,509) 13. Available-For-Sale Financial Assets 2012 2012 201 1 2011 Group Company Group Company £000 O000 0000 £000 Debt securities 275.024 274.899 488.578 488.578 Allowance for impairment (10.891) (10.891) (29.044) (29,044) Total debt securities — at fair value 264,133 264,008 459334 459334 Eqsty securities 111.911 110.403 1 19366 116.813 Allowance for impairment (3.367) (3,267) (3,443) (3343) Total equity securities — at fair value 108344 107,136 116.123 113.470 Total available-for-sale financial assets 372,677 371,144 575.657 573.004 Page 681N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112992 Notes to the Financial Statements (forming part of the Financial Statements) 13. Available-For-Sale Financial Assets (continued) 2012 2012 2011 2011 Group Company Group Company C000 0000 (000 0000 Available-for-sale financial assets may be analysed as follows: Debt securities - Listed 263.149 263.449 112.155 412.155 - Unlisted 684 559 17.079 47.079 Total debt securities 264,133 264.008 459.534 459.534 Equity securities - Listed 26.729 25313 33.684 31.223 - Unlisted 81.815 81.623 82.139 82.247 Total equity securities 108,544 107.136 116,123 113.470 Total avaibble-for-sale financial assets 372,677 371.144 575,657 573.004 Available-for-sale debt securities of C32.31 1000 (201 1:L79.159.000) were pledged as security for liabilities of the Company. Equity securities include shares in Paris Orleans SA.Third New Court Limited and Rothschild Holding AG. fellow subsidiaries of Rothschild Concordia SAS. The movement in the impairment allowance for available-fcosale financial assets is as follows 2012 2012 2011 2011 Group Company Group Company 0000 0000 0000 0000 Debt securities At I April 29,044 29.044 26.433 26,433 Charge to income statement 1.322 1.322 2.866 2.866 Amounts written off (18.956) (18.956) - - Exchange movements (519) (519) (255) (255) At 31 March 10,891 10.891 29.044 29.044 Equity securities At I April 3.443 3.343 2.953 2.853 Charge to income statement - - 500 500 Exchange movements (76) (76) (10) (10) At 31 March 3.367 3267 3.443 3,343 N M Rothschild & Sons Limited I Regjstertd Number 925279 1 Page 69 EFTA01112993 Notes to the Financial Statements (forming part of the Financial Statements) 13. Available-For-Sale Financial Assets (continued) 2012 2012 201 1 201 1 Group Company Group Company C000 0000 0000 0000 Ac I April 575.657 573.004 760.813 758.951 Additions 282.186 282051 357,534 356906 Deposals (sales and redemptions) (451.160) (153.310) (556,867) (556.866) (Losses)/gains from changes in fair value (16376) (16.151) 30.588 30.421 Movement in allowance for impairment (727) (727) (3.101) (3.101) Unwinding of discount (6.157) (6.157) (6.673) (6.673) Exchange differences (7346) (7.539) (6.637) (6.637) At 31 March 372,677 371.144 575,657 573.004 14. Derivatives The Group's use of financial instruments. including derivatives. is set out in note 2.A derivative is a financial instrument the value of which is derived from the value of another financial instrument an index or some other variable (the "underlying").Typically the underlying is an interest rate. a currency exchange rate or the price of a debt or equity security.The majority of derivative contracts are negotiated as to amount tenor and price between the Group and its counterparties. and are known as "over the counter' ("OTC) derivatives.The remainder are standardised in terms of their amounts and settlement dates and are bought and sold in organised markets. and are known as exchange traded derivatives. Derivative instruments are carried at fair value. shown in the balance sheet as separate totals of positive replacement values (assets) and negative replacement values (liabilities). Positive replacement values represent the cost to the Group of replacing all transactions with a fair value in the Group's favour if the counterparties default. Negative replacement values represent the cost to the Group's counterparties of replacing all their transactions with the Group with a fair value in the counterparties'favour if the Group were to default Positive and negative replacement values on different transactions are only netted if there is a legal right of set-off, the transactions are with the same counterparty and the cashflows will be settled on a net basis. Changes in replacement values of derivative instruments are recognised in trading income unless they qualify as cash flow hedges for accounting purposes. The Group uses the following derivative financial instruments for both trading and hedging purposes: • Forward contracts and futures - contractual obligations to buy or sell financial instruments on a future date at a specified price. Forward contracts are OTC contracts. whereas futures are exchange traded derivatives. ■ Interest rate swaps - transactions in which two parties exchange interest cashflows on a specified notional amount for a predetermined period. Most swaps are OTC instruments, Interest rate swap contracts generally entail the contractual exchange of fixed and floating rate interest payments in a single currency • Options - contractual agreements under which the seller grants the purchaser the right but not the obligation to buy or sell by or at a future date a specified quantity of a financial instrument at a predetermined price. The purchaser pays a premium to the seller for this right Options may be transacted OTC or on a regulated exchange. Derivatives may be transacted for hedging or trading purposes.The Group enters into derivative transactions primarily for the purpose of hedging exposures in the non-trading book.The accounting treatment of hedge transactions depends on the nature of the hedging relationship and whether the hedge qualifies as such for accounting purposes. Derivative transactions may qualify as hedges for accounting purposes as either fair value or cash flow hedges.Trading involves taking positions with the intention of profiting from changes in market variables such as interest rates. Page 70 I N N Rothschild & Sons Limited I Registered Number 925279 EFTA01112994 Notes to the Financial Statements (forming part of the Financial Statements) 14. Derivatives (continued) FairValue Hedges The Group's fair value hedges consist of interest rate swaps that are used to protect against changes in the fair value of fixed rate lending. fixed rate debt securities and fixed rate borrowing. The fair value of derivatives designated as fair value hedges at 31 March 2012 was LI6.334.000 (201 1: loss of L2.060.000). Fair value gains of L16.833.000 (201 1: losses of L6.484.000) on derivatives held in qualifying fair value hedging relationships are included in net trading income. Fair value losses of LI 7.05Z000 (2011:gains of L6.394.000). which relate to changes in fair value of hedged items attributable to the hedged risk are also included in net trading income. Cash Flow Hedges The Group is exposed to variability in future interest cash flows on non-trading assets and issued debt securities which receive or pay interest at variable rates. Gains and losses on the effective portion of interest rate swaps designated as cash flow hedges are recorded in other comprehensive income. Gins or losses on any ineffective portion of these swaps are recognised immediately in the income statement. No profit or loss was recognised in the income statement in respect of the ineffective portion of cash flow hedges (201 1: LO). The fair value of derivatives designated as cash flow hedges at 31 March 2012 was L4.565.000 (2011:gain of L3.904.000).At 31 March 2012. an unrecognised fair value gain of L2.655.000 (2011:gain of L499.000) associated with these derivatives has remained deferred in shareholders' equity and will be transferred to the income statement when the hedged cashflows affect profit or loss. Amounts relating to cash flow hedges transferred to the income statement during the period are included in net trading income. the schedule of cash flows hedged is as follows: < 1 yr 1-3 yrs 3-5 yrs 5-10 yrs > 10 yrs Group and Company O000 O000 O000 C000 O000 As at 31 March 2012 Cash inflows (assets) 821 159 As at 31 March 2011 Cash inflows (assets) 1.390 N M Rothschild & Sons Limited I Registered Number 925279 I Page 71 EFTA01112995 Notes to the Financial Statements (forming part of the Financial Statements) 14. Derivatives (continued) Notional principal Positive fair value Negative fair value 2012 2011 2012 2011 2012 2011 0000 C000 £000 0000 C000 0000 Group Contracts held for risk management purposes Derivatives designated as hedges fair value interest rate swaps 821.733 1.152.006 18.480 9.675 (2.146) (11.735) Cash flow interest rate swaps 175.000 191.937 4.565 3.909 — (5) Other derivatives held for risk management purposes Interest rate swaps — 10.000 - - - (37) OTC interest rate cptions 11.671 12.378 - II - - 1,008.404 1.366,321 23.045 13595 (2.146) (11,777) Contracts held for trading purposes Forward foreign exchange contracts 414.356 144.606 997 2.100 (1.191) (1.795) Interest rate swaps 26.912 25.388 1.028 1.035 (1.029) (1.003) Exchange traded interest rate futures 5.629 5.604 47 17 - - Other - 4.421 - 397 446,897 180,019 2072 3.549 (2,220) (2,798) 1,455301 1.546,340 25.117 17,144 (4.366) (14,575) Company Contracts held for risk management purposes Derivatives designated as hedges Fair value interest rate swaps 821.733 1.152.006 18.480 9.675 (2.146) (11.735) Cash flow interest rate swaps 175.000 191.937 4.565 3.909 (5) Other derivatives held for risk management purposes OTC interest rate cptions 11.671 12,378 11 1,008.404 1.356,321 23.045 13.595 (2.146) (11.740) Contracts held for trading purposes forward foreign exchange contracts 414.356 144.606 997 2.100 (1.191) (1.795) Interest rate swaps 26.912 25.388 1.028 1.035 (1.029) (1.003) Exchange traded interest rate futures 5.629 5.604 47 17 Other — 4.421 — 397 446,897 180,019 2072 3.549 (2.220) (2,798) 1,455,301 1.536,340 25.117 17.144 (4.366) (14,538) Page 72 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112996 Notes to the Financial Statements (forming part of the Financial Statements) IS. Other Assets 2012 2012 2011 2011 Group Company Group Company O000 O000 (O00 (O00 Accotnts receivable and prepayments 111206 84.901 116.349 89.039 Accrued income 23.300 11.298 21.282 15.175 Other 8.775 5.095 1 1.066 1185 145,281 104,294 151.697 111.999 Accounts receivable are net of allowances of L3.420.000 (201 1: C3.306.000). 16. Investments in Associates 2012 2011 Group 0000 O000 At 1 April 40,121 37,763 Adckbans 906 2.043 Disposals (3.503) (527) Share of results (net of tax) 3.511 1.920 Gams from changes n fair value 71 1 — Dividends (2.509) (1.496) Exchange differences (730) 418 At 31 March 38,510 40,121 The Group's interests in its principal associated undertakings, which are unlisted, are as follow& 2012 2011 Group's share ot C000 C000 Assets 120,286 112.136 Ludities 81.776 72.015 Revenues 25.120 27.996 Results (net of tax) 3.514 1.920 The Company holds a 9.38 per cent interest in Rothschild & Ge Banque, a French limited partnership in which the Company exercises a significant influence, which carries out banking activities in France. The Company also holds a 50.0 per cent interest in Quintus European Mainline Fund Limited Partnership, a Jersey limited partnership that is an investment vehicle for institutional investors. Substantive "lock out" rights granted to other interest holders mean overall control of the kind does not rest with the Company and the investment continues to be classified as an investment in an associate. The Group's interests in associates are held by the Company at historical cost of C36,61 1,000 (201I: L39.208,000). N M Rothschild & Sons Limited I Registered Number 925279 1 Page 73 EFTA01112997 Notes to the Financial Statements (forming part of the Financial Statements) 17. Investments in Joint Ventures I ne Group holds a 50.0 per cent interest in N M Rothschild Europe Partnership. an English partnership, and a 50.0 per cent interest in Rothschild Europe SNC, a French partnership.These partnerships undertake financial advisory activities in continental Europe and are accounted for as jointly controlled entities in accordance with IAS 31 Interests in Joint Ventures using the proportionate consolidation method.The Group's share of assets, liabilities. income and expenses of the partnerships is as follow& 2012 2011 L'000 £000 Current assets 7.881 10.983 Current liabilities 1.252 5.794 Income 5.415 6.490 Expenses 7008 7.965 IS. Intangible Assets Other intangible Goodwill assets Total Group O000 c000 O000 Cost at I Apra 2011 14.778 1,0[0 15.778 Acquisition of subvdiary undertaking 8,154 8.151 At 31 March 2012 14,778 9,154 23,932 Accumulated amortisation at I April 2011 875 875 Amortisation charge 426 426 At 31 March 2012 1,301 1,301 Net book value at 31 March 2012 14.778 7.853 22,631 Cost at 1 Ap-i 2010 14.478 1.033 15.478 Additions 300 300 At 31 March 20111 14.778 1,000 15,778 Accumulated amortisation at I April 2010 775 775 Amortisation charge 100 100 At 31 March 2011 875 875 Net book value at 31 March 2011 14.778 125 14,903 Included within goodwill as at 31 March 2012 is L9,786.000 (201 1: O.786,000) relating to the purchase of Lanebridge Investment Management Limited in the year ended 31 March 20O8. In assessing impairment of goodwill, the Group has used the latest forecasts of Lanebridge Investment Management Limited for the periods to March 2017.A discount rate of 10 per cent (201 1: 10 per cent) was applied to the forecast cash0aws.The results of the sensitivity analysis performed during the course of the review, which indudes assumptions regarding the timing and value of property sales, have provided sufficient assurance that the good/All is not impaired.The remainder of goodwill relates to various acquisitions within the Five Arrows Leasing Group. During the year. the Group acquired the entire capital of Elgin Capital LLea company that provides investment management services for various investment funds.The present value of the future servicing rights has been recognised at acquisition and will be amortised over the servicing period as the fees from servicing are recognised. Page 74 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01112998 Notes to the Financial Statements (forming part of the Financial Statements) 19. Property, Plant and Equipment Leasehold Cars. fixtures and Computer improvements fittings equipment Total Grow C000 O000 C000 O000 Cost a I April 2011 29.682 24.521 25.092 79.295 Additons 27.830 3.192 8.541 39.866 Disposals (7.179) (8.923) (421) (16.523) Exchange differences (I 4 I ) (139) (101) (381) At 31 March 2012 50,192 18.951 33.114 102.257 Accumulated depredation at I April 201 1 10.631 11.184 22.751 47366 Disposals (7.179) (8.012) (418) (15.609) Depreciation charge 2.792 2.990 1.631 7.416 Exchange differences (97) (84) (71) (252) At 31 March 2012 6,147 9,078 23,896 39,121 Net book value at 31 March 2012 44,045 9,873 9,218 63.136 Cost a I April 2010 16222 22.923 21.802 63.947 Additons 13.436 3.700 1.642 18.778 Disposals — (2250) (1.365) (3.615) Acqutstion of subsidary undertakings 27 I1 39 77 Elahange differences (3) 137 (26) 108 At 31 March 2011 29.682 24.521 25,092 79,295 Accumulated depredation at I April 2010 8.096 '2.965 22.932 43.993 Disposals (1.412) (1.364) (2.776) Depreciation charge 2.516 2.599 1.205 6.320 Exchange differences 19 32 (22) 29 At 31 March 2011 10.631 14,184 22.751 47,566 Net book value at 31 March 2011 19.051 10,337 2,341 31,729 Included within the net book value of cars, fixtures and fittings for the Group as at 31 March 2012 is 8.266,000 (201 I: (6,054000) relating to assets leased to customers under operating leases. N M Rothschild & Sons Limited I Registered Number 9252791 Page 75 EFTA01112999 Notes to the Financial Statements (forming part of the Financial Statements) 19. Property. Plant and Equipment (continued) Leasehold Cars.fcctures and Computer improvements fittings equipment Total Company C000 C000 (000 (000 Cost at 1 Aprd 2011 26.451 6.328 20.217 52.996 Additions 27.809 290 7.806 35.905 Disposals (7.179) (5.410) (239) (12.828) At 31 March 2012 47.081 1,208 27,784 76.073 Accumulated depredation at I April 2011 8.831 6.054 18.840 33.725 Disposals (7.179) (5.110) (239) (12.828) Depreciation charge 2.377 191 1.046 3.614 At 31 March 2012 4.029 835 19.647 24.511 Net book value at 31 March 2012 43.052 373 8.137 51.562 Cost at 1 Aped 2010 13.538 6.218 19.882 39.638 Additions 12913 1 10 1.248 14.271 Disposals (913) (913) At 31 March 2011 26.451 6.328 20.217 52,9% Accumulated depredation at I April 2010 6.767 5931 19.153 31.851 Dsposals (911) (911) Depreciation charge 2.064 123 598 2.785 At 31 March 2011 8,831 6.054 18.840 33.725 Net book value at 31 March 2011 17.620 274 1.377 19.271 20. Debt Securities in Issue 2012 2012 2011 2011 Group Company Group Company (000 £000 (000 C000 Medium term floating rate notes 58.355 — 367.338 Certificates of deposit in issue 83.365 83.365 93.413 93.413 141.720 83,365 460.751 93,413 Medium term notes are issued under the Group's Euro Medium Term Note programme.The notes are issued at a floating rate of interest and had a residual maturity of less than 1 month as at 31 March 2012 (20 I I: between 6 months and 1 year 1 month). Certificates of deposit issued by the Company had residual maturity dates of less than 1 month as at 31 March 2012 (201 1: 1year I month) and are issued at a fixed rate of interest Page 761N M Rothschild & Sons Limited I Registered Number 925279 EFTA01113000 Notes to the Financial Statements (forming part of the Financial Statements) 21. Other Liabilities 2012 2012 2011 2011 Group Company Group Company Note 0000 C000 C000 0000 Accounts payable 12.926 12,869 54.503 51.146 Decried benefit pension liabilities 23 98.585 97.311 50.811 49.588 Other habitues 27.599 1.800 23.664 5.777 139,110 112.010 129.008 109.811 22. Deferred Income Taxes Deferred taxes are calculated on all temporary differences under the liability method using an effective tax rate of 24 per cent (201 1:26 per cent). The movement on the deferred tax account is as follows: 2012 2012 2011 2011 Group Company Group Company C000 0000 0000 0000 At I April 85,971 72.625 111,773 99,191 Recognised in income hcome szatement (charge)./credit (6.807) (3.802) (11.733) (12.407) Recognised in other comprehensive income Defned benefit pension arrangements 12.359 12.450 (10.241) (10.267) Available-for-sale securities - Fair value measurement 151 17 (3.249) (3.234) Cash flow hedges - Fair value measurement (508) (508) (658) (658) Exchange differences (95) - 283 Other 7.143 7.358 (201) At 31 March 98,214 88.140 85.971 72,625 Deferred tax assets are attributable to the following items: 2012 2012 2011 2011 Group Company Group Company C000 C000 C000 C000 Accelerated tax depreciation 10.31 1 6.137 10.037 5.011 Deferred profit share arrangements 29.340 21.312 33.137 25.383 pension and other post-retirement benefits 23.889 23.889 14.169 14.034 Available-for-sale securities 17.605 17.884 17.292 17.705 Tax losses 15.525 14.922 8.368 8.368 Other temporary differences 1.544 996 2.968 2.124 98,214 88.140 85.971 72.625 N M Rothschild & Sons Limited I Registered Number 925279 I Page 77 EFTA01113001 Notes to the Financial Statements (forming part of the Financial Statements) 22. Deferred Income Taxes (continued) The deferred tax (charge)ici eat in the income statement cornpnses the fol.omng temporary differences: 2012 2012 2011 2011 Group Company Group Company C000 C000 C000 C000 Accelerated tax depreciation 271 1.126 (80) 316 Deferred profit share arrangements (3.220) (1.071) (12.421) (13.575) Aniablefor-sak securities 162 162 183 183 Pensions and other post-retirement benefits (2.595) (2.595) (1.91 1) (1.925) Tax losses (804) (804) 3.269 3289 Other temporary differences (624) (620) (773) (695) (6.807) (3.802) (11.733) (12.407) Deductible temporary differences relating to unutilised tax losses within the Group for which no deferred tax asset has been recognised are Lnil (201 1: L465.000). Deferred tax liabilities have not been recognised for the withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries and other interests as it is anticipated that such profits would qualify for exemption from UK taxation. The amount of Shading taxes that would be payable should the retained earnings be remitted would be L411.000 (201 1: L209.000). 23. Retirement Benefit Obligations Defined benefit pension plans and other post-retirement benefits The Company is a member of a group pension scheme. the NMR Pension Fund ("the Fund"). which is operated by the Company for the benefit of employees of certain Rothschild group companies in the United Kingdom.The Fund comprises a defined benefit section. which closed to new entrants in April 2003. and a defined contribution scheme established with effect from April 2003.The Company has unfunded obligations in respect of pensions and other post-retirement benefits. The Group and the Company have adopted the revisions to IAS 19 which were published in December 2004. Actuarial gains and losses are recognised in full in the period in which they occur. outside the income statement through the statement of comprehensive income. The latest formal actuarial valuation of the Fund was carried out as at 31 March 2010 and has been updated for IAS 19 purposes to 31 March 2012 by qualified independent actuaries. As required by IAS 19. the value of the defined benefit obligation and current service cost have been measured using the projected unit credit method. In July 2010. the UK Government announced its intention that future statutory minimum pension indexation would be measured by the Consumer Prices Index. Deferred pensions will therefore also be indexed up to retirement in line with the Consumer Prices Index in future. This has been reflected in the Company's assumptions and a gain of Lk million was recognised in the year to 31 March 201 1as a result. included in "Actuarial (gains)/losses" in the figures below. The Company had previously augmented certain early retirement benefits but this has ceased following recent changes to pensions tax relief in the UKThe effect of this change was included as a L2.5 million credit to the income statement in the year to 31 March 201 1 as a past service cost. Page 78 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01113002 Notes to the Financial Statements (forming part of the Financial Statements) 23. Retirement Benefit Obligations (continued) The peinctpai actuattai assumptions used as at the balance sheet date were as follows: Group and Company 2012 2011 2010 Discount rate 4.8(Y% 5.50% 5.60% Retail price inflation 3.30% 3.50% 3.70% Consumer price inflation 2.30% 2.80% Na Expected rate of salary increases 4.30% 4.50% 4.70% Expected rate of ncrease in pensions in payment Capped at 5.0% per annum 3.20% 3.40% 3.60% Capped at 25% per annum 2.20% 2.30% 2.40% Life expectancy of a pensioner aged 60 Male 27.8 272 27.3 Female 285 28.4 29.1 Life expectancy of a future pensioner aged 60 in 20 years time Male 29.4 29.3 29.4 Female 29.3 29.2 30.4 Movement in defined benefit obligation: 2012 2012 2011 2011 Group Company Group Company 0000 0000 0000 C000 At I AprIl 507,149 505.896 511,578 509,876 Current service cost (net of contributions paid by other plan participants) 3.020 2.871 1.043 3.952 Current service cost relating to other plan partiopants 1.652 1.652 930 930 Interest cost 27.381 27.381 28.288 28.228 Actuarial lossesf(gains) 55.821 55.823 (19.331) (19.422) Benefits pad (19.751) (19.551) (15.632) (15.155) Past service costs 195 195 (2513) (2513) Echange differences 41 - (214) At 31 March 575.514 574.270 507.149 505.896 Movement in plan assets: 2012 2012 201 1 201 1 Group Company Group Company 0000 C000 0000 0000 At I AprIl 456,308 456.308 422.803 422.803 Egaected return on plan assets 27.963 27.963 27.137 27.137 Actual less expected return on assets (6.399) (6399) 8.373 8.373 Contributions by the Group 17.156 16.956 12.220 12.220 Contributions by other plan participants 1.652 1.652 930 930 Benefits pad (19751) (19.551) (15.155) (15.155) At 31 March 476.929 476.929 456.308 456,308 N M Rothschild & Sons Limited I Registered Number 925279 1 Page 79 EFTA01113003 Notes to the Financial Statements (forming part of the Financial Statements) 23. Retirement Benefit Obligations (continued) At 31 March. the fair value of plan assets comprised: 2012 2011 Group and Company (000 (000 Eqstes 162.086 184.115 Bonds 70515 72.811 Gilts and cash 11 1289 96.838 Property 1.989 1961 Hedge funds 45965 36.089 PA. private equity and infrastrucure 85.085 64.431 476.929 456.308 The expected return on assets for the financial year ended 31 March 2012 was 6.4 per cent S (201 I: 6.8 per cent).The rate of return is derived from the weighted average of the long term expected rates of return on the asset classes in the Trustees intended long term investment strategy A deduction was then made from the expected return on assets for the expenses incurred in running the Fund. The actual return on plan assets in the year was L21.6 million (201 I: L35.5 million). Amounts recognised in income statement: 2012 2012 201 1 201 1 Group Company Group Company Note C000 C000 C000 C000 Current service cost 3.020 2,871 4.013 3952 Interest cost 27.384 27.384 28.288 28.228 Expected return on plan assets (27963) (27963) (27.137) (27.137) Past service costs 195 195 (2.513) (2513) Total (induded in staff costs) 9 2,636 2.487 2,681 2.530 Amounts recognised in the balance sheet for current and previous four periods are as follows: 2012 2011 2010 2009 2008 C000 (000 (000 (000 0000 Group Present value of find obligations 572.052 503906 507.808 351.751 415210 Fair value of plan assets (476.929) (456.308) (122.803) (328.807) (422.764) 95.123 47.598 85005 22,944 (7,554) Present value of unfunded obligations 3.162 3.243 3.770 3.986 2214 Balance sheet liabilicy/(asset) 98.585 50.841 88.775 26,930 (5,340) Company Present value of fund obligations 572.052 503906 507.808 351.751 415210 Fair value of plan assets (476.929) (156.308) (122.803) (328.807) (422.764) 95,123 47.598 85.005 22.944 (7,554) Present value of unfunded obligations 2.218 1990 2.068 1.902 2.211 Balance sheet liability/(asset) 97,341 49.588 87,073 24.846 (5,340) Page 80 I N N Rothschild & Sons Limited I Registered Number 925279 EFTA01113004 Notes to the Financial Statements (forming part of the Financial Statements) 23. Retirement Benefit Obligations (continued) The experience aclj.ntirents ar,ng on the plan assets and liabilities were as follows: 2012 2011 2010 2009 2008 0000 £000 0000 £000 £000 Group Actual less expected return on assets (6.399) 8.373 69.327 (113.472) (33.138) Expenence gains and losses ansng on liabilities (7.537) (6.034) 2.362 144 (2.982) Company Actual less expected return on assets (6.399) 8.373 69.327 (113.472) (33.138) Expenence gains and losses ansng on liabilities (7.537) (6.034) 2.362 444 (2.982) Amounts recognised in the statement of comprehensive income: 2012 2012 2011 2011 Group Company Group Company £000 C000 £000 £000 Actuarial (losses)7gains recogyused in the year (62.221) (62.222) 27.704 27.795 Cumulative actuarial losses recognised in the statement of comprehensive income (162.965) (162.985) (100.741) (100.763) It is estimated that total contributions of L15.7 million will be paid to the Fund in the year ending 31 March 2013. of which it is estimated that the Company will pay L14.2 million. The highest paid director was not a member of the defined benefit pension scheme. Defined contribution schemes 2012 2012 2011 201 1 Group Company Group Company Noce £000 £000 £000 £000 Contributions paid 9 4.094 2.059 1.16/ 2.735 These amounts represent contributions to the defined contribution section of the Fund and other defined contribution pension arrangements. N M Rothschild & Sons Limited I Registered Number 925279 I Page 81 EFTA01113005 Notes to the Financial Statements (forming part of the Financial Statements) 24. Contingent Liabilities and Commitments 2012 2012 201 1 2011 Group Company Group Company 0000 C000 0000 C000 Guarantees Guarantees and irrevocable letters of credit 8.913 192.316 9.083 509.038 Commitments Undrawn formal standby facilities. credit lines and other commitments to lend 47.840 62.092 24.415 55.003 From time to time the Group is involved in judicial proceedings or receives claims arising from the conduct of its business. Based upon available information and, where appropriate, legal advice. the directors do not believe that there are any potential or actual proceedings or other claims which will have a material adverse impact on the Group's financial position. Assets pledged: 2012 2011 Group and Company C000 C000 Investment securities 32.31 1 /9.159 Assets are pledged as security over Euroclear overdraft facilities and as collateral to stare liabilities under sale and repurchase agreements and borrowing facilfties.These transactions are conducted under terms that are usual and customary to standard lending and securities borrowing and lending activities. 25. Operating Lease Commitments At 31 March 20 I 2, the Group was obligated under a nionber of non-cancellable operating leases for premises used primarily for business ptrposes.The significant premises leases usually include renewal options and escalation clauses in line with general office rental market conditions. Minimum commitments for non-cancellable leases of premises and equipment are as follows: Land and Buildings Ocher 2012 201 1 2012 201 1 Group C003 C000 C000 EV00 Up to I year 14.425 15.831 231 353 Between I and S years 53246 52.271 303 208 More than 5 years 208.601 213.616 28 - 276.272 281.718 56S 561 Company Up to I year 10.187 10.996 Between I and 5 years 40.585 38.314 - - More than 5 years 197.398 199.815 - - 248.170 249,125 Operating expenses include operating lease rentals of £16.798.000 (20I I: [13,781.000). Page 82IN M Rothschild & Sons Limited I Registered Number 925279 EFTA01113006 Notes to the Financial Statements (forming part of the Financial Statements) 26. Distributions 2012 2011 C000 O000 Other Equity Interests Perpetual floating rate subordinated ban (US$100 million) 575 570 Perpetual (wed rate subordinated loan (O5 miton) 6.780 6.762 Perpetual floating rate subordinated notes (E150 miton) 4.817 4.193 12.172 11.825 Tax credit thereon (3.165) (3.311) 9.007 8.514 Ordinary Shares Dividends paid 18.003 25.030 27.007 33.514 The dividends per ordinary share were 3Ip (201 1:43p). 27 Cash and Cash Equivalents For the purposes of the cash flow statement cash and cash equivalents comprise the following balances with an original maturity of less than three months. 2012 2012 2011 2011 Group Company Group Company C000 O000 C000 C000 Cash and balances at central banks 513.038 513.025 646.535 646.523 Loans and advances to banks 151.730 91.834 370.397 292.357 694.768 634.859 1.016.932 938.880 28. Transactions with Related Parties Group 'transactions with key management personnel (and their connected persons) of the Group are as follows: 2012 2011 At 31 March O000 C000 Loans 3 2 Deposits 1.404 908 Key management personnel are the directors of the Company and of parent companies. Loans are made to directors for the purchase of travel season tickets and are provided on an interest-free basis. Deposits are taken on normal commercial terms. N M Rothschild & Sons Limited I Registered Number 925279 I Page 83 EFTA01113007 Notes to the Financial Statements (forming part of the Financial Statements) 28. Transactions with Related Parties (continued) 2012 2011 £000 C000 Key management personnel compensation Short term employee benefits 5.739 8.224 Post-retirement benefits I 20 Other long term employee benefits 2.567 3.035 Amounts receivable from related parties of the Group are as follows: 2012 2011 Loans and Other Loans and Ocher advances assets ad vanes asses At 31 March COM C000 C000 C000 Amounts due from parent companies 37.650 290 31.318 605 Amounts due from joint vemures 21 204 Amounts due from associated undertakings 6.976 9566 Amounts due from other related parties 5.956 26.908 6.766 22.949 Other related parties are fellow subsidiaries of Rothschild Concordia SAS. Amounts receivable include loans to related parties and amounts recoverable from related parties in respect of expenses incurred on their behalf and services provided. Loans are made in the ordinary course of business and on substantially the same terms as comparable transactions with third parties. Amounts payable to related parties of the Group are as follows: 2012 2011 Perpetual Other Perpetual Other Deposits instruments liabilities Deposits instruments liabilities At 31 March C000 C000 £000 C000 0000 C000 Amounts due to parent companies 103 130 12.907 129 Amounts due to joint ventures 5.087 - 7.543 Amounts due to associated undertakings 5.461 9.712 Amounts due to pension funds 1.551 I 1.343 I Amounts due to other related parties - subordinated 72.610 - 72.610 - other 218.924 5.032 194.127 2672 Amounts payable consist of deposits taken and bank account balances held in the ordinary course of business and on substantially the same terms as comparable transactions with third parties. Guarantees from related parties of the Group are as follows: 2012 2011 At 31 March 0000 0000 Guarantees received from other related parties 51.672 51.033 The Group has received guarantees from a fellow subsidiary of Rothschild Concordia SAS in respect of certain customer loans and available-for-sale securities. Page 84 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01113008 Notes to the Financial Statements (forming part of the Financial Statements) 28. Transactions with Related Parties (continued) Amounts recognised in the income statement of the Group in respect of related party transactions are as folloves: Parent Joint Associated Pension Other related companies ventures undertakings funds parties Total C000 0000 C000 C000 C000 £000 2012 hterest receivable 1,073 - 27 I.1CO hterest payable (39) (28) (35) (II) (1.261) (1.374) Fees and commisvons receivable 5000 7.803 - 3.062 15.862 Fees and commisvons payable (3.551) (5.700) (9.674) (18.925) Dividend income 706 2.509 1.058 4.273 Rent payable (8984) (8.984) Recoverable expenses 82 (217) 5.532 5.397 2011 hterest receivable 938 - 39 977 hterest payable (33) (28) (25) (1.059) (1.145) Fees and commissions receivable 14.524 - 3.515 18.039 Fees and commissions payable - (4.600) (6.937) - (9.805) (21.342) Dividend income 525 151 1.496 1.187 3.359 Rent payable - - (7.167) (7.167) Recoverable expenses - (1.547) 3.528 1981 Fees and commissions receivable/payable relate to transactions where the Group has worked in collaboration with related parties. N M Rothschild & Sons Limited I Registered Number 925279 I Page 85 EFTA01113009 Notes to the Financial Statements (forming part of the Financial Statements) 28. Transactions with Related Parties (continued) Company Amounts receivable from related parties of the Company are as follow:s: 2012 2011 Loans and Other Loans and Other advances assets advances assets At 31 March C000 C000 0000 L'000 Amounts due from parent companies 37.650 290 34.318 605 Amounts due from subsidiary undertakings 97.960 10.489 79975 13.456 Amounts due from joint ventures - 407 Amounts due from associated undertakngs - 3.075 4.130 Amounts due from other related panes 5.956 26.817 6.751 22916 Amounts receivable include loans to related parties and amounts recoverable from related parties in respect of expenses incurred on their behalf and services provided. Loans are made in the ordinary course of business and on substantially the same terms as comparable transactions with third parties. Amounts payable to related parties of the Company are as follows: 2012 2011 Perpetual Other Perpetual Other Deposits instruments liabilities Deposits instruments liabilities At 31 March C000 L'000 0000 C000 0000 £000 Amounts due to parent companies 100 130 12.907 129 Amounts due to subsidary undertakings - subordinated 51.725 51.725 - other 69.425 6.893 373.711 7.460 Amounts due to joint ventures 10.174 15.086 Amounts due to associated undertakings 1.609 3.506 Amounts due to pension funds 1.551 I 1.343 Amounts due to other related parties - subordinated 72.610 72.610 - other 218924 3.770 194.127 2.672 Amounts payable consist of deposits taken and bank account balances held in the ordinary course of business and on substantially the same terms as comparable transactions with third parties. Guarantees made on behalf of and received from related parties of the Company are as follows: 2012 2011 At 31 March 0000 0000 Guarantees made on behalf of subvdiary isidertalongs 183.401 499958 Guarantees received from other related parties 54.672 54.033 Page 86 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01113010 Notes to the Financial Statements (forming part of the Financial Statements) 28. Transactions with Related Parties (continued) Company (continued) The Company has guaranteed LI 25,048,000 (201 1: LI32420.000) of perpetual floating rate subordinated notes and L58,355,000 (201I: L367.338,000) of medium term notes issued by Rothschilds Continuation Finance PLC.The issue proceeds have been placed on deposit with the Company on terms similar to those of the notes issued. The Company has received guarantees from a fellow subsidiary of Rothschild Concordia SAS in respect of certain customer loans and available-for-sale securities. 2012 2011 At 31 March C000 C000 Undravin credit commitments 14.252 30.588 Commitments provided to related parties of the Company are as follows: The Company has entered into a lease agreement with a fellow subsidiary of Rothschild Concordia SAS for the rental of office space.The lease agreement expires in 2035 and is on normal commercial terms. Amounts recognised in the income statement of the Company in respect of related party transactions are as follows: Other Parent Subsidiary Joint Associated Pension related companies undertakings ventures undertakings hinds parties Total C000 C000 C'000 C000 C000 C000 0000 2012 Interest receivable 1.073 3.224 - 27 4.324 Interest payable (39) (3,392) (55) - (II) (1.261) (4.758) Fees and commissions receivable 5.000 736 - 1.021 - 3.062 9.819 Fees and commissar's payable - (6,527) (7.102) (5.081) (9.674) (28.384) Dividend income 706 18.300 - 2.509 1.058 22.573 Rent payable - - - - (8.981) (8.984) Recoverable expenses - (3,451) - 744 - 6.072 3.365 IOU hterest receivable 938 3.131 - - - 39 4.108 hterest payable (33) (3,926) (55) - (25) (1.059) (5.098) Fees and commisoans receivable 4.186 - 4.371 - 3.515 12.072 Fees arid commiss.ons payable (10.284) (9.200) (1.092) (9.805) (33.381) Dividend income 525 22.153 - 1.497 1.187 25.362 Rent payable - - (7.167) (7.167) Recoverable expenses - (7.623) - - - 3.528 (4.095) Fees and commissions receivable/payable relate to transactions where the Company has worked in collaboration with other gray) companies, N M Rothschild & Sons Limited I Regjstercd Number 925279 IPage 87 EFTA01113011 Notes to the Financial Statements (forming part of the Financial Statements) 29. Non-controlling Interests 2012 2011 C000 C0® At I April 18.138 28.354 Profit attributable to non-controlling interests 6.892 4592 Actuarial losses (50) (15) Dividends (5.269) (13.810) Exchange (1.1 18) (983) At 31 March 18.593 18.138 30. Share Capital 2012 2011 Authorised 199.900.000 199.900.0GO Allotted ca"ed up and fully paid ordinary shares of CI each 57.654.551 5/654.55! 31. Perpetual Instruments 2012 2012 2011 201 1 Group Company Group Group C000 C000 C000 COM Perpetual Fixed Rate Subordnated Notes 9% (05 million) 18.750 48.750 18.750 48.750 Perpetual Floating Rate Suboninated Notes (€150 million) 51.725 51.725 51.725 51.725 Perpetual Floating Rate Suboninated Notes (US$100 million) 23.860 23.860 23.860 23.860 At 31 March 124.335 124.335 124.335 124.335 Page 88 I N N Rothschild & Sons Limited I Registered Number 925279 EFTA01113012 Notes to the Financial Statements (forming part of the Financial Statements) 32. Principal Subsidiary Undertakings The principal subsidiary undertakings of the Company are detailed below.All the principal subsidiary undertakings are registered in England and Wales except where otherwise indicated.The Company's remaining subsidiary undertakings are not material and accordingly no disclosure has been made in respect of these entities. Percentage held Five Arrows Leasing Group Limited (Lease portfolio management) 100 Five Arrows Leasing Lmited (Asset finance) 100 State Securities Pk (Asset finance) 100 Specialist Beet Services Finance Lmited (Contract hire and mantenance) 100 Rothschilds Continuation Finance PLC (Finance company) 100 Lanebndge Investment Management Limited (Property investment management) 100 Elgin Capital UP (Investment kind management services) 100 Rothschild Europe BV (Finanoal advisory company - incorporated in the Netherlands). 50 which owns the following subsidaries: Rothschild GmbH (Financial advisory company - incorporated in Germany) 100 Rothschild SpA (Financial advisory company - incorporated in Italy) 90 RCF Polska sp. z.ao. (Financial advisory company - incorporated in Poland) 100 Rothschild Portugal Umrtada (Financial advisory company - ncorporated in Portugal) 100 RCF (Russia) BV (Financial advisory company - incorporated in Russia) 100 Rothschild SA (Financial advisory company - incorporated n Spain) 98 Rothschild (Noddle East) Limited (Financial advisory company - incorporated n Dubai) 100 Rothschild Australia Limited (Financial advisory company - ncorporated in Austraka) 100 Arnzw Capital Limited (Investment holdng company - ncorporated in Austraka) 100 The historical cost of the investments in subsidiary undertakings was 043.547.000 (201 1: L43.547.000). On 17 August 201 1. the Group acquired Rothschild Credit Management Limited. Elgin Capital LLP and Elgin Capital Services Limited.The acquisition was financed in part by cash consideration and in part by deferred and contingent consideration. LI.65m of the consideration is deferred. payable in 4 instalments over a period of 20 months.A maximum of L6.6m will be paid. being 50% of net subordinated fees earned post acquisition.The total deferred and contingent consideration is discounted at the rate of 12%. The acquisition had the following effect on the Groups assets and liabilities: (000 Loans and advances to banks 695 Available-for-sale financial assets 132 Debtors 98 Creditors (298) Vitangble assets 8.151 Net assets acquired 8.781 Less: Cont ngenVdeferred consideration (6.433) Cash outflow on acquisition 2.348 From the date of acquisition to 31 March 2012. the acquisition contributed C1.358.000 to operating income and L76.000 to profit before tax. If the acquisition had been made at the beginning of the financial year. L2.345.000 would have been contributed to operating income and L427.000 to profit before tax. N M Rothschild & Sons Limited I Registered Number 925279 I Page 89 EFTA01113013 Notes to the Financial Statements (forming part of the Financial Statements) 33. Parent Undertaking and Ultimate Holding Company The largest group in which the results of the Company are consolidated is that headed by Rothschild Concordia SAS, incorporated in France.The smallest group in which they are consolidated is that headed by Paris Orleans SA. registered in France.The accounts are available on Paris Orleans web-site at www.paris-c(leanscom. On 8 June 2012. Paris Orleans SA. a French public limited liability corporation. converted to Paris Orleans SCA. a French public limned partnership.At the same time. Rothschild Concordia SAS ceased to control Paris Orleans. From this date. both the largest and the smallest group in which the results of the Company are consolidated will be Paris Orleans SCA. 34. Remuneration of Directors 2012 2011 0000 L'000 Drectors emoluments 1.799 3.326 Amounts receivable under long ten) profit share schemes 422 642 2.221 3.968 Pension contributions to money purchase schemes 18 2.221 3.986 The emoluments of the highest paid director were L1.085.000 (201 1: L1.537.000). 2012 2011 Retirement benefits are accruing to the foil ng number of directors under Money purchase schemes Defined benefit schemes Page 90 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01113014 Group directory EFTA01113015 Group directory Australia Canada Rothschild Australia Limited Rothschild (Canada) Limited Level 41,50 Bridge Street 1002, rue Sherbrooke Ouest Sydney, NSW 2000,Australia Bureau 2300, Montreal, Quebec Telephone +61 (0)2 9323 2000 Canada H3A 3L6 Facsimile +61 (0)2 9323 2040 Telephone +1 514 840 1016 Level 21, 120 Collins Street Facsimile +1 514 840 1015 Melbotrne,Victoria 3000, Australia Brookfield Place Telephone +61 (0)3 9656 4630 TD Canada Trust Tower Facsimile +61 (0)3 9656 4950 161 Bay Street Suite 3150 PO Box 206,Toronto Ontario, Canada MSJ 2S I Telephone +1 416 369 9600 Belgium Facsimile +1 416 864 1261 Rothschild Belgique Rothschild Canada Inc Succursale de Rothschild & Ge Banque Eigth Avenue Place Avenue Louise, 166 1910,525 - 8th Avenue SW 1050 Bruxelles Calgary,Alberta Telephone +32 (0)2 627 77 30 Canada T2P I GI Facsimile +32 (0)2 627 77 59 Telephone +1 403 537 6300 Facsimile +1 403 537 6389 Brazil Channel Islands Rothschild (Brasil) Ltda Av. Brigadeiro Faria Lima 2055 Rothschild Bank International Limited 18th Floor. Jardim Paulistano st. Julian's Court, St Julian's Aver 01451-000 Sao Paulo, Brazil St Peter Port, Guernsey Telephone +55 (0)11 3039 5828 Channel Islands GYI 3BP Facsimile +55 (0)1 1 3039 5826 Telephone +44 (0)1481 713713 Facsimile +44 (0)1481 727705 Rothschild Bank (CI) Limited St Julian's Court, St Julian's Avenue St Peter Port, Guernsey Channel Islands GYI 3BP Telephone +44 (0)1481 713713 Facsimile +44 (0)1481 711272 Rothschild Trust Guernsey Limited St Peter's House, Le Bordage St Peter Port, Guernsey Channel Islands GYI 6AX Telephone +44 (0)1481 707800 Facsimile +44 (0)1481 712686 Page 92 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01113016 Group directory China France Rothschild China Holding AG Rothschild Concordia SAS Beijing Representative Office Paris Orleans SCA Room 912A,Winland International 23 bis avenue de Messine Finance Center, No.7 Finance Street 75008 Paris. France Xicheng District. Beijing 100033 Telephone +33 (0)1 5377 6510 People's Republic of China Facsimile +33 (0)1 4563 8528 Telephone +86 10 6321 2900 Facsimile +86 10 6655 5880 Shanghai Representative Office Rothschild & Cie Banque Suite 3207.Tower 2, Plaza 66 29 avenue de Messine 1266 Nan Jing Xi lu Road 75008 Paris. France Shanghai 200040 Telephone +33 (0)1 4074 4074 People's Republic of China Facsimile +33 (0)1 4074 9847 Telephone +86 21 6288 1528 Facsimile +86 21 6288 1517 Rothschild & Cie 23 bis avenue de Messine Rothschild (Hong Kong) Limited 75008 Paris, France Rothschild Wealth Management Telephone +33 (0)1 4074 4074 Facsimile +33 (0)1 4074 9847 (Hong Kong) Limited 16/F Alexandra House 18 Chater Road Rothschild & Cie Gestion Central. Hong Kong 29 avenue de Messine People's Republic of China 75008 Paris. France Telephone +852 2525 5333 Telephone +33 (0)1 4074 4074 Facsimile +852 2868 1728 Facsimile +33 (0)1 4074 4969 Rothschild & Sons Financial Advisory Services (Beijing) Co Ltd Germany F910Winland International Finance Center, No.7 Finance Street Rothschild GmbH Xicheng District Beijing 100033 Rothschild Vermogensverwaltungs-GmbH People's Republic of China Telephone +8610 6321 2%0 Borsenstra0e 2-4 Facsimile +8610 6655 5880 60313 Frankfurt am Main. Germany Telephone +49 (0)69 4080 2600 Facsimile +49 (0)69 4080 2655 N M Rothschild & Sons Limited I Registered Number 925279 i Page 93 EFTA01113017 Group directory India ►apan Rothschild (India) Private Limited Rothschild Bank AG 103, 1st Floor, Pirarnal Tower Tokyo Representative Office Peninsula Corporate Park 20F Kamiyacho MT Building Ganpatrao Kadam Marg, Lower Party 4-3-20Tccanomon Mumbai 400 013, India Minatc-ku,Tolcyo 105-001, Japan Telephone +91 (0)22 4081 7000 Telephone +81 (0)3 5408 8045 Facsimile +91 (0)22 4081 7001 Facsimile +81 (0)3 5408 8048 Unit No. F 1+F2. 1st Floor, Plot No.2 The Grand Hotel, Nelson Mandela Road Vasant Kunj, New Delhi - 1 10 070, India Telephone +91 (0)11 4922 3009 Malaysia Facsimile +91 (0)1 1 4922 3001 Rothschild Malaysia Sdn Bhd Letter Box No.42, 29th Floor Indonesia UBNTower, IO.Jalan P Ftarnlee 50250 Kuala Lumpur, Malaysia Telephone +603 2687 0966 PT Rothschild Indonesia Facsimile +603 2070 1001 Indonesia Stock Lxchange Budding Tower l. 15th Floor Jend. Sudirman Kay. 52-53 Jakarta 12190. Indonesia Mexico Telephone +62 (0)2 l 515 3588 Facsimile +62 (0)21 515 3589 Rothschild (Mexico) SA de CV Campos Eliseos 345-8° piso, Polanco CP 1 1550 Mexico D.F. Mexico Israel Telephone +52 55 5327 1450 Facsimile +52 55 5327 1485 Rothschild Israel Rothschild Blvd .32 Tel Aviv 6688210, Israel Netherlands Telephone +972 72 220 4100 Facsimile +972 72 220 4106 Rothschild Europe BV Appollolaan 133-135 1077 AR Amsterdam,The Netherlands Italy Telephone +31 (0)20 570 2916 Facsimile +31 (0)20 570 2901 Rothschild SpA Via Santa Radegonda 8 20121 Milan, Italy Telephone +39 02 7244 31 Facsimile +39 02 7244 3310 Via S. Nicola da Tolentino I/5 00187 Rome, Italy Telephone +39 06 4217 01 Facsimile +39 06 4217 0252 Page 94 I N M Rothschild & Sons Limited I Registered Number 925279 EFTA01113018 Group directory Poland Singapore (continued) RCF Polska sp. z o.o. Rothschild Trust (Singapore) PTE Limited Warsaw Financial Centre Rothschild Wealth Management Emilii Plater 53 (Singapore) Limited CO-113 Warsaw, Poland Telephone +48 22 540 6400 Rothschild Bank AG Facsimile +48 22 540 6402 One Raffles Quay NorthTower 1 Raffles Quay, #10-02 Singapore 048583 Portugal Telephone +65 6532 0866 Facsimile +65 6532 4166 Rothschild Portugal, Limitada Calcada do Marques de Abrantes 40-10 Esq., 1200-719 Lisbon, Portugal South Africa Telephone +351 (0)21 397 5378 Facsimile +351 (0)21 397 5476 Rothschild (South Africa) (Proprietary) Limited 3rd Floor Oxford Comer. 32a Jellicoe Avenue Rosebank 2196, South Africa Russia Telephone +27 (0)1 1 428 3700 Facsimile +27 (0) I 1447 0967 RCF (Russia) BV (Representative Office) Spain Novinsky Passazh (8th Floor) 31 Novinslcy Boulevard Rothschild SA 123242, Moscow, Russia Telephone +7 495 775 8221 Paseo de la Castellana,35-3* Facsimile +7 495 775 8222 28046 Madrid, Spain Telephone +34 91 702 2600 Facsimile +34 9I 702 2531 Singapore Avigunda Diagonal, 442-3*I 08037 Barcelona, Spain Telephone +34 93 254 7503 Rothschild (Singapore) Limited Facsimile +34 93 254 7504 One Raffles Quay, NorthTower I Raffles Quay, #10-02 Singapore 048583 Telephone +65 6535 8311 Sweden Facsimile +65 6535 8326 Rothschild Nordic AB Strandvagen 7,4114 56 Stockholm Sweden Telephone +46 (0)8 586 33590 Facsimile +46 (0)8 660 9791 N M Rothschild & Sons Limited I Regjstercd Number 9252791 Page 95 EFTA01113019 Group directory Switzerland United Arab Emirates Rothschild Holding AG Rothschild Middle East Limited Rothschild Bank AG PO Box 506570 Zollkerstrasse 181 Dubai International Financial Centre Gate Precinct Building 6. Level 7 8034 Zurich, Switzerland Telephone +41 (0)44 384 71 1 1 Dubai, United Arab Emirates Fac≤ -4l (0)44 384 7222 Telephone +971 4 428 4300 Facsimile +971 4 365 3183 Rothschild Trust (Switzerland) AG Rothschild Europe BV Zollikerstrasse 181 8034 Zurich, Switzerland (Representative Office) Telephone +41 (0)44 384 71 1 1 Office 1 14, Bainunah Street 34 Facsimile +41 (0)44 384 7201 Al Bateen, PO Box 1 13100 Abu Dhabi, United Arab Emirates Telephone +971 2 406 9866 Equitas SA Facsimile +971 2 406 9810 3, rue du Commerce 1204 Geneva, Switzerland Telephone +41 (0)22 818 5900 Rothschild (Qatar) LLC Facsimile +41 (0)22 818 5901 Po Box 31316.A Farclan Office Tower Office 924.8-9th FloorWest Bay Doha, Qatar, United Arab Emirates Rothschilds Continuation Holdings AG Telephone +974 410 1680 Rothschild Concordia AG Facsimile +974 410 1500 Five Arrows Capital AG Baarerstrasse 95. Postfach 735 6301 Zug, Switzerland United Kingdom Telephone +41 (0)41 720 0680 Facsimile +41 (0)41 720 0683 N M Rothschild & Sons Limited New Court St Swithin's Lane RTS Geneva SA London EC4N 8AL, UK 3, rue du Commerce Telephone +44 (0)20 7280 5000 1204 Geneva, Switzerland Facsimile +44 (0)20 7929 1643 Telephone +41 (0)22 818 5995 82 King Street Facsimile +41 (0)22 818 5902 Manchester M2 4WQ, UK Telephone +44 (0)161 827 3800 Facsimile +44 (0)161 835 3789 Turkey 67Temple Row Birmingham B2 5LS, UK Telephone +44 (0)121 600 5252 Rothschild Kurumsal Finansman Hizmetleri Facsimile +44 (0)121 643 7207 Limited $irketi I Park Row Akmerkez Rezidans No. 14 D 2 Leeds LSI SNP( UK Akmerkez I@ MerkeziYani Telephone +44 (0)113 200 1900 Nispetiye Caddesi, 34340 Etiler Facsimile +44 (0)1 13 243 4507 litanbulTuticey Telephone +90 212 371 0800 Facsimile +90 212 371 0809 Page 961 N M Rothschild & Sons Limited I Registered Number 925279 EFTA01113020 Group directory United Kingdom (continued) Rothschild Trust Corporation Limited New Court St Swithin's Lane London EC4N 8AL, UK Telephone +44 (0)20 7280 5000 Facsimile +44 (0)20 7929 5239 Rothschild Wealth Management (UK) Limited New Court, St Swithin's Lane London EC4N 8AL UK Telephone +44 (0)20 7280 5000 Facsimile +44 (0)20 7280 1567 Five Arrows Leasing Group Limited Heron House. S Heron Square Richmond-upon-Thames SurreyWO? 1EL, UK Telephone +44 (0)20 8334 3900 Facsimile +44 (0)20 8332 1636 United States Rothschild North America Inc Rothschild Inc Rothschild Asset Management Inc 1251 Avenue of the Americas 51st Floor NewYork NY 10020, USA Telephone +1 (0)212 403 3500 Facsimile +1 (0)212 403 3501 Rothschild Inc. 1101 Connecticut Avenue NW Suite 700, Washington DC 20036, USA Telephone +1 (0)202 862 1660 Facsimile +1 (0)202 862 1699 Zimbabwe MBCA Bank Limited 14th Floor, Old Mutual Centre Third Street Harare, Zimbabwe Telephone +263 (0)4 701636 Facsimile +263 (0)4 708O05 N M Rothschild & Sons Limited I Registered Number 925279 1 Page 97 EFTA01113021 Page 98IN M Rothschild & Sons Limited I Registered Number 925279 EFTA01113022