Annual Report for the year ended 31 December 2008

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I Am PLEASEd TO REPORT THAT THE GROUP HAS PERFORmEd WELL dURING THE YEAR ANd WE HAVE ACHIEVEd A NUmBER OF OUR STRATEGIC OBjECTIVES. THE GROUP HAS dELIVEREd INCOmE (BEFORE FEE ANd COmmISSION ExPENSES) IN 2008 OF £65.2m, dOWN 25% FROm THE LEVEL ACHIEVEd IN 2007 OF £87.5m. THERE IS A BETTER BALANCE OF THESE REVENUES BETWEEN INSTITUTIONAL INVESTmENT BANKING AT 46% (2007: 62%) ANd PRIVATE CLIENT INVESTmENT mANAGEmENT AT 54% (2007: 38%). EVOLUTION GROUP INCOmE (before fee and commision expenses) £m The historic growth in income is demonstrated below: 7.6 2001 15.8 2002 40.8 2003 64.1 2004 73.5 2005 uKGAAp iFRs 84.8 2006 CHIEF ExECUTIVE’S REPORT THE EVOLUTION GROUP PLC 04 THE EvOluTiON GROup plC ANNuAl REpORT & ACCOuNTs 2008 87.5 2007 Restated 65.2 2008 INCOmE BREAKdOWN The detailed income analysis by segment and by operating company is shown below: 2008 Restated 2007 £’000 % £’000 % insTiTuTional invesTmenT banking Evolution securities 1 privaTe clienT invesTmenT managemenT 29,774 46 54,650 62 Williams de Broë 2 oTher 35,727 54 32,606 38 Other income (340) – 219 – 65,161 100 87,475 100 Commissions paid away (1,257) (2,007) Total income 63,904 85,468 notes 1 The results of Evolution securities are defined as those arising from Evolution securities limited (“Esl”) and its subsidiary Evolution securities (us) inc. (“Esus”). 2 The results of Williams de Broë are defined as those arising from Williams de Broë limited (“WdB”), Williams de Broë Management Company limited and from WDB Capital limited, including the consolidated results of the WDB Capital uK Equity Fund limited. alex snoW Chief Executive Officer
evolution securities Evolution securities provide equity and fixed income research, institutional sales and trading, equity market making, corporate finance and corporate broking advice. Within Evolution securities, the core strategic objective is to maintain a balanced business, between equities and fixed income, servicing the needs of institutional and Corporate customers in both of these product areas. 2008 presented an extraordinary business environment. Capital markets all but ceased to exist with well-publicised significant falls in all FTsE indices, especially in AiM and the small cap indices as well as in Official list initial public Offerings (“ipO”). in addition, secondary volumes on all indices fell between 30-65% with a corresponding impact on share prices. Despite this backdrop, Evolution securities continued to maintain significant market shares in both agency business and total transactional shares across all uK indices. Faced with these conditions, Evolution securities reduced its headcount and costs in its equities division and strategically took the decision to further invest in people within fixed income, and align this business to the opportunities that prevail in its market place. This latter point, in particular, refers to the servicing of the customer at both the institutional and corporate level. Results for the year have been affected by the prevailing market conditions in equities, especially in the second half of the year, which significantly impacted equity market making. For the year to 31 December 2008 Evolution securities traded at a loss, recording an adjusted operating loss (as defined in the Financial Review) of £5.4m (2007: profit £13.0m). Total income before fee and commission expenses was £29.8m (2007: £54.7m), with secondary sales and trading for equity and fixed income holding up, despite market factors, at £19.8m (2007: £19.7m). The business reduced its annualised cost base by £7.2m (14%) during the year as part of an ongoing programme to drive efficiency through to the bottom line and streamline the business. The fully annualised benefit of these savings will not been seen until 2009. Our objective for 2008 has been the reduction of costs, streamlining the business and positioning our fixed income and equities businesses for 2009. We are very confident about our prospects in both. CHIEF ExECUTIVE’S REPORT CONTiNuED INSTITUTIONAL INVESTmENT BANKING Secondary market activities Research strength in equity research lies at the heart of a strong equities franchise, it helps brand the business. Our research teams are highly experienced, with in-depth knowledge and a strong reputation across a broad range of uK sectors and industries. Our research offering covers small, mid and large sized capitalised companies. in total, we research approximately 200 stocks. A notable award in 2008 was from starmine (sponsored by The sunday Times) where we achieved the No 1 ranking in FTsE 100 research recommendations across our industry. Fixed Income Changing working capital practises within the major investment Banks, a changing regulatory environment as well as a redirection of risk appetite have all produced a changing picture for fixed income markets. We believe that these changes are permanent and here to stay. During 2008 Evolution securities has adapted to these changes by investing in the talent pools in the market place as well as in execution technology. Our business in this area has changed considerably in 2008, with further expansion in the first quarter of 2009, which is expected to continue throughout the year. We now service a global client base and in terms of an offering, we price over 4,000 bonds, have a first class and independent research team, and offer services in fixed income products across Government Bonds, investment Grade, High Yield, Distressed and Asset Backed securities areas. in conclusion, we believe that we offer a service that is independent and is broadly unique to many of our competitors. Whilst these new initiatives were not fully operational or complete in 2008, we are delighted to report a robustness in our performance where income grew by 97% to £7.1m (2007: £3.6m). 05
Page 1 and 2: Yesterday Today Tomorrow... ANNUAL
Page 3 and 4: FINANCIAL ANd OPERATIONAL HIGHLIGHT
Page 5: Balance Sheet strength and cash bal
Page 9 and 10: Corporate Finance Evolution securit
Page 11 and 12: Wdb capital The Group’s investmen
Page 13 and 14: EARNINGS PER SHARE ON TOTAL OPERATI
Page 15 and 16: evolution securities’ income anal
Page 17 and 18: other activities The Group’s othe
Page 19 and 20: Lord macLaurin of Knebworth, dL (72
Page 21 and 22: principal risks and uncertainties T
Page 23 and 24: share capital Details of the change
Page 25 and 26: The Directors consider that in prep
Page 27 and 28: The Chief Executive, Alex snow, is
Page 29 and 30: The Committee observed that during
Page 31 and 32: appropriate and comprehensive proce
Page 33 and 34: The Board has delegated to the Remu
Page 35 and 36: The concept of a bonus ceiling does
Page 37 and 38: non-executive directors Non-executi
Page 39 and 40: On 8 April 2009, Alex snow was awar
Page 41 and 42: We have audited the Consolidated Fi
Page 43 and 44: ASSETS 2008 2007 Note £’000 £
Page 45 and 46: 2008 2007 £’000 £’000 (loss)/
Page 47 and 48: shareholding of more than one half
Page 49 and 50: ) Distribution channels and custome
Page 51 and 52: (b) Share-based plans The Group’s
Page 53 and 54: Risk Reporting The Group Board rece
Page 55 and 56: Neither past Past due but not impai
Page 57 and 58:
By business segment (continued) The
Page 59 and 60:
6. otHeR inCome Restated 2008 2007
Page 61 and 62:
11. aUditoRs’ RemUneRation During
Page 63 and 64:
14. inCome taX eXPense (CONTINuED)
Page 65 and 66:
18. intanGiBle assets notes to tHe
Page 67 and 68:
20. deFeRRed inCome taX (CONTINuED)
Page 69 and 70:
24. tRadinG PoRtFolio assets notes
Page 71 and 72:
31. Consolidated moVement in sHaReH
Page 73 and 74:
33. CasH FloW FRom oPeRatinG aCtiVi
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38. emPloYee sHaRe sCHemes Movement
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38. emPloYee sHaRe sCHemes (CONTINu
Page 79 and 80:
THE EVOLuTION GROuP PLC PARENT COMP
Page 81 and 82:
ASSETS ComPanY BalanCe sHeet AS AT
Page 83 and 84:
statement oF ReCoGnised inCome and
Page 85 and 86:
1. aCCoUntinG PoliCies (CONTINuED)
Page 87 and 88:
2. FinanCial instRUments and RisK m
Page 89 and 90:
2. FinanCial instRUments and RisK m
Page 91 and 92:
5. inVestment in sUBsidiaRies notes
Page 93 and 94:
10. CasH and CasH eQUiValents 2008
Page 95 and 96:
17. Post BalanCe sHeet eVents There
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Page 99 and 100:
Page 101 and 102:
FoR YoUR notes 99
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DesiGneD AnD proDuceD BY BesT&co. l
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Annual Report for the year ended 31 December 2008

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