Final Results

5th Mar 2009 07:00



5 March 2009

Charlemagne Capital Limited

Audited Results for the year ended 31 December 2008

Charlemagne Capital Limited ("Charlemagne", or the "Group"), the specialist emerging markets equity investment manager, today announces audited results for the year ended 31 December 2008.

Key Highlights

Assets Under Management - US$2.18 billion (2007: US$6.5bn)

Net Profit after Tax and Minority Interest - US$13.9 million (2007: US$58.8m)

Earnings per share - 4.9 US cents per share (2007: 20.5 US cents)

Management Fees - US$39.5 million (2007: US$43.5m)

Average Management Fee margin on AUM - unchanged at 82 bps

Performance Fees - US$3.7 million (2007: US$83.8m)

Operating Profit Margin - 38.0% (2007: 52.7%)

Second interim dividend of 1.3 US cents declared (2007: 2.4 US cents)

New institutional business from pension funds and endowments totalling US$535m in 2008 

Exceptional opportunites emerging across asset classes - corporate debt, undervalued equities, discounted funds and property companies

Commenting on the results, Jayne Sutcliffe, Chief Executive : 

This year was an extremely challenging one for investors in the emerging markets and elsewhere, and the 2008 results for Charlemagne were adversely affected as a result. We are however confident that the long term investment case for emerging markets remains intact and we continue to see exceptional investment opportunities. Charlemagne's efficient business model, long track record and consistent strategy leaves it well positioned to benefit from future growth in the emerging markets.

Enquiries:

 

Charlemagne Capital	Tel. 020 7518 2100
Jayne Sutcliffe, Chief Executive
David McMahon, Finance Director

 

Smithfield Consultants	Tel. 020 7360 4900
John Kiely / Gemma Froggatt

 

There is a presentation for analysts and investors at 09.30am today at the offices of Smithfield Consultants, 10 Aldersgate St., London EC1A 4HJ.

Notes to Editors:

Charlemagne Capital is a specialist emerging markets equity investment management group. Charlemagne Capital Limited was admitted to the AIM market of the London Stock Exchange on 4 April 2006.

Charlemagne's product range comprises mutual funds, institutional and specialist fund products and hedge funds primarily covering GEMs, EMEA,  Latin America and Asia. Charlemagne Capital employs a range of investment strategies including: long only, long/short, structured products and private equity. Charlemagne Capital's funds aim to exploit the inefficiencies in the market via a strict bottom up approach and focused stock selection.

   

Chairman's Statement

2008 was a year in which the environment for investors in emerging markets and elsewhere changed dramatically. It will come as no surprise to shareholders therefore that the business of Charlemagne Capital was adversely affected in the period. Nothwithstanding this inevitable reduction in profits and assets under management, given the Group's concentration on the volatile equity markets of emerging economies, Charlemagne remains in good shape for the opportunities ahead. The Group has no debt and substantial cash. Assets under Management and Advice ("AuM"), which had increased by almost 40% in 2007, decreased by 66% in 2008 to US$2.2 billion. This drop was primarily the result of falls in underlying investment values and was particularly steep in the period between August and November. Asset flows into existing and new products were affected to a much lesser degree although, in the prevailing circumstances, some decrease was inevitable. Of particular note is the continued growth of the Group's institutional business, which built upon a promising start and continued to win mandate appointments throughout the year despite adverse market conditions. 

The global nature of events sets this crisis apart from those occurring in emerging markets in the past. As a result of the sell off, many emerging markets are now trading at valuation levels not seen in the recorded history of this asset class. The economies of the emerging markets now account for 50% of the world's total output and that percentage can be expected to rise as developed markets continue to tread water. Set this against the fact that the emerging market asset class represents less than 10% of global stockmarket capitalisation and shareholders will understand the scale of the opportunity for the Company. To add to this, exchange rates in emerging economies are now at almost record lows in real terms making valuations even more compelling.

The year under review saw our stock picking approach underperform market indices. This, in our view, was caused by mass risk aversion and a switch to areas perceived as safer, rather than the focus on fundamentals which is our guiding principle as investors. Our disciplined investment process within emerging markets seeks to generate consistent, low risk returns through an active, bottom up, risk aware process. We remain confident that this strategy will continue to produce superior returns over the long term in markets which are fundamentally undervalued. 

Due to the drop in AuM, our annual management fees decreased by 9% to US$39.5 million. Unsurprisingly, given the market falls, the Group's funds generated only minimal performance fees of US$3.7 million, down substantially from 2007. Unless the average level of AuM rises during the coming year, a further fall in management fee revenues can be expected in 2009. Profitability remains closely aligned with AuM. However the development of institutional business does reduce the volatility of flows within overall AuM. 

Our basic strategy still remains unchanged. We will continue to focus on our core global emerging market specialisation, operating within an asset class which we believe is now more attractive than ever. Demographics in emerging economies and the position they occupy within the world ecomomy make it clear to us that the events of 2008 mainly represent extreme and irrational market fear rather than signalling a permanent shift of value.

The Group has not sought to take steps to restructure its investment approach nor has it made structural moves to reduce its cost base permanently. Whilst margins have clearly reduced during 2008, we are now seeing the benefits of operating with a lean fixed cost structure without having to lose the experienced personnel, organisational structure and expertise available to us. In this way, we aim to be able to return to providing consistently superior returns to investors and to build value for our shareholders, once market conditions begin to focus on fundamentals again. We continue to aim to foster a culture and framework which attracts the talented individuals whose efforts will make this possible. 

As previously stated, it is our intention and policy to declare regular dividends which reflect the earnings and cash flow of the Group. It is intended to continue this policy into the future. Shareholders have already received dividends of US$7.0 million in respect of the first interim distribution for 2008 (2007: US$11.0 million). A further amount of US$3.6 million is now being declared in respect of the second interim distribution for 2008 (2007: US$35.8 million). Additionally the Company has bought back shares for cancellation in the amount of US$2.6 million (2007: US$12.7 million).  The Group holds the bulk of its assets in cash and has no borrowings. Total cash as of the end of 2008 was US$28.1 million.

  Chairman's Statement (continued)

The overall outlook for 2009 clearly depends on market fundamentals in emerging economies being recognised once again. When - and this is a question of timing, not if - this happens, the Group believes its long track record and confidence in the continued growth in the key markets in which it invests, will leave it well positioned to grow its business in the future. 

Finally, I wish to thank Charlemagne Capital's staff for their efforts. This has been a difficult year for everyone. Hard work, motivation, skill and commitment are going to continue to be essential to the Group's development. 

Michael Baer

5 March 2009  Financial and Operating Review

Financial Results 

The results for the year ended 31 December 2008 were disappointing in absolute terms but, given the underlying market conditions, were probably as reasonable as could be expected. The Group has previously demonstrated significant growth and progress towards delivering its strategic objectives but 2008 sees a reverse of that growth.

AuM at the end of 2008 was US$2.2 billion, a decrease of 66% over the prior year (2007: US$6.5 billion). Net redemptions were US$506 million, reflecting strong inflows from new institutional mandates of US$535 million but offset by redemptions in "White Label" retail products in particular and by redemptions in the Magna and OCCO funds to a lesser extent. However, by far the biggest part of the fall in AuM was caused by market movement. AuM is the prime driver of the Group's recurring profits.

Revenues from net management fees in the period decreased by 9% from those of the prior year to stand at US$39.5 million (2007: US$43.5 million). The Group's net management fee margin remained stable at 82 basis points ("bps") for the year (2007: 82 bps). However the present mix of AuM suggests that this margin may fall below 80 bps in 2009.

The investment performance of funds managed and advised by the Group were impacted by both the general fall in market values and an underperformance by our own funds beyond that of the general fall. This additional underperformance is viewed as having been caused by company fundamentals becoming of secondary importance. The Group firmly believes that this position will change going forward. Nevertheless, the falls in market values were reflected in crystallised performance fees falling to US$3.7 million (2007: US$83.8 million) during the year. Prospectively, it may take more than one year before significant performance fees are once again being earned.

Operating expenses fell to US$27.1 million from US$63.3 million with the majority of the decrease reflecting the fall in profit related staff performance awards earned during the year. Additionally, the majority of the fixed costs of the Group are incurred in GBP and the significant fall of that currency against the dollar, especially in the latter part of 2008, has resulted in material falls in the operating expenses of the Group when converted back to its reporting currency. In November 2008, the Directors instigated a currency hedge such that an amount of USD approximately equal to the expected fixed costs of the Group until June 2009 was converted to Sterling. International Financial Reporting Standards requires that this position is marked to market and, as a result, the fixed expenses for the first six months of 2009 can be regarded as having been hedged at a rate of approximately US$1.46 to GBP. The Directors believe that fixed expenses of the Group in 2009 will not be materially different to those of the second half of 2008 save for the effects of currency translation. The Group's operating profit margin for the year was 38.0% (2007: 52.7%) mainly reflecting the reduction in revenues, offset by reduced staff performance awards. Should AuM remain at present levels, this margin can be expected to reduce further in 2009.

Operating earnings before taxation and non-recurring items, were US$16.6 million in 2008, substantially lower than the US$70.6 million earned in 2007 reflecting both the fall in AuM during the year and the reduced performance fees earned. 

Profit, after taxation provisions of US$2.7 million, was US$13.9 million during 2008 compared with US$58.9 million in 2007, again reflecting the net effect of the same factors. 

  Financial and Operating Review (continued)

Financial Results (continued)

Operating earnings per share fell by 76% to 5.9 US cents (2007: 24.7 US cents). The operating earnings per share calculation has been arrived at before taxation and non-recurring forms of income and expenditure as we believe that this better reflects the underlying profitability of the business. After taxation and other income and expenditure, earnings per share attributable to shareholders were 4.9 US cents per share (2007: 20.5 US cents per share) on a fully diluted basis.

In the absence of unforeseen circumstances it remains the Directors' intention that substantially all surplus cash generated will be returned to shareholders by means of dividends and share buy back programmes. 

Group net assets at the end of 2008 were US$25.3 million compared to US$57.6 million at the beginning of the year, reflecting the fact that the Group spent US$2.6 million in repurchasing shares for cancellation and paid a further US$42.8 million in dividends during the year, with movements in reserves accounting for the remainder.

A first interim ordinary dividend of 2.5 US cents per share was declared and was paid on 9 October 2008. A second interim ordinary dividend of 1.3 US cents has been declared by directors and will be paid on 7 April 2009 at a cost of US$3.6 million. No special dividends have been declared in respect of 2008. It is not proposed to recommend a final dividend. Interim dividends have been recommended by the board in order that the funds can be paid to shareholders more quickly than would otherwise be the case. 

Operations and Investment Review

Net outflows of new money from the Group's products were dwarfed by the effects of reductions in market values during 2008. The effects of the latter caused AuM to reduce by US$3.72 billion whilst net outflows from redemptions totalled US$0.51 billion for the full year (after allowing for planned restructures of US$94 million).

The net outflows from mutual fund products operated or advised by the Group was US$1.18 billion which was offset by net inflows to institutional mandates of US$0.58 billion. Whilst any net outflows through redemptions are unwelcome, the largest sector seeing such outflows was the White Label range, which also carries the lowest Revenue per US$ of any of the Group's range. Fund launches were constrained by market conditions during the year and the Group has taken the decision to close a small number of legacy specialist mutual funds which were no longer being actively marketed and market falls had made them uneconomic for both the underlying investors and the Group. The remaining investors in those products have been offered transfers into other similar products in the Group's Magna range.

Institutional managers around the world remain committed investors in the sector and the Group's acknowledged expertise in many sectors of the emerging market universe continues to mean that we gain new mandates on a regular basis.

Increases in Group AuM will continue to be sought from an expansion of existing products and strategies when market conditions allow, and will hopefully be augmented by investment performance as market fundamentals begin to reassert themselves.

Magna

During 2008 the Magna MENA sub-fund was launched but, in the face of deteriorating market conditions for fund raising, it was temporarily closed again in December as it had not reached an economic size. Over the longer term, we have been pleased with the performance of the product range but clearly 2008 was an exceptional year. During the year US$0.3 million performance fees were generated from this source. At the end of 2008, there were eight sub-funds within the Magna Umbrella Fund with a total AuM of US$0.39 billion (2007: US$1.65 billion).

  Financial and Operating Review (continued)

Operations and Investment Review (continued)

OCCO

During the year the OCCO funds specialising in Latin America and Asia were merged into the Global Emerging Markets product following requests from investors for a broader spread of investment. Unfortunately events around the world have changed sentiment for Hedge funds markedly during 2008. Thus what had been a "waiting list" of funds awaiting investment has dried up and both of the remaining funds suffered redemptions in the latter part of the year. We continue to believe that the OCCO funds have the ability to produce positive returns uncorrelated to the performance of the associated markets and we will continue to look to improve the overall offer and seek new clients. During the year, the OCCO funds produced US$1.3 million in performance fees. At the end of 2008, the funds had a total AuM of US$247 million (2007: US$473 million).

Specialist

At the start of 2008 the Group was engaged in raising funds for new property related vehicles focusing on the "BRIC" markets. Whilst sufficient monies were raised to allow the products to be launched, the take up by investors was not as great as had been hoped. The institutional managers being targeted had, by then, to deal with issues caused by the wider market falls. Nevertheless the Group is hopeful that it can source further monies for this product in 2009. A planned realisation of investments by European Convergence Property Company plc ("ECPC"), led to an asset restructure and repayment of US$88 million. Three further legacy funds, which were no longer being marketed and had dropped below economic size, were wound up towards the end of the year. During the year, two of the funds in this category contributed performance fees totalling US$1.1 million. At the end of 2008, Specialist funds had a total AuM of US$255 million (2007: US$563 million).

Institutional - White Label

The institutional white label advisory relationships have suffered from significant client redemptions during the year in addition to market related falls. One of the managers involved has decided to take mandates fully back in house for reasons unconnected with the Group whilst one of the other managers has decided to restructure its operations leading to a reduced role for the Group going forward. Performance fees of US$0.2 million were generated during the year. At the end of the year the institutional white label accounts, covering five funds from two organisations, had a total AuM of US$0.53 billion (2007: US$2.66 billion).

Institutional - Mandates

This category contains a number of individual mandates together with a range of products tailored to the needs of institutions. This was the only segment to see net subscriptions in the year but, in common with all areas, saw significant falls in asset values due to market movement. Performance fees of US$0.8 million were generated during the year. At the end of the year, Institutional Mandates had a total AuM of US$0.75 billion (2007: US$1.15 billion).

  Consolidated Income Statement

Expressed in United States Dollars	Notes	Year ended	Year ended
		31 December 2008	31 December 2007
		US$'000	US$'000
Revenue	2	43,664	133,902
Expenses
Personnel expenses	3	(20,421)	(56,069)
Other costs		(6,634)	(7,232)
Operating Profit	5	16,609	70,601
Share of profit of jointly controlled entity	13	-	195
Profit before tax		16,609	70,796
Taxation	7	(2,695)	(11,933)
Profit after tax		13,914	58,863
Minority Interest	12	(57)	(104)
Profit after tax and Minority Interest		13,857	58,759
Dividends	9	(42,766)	(24,362)
Profits transferred (from) / to retained earnings		(28,909)	34,397
		US$	US$
Earnings per share
Basic	10	0.049452	0.205279
Diluted	10	0.049410	0.205090

The directors believe that all results derive from continuing activities.

  Consolidated Statement of Recognised Income and Expense

Expressed in United States Dollars	Notes	Year ended	Year ended
		31 December 2008	31 December 2007
		US$'000	US$'000
Movements in exchange differences on the translation of the financial statements of entities not accounted for in United States Dollars	20	(629)	1,310
Net (expense) / income for the year recognised directly in equity		(629)	1,310
Net profit for the year		13,914	58,863
Total recognised income for the year		13,285	60,173
Attributable to:
Equity holders of the Company		13,228	60,069
Minority Interest		57	104
Total recognised income for the year		13,285	60,173

  Consolidated Balance Sheet

Expressed in United States Dollars	Notes	As at	As at
		31 December 2008	31 December 2007
		US$'000	US$'000
Non-current assets
Property and equipment	11	746	1,282
Interest in jointly controlled entity	13	220	220
Total non-current assets		966	1,502
Current assets
Current investments	14	1,459	8,975
Receivables	16	6,755	81,429
Cash and cash equivalents	17	28,098	33,168
Total current assets		36,312	123,572
Total assets		37,278	125,074
Issued share capital	19	2,808	2,853
Reserves		22,263	54,624
Shareholders' equity	20	25,071	57,477
Minority Interest	12	190	133
Total equity		25,261	57,610
Current liabilities
Accounts payable, accruals and other payables	18	10,947	57,752
Taxation		1,070	9,712
Total current liabilities		12,017	67,464
Total equity and liabilities		37,278	125,074

Approved by the Board of Directors on 5 March 2009.

Anderson Whamond Jane Bates

Director Director

  Consolidated Cash Flow Statement

Expressed in United States Dollars	Notes	Year ended	Year ended
		31 December 2008	31 December 2007
		US$'000	US$'000
Operating Profit		16,609	70,601
Adjustments for:
Depreciation	5	428	406
Exchange loss on property and equipment		289	5
Provision for unrealised loss/(gain) on foreign exchange contracts and investments	5	857	(1,459)
Foreign currency translation adjustment		(629)	1,310
Loss / profit on disposal of investments	5	863	(745)
Share based option plan		(320)	599
Decrease/(increase) in receivables		74,674	(38,224)
(Decrease)/increase in accounts payable, accruals and other payables		(46,805)	29,909
Tax paid		(11,337)	(4,352)
Net cash from operating activities		34,629	58,050
Investing activities
Proceeds from sale of investments		8,684	2,666
Purchase of investments		(2,888)	(4,766)
Proceeds from sale of property and equipment		33	-
Purchase of property and equipment	11	(214)	(1,223)
Net cash from / (used) in investing activities		5,615	(3,323)
Financing activities
Shares repurchased	20	(2,548)	(12,676)
Dividends paid	9	(42,766)	(24,362)
Net cash flows used in financing activities		(45,314)	(37,038)
Net (decrease)/increase in cash and cash equivalents		(5,070)	17,689
Cash and cash equivalents at the beginning of the year	17	33,168	15,479
Cash and cash equivalents at the end of the year	17	28,098	33,168

  Company Balance Sheet

Expressed in United States Dollars	Notes	As at	As at
		31 December 2008	31 December 2007
		US$'000	US$'000
Non-current assets
Interests in subsidiaries	12	2,622	2,785
Interest in jointly controlled entity	13	220	220
Total non-current assets		2,842	3,005
Current assets
Receivables	16	48	64
Due from subsidiaries	24	15,460	30,400
Cash and cash equivalents	17	10,213	170
Total current assets		25,721	30,634
Total assets		28,563	33,639
Issued share capital	19	2,808	2,853
Reserves	20	2,042	8,377
Shareholders' equity	20	4,850	11,230
Current liabilities
Accounts payable, accruals and other payables		77	135
Due to subsidiaries	24	23,636	22,274
		23,713	22,409
Total equity and liabilities		28,563	33,639

Approved by the Board of Directors on 5 March 2009.

Anderson Whamond Jane Bates

Director Director

Notes to the Financial Statements

1. Significant Accounting Policies

Charlemagne Capital Limited (formerly Regent Fund Management (Cayman) Limited and Regent Europe Limited) was incorporated in the Cayman Islands as an exempt company with limited liability (registered number CR-75327) on 29 July 1997. The Company's registered office is at P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies. The consolidated financial statements of the Company for the year ended 31 December 2008 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in a jointly controlled entity. The financial statements were authorised for issue by the Directors on 5 March 2009.

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the requirements of International Financial Reporting Standards ("IFRS") and their interpretations adopted by the International Accounting Standards Board ("IASB"). 

Basis of Preparation

The consolidated financial statements are prepared on the historical cost basis except that the following are stated at their fair value: financial instruments at fair value through profit or loss including derivative financial instruments. Recognised assets and liabilities that are hedged are stated at fair value in respect of the risk that is hedged.

The Company's shares are issued in United States Dollars ("US Dollars") as the US Dollar is a more widely recognised currency internationally than the local currency of the Cayman Islands. The functional and presentation currency of the financial statements is US Dollars and not Cayman Islands Dollars reflecting the fact that the transactions are denominated in US Dollars.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in note 25.

Basis of Consolidation

Subsidiaries

Subsidiaries are those enterprises controlled by the Group. Control exists where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Jointly controlled entities

Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement, and are accounted for using the equity accounting method in the consolidated financial statements.  

Transactions eliminated on consolidation

Intra-group balances and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but to the extent that there is no evidence of impairment.

  Notes to the Financial Statements (continued)

1. Significant Accounting Policies (continued)

Basis of Consolidation (continued)

Investment in funds managed by Charlemagne Capital Group companies

Certain Group companies, from time to time, purchase shares in funds managed by other Charlemagne Capital Group companies. Such holdings can amount to over 20% of the issued share capital and occasionally more than 50%. Those holdings over 50% of the issued share capital, are treated as subsidiaries. Those holdings which are over 20% but not more than 50% of the issued share capital are treated as associates and equity accounted in the consolidated financial statements for the Group. No holdings of over 20% but below 50%, and no holdings of over 50% in Charlemagne managed funds existed at 31 December 2008.

Foreign Currency

Foreign currency transactions

Transactions in foreign currencies are translated to US Dollars at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to US Dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated to US Dollars at the foreign exchange rate ruling at the date of the transaction.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to US Dollars at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated to US Dollars at the foreign exchange rates at the dates of the transactions. Foreign currency differences are recognised in "foreign currency exchange reserve" directly in equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency exchange reserve is transferred to profit or loss.

Derivative Financial Instruments

The Group uses derivative financial instruments including forward exchange contracts to manage its exposure to foreign exchange, interest rate and equity market risks arising from operational, financing and investment activities and for trading purposes.

Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of the resultant gain or loss depends on the nature of the item being hedged (see Cash flow hedges below).

Cash flow hedges

Where a derivative is designated as a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative are recognised directly in equity. The amount recognised in equity is removed and recognised in profit or loss in the same period as the hedged cash flows affect profit or loss under the same profit or loss line item as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the profit or loss.

If the derivative expires or is sold, terminated, or exercised, or no longer meets the criteria for cash flow hedge accounting, or the designation is revoked, then hedge accounting is discontinued and the amount recognised in equity until the forecast transaction affects profit or loss. If the forecast transaction is no longer expected to occur, then hedge accounting is discontinued and the balance in equity is recognised immediately in profit or loss.

Owned assets

Items of property and equipment are measured at cost less accumulated depreciation and impairment losses.

  Notes to the Financial Statements (continued)

1. Significant Accounting Policies (continued)

Property and equipment

Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of items of property and equipment. The estimated useful lives are as follows:

Furniture and fixtures 5 years

Computer equipment 3 years

Other equipment 4 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Investments

Classification

An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group's risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss. All investments are designated at fair value through profit or loss, except for derivative financial instruments which are classified as held for trading.

Recognition and derecognition

The Group recognises financial assets at fair value through profit or loss on the date it commits to purchase the instruments. From this date any gains and losses arising from changes in fair value of the assets are recorded. These assets are derecognised when the rights to receive cash flows from the assets have expired or when the Group has transferred substantially all risks and rewards of ownership.

Measurement

Investments are measured initially fair value, and subsequently measured at fair value, with fair value changes being recognised in profit or loss.

Fair value measurement principles

The value of financial instruments is based on their quoted market bid price, where available, at the balance sheet date without any deduction for transactions costs. If a quoted market price is not available on a recognised exchange or from a broker/dealer for non-exchange traded financial instruments, the fair value of the instrument is estimated by the Board of Directors.

Gains and losses on subsequent measurement

Gains and losses arising from a change in the fair value of investments are recognised in profit or loss.

Other receivables

Other receivables are measured at amortised cost less impairment losses.

Other payables

Other payables are measured at amortised cost.  Notes to the Financial Statements (continued)

1. Significant Accounting Policies (continued)

Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances and call deposits. For the purpose of the statement of cash flows, cash and cash equivalents would be presented net of bank overdrafts if any existed.

Impairment of non financial assets 

The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. All impairment losses and reversals are recognised in profit or loss.

Share Capital

Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are classified as cancelled shares and presented as a deduction from total equity.

Treasury shares

Shares issued to the Charlemagne 2005 Employee Benefit Trust (note 21) are accounted for as treasury shares within equity (see note 20).

Dividends

Dividends are recognised as a liability in the year in which they are declared and approved.

Revenue Recognition

Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:-

Operating Lease Payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. 

 

Notes to the Financial Statements (continued)

1. Significant Accounting Policies (continued)

Employee benefits

Obligations for contributions to employees' International Pension Plans are recognised as an expense in profit or loss as incurred. Obligations to the Charlemagne 2005 Employee Benefit Trust are recognised as an expense in profit or loss to the extent that these have been provisionally allocated to discretionary revocable sub-trusts of which certain directors and employees of the Group may become beneficiaries. 

In common with other groups which have initiated employee benefit trusts, from time to time the Group may receive inquiries from revenue authorities regarding taxation aspects. It is the policy of the Group to account for any taxation due as a result of such inquiry in the year in which the substance of any settlement is agreed.

The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share options expected to vest.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense, with a corresponding increase in liabilities, over the period the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expense in profit or loss.

The fair value of employee stock options is measured using binomial lattice model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average competitor volatility), weighted average expected life of the instruments (based on general option holder behaviour), expected dividends, and a risk-free interest rate. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. 

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.  A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. A deferred tax asset is reduced to the extent that it is no longer probable that the related tax benefit will be realised.

From time to time the Group receives inquiries from revenue authorities into its taxation affairs, as is common for entities operating international transfer pricing policies. It is the policy of the Group to account for any taxation due as a result of such inquiry in the year in which the substance of any settlement is agreed.

Investment in subsidiaries, associates and jointly controlled entities

The Company's investment in the subsidiaries and associates is stated at cost less impairment losses. The interest in jointly controlled entities is accounted for in the Company's balance sheet as a financial asset at fair value through profit or loss in accordance with IAS 39. In the absence of a quoted market price for the jointly controlled entity share of net assets is considered to approximate fair value.

Comparative Figures

Where necessary, comparative figures have been adjusted to conform to changes in presentation for the current year.

  Notes to the Financial Statements (continued)

1. Significant Accounting Policies (continued)

New standards and interpretations not yet issued

No new accounting standards have been adopted in respect of the financial statements for the year ended 31 December 2008. The following standards, amendments and interpretations to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2009 or later periods, but the Group has not early adopted them:

IAS 1 (Revised), 'Presentation of financial statements' (effective from 1 January 2009). The revised standard will prohibit the presentation of items of income and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The group will apply IAS 1 (Revised) from 1 January 2009. It is likely that both the income statement and statement of comprehensive income will be presented as performance statements.

IFRS 8 Operating Segments introduces the "management approach" to segment reporting. IFRS 8, which becomes mandatory for the Group's 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group's Chief Operating Decision Maker in order to assess each segment's performance and to allocate resources to them. Currently the Group presents segment information in respect of its business segments. Management believe that the information currently presented is consistent with the information reviewed by management and therefore no significant changes will result from adoption of IFRS 8. 

2. Revenue

	Year ended	Year ended
	31 December 2008	31 December 2007
	US$'000	US$'000
Fund management and related fees, net of rebates	39,515	43,526
Performance fees	3,690	83,775
Investment income on assets designated at fair value through profit or loss	(316)	2,563
Investment income on assets held for trading	-	343
Other income	775	3,695
	43,664	133,902

3. Personnel Expenses

	Year ended	Year ended
	31 December 2008	31 December 2007
	US$'000	US$'000
Salaries	8,820	8,594
Performance Related Bonuses	1,628	18,117
Share Based Incentive Plans (see note 21)	(1,434)	1,539
Contributions to Employee Benefit Trust	10,133	23,072
Pension Contributions	184	960
Compulsory social security contributions	1,090	3,787
	20,421	56,069

	Year ended	Year ended
Directors' Emoluments	31 December 2008	31 December 2007
	US$'000	US$'000
Fees	278	278
Salaries	1,416	1,276
Performance Related Bonuses	500	1,880
Pension Contributions	9	800
	2,203	4,234

  Notes to the Financial Statements (continued)

3. Personnel Expenses (continued)

The number of employees of the Group as at the end of the year was 68 (2007: 67) full time equivalent. 

The Group operates a discretionary bonus scheme, as approved by the Board, which is based on the Group's profit before taxation. Bonuses are accounted for in the financial year in which the bonus is earned.

In 2005 the Group created an employee benefit trust, the Charlemagne 2005 Employee Benefit Trust ("EBT"). The EBT is controlled by an independent Trustee (the "Trustee"). The EBT was created in order to motivate and retain the Group's directors and employees, each of whom is a potential beneficiary from the trust. These contributions have been expensed through Personnel Expenses.

Of the total amount contributed to the EBT relating to 2008, the Directors of Charlemagne Capital Services Limited ("CCSL"), the Group's global employment company, have recommended to the Trustee that the sum of US$1.1million (2007: US$10.3million) be provisionally allocated to discretionary revocable sub-trusts of which certain directors of the Company may be potential beneficiaries. However no amount has been included in directors' emoluments since the amounts have not been allocated to any director or employee with any certainty.

Highest Paid Director

The highest paid Director had emoluments of US$0.65 million (2007: US$1.90 million).

4. Related Party Transactions

Identity of related parties

The Group is related to its subsidiaries (note 12), its jointly controlled entity (note 13) and to its Directors and executive officers.

Transactions with Directors and executive officers

As at 31 December 2008, Directors of the Company and their immediate interests controlled 40% (2007: 38%) of the voting shares of the Company.

Summary of transactions

The following is a summary of transactions with related parties during the year. All such transactions were entered into in the ordinary course of business.

  Notes to the Financial Statements (continued)

5. Profit from Operations

The Group's profit from operations was arrived at:-	Year ended	Year ended
	31 December 2008	31 December 2007
	US$'000	US$'000
After charging and (crediting):
Revenue Items
Realised loss/(profit) on disposal of current investments	863	(745)
Unrealised loss/(profit) on current investments	857	(1,459)
Interest income	(1,307)	(1,745)
Net foreign exchange gain net	(97)	(153)
Expense Items
Depreciation	428	406
Auditors' remuneration	168	195
Operating lease rental on property	723	611

6. Segment Reporting

Year to 31 December 2008
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
	Magna	OCCO	Institutional White Labels	Institutional Mandates	Specialist	Other	Total
Net Management Fees	11,141	5,206	9,434	7,764	5,970	-	39,515
Net Performance Fees	264	1,323	222	831	1,050	-	3,690
Return on Investment	-	-	-	-	-	(1,720)	(1,720)
Other Income	-	-	-	-	345	1,834	2,179
Segment Revenue	11,405	6,529	9,656	8,595	7,365	114	43,664
Segment Result	7,179	3,955	6,713	5,802	5,338	114	29,101
Unallocated Expenses							(12,492)
Results from Operating Activities							16,609

Year to 31 December 2007
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
	Magna	OCCO	Institutional White Labels	Institutional Mandates	Specialist	Other	Total
Net Management Fees	13,573	5,626	12,749	4,898	6,680	-	43,526
Net Performance Fees	43,850	16,389	7,976	10,474	5,086	-	83,775
Return on Investment	-	-	-	-	-	2,906	2,906
Other Income	-	-	-	-	3,305	585	3,890
Segment Revenue	57,423	22,015	20,725	15,372	15,071	3,491	134,097
Segment Result	36,642	14,068	14,330	10,233	10,390	3,491	89,154
Unallocated Expenses							(18,358)
Results from Operating Activities							70,796

Notes to the Financial Statements (continued)

6. Segment Reporting (continued)

IFRS 8 Operating Segments introduces the "management approach" to segment reporting. IFRS 8, which becomes mandatory for the Group's 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Group's Chief Operating Decision Maker in order to assess each segment's performance and to allocate resources to them. Currently the Group presents segment information in respect of its business segments. Management believe that the information currently presented is consistent with information reviewed by management and therefore no significant changes will result from adoption of IFRS 8.

7. Taxation

Recognised in the income statement	Year ended	Year ended
	31 December 2008	31 December 2007
	US$'000	US$'000
Current tax expense:
Current year	2,797	8,494
(Over)/Underprovided in prior years	(102)	3,439
Total income tax expense in income statement	2,695	11,933

Reconciliation of effective tax rate	Year ended		Year ended
	31 December 2008		31 December 2007
	US$'000		US$'000
Profit before tax	16,609		70,796
Income tax using the domestic corporation tax rate	0%	-	0%	-
Effect of different tax rates in foreign jurisdictions	16.84%	2,797	12.00%	8,494
(Over)/Underprovided in prior years	(0.61%)	(102)	4.86%	3,439
	16.23%	2,695	16.86%	11,933

8. Profit Attributable to Shareholders

The net profit attributable to shareholders reflected in the financial statements of the Company itself amounts to US$38.93 million (2007:  US$45.12 million).

  Notes to the Financial Statements (continued) 

9. Dividends

	Year ended	Year ended
	31 December 2008	31 December 2007
	US$'000	US$'000
Dividends per share of 15.25 US cents (2007: 8.45 US cents)	42,766	24,362

A second interim ordinary dividend of 2.4 US cents (GB 1.2179p) per ordinary share and a second interim special dividend of 10.35 US cents (GB 5.2522p) per ordinary share in respect of the year ended 31 December 2007 was paid on 4 April 2008 to those shareholders on the register on 7 March 2008 and was distributed from retained earnings in 2008.

An interim ordinary dividend of 2.5 US cents (GB 1.3863p) per ordinary share was paid on 9 October 2008 to those shareholders on the register on 12 September 2008 and distributed from retained earnings in 2008.

A second interim ordinary dividend of 1.3 US cents (GB 0.9205p) per ordinary share in respect of the year ended 31 December 2008 will be paid on 7 April 2009 to those shareholders on the register on 13 March 2009 and will be distributed from retained earnings in 2009.

10. Earnings Per Share

The calculation of basic earnings per share of the Group is based on the net profit attributable to shareholders for the year of US$13.86 million (2007: US$58.76 million) and the weighted average number of shares of 280,209,015 (2007: 286,239,590) in issue during the year.

The calculation of diluted earnings per share of the Group includes the weighted average number of share options where the specified performance conditions have been satisfied, even though the service criteria have not yet been met.

Shares issued during the year ended 31 December 2006 to Sanne Trust Company Limited (note 21) have been excluded from the earnings per share calculation as such shares are currently accounted for as treasury shares.

  Notes to the Financial Statements (continued) 

11. Property and equipment

Group	Furniture and	Computer and Other
	Fixtures	Equipment	Total
Cost:	US$'000	US$'000	US$'000
At 1 January 2007	678	1,727	2,405
Acquisitions	947	276	1,223
Disposals	(421)	(720)	(1,141)
Exchange adjustment	4	30	34
At 31 December 2007	1,208	1,313	2,521
At 1 January 2008	1,208	1,313	2,521
Acquisitions	30	184	214
Disposals	-	(78)	(78)
Exchange adjustment	(327)	(372)	(699)
At 31 December 2008	911	1,047	1,958
Depreciation and impairment:
At 1 January 2007	626	1,309	1,935
Provided during the year	146	260	406
Disposals	(421)	(716)	(1,137)
Exchange adjustment	12	23	35
At 31 December 2007	363	876	1,239
At 1 January 2008	363	876	1,239
Provided during the year	193	235	428
Disposals	-	(45)	(45)
Exchange adjustment	(137)	(273)	(410)
At 31 December 2008	419	793	1,212
Carrying amounts:
At 1 January 2007	52	418	470
At 31 December 2007	845	437	1,282
At 1 January 2008	845	437	1,282
At 31 December 2008	492	254	746

There was no property and equipment in the Company.

12. Interests in Subsidiaries

Company	US$'000
Cost
At 1 January 2007	4,027
At 31 December 2007	4,027
At 1 January 2008	4,027
Disposal	(1,405)
At 31 December 2008	2,622

  Notes to the Financial Statements (continued) 

12. Interests in Subsidiaries (continued)

Impairment
At 1 January 2007	1,242
At 31 December 2007	1,242
At 1 January 2008	1,242
Disposal	(1,242)
At 31 December 2008	-

	US$'000
Carrying Amount
At 31 December 2007	2,785
At 31 December 2008	2,622

Balances with subsidiaries are included within current assets and current liabilities within the parent company balance sheet. During the year Regent Special Projects Limited, a subsidiary of Charlemagne Caplital Limited, was dissolved. 

Particulars of the principal subsidiaries of the Company at 31 December 2008 are as follows:

Name	Place of Incorporation/ Operation	Issued and Fully Paid Share Capital	Percentage of Equity Interest Attributable to the Company		Principal Activities
			Direct	Indirect
Charlemagne Capital (IOM) Limited	Isle of Man	Ordinary GBP20,000	100%	-	Investment Management
Charlemagne Capital (UK) Limited	United Kingdom	Ordinary GBP100	100%	-	Investment Advice and Marketing
Charlemagne Capital (Investments) Limited	Isle of Man	Ordinary GBP1	100%	-	Investment and Investment Research
Charlemagne Capital (Services) Limited*	Isle of Man	Ordinary GBP2,000	60%	-	Personnel

*40% of the shares of Charlemagne Capital (Services) Limited, the Group's global employment company, are held by the Trustee of the Charlemagne 2005 Employee Benefit Trust. The Trust is controlled by an independent trustee.

13. Interest in Jointly Controlled Entity

	Group
	31 December 2008	31 December 2007
	US$'000	US$'000
Share of net assets	220	220

The Group has a 12.86% (2007: 12.86%) interest in a jointly controlled entity, SWR Investments Limited ("SWR"), a company incorporated in the Cayman Islands, which invested in banking and financial entities in Eastern Europe. In view of the fact that the Group retains a significant influence over the management of SWR, an equity accounting approach has continued with regard to this investment.

  Notes to the Financial Statements (continued)

14. Investments

	31 December 2008	31 December 2007
	US$'000	US$'000
Group
Current investments - at fair value through profit or loss
Equity securities	1,059	1,816
Equity securities held for deferred bonus payments	400	7,159
	1,459	8,975

There were no investments held by the Company.

15. Deferred Taxation

There is an unrecognised deferred taxation asset of US$19,732 (2007: unrecognised liability of US$8,587) representing the tax effect of depreciation in excess of capital allowances.

16. Receivables

	Group		Company
	31 December	31 December	31 December	31 December
	2008	2007	2008	2007
	US$'000	US$'000	US$'000	US$'000
Trade receivables	3,767	77,517	-	-
Other receivables	2,459	3,230	14	41
Prepayments	529	682	34	23
	6,755	81,429	48	64

As at 31 December 2008 margin deposits of US$4,860 (2007:US$1,399) were held by the Group in respect of their normal trading in currencies, futures and options (note 22).

17. Cash and Cash Equivalents

	Group		Company
	31 December	31 December	31 December	31 December
	2008	2007	2008	2007
	US$'000	US$'000	US$'000	US$'000
Bank balances	459	563	37	170
Call deposits	6,501	267	176	-
Term deposits	11,138	32,338	-	-
US treasury bills	10,000	-	10,000	-
Cash and cash equivalents	28,098	33,168	10,213	170

18. Accounts Payable, Accruals and Other Payables

	Group		Company
	31 December	31 December	31 December	31 December
	2008	2007	2008	2007
	US$'000	US$'000	US$'000	US$'000
Provision for performance awards	5,413	34,851	-	-
Accruals and other payables	5,534	22,901	77	135
	10,947	57,752	77	135

Notes to the Financial Statements (continued)

19. Issued Share Capital

Shares	31 December	31 December
	2008	2007
	US$'000	US$'000
Authorised
2,000,000,000 ordinary shares of US$0.01 each	20,000	20,000
Issued and fully paid
At beginning of year 285,274,173 (2007: 294,061,772)
ordinary shares of US$0.01 each	2,853	2,941
Shares repurchased; 4,463,500 (2007:  8,787,599)	(45)	(88)
At end of year; 280,810,673 (2007: 285,274,173) fully paid	2,808	2,853

During the year ended 31 December 2008, the Company repurchased 4,463,500 (2007: 8,787,599) of its own shares at market value for cancellation.

As at the date of signing the financial statements there were 280,810,673 (2007: 285,274,173) ordinary shares of US$0.01 each issued and fully paid.

20. Shareholders' Equity

2008	Share Capital	Share Premium	Retained Earnings	Treasury Shares	Share Option Reserve	Foreign Currency Exchange Reserve	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Group
At 1 January 2008	2,853	6,520	50,726	(6,280)	1,057	2,601	57,477
Shares repurchased	(45)	-	(2,503)	-	-	-	(2,548)
Foreign currency translation adjustment	-	-	-	-	(392)	(629)	(1,021)
Share based option plans	-	-	-	-	72	-	72
Profit for the year	-	-	13,857	-	-	-	13,857
Dividends	-	-	(42,766)	-	-	-	(42,766)
At 31 December 2008	2,808	6,520	19,314	(6,280)	737	1,972	25,071

2008	Share Capital	Share Premium	Retained Earnings	Foreign Currency Exchange Reserve	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Company
At 1 January 2008	2,853	6,520	1,876	(19)	11,230
Shares repurchased	(45)	-	(2,503)	-	(2,548)
Profit for the year	-	-	38,928	6	38,934
Dividends	-	-	(42,766)	-	(42,766)
At 31 December 2008	2,808	6,520	(4,465)	(13)	4,850

Notes to the Financial Statements (continued)

20. Shareholders' Equity (continued)

2007	Share Capital	Share Premium	Retained Earnings	Treasury Shares	Share Option Reserve	Foreign Currency Exchange Reserve	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Group
At 1 January 2007	2,941	6,520	28,917	(6,280)	458	1,291	33,847
Shares repurchased	(88)	-	(12,588)	-	-	-	(12,676)
Foreign currency translation adjustment	-	-	-	-	-	1,310	1,310
Share based option plans	-	-	-	-	599	-	599
Profit for the year	-	-	58,759	-		-	58,759
Dividends	-	-	(24,362)	-	-	-	(24,362)
At 31 December 2007	2,853	6,520	50,726	(6,280)	1,057	2,601	57,477

2007	Share Capital	Share Premium	Retained Earnings	Foreign Currency Exchange Reserve	Total
	US$'000	US$'000	US$'000	US$'000	US$'000
Company
At 1 January 2007	2,941	6,520	(6,297)	(19)	3,145
Shares repurchased	(88)	-	(12,588)	-	(12,676)
Profit for the year	-	-	45,123	-	45,123
Dividends	-	-	(24,362)	-	(24,362)
At 31 December 2007	2,853	6,520	1,876	(19)	11,230

Under Cayman Island law all categories of reserves are distributable. However, under normal circumstances the Company considers that only retained profits are distributable to shareholders. In the current and previous periods, the Company repurchased some of its own shares. These shares were cancelled upon repurchase and accordingly the issued share capital of the Company was reduced by their nominal value. The premium on shares repurchased during 2008 was transferred to retained earnings.

The Board's policy is to maintain an adequate capital base so as to maintain investor, creditor and market confidence and to sustain future development of business. The Board of Directors monitors the return on capital and the level of dividends to ordinary shareholders.

There were no changes to the Group's approach to capital management during the year.

Two of the Company's subsidiaries are subject to externally imposed capital requirements and are required to submit periodic returns summarising their financial resources. These companies have complied with relevant regulatory requirments in all material respects during the year.  Notes to the Financial Statements (continued)

21. Share Based Incentive Plans

Equity Settled

The Group has established several share based incentive programmes that entitle certain employees to acquire shares in the Company subject to the vesting conditions set out below at an exercise price that was set at the date of grant.

The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the vesting period. The amount recognised as an expense is adjusted to reflect the actual number of share options that are expected to vest.

Grant Date	Options Issued	Options Remaining	Vesting Conditions	Contractual life of Options
27 March 2006	1,013,578	575,420	Equal parts vesting over three, four and five years service plus achievement of EPS performance targets	7 Years
27 March 2006	471,427	-	Three years service plus achievement of Assets under Management (AuM) performance targets	7 years
8 May 2006	212,564	-	Three years service plus achievement of Assets under Management (AuM) performance targets	10 years
21 November 2006	50,903	45,894	Equal parts vesting over three, four and five years service plus achievement of EPS performance targets	7 years
21 November 2006	56,737	-	Three years service plus achievement of Assets under Management (AuM) performance targets	10 Years
13 March 2007	134,851	119,882	Equal parts vesting over three, four and five years service plus achievement of EPS performance targets	7 Years
18 March 2008	356,430	356,430	Three years service plus achievement of Assets under Management (AuM) performance targets	10 years
18 March 2008	200,000	200,000	Equal parts vesting over three, four and five years service plus achievement of Assets under Management (AuM) performance targets	7 years
Total Share Options	2,496,490	1,297,626

The number and weighted average exercise price of outstanding share options is as follows:

	Weighted average exercise price	Number of Options
Outstanding at beginning of period	GBP0.46	1,542,747
Granted during the period	GBP0.51	556,430
Forfeited/lapsed during the period	GBP0.85	801,551
Outstanding at the end of the period	GBP0.24	1,297,626

The options outstanding at 31 December 2008 have an exercise price between GBPNil and GBP1.05 and a weighted average contractual life of 5.85 years. Outstanding share options are contingent upon specified performance and service criteria being satisfied. As at 31 December 2008 some of the performance criteria had been achieved however, as none of the service criteria have yet been met, none of the options are exercisable at this time. Also as at 31 December 2008 some of the performance criteria failed to achieve their targets and the associated options have therefore lapsed. 

The weighted average fair value of the options issued during the period was GBP0.14 (2007: GBP0.21)

  

Notes to the Financial Statements (continued)

21. Share Based Incentive Plans (continued)

The estimate of the fair value of the share options granted with a grant price of GBP Nil has been calculated by reference to the face value of the award adjusted for the loss of dividends over the vesting period. All other options are measured using a binomial lattice model to estimate the early exercise behaviour. The contractual life of the options, 7-10 years, is used as an input to this model.

Fair value of share options and assumptions	27 Mar 2006  EPS Targets	27 Mar 2006 AuM Targets	8 May  2006 AuM Targets	21 Nov 2006  EPS  Targets	21 Nov 2006  AuM  Targets	13 Mar 2007 EPS Targets	18 Mar 2008 AuM Targets	18 Mar 2008 EPS Targets
Fair value at measurement date (GBP)	0.86	0.38	0.39	0.20	0.20	0.21	0.14	0.14
Share price at grant date (GBP)	1.05	1.05	1.035	0.705	0.705	0.7475	0.505	0.505
Exercise price (GBP)	Nil	1.05	1.035	0.705	0.705	0.7475	0.505	0.505
Expected volatility (% p.a.)	50.0	50.0	50.0	40.0	40.0	40.0	37.4	37.4
Option life (years)	7	7	10	7	10	7	10	7
Assumed dividend yield (% p.a.)	5.0	5.0	5.0	5.0	5.0	5.0	5.0	5.0
Risk-free interest rate (% p.a.)	4.4	4.4	4.9	4.8	4.8	5.0	5.0	5.0

The Company's shares were not traded before the majority of the options were granted. In setting the volatility assumption therefore regard was given to the share price volatilities of the Company's closest traded comparator companies, as well as the share price since listing. Based on daily and weekly price observations, the share price volatility was estimated at around 50% which was comparable to that of its competitors over a longer period. For those options listed substantially after listing the share price volatility has been assumed to be 40% and 37.4% relating the average volatility between listing and the grant dates.

The share options are granted under service and non-market performance conditions. Such conditions are not taken into account in the grant date fair value measurement of the services received. There are no market conditions associated with the share option grants.

Cash Settled

At 24 March 2006, the Group's global employment company, Charlemagne Capital Services Limited (CCSL), made a contribution of US$6.28m to the Charlemagne 2005 Employee Benefit Trust (EBT). The Directors of CCSL recommended to the Trustee of the EBT that this sum be used to purchase Company shares and those shares be held until EPS performances targets and service targets are met, after which time the shares should be sold. The Trustee of the EBT (Sanne Trust Limited, an independent trustee company) may at its discretion allocate the proceeds to discretionary sub-trusts of which certain employees and their families are beneficiaries. 

The EBT subsequently purchased 3,422,185 Company shares, which had a fair value of US$368,264 as at 31 December 2008 (2007: US$4,563,279), based on the market price as at that date, after adjusting for the waiver of dividend rights at an assumed dividend yield of 5%.

The fair value of the future cash settlement is spread over the vesting period, and recognised as an expense in the accounts with a corresponding increase in liabilities. The fair value is re-measured at each reporting date, with any adjustment in the cumulative fair value being recognised in the reporting period.

Expenses in respect of share based incentive plans

The following amounts have been (credited) / charged as an expense within these financial statements

	Year to  31 December 2008 US$	Year to  31 December 2007 US$
Equity settled incentive plans	72,843	599,114
Amount relating to cash-settled transaction liabilities	(1,506,787)	940,258
Total (credited) / charged to employee costs	(1,433,944)	1,539,372

As at 31 December 2008, total liabilities in respect of cash-settled share-based incentive plans were US$199,160 (2007: US$1,947,033). No liabilities had vested by the end of the period.

Notes to the Financial Statements (continued)

22. Financial Instruments and Concentration Risk

Financial assets of the Group include cash and cash equivalents, investments and other receivables. Financial liabilities include accruals and other payables. The carrying amounts of these other assets approximate their fair values.

The Group's trading in derivatives is partly for hedging purposes, and partly for speculative investment. Where hedging is involved, the policy is fully or partly to match positions held in other assets. Speculative investment is carefully used, in accordance with parameters set by the Board, in short term situations where physical assets are inappropriate.

Derivatives refer to financial contracts whose value depends on the face value of one or more underlying assets or indices. At 31 December 2008 and 2007 the Group did not hold any derivatives.

Notional amounts are the underlying reference amounts to stock exchange differences, equities and foreign currencies upon which the fair value of the futures, forwards and option contracts traded by the Group are based. While notional amounts do not represent the current fair value and are not necessarily indicative of the future cash flows of the Group's futures, and forward contracts, the underlying price changes in relation to the variables specified by the notional amounts affect the fair value of these derivative financial instruments. 

The following is a summary of amounts included recognised in profit or loss in respect of derivatives:

	31 December 2008	31 December 2007
	US$'000	US$'000
Group
Realised gain on derivatives trading in the year	-	343

The purchase and sale of derivatives are subject to limits established by the Board. These are monitored on a regular basis and the Group continues to develop its statistical techniques for monitoring purposes.

There is strict segregation between the investment management and deal settlement functions.

In the course of the Group's normal trading in currencies, futures and options, margin deposits of varying amounts of cash are held by the Group's brokers. As at 31 December 2008, the amount of these margin deposits was US$4,860 (2007: US$1,399), such deposits being included within other receivables in the balance sheet (note 16).

Hedging

Details of the nominal and fair values of all contracts as at 31 December 2008 are disclosed earlier in this note. In accordance with IAS39, Financial Instruments: Recognition and Measurement, as these instruments represent cash flow hedges all gains and losses relating to these contracts have been recognised in equity rather than within profit or loss for the current year.

  Notes to the Financial Statements (continued)

22. Financial Instruments and Concentration Risk (continued)

Liquidity risk

The Group is exposed to liquidity risk to the extent that it holds stakes in certain financial instruments for which no developed market exists. Therefore, the Group might be unable to sell such stakes quickly at close to fair value. This risk is managed by the Group by means of cash flow planning to ensure that future cash requirements are anticipated and, where financial instruments have to be sold to meet these requirements, the process is carried out in a controlled manner intended to minimize the liquidity risk involved. The Group maintains an overdraft facility with its bankers which can be used if necessary.

Residual contractual maturities of financial liabilities:

As at 31 December 2008	Falling due: less than 1 Month	Falling due: Between 1-3 Months	Falling due: more than 3 Months
	US$'000	US$'000	US$'000
Trade Payables	1,410	-	-
Performance related awards	-	4,056	4,617
Other	864	-	1,070
Total	2,274	4,056	5,687

As at 31 December 2007	Falling due: less than 1 Month	Falling due: Between 1-3 Months	Falling due: more than 3 Months
	US$'000	US$'000	US$'000
Trade Payables	15,228	-	-
Performance related awards	-	23,744	18,270
Other	8,556	-	1,665
Total	23,784	23,744	19,935

Credit risk

The majority of debtors arise from fund management and related activities of the Group. As such the Group is able to determine that the credit risk is considered minimal in relation to the majority of its debtors. For other debtors a credit evaluation is undertaken on a case by case basis. To reduce exposure to credit risk arising from non-performance by counterparties in derivative transactions, the Group's policy is to transact business through brokers with high credit ratings wherever practicable. The Group invests available cash and cash equivalents with various banks. The Group is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments but, given their high credit ratings, management does not expect any counterparty to fail to meet its obligations.

At the reporting date, the Group's financial assets exposed to credit risk amounted to the following:

As at 31 December 2008	Falling due: less than 1 Month	Falling due: Between 1-3 Months	Falling due: more than 3 Months
	US$'000	US$'000	US$'000
Amounts due from funds	4,192	-	-
Interest and other receivables	1,218	311	1,034
Total	5,410	311	1,034

As at 31 December 2007	Falling due: less than 1 Month	Falling due: Between 1-3 Months	Falling due: more than 3 Months
	US$'000	US$'000	US$'000
Amounts due from funds	78,058	-	-
Interest and other receivables	1,956	560	855
Total	80,014	560	855

Notes to the Financial Statements (continued)

22. Financial Instruments and Concentration Risk (continued)

Credit risk (continued)

The credit risk on transactions with funds primarily relates to transactions awaiting settlement. This risk is considered small due to the short settlement period involved and the high credit quality of the funds involved.

The cash and cash equivalents held by the Group is held by a number of international banks and it is the Group's policy to avoid concentrating credit risk in any one institution. The credit risk is also managed by carrying out regular reviews of each institutiuon's credit ratings and of their published financial position.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and equity prices will affect the Group's income or the value of its holding of financial instruments.

The Group is exposed to market risk directly via its investment holdings and indirectly via assets under its management, from which its fee income is derived. As the investments held directly and indirectly are mostly in the emerging markets, there is a concentration of this risk and any general movement in these markets would have a significant impact on the Group's income and the value of the Group's investments.

Foreign currency risk

The Group is exposed to foreign currency risk on investments and expenses denominated in currencies other than US Dollars. The Group will normally hedge large exposures to foreign currency risk by using forward exchange contracts.

In respect of monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short term imbalances.

The Group's exposure as at the balance sheet date was as follows:

		31 December 2008					31 December 2007
	AUD		EUR	GBP		EUR		GBP
USD ' 000s equivalent	US$'000		US$'000	US$'000		US$'000		US$'000
Cash and Cash Equivalents	-		2,927	8,640		1,823		1,356
Investments	-		890	-		7,618		-
Trade Debtors	174		1,075	3,570		51,342		2,620
Trade Creditors	-		(1,244)	(1,987)		(13,607)		(5,413)
Total	174		3,648	10,223		47,176		(1,437)

As at 31 December 2008, had the US Dollar strengthened by 1% in relation to all other currencies, with all other variables held constant, the net assets of the Group would have been decreased both profit and equity by US$111,183, (2007: US$457,390). A weakening of the US Dollar against the above currencies would have had the opposite effect. 

Interest rate risk

The Group is exposed to interest rate risk with regard to holdings in cash and cash equivalents. All cash holdings and cash equivalents are held at maturity dates of less than one month and are at variable rates. The Group does not have any borrowings. Surplus funds are placed on short term deposit.

  Notes to the Financial Statements (continued)

22. Financial Instruments and Concentration Risk (continued)

Other price risk

Price risk arises from equity securities held by the Group. As at the reporting date these assets amounted to the following:

Investment Assets	31 December 2008	31 December 2007
	US$'000	US$'000
Assets held for trading:
Equities - Listed	657	1,070
Equities - Unlisted	802	7,905
Total Investment Assets	1,459	8,975

The majority of the Group's investments are readily realisable into cash. A 3% increase in the reported Net Asset Values of these assets at the reporting date would lead to a US$43,770 increase in the value of those investments (2007: US$269,250). An equal and opposite decrease in the reported Net Asset Values would have decreased the value of the investments by an equal and opposite amount.

23. Commitments

Operating lease commitments during the next twelve months are as follows:

	31 December 2008	31 December 2007
	US$'000	US$'000
Group
Property, expiring:
Within 1 year	21	22
In the second to fifth years, inclusive	388	535
Over five years	141	195

24. Amounts due to and from Subsidiaries

The amounts due to and from subsidiaries are unsecured, repayable on demand and bear interest at commercial rates.

25. Critical accounting estimates, and judgement in applying accounting policies 

The directors considered the development, selection and disclosure of the Group's critical accounting policies and estimates and the application of these policies and estimates. Estimates and judgements are continually evaluated and are based on historical and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

  Notes to the Financial Statements (continued)

25. Critical accounting estimates, and judgement in applying accounting policies (conitnued)

Fair value of financial instruments

The fair value of financial instruments that are not quoted in an active market are determined by the directors by using valuation techniques. 

Where valuation techniques are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of the area that created them. To the extent practical, models use only observable data. However areas such as credit risk, volatilities and correlations require the directors to make estimates. Changes to the assumptions about these factors could affect reported fair values of financial instruments.

26. Contingent Liabilities

The Group has no significant contingent liabilities.

ENDFR CKQKKOBKDANK

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Related Shares:

CCAP.L