4th Sep 2006 07:02
Charlemagne Capital Limited04 September 2006 4 September 2006 Charlemagne Capital Limited Interim Results for the six months ended 30 June 2006 Charlemagne Capital Limited ("Charlemagne", or the "Group"), the specialistemerging markets equity investment manager, today announces interim results forthe six months ended 30 June 2006. Financial Highlights • Revenue up 121% to US$47.9m • Operating profit up 177% to US$26.0m • Basic and diluted earnings per share up 136% to 6.26 US cents • Ordinary interim dividend per share 2.10 US cents • Special interim dividend per share 1.65 US cents Operational Highlights • Assets under Management ("AuM") up 42% to US$4.0bn (versus June 2005) from both existing funds and new mandates • Listed on AIM in April 2006 • Winner of a number of awards for investment performance • Launched Magna Asia Fund in June 2006 • Expanded institutional business to manage products investing in Russia, India GEMs and Turkey Commenting on the results, Michael Baer, Chairman said: "We are delighted with the Group's strong performance which has been achieveddespite the volatile market conditions experienced in the second quarter.Charlemagne's strong fundamentals and expertise means it is well positioned todeliver further growth." Commenting on the results, Jayne Sutcliffe, Chief Executive said: "Although the Group entered the second half of the year experiencing marketconditions less favourable than expected at the time of listing, we remainconfident in the strength of Charlemagne's business model and in its ability tocontinue to deliver strong, long-term growth. The Group remains well positionedto benefit from a future rise in emerging market asset values and from a returnof strong investor flows." Enquiries: Charlemagne Capital Tel. 020 7518 2100Jayne Sutcliffe, Chief ExecutiveDavid Curl, Finance Director & Head of Investment Smithfield Consultants Tel. 020 7360 4900John KielyGeorge Hudson Notes to Editors: Charlemagne Capital is a specialist emerging markets equity investmentmanagement group. Charlemagne Capital Limited was admitted to the AIM market ofthe London Stock Exchange on 4 April 2006. Charlemagne's product range comprises mutual funds, hedge funds andinstitutional and specialist fund products primarily covering GEMs, EasternEurope, Latin America and Asia. Charlemagne Capital employs a range ofinvestment strategies including: long only, long/short, structured products andprivate equity. Charlemagne Capital's funds aim to exploit the inefficiencies inthe market via a strict bottom up approach and focused stock selection. Through the strong long-term investment performance track record of itsprincipal funds, Charlemagne Capital has established itself as a market leaderin emerging markets investment management. Its performance has been recognisedthrough numerous awards and top rankings for its funds, including the 2005Standard and Poor's 5-year best performing fund award in Austria, the 2006 SwissLipper Leaders 5-year award winner for Emerging Markets Europe and an AAA-ratingby Standard & Poor's for its Magna Eastern European Fund (a sub-fund of MagnaUmbrella Fund Plc). Financial Summary Summary Financial Information The results and the assets and liabilities of the Group for the current andcomparative interim periods along with the last full financial year (extractedfrom the audited financial statements) are set out below in summary:- Results Notes Unaudited Unaudited Audited For the six For the six For the months to months to Year to 30 June 2006 30 June 2005 31 December 2005 US$'000 US$'000 US$'000--------------------- ------ ----------- ----------- ----------- Revenue 47,873 21,611 90,839--------------------- ------ ----------- ----------- ----------- Operating Profit 26,011 9,377 49,600Share of profits ofjointly controlledentity net ofperformance awards - 13,193 13,193Listing costs (3,540) - ----------------------- ------ ----------- ----------- ----------- Profit before tax 22,471 22,570 62,793---------------------- ------ ----------- ----------- ----------- Balance sheet summary Assets and liabilitiesProperty, plant andequipment 394 321 413Interest in jointlycontrolled entity 25 4,261 4,261Current assets 51,962 92,061 105,306---------------------- ------ ----------- ----------- -----------Total assets 52,356 96,643 109,980---------------------- ------ ----------- ----------- -----------Total liabilities 25,459 25,967 47,849---------------------- ------ ----------- ----------- -----------Net assets 26,897 70,676 62,131---------------------- ------ ----------- ----------- ----------- US$ US$ US$Basic and dilutedearnings per share 9 0.062553 0.026450 0.097341---------------------- ------ ----------- ----------- ----------- US$'000 US$'000 US$'000Interim dividend inrespect ofprior period 5 6,540 4,912 4,912---------------------- ------ ----------- ----------- ----------- Assets under Management ("AuM") The table below sets out the Group's AuM as at 3 July 2006 and the movementsexperienced in each product range in the period since 1 January 2006. 1 Net Novy Neft Net 3 July Movement January subscriptions reorganisation performance 2006 in 2006 AuM AuM period (US$m) (US$m) (%) (US$m) (%) (US$m) (%) (US$m) (%) ------------- -------- ------ ------ ------ ------ ------- ------ -------- --------Magna 988 45 4.6% 59 6.0% (22) (2.1%) 1,070 8.3%OCCO 254 130 51.2% - - (10) (3.1%) 374 47.2%Institutional 1,998 172 8.6% 77 3.8% (65) (3.1%) 2,182 9.2%Specialist 844 (69) (8.2%) (537) (63.6%) 134 24.8% 372 (55.9%)------------- -------- ------ ------ ------ ------ ------- ------ -------- --------Total 4,084 278 6.8% (401) (9.8%) 37 0.9% 3,998 (2.1%)------------- -------- ------ ------ ------ ------ ------- ------ -------- -------- Since 1 January 2006, Group AuM has reduced to US$3,998 million, a decrease ofUS$86 million or 2.1%. This includes the return of US$401 million or 9.8% of theopening AuM, as a result of the planned Novy Neft capital return as indicated inthe Group's AIM Admission Document. Excluding the Novy Neft capital return, theGroup's AuM increased by 7.7%. Chief Executive's Report The first half of 2006 has seen strong year on year growth in all key measuresfor Charlemagne Capital Limited (the "Company", the "Group") despite turbulentmarket conditions during the second quarter. Revenue for the first half year wasUS$47.9m (up 121% from US$21.6m in 2005) of which US$21.0m (2005 US$12.0m) wasfrom net management fees. Net performance fees were US$23.5m (up 291% fromUS$6.0m in 2005) reflecting the Group's fund performance and very strong marketconditions at the end of 2005 and during the first quarter of 2006. The balanceof the total revenues of US$3.4m (2005 US$3.6m) arose from investment and otherincome. AuM increased to US$4.0bn (up 42% from US$2.8bn as at 30 June 2005),representing growth in existing funds as well as new funds and institutionalbusiness. Operating profits for the six months to 30 June 2006 were US$26.0m (up 177% fromUS$9.4m in 2005) excluding exceptional items. Pre tax profits were US$22.5m,after listing costs of US$3.5m. Pre tax profits in 2005, US$22.6m, included therecognition of US$13.2m of non recurring operating profit net of attributablebonus from a maturing private equity vehicle. After due allowance for taxation,profits after tax were US$18.9m (2005 US$21.6m). This is the Company's first half year as a quoted company on the London AIMmarket. The Board of Directors (the "Board") decided at the end of 2005 that itwould be appropriate to seek a listing for the Company's shares to enhance theGroup's profile and be able, amongst other things, to broaden the shareholderbase and to allow existing shareholders, who had supported the Company's growthsince its independent inception in 2000, to realise the whole or part of theirinvestment. A listing on London Stock Exchange's AIM market was achieved at thebeginning of April 2006. The Group was able to take advantage of buoyant market conditions in the firstquarter of the year and leverage its track record to raise AuM from US$4.1bn atthe beginning of 2006 to US$5.8bn at the end of April. The second quarter,however, saw considerable retrenchment as global markets experienced significantvolatility. These market conditions inevitably impacted both the market value ofthe Group's products and investor flows. As a result AuM fell to US$4.0bn by theend of June. This reduction includes the impact of the planned restructuring ofholdings within the Novy Neft product range, which itself accounted for US$0.4bnof the decline. This product no longer served an economic purpose for mostclients after the removal of Russian investment restrictions in the shares ofGazprom. Overall, whilst a fall in AuM is always disappointing, in the light ofthe degree of market turbulence experienced and the follow-on impact on theemerging market asset management industry as a whole, we were satisfied with theperformance of the business. The Group has continued to expand its operations in the first half in line withour strategy to grow and diversify each of the four principal product ranges.One such initiative was the launch in June of the Magna Asia Fund, a newaddition to the Magna mutual fund range. Of particular note is the continuedexpansion of our institutional business. This business is increasinglydiversifying its original focus on Eastern Europe gaining recent newappointments to additional mandates to manage products investing in Russia,India, GEMs and Turkey. Enhancing Charlemagne's presence within theinstitutional market is a key focus for the group going forward. We reached thethree year anniversary for managing Global Emerging Markets assets in July, withan impressive track record which places our fund performance in the firstquartile (Source: S&P Emerging Markets Database, Equity Global Emerging MarketsUniverse). We believe that a combination of our track record together with ourspecific focus on the emerging markets, leaves us well placed to further ourpenetration of the institutional market. We have also developed a new initiativewithin the private equity business and expect to close a new fund, focussing onproperty development opportunities within Eastern Europe, by mid September. Forthe Group's own branded funds, the Magna mutual fund range and the long/shortOCCO funds, we see substantial opportunities to increase AuM by building on ourstrong franchise in Europe and to widen distribution into other parts of theworld. In particular, we are committing greater resources to accessingdistribution channels in the US. In order to return surplus capital to shareholders and improve the efficiency ofthe balance sheet, the Board decided in January that it would be appropriate todeclare a dividend in respect of 2005 and to buy back a number of shares forcancellation. Therefore, on 30 January 2006 an interim dividend of 2.00 US centsper share was paid. On 14 February 2006, the Company made a compulsoryrepurchase of 10% of its outstanding share capital for cancellation. Takentogether, these measures returned US$50m to shareholders. As indicated at the time of the listing, the Company intends to declaredividends which reflect the long term earnings and cash flow potential of theGroup. It remains the long-term aim to return a substantial majority of thoseearnings arising from the management fee component of post tax earnings toshareholders by way of dividend. In respect of the six months to 30 June 2006,the Board has resolved to declare an interim dividend, based on post taxmanagement fee earnings, of 2.10 US cents (1.1025 pence) per share. Thisrepresents a significant portion of the post tax management fees earnings in theperiod. It remains the Board's intention that the final dividend will representthe greater proportion of the total dividend, subject to earnings in theremainder of the year and cash flow considerations at the time of declaring thefinal dividend for the year ended 31 December 2006. Given that the Groupgenerated earnings in excess of those from management fees in the period underreview, the Board is also declaring a special dividend of 1.65 US cents (0.8662pence) per share. Additionally, the Company purchased 2.75m shares forcancellation in late May and early June, at a total cost of US$3.6m. Both dividends will be payable on 13 October 2006 to shareholders on the recordon 15 September 2006. Dividends will be payable in pounds sterling unless theCompany's registrar holds an instruction from the shareholder to pay in USdollars. The Group's strategy and ambitions remain unchanged; it is our intention to bethe leading emerging market asset management specialist, providing high qualityinvestment management services to clients and building value for shareholders.We will achieve this by continuing to focus our expertise and resources solelyon emerging markets, continuing to accumulate assets by expanding ourdistribution capabilities in existing and new investor markets and diversifyingour business by region, client type and fee structure. We aim to attract andretain high calibre professionals for all areas of our operation by providing aculture in which they have the support and incentives to perform. Although the Group entered the second half of the year experiencing marketconditions less favourable than expected at the time of listing, we remainconfident in the strength of Charlemagne's business model and in its ability tocontinue to deliver strong, long-term growth. The Group remains well positionedto benefit from a future rise in emerging market asset values and from a returnof strong investor flows. The Board would like to express its thanks to theircolleagues for their support and focus during a year in which the Group hascommitted significant management resources to the AIM listing and experienced very difficult market conditions in the geographies in which the Group invests. Jayne SutcliffeChief Executive 4 September 2006 Consolidated Income Statement Expressed in United States Notes Unaudited Unaudited AuditedDollars Six months Six months Year to to 30 June to 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000-------------------------- ------ ---------- ---------- ---------- Revenue 2 47,873 21,611 90,839 ExpensesPersonnel expenses 9 (19,969) (9,831) (36,258)Other costs (1,893) (2,403) (4,981)-------------------------- ------ ---------- ---------- ---------- Operating Profit 26,011 9,377 49,600Share of profit of jointlycontrolled entity - 25,767 25,767Uplift in holding injointly controlled entity - 684 684Performance awards relating to jointly controlled entity - (13,258) (13,258)Listing costs 3 (3,540) - --------------------------- ------ ---------- ---------- ----------Profit before tax 22,471 22,570 62,793 Taxation 4 (3,593) (932) (6,474)-------------------------- ------ ---------- ---------- ---------- Profit after tax 18,878 21,638 56,319-------------------------- ------ ---------- ---------- ---------- Dividends 5 (6,540) (4,912) (4,912)-------------------------- ------ ---------- ---------- ---------- Retained earnings for theperiod 12,338 16,726 51,407-------------------------- ------ ---------- ---------- ---------- US$ US$ US$Earnings per shareBasic and diluted 10 0.062553 0.026450 0.097341-------------------------- ------ ---------- ---------- ---------- Consolidated Statement of Recognised Income and Expense Expressed in United States Notes Unaudited Unaudited AuditedDollars Six months Six months Year to to 30 June to 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000---------------------------- ------ --------- --------- --------- Movements in exchange differences on the translationof the financial statements ofentities not accounted forin United States Dollars 279 (4,225) (3,682)Movement in other reserves in jointly controlled entity - (128) (128)(Decrease) in fair valueof cash flow hedge (400) (852) (852)---------------------------- ------ --------- --------- ---------Net (expense) for the period (121) (5,205) (4,662)---------------------------- ------ --------- --------- ---------Net profit for the period 18,878 21,638 56,319---------------------------- ------ --------- --------- ---------Total recognised incomefor the period 18,757 16,433 51,657-------------------------- ------ --------- --------- --------- Consolidated Balance SheetExpressed in United States Dollars Notes Unaudited Audited As at As at 30 June 31 December 2006 2005 US$'000 US$'000-------------------------- ------ ---------- --------- Non-current assetsProperty, plant and equipment 394 413Interest in jointly controlled entity 25 4,261-------------------------- ------ ---------- ---------Total non-current assets 419 4,674-------------------------- ------ ---------- --------- Current assetsCurrent investments 7,090 15,863Receivables 6 19,446 78,931Cash and cash equivalents 25,401 10,512-------------------------- ------ ---------- --------- 51,937 105,306-------------------------- ------ ---------- --------- Current liabilitiesAccounts payable, accruals and other 7 21,953 40,309payablesFinancial liability held for trading - 2,438Taxation 4 3,506 5,102-------------------------- ------ ---------- --------- 25,459 47,849-------------------------- ------ ---------- --------- Net current assets 26,478 57,457-------------------------- ------ ---------- --------- Net assets 26,897 62,131-------------------------- ------ ---------- --------- Issued share capital 11 2,950 3,270Reserves 23,947 58,861-------------------------- ------ ---------- --------- Shareholders' equity 26,897 62,131-------------------------- ------ ---------- --------- Consolidated Cash Flow StatementExpressed in United States Unaudited Unaudited AuditedDollars Six months Six months Year to to 30 June to 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000Operating Profit 26,011 9,377 49,600Adjustments for:Listing cost (3,540) - -Depreciation 101 66 161Exchange (gain)/loss onequipment (30) 20 44Provision for unrealisedloss/(profit) on foreignexchange contracts andinvestments 1,997 (1,232) 312Purchase of investments - (6,341) (6,341)Sale of investments 9,541 1,045 11,551Loss/(Profit) on disposal ofinvestments 800 471 (6,126)Decrease/(Increase) inreceivables 52,635 17,224 (51,073)(Decrease)/Increase inaccounts payable, accrualsand other payables (18,127) 561 15,456Dividend and Distributionreceived from jointlycontrolled entity 4,558 33,101 33,101Tax paid (5,085) (613) (1,397)Share based incentive scheme (6,280) - -Foreign currency transactionadjustment (279) (35) 508-------------------------- ---------- --------- ---------Cash flows from operatingactivities 62,302 53,644 45,796-------------------------- ---------- --------- --------- Investing activitiesSale of investments 17 16 16Purchase of property, plantand equipment (52) (182) (393)-------------------------- ---------- --------- ---------Cash flows (used in)investing activities (35) (166) (377)-------------------------- ---------- --------- --------- Financing activitiesCompany Shares issued 6,280 - -Shares repurchased (47,118) (162) (40,338)Dividend paid (6,540) (4,912) (4,912)-------------------------- ---------- --------- ---------Cash flows used in financingactivities (47,378) (5,074) (45,250)-------------------------- ---------- --------- --------- Net increase in cash and cashequivalents 14,889 48,404 169 Cash and cash equivalents atthe beginning of the period 10,512 10,343 10,343-------------------------- ---------- --------- --------- Cash and cash equivalents atthe end of the period 25,401 58,747 10,512-------------------------- ---------- --------- --------- Notes to the Consolidated Interim Financial Statements 1. Basis of Preparation The consolidated interim financial statements have been prepared on a condensedbasis, in accordance with the accounting policies applied to the most recentaudited statutory accounts and in accordance with the requirements ofInternational Accounting Standard 34 "Interim Financial Reporting".The consolidated interim financial statements are prepared on the historicalcost basis except that the following are stated at their fair value: financialinstruments at fair value through profit or loss including derivative financialinstruments. Recognised assets and liabilities that are hedged are stated atfair value in respect of the risk that is hedged. 2. Segment Reporting Unaudited Six months to 30 June 2006 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Magna OCCO Institutional Specialist Other TotalNetManagement Fees 5,688 2,361 7,451 5,468 - 20,968NetPerformance Fees 5,043 1,811 2,830 17,106 - 26,790Return onInvestment - - - (3,321) 666 (2,655)Other Income - - - - 2,770 2,770 -------- ------- -------- -------- -------- -------- Segment Revenue 10,731 4,172 10,281 19,253 3,436 47,873 -------- ------- -------- -------- -------- -------- Segment 6,693 2,637 7,072 12,593 3,436 32,431ResultUnallocatedExpenses (6,420) --------Results fromOperating Activities 26,011 -------- Unaudited Six months to 30 June 2005 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Magna OCCO Institutional Specialist Other TotalNetManagement Fees 3,221 1,523 3,642 3,630 - 12,016NetPerformance Fees 1,024 371 1,407 3,381 - 6,183Return onInvestment - - - (174) 1,431 1,257Other Income - - - 2,014 141 2,155 -------- ------- -------- -------- -------- --------Segment Revenue 4,245 1,894 5,049 8,851 1,572 21,611 -------- ------- -------- -------- -------- -------- Segment Result 2,861 1,298 3,709 4,776 1,572 14,216UnallocatedExpenses (4,855) --------Results fromOperating 9,361Activities -------- 3. Listing costs The Company was admitted to the AIM market of the London Stock Exchange on 4 April 2006. Total costs related to listing amounted to US$3.5m. Notes to the Consolidated Interim Financial Statements (Continued) 4. Taxation Income tax expense is recognised in each interim period based on the bestestimate of the weighted average annual income tax rate expected for the fullfinancial year. Amounts accrued for income tax expense in one interim period maybe adjusted in a subsequent period of that financial year if the estimate of theeffective rate of income tax changes. 5. Dividends Unaudited Unaudited Six months to Six months to 30 June 2006 30 June 2005 US$'000 US$'000------------------------------------- ------------- ------------- Interim dividend of 2 US cents (2005: 0.6 US cents) 6,540 4,912------------------------------------- ------------- ------------- The interim dividend of 2 US cents per ordinary share in respect of the yearended 31 December 2005 was paid on 30 January 2006 and has been charged to theincome statement in 2006. The interim dividend of 0.6 US cents per ordinary share in respect of the yearended 31 December 2004 was paid on 16 February 2005 and was charged to theincome statement in 2005. 6. Receivables Unaudited Audited Six months to Year to 30 June 2006 31 December 2005 US$'000 US$'000--------------------------------- ------------- -------------Trade receivables 18,049 70,061Other receivables 1,023 8,497Prepayments 374 373--------------------------------- ------------- ------------- 19,446 78,931--------------------------------- ------------- ------------- 7. Accounts Payable, Accruals and Other Payables Unaudited Audited Six months to Year to 30 June 2006 31 December 2005 US$'000 US$'000--------------------------------- ------------- -------------Provision for performance awards 14,522 22,310Accruals and other payables 7,431 17,999--------------------------------- ------------- ------------- 21,953 40,309--------------------------------- ------------- ------------- Notes to the Consolidated Interim Financial Statements (Continued) 8. Related Party Transactions Transactions with Directors and executive officers As at 30 June 2006, Directors of the Company and their immediate interestscontrolled 33.3% (2005: 59%) of the voting shares of the Company. Summary of transactions a. During the period US$65,983 (2005: US$68,790) was paid to Burnbrae Ltd, a company where ultimate ownership is connected with James Mellon, a director of Charlemagne Capital Limited, for rental of property. Anderson Whamond, a director of Charlemagne Capital Limited, was a Director of Burnbrae Ltd during 2006. b. During the period US$38,480 (2005: US$Nil) was paid to David McMahon, a director of Charlemagne Capital Limited, for consultancy services for a period prior to him becoming an employee c. During the period, the Company made no payment (2005: US$42,360) to Lattice Limited a company where the ultimate ownership is connected with David McMahon, a director of Charlemagne Capital Limited, for consultancy services. Anderson Whamond is a director of Lattice Limited. d. Transactions with funds managed by Charlemagne Capital Group companies: Over 78% (2005: 75%) of the turnover from investment management, administration, performance incentive fees, advisory fees and commissions is derived from funds over which the Directors consider the Group has influence by virtue of its management, administration and advisory roles. 9. Directors' Remuneration Total salaries of US$0.5m (2005: US$0.4m) were awarded to Directors during theperiod. An amount of US$14.0m has been accrued within personnel expenses inrespect of director and employee bonus awards. However, as at the date ofissuance of these Financial Statements, no individual bonus allocations (2005:US$4.3m) or contributions to the Charlemagne 2005 Employee Benefit Trust hadbeen made (2005: US$13.5m), other than those relating to share based incentiveplans (note 12). The Group has no plans to make contributions (2005: US$1.4 m)into any International Pension Plan. 10. Earnings per Share The calculation of basic earnings per share of the Group is based on the netprofit attributable to shareholders for the six months to 30 June 2006 ofUS$18.9m (2005: US$21.6m) and the weighted average number of shares of301,783,392 (2005: 818,069,740) in issue during the period. The calculation of diluted earnings per share of the Group is same as basicearnings per share as the share options outstanding have been issued contingentupon specified performance conditions being satisfied. As at 30 June 2006 theseperformance conditions had not been met. Shares issued during the year to Sanne Trust Company Limited (note 11) have beenexcluded from the earnings per share calculation as such shares are currentlyaccounted for as treasury shares. Notes to the Consolidated Interim Financial Statements (Continued) 11. Issued Share Capital Shares Unaudited Audited 30 June 31 December 2006 2005 US$'000 US$'000---------------------------------------------- --------- ---------Authorised2,000,000,000 ordinary shares of US$0.01 each 20,000 20,000---------------------------------------------- --------- --------- Issued and fully paidAt beginning of period; 326,988,423 (2005: 921,987,311)ordinary shares of US$0.01 each 3,270 8,220Shares issued; 3,422,185 (2005: None) 34 -Shares repurchased; 35,448,836(2005: 494,998,895) (354) (4,950)---------------------------------------------- --------- ---------At end of period; 294,961,772 (2005: 326,988,423)fully paid 2,950 3,270---------------------------------------------- --------- --------- During the six months ended 30 June 2006, the Company repurchased 35,448,836 ofits own shares, of which 32,698,836 (10% of the total shares in issue at thecommencement of the period) were the result of a compulsory repurchase by theCompany. The remainder were purchased at market value for cancellation afterlisting. During the six months ended 30 June 2006, the Company issued 3,422,185 sharesfor US$6.28m to Sanne Trust Company Limited (Trustee of the Charlemagne 2005Employee Benefit Trust) on 27 March 2006. Dividends on these shares have beenwaived by Sanne Trust Company Limited until further notice. As at the date of signing the financial statements there were 294,961,772ordinary shares of US$0.01 each issued and fully paid. Notes to the Consolidated Interim Financial Statements (Continued) 12. Share Based Incentive Plans Equity Settled At 27 March 2006 and 8 May 2006 the Group established several share basedincentive programmes that entitle certain employees to acquire shares in theCompany subject to the vesting conditions set out below at an exercise pricethat was set at the date of grant. The fair value of options granted is recognised as an employee expense with acorresponding increase in equity. The fair value is measured at grant date andspread over the vesting period. The amount recognised as an expense is adjustedto reflect the actual number of share options that vest. Grant Date Number of Vesting Conditions Contractual shares life of Options------------- --------- ----------------------------------------- ---------27 March 2006 1,013,577 Equal parts vesting over three, four 7 Years and five years service plus achievement of EPS performance targets27 March 2006 471,427 Three years service plus achievement of 7 years Assets Under Management (AUM) performance targets8 May 2006 212,564 Three years service plus achievement of 7 years Assets Under Management (AUM) performance targets------------- --------- ----------------------------------------- ---------Total ShareOptions 1,697,569------------- --------- ----------------------------------------- --------- The number and weighted average exercise prices of share options is as follows: Weighted average Number of exercise price Options Outstanding at beginning of period N/A Nil Granted during the period GBP0.42 1,697,569Forfeited during the period GBP1.04 55,000------------------------------------- ---------- ---------Outstanding at the end of the period GBP0.40 1,644,843------------------------------------- ---------- --------- The options outstanding at 30 June 2006 have an exercise price between GBPNiland GBP1.05 and a weighted average contractual life of 6.75 years. Outstandingshare options are contingent upon specified performance and service criteriabeing satisfied. As at 30 June 2006 none of the performance or service criteriahad been achieved and therefore none of the options are exercisable at thistime. There were no share option programmes in place in the prior year. The weighted average fair value of the options issued during the period wasGBP0.67 Notes to the Consolidated Interim Financial Statements (Continued) 12. Share Based Incentive Plans (cont'd) The estimate of the fair value of the share options granted with a grant priceof GBP Nil has been calculated by reference to the face value of the awardadjusted for the loss of dividends over the vesting period. All other optionsare measured using a binomial lattice to model the early exercise behaviour. Thecontractual life of the options, 7 years, is used as an input to this model. Fair value of share options and 27 March 27 March 8 May 2006 assumptions 2006 EPS 2006 AUM AUM Targets targets TargetsFair value at measurement date(GBP) 0.86 0.38 0.39---------------------- ----------- ----------- ----------Share price at grant date (GBP) 1.05 1.05 1.035Exercise price (GBP) Nil 1.05 1.035Expected volatility (% p.a.) Nil 50.0 50.0Option life (years) 7 7 7Assumed dividend yield (% p.a.) 5.0 5.0 5.0Risk-free interest rate (% p.a.) Nil 4.4 4.9 The Company's shares were not traded before the majority of the options weregranted. In setting the volatility assumption therefore regard was given to theshare price volatilities of the Company's closest traded comparator companies,as well as the share price since listing. Based on daily and weekly priceobservations, the share price volatility has been around 50% which is comparableto that of its competitors over a longer period. The share options are granted under service and non-market performanceconditions. Such conditions are not taken into account in the grant date fairvalue measurement of the services received. There are no market conditionsassociated with the share option grants. Cash Settled At 24 March 2006, the Group's global employment company, Charlemagne CapitalServices Limited (CCSL), made a contribution of US$6.28m to the Charlemagne 2005Employee Benefit Trust (EBT). The Directors of CCSL recommended to the Trusteeof the EBT that this sum be used to purchase Company shares and those shares beheld until EPS performances targets and service targets are met, after whichtime the shares should be sold. The Trustee of the EBT (Sanne Trust Limited, anindependent trustee company) may at its discretion allocate the proceeds todiscretionary sub-trusts of which certain employees and their families arebeneficiaries. The EBT subsequently purchased 3,422,185 Company shares, which had a fair valueof US$3,907,939 as at 30 June 2006, based on the market price as at that date,after adjusting for the waiver of dividend rights at an assumed dividend yieldof 5%. The fair value of the future cash settlement is spread over the vesting period,and recognised as an expense in the accounts with a corresponding increase inliabilities. The fair value is re-measured at each reporting date, with anyadjustment in the cumulative fair value being recognised in the reportingperiod. Expenses in respect of share based incentive plans The following amounts have been charged as an expense within these financialstatements Six months to 30 June 2006 US$ Equity settled incentive plans 228,848Amount relating to cash-settled transaction liabilities 350,223------------------------------ ----------Total expense recognised as employee costs 579,071------------------------------ ---------- As at 30 June 2006, total liabilities in respect of cash-settled share-basedincentive plans were US$350,223. No liabilities had vested by the end of theperiod. Report of the Independent Auditors Independent review report by KPMG Audit LLC to the shareholders of CharlemagneCapital Limited We have reviewed the accompanying consolidated balance sheet of the Company at30 June 2006 and the related consolidated statements of income, recognised gainsand losses and cash flows for the six month period then ended ("the interimfinancial information"). Management is responsible for the preparation andpresentation of this interim financial information in accordance withInternational Financial Reporting Standard IAS 34 "Interim Financial Reporting".Our responsibility is to express a conclusion on this interim financialinformation based on our review. We conducted our review in accordance with the International Standard on ReviewEngagements 2410 "Review of Interim Financial Information Performed by theIndependent Auditor of the Entity". A review of interim financial informationconsists of making inquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believethat the accompanying consolidated interim financial information is notprepared, in all material respects, in accordance with IAS 34, "InterimFinancial Reporting". KPMG Audit LLCChartered AccountantsHeritage Court41 Athol StreetDouglasIsle of Man 4 September 2006 This announcement is not for publication or distribution to persons in theUnited States of America, its territories or possessions or to any US person(within the meaning of Regulation S of the US Securities Act of 1933, asamended). Neither this announcement nor any copy of it may be taken ortransmitted into Australia, Canada or Japan or to Canadian persons or to anysecurities analyst or other person in any of those jurisdictions. Any failure tocomply with this restriction may constitute a violation of United States,Australian, Canadian or Japanese securities law. The distribution of thisannouncement in other jurisdictions may be restricted by law and persons intowhose possession this announcement comes should inform themselves about andobserve any such restrictions. This announcement contains certain forward-looking statements with respect tothe financial condition, results of operations and businesses of the CharlemagneCapital Group. These statements and forecasts involve risk and uncertaintybecause they relate to events and depend upon circumstances that will occur inthe future. There are a number of factors that could cause actual results ordevelopments to differ materially from those expressed or implied by theseforward-looking statements and forecasts. Nothing in this announcement should beconstrued as a profit forecast. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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