. Part 2 : For preceding part double-click [nRn1O0444Z] headcount increase during the first half, growing from 93 to 138 employees at 31 December 2008. Subsequently, the Group has added a further 4 heads, taking the year end headcount to 142, of whom 41 are employed in relatively newly established local asset management operations. The increased headcount has been focused on two areas: first, improving the Group's infrastructure; and secondly, expanding the number of investment professionals based in overseas jurisdictions, in keeping with the Group's strategy establishing local asset management operations in emerging economies. The Group's investment in infrastructure initiatives to support the development of the business have also affected other operating costs, which increased by £5.8 million (52%) to £16.9 million during the period. As reported in last year's annual report, an additional £1.8 million was incurred in respect of full year charges on the Group's new premises in London and amortisation of the deferred acquisition costs (DAC) associated with the launch of AGOL in December 2007. In addition, a further £1.3 million of the increment on FY07/08 relates to enhancing information technology capabilities across the business; £0.8 million to legal and professional fees, including corporate development and due diligence activities; and £0.8 million to higher travel costs, reflecting the Group's increased headcount. As a result, the operating profit margin for the year ended 30 June 2009 was 74.5% (2008: 76.0%). Taxation The vast majority of the Group's profit is subject to UK taxation, and typically the Group has a limited number of non-tax deductible expenses. Consequently the Group's effective tax rate (27.8%) has historically tracked close to the UK corporation tax rate (currently 28.0%). There is a £14.0 million deferred tax asset on the Group's balance sheet at 30 June 2009, as a result of timing differences in the recognition of the accounting expense and actual tax deductions in connection with share price appreciation on share based awards. Dividend In recognition of the financial performance during the period, and our confidence in the Group's future prospects, the directors are recommending a final dividend of 8.34 pence per share for the year ended 30 June 2009 which, subject to shareholder approval, will be paid on 4 December 2009 to all shareholders who are on the register on 6 November 2009. An interim dividend for the six month period to 31 December 2008 of 3.66p (2007:3.66p) was paid on 24 April 2009. Together, these result in a full year dividend of 12.0p (2008: 12.0p). Purchase of Ashmore Group plc shares In line with authorities granted at the AGM in October 2008, the Company purchased 5,368,331 shares, for an aggregate consideration of £6.9 million, which are held in treasury. Balance sheet management and cash flow It is the Group's policy to maintain a strong balance sheet in order to support regulatory capital requirements, to meet the commercial demands of current and prospective investors, and to fulfil the development needs across the business. Development needs include funding the establishment costs of local asset management ventures, seeding new funds and other strategic initiatives. As at 30 June 2009, total equity attributable to shareholders of the parent was £308.5 million, as compared to £271.8 million at 30 June 2008. There is no debt on the Group's balance sheet. Cash The Group's cash and cash equivalents balance increased by £9.2 million in the period to £288.4 million. The Group continues to generate significant cash from operations, totalling £150.9 million in the year (year to 30 June 2008: £195.5 million), from which it paid the following significant items: £81.9 million in cash dividends (FY07/08: £70.1 million); £47.7 million of taxation (FY07/08: £46.5 million); £11.6 million for new seed investments (FY07/08: £15.1 million); £6.9 million for Ashmore Group plc shares held in treasury (FY07/08: nil); £3.7 million to acquire new subsidiaries (FY07/08: nil); and £2.1 million to purchase property, plant and equipment, largely IT-related (FY07/08: £3.5 million). The Group's cash balances are invested with the objective of optimising returns within a strict framework which emphasises capital preservation, security, liquidity and counterparty risk. Cash is invested only in institutions with approved credit ratings of A or better. Typically, during the financial year, investments have been in short-term cash deposits. Based on the level of cash balances at 30 June 2009, a 1% change in UK interest rates would have a £2.8 million impact on the Group's profit before tax. Seeding The Group supports the creation of new business by seeding new funds where necessary. As at 30 June 2009 the amount invested was £26.6 million (at cost), with a market value of £32.2 million, and an aggregated annualised return for FY08/09 of 13% (including FX). Foreign exchange management The Group's long-standing policy is to hedge up to two-thirds of the foreign exchange exposure in connection with its net management fee cash flows, using a combination of forward foreign exchange contracts and options for up to two years forward. The period to 30 June 2009 was characterised by extreme currency volatility, with the GBP/USD exchange rate ranging between GBP1.00:1.43-1.98USD. In the first half there was a significant strengthening of the US Dollar relative to sterling, with the exchange rate closing on 31 December 2008 at GBP1:1.46USD. As we set out in our Interims, this volatility resulted in a £41.4 million loss being recognised in the first half in respect of the unrealised marked-to-market of US$265 million open forward foreign exchange contracts. The overall foreign exchange loss for the first half was £49.8 million, comprising £54.2 million relating to hedging activity, partially offset by £4.4 million of gains on revaluation of other non-sterling denominated assets and liabilities. During the second half US$165 million of these contracts matured, with the crystallised losses offsetting gains on the translation of the US Dollar management fees back into sterling at the prevailing rate, relative to the budgeted rate of GBP1:2.00USD. The weakening of the US Dollar during the second half to close at a 30 June 2009 rate of GBP1:1.65USD contributed to hedging-related losses being reduced by £11.8 million to £42.4 million, within an overall foreign exchange loss for the year of £38.6 million. The level of FX hedges in place as 30 June 2009 is US$180 million. This includes the US$120 million of forward foreign exchange contracts in respect of FY09/10 net management fee cash flows, and US$60 million of options in respect of FY10/11 net management fee cash flows. These have been marked-to-market at the year end rate of GBP1:1.65USD. The options effectively operate as a collar, protecting the sterling value of US$60 million of the Group's forecast management fee revenue cash flows for FY10/11 from being impacted by currency movements outside of a range from GBP1:1.52-1.70USD. As designated hedges the mark-to-market movement in the value of the options will be taken through reserves, until such time as they and the associated hedged revenues mature, so long as the hedges are assessed as being effective. If assessed as ineffective, the mark-to-market of the options will be taken through the income statement. Deferred acquisition costs ("DAC") As we indicated last year, Ashmore was appointed investment manager of Ashmore Global Opportunities Limited ("AGOL"), a newly incorporated publicly listed closed-ended investment company on 12 December 2007. This vehicle raised E500 million capital, with the purpose of investing in Ashmore's special situations and multi strategy funds. During 2008, the shares of the company have, for the most part, traded at a discount to the net asset value of its balance sheet, although this discount was significantly less than many of its peer group. Where this discount is in excess of 10% for 12 consecutive months, an EGM is required to consider whether AGOL should be wound up. Such an EGM was held on 5 May 2009, with 80% of the voting shareholders voting against the resolution. Should the discount continue to exceed 10% for a further 12 consecutive months, an EGM would once again be required. The Group holds on its balance sheet unamortised DAC in respect of the launch of AGOL which amounted to £11.3 million at 30 June 2009. Any such future vote would not result in an escalation of the recognition of these costs, as an early termination of the company triggers full recovery of the set up costs (including the portion previously amortised - £2.1 million per annum, and £3.3 million cumulative to 30 June 2009). Regulatory capital As a UK listed asset management group, Ashmore is subject to regulatory supervision by the Financial Services Authority (FSA) under the Prudential Sourcebook for Banks, Building Societies and Investment Firms. The Group has one UK regulated entity, Ashmore Investment Management Limited ("AIML"), on behalf of which quarterly capital adequacy returns are filed. AIML held surplus capital resources relative to its requirements at all times during the period under review. Further, with effect from 1 January 2007, the Group has been subject to consolidated regulatory capital requirements, whereby the Board is required to assess the degree of risk across the business, and hold sufficient capital within the Group against them. The Board has assessed the amount of capital required to cover such risks as £28.0 million. Thus, given the considerable balance sheet resources available to the Group, the Board is satisfied that the Group is adequately capitalised to continue its operations effectively. Further information regarding the Group's capital adequacy status can be found in the Group's Internal Capital Adequacy Assessment Process (ICAAP) Pillar III disclosures, which are available on our website at www.ashmoregroup.com. Graeme Dell Group Finance Director Ashmore Group plc Consolidated income statement Year ended 30 June 2009 2009 2008 Notes £m £m Management fees 186.8 186.7 Performance fees 52.5 44.7 Other revenue 6.4 10.1 Total revenue 245.7 241.5 Less: Distribution costs (3.6) (4.7) Less: Foreign exchange 2 (38.6) 3.2 Net revenue 203.5 240.0 Personnel expenses 3 (36.0) (47.7) Other expenses 4 (16.9) (11.1) Operating profit 150.6 181.2 Interest income 9.2 15.0 Profit before tax 159.8 196.2 Tax expense (44.3) (55.2) Profit for the year 115.5 141.0 Attributable to: Equity holders of the parent 115.0 140.8 Minority interests 0.5 0.2 Profit for the year 115.5 141.0 Earnings per share: Basic 5 17.12p 21.03p Diluted 5 15.99p 19.89p Ashmore Group plc As at As at Consolidated balance sheet 30 June 30 June 2009 2008 Notes £m £m Assets Property, plant and equipment 4.6 3.3 Intangible assets 6.7 4.1 Deferred acquisition costs 11.3 13.4 Other receivables 0.9 - Deferred tax assets 14.0 13.8 Total non-current assets 37.5 34.6 Trade and other receivables 33.1 34.7 Available-for-sale financial assets 4.8 - Derivative financial instruments 0.8 1.2 Cash and cash equivalents 288.4 279.2 Total current assets 327.1 315.1 Non current assets held for sale 7 34.8 16.4 Total assets 399.4 366.1 Equity Issued capital - - Share premium 0.3 0.3 Retained earnings 308.2 271.5 Total equity attributable to equity holders of the parent 308.5 271.8 Minority interests 2.0 1.5 Total equity 310.5 273.3 Liabilities Deferred tax liabilities 1.5 3.8 Total non-current liabilities 1.5 3.8 Current tax 24.0 24.5 Derivative financial instruments 5.0 0.7 Trade and other payables 51.0 63.7 Total current liabilities 80.0 88.9 Non current liabilities held for sale 7 7.4 0.1 Total liabilities 88.9 92.8 Total equity and liabilities 399.4 366.1 Mark Coombs Graeme Dell Chief Executive Officer Group Finance Director Ashmore Group plc Total equity attributable to equity holders of the parent Consolidated statement of changes in equity Issued capital Share premium Retained earnings Minority interests Total equity £m £m £m £m £m £m Balance at 1 July 2007 - 0.3 195.6 195.9 0.1 196.0 Net gains on available-for-sale financial assets including - - 0.4 0.4 - 0.4 deferred tax Total income and expense recognised directly in equity - - 0.4 0.4 - 0.4 Profit for the year - - 140.8 140.8 0.2 141.0 Total recognised income and expense - - 141.2 141.2 0.2 141.4 Issue of share capital - - - - 1.2 1.2 Share based payments - - 8.8 8.8 - 8.8 Current tax related to share based payments - - (1.3) (1.3) - (1.3) Deferred tax related to share based payments - - (2.7) (2.7) - (2.7) Dividends to equity holders - - (70.1) (70.1) - (70.1) Balance at 30 June 2008 - 0.3 271.5 271.8 1.5 273.3 Exchange adjustments on translation of foreign operations - - 0.5 0.5 - 0.5 Net gains on available-for-sale financial assets including - - 2.3 2.3 - 2.3 deferred tax Total income and expense recognised directly in equity - - 2.8 2.8 - 2.8 Profit for the year - - 115.0 115.0 0.5 115.5 Total recognised income and expense - - 117.8 117.8 0.5 118.3 Own shares - - (0.8) (0.8) - (0.8) Treasury shares - - (6.9) (6.9) - (6.9) Share based payments - - 8.2 8.2 - 8.2 Current tax related to share based payments - - 0.2 0.2 - 0.2 Deferred tax related to share based payments - - 0.1 0.1 - 0.1 Dividends to equity holders - - (81.9) (81.9) - (81.9) Balance at 30 June 2009 - 0.3 308.2 308.5 2.0 310.5 Ashmore Group plc Consolidated cash flow statement Year ended 30 June 2009 2009 2008 Notes £m £m Operating activities Cash receipts from customers 198.9 242.8 Cash paid to suppliers and employees (48.0) (47.3) Cash generated from operations 150.9 195.5 Taxes paid (47.7) (46.5) Net cash from operating activities 103.2 149.0 Investing activities Interest received 9.3 15.4 Acquisition of subsidiary (3.7) - Net purchase of non-current assets held for sale (6.9) (15.1) Purchase of available-for-sale financial assets (4.7) - Purchase of deferred acquisition costs - (14.6) Purchase of property, plant and equipment (2.1) (3.5) Net cash used in investing activities (8.1) (17.8) Financing activities Dividends paid 6 (81.9) (70.1) Purchase of own shares (0.9) - Purchase of treasury shares 9 (6.9) - Net cash used in financing activities (89.7) (70.1) Effect of exchange rate changes on cash and cash equivalents 3.8 0.1 Net increase in cash and cash equivalents 9.2 61.2 Cash and cash equivalents at beginning of year 279.2 218.0 Cash and cash equivalents at end of year 288.4 279.2 Cash and cash equivalents comprise: Cash at bank and in hand 288.4 279.2 288.4 279.2 Notes to the Group Financial Statements 1 Basis of preparation and significant accounting policies In preparing the financial information in this statement the Group has applied policies which are in accordance with IFRSs as adopted by the European Union at 30 June 2009. Certain comparative amounts relating to foreign exchange have been reclassified to conform to the current year presentation. None of the changes are significant in nature. In addition to consistently applying the accounting policies applied in the Group's annual report for the year ended 30 June 2008, which is available on the Group's website, the following accounting policies were adopted: Financial assets The Group may, from time-to-time, invest in funds where an Ashmore Group subsidiary is the Investment Manager or an Adviser ('seeding'). Where the holding in such investments is deemed to represent a controlling stake and is acquired exclusively with a view to subsequent disposal through sale or dilution, these seed investments are recognised as non-current assets held-for-sale in accordance with IFRS 5. Where control is not deemed to exist, and the assets are readily realisable, they are recognised as available-for-sale financial assets. The recognition policy for both is set out below: * Financial assets held as non current assets held for sale Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell except where measurement and re-measurement is outside the scope of IFRS 5, the relevant policy is set out in Financial Instruments. Where investments that have initially been recognised as non-current assets held-for-sale, because the Group has been deemed as holding a controlling stake, are subsequently disposed of or diluted such that the Group's holding is now insufficient to be deemed a controlling stake, the investment will subsequently be reclassified as an available-for-sale financial asset. Any such reclassification will crystallise any gain or loss previously recognised directly through equity within the income statement. Subsequent movements will be recognised in accordance with the Group's accounting policy for the newly adopted classification. * Financial assets held as available-for-sale For available-for sale financial assets, gains and losses arising from changes in their fair value are recognised directly in equity, until the security is disposed of or is impaired, at which time the cumulative gain or loss previously recognised in equity is taken to the income statement for the accounting period. Hedge accounting The Group applies cash flow hedge accounting when the transactions meet the specified hedge accounting criteria. To qualify the following conditions must be met: * Formal documentation of the relationship between the hedging instrument(s) and hedged item(s) must exist at inception. * The hedged cash flows must be highly probable and must present an exposure to variations in cash flows that could ultimately affect profitability. * The effectiveness of the hedge can be reliably measured. * The hedge must be highly effective, with effectiveness assessed on an ongoing basis. For qualifying cash flow hedges, the change in fair value of the effective hedging instrument, is initially recognised in equity and is released to the income statement in the same period during which the relevant financial asset or liability affects profit or loss. Where highly effective, any ineffective portion of the hedge is immediately recognised in the income statement. Where the instrument ceases to be highly effective as a hedge, or is sold, terminated or exercised, hedge accounting is discontinued. Treasury shares Treasury Shares are recognised in equity and are measured at cost. Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from the sale and original cost being taken to revenue reserves. 2 Foreign exchange The only foreign exchange rate which has a material impact on the reporting of the Group's results is the US dollar. Closing rate Closing rate Average rate Average rate as at as at year ended year ended 30 June 30 June 30 June 30 June 2009 2008 2009 2008 US dollar 1.6458 1.9923 1.6044 2.0119 Analysis of foreign exchange Year ended Year ended 30 June 30 June 2009 2008 £m £m Realised and unrealised hedging (losses)/gains (42.4) 3.1 Translation gains on non-Sterling denominated monetary 3.8 0.1 assets and liabilities Total foreign exchange (losses)/gains (38.6) 3.2 3 Personnel expenses Analysis of employee benefits expense Year ended Year ended 30 June 30 June 2009 2008 £m £m Wages and salaries 8.9 5.3 Performance related bonuses 10.1 23.5 Share based payments 11.9 10.0 Social security costs 3.2 7.3 Pension costs 0.6 0.3 Other costs 1.3 1.3 Total employee benefits 36.0 47.7 4 Other expenses Other expenses Year ended Year ended 30 June 30 June 2009 2008 £m £m Travel 3.3 2.5 Professional fees 3.0 2.2 Information technology and communications 2.1 1.4 Deferred acquisition costs charges 2.1 1.2 Operating leases 1.9 1.0 Premises related costs 0.8 0.6 Insurance 0.6 0.5 Auditors' remuneration 0.6 0.7 Depreciation of property, plant and equipment 0.8 0.3 Other expenses 1.7 0.7 Total other expenses 16.9 11.1 5 Earnings per share Basic earnings per share is calculated by dividing the profit for the financial year attributable to equity holders of the parent of £115.0m (2008: £140.8m) by the weighted average number of ordinary shares in issue during the year. Reconciliation of the figures used in calculating basic and diluted earnings per share: Year ended Year ended 30 June 30 June 2009 2008 Weighted average number of ordinary shares used in calculation 671,667,998 669,671,683 of basic earnings per share Effect of dilutive potential ordinary shares - share options 47,330,538 38,322,426 Weighted average number of ordinary shares used in calculation 718,998,536 707,994,109 of diluted earnings per share 6 Dividends An analysis of dividends is as follows: 2009 2008 Dividends declared/proposed in respect of the year: Interim dividend declared per share (p) 3.66 3.66 Final dividend proposed/declared per share (p) 8.34 8.34 Dividends paid in the year: Interim dividend paid(£m) 24.9 24.9 Interim dividend per share (p) 3.66 3.66 Final dividend paid(£m) 57.0 45.2 Final dividend per share (p) 8.34 6.70 Dividends are recognised in the accounts in the year in which they are paid, or in the case of a final dividend when approved by the shareholders. On 15 September 2009 the Board proposed a final dividend of 8.34p per share for the year ended 30 June 2009. This has not been recognised as a liability of the Group at the year end as it has not yet been approved by shareholders. Based on the number of shares in issue at the year end which qualify to receive a dividend, the total amount payable would be £56.7m (2008:£57.0m). 7 Non-current assets and non-current liabilities held for sale Where Group companies inject seed capital into funds operated and controlled by the Group, then the fund is classified as being held for sale. Typically, if the fund remains under the control of the Group for more than one year from the original investment date it will cease to be classified as held for sale, and will be consolidated line by line. In determining whether to execute the reclassification, the Group will have regard to the proximity of loss of control, and the extent to which consolidation of the fund on a line by line basis would be material to the presentation of the Group's financial statements. 2009 2008 £m £m Non-current assets held for sale 34.8 16.4 Non-current liabilities held for sale (7.4) (0.1) Seed capital classified as being held for sale 27.4 16.3 The Group's maximum exposure to credit, liquidity, interest rate, foreign exchange and price risk in respect of these assets and liabilities is represented by their carrying value. 8 Own shares The Ashmore 2004 Employee Benefit Trust ("EBT") was established to encourage and facilitate the acquisition and holding of shares in the Company by the employees of the Company with a view to facilitating the recruitment and motivation of the employees of the Company. As at the period end, the EBT owned 34,293,185 (2008: 34,012,500) ordinary shares of 0.01p with a nominal value of £3,429.32 (2008: £3,401.25) and shareholders' funds are reduced by £6.2m (2008: £5.4m) in this respect. It is the intention of the directors to make these shares available to employees by way of sale through the share based compensation plans. 9 Treasury shares In line with authorities granted at the AGM in October 2008 the Company purchased shares which are held in treasury. An analysis of treasury shares is as follows: Treasury shares held by Ashmore Group plc 2009 2008 Cost of treasury shares: £m £m Ashmore Group plc ordinary shares 6.9 - Number Number Ashmore Group plc ordinary shares 5,368,331 - Reconciliation of treasury shares Number Number At beginning of year - - Purchase of own shares 5,368,331 - At end of year 5,368,331 - Market value of treasury shares: £m £m Ashmore Group plc 10.2 - 10 Group risks The Group's principal risks are as detailed within the Business Review and Corporate Governance sections of the Group's Annual Report and are categorised as strategic and business, investment and operational. 11 Post balance sheet events There are no post balance sheet events for the year ended 30 June 2009. 12 Statutory accounts The financial information set out above does not constitute the company's statutory accounts for the years ended 30 June 2009 or 2008. Statutory accounts for 2008 have been delivered to the registrar of companies, and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985 in respect of the accounts for 2008 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2009. 13 Forward-looking statements This news release contains certain forward-looking statements with respect to the Ashmore Group's financial condition, operations, and business opportunities. These forward-looking statements represent the Group's expectations or beliefs concerning future events, and involve known and unknown risks, and uncertainty, that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements. Past performance cannot be relied on as a guide to future performance. This information is provided by RNS The company news service from the London Stock Exchange END FR DGGDCDGBGGCS