13 January 2015

Charlemagne Capital Announces Unaudited Revenues and Assets under Management ("AuM") for the year ended 31 December 2014

Charlemagne Capital Limited ("Charlemagne" or the "Group") today issues a trading update for the year ended 31 December 2014 in advance of the results announcement scheduled for 17 March 2015.

Key highlights for the 12 months ended 31 December 2014

·     Group AuM US$2.25 billion, a decrease of 13.2% in the quarter, 17.7% over the full year.

·     Net management fees for the year were US$25.8 million, up 7.9%.

·     Net performance fees for the year were US$2.4 million, down 85.2%.

·     Total revenue for the year was US$28.5 million, down 31.0% on the prior year.

·     Interim dividends of 1.0 US cents in respect of 2013 and 0.5 US cents in respect of 2014 have been paid during the year.

·     Continued positive net inflows into key long only investment strategies and initiation of US institutional marketing relationship.

Key Financial Items for the year ended 31 December 2014

The key financial items for the financial year which ended on 31 December 2014 are set out below.  Values in relation to 2014 are unaudited and may be subject to adjustment during the audit process.

Unaudited revenue numbers for the year and net asset position

Management fees for the year include US$11.2 million earned from OCCO (2013: US$10.5 million). Performance fees crystallised in 2014 were US$0.02 million earned from OCCO (2013: US$ 15.6 million) and US$2.4 million from other funds (2013: US$ 0.6 million).

As at 31 December 2014, the Group has unaudited net assets of approximately US$24 million (2013: US$28 million) which include cash balances of approximately US$17 million (2013: US$25 million) and current asset investments of approximately US$7 million (2013: US$7 million).

Comment

 "Notwithstanding the 2.19% fall in the MSCI Emerging Markets Index, the challenges faced by emerging equity markets in 2013 were compounded in 2014 by a number of different crises. Eastern European markets in particular, suffered extreme volatility, due to the Ukraine crisis and, in the second half of the year, the plunge in the oil price; this all contributed to further outflows from the sector.

Despite these outflows from the asset class, the Group has seen some positive developments with net inflows over the year into the core, long-only funds in line with our asset raising strategy.  Of the most significant strategies, the core Emerging Markets and Latin America portfolios again outperformed.  Among the more specialist products, the Magna MENA fund continued to achieve outstanding performance over the year. 

Building on this, we have cemented our relationship with leading US marketing advisor North Bridge Capital whose longstanding and deep expertise in emerging markets has helped them raise billions of dollars of institutional assets since 1994.   A long-term marketing arrangement is now in place under which North Bridge Capital will help us to build a presence in the US institutional investment community.

With a strong product offering we remain well positioned to benefit from any recovery in the Emerging Markets in the coming months."

Dividend

In the absence of unforeseen circumstances, the Group intends to declare a second interim dividend in respect of the year ended 31 December 2014 at the same level as the first interim dividend already paid in respect of this financial year.  The directors have taken the view that, given the difficult conditions encountered during the year and the strength of the Group's balance sheet, it would be appropriate to support the amount declared from reserves.

Group AuM as at 1 January 2015⁽ⁱ⁾

The table below shows the distribution of the Group's AuM across its product ranges as at 1 January 2015 and the movements experienced during the year for 2014.

(i)  Data is reported as at the first business day of the following period in order to capture all subscription and redemption orders placed during the period but not processed until the next dealing date for the funds concerned. AuM data is net of any crossholdings and is unaudited and may be subject to adjustment during the audit process.

(ii) The percentage for net performance is calculated based upon the average AuM for the year.

Summary

Emerging markets ended 2014 with a loss for the year as a whole (the MSCI Emerging Markets Index was down 2.19% on a net basis in US$).  Eastern European markets, however suffered extreme volatility, due to the Ukraine crisis and, in the second half of the year, the plunge in the oil price; the MSCI Eastern European Index ended the year down 37.59%, falling 26.79% in the final quarter with Russia down 46.27% for the year as a whole. This impacted the investment performance of assets managed by the Group under strategies which have a greater focus on East Europe.

As in the previous year, there have been substantial net outflows from the industry asset class over the year. These were at their highest in the first and fourth quarters, coinciding with the worst quarters for market performance.  2014 was the second consecutive year with outflows of greater than US$25bn for emerging markets.

By comparison, the Group has seen net inflows over the year into the core, long-only funds in line with our asset raising strategy.  It should be noted that three quarters of the outflows from the Institutional range of products were in respect of the terminated advisory only mandate reported earlier in the year and white label managed funds where the Group has no control over distribution.

To further enhance its asset raising capabilities, Charlemagne has cemented its relationship with leading US marketing advisor North Bridge Capital.    North Bridge Capital has long and deep expertise in emerging markets and a proven track record, having raised multiple billions of dollars of institutional assets since 1994.   A long-term marketing arrangement is now in place under which North Bridge Capital will assist Charlemagne in building a presence in the US institutional investment community.  Under the agreement, Charlemagne has undertaken to grant options to North Bridge Capital to purchase shares in Charlemagne, subject to challenging performance criteria based on raising target levels of AuM.   The initial option was granted on signature of the agreement and entitles North Bridge to acquire a number of shares equivalent to 1% of the current total number of shares in issue at an exercise price equal to the closing price at date of grant, subject to a vesting condition that US$ 100 million AuM has been raised.  Subsequent options may be granted upon incremental increases in AuM to a maximum of 9.9% of shares in issue provided US$2 billion has been raised.

2014 was a mixed year for investment performance.  Of the most significant strategies, the core Emerging Markets and Latin America portfolios again outperformed.  Among the more specialist products, the Magna MENA fund continues to achieve outstanding performance over the year. 

It was a challenging year for the OCCO Eastern European Fund which had small negative performance during the period, mainly driven by the geo-political backdrop in Russia.   The resulting absence of performance fees from this area will have a significant effect on year end results. 

2015 returns for emerging markets are likely to be driven by factors such as growth - where most economies should see an improvement; interest rates - which are likely to be cut in a number of key emerging countries; and earnings, which is where stock picking comes in.   After four years of underperformance, another year of capital leaving the asset class and many strategists bearish, it's hard to argue that emerging market equities are a crowded trade.

Enquiries:

This announcement is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into the United States of America, Australia, Canada, Japan or South Africa or any other jurisdiction into which the release, publication or distribution would be unlawful. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, Japanese, South African or other securities law. The distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and persons into whose possession this announcement comes should inform themselves about and observe any such restrictions.

This announcement contains (or may contain) certain forward-looking statements with respect to the financial condition, results of operations and businesses of the Group. These statements and forecasts are based on Charlemagne's beliefs, assumptions and expectations of the Group's future performance. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to Charlemagne at the date of this announcement or are within its control, that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Data or statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Nothing in this announcement should be construed as a profit forecast or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Group.

This announcement is for information purposes only and shall not constitute an offer to buy, sell, issue or subscribe for, or the solicitation of an offer to buy, sell, issue, or subscribe for, any securities in Charlemagne or any other entity. This announcement is aimed at providing information regarding the Assets under Management on which revenue is derived by Charlemagne. The unaudited data contained in this announcement are currently provisional and all such data are subject to change without notice and, except as required by applicable law, neither Charlemagne nor N+1 Singer assumes any responsibility or obligation to update publicly or review any of the data or statements contained herein.