Notes to the Financial Statements

1.               The Company

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 2014 comprise the Company and its subsidiaries (together referred to as the "Group"). 

2.                   Basis of Preparation

Statement of Compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union (EU). The financial statements were authorised for issue by the Directors on 16 March 2015.

Basis of Measurement

The consolidated financial statements are prepared on the historical cost basis except for the following that 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.

Functional and Presentation Currency

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 Parent Company and subsidiary financial statements is US Dollars and not Cayman Islands Dollars reflecting the fact that the transactions are denominated in US Dollars. 

Use of Estimates and Judgements

The preparation of financial statements in conformity with IFRS, as adopted by the EU, requires management to make judgements, estimates and assumptions that affect the application of accounting 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 26.

 

Changes in Accounting Policies

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015, and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the Group.

3.                   Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by the Group entities.

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 and when it is exposed to, or has rights to, variable returns from its involvement with the entity.  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.

Transactions eliminated on consolidation

Intra-group balances and transactions 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 only to the extent that there is no evidence of impairment.

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 2014 or 2013.

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 other comprehensive income, and presented in the "foreign currency exchange reserve" 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.

Property and Equipment

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

Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of items of property and equipment taking into account the items' residual value.  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 at Fair Value Through Profit or Loss

Classification and measurement            

An instrument is classified at fair value through profit or loss if it is classified as 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 contractual rights to receive cash flows from the assets have expired or when the Group has transferred the right to receive the contractual cash flows in a transaction in which substantially all risks and rewards of ownership are transferred.   

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.

The following represents the fair value hierarchy of financial instruments measured at fair value in the statement of financial position. The hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.  The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Trade and Other Receivables

Trade and other receivables are measured at amortised cost less impairment losses.

Trade and Other Payables

Trade and other payables are measured at amortised cost.

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

Ordinary shares

Ordinary shares are classified as equity.  Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of tax effects.

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 22) 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:-

(a)             investment management, administration and advisory fees contractually receivable by the Group, net of rebates, are recognised in the year in which the respective fees are earned.  Performance fees arising upon the achievement of specified targets are recognised at the respective funds' year-ends, when such performance fees are confirmed as receivable, or when there is a crystallising event, including but not limited to redemption of shares against which performance fees have been accrued;

(b)             profit or loss on sale of investments is recognised when title is passed;

(c)              interest is recognised on a time apportioned basis using the effective interest rate;

(d)             dividend income from unlisted investments is recognised when the shareholder's right to receive payment is established.  Dividend income from listed investments is recognised when the share price of the investment turns ex-dividend;

(e)             revenue related to provision of services is recognised on an accruals basis.

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.

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 becomes probable.

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 a Black-Scholes or binomial lattice model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected 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 or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting 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 becomes probable.

Investment in Subsidiaries and Associates

The Company's investments in the subsidiaries and associates are stated at cost less impairment losses. 

Comparative Figures

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

Earnings per Share                                                                                                                                               

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

4.                   Revenue

	Year ended	Year ended
	31 December 2014	31 December 2013
	US$'000	US$'000
Fund management and related fees, net of rebates	25,881	23,862
Performance fees	2,431	16,210
Investment (loss)/profit on assets designated at fair value through profit or loss	(213)	836
Other income	450	347
	28,549	41,255

5.                   Personnel Expenses

	Year ended	Year ended
	31 December 2014	31 December 2013
	US$'000	US$'000
Salaries	11,131	10,507
Performance related bonuses	5,846	12,180
Share Based Incentive Plans (see note 22)	906	1,220
Compulsory social security contributions	1,859	2,711
	19,742	26,618

 

	Year ended	Year ended
Directors' Emoluments	31 December 2014	31 December 2013
	US$'000	US$'000
Fees	301	301
Short-term employee benefits	1,287	1,445
Pension contributions	112	105
	1,700	1,851

 

The highest paid Director had emoluments of US$0.50 million (2013: US$0.57 million).

The number of employees of the Group as at the end of the year was 66 (2013: 62) full time equivalent.

The Group operates a discretionary bonus scheme, as approved by the Board, which is based on the Group's divisional profit before tax.  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.  Her Majesty's Revenue and Customs ("HMRC") in the United Kingdom have made certain enquiries in respect of these arrangements and protective assessments in respect of social security contributions have been raised. This stance is consistent with the approach taken by HMRC to many businesses which have utilised such employee benefit trust structures.

 

Management has always been firmly of the opinion that challenges by HMRC against entities within the Group in relation to the EBT arrangement are without merit and will be robustly defended. In addition, the Group's EBT arrangements provide that the Trustee must retain sufficient sums to allow such liabilities to be met. Accordingly, no provisions have been made by any Group entities in respect of additional tax obligations, including any related interest or penalties thereon. However, should any challenges prove successful or should tax legislation change significantly to the detriment of the Group, liabilities may arise which may or may not be significant. 

 

During 2011 and 2014 the UK Treasury published legislation that further impacts upon EBT arrangements.  Based upon advice received, the Board remains of the view that no liabilities arise for the Group in relation to these EBT arrangements.  However, in response to HMRC's published EBT Settlement Opportunity and the announcement that this facility is to be withdrawn on 31 March 2015, the Group, in consultation with the beneficiaries of the EBT, have entered into discussions with HMRC with a view to taking advantage of the beneficial terms offered under the arrangement.   These discussions are at an advanced stage and if an agreement with HMRC is reached this would resolve any potential issues of significance for the Group in relation to the EBT arrangements.  At this point, however, there can be no certainty that such an agreement will be reached.

 

No contributions have been made to the EBT during this or the prior year.

 

 

6.                   Related Party Transactions

Identity of related parties

The Group is related to its subsidiaries (note 14), and to its Directors and executive officers.

Transactions with Directors and executive officers

As at 31 December 2014 Directors of the Company and their immediate interests controlled 32% (2013: 31%) of the voting shares of the Company.  The Directors' Remuneration Report on pages 15 and 16 gives details of share interests and remuneration.

Summary of transactions

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

a.               Approximately 77% (2013: 81%) 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.

b.               Certain Directors and the Company have shareholdings in certain funds managed by Charlemagne Capital Group companies.

c.                During 2009 the Group established a subsidiary entity and entered into an economic interest agreement with this entity in respect of one of the management contracts held by the Group.  An employee of the Group holds a 49.9% non-controlling interest in the shares of this entity and has an option to acquire a further 12.6% of the shares in issue (see notes 14 and 22).

7.               Profit from Operations

The Group's profit from operations was arrived at:-	Year ended	Year ended
	31 December 2014	31 December 2013
	US$'000	US$'000
After charging or (crediting):
Revenue Items
Realised loss on disposal of current investments	439	-
Unrealised (profit) on current investments	(356)	(404)
Interest income	(84)	(133)
Net foreign exchange loss/(gain)	214	(269)
Expense Items
Depreciation	110	153
Auditors' remuneration	138	135
Operating lease rental on property	645	654

 

8.                   Segment Reporting

Year to 31 December 2014
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
	Magna	OCCO	Institutional	Specialist	Other	Total
Net Management Fees	6,132	11,317	6,535	1,897	-	25,881
Net Performance Fees	1,742	56	-	633	-	2,431
Return on Investment	-	-	-	-	(213)	(213)
Other Income					450	450
Segment Revenue	7,874	11,373	6,535	2,530	237	28,549
Segment Result	6,455	6,971	6,146	2,092	237	21,901
Unallocated Expenses						(18,791)
Results from Operating Activities						3,110
	US$m	US$m	US$m	US$m	US$m	US$m
Asset under Management at Beginning of Year	560	664	1,373	134	-	2,731
Net Subscriptions/(Redemptions)	142	(113)	(225)	(13)	-	(209)
Net Performance	(48)	(26)	(182)	(18)	-	(274)
Asset under Management at End of Year	654	525	966	103	-	2,248

 

Year to 31 December 2013
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
	Magna	OCCO	Institutional	Specialist	Other	Total
Net Management Fees	4,181	10,489	7,489	1,703	-	23,862
Net Performance Fees	559	15,632	-	19	-	16,210
Return on Investment	-	-	-	-	836	836
Other Income					347	347
Segment Revenue	4,740	26,121	7,489	1,722	1,183	41,255
Segment Result	4,176	13,461	7,052	1,526	1,183	27,398
Unallocated Expenses						(17,931)
Results from Operating Activities						9,467
	US$m	US$m	US$m	US$m	US$m	US$m
Asset under Management at Beginning of Year	364	597	1,526	145	-	2,632
Net Subscriptions/(Redemptions)	193	(3)	(130)	(12)	-	48
Net Performance	3	70	(23)	1	-	51
Asset under Management at End of Year	560	664	1,373	134	-	2,731

 

In accordance with IFRS 8 Operating Segments, the Group presents segment information in respect of its business segments that is consistent with information reviewed by management and 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.

 

9.               Taxation

Recognised in the income statement	Year ended	Year ended
	31 December 2014	31 December 2013
	US$'000	US$'000
Current tax expense:
Current year	84	271
Under provided in prior years	-	8
Total income tax expense/(refund)	84	279

 

Reconciliation of effective tax rate	Year ended		Year ended
	31 December 2014		31 December 2013
	US$'000		US$'000
Profit before tax	3,110		9,467
Income tax using the domestic corporation tax rate	0%	-	0%	-
Effect of different tax rates in foreign jurisdictions	2.70%	84	2.86%	271
Under provided in prior years	0%	-	0.08%	8
	2.70%	84	2.94%	279

 

10.            Profit Attributable to Shareholders

The net loss attributable to shareholders reflected in the financial statements of the Company itself amounts to US$0.2 million (2013: profit US$2.1 million).

11.            Dividends

	Year ended	Year ended
	31 December 2014	31 December 2013
	US$'000	US$'000
Dividends per share of 1.5 US cents (2013: 1.5 US cents)	4,364	4,198

A second interim dividend of 1.0 US cents (GB0.6014p) per ordinary share in respect of the year ended 31 December 2013 was paid on 25 April 2014 to those shareholders on the register on 26 March 2014 and was distributed from retained earnings in 2014.

An interim dividend of 0.5 US cents (GB0.3074p) per ordinary share in respect of the year ended 31 December 2014 was paid on 24 October 2014 to those shareholders on the register on 26 September 2014 and was distributed from retained earnings in 2014.

An interim dividend of 0.5 US cents (GB0.3393p) per ordinary share in respect of the year ended 31 December 2014 will be paid on 24 April 2015 to those shareholders on the register on 27 March 2015 and will be distributed from retained earnings in 2015.

12.            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$1.52 million (2013: US$4.16 million) and the weighted average number of shares of 290,482,876 (2013: 279,749,386) in issue during the year.

The calculation of diluted earnings per share of the Group includes options that have vested but not yet been exercised and the weighted average number of share options where the specified performance conditions have been satisfied, but the service criteria have not yet been met (note 22).  The weighted average number of shares in respect of diluted earnings per shares is 299,483,594 (2013: 294,489,706) for the year.

13.            Property and equipment

Group	Furniture and	Computer and Other
	Fixtures	Equipment	Total
Cost:	US$'000	US$'000	US$'000
At 1 January 2013	859	1,103	1,962
Acquisitions	20	35	55
Disposals	-	(2)	(2)
At 31 December 2013	879	1,136	2,015
At 1 January 2014	879	1,136	2,015
Acquisitions	-	8	8
Disposals	-	(2)	(2)
At 31 December 2014	879	1,142	2,021
Depreciation and impairment:
At 1 January 2013	744	954	1,698
Provided during the year	40	115	155
Disposals	-	(2)	(2)
At 31 December 2013	784	1,067	1,851
At 1 January 2014	784	1,067	1,851
Provided during the year	37	75	112
Disposals	-	(2)	(2)
At 31 December 2014	821	1,140	1,961
Carrying amounts:
At 31 December 2013	95	69	164
At 31 December 2014	58	2	60

There was no property and equipment in the Company.

Assets which were purchased at a historic cost of US$1.5 million and are fully depreciated are still being used by the Group.

 

14.            Interests in Subsidiaries

Company	US$'000
Cost
At 1 January 2013	5,880
At 31 December 2013	5,880
At 1 January 2014	5,880
Addition	-
At 31 December 2014	5,880

 

Impairment
At 1 January 2013	3,059
Charge for the year	-
At 31 December 2013	3,059
At 1 January 2014	3,059
Charge for the year	-
At 31 December 2014	3,059

 

	US$'000
Carrying Amount
At 31 December 2013	2,821
At 31 December 2014	2,821

Balances with subsidiaries are included within current assets and current liabilities within the parent company statement of financial position. 

Particulars of the principal subsidiaries of the Company at 31 December 2014 and 31 December 2013 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
Charlemagne Capital (Services) Limited	Isle of Man	Ordinary GBP2,000	100%	-	Personnel
Charlemagne Capital (OCCO EE) Limited	Isle of Man	Ordinary GBP100,000	50.1%	-	Internal Servicing Company

15.       Investments

	31 December 2014	31 December 2013
	US$'000	US$'000
Group
Current investments - at fair value through profit or loss
Equity securities in certain funds managed by Charlemagne Capital Group	7,070	7,206
Equity securities in certain funds managed by Charlemagne Capital Group held for future incentive/deferred bonus payments	2,819	21
Equity securities	-	206
	9,889	7,433

There were no investments held by the Company.

The group's exposure to credit and market risks, and fair value information related to investments are disclosed in note 23.

16.            Deferred Taxation

There is an unrecognised deferred taxation asset of US$12,107 (2013: deferred taxation asset  of US$5,415) representing the tax effect of depreciation in excess of capital allowances.

17.            Trade and Other Receivables

	Group		Company
	31 December	31 December	31 December	31 December
	2014	2013	2014	2013
	US$'000	US$'000	US$'000	US$'000
Trade customers	6,177	18,133	-	-
Other receivables	2,688	963	92	200
Prepayments	824	1,024	12	38
	9,689	20,120	104	238

                                                                                                  
As at 31 December 2014, there were no margin deposits held by the Group (2013:$nil) in respect of the normal trading in currencies, futures and options (note 23).

The group's exposure to credit and market risks, and impairment losses related to trade and other receivables are disclosed in note 23.

 

 

18.            Cash and Cash Equivalents

	Group		Company
	31 December	31 December	31 December	31 December
	2014	2013	2014	2013
	US$'000	US$'000	US$'000	US$'000
Bank balances	191	104	33	14
Call deposits	16,198	21,670	1,689	1,797
Term deposits	1,006	3,504	-	-
Cash and cash equivalents	17,395	25,278	1,722	1,811

19.                Trade and Other Payables

	Group		Company
	31 December	31 December	31 December	31 December
	2014	2013	2014	2013
	US$'000	US$'000	US$'000	US$'000
Accrual for performance awards	7,324	14,157	-	-
Other accruals and payables	3,940	4,902	47	46
	11,264	19,059	47	46

 

The Group's exposure to currency and liquidity risk related to trade and other payables is disclosed in note 23.

20.                Issued Share Capital

Shares	31 December	31 December
	2014	2013
	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 280,385,616 (2013: 280,385,616)
ordinary shares of US$0.01 each	2,804	2,804
Shares issued;  10,500,000 (2013:  nil)	105	-
At end of year; 290,885,616 (2013: 280,385,616) fully paid	2,909	2,804

 

During the year ended 31 December 2014 and 2013, the Company did not repurchase any of its own shares.  The Company issued 10,500,000 new ordinary shares of US$0.01 each during the year.

Included within share capital are 1,581,974 (2013: nil) shares which are held on behalf of a subsidiary of the Company (see note 22). These are accounted for as treasury shares and are included as a debit reserve within equity.

As at the date of signing the financial statements there were 290,885,616 ordinary shares of US$0.01 each issued and fully paid of which 1,581,974 are held as treasury shares with the intention that they will be utilised to settle equity settled share awards.

21.                Share Capital and Reserves

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 previous periods, the Company has 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 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 requirements in all material respects during the year.

22.       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
21 November 2006	50,903	25,071	Equal parts vesting over three, four and five years' service plus achievement of EPS performance targets	10 years
26 September 2012	2,803,856	2,803,856	Three years' service	3 years
29 September 2014	1,149,136	1,149,136	Two and a half years' service and Magna Performance targets	2.5 years
Total Share Options	4,003,895	3,978,063

 

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 year	GBP0.006	17,073,921
Granted during the year	-	1,149,136
Vested during the year	GBP0.00	(13,959,233)
Failed to vest during the year	GBP0.1925	(155,844)
Lapsed unexercised	GBP0.748	(74,917)
Cancelled during the year	GBP0.00	(55,000)
Outstanding at the end of the year	GBP0.004	3,978,063

 

Equity Settled (continued)

 

The options outstanding at 31 December 2014 have an exercise price between GBPNil and GBP0.748 and a weighted average contractual life of 1.2 years.  Outstanding share options are contingent upon specified performance and service criteria being satisfied.  

 

During the year 13,959,233 nil price share awards vested and were exercised.

 

During the year 155,844 options failed to meet the required performance criteria.  Amounts of GBP7,544 previously provided for these options were written back to profit or loss.

 

As at 31 December 2014 25,071 options had vested but had not been exercised.  The average exercise price of these options is GBP0.705. 

 

The fair values of the options granted during the year are measured at the grant date using a Black-Scholes or binomial lattice model and spread over the vesting period of these schemes.  The values are adjusted to reflect the actual number of shares that are expected to vest and recognised as an employee expense with a corresponding increase in equity.

 

The estimate of the fair value of the share options and share awards granted 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 is used as an input to this model.

 

Fair value of share options/awards and assumptions	21 Nov 2006 EPS Targets	26 Sep 2012 Service Targets	29 Sep 2014 Service Targets
Fair value at measurement date (GBP)	0.20	0.073	0.122
Share price at grant date (GBP)	0.705	0.085	0.1388
Exercise price (GBP)	0.705	Nil	Nil
Expected volatility (% p.a.)	40.0	60.0	40.0
Option life (years)	10	3	2.5
Assumed dividend yield (% p.a.)	5.0	5.0	5.0
Risk-free interest rate (% p.a.)	4.8	0.25	0.25

 

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.

 

On 24 December 2014, the Company appointed North Bridge Capital LLC, a US registered broker-dealer, to act as its placement agent in marketing its long-only funds and strategies to institutions in the US.  Under the terms of the relevant agreement, North Bridge receives an equity incentive consisting of:

 

a.                   an initial option granted on signing the agreement to acquire up to 1% of the issued share capital on the date of the agreement at an exercise price equal to the closing price on that day subject to raising US$100m of new assets; and

b.                   an undertaking by CCL to grant subsequent options to North Bridge upon incremental increases in AUM at a discount of 10% to market value up to a limit of 9.99% of the issued share capital once US$2billion has been raised. 

 

As at the grant date, the Directors believe that the option granted to North Bridge had no significant value. 

 

An employee of the Group holds a 49.9% non-controlling interest in the shares of a group entity and has an option to acquire a further 12.6% of the shares in issue.  The Group has retained an option to re-acquire the shares held by the employee for a nominal

sum under certain conditions, should the employee's option no longer be exercisable for any reason.  As at the grant date, the Directors believe that the option granted to the employee had no significant value.  All options involved in this arrangement expire on 31 December 2018.

 

At 1 January 2014 the trustees of the Charlemagne 2005 Employee Benefit Trust (EBT) held no shares in the Company.  During the year the Company issued and allotted 10,500,000 new shares to the EBT of which 8,918,026 shares have been transferred to employees in respect of share awards that had been exercised leaving 1,581,974 shares held by the EBT as at 31 December 2014 with the intention that they would be utilised to settle equity settled options as they vested and were exercised.

 

Cash settled

 

There were no cash settled share-based incentive plans in issue during the year.

 

Other incentive plans

During the year awards of shares in the Magna Global Emerging Markets Fund ("the Fund") were issued to certain employees subject to the vesting conditions set out below. The fair value of the awards granted is spread over the vesting period, and recognised as an expense in the accounts with a corresponding increase in liabilities.  The fair values of the awards were measured at grant date by reference to the cost of the equivalent number of shares acquired by the Company with the intention that they would be held and utilised to settle these awards as they vested.

The total number of shares subject to the award was 164,468.112 with 100% of the shares allocated to each employee vesting upon three years' service provided that the Fund outperforms the MSCI Emerging Market Index (USD) ("the benchmark") by 1% to 2.99% per annum over the whole life of the award.  If the Fund outperforms the benchmark by 3% or more, 110% of the shares subject to the award vest but if the Fund's performance is less than the benchmark plus 0.99%, then 80% of the shares subject to the award vest.

The amount charged as an expense within these financial statements in respect of these awards is US$702,424.

Expenses in respect of share based incentive plans

 

The following amounts have been charged as an expense within these financial statements:

 

	Year to 31 December 2014 US$	Year to 31 December 2013 US$
Equity settled incentive plans	203,560	1,220,105
Other incentive plans	702,424	-
Total charged to employee costs	905,984	1,220,105

 

Included in the charge for equity settled incentive plans shown above were amounts totalling US$102,387 (2013: US$290,780) relating to directors.

23.            Financial Instruments - Fair Values and Risk Management

a)               Accounting Classification and Fair Values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy.

31 December 2014 Carrying amount Fair value Financial assets measured at fair value Designated at fair value Loans and receivables other financial liabilities Total Level 1 Level 2 Level 3 Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Current investments 9,889 - - 9,889 - 9,881 8 9,889 9,889 - - 9,889 - 9,881 8 9,889 Financial assets not measured at fair value Trade and other receivable - 9,689 - 9,689 Taxation - 95 - 95 Cash and bank equivalent - 17,395 - 17,395 - 27,179 - 27,179 Financial liabilities not measured at fair value Accounts payable, accruals and other payables - - 11,264 11,264 - - 11,264 11,264   31 December 2013 Carrying amount Fair value Financial assets measured at fair value Designated at fair value Loans and receivables other financial liabilities Total Level 1 Level 2 Level 3 Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Current investments             7,433                 -               -       7,433 -     7,227        206     7,433             7,433                 -               -       7,433 - 7,227 206 7,433 Financial assets not measured at fair value Trade and other receivable                   -           20,120             -     20,120 Cash and bank equivalent                   -           25,278             -     25,278                   -           45,398             -     45,398 Financial liabilities not measured at fair value Accounts payable, accruals and other payables                   -                   -       19,059   19,059 Taxation                   -                   -            218        218                   -                   -       19,277   19,277

Carrying amount

Fair value

 

b)               Measurement of Values

i)                Valuation techniques

The valuation technique applied to level 2 financial instruments measured at fair value is based on the net asset value per share of the relevant investments which are published by their appointed custodian.

Level 3 financial assets consist solely of investments in a private company.  The fair value of this investment is determined based on the most recent net assets of the company.

There have been no changes to the valuation techniques used during the year.

ii)               Level 3 fair values

Reconciliation of Level 3 fair values

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values.

	Equity securities available for sale
Balance at 1 January 2013	-
Transfer from trade and other receivables	198
Net change in fair value	8
Balance at 31 December 2013	206
Balance at 1 January 2014	206
Additions	8
Disposals	(206)
Balance at 31 December 2014	8

The Group held an investment in equity shares of a private company, which had previously been classified within trade and other receivables as it was only intended to be held temporarily on behalf of one of the funds it manages.  The fair value of this investment was US$198k at 31 December 2012.  The Group had reclassified the holding as an equity investment available for sale in the year ended 31 December 2013 as the Group was intended to retain the investment.  However, during this financial year, the investment was sold.  In 2014, an investment held by the Group was delisted from the relevant stock exchange, hence, the Group has reclassified the holding from Level 2 to Level 3.

c)               Financial Risk Management

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 operates a central Treasury function based upon weekly cash flow forecasts for each of the operating entities and the Group as a whole. This enables the regulatory liquidity requirements to be managed accurately for each entity subject to them. The Group normally operates a position of holding US dollars for all amounts in excess of working capital needs held in local currencies. Such balances are placed on deposit with major banks taking account of prudent spreading of risk. Where a decision is taken to hold local currency balances in excess of working capital needs, it is required that an Executive Director approves the position. All currency positions are formally monitored monthly by the Board as part of the Group's reporting procedures.

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

The Group has established a Group Risk Committee that reports to the directors and oversees how management monitors compliance with the Group's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

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 2014, no margin deposits were held (2013: US$nil).

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

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. 

Residual contractual maturities of financial liabilities:

As at 31 December 2014	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	1,315	-	-
Performance related awards	3,137	-	4,187
Other	920	319	1,386
Total	5,372	319	5,573

 

As at 31 December 2013	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	2,330	-	-
Performance related awards	10,394	-	3,763
Other	807	1,421	344
Total	13,531	1,421	4,107

 

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers and investment securities.

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 the financial institutions involved, management does not expect any counterparty to fail to meet its obligations.

Credit risk (continued)

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

As at 31 December 2014	Neither past due or Impaired	Past due: 1-30 days	Past due: 31-90 days	Past due: more than 90 days
	US$'000	US$'000	US$'000	US$'000
Amounts due from funds	5,307	-	605	813
Interest and other receivables	2,095	-	413	456
Cash and cash equivalents	17,395	-	-	-
Total	24,797	-	1,018	1,269

 

As at 31 December 2013	Neither past due or Impaired	Past due: 1-30 days	Past due: 31-90 days	Past due: more than 90 days
	US$'000	US$'000	US$'000	US$'000
Amounts due from funds	18,245	-	-	565
Interest and other receivables	276	-	448	586
Cash and cash equivalents	25,278	-	-	-
Total	43,799	-	448	1,151

 

The credit risk on transactions with funds primarily relates to transactions awaiting settlement.  This risk is considered low due to the short settlement period involved and the credit quality of the funds involved.  Included in receivables past due more than 90 days are amounts totalling nil (2013: US$206,000) after allowing for a total impairment provision of US$263,294 (2013: US$ 554,471).

The cash and cash equivalents held by the Group are held by a number of international banks and it is the Group's policy to avoid concentrating credit risk in any one institution.

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.  Investments subject directly to market risks which are held at fair value amounting to US$9,889,000.  If the value of these investments, as at 31 December 2014, increased by 1% the profit of the Group would be increased by US$98,890.  A decrease of 1% would have had an equal and opposite effect.

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 reporting date was as follows:

			31 December 2014				31 December 2013
	AUD			EUR	GBP	CHF	AUD	EUR	GBP	CHF
USD ' 000s equivalent	US$'000			US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Cash and Cash Equivalents	3			228	2,770	-	4	359	704	-
Investments	-			8	2,890	283	-	214	103	-
Trade Debtors	-			2,537	1,970	-	-	1,190	264	-
Trade Creditors	-			(521)	(2,216)	-	-	(528)	(821)	-
Total	3			2,252	5,414	283	4	1,235	250	-

 

As at 31 December 2014, 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 in both profit and equity by US$79,520 (2013: US$14,890).  A weakening of the US Dollar by 1% against the above currencies would have had an equal and 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 in accounts with variable rates. The Group does not have any borrowings.  Surplus funds are placed on short term deposit.

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 2014	31 December 2013
	US$'000	US$'000
Assets held for trading:
Equities:
Listed	-	8
Unlisted	8	206
Total Equities	8	214
Shares in open ended collective investment scheme	9,881	7,219
Total Investment Assets	9,889	7,433

 

The majority of the Group's investments are readily realisable into cash.  A 3% increase in the reported market price of these assets at the reporting date would lead to a US$296,670 increase in the value of those investments (2013: US$222,990).  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.

24.                Operating Leases

At the end of the reporting year, the future minimum lease payments due under operating lease commitments during the lease terms  are as follows:

	31 December 2014	31 December 2013
	US$'000	US$'000
Group
Within 1 year	616	675
In the second to fifth years, inclusive	756	1,290
Over five years	447	647
Total	1,819	2,612

 

The group leases a number of offices under operating leases.  The lease terms vary between 5 years to 15 years.  One of the 5 year leases has an option to break after 3 years and the 15 year lease has an option to break after the 7th year.  During the year an amount of US$645k was recognised as expense in profit or loss in respect of operating leases (2013: US$654k).  The rent paid to the landlord is increased to market rent at intervals as stated in lease agreements and the Group does not participate in the residual value of the office as all the risks and rewards of the offices are with the landlords.

25.                Amounts due to and from Subsidiaries

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

26.            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.

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. 

27.            Contingent Liabilities

Following the end of the financial year the Group has been notified of a claim in the Employment Tribunal in the United Kingdom by an ex-employee.  It is the Group's view that this claim has little substantial merit and it will be robustly defended.  Except for this matter and as noted within note 5 in respect of the Charlemagne Capital 2005 Employee Benefit Trust, there are no significant contingent liabilities.

 

28.            Subsequent Events

There have been no significant events subsequent to the reporting date.