Ashmore Regulatory News (ASHM)

16 Sep 2008 07:00



 

Press release

Ashmore Group plc

16 September 2008

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2008

Ashmore Group plc, one of the world's leading emerging market investment managers, today announces its audited results for the year ended 30 June 2008.

Financial highlights

Assets under management (AuM) of US$37.5 billion at 30 June 2008, up US$5.9 billion, 19% in the year

Net management fees of £182 million, 44% higher than for the year ended 30 June 2007

Performance fees of £44.7 million (£20.4 million for the year ended 30 June 2007)

Operating margin of 76% (2007: 76%)

Profit before tax of £196.2 million, up 49%

Basic eps up 53% to  21.0p (2007: 13.7p) and diluted eps of 19.9p (2007: 12.9p)

A final dividend of 8.34p per share will be paid on 5 December 2008, giving a total dividend for the year of 12.0p (2007: 9.0p)

Operational highlights

Ashmore launched its fifth investment theme, emerging corporate high yield, which offers investors a risk return profile distinct from other segments of emerging market fixed income. 

The launch of a permanent capital vehicle in December 2007 (Ashmore Global Opportunities Limited) through which € 500 million was raised. Provides broader access to the special situations theme via a listed vehicle with daily liquidity and pricing.

A dedicated Brazilian local currency fund was launched in January 2008, managed by our newly established fund management subsidiary in Sao Paulo. This was followed in April 2008 by the launch of a Brazilian onshore local currency fund targeting domestic institutional investors. 

The fourth Global Special Situations Fund (GSSF4) closed in October 2007 with commitments of US$1.4 billion. At 30 June 2008 it was 70% drawn down and it has since become fully drawn. Marketing began in June 2008 for the next special situations fund GSSF5.

Significant infrastructure initiatives have been put in place, aimed at providing the Group with development, continuity and expansion to enable the execution of strategic plans.

Mark Coombs, Chief Executive Officer, Ashmore Group said: 

"This year's results underline the continued progress and satisfactory growth of the company. We have continued to make progress from an operational point of view with fund launches, further product innovation and the implementation of significant infrastructural initiatives that includes beginning to develop local asset management operations in some of the world's key emerging markets.

 

The world has not been the most comfortable place this year and will continue to be challenging. However, these conditions provide Ashmore with major opportunities. The market currently offers more value and transactional scope available to us to invest for strong medium term returns over the next 12-24 months than at any time over the previous 5 years. Our task is to continue persuading investors to allocate us capital and allow us to execute strategies to capture that value."

Analyst/investors briefing

There will be a presentation for analysts at 09.00 on 16 September at the offices of Goldman Sachs at Peterborough Court, 133 Fleet Street, London EC4A 2BB. A copy of the presentation will be made available on the Group's website at www.ashmoregroup.com

Contacts

For further information, please contact:

Ashmore Group plc +44 20 3077 6000

Graeme Dell

Group Finance Director

Penrose Financial +44 20 7786 4888

Gay Collins +44 7798 626 282

Lauren Stewart +44 20 7786 4835

Stefanie Theis  +44 20 7786 4859

Or email ashmore@penrose.co.uk

  

Ashmore Group plc

Chairman's statement

A review of the Group's financial and operational highlights demonstrate a year of excellent progress. The profit before tax was £196.2 million against £131.4 million for the previous year, an increase of 49%. These results are highly satisfactory, particularly as they have been achieved against a background of extreme volatility in the global financial markets.

The Group's core capabilities of product innovation, asset raising, delivering good investment performance and excellent client service have again continued to be demonstrated. During this period we have worked extensively on building a stronger infrastructure platform for the further development of the business going forward. In addition in line with our strategy we are beginning to develop a local asset management presence on the ground in a number of the key emerging markets in which we participate to enable the Group to benefit from the development of these markets. All of these areas will be expanded upon further in the Chief Executive Officer's statement and Business Review that follow. 

Recognising the continued strong progress and our confidence in the Group's prospects the directors are recommending a final dividend of 8.34p for the year ended 30 June 2008 and, subject to shareholder approval, this will be paid on 5 December 2008 to all shareholders who are on the register on 7 November 2008. This makes a total dividend of 12.0p for the year (2007 - 9.0p) an increase on last year of 33%.

We were delighted to welcome Graeme Dell to the Board in December as Group Finance Director. Graeme has brought with him significant listed company experience and has made an immediate contribution to the Board and its governance processes.  Additionally we were pleased that Jonathan Asquith joined our Board on 1 September 2008 as an independent non-executive director. Jonathan has a wealth of experience in our industry having been Vice Chairman and Chief Financial Officer at Schroders plc and has also held a number of senior positions in the investment banking sector . I have no doubt that he will be a considerable asset to our Board. The Group expects to further strengthen the Board by the appointment of additional non-executive directors and continues to be actively engaged in this process. Jon Moulton who has served on our Board since 1999 will retire and not seek re-election at the AGM and, on behalf of the Board, I would like to express our gratitude for his service and counsel over this period.

To build a first class asset manager requires a team of the highest calibre committed to delivering consistently good investment performance and client service. This year's results confirm my belief that Ashmore has such a team. In addition, the Group's strategic position, focusing exclusively on emerging markets combined with the team's long history of managing these assets through many periods of extreme market volatility, represents a significant opportunity. Whilst the markets may present further challenges I am confident that the Group is ready to meet them and to deliver on its strategy. 

Michael Benson

Chairman  Chief Executive Officer's statement

The Group results for the year ended 30 June 2008 are satisfactory from a number of perspectives. Firstly in absolute financial terms they demonstrate the further progress made against the results of prior periods and our own forecasts. Secondly we have continued to make progress from an operational point of view with fund launches, further product innovation and the implementation of significant infrastructural initiatives aimed at developing an even more robust platform for the Group's continued development. Finally, we have undertaken further steps to begin to develop a network of local asset management operations in some of the world's key emerging markets. This has all taken place in global financial market conditions judged by many commentators to be as difficult as any they can remember which have both made the execution of an active style of investment management a greater challenge and generally reduced investor appetite for risk. I will expand upon these in my report and then outline the strategic rationale and some of the emerging market dynamics that we believe position the Group well for future success. 

Assets under Management ("AuM") and financial performance

At the end of the previous financial year, 30 June 2007, AuM stood at US$ 31.6 billion. Through net subscriptions of US$ 3.0 billion and investment performance of US$ 2.9 billion we have reached a closing level for AuM at 30 June 2008 of US$ 37.5 billion. As we forecast the AuM growth has been strongest in our local currency theme where overall levels of AuM were 70% higher (at US$ 8.5billion at the end of the period) than a year earlier, followed by special situations where AuM have grown by 62% to US$ 5.5 billion over the period. The AuM growth within these two themes is in line with our view of the significant future opportunity they present. Our dollar debt theme has seen gross subscriptions exactly matched by redemptions, so growth in this theme arises from investment performance of US$ 1.5 billion, and, as anticipated and targeted several of the redemptions in this theme have been prompted by reallocation into local currency mandates where there are opportunities for higher returns. The equity theme has completed a difficult year in line with global equity markets and whilst the investment performance has been flat, there have been redemptions as investors have allocated away from equities resulting in a US$ 1.2 billion reduction in AuM. 

The overall growth in AuM has driven the Group's 44% increase in net management fee income to £182 million in the year to 30 June 2008 (year ended 30 June 2007: £126.4 million). The Group remains focused on the delivery of a high proportion of its overall revenue from high margin management fees. Performance fee income has also increased significantly to £44.7 million, an increase of 119% from £20.4 million in the previous year which has been delivered across all our investment themes. These two principle sources of revenue together with other income result in strong growth in our overall net revenue by 50% to £240.0 million (year ended 30 June 2007: £159.8 million). After costs of £58.8 million (year ended 30 June 2007: £38.1 million) and interest income of £15.0 million (year ended 30 June 2007: £9.7 million) this results in a profit before tax of £196.2 million, an increase of 49% in the year (year ended 30 June 2007: £131.4 million). Basic earnings per share for the year was 21.0p (2007: 13.7p), a 53% increase in the year.

Operational delivery

From an operational perspective in the area of fund launches and product innovation the year began with the launch of our fourth global special situations fund ("GSSF4") which closed with commitments totalling US$ 1.4 billion. Thereafter, developments in emerging markets corporate debt, following significant repricing in these markets, provided Ashmore with the opportunity to launch a dedicated corporate high yield fund and establish it as a new investment theme in October 2007 offering enhanced levels of return with a low correlation to the dollar debt theme. We expect this to grow over time as the credit markets stabilise.

In December 2007 we completed the launch of a permanent capital vehicle, Ashmore Global Opportunities Limited, through which we raised € 500 million via a listing on the London Stock Exchange. This fund was established to focus on the special situations theme enabling a new client base to invest in this theme via a listed vehicle with daily liquidity and pricing. It contributed US$ 250 million of the GSSF4 commitments and will be provided allocations in future special situations funds. 

In January 2008 we launched a dedicated Brazilian local currency fund domiciled in Guernsey managed by our newly established fund management subsidiary in Sao Paulo. This was followed in April by the launch of a Brazilian onshore local currency fund targeting domestic institutional investors which, in line with the strategy previously outlined, the Group seeded in the amount of BRL49.3 million (£15.1 million). 

Investment activity within the special situations theme had resulted in GSSF4 being 70% drawn down at 30 June 2008 and it has since become fully drawn. Given the significant ongoing investment opportunities within this theme, we announced in June 2008 the beginning of marketing the next special situations fund GSSF5 which we expect to close in the new financial year. 

The year has also been a busy one in the area of infrastructure projects, the implementation of a new fund accounting system, the migration of fund administration services for the Group's global public funds to a single service provider and in May 2008 the relocation of the entire London based staff to a new office. In all cases these projects were executed following months of planning by multi-disciplinary teams and are aimed at providing the Group with development, continuity and expansion to enable us to execute our strategic plans. 

Strategic positioning

The Group's strategy remains consistent; to deliver long term investment outperformance; generate and diversify net management fee income through the attraction of net subscriptions across an increasing variety of investment themes; and develop the Ashmore brand and business. In evaluating our progress toward the achievement of our strategic goals and evaluating the future opportunity available we consider all of these across three phases of development - establishment, diversification and emerging market capital mobilisation. 

The first of these phases is largely completed: establishing the emerging market fixed income asset class; educating the investor base; refining the investment processes and creating the performance track record to attract the investment of developed world capital into the emerging markets.

The second phase continues to apply to the management of developed world capital into emerging markets as we grow our AuM diversifying by investment themes, product structures, investor type, investor geography and distribution route. This is an ongoing process where we have a great deal more to do in all areas and which offers much potential for growth. 

The third phase of our strategy diversifies the origin of funds that we manage looking toward the capital pools that we consider will grow the most and we believe can be mobilised within the emerging markets themselves. In this phase we first use the existing Ashmore central investment processes and funds to manage capital from the largest emerging world sources of capital cross border into other emerging markets. Initially this comes from central banks, governments/reserve managers and sovereign wealth funds and gradually expands to other domestic institutions. Thereafter we expect to progressively establish local asset management operations in a number of the world's key emerging economies using our expertise, investment processes and track record to manage domestic capital within these markets. This will enable us to participate in the significant long term growth opportunity available in these markets both by investing funds from offshore but also developing onshore investment management by Ashmore and its subsidiaries. 

Investor allocations to emerging markets

Whilst the first phase - establishment - is largely complete, there is significant future potential for strong growth in the second - diversification - phase. 

One of the major driving forces of future growth is the macro one, based on the low allocations that investors from the developed world have so far made to emerging markets, and how these will change in the future as those markets outgrow the developed world. We believe that an average institutional investor may currently have an emerging market allocation across investment themes anywhere in the broad range of five to fifteen percent whilst a progressive investor may have an allocation at double these levels. This compares with the emerging markets contribution to the global economy at  between fifteen and twenty-five percent when measured by either GDP, equity or bond market capitalisation levels. Over the next ten years or so we would expect the emerging market contribution to increase to over 50% of the overall global economy by all these measures so the opportunity for current and future allocations to grow dramatically is very clear. We are well positioned  to benefit from this allocation shift as we have a long history of total focus on emerging markets across all available asset classes and a commitment to broaden our capability in these and new asset classes.

Another driver for growth in this second - diversification - phase is the development of the local currency markets, and this is also one of the principal areas we see having a significant impact upon the pace with which emerging markets capital mobilisation - our third phase - is progressing. 

Local currency debt and local asset management operations

Ashmore's local currency theme AuM is undergoing the strongest absolute growth of any of our themes. We believe that this is set to continue and should establish it as our largest theme by volume within three years. In fact, we continue to encourage our dollar debt investors to diversify with us into this theme. The underlying local currency debt markets are believed to total over US$ 6 trillion at the end of 2007 - already five times the size of the external debt market in which Ashmore's dollar debt theme invests. As local currency markets mature and their liquidity and duration measures increase we expect to see increased international investment into these markets coming from both developed world investors and intra-emerging market flows. These latter flows typically form the first part of our mobilisation of emerging markets capital phase. As highlighted above, the earliest movers in this phase are the largest sources of capital from central banks, reserve managers and sovereign wealth funds. Ashmore is already managing local currency funds for a number of such organisations and we see further growth in the number and scale of these mandates in the future. Thereafter we would expect this trend to develop to include the larger institutions and pension funds in these economies. In order to capitalise on this trend, we believe that local asset management operations on the ground in a number of key emerging markets represent the other key to participating in the growth and development of the local currency and other markets. 

Our operations now include subsidiaries in Turkey and India that are active in the local mid-market private equity markets. During this year we have established a subsidiary operation in Brazil managing offshore and onshore local currency funds. Immediately after the financial year ended in July we received final stage approval in Turkey from the Capital Markets Board to establish and operate a regulated portfolio management business which began operations on 1 August 2008. Whilst the financial impact of these operations was not material in context of the overall Group result for the year ended 30 June 2008, we believe going forward that the contribution from the local asset management operations that the Group establishes will gradually and progressively contribute meaningfully to the Group's results and valuation. 

Special situations: Opportunities and performance fees

Ashmore's team have been investing in the special situations asset class, in both distressed debt and private equity forms, even before the Group's first fund was established in 1992, and the investment into this theme from all funds, where the investment mandate allows, has continued ever since. This long history, resultant specialist transaction experience and network of relationships throughout the emerging markets are keys to our strength in the area. As I have described above, the financial year ended 30 June 2008 saw the closing, drawing down and deployment of our fourth global special situations fund (GSSF4) and the launch of fundraising for our fifth global fund (GSSF5). The investment opportunity presented for this asset class going forward is very strong with a significant pipeline of attractive potential transactions, and particularly following the broad reduction of easy credit in the market.

Our first global special situations fund (GSSF) matured after the financial year ended in July five years after its closing in July 2003, and the mechanics of the fund wind up are underway with first stage payments made to fund shareholders. As a result of strong investment returns the fund has generated a performance fee of between £15.6 million and £21.0 million which will be recognised in the financial year ended 30 June 2009, the final level being determined by the finalisation of the few remaining asset realisations.

Our people and culture

The operational highlights described in this report share many common features. Most striking amongst these is the role of the team at Ashmore, spread broadly throughout the organisation, in making the business a success. At 30 June 2008 the Group's headcount stood at 93, an increase of 24 or 35% on the figure a year earlier, with additions across the Group's global functions in London, and in particular within local asset management operations. The Group places a tremendous focus on the process of recruiting like minded individuals from different backgrounds with a common desire to specialise in their field within the emerging markets. This takes time but is critical to our success. I should like to add my own thanks to those expressed in the chairman's report for the dedication and commitment that all those already in the Ashmore team have made into making the year and the business a success.

Now we move onto next year and as the Group grows we continue to work hard in ensuring that this growth occurs in a controlled manner. Part of this is achieved through the recruitment of a broad team of varying talents and the implementation of initiatives and systems aimed at further strengthening our processes and controls. This is ongoing. At the heart of the organisation I believe that we retain and develop the Ashmore culture and work ethos which will enable us to execute on and benefit from the significant strategic opportunities that lie ahead. We have much to do, and execution will always be the key, but we continue to look forward to the challenges ahead.

August 2008 annual performance fees

Unaudited annual performance fees for the funds with annual performance years ended 31 August 2008 (including EMLIP and LCD) were £31.0 million (August 2007: £17.6 million) which will be recognised in the financial year ended 30 June 2009 in addition to the GSSF fee detailed above.

Outlook statement

The world has not been the most comfortable place this year. The general market outlook continues to be difficult, deleveraging has been significant and continues and many investors are doing what they often do in times of stress……as little as possible, as a precursor to working out where to allocate their capital as things settle down.

Against this market backdrop, since the year end the Group has experienced slightly lower subscription activity and some redemptions which, coupled with negative market performance, has resulted in a modest reduction in AuM. Given the margin profile of these assets, we remain confident that the revenue impact of this has been offset by the increased levels of fees elsewhere including those performance fees already recorded, demonstrating the Group's robust business model.

It is these dynamics which provide us with both challenges and our major opportunity. We have more value and transactional scope available to us to invest for strong medium term returns over the next 12-24 months than at any time over the previous 5 years. Our task is to continue persuading investors to allocate us capital and allow us to execute strategies to capture that value particularly from local currency, in our special situations theme (in both distressed debt and private equity) and in corporate high yield as well as in our local asset management businesses. 

Mark Coombs

Chief Executive Officer

 

Business review

The financial and operational highlights outlined above clearly demonstrate a year of further substantial progress towards the Group's strategic goals. In addition the Chief Executive Officer's statement provides an outline of the significant future opportunities for the Group. The financial and business review section that follows will provide a detailed account of the Group's activities and their financial impact.

Key performance indicators  

Progress towards achieving the Group's strategic objectives is monitored with reference to a number of key performance indicators. These are set out below:

Key performance indicators	Year ended	Year ended
	30 June	30 June
	2008	2007
Year end AuM	US$37.5bn	US$31.6bn
Average AuM	US$35.3bn	US$26.4bn
Net management fee margins (basis points)	103bp	93bp
Operating profit margin	76%	76%
Compensation/revenue ratio	19.9%	20.4%
Variable compensation (“vc”)/ebvcit	18.2%	18.4%
Year-end head count	93	69

Assets under Management

As a result of further growth during the year, the Group's AuM as at 30 June 2008 had reached the level of US$37.5 billion, the development of which is broken down as follows:-

	Year ended 30 June 2008		Year ended 30 June 2007
	US$ billions		US$ billions
Opening AuM		31.6		20.1
Gross subscriptions	11.0		10.4
Gross redemptions	(8.0)		(2.1)
Net subscriptions		3.0		8.3
Investment performance		2.9		3.2
Closing AuM		37.5		31.6

As these figures highlight, the Group has continued to win good absolute levels of gross subscriptions through the period. Gross redemptions are clearly significantly higher than for the previous period. Measured as a percentage of average AuM this represents an increase to 22.5%, which we believe represents a long run industry average for an institutional fund management business. Whilst ahead of the levels we had seen over recent periods (2007: 8%; 2006: 15%; 2005: 18%), given the extraordinary events in the global markets this had been anticipated.

The number of funds and levels of AuM can be analysed according to the type of fund or mandate as outlined below. These changes demonstrate the continued product innovation and a further breakdown of these are provided in the investment theme reviews.

	Number of accounts		Percentage of AuM
	30 June 2008	30 June 2007	30 June 2008	30 June 2007
Ashmore sponsored	24	16	56%	52%
Segregated	16	14	31%	32%
Structured product	3	3	4%	6%
White label/dual branded	7	8	9%	10%
Total	50	41	100%	100%

Investor profile

There are a broad range of investors in the funds managed by the Group. 

The funds which Ashmore manage remain predominately sourced from institutional investors. As at 30 June 2008, 88% of the Group's AuM was institutional (2007: 85%) and 12% was high net worth individuals/retail (2007: 15%). The institutional investor profile includes pension plans, government agencies, financial institutions and corporates. The institutional segment showed an increase in the proportion of government investors (up from 12% to 15%). Public pension plan investors and corporate pension investors showed steady growth in the year and remained proportionately constant at 18% and 16% respectively. 

The geographical profile of the Group's investors remains diversified. During the year there was strong growth in the Middle East, with US$1.5 billion of subscriptions from this region. Europe also continued to show robust growth, with significant growth in the UK in particular.

The AuM by investment theme under which the fund or mandate is organised is shown below:-

	AuM 30 June 2008	AuM 30 June 2007	Increase/(Decrease)
	US$ billions		Percentage
Dollar debt	22.7	21.2	7%
Local currency	8.5	5.0	70%
Special situations	5.5	3.4	62%
Equity	0.8	2.0	(60%)
Total	37.5	31.6	19%

The investment theme classification into dollar debt, local currency, special situations and equity is based upon the theme under which the principal asset class of the funds is organised and this is represented by percentage of total AuM below. The majority of dollar debt mandates have cross over capacity which represents the ability to invest a proportion of the funds within certain limits into individual assets within the local currency, corporate high yield and special situations themes. Therefore to obtain a more representative picture of the asset classes into which the Group was actually invested at 30 June 2008, we provide below the breakdown after taking into account the actual amounts invested in this manner.

	AuM % by theme		AuM % as invested
	30 June 2008	30 June 2007	30 June 2008	30 June 2007
Dollar debt	60%	67%	49%	54%
Local currency	23%	16%	26%	24%
Special situations	15%	11%	20%	16%
Equity	2%	6%	2%	6%
Corporate high yield	-	-	3%	-

In line with the strong levels of growth within the local currency and special situations themes the Group's dollar debt theme is reducing significantly as a proportion of overall AuM classified by theme. When this is viewed in terms of invested asset class after taking cross over investment into account the dollar debt percentage is less than half of the Group's AuM.

Investment theme reviews

The following reviews of each of the principal investment themes provide details of the AuM development, investment performance, management fee income, management fee margin levels and performance fees:-

Dollar debt

The dollar debt investment theme comprises principally US dollar and other hard currency denominated instruments, which may include derivatives, investing mainly in sovereign bonds.

	Year ended		Year ended
Dollar debt	30th June 2008		30th June 2007
AuM opening (US$bn)		21.2		15.2
Subscriptions (US$bn)	4.8		5.9
Redemptions (US$bn)	(4.8)		(1.8)
Net subcriptions (US$bn)		(0.0)		4.1
Performance (US$bn)		1.5		1.9
Closing AuM (US$bn)		22.7		21.2
Net management fees (£m)		91.0		71.9
Management fee margins (bps)		82.0		76.0
Performance fees (£m)		17.1		5.8

AuM at 30 June 2008 were US$22.7 billion, an increase of US$1.5 billion (7%) from 30 June 2007, which was solely attributed to performance achieved in the year. The subscriptions of US$4.8 billion include a new segregated mandate won from a European pension fund. 

Net management fees showed strong growth, with an increase of £19.1 million (27%) from the previous year as the theme's margin also increased to 82 basis points, from 76 basis points in the financial period to 30 June 2007, continuing the trend of high and stable net management fee margins. 

Performance fees achieved increased by £11.3 million (195%) compared to the previous financial year. This was predominantly due to the August 2007 annual performance fee delivered by EMLIP of £8.2 million (August 2006; £0.3 million) The remaining performance fees arose from the annual performance fees of the other dollar debt funds and crystallised fees following redemptions during the performance year.

Local currency

The local currency investment theme comprises local currency and local currency denominated debt instruments, principally sovereign in nature, and it may include derivatives.

	Year ended		Year ended
Local currency	30 June 2008		30 June 2007
AuM opening (US$bn)		5.0		3.0
Subscriptions (US$bn)	4.2		1.7
Redemptions (US$bn)	(1.6)		(0.3)
Net subscriptions (US$bn)		2.6		1.4
Performance (US$bn)		0.9		0.6
Closing AuM (US$bn)		8.5		5.0
Net management fees (£m)		38.8		21.4
Management fee margins (bps)		119.0		108.0
Performance fees (£m)		17.2		3.1

AuM at 30 June 2008 were US$8.5 billion, an increase of US$ 3.5 billion (70%) from 30 June 2007. Good investment performance in this theme contributed US$0.9 billion. 

There has been strong demand for the Group's local currency products with subscriptions in the period of US$4.2 billion, an increase of 147% from the previous year. The number of funds within the local currency theme has increased this financial year, with five additional funds introduced to capitalise on the opportunities the theme presents. Firstly, a Turkish debt fund was launched in November 2007, accessing local currency funds. During 2008 two Brazilian funds have also been established by the Group's local asset management subsidiary to manage offshore and onshore local currency funds. Finally, two segregated mandates were won, one from an emerging market central bank. 

Strong growth was achieved within net management fees, as these increased from £21.4 million in the year ended 30 June 2007 to £38.8 million (81%) in the year ended 30 June 2008. Management fee margins continued the trend of steady growth from the previous year, moving from 108 basis points to 119 basis points.

Performance fees achieved in the year increased by £14.1 million (455%) compared to the previous financial year. This was primarily due to the annual performance fee delivered by LCD of £9.4 million (2007: £ nil). Additionally, annual performance fees from other local currency funds and crystallised fees following redemptions during the performance year contributed towards the remaining performance fees that were attained. 

Special situations 

The special situations (distressed debt/private equity) theme comprises investments in debt and/or equity or other instruments focusing on situations usually involving specialist corporate investments and/or projects and including distressed assets or distressed sellers of assets, often incorporating restructuring, reorganisations and/or a private equity approach.

	Year ended		Year ended
Special situations	30 June 2008		30 June 2007
AuM opening (US$bn)		3.4		1.3
Subscriptions (US$bn)	1.8		1.8
Redemptions (US$bn)	(0.2)		0.0
Net subscriptions (US$bn)		1.6		1.8
Performance (US$bn)		0.5		0.3
Closing AuM (US$bn)		5.5		3.4
Net management fees (£m)		42.6		25.9
Management fee margins (bps)		184.0		171.0
Performance fees (£m)		7.2		7.5

AuM at 30 June 2008 were US$5.5 billion, an increase of US$2.1 billion (62%). Net subscriptions were US$1.6 billion, predominantly comprised of the Ashmore Global Special Situations Fund 4 ("GSSF4") which was launched with commitments totalling US$1.4 billion. As at 30 June 2008, 70% of this commitment had been drawn down, with 100% drawn down by July 2008. In June marketing began for the fifth Global Special Situations Fund ("GSSF5"). Additionally the Group completed funding of an Indian fund, which is active in the local mid-market private equity markets. 

Net management fees increased by £16.7 million (64%) to £42.6 million, following the GSSF4 fund launch and the growth in AuM within the Asian Recovery Fund ("ARF"). Management fee margins continued the trend of steady growth from the previous period, moving from 171 basis points to 184 basis points, reflecting the increased proportion of special situations funds with a 2% management fee.

Performance fees attained of £7.2m arose principally from the annual performance fee of the ARF fund. In the majority of special situations funds, performance fees accrue over the full fund life.

The Group's strong network continues to source a significant pipeline of attractive potential transactions within this asset class.

Equity

The equity investment theme comprises public equity and equity-related securities. The instruments invested in by the funds can include equities, convertibles, warrants and equity derivatives.

	Year ended		Year ended
Equity	30 June 2008		30 June 2007
AuM opening (US$bn)		2.0		0.6
Subscriptions (US$bn)	0.2		1.4
Redemptions (US$bn)	(1.4)		(0.4)
Net subscriptions (US$bn)		(1.2)		1.0
Performance (US$bn)		0.0		0.4
Closing AuM (US$bn)		0.8		2.0
Net management fees (£m)		9.6		7.2
Management fee margins (bps)		119.0		100.0
Performance fees (£m)		3.2		4.0

AuM at 30 June 2008 were US$0.8 billion, a decrease from the previous year of US$1.2 billion. This was as a result of significant allocations away from the equity theme. Following the reduction of funds, equity now represents 2% of the Group's overall AuM. The Group remains committed to growing this theme to represent a more significant proportion of overall AuM. 

Net management fees grew by 33% in the year, with net management fee margins increasing in this area by 19%. £3.2 million of performance fees were achieved (2007: £4.0 million), principally from the annual performance fees from AREF and AEEP of £1.9 million. Additionally, annual performance fees from other equity funds and crystallised fees following redemptions during the performance year contributed towards the remaining performance fees achieved. 

Corporate high yield 

During the 2008 financial year, Ashmore launched its fifth investment theme, emerging corporate high yield with the launch of the Ashmore Emerging Markets Corporate High Yield fund ("AEMCHY"). This launch recognised the fact that the asset class can offer investors a risk return profile distinct from other segments of emerging market fixed income. At the end of the financial year, AEMCHY had AuM of US$0.5 billion drawn principally from funds within the dollar debt theme. 

Multi-strategy funds, permanent capital vehicle and liquidity fund

The five core investment themes for the Ashmore product range are supplemented by the multi strategy funds where Ashmore makes the asset allocation decisions across the investment themes. As at 30 June 2008, the total AuM within the five themes arising from the multi strategy funds and included within the theme AuM totals above was US$3.0 billion, an increase of 15% from the previous year. 

	Year ended		Year ended
Multi strategy funds	30 June 2008		30 June 2007
AuM opening (US$bn)		2.6		0.6
Subscriptions (US$bn)	1.2		1.8
Redemptions (US$bn)	(1.1)		0.0
Net subscriptions (US$bn)		0.1		1.8
Performance (US$bn)		0.3		0.2
Closing AuM (US$bn)		3.0		2.6

In addition, Ashmore was appointed investment manager following the launch of a newly incorporated publicly listed closed-ended investment company, Ashmore Global Opportunities Limited ("AGOL"), This source of permanent capital raised € 500 million upon listing on the Main Market of the London Stock Exchange on 12 December 2007. These funds are now invested across the Group's investment themes and multi strategy fund. AGOL provides the Group with a new point of access for an investor class to gain access to Ashmore's investment themes within a listed fund vehicle with a stated focus on the special situations investment theme, in line with which, AGOL has invested US$250 million into GSSF4.

Additionally, during the year, a liquidity fund was launched offering a Standard & Poor's "AAAm" rated fund. This is able to manage the cash components of the underlying Ashmore funds, retained by the funds for liquidity purposes, with a view to enhancing the absolute return received on this cash and to attract external funds in due course. The level of funds at year end was US$2.2 billion drawn from across the investment themes and funds. 

Management fee margins and performance fees

The year on year improvements in management fee margins detailed in each of the investment theme reviews above have resulted in the achievement of an overall average management fee margin of 103bp across the themes (2007: 93bp). This is in line with the Group's strategy of maintaining high and stable management fee margins. 

The Group's strategy is also to maintain a balance between funds able to earn performance fees and those that are management fees only. At the year end the Group was able to earn performance fees on 65% of AuM (2007: 64%). Within this a further proportion of the AuM did not earn performance fees in the year because either such fees are earned at the end of the multi year fund life; or are subject to rebate agreements. The overall performance fee income was £44.7 million for the year ended 30 June 2008 (2007: £20.4 million).

Operating costs and operating margin

The Group's cost structure, with a low proportion of tightly controlled recurring costs and a large proportion of variable performance related costs, is at the core of the Group's philosophy. 

The majority of the Group's costs are made up of personnel expenses. The Group continues to invest to support the future growth of the business through recruitment. Headcount increased by 35%, from 69 at 30 June 2007 to 93 at 30 June 2008, in line with which wages and salaries increased to £5.3 million (2007: £3.8 million). The Group's variable compensation represents the majority of the overall personnel expenses. This includes performance related bonuses, share based payments and associated social security costs and is calculated as a percentage of profit before tax, interest and variable compensation. In the year ended 30 June 2008 the percentage of variable compensation was 18.2% (2007: 18.4%).

The Group continues to undertake infrastructure initiatives to support the development of the business. In line with this, and the headcount growth, the overall total for other expenses for the year ended 30 June 2008 was £11.1 million (2007: £5.5 million) which included a number of new and one off costs. Firstly £1.2 million of deferred acquisition costs related to the Group meeting the underwriting expenses of the AGOL launch were charged in the year. This will result in an annualised charge going forward of £2.1 million for seven years from December 2007. Secondly the Group completed the lease of a new London office, from January 2008 with an annualised increase in operating lease and other premises costs of £1.0 million, and a £0.3 million one off charge in relation to the office move. Finally the cost base included amounts of £1.2 million (2007: £0.1 million) in the subsidiary  local asset management operations in India, Turkey and Brazil, together with additional professional fees associated with the establishment of these and other potential local asset management ventures. 

As a result, the operating profit margin for the year ended 30 June 2008 was 76% (2007: 76%).

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 has historically tracked close to the 30% UK corporation tax rate. The introduction of a 28% UK corporation tax rate from 1 April 2008 has resulted in a small beneficial impact on the Group's effective corporation tax rate in the financial year to 30 June 2008 (overall blended corporation tax rate of 29.5%), with the full-year benefit coming through in the following financial year.

There is a £13.8 million deferred tax asset on the Group's balance sheet at 30 June 2008. This is largely due to cash tax deductions which will arise over the next six or so years in respect of share price appreciation on share-based payments awards. In addition there is also a deferred tax liability on the Group's balance sheet of £3.8 million. This is in respect of the deferred acquisition costs associated with the launch of AGOL which will be charged over seven years to the Group's income statement.

Balance sheet and cash flow

The Group's strategy is 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. These needs include funding the establishment costs of local asset management ventures, seeding new funds and other strategic initiatives. 

In line with this strategy during the period, the Group invested £14.6 million in meeting the underwriting costs of the AGOL fundraising. In accordance with International Accounting Standards, these underwriting costs are recognised in the balance sheet as deferred acquisition costs which are charged to the income statement as the related revenue is recognised. Additionally, during April 2008, the Group invested BRL49.3 million (£15.1 million) of seed capital in the initial launch of an onshore Brazilian local currency fund, managed by the Brazilian asset management subsidiary. 

The Group continues to generate significant cash from operations which totalled £195.5 million in the year (year to 30 June 2007: £132.3 million). After the payments of the deferred acquisition costs and seed capital investment and, after taking account for taxation, property, plant and equipment purchases, dividend payments and interest received the overall cash has increased by £61.2 million during the year ended 30 June 2008 to £279.2 million (30 June 2007: £218.0 million). 

As at 30 June 2008, total equity attributable to shareholders of the parent was £271.8 million compared to £195.9 million at 30 June 2007. There is no debt on the Group's balance sheet.

Foreign exchange and treasury management

The Group's revenue is almost entirely denominated in US dollars, whilst the Group's cost base is largely Sterling based. Consequently, the Group has an exposure to movements in the US$/£ exchange rate. The results for the year ended 30 June 2008 were achieved against the backdrop of a weaker US$/£ exchange rate and this has impacted on the Group's reported profit. Reported profit before tax increased by £64.8 million, a 49% increase over the prior year. In constant exchange rate terms, profit before tax increased by £68.9 million, an increase of 54% in the year. This was after restating the prior year figures at the current year's average US$/£ exchange rate (2008: US$/£2.01; 2007: US$/£1.95). This resulted in the following restatements to the prior year numbers: lower net revenue in Sterling terms (£5.1 million), net hedging gains excluded (£2.7 million), and a notional reworking of the variable compensation cost to reflect the above items (a £1 million reduction). In the current year, net hedging gains of £3.2 million were excluded. On this basis, the net impact of the movement in the US$/£ exchange rate on the reported increase in profit before tax in the year of £64.8 million was £4.1 million. 

The Group's policy is to hedge its net foreign exchange exposure by using a combination of forward foreign exchange contracts and options for up to two years forward. The Group also sells US dollars at spot rates when opportunities arise. As at the date of this report, the Group has hedged 67% of its forecast US dollar based net management fee revenue for the remainder of this financial year at US$/£1.95. Based on the current year's net management fee revenue, at current exchange rates, a +/-10 cent exchange rate movement would have an £3.9 million/£4.3 million impact on net management fees. 

Dividend

Recognising the continued strong progress and the Board's confidence in the Group's prospects, subject to shareholder approval, a final dividend of 8.34p per share is proposed to be paid on 5 December 2008 (2007: 6.7p) to shareholders on the register on 7 November 2008. An interim dividend for the six-month period to 31 December 2007 of 3.66p (2007:2.3p) was paid on 25 April 2008. This would result in a full-year dividend of 12.0p (2007: 9.0p). The Company's intention is for its dividend policy to be progressive.

		2008	2007
	Notes	£m	£m
Management fees		186.7	130.2
Performance fees		44.7	20.4
Other revenue		13.3	13.0
Total revenue		244.7	163.6
Less: Distribution costs		(4.7)	(3.8)
Net revenue		240.0	159.8
Personnel expenses	2	(47.7)	(32.6)
Other expenses	3	(11.1)	(5.5)
Operating profit		181.2	121.7
Interest income		15.0	9.7
Profit before tax		196.2	131.4
Tax expense		(55.2)	(39.9)
Profit for the year		141.0	91.5
Attributable to:
Equity holders of the parent		140.8	91.4
Minority interest		0.2	0.1
Profit for the year		141.0	91.5
Earnings per share:
Basic	4	21.0p	13.7p
Diluted	4	19.9p	12.9p

		As at 30 June 2008	As at 30 June 2007
	Notes	£m	£m
Assets
Property, plant and equipment		3.3	0.2
Intangible assets		4.1	4.1
Deferred acquisition costs	7	13.4	-
Other receivables		-	0.1
Deferred tax assets		13.8	14.4
Total non-current assets		34.6	18.8
Trade and other receivables		34.7	27.2
Derivative financial instruments		1.2	0.5
Cash and cash equivalents		279.2	218.0
Total current assets		315.1	245.7
Non-current assets held for sale	6	16.4	-
Total assets		366.1	264.5
Equity
Issued capital		-	-
Share premium		0.3	0.3
Retained earnings		271.5	195.6
Total equity attributable to equity holders of the parent		271.8	195.9
Minority interest		1.5	0.1
Total equity		273.3	196.0
Liabilities
Deferred tax liabilities		3.8	-
Total non-current liabilities		3.8	-
Current tax		24.5	15.7
Derivative financial instruments		0.7	-
Trade and other payables		63.7	52.8
Total current liabilities		88.9	68.5
Non-current liabilities held for sale	6	0.1	-
Total liabilities		92.8	68.5
Total equity and liabilities		366.1	264.5

	Issued capital	Share premium	Retained earnings	Total equity attributable to equity holders of the parent	Minority interest	Total equity
	£m	£m	£m	£m	£m	£m
Balance at 1 July 2006	-	0.3	96.3	96.6	-	96.6
Profit for the year	-	-	91.4	91.4	0.1	91.5
Share based payments	-	-	6.5	6.5	-	6.5
Current tax related to share based payments	-	-	4.2	4.2	-	4.2
Deferred tax related to share based payments	-	-	11.6	11.6	-	11.6
Sale of own shares held	-	-	1.1	1.1	-	1.1
Dividends	-	-	(15.5)	(15.5)	-	(15.5)
Balance at 30 June 2007	-	0.3	195.6	195.9	0.1	196.0
Profit for the year	-	-	140.8	140.8	0.2	141.0
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)
Net gains on available-for-sale financial assets	-	-	0.4	0.4	-	0.4
Dividends	-	-	(70.1)	(70.1)	-	(70.1)
Balance at 30 June 2008	-	0.3	271.5	271.8	1.5	273.3

		2008	2007
	Notes	£m	£m
Operating activities
Cash receipts from customers		242.8	164.6
Cash paid to suppliers and employees		(47.3)	(32.3)
Cash generated from operations		195.5	132.3
Taxes paid		(46.5)	(39.2)
Net cash from operating activities		149.0	93.1
Investing activities
Interest received		15.4	9.5
Purchase of non-current assets held for sale		(15.1)	-
Purchase of deferred acquisition costs	7	(14.6)	-
Purchase of property, plant and equipment		(3.5)	(0.1)
Net cash from investing activities		(17.8)	9.4
Financing activities
Dividends paid	5	(70.1)	(15.5)
Net cash used in financing activities		(70.1)	(15.5)
Effect of exchange rate changes on cash and cash equivalents		0.1	(1.7)
Net increase in cash and cash equivalents		61.2	85.3
Cash and cash equivalents at beginning of year		218.0	132.7
Cash and cash equivalents at end of year		279.2	218.0
Cash and cash equivalents comprise:
Cash at bank and in hand as shown in balance sheet		279.2	218.0
		279.2	218.0

Analysis of employee benefits expense
	Year ended 30 June 2008		Year ended 30 June 2007
	£m		£m
Wages and salaries	5.3		3.8
Performance related bonuses	23.5		18.0
Share based payments	10.0		5.7
Social security costs	7.3		4.2
Pension costs	0.3		0.2
Other costs	1.3		0.7
Total employee benefits	47.7		32.6

Other expenses
	Year ended 30 June 2008		Year ended 30 June 2007
	£m		£m
Travel	2.5		1.7
Professional fees	2.2		0.6
Information technology and communications	1.4		1.0
Operating leases	1.0		0.4
Premises related costs	0.6		0.3
Insurance	0.5		0.3
Auditors’ remuneration	0.7		0.2
Depreciation of property, plant and equipment	0.3		0.1
Deferred acquisition costs charges	1.2		-
Other expenses	0.7		0.9
Total other expenses	11.1		5.5

	Year ended 30 June 2008		Year ended 30 June 2007
Weighted average number of ordinary shares used in calculation of basic earnings per share	669,671,683		667,467,808
Effect of dilutive potential ordinary shares – share options	38,322,426		38,827,815
Weighted average number of ordinary shares used in calculation of diluted earnings per share	707,994,109		706,295,623

Group and Company	Year ended 30 June 2008		Year ended 30 June 2007
Interim dividend	£24.9m		£15.5m
Dividend per share	3.66p		2.30p
Final dividend	£57.0m		£45.2m
Dividend per share	8.34p		6.70p

	2008		2007
	£m		£m
Non-current assets held for sale	16.4		-
Non-current liabilities held for sale	(0.1)		-
Seed capital classified as being held for sale	16.3		-

	2008		2007
	£m		£m
Cost	14.6		-
Accumulated charge	(1.2)		-
	13.4

	Closing rate as at 30 June 2008	Closing rate as at 30 June 2007	Average rate year ended 30 June 2008	Average rate year ended 30 June 2007
US dollar	1.9923	2.0088	2.0119	1.9466

ENDFR ILFIVAFIELIT