Final Results

RNS Number : 3140H

Man Group plc

26 May 2011

 



26 May 2011

RESULTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2011

Key points - financial

·     Statutory profit before tax from continuing operations of $324 million (2010: $541 million), ahead of pre-close estimate of $280 million after strong investment performance in the last week of March and an adjustment to the GLG acquisition balance sheet 

·     Adjusted profit before tax from continuing operations of $599 million (2010: $560 million)

·     Diluted statutory EPS from continuing operations of 14.0 cents per share (2010: 24.8 cents per share); adjusted EPS of 27.6 cents per share (2010: 25.5 cents per share)

·     Financial position remains strong: current regulatory capital surplus estimated at around $900 million (31 March: $650 million); net cash of $900 million (31 March: $881 million)

·     Board to recommend final dividend of 12.5 cents per share to bring total dividend for the year to 22 cents per share.

	Year ended 31 March 2011 $	Year ended 31 March 2010 $
Funds under management (end of period)	69.1bn	39.4bn
Net management fee income	430m	463m
Net performance fee income	169m	97m
Profit before tax and adjusting items - continuing items	599m	560m
Adjusting items*	(275m)	(19m)
Statutory profit before tax from continuing operations	324m	541m

          * Impairments of Man Multi-Manager and Ore Hill ($397 million); restructuring costs ($72 million);    

          GLG acquisition costs ($35 million); amortisation of acquisition intangibles ($28 million); gain on disposal of   

          BlueCrest stake ($257 million).  Refer to Note 7 of the Financial Review Highlights for further details.

Key points - operating

·     Funds under management (FUM) currently estimated at $71 billion (31 March 2011:
$69.1 billion), reflecting positive flows despite recent demanding performance environment

o  Strong net inflows since year end include $2 billion from Nomura Global Trend and $400 million from Man IP220 GLG, the first guaranteed product to include GLG strategies.

·     Continuing to build a diverse range of strategies and formats to meet global investor needs:  over $10 billion under management in UCITS formats; $1.3 billion under management in Man Systematic Strategies

·     Expanding global footprint:  moving investment management closer to markets
(e.g. Hong Kong); launch of AHL renminbi share class

Peter Clarke, Chief Executive of Man, said:

"Over the last year we have built Man into the industry's most comprehensive provider of liquid alternative investment styles.  We acquired and integrated GLG without disruption to investment performance or flows, continued to expand the range of our investment management capabilities, and developed new products and formats.  Combined with the wide geography of our franchise, this has resulted in strong demand from institutions and private investors globally, and growing assets under management.  Our recent AHL open-ended launch in Japan, which has now raised $2 billion, is a clear example of this momentum and is being followed by a Japan GLG currency launch.

"Macro uncertainty has impacted markets and performance across most asset classes again recently, reinforcing investors' long-term focus on liquid and diversifying investment strategies.   Man is positioned to address these requirements through our focus on performance, our wide range of investment strategies, and the scale and resources we can apply to producing solutions for investor portfolios across the world.  We are very well placed to meet investor demand."

Adjusted profit before tax

Adjusted pre-tax profit from continuing operations was $599 million (2010: $560 million).

	Year ended 31 March 2011  $m	Year ended 31 March 2010 $m
Management and other fees	1,452	1,293
Performance fees	203	52
Gains/(losses) on investments and other financial instruments	25	39
Share of after tax profit from associated and joint ventures	65	70
Total income	1,745	1,454
Distribution costs	(318)	(325)
Asset servicing	(16)	-
Compensation	(501)	(330)
Other costs	(265)	(232)
Total costs	(1,100)	(887)
Net finance expense	(46)	(7)
Adjusted profit before tax from continuing operations	599	560

The increase in total income over the prior year was driven by the acquisition of GLG in October 2010, the effect of positive AHL investment movement on performance fees and stable revenue margins. 

Costs reflect compensation ratios of around 25% for Man ex GLG and around 65% for GLG (including amortisation of share and fund based payments).  Both of these ratios are similar to historic levels, and are expected to hold steady for the next reporting period.  The cost base includes asset servicing of $16 million linked to the outsourcing of shareholder services.  Outsourcing is expected to generate a net reduction in costs over time, but an expense of approximately $30 million is anticipated in the next reporting period.  Cost synergies achieved from the GLG acquisition amounted to $16 million, and Man remains on track to deliver the full $50 million by the end of September 2011, as previously announced.    

Adjusted PBT is higher than Man's pre-close estimates for three main reasons.

·     An increase of $10 million in gross management fee income following strong AHL investment performance at the end of the reporting period.

·     Gains of $10 million on seed capital investing, which were not included in the pre-close estimate.

·     A $15 million adjustment to the GLG acquisition balance sheet.

Dividend

The Board confirms that it will recommend a final dividend of 12.5 cents per share for the year ended 31 March 2011, giving a total dividend for the year of 22 cents per share. This dividend will be paid at the rate of 7.68 pence per existing share.  The Board is committed to a progressive and sustainable dividend policy.

Dates for 2011 final dividend

Ex dividend date                      29 June 2011

Record date                            1 July 2011

Payment date                          19 July 2011

Reporting changes

As previously announced, Man is moving to a December year end to align its reporting cycle with that generally adopted in the asset management industry.  Man's next reporting period will be the nine months to December 2011, which will include an interim report for the first six months of the shortened period.   

Results presentation, video interviews and audio webcast

There will be a presentation for investors and analysts at 8.45am (UK time) in The Auditorium, Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ. A live audio webcast will be available on www.mangroupplc.com and www.cantos.com and will also be available on demand from later in the day.

Live Conference Call Dial in Numbers:

Rest of World Access Number: + 44 (0)20 3140 0724

UK Toll Free: 0800 368 1918

US Toll Free: 1866 978 9967

7 Day Replay Dial in Numbers:

Rest of World Access Number: [phone]

UK Toll Free Access Number: 0800 368 1890

US Toll Free Access Number: [phone]

Conference Reference: 377470#

Interviews with Peter Clarke, Chief Executive, and Kevin Hayes, Finance Director, in video, audio and text are available on www.mangroupplc.com and www.cantos.com.

Enquiries

Miriam McKay

Head of Investor Relations and Financial Communications

[phone]

[e-mail]

David Waller

Head of Media Relations

[phone]

[e-mail]

Maitland PR

George Trefgarne / Anthony Silverman

[phone]

About Man

Man is a world-leading alternative investment management business. It has expertise in a wide range of liquid investment styles including managed futures, equity, credit and convertibles, emerging markets, global macro and multi-manager, combined with powerful product structuring, distribution and client service capabilities. At 31 March 2011, Man managed $69.1 billion. 

The original business was founded in 1783. Today, Man Group plc is listed on the London Stock Exchange and is a member of the FTSE 100 Index with a market capitalisation of over £4.5 billion.

Man is a member of the Dow Jones Sustainability World Index and the FTSE4Good Index. Man also supports many awards, charities and initiatives around the world, including sponsorship of the Man Booker literary prizes. Further information can be found at www.mangroupplc.com.

Forward looking statements and other important information

This document contains forward-looking statements with respect to the financial condition, results and business of Man Group plc. By their nature, forward looking statements involve risk and uncertainty and there may be subsequent variations to estimates. Man Group plc's actual future results may differ materially from the results expressed or implied in these forward-looking statements.

The content of the websites referred to in this announcement is not incorporated into and does not form part of this announcement.  Nothing in this announcement should be construed as or is intended to be a solicitation for or an offer to provide investment advisory services.

FUNDS UNDER MANAGEMENT ANALYSIS

	Guaranteed	Open-ended alternative1	Institutional FoF and other2	Long only	Total
FUM at 31 December 2010	15.3	26.7	13.3	13.3	68.6
Sales	0.3	2.5	0.5	2.2	5.5
Redemptions	(0.5)	(1.7)	(1.3)	(1.4)	(4.9)
Net inflows/(outflows)	(0.2)	0.8	(0.8)	0.8	0.6
Investment movement	(0.4)	(1.2)	-	(0.1)	(1.7)
FX	0.1	0.5	0.4	0.1	1.1
Other	0.3	0.5	(0.2)	(0.1)	0.5
FUM at 31 March 2011	15.1	27.3	12.7	14.0	69.1

1) Reflects flows of $0.5 billion into GLG strategies and $0.3 billion into AHL and other strategies

2) Includes Pemba/Ore Hill and Man Convertibles ($3.1 billion and $1.2 billion at 31/12/2010; est. $3.2 billion and $1.3 billion at 31/3/2011)

	Guaranteed	Open-ended alternative	Institutional FoF and other1	Long only	Total
FUM at 31 March 2010	14.0	12.8	12.6	-	39.4
Acquired 14 October 20102	-	11.5	0.7	13.2	25.4
Sales	0.6	5.9	1.8	3.4	11.7
Redemptions	(2.4)	(4.4)	(3.2)	(3.7)	(13.7)
Net inflows/(outflows)	(1.8)	1.5	(1.4)	(0.3)	(2.0)
Investment movement	0.4	0.9	0.4	1.1	2.8
FX	0.5	0.6	0.8	0.1	2.0
Other	2.0	-	(0.4)	(0.1)	1.5
FUM at 31 March 2011	15.1	27.3	12.7	14.0	69.1

1) Includes Pemba/Ore Hill and Man Convertibles ($3.2 billion and $1.3 billion at 31/3/2011; $3.1 billion and $1.2 billion at 31/12/2010)

2) GLG data as at acquisition close on 14 October 2010

FUNDS BY MANAGER

	31 March 2011  $bn	31 December 2010 $bn	31 March 2010 $bn
AHL	22.7	23.6	21.2
GLG
Long only	14.0	13.3	-
Alternatives
- Equity	8.3	7.9	4.5
- Credit and Convertibles1	6.5	6.0	-
- Emerging markets	2.6	2.6	-
- Macro and special situations	0.6	0.5	-
Multi-Manager	14.4	14.7	13.7
Total	69.1	68.6	39.4

 1) Includes Pemba/Ore Hill and Man Convertibles ($3.2 billion and $1.3 billion at 31/3/2011; $3.1 billion and $1.2 billion at 31/12/2010)

INVESTMENT PERFORMANCE

	Total return	Annualised return
	Financial year to 31 Mar 11	3 years to 31 Mar 11	5 years to 31 Mar 11
Fund of funds
Man Absolute Return Strategies1	6.1%	1.1%	2.8%
Man Dynamic Selection2	5.6%	1.4%	4.7%
Structured - principal protected
Man-IP 2203	8.0%	-1.9%	3.9%
AHL
Man AHL Diversified plc4	4.5%	1.3%	8.3%
AHL Alpha plc5	5.3%	2.3%	7.2%
GLG Ore Hill Fund6	13.6%	4.9%	3.4%
GLG Alternative
GLG Alpha Select Fund7	5.4%	10.9%	11.1%
GLG Atlas Macro Fund8	10.4%	n/a	n/a
GLG Emerging Markets Fund9	3.9%	0.7%	13.6%
GLG European Distressed Fund10	20.8%	n/a	n/a
GLG European Long Short Fund11	11.3%	5.6%	5.9%
GLG European Opportunity Fund12	1.8%	7.9%	8.3%
GLG Global Convertible Fund13	4.6%	5.9%	4.2%
GLG Global Opportunity Fund14	5.5%	1.6%	4.5%
GLG Market Neutral Fund15	22.9%	10.7%	9.3%
GLG North American Opportunity Fund16	11.0%	9.2%	4.0%
Alternative UCITS III
GLG Alpha Select UCITS Fund17	4.0%	n/a	n/a
GLG Atlas Macro Alternative UCITS Fund18	n/a	n/a	n/a
GLG Emerging Markets UCITS Fund19	-0.5%	n/a	n/a
GLG European Alpha Alternative UCITS Fund20	5.4%	n/a	n/a
GLG Global Corporate Bond UCITS Fund21	6.0%	18.4%	11.6%
GLG Global Convertible UCITS Fund22	5.6%	4.4%	3.6%
Man AHL Diversity23	2.2%	n/a	n/a
Man AHL Trend24	2.5%	n/a	n/a
Long only UCITS III
GLG Japan Core Alpha Equity Fund25	-9.5%	-2.3%	-5.2%
GLG Performance Fund26	9.8%	-3.2%	-0.4%
GLG UK Select Fund27	10.2%	n/a	n/a
Indices
World stocks28	9.3%	0.4%	0.6%
World bonds29	1.5%	3.3%	4.5%
Corporate bonds30	9.2%	8.0%	6.5%

Investment performance contd

	Total return	Annualised return
	Financial year to 31 Mar 11	3 years to 31 Mar 11	5 years to 31 Mar 11
Hedge fund indices
HFRI Fund Weighted Composite Index31	9.5%	4.1%	5.0%
HFRI Fund of Funds Composite Index31	5.1%	-0.8%	1.6%
Style indices
Barclay BTOP 50 Index	3.6%	2.0%	4.6%
HFRI Equity Hedge (Total) Index31	9.9%	3.1%	3.6%
HFRI Event-Driven (Total) Index31	10.7%	5.5%	5.4%
HFRI Macro (Total) Index31	7.7%	4.1%	6.5%
HFRI Relative Value (Total) Index31	9.9%	6.7%	6.7%
Commodity indices
S&P GSCI Commodity TR	22.7%	-12.4%	-3.3%
Dow Jones-UBS Commodity Index	28.5%	-5.2%	2.6%

Source: Man database and Bloomberg. There is no guarantee of trading performance and past or projected performance is not a reliable indicator of future performance. Returns may increase or decrease as a result of currency fluctuations                                       

1) Represented by Man Absolute Return Strategies II - Class ARS2I1                                 

2) Represented by Man Dynamic Selection - Class ISI12                                      

3) Represented by Man-IP 220 Ltd from 18 December 1996 to 31 December 2005 and Man-IP 220 Ltd - USD class bonds from 1 January 2006                                            

4) Man AHL Diversified plc is valued weekly, but for comparative purposes the last weekly valuation of the month has been used.               

5) AHL Alpha plc is valued weekly, but for comparative purposes the last weekly valuation of the month has been used.                              

6) Represented by Ore Hill International Fund II Ltd.                                              

7) Represented by GLG Alpha Select Fund - Class C - EUR                                 

8) Represented by GLG Atlas Macro Fund - Class A - USD                                 

9) Represented by GLG Emerging Markets Fund - Class A Restricted to Unrestricted (31/08/2007) - USD                                        

10) Represented by GLG European Distressed Fund - Class A - USD                                 

11) Represented by GLG European Long Short Fund - Class D Restricted to Unrestricted (29/06/2007) - EUR                                 

12) Represented by GLG European Opportunity Fund - Class D Restricted to Unrestricted (31/08/2007) - EUR                                

13) Represented by GLG Global Convertible Fund - Class A - USD                                     

14) Represented by GLG Global Opportunity Fund - Class Z - USD                                     

15) Represented by GLG Market Neutral Fund - Class Z Restricted to Unrestricted (31/08/2007) - USD                                            

16) Represented by GLG North American Opportunity Fund - Class A Restricted to Unrestricted (29/06/2007) - USD                      

17) Represented by GLG Alpha Select UCITS III Fund - Class C - EUR                                 

18) Represented by GLG Atlas Macro Alternative UCITS Fund - Class E - GBP                                   

19) Represented by GLG Emerging Markets UCITS III Fund - Class A - USD                                        

20) Represented by GLG European Alpha Alternative UCITS Fund - Class C - EUR                                            

21) Represented by GLG Global Corporate Bond Fund - Class C - GBP                                              

22) Represented by GLG Global Convertible UCITS Fund - Class A - USD                                           

23) Represented by Man AHL Diversity - Class MUSD34 - GBP                                           

24) Represented by Man AHL Trend - Class MUSI20 - EUR                                  

25) Represented by GLG Japan Core Alpha Equity Fund - Class C to Class AAX (28/01/2010) - JPY                                

26) Represented by GLG Performance Fund Class A - USD                                

27) Represented by GLG UK Select Fund - Class AX - GBP                                

28) Represented by MSCI World (USD, NDTR) Hedged Index                                               

29) Represented by Citigroup World Government Bond Index hedged to USD (total return)                                

30) Represented by Citigroup High Grade Corp Bond TR                                      

31) HFRI index performance over the past 4 months is subject to change.                                                                              

HIGHLIGHTS FROM MAN'S 2011 ANNUAL REPORT

CHIEF EXECUTIVE'S REVIEW

In the course of the 2011 financial year we have transformed our business, delivered positive investment performance and seen an improvement in fund flows.

A largely supportive industry backdrop and the actions we have taken this year position us well for future growth and returns.

Our growth strategy has four key elements.

·     Deliver strong long-term performance across a wide range of liquid alternative investment styles

·     Create a diverse range of fund strategies and formats to meet the needs of private investors and institutions, worldwide

·     Expand our global investor base through strong local relationships and partnerships

·     Continue to build our corporate reputation based on strong governance, risk management, financial discipline and innovation.

Industry backdrop

Renewed investor focus on risk-adjusted returns

Our 2011 financial year saw periods of volatility across financial markets. Investors have now experienced three sharply different but equally challenging trading years: the liquidity driven crisis in 2008; initial fears followed by sharp rallies in 2009 and the volatile, macro-driven market of 2010 and early 2011. On a three year annualised basis to the end of March 2011, hedge fund composite performance is up 4.1% with an annualised volatility of 8.5%, while world stocks are up 0.4% with an annualised volatility of 20.4%. The hedge fund industry's ability to deliver diversifying, risk-adjusted returns across challenging markets has been reaffirmed.

Hedge fund industry assets break the $2 trillion barrier

By the middle of our financial year, renewed investor focus on the hedge fund proposition was starting to translate into an uptick in inflows. By March 2011, total capital invested in the global hedge fund industry exceeded $2 trillion for the first time in its history. This represents about 8% of global invested assets, so there remains plenty of room for further growth.

Manager selection matters

Fortunes have remained notably mixed among alternative investment managers, with wide performance dispersion between and within styles. It is not enough for investors simply to increase their allocation to alternatives: manager selection can make a significant difference to returns.

Importance of global scale

Demand for alternatives is global, and global scale is required to capitalise on this demand. Broad distribution - be it direct or through third parties - is a rare commodity in our industry. I continue to believe that global distribution brings an under-appreciated but deeply significant level of competitive advantage.

Although there will always be a place for niche firms, this year has seen continued concentration of flows into larger scale alternative asset managers. Investors are paying as much attention to the sustainability of the firm as they are to the expertise of the manager. Given the complexity of the due diligence process, partnering with a trustworthy, multi-strategy manager can generate economies of scale for the investor. Scale also benefits investment managers. As my new GLG colleagues affirm, being part of a larger organisation allows portfolio managers to focus on what adds most value: delivering investment performance.

Investor demand for institutional quality and scale is one of a series of forces at play in our industry which are increasing barriers to entry and strengthening our competitive advantage. Others include an ever increasing volume of regulatory initiatives across multiple jurisdictions, some of which we need to absorb into our business model while others are drivers of growth. A notable example in the latter category is the growth of the UCITS format which has become a global phenomenon, opening up new markets for alternatives in Asia and Latin America as well as Europe.

Supportive market environment

Taking all of these industry trends into account, my conclusion is that market conditions are broadly supportive to diversified, large scale managers such as Man. We have fundamentally reshaped our business in the past year to directly address investor requirements and to position Man to perform across market cycles. We can now offer strong long-term investment performance across a unique range of investment strategies and formats to a growing investor base, and share with our investors the benefits of our global scale.

Review of Man's 2011 financial year

FY2011 investment performance: dispersion between styles

In the course of the 2011 financial year, Man delivered $2.8 billion of positive investment performance to our investors.

AHL had a strong 2010 calendar year (up 14.8%) but suffered in volatile markets in the first quarter of 2011, to end the financial year up 4.5%. The diversification benefits enjoyed by investors in AHL were starkly visible in May and August 2010. Global equity markets were down 7.4% and 3.4% respectively, while AHL limited losses to 1.9% in May and was up 6.8% in August.

GLG saw strong performance in FY 2011 across a range of discretionary styles, with long only products generally outperforming their benchmarks and double digit returns in a range of alternative strategies including macro, European distressed, European long/short, market neutral and North American opportunities.  

Calendar year performance is widely reviewed across our industry. In calendar 2010 our managers delivered a textbook example of the benefits of risk adjusted performance which investors seek. Although performance conditions in 2011 to date have been challenging, our strong long term track records are providing a helpful backdrop to this year's sales initiatives.

Funds under management: improving flows trend

Funds under management increased from $39.4 billion at 31 March 2010 to $69.1 billion at 31 March 2011, largely driven by the acquisition of GLG.

Significantly, the sales trend improved steadily throughout the year driven by GLG flows, strong AHL performance, an uptick in demand for guaranteed products and initial allocations from one of the two large scale institutional mandates won in the period.

The sales pipeline suggests that this trend will continue, with over $2 billion still to fund from the USS and BVK institutional mandates and $2 billion raised after our financial year end from the launch in Japan of Nomura Global Trend, an open-ended fund advised by AHL.

Profitability

The business remains profitable and operationally cash generative. Statutory profit before tax from continuing operations was lower than the previous year, at $324 million (2010: $541 million). The biggest contribution to this reduction was a non-cash impairment in Man Multi-Manager, taken although the business is profitable and making good operational progress. Adjusted profit before tax from continuing operations for the year to 31 March 2011 was $599 million (2010: $560 million).

Capital management and dividend

Man's financial position remains strong, with a regulatory capital surplus of currently around $900 million and net cash of around $900 million. The Board has recommended a final dividend payment for the year of 12.5 cents per share, taking the total dividend payment for the year to 22.0 cents. The Board has a progressive dividend policy, and intends to ensure that the dividend payment remains sustainable.

Progress on strategic priorities

In our 2010 Annual Report, we set out five strategic priorities for the firm in the 2011 financial year.

• Harness new single manager content by executing on acquisitions/stakes

• Invest in AHL to ensure that we capture the programme's full potential

• Maximise Man Multi-Manager by rebuilding scale and profitability

• Deepen our distribution reach, specifically in onshore regulated markets and across institutions worldwide

• Maintain focus on efficiency by continually evaluating our cost base

I am pleased to report significant progress on all five of these priorities, and particularly on our acquisition of GLG Partners, Inc. (GLG).

GLG acquisition and integration

We acquired GLG in October 2010 for a total consideration of $1.7 billion, $628 million of which was in the form of Man shares issued to GLG Principals. GLG's investment management expertise across a wide range of liquid styles complements that of AHL and Man Multi-Manager. We see considerable growth potential in marketing GLG strategies through our global distribution network, as well as in the creation of new products.

Extensive integration planning after the announcement of the acquisition meant that we were ready to operate as one business very soon after the completion of the transaction. Consistent with the approach we take with AHL and Man Multi-Manager, the unique investment culture and focus of the GLG investment management teams remains unchanged, but is now supported by a fully integrated, larger scale product structuring, distribution and client service capabilities. Our newly integrated sales force began marketing Man's combined range of strategies immediately after close, and we have been very encouraged by early progress. Our first combined product - Man IP220 GLG - was launched in the fourth quarter of our financial year and started trading with $400 million under management after year end. We have also created a new venture, Man Systematic Strategies, which pools expertise from GLG, AHL and Man Multi-Manager to develop new systematic trading ideas.

While the acquisition is on track to deliver $50 million of cost savings by September 2011, the real value will lie in our ability to generate revenue synergies as we capitalise on the investment management, structuring and distribution power of the combined firm.

Disposal of BlueCrest interest and integration of Ore Hill

In March 2011 we made two further changes to our investment management portfolio. After a successful eight year commercial relationship with BlueCrest, we sold our c.25% interest to BlueCrest for a total consideration of $633 million, generating a pre-tax profit on disposal of around $250 million. Post year end, we also took our ownership of Ore Hill from 50% to 100% for a consideration of $18 million. Ore Hill is being integrated into GLG, to lead GLG's expansion into the US credit markets.

Both transactions demonstrate our general preference for wholly-owned investment management. The Ore Hill transaction also illustrates a further benefit of the GLG acquisition. In GLG, we have a single manager platform to which we can add investment management teams organically, to gain exposure to new strategies and markets.

Capture the full potential of AHL

We continue to invest in AHL, our world-leading managed futures manager. AHL's research team has continued to expand and now numbers nearly 90 researchers. Research activity has been grouped into sector teams to encourage idea generation and accelerate the implementation of the research pipeline. AHL has expanded its operations in Hong Kong to continue its strong tradition of being first into new markets, and is broadening its trading capabilities to include a renminbi share class.

Our unique and very successful collaboration with the University of Oxford has been extended for another three years. This continues to give AHL access to early exposure to leading academic research, as well as significantly enhanced recruitment opportunities. The Oxford team is heavily involved in the development and implementation of AHL's extensive research pipeline.  

Maximise Man Multi-Manager

In September 2010, Man Multi-Manager transitioned to new leadership with the recruitment of Luke Ellis to head the business. In the course of the last financial year, the Man Multi-Manager team have focused on expanding Man's managed account (MAC) platform both as a discretionary investment tool, and as the foundation of a robust hedge fund allocation and risk advisory service for institutional investors. Tangible evidence of the success of this strategy came in the form of two $1 billion+ mandate wins - from the UK Universities Superannuation Fund (USS) and Germany's Bayerische Versorgungskammer (BVK).   

Deepen our Distribution reach

One of Man's key assets is our sales force and distribution network which, post the GLG acquisition, has over 300 people working in sales, marketing and client service in 25 offices worldwide. Local specialists with longstanding relationships with investors, intermediaries and regulators are responsible for identifying the strategies and formats most appropriate for sale in their local markets.

This has been an extraordinarily busy period of sales activity. As part of the GLG integration, each office identified a focus list of GLG strategies and took these to market immediately after deal completion. We continue to focus on UCITS formats, and now offer 14 alternative strategies (including GLG's) with $3.4 billion under management in 22 countries within and outside the EU, as well as long only strategies with $7.4 billion under management.

Testament to the strength of our distribution network lies in our fourth quarter sales of $5.5 billion - the highest quarterly sales amount since September 2008.  

Maintain focus on efficiency

We have made significant progress this year on operational efficiency. After the GLG acquisition completed, I restructured the Executive Committee to augment investment management focus, reorganise some activities under a new Chief Operating Officer role and clarify responsibilities across the enlarged firm. We continue to manage our cost base actively to preserve operating margins, while investing appropriately in technology, infrastructure and expertise. A key example of this active management is our decision to appoint Citi to perform global shareholder and transfer agency services on our behalf, a move expected to generate positive operating leverage as funds under management increase.

Case study: $2 billion fund launch in Japan

Since the end of our financial year, our team in Japan has raised a remarkable $2 billion with the launch of Nomura Global Trend.

In partnership with Nomura, we designed an AHL fund offering daily liquidity, exposure to high yielding currencies and the potential for monthly dividends. This is a brand new product concept, and these features were especially appealing to the Japanese retail sector.

Investors can choose to have exposure to one of three different currency baskets

• Japanese Yen

• Brazilian Real, Australian Dollar and South African Rand

• Chinese Renmimbi, Indian Rupee and Indonesian Rupiah

Foreign exchange hedging is provided by Nomura Asset Management, with the AHL investment being managed in US dollars.

Nomura Global Trend has been actively marketed by the combined Man and Nomura team, with over a hundred seminars and study sessions held thoughout the Nomura branch network. The response has been exceptional and, because the fund is open-ended, it can continue to grow.

The success of this launch in the immediate aftermath of the Japan earthquake is testament both to the commitment and expertise of our Japanese team and their counterparts at Nomura, and to the resilience of the Japanese markets. There can be no better demonstration of the benefits of local expertise, innovative product structuring and strong distribution partnerships.

Strategic priorities for the coming year

Our key priority for the next reporting period is to capitalise on the substantial business

transformation we undertook in the 2011 financial year.

Our corporate strategy remains as follows.

• To deliver strong long-term investment performance ….

• Across a unique range of alternative investments strategies and formats …

• To a growing global investor base ….

• And to continue to build our corporate reputation based on strong governance, risk management, financial discipline and innovation.

To deliver this strategy, we will

• Realise the full potential of AHL through investment and research, and develop new quantitative strategies

• Continue to build out GLG single manager strategies, focusing on talent and superior investment performance

• Maximise Man Multi-Manager through managed accounts and tailored institutional portfolio solutions

• Deepen our sales reach across the combined firm, using GLG strategies individually and in combination with AHL and Man Multi-Manager

• Increase efficiency, with focus on using our capital and resources effectively.

I am grateful to everyone at Man for the commitment, expertise and sheer hard work they have contributed this year in making substantial progress on each of our objectives. I look forward to continued progress in the next reporting period.

Outlook

As I look forward, my working assumption is that markets will remain volatile. With a strong suite of liquid investment strategies designed to capture value for investors across market cycles, Man is well placed to continue to attract investors even in tough markets.

Strong investment performance across the board in calendar year 2010 has provided a healthy backdrop for sales.  Although recent performance conditions have been challenging, we remain focused on building sales momentum.

We expect the current high level of regulatory and policy change to continue, but at a slower pace, with the detailed implementation of regulation now becoming clear. Man is well placed to address these new regulatory environments given our scale, relationships and brand. I continue to regard scale as a competitive advantage in this area.

Although our focus this year will be on organic growth, we remain prepared to use our financial strength to invest in our talent pool and develop new market opportunities as they arise.

Man now has a highly competitive suite of investment strategies, strong global distribution and significant scale advantages. By executing well on a compelling strategy in a structurally favourable market, we can achieve substantial asset and profit growth over the years to come.

FINANCIAL REVIEW HIGHLIGHTS

Funds under management (FUM)

The growth in FUM is a key indicator of our performance as an investment manager and our ability to remain competitive and build a sustainable business. Average FUM multiplied by our fee margin equates to our revenue earning capacity. Our objective is therefore to grow funds under management while maintaining our fee margin.

Funds under management are shown by product groupings that have similar margin and investor characteristics. The GLG FUM and FUM movements are included from the acquisition date 14 October 2010.

$bn	Guaranteed	Open-ended alternative	Institutional FoF and other	Long only	Total
FUM at 31 March 2010	14.0	12.8	12.6	-	39.4
Acquired 14 October 2010	-	11.5	0.7	13.2	25.4
Sales	0.6	5.9	1.8	3.4	11.7
Redemptions	(2.4)	(4.4)	(3.2)	(3.7)	(13.7)
Net inflows/(outflows)	(1.8)	1.5	(1.4)	(0.3)	(2.0)
Investment movement	0.4	0.9	0.4	1.1	2.8
FX	0.5	0.6	0.8	0.1	2.0
Other	2.0	-	(0.4)	(0.1)	1.5
FUM at 31 March 2011	15.1	27.3	12.7	14.0	69.1

Guaranteed product FUM increased by 8% during the year mainly driven by FX and the re-gearing of the funds following strong AHL performance in CY2010, which offset asset redemptions. 

Open ended alternative FUM increased by 113% during the year due to the acquisition of GLG and net inflows following strong demand for alternative formats and positive fund performance in both AHL and GLG. The FUM of $27.3 billion at the year-end comprised $13.7 billion from AHL open-ended products and $13.6 billion from GLG alternatives.

Institutional FUM remained broadly flat during the year with net outflows being offset by positive FX movements related to the strengthening of the Euro. 63% of Institutional FUM is denominated in non USD currencies.

GLG long only FUM increased by 6% post acquisition driven by strong fund performance.

Margins

The management fee margin is calculated as revenue divided by average FUM.   Previously the share of management fees from associates, primarily from BlueCrest, were included in the gross management fee margin. The sale of the interest in BlueCrest in March 2011 will result in lower associate income in future periods, therefore in the analysis of management fee margins in the table below we have excluded income from associates for all periods.  Gross management fee margins by product channel are shown in the table below.

	FY 2011 Average FUM $bn	FY Revenue $m	Margin bp	FY 2010 Average FUM $bn	Revenue $m	Margin bp
Average FUM / Total	52.4	1,452	277	42.6	1,293	304
Guaranteed			470			463
AHL open ended			360			356
GLG alternatives			156			* 155
Institutional			115			93
Long only			75			*  83

* Based on GLG average margins for the period from 1 October 2009 to 31 March 2010.

The guaranteed products gross management and other fees margin was 470 bp (2010: 463 bp). The small increase is primarily the result of higher redemption fee income received, mainly in the first half of the year. Margins on recent guaranteed products are consistent with historical levels.

The AHL gross management and other fees margin on open-ended products was 360 bp, broadly the same as in 2010.

The GLG alternatives gross management and other fees margin was 156 bp, compared to 155 bp for 2010 based on GLG average margins for the period from 1 October 2009 to 31 March 2010. An increase in the net flows and investment performance of higher yielding funds being broadly offset by inflows and investment performance into lower yielding managed accounts.

Institutional gross management and other fees margin was 115 bp, compared to 93 bp for 2010. The primary reason for the increase relates to additional management fees earned following the achievement of net asset thresholds in certain Pemba funds. Margins on institutional products are expected to reduce as a result of a mix shift towards managed account mandates which have an average margin of 50 bp.

Long only gross management and other fees margin was 75 bp, compared to 83 bp for 2010. The primary reason for the decrease is due to material inflows of lower yielding institutional mandates.

Group financial statements

In preparing the financial information in this statement the Group has applied policies which are in accordance with International Financial Reporting Standards as adopted by the European Union at 31 March 2011. Details of the Group's accounting policies can be found in the Group 2010 Annual Report.

The financial information included in this statement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2011, upon which the auditors have issued an unqualified report, will shortly be delivered to the Registrar of Companies.

The annual report will be posted to shareholders on 6 June 2011. The Company's Annual General Meeting will be held on Thursday 7 July 2011 at 11am at Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE.

Group Income Statement

For the year ended 31 March                                                                                            

$m	Note	2011		2010
Revenue:
Gross management and other fees	1	1,452		1,293
Performance fees	1	203		52
		1,655		1,345
Gains/(losses) on investments and other financial instruments		25		39
Distribution costs	2	(318)		(325)
Asset services	3	(16)		-
Amortisation of acquired intangible assets	7,10	(28)		-
Compensation	4	(566)		(349)
Other costs	5	(307)		(266)
Share of after tax profit of associates and joint ventures		65		70
Gain on disposal of BlueCrest	7	257		-
Impairment of Man Multi-Manager and Ore Hill	7,10	(397)		-
Gain arising from residual interest in brokerage assets	7	-		34
Finance expense	6	(86)		(36)
Finance income	6	40		29
Profit before tax - continuing operations		324		541
Taxation		(51)		(96)
Profit for the year - continuing operations		273		445
Discontinued operations - brokerage	7	(62)		-
Statutory Profit for the year attributable to owners of the parent		211		445

Earnings per share from continuing operations:	9
Basic (cents)		14.2		25.1
Diluted (cents)		14.0		24.8
Earnings per share from continuing and discontinued operations:	9
Basic (cents)		10.7		25.1
Diluted (cents)		10.5		24.8

Adjusted profit before tax -continuing operations

7

599

560

1.         Revenue

Management fee revenue for the year was $1,452 million, compared to $1,293 million in the prior year. Excluding the impact of the GLG acquisition in October 2010, gross management and other fees have remained broadly flat year on year.

Performance fees for the year were $203 million (2010: $52 million), split approximately equally between AHL and GLG.

2.         Distribution costs

Distribution costs of $318 million (2010: $325 million) paid to intermediaries and employees are directly related to their sales activity and the FUM serviced by them. The expense is therefore scalable to sales volumes, FUM and the associated management fee income to sustain margins.

Distribution costs consist of two components: placement fees which are payable to distributors and employees when a fund product is first launched and are based on the amount of investors' capital introduced; and servicing fees which are payable to distributors and employees for ongoing services and are based on the current net asset value of the fund products.

Placement fee expense for the year was $151 million (2010: $171 million), primarily relating to amortisation of placement fees.  At year end the unamortised placement fees were $184 million (2010: $278 million) and the amortisation charge for the period was $92 million (2010: $110 million). The weighted average remaining amortisation period of the unamortised placement fees at 31 March 2011 is two years.

Servicing fee expense for the period was $167 million (2010: $154 million).

3.         Asset services

Asset services includes custodial, valuations, fund accounting, and registrar functions performed by third parties under contract to Man, on behalf of the funds. The cost of these services is based on activity or FUM, therefore variable with activity levels. Previously many of these services had been performed internally. During the year we commenced an initiative to transition these services to third party providers and thereby reduce our internal resources. Asset services costs for the year were $16 million (2010: nil). It is anticipated that these costs will increase during calendar year 2011 (CY2011) with a corresponding decrease over time in internal costs, primarily compensation and headcount related other costs.

4.         Compensation

$m	2011	2010
Salaries - fixed	173	145
- variable	165	87
Share-based payment charge	86	50
Fund product based payment charge	15	5
Social security costs	40	26
Pension costs	22	17
Compensation costs - before restructuring and GLG acquisition costs	501	330
Restructuring	55	19
GLG acquisition	10	-
Total compensation costs	566	349

Compensation is our largest category of expense and an important component in our ability to retain and attract talent at Man.  In the short term the variable component of compensation adjusts with performance.   In the medium term the active management of headcount can reduce fixed based compensation, if required. Historically Man's compensation has been in the range of 18% to 25% of revenues, excluding restructuring costs. The compensation at GLG has been between 55% - 65% of revenue.

The unamortised deferred compensation at year end was $177 million (2010: $65 million) which had a weighted average remaining vesting period of 2 years. The increase in the balance primarily results from the acquisition of GLG.   Base salaries and the amortisation of deferred compensation are fixed expenses. The discretionary bonus element of compensation, which comprises 33% of total compensation, is variable with the performance of the business economics.

Included in restructuring costs of $55 million are termination costs of $43 million (2010: $13 million), of which $17 million relates to payment on severance arrangements established before the acquisition of GLG to certain key individuals in GLG and $12 million in accelerated share-based payment charges (2010: $6 million). This is not expected to re-occur as headcount has been permanently reduced in these functions. GLG acquisition costs relate to $10 million compensation costs paid to employees involved in the transaction. These items are treated as an adjusting item to statutory net profit (Note 7).

Included in pension costs is $12 million relating to the enhanced transfer exercise relating to the Defined Benefit Pension plan.

5.           Other costs

Other costs before restructuring and GLG acquisition costs were $265 million in the year, compared to $232 million in the prior year. The increase in other costs compared to the prior year is the result of consolidating the expense base of GLG of $40 million for the 5.5 months post acquisition. The other cost annual expense base of GLG was $98 million at the date of the acquisition.

Analysis of other costs

$m	2011	2010
Occupancy	55	40
Travel and entertainment	16	14
Technology	37	28
Communication	18	13
Consulting and professional services	42	36
Depreciation and amortisation	51	45
Charitable donations	4	3
Other	42	53
Other costs - before restructuring and GLG acquisition costs	265	232
Restructuring	17	34
GLG acquisition costs	25	-
Total other costs	307	266

The number of employees drives many of the expenses including occupancy, communications and technology and travel and entertainment. As the level of headcount is not directly proportional to the level of FUM it is possible to maintain a level of scalability within a range of FUM. Outside that range the size of the employee base is actively managed to preserve operating leverage and the sustainability of margins.

Occupancy expense has increased by $15 million in the year which relates to rental expense during the fit-out period of the new London headquarters and the inclusion of GLG.

Included in depreciation and amortisation is $25 million (2010: $22 million) of amortisation of capitalised computer software and $24 million (2010: $21 million) of depreciation primarily on computer equipment.

Restructuring costs primarily relate to $16 million (2010: $4 million) of professional fees. In the prior year restructuring costs also included $18m of onerous lease provisions in respect of leasehold properties; and an impairment charge of $11 million in relation to capitalised fixed assets associated with unused floor space. GLG acquisition costs of $25 million, primarily relating to legal fees, reporting accountants' fees and advisor fees, have been expensed and do not form part of franchise value.

As part of the acquisition of GLG we announced that we would achieve costs synergies of $50 million.  The majority of these cost synergies arise from overlapping back office functions and the delisting of the US listing entity.  One third of these cost synergies were achieved by year end, $8 million is reflected in reduced other costs and $8 million in reduced fixed compensation expense.

6.         Finance expense and finance income

Finance expense includes interest expense on borrowings and fees of $86 million (2010: $36 million), reflecting an increase in average debt levels compared to the previous year. Finance income is $40 million (2010: $29 million), which includes interest income on cash and cash equivalents of $27 million and a gain of $11 million on the repayment of the BlueCrest existing loan note as part of the disposal of the interests in BlueCrest.

7.         Adjusted profit before tax -continuing operations

Statutory profit before tax from continuing operations is adjusted for material items to give a fuller understanding of the underlying profitability of the business.

$m	Note	2011	2010
Statutory profit before tax from continuing operations		324	541
Adjusting items:
Gain on disposal of BlueCrest		(257)	-
Impairment of Man Multi Manager and Ore Hill	10	397	-
Compensation  - restructuring	4	55	19
Other costs - restructuring	5	17	34
GLG acquisition costs	4,5	35	-
Amortisation of acquired other intangibles (provisional)	10	28	-
Gain arising from residual interest in brokerage assets		-	(34)
Adjusted profit before tax from continuing operations		599	560
Tax		(85)	(104)
Adjusted net income - continuing operations		514	456

	Note	2011	2010
Adjusted earnings per share from continuing operations:     Adjusted diluted (cents)	9	27.6	25.5
Adjusted basic (cents)	9	28.0	25.8

The interest in BlueCrest Capital Management LLP (BlueCrest), previously reported as an associate, together with the existing loan note was sold on 21 March 2011 for $533 million of cash and $100 million par value new loan note. A gain of $257 million has been recorded on the sale of the equity interest and a gain of $11 million has been recorded on the repayment of the loan note in finance income in the Income Statement (Note 6). In 2011 the share of associate income after tax from BlueCrest was $67 million (2010: $73 million).

8.  Discontinued operations - brokerage

In September 2010, an independent arbitrator found in favour of MF Global, awarding them $33 million, in respect of a claim raised by MF Global in April 2009 relating to certain financial adjustments in relation to their closing IPO statement of financial position.

A further loss of $33 million resulting from the settlement of a class action suit relating to the IPO has been recognised. In addition, a $4 million tax provision made at the time of the IPO has been released.

The settlement of the actions above will extinguish all related and adjacent current and future claims. These losses relate to a discontinued business and reduce the gain on sale on the IPO previously recognised in the year ended 31 March 2008 and disclosed in the 2008 Annual Report.

9.         Earnings per ordinary share (EPS) 

The calculation of basic EPS is based on a basic post tax earnings for the year of $187 million (2010: $421 million) and ordinary shares of 1,749,928,034 (2010: 1,678,121,503), being the weighted average number of ordinary shares in issue during the year after excluding the shares owned by the Man employee trusts. For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The details of movements in the number of shares used in the basic and fully dilutive earnings per share calculation are provided below.

	2011			2010
	Total Number (millions)	Weighted average (millions)		Total Number (millions)	Weighted average (millions)
Number of shares at beginning of year	1,712.3	1,712.3		1,707.9	1,707.9
Issues of shares	6.4	1.6		4.4	2.8
Business combinations	162.8	74.9		-	-
Number of shares at 31 March	1,881.5	1,788.8		1,712.3	1,710.7
Shares owned by employee trusts	(47.1)	(38.9)		(26.8)	(32.6)
Basic number of shares	1,834.4	1,749.9		1,685.5	1,678.1
Share awards under incentive schemes		26.1			21.9
Employee share options		0.5			-
Dilutive number of shares		1,776.5			1,700.0

The reconciliation from EPS to an adjusted EPS is given below:

	Year to 31 March 2011
$m	Basic post-tax earnings $m	Diluted post-tax earnings $m	Basic earnings per share cents		Diluted earnings per share cents
Earnings per share on continuing and discontinued operations+	187	187	10.7	10.5
Discontinued operations - brokerage	62	62	3.5	3.5
Earnings per share on continuing operations+	249	249	14.2	14.0
Items for which EPS has been adjusted	275	275	15.7	15.5
Tax on the above items	(33)	(33)	(1.9)	(1.9)
Adjusted Earnings per share	491	491	28.0	27.6

	Year to 31 March 2010
$m	Basic post-tax earnings $m	Diluted post-tax earnings $m	Basic earnings per share cents	Diluted earnings per share cents
Earnings per share from continuing operations+	421	421	25.1	24.8
Items for which EPS has been adjusted	19	19	1.1	1.1
Tax on the above items	(8)	(8)	(0.4)	(0.4)
Adjusted Earnings per share	432	432	25.8	25.5

+ The difference between profit after tax and basic and diluted post-tax earnings is the adding back of the expense in the year relating to the Fixed Rate Perpetual Capital Securities, totalling $24 million post-tax at 28% (2010: $24 million).

Group Statement of Financial Position

The Statement of Financial Position represents the assets and liabilities of Man as at the year end. The most significant assets of Man are the franchise value (goodwill) invested in our business through acquisitions and the cash balances which represent part of our liquidity pool. These assets, together with other operating assets are supported by our shareholder equity base and issued debt.

The difference between the market valuation of Man of $7.4 billion at the balance sheet date and the balance sheet valuation of Man of $4.4 billion is an indication of other franchise value not recorded on the Statement of Financial Position, for example, the full value of the AHL franchise, the global distribution network, our investor base as represented by FUM and our people. While not recognised in the historical financial statements these assets underpin the sustainability of Man's business.

At 31 March
$m		Note	2011		2010
ASSETS
Cash and cash equivalents		12	2,359		3,229
Fee and other receivables			522		320
Investments in fund products		11	917		784
Other investments and pension asset			102		141
Investments in associates and joint ventures			68		351
Leasehold improvements and equipment			138		72
Franchise value and other intangible assets		10	2,712		1,135
Total assets			6,818		6,032
LIABILITIES
Trade and other payables			647		366
Current tax liabilities			157		180
Borrowings		12	1,478		1,489
Deferred tax liabilities			100		10
Total liabilities			2,382		2,045
NET ASSETS			4,436		3,987
EQUITY
Capital and reserves attributed to owners of the parent			4,436		3,987

10.       Franchise value (goodwill) and other intangible assets

		2011						2010
$m		Franchise value		Other intangibles	Total		Franchise value		Other intangibles	Total
Cost:
At beginning of year		798		1,028	1,826			785	1,018	1,803
Currency translation difference +		13		-	13			24	-	24
Acquisition of business		1,403		674	2,077			-	-	-
Additions		-		78	78			-	155	155
Reclassifications		-		(11)	(11)			-	-	-
Redemptions/Disposals		-		(162)	(162)			(11)	(145)	(156)
At 31 March		2,214		1,607	3,821			798	1,028	1,826
Aggregate amortisation/ impairment:
At beginning of year		-		(691)	(691)			(11)	(652)	(663)
Disposals		-		102	102			11	93	104
Amortisation		-		(145)	(145)			-	(132)	(132)
Impairment		(375)		-	(375)			-	-
At 31 March		(375)		(734)	(1,109)			-	(691)	(691)
Net book value at 31 March		1,839		873	2,712			798	337	1,135
Made up as follows:
AHL		83						74
Multi-Manager Business		353						724
GLG		1,403						-

+ The currency translation difference relates to the Man Investments Australia franchise value, which is denominated in Australian dollars.

Acquisition of GLG

On 14 October 2010, Man acquired GLG Partners, Inc (GLG) (the Acquisition), which then became a wholly owned subsidiary of Man. The Acquisition was structured as a cash acquisition with respect to the GLG Public Shareholders and a share exchange in respect of the GLG Principals and key employees. The cash consideration for the Public Shareholders was around $1.0 billion, which was funded from existing cash resources. The GLG Principals and key employees were granted in aggregate 162,732,446 newly issued shares of Man in exchange for their shares in GLG. The shares issued are subject to sale restrictions of between two and three years, and in some cases, service vesting conditions.  

Man engaged external valuation specialists to advise on the allocation of the purchase price between franchise value, intangible assets and net tangible assets. Provisional values for the acquired business, at the date of acquisition, are set out in the table overleaf:

$m (Provisional)	Book Value	Fair value adjustment		Fair value
Cash and cash equivalents	206	-		206
Fee and other receivables	110	4		114
Investments in fund products	29	-		29
Leasehold improvements and equipment	7	-		7
Franchise value and other intangible assets	34	640		674
Trade and other payables	(202)	(88)		(290)
Borrowings	(484)	(99)		(583)
Deferred tax arising on other intangible assets	-	(141)		(141)
Net assets acquired	(300)	316		16
Repurchase of convertible notes				297
Franchise value arising on acquisition				1,403
				1,716
Purchase consideration:
Cash consideration			997
Value of shares issued			628
Share replacement schemes, net of deferred tax			91
			1,716

The fair value adjustment relating to other intangible assets above relates to the valuation of investment management contracts (IMCs) of GLG ($596 million) along with other intangibles such as the GLG brand name ($34 million) and distribution channel ($42 million) as well as other assets of $2 million. The fair value adjustments to trade and other payables primarily relates to compensation accruals on un-crystallised performance fee income at the date of the acquisition. This accrual was crystallised in December 2010 when the performance fees were realised. The remaining adjustment relates to the fair value of the GLG premises lease and other liabilities. The fair value adjustment to borrowings relates to the convertible debt and term loan, which were both repaid soon after the acquisition. Deferred tax has been provided on the value of the intangible assets and this is a non-cash item as the liability arises due to the tax non-deductibility of the amortisation of IMCs. The share replacement schemes component of purchase consideration relates to the fair value of new Man share awards issued on acquisition date to replace pre-existing GLG employee share awards.

The franchise value primarily represents the significant revenue synergies to be generated from acquiring and integrating the GLG businesses with Man together with cost synergies from combining the two operating platforms. Man has the potential to add significant incremental funds under management through combining GLG's investment offering with Man's structuring and distribution expertise. The franchise value is not expected to be deductible for tax purposes.

The post tax result for the period since the acquisition date for GLG alone amounted to a profit of $11 million, excluding pre-tax items in relation to post-acquisition amortisation of purchased intangibles of $28 million, a charge of $17 million for restructuring costs included within adjusting items and an acquisition balance sheet fair value adjustment relating to compensation of $54 million. If the Acquisition had taken place at the beginning of the financial year, the loss after tax of GLG would have been $36 million, excluding amortisation of purchased intangibles of $60 million and a charge of $17 million for restructuring costs included within adjusting items. This result does not include any benefit from cost or revenue synergies.

Revenue for the period since the acquisition date for GLG amounted to $255 million, and if the Acquisition had taken place at the beginning of the financial year, the revenue for GLG would have been $431 million.

Other intangible assets have been recognised in respect of acquired IMCs, the distribution network and the GLG brand value. These intangible assets are recognised at the present value of the expected future cash flows of the investment management contracts and distribution channels acquired and are amortised on a straight-line basis over the expected life which is provisionally 9 to 12 years, and 10 years for the GLG brand name.  Amortisation expense in relation to these acquired other intangible assets was $28 million. 

From a capital management perspective all acquisition intangibles, net of deferred taxes, and franchise value is supported with shareholders' equity. This approach is consistent with our regulatory capital treatment. The acquisition of GLG was supported with existing excess shareholders' capital and the issuance of new Man shares to the principals and key employees.

Impairment of Man Multi-Manager (MMM)

In respect of the MMM business, although the business is profitable and making good operational progress, particularly with its managed account based solutions, the key sensitivity in the regular impairment review of this cash generating unit is the outlook for sales. Man's structured products are now expected primarily to use GLG strategies in place of MMM content, which means that future sales and margins anticipated for the MMM business may be lower than previously expected.

The value of the MMM business has been reassessed at 31 March 2011 by applying a discounted future cash flow model which reflects lower sales and margin expectations, and by assessing the fair value of the business based on market multiples applied to net fee income. Both methodologies resulted in a similar valuation. As a result an impairment of $375 million has been recognised. This impairment is a non-cash charge and has no impact on the excess regulatory capital position.

The discounted cash flow valuation has been based on the Three Year Plan (for the calendar years ended 31 December 2013) which was approved by the Board of Directors, and which factored in expected gross sales growth of 20% per annum, average redemptions of around 14% of FUM, lower fee margins reflecting the sales content mix, average investment performance of 8% and cost estimates. The discounted cash flows have been modelled for three years to be consistent with the Three Year Plan. The cash inflows and outflows are then modelled to increase by 2% per annum in perpetuity, as a reasonable approximation of historic US long term growth rates. This is used due to the low certainty around forecasting over longer time frames.The risk adjusted discount rate is based on the pre-tax weighted average cost of capital (WACC) of 11.25%.

If fair value amount was to fall to below the discounted cash flow valuation, the following sensitivities around the discounted cash flow valuation would result in further impairment.

The individual sensitivities around the key assumptions applied in the discounted cash flow model highlight that the MMM business continues to be dependent on the sales budget and fund performance being achieved and the discount rate applied, as below:

• If gross sales are $550 million lower than budget for the financial year ending 31 December 2011, the valuation would fall by around $40 million

• If fund performance is flat in the financial year ending 31 December 2011, instead of the assumed 8% return, the valuation would fall by around $165 million

• If the discount rate is increased by 1%, the valuation would fall by around $45 million.

11.                   Investments in fund products

	2011					2010
$m	Financial assets at fair value through profit or loss	Available-for-sale financial assets	Loans and receivables	Total		Financial assets at fair value through profit or loss	Available-for-sale financial assets	Loans and receivables	Total
Investments in fund products:
Loans to fund products	-	-	551	551		-	-	373	373
Other investments in fund products	363	3	-	366		409	2	-	411
	363	3	551	917		409	2	373	784

 

Loans to Fund Products

Loans to fund products are short term advances primarily to Man structured fund products (ie IP220 products). The loans are repayable on demand. The average balance is not materially different from the year end balance. The increase in the balance compared to the prior year is due to rebalancing in March as a result of negative performance. Loans to fund products are funded from available cash liquidity.

Other investments in fund products

Man uses capital to invest in our fund products as part of our ongoing business to build our product breadth and to trial investment research developments before we market the products to investors. These investments are generally held for less than one year.

Investment in fund products includes $50 million (2010: $18 million) of Man and GLG fund products which are held against outstanding deferred compensation arrangements

Total net gains on investments in fund products reported in income were $32 million (2010: $52 million).

Cash Flow Statement

For the year ended 31 March

$m	2011	2010
Pre tax profit for the year	273	445
Adjustments for:
Gain on disposal of BlueCrest	(257)	-
Amortisation of other intangible assets	145	132
Impairment of franchise value and other investments	397	-
Other adjustments	14	(41)
Changes in working capital	(45)	218
Cash flows from operating activities	527	754
Cash flows from investing activities	(31)	85
Cash flows from financing activities	(1,311)	(25)
Net increase in cash and cash equivalents	(815)	814
Cash and cash equivalents at the beginning of the year	3,174	2,360
Cash and cash equivalents at the end of the year	2,359	3,174

Cash flows from operating activities is 193% of statutory post tax income. The primary difference between post tax income and cash from operating activities relates to non-cash items: the impairment charge for the Man Multi-Manager and Ore Hill businesses; the amortisation of intangibles; offset by the gain on sale of BlueCrest.

In the prior year, cash flows from operating activities is 169% of statutory post tax income.  The primary difference between post tax income and cash from operating activities relates to amortisation and working capital movements, primarily a decrease in receivables and other financial assets.

Cash flows from investing activities primarily relate to the cash component of the consideration paid to acquire GLG (Note 9) of $692 million, partly offset by the cash acquired from GLG ($206 million) and the consideration received from the disposal of the equity holding in BlueCrest ($443 million). 

In the prior year, cash flows from investing activities primarily relate to proceeds from the sale of other investments, partly offset by the purchase of other intangible assets.

Cash flows from financing activities primarily relates to: the payment of dividends to ordinary shareholders ($613 million); the repayment of the convertible notes and senior debt acquired with GLG ($583 million); and the repurchase of own shares by the ESOP trust ($108 million).

In the prior year, cash flows from financing activities primarily relate to proceeds from borrowings, partly offset by dividend payments.

12.       Cash, liquidity and borrowings

Cash and cash equivalents of $2,359 million (2010: $3,229 million) represent our funded liquidity resources to support our ongoing operations and our stress liquidity requirements. The cash is invested in accordance with limits consistent with the Board's risk appetite, which consider both the security and availability of the liquidity. 

The business is cash generative and it has the ability to generate significant equity and cash through performance fees, particularly from AHL. Man's strategy is to have a diversified borrowing base combining both funded and unfunded facilities and sourced from financial institution and capital market

sources.

Man's liquidity resources, aggregated to $4.8 billion at year end (2010: $5.6 billion) comprising: net free cash balances (cash and cash equivalents less funded debt) of $0.6 billion (2010: $1.5 billion); total debt of $1.8 billion (2010: $1.7 billion), held as cash balances; and an undrawn committed syndicated

loan facility of $2.4 billion (2010: $2.4 billion).

The carrying amounts at year end included in borrowings were as follows:

$m	2011			2010
Bank overdrafts	-			55
2013 Senior Fixed Rate Notes	229			228
2015 Senior Fixed Rate Notes	847			806
2015 Subordinated Floating Rate Note	171			400
2017 Subordinated Fixed Rate Note	231			-
	1,478			1,489

On 9 August 2010, $231million of the 2015 subordinated floating rate notes were exchanged at par into new seven year subordinated fixed rate notes which have a coupon of 5% and mature on 9 August 2017 (2017 Subordinated Fixed Rate Notes).

Group Statement of Changes in Equity

At 31 March

	Equity attributable to shareholders of the Company
	2011				2010
$m	Share capital and capital reserves	Revaluation reserves and retained earnings	Total		Share capital and capital reserves	Revaluation reserves and retained earnings	Total
At beginning of the year	2,626	1,361	3,987		2,608	1,584	4,192
Profit for the year	-	211	211		-	445	445
Other comprehensive income	-	71	71		-	101	101
Perpetual capital securities coupon	-	(24)	(24)		-	(24)	(24)
Acquisition of business	694	(65)	629		-	-	-
Share-based payments	26	27	53		18	(5)	13
Disposal of business	-	22	22		-	5	5
Movement in close period buyback obligations	-	100	100	-	-	-	-
Dividends	-	(613)	(613)		-	(745)	(745)
At 31 March	3,346	1,090	4,436		2,626	1,361	3,987

During the year there have been no changes in the underlying instruments of shareholders' equity.  Shareholders' equity increased during the year as a result of profits and issuance of shares in relation to the GLG acquisition, net of dividend payments.  In 2010 shareholders' equity decreased as a result of dividend payments exceeding profits. 

The proposed final dividend will reduce shareholders' equity by $229 million (2010 $425 million).

13.  Dividends

$m	2011	2010
Ordinary shares
Final dividend paid for 2010 - 24.8 cents (2009: 24.8 cents)	441	419
Interim dividend paid for 2011 - 9.5 cents (2010: 19.2 cents)	172	326
Dividends paid during the year	613	745
Proposed final dividend for 2011 -12.5 cents (2010: 24.8 cents)	229	425

The proposed final dividend recommended by the board is payable on 19 July 2011, subject to shareholder approval, to shareholders who are on the register of members on 1 July 2011.  Dividends on ordinary shares are declared in US dollars but paid in sterling.

$m	2011	2010
Fixed rate perpetual subordinated capital security
Dividends paid during the year	33	33

The $33 million (2010: $33 million) of dividends paid during the year on fixed rate perpetual subordinated capital securities relate to the $300 million US$ RegS Fixed Rate Perpetual Subordinated Capital Securities issued in May 2008.

ENDS

 

END

 

 

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