Annual Report for the year ended 31 December 2008

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1. aCCoUntinG PoliCies (CONTINuED) Segment reporting Business segments are distinguishable components of the Group that provide products or services that are subject to risks and reward that are different to those of other business segments. Geographical segments provide products or services within a particular economic environment that is subject to risks and rewards that are different to those of components operating in other economic environments. Business segments are the primary reporting segments. Group costs are allocated to segments on a reasonable and consistent basis. The analysis by geographical segment is based on the location of the customer. Foreign currency translation (a) Functional and presentation currency items included in the Financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). The consolidated Financial statements of the Group are presented in sterling, which is the company’s functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of their fair value gain or loss. Translation differences on non-monetary items measured at fair value in a foreign currency, such as equities classified as available-for-sale financial assets, are translated into the functional currency using the rate of exchange at the date the fair value was determined. Translation differences are included in the fair value reserve in equity. (c) Group companies The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each Balance sheet presented are translated at the closing rate at the date of that Balance sheet; • income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and • all resulting exchange differences are recognised as a separate component in equity which is fair value and other reserves. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. notes to tHe FinanCial statements CONTINuED FOR THE YEAR ENDED 31 DECEMBER 2008 46 The evoluTion Group plc AnnuAl reporT & AccounTs 2008 Financial Liabilities - Redeemable Investment Shares WDB capital uK equity Fund limited, a subsidiary of the Group, issues redeemable investment shares to subscribers of its fund. The fund’s redeemable investment shares can be redeemed, subject to certain restrictions in relation to the timing of redemptions at the option of holders. Therefore the Group deems these redeemable investment shares to be a financial liability and classifies them under trade and other payables. The value of these redeemable shares changes depending on the performance of the fund. As WDB capital uK equity Fund limited is a subsidiary of the Group, and therefore consolidated within the Groups Financial statements, any change in the value of these redeemable investment shares issued to third party’s leads to an adjustment to trade and other payables, and a corresponding debit or credit being taken to other income. Finance income and expense interest income and expense for all interest-bearing financial instruments, except for those classified as held for trading or designated at fair value through profit or loss, are recognised within ‘finance income’ and ‘finance expense’ in the income statement using the effective interest method. The effective interest rate method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. The calculation of the effective interest rate includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Goodwill Goodwill arises on business combinations, including the acquisition of subsidiaries, associated entities, and represents the excess of the fair value of the purchase consideration and direct costs of making the acquisition, over the fair value of the Group’s share of the identifiable assets acquired and the liabilities and contingent liabilities assumed on the date of the acquisition. Goodwill is stated at cost less accumulated impairment losses, which are charged to the income statement. For calculating Goodwill, fair values of acquired identifiable assets, liabilities and contingent liabilities are determined by reference to market values or by discounting expected future cash flows to present value. This discounting is either performed using market rates or by using risk-free rates and risk adjusted expected future cash flows. Intangible assets intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses, if any. The following are the main categories of intangible assets: Intangible assets with a finite useful life a) Brands: purchased brands are capitalised at cost less amortisation and provisions for impairment over their estimated useful lives. expenditure incurred to develop or maintain brands internally is recognised as an expense in the period incurred.
) Distribution channels and customer relationships: purchased distribution channels and customer relationships are capitalised at cost less amortisation and provisions for impairment over their estimated useful lives. c) Computer software: Acquired computer software licenses are stated at cost, including those costs incurred to acquire and bring to use the specific software, less amortisation and provisions for impairment, if any. Any intangible assets with a finite life are amortised over a period of their useful lives on a straight-line basis. The following useful lives have been determined for intangible assets: computer software 3 years customer relations 5 years Brand 5 years Distribution channels 5 years Intangible assets with an indefinite useful life Financial Industry Regulatory Authority (“FINRA”) Licence costs associated with the acquisition of the us Broker Dealer, esus, are deemed to relate to the FinrA licence only. The licence is deemed to have an indefinite life, based on continuing FinrA membership having no fixed life, and consequently is not being amortised. Financial Services Authority (“FSA”) Regulatory Status costs associated with the acquisition of WDB capital limited (previously Wickam capital limited on 14 August 2007), are deemed to relate to its FsA regulatory status. The regulatory status is deemed to have an indefinite life, based on continuing FsA membership having no fixed life, and consequently is not being amortised. Property, plant and equipment All property, plant and equipment (“ppe”) is shown at cost less subsequent depreciation and impairment. cost includes expenditure that is directly attributable to the acquisition of the item. Depreciation on ppe is calculated using the straight-line method to allocate the cost of each asset to its residual value over its estimated useful life, as follows: leasehold improvements over 5 years computers and similar equipment over 3 to 5 years Fixtures, fittings, and other equipment over 3 to 5 years Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major renovation, whichever is sooner. Impairment of goodwill, intangible assets and PPE Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation or depreciation and are tested annually for impairment. other intangibles and ppe are assessed at the reporting date or whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. The impairment review comprises a comparison of the carrying amount of the asset with its recoverable amount of the asset or cash generating unit (for goodwill and intangible assets with an indefinite useful life). notes to tHe FinanCial statements CONTINuED FOR THE YEAR ENDED 31 DECEMBER 2008 The recoverable amount is the higher of an asset’s or cash generating units fair value less costs to sell and its value in use. An impairment loss is recognised in the consolidated income statement in the period in which it occurs for the amount by which the asset’s or cash generating unit’s carrying amount exceeds its recoverable amount. The assets’ residual values and useful lives, are reviewed and adjusted if necessary at each Balance sheet date. Financial assets and liabilities The Group classifies its financial assets and liabilities as trading portfolio assets and liabilities, available-for-sale financial assets, derivative financial instruments, stock borrowing and lending, trade and other receivables, cash and cash equivalents, and trade and other payables. The classification depends on the purpose for which the assets and liabilities were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at every reporting date. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through the profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when they are extinguished, that is, when the obligation is discharged, cancelled or expires. Trading portfolio assets and liabilities Financial assets and liabilities are classified as held for trading if acquired principally for the purpose of selling in the short-term or if so designated by management. purchases and sales of investments are recognised on trade date, being the date on which the company commits to purchase or sell the asset. Available-for-sale financial assets Available-for-sale financial assets are either designated in this category or are not classified in any other category. Available-for-sale financial assets are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. They are initially recognised at fair value including direct and incremental transaction costs. They are subsequently held at fair value. Dividends on available-for-sale equity instruments are recognised in the income statement when the entity’s right to receive payment is established. Gains and losses arising from changes in fair value are included as a separate component of equity within fair value and other reserves until sale or when impaired, when the cumulative gain or loss is transferred to the income statement. Measurement of trading portfolio assets and liabilities and available-forsale financial assets For trading portfolio assets and liabilities and available-for-sale financial assets that are quoted in active markets, fair values are determined by reference to the current quoted bid/offer price, with trading portfolio assets marked to the bid price and trading portfolio liabilities marked at the offer price. Where independent prices are not available, fair values may be determined using valuation techniques with reference to observable market data. 47
Page 1 and 2: Yesterday Today Tomorrow... ANNUAL
Page 3 and 4: FINANCIAL ANd OPERATIONAL HIGHLIGHT
Page 5 and 6: Balance Sheet strength and cash bal
Page 7 and 8: evolution securities Evolution secu
Page 9 and 10: Corporate Finance Evolution securit
Page 11 and 12: Wdb capital The Group’s investmen
Page 13 and 14: EARNINGS PER SHARE ON TOTAL OPERATI
Page 15 and 16: evolution securities’ income anal
Page 17 and 18: other activities The Group’s othe
Page 19 and 20: Lord macLaurin of Knebworth, dL (72
Page 21 and 22: principal risks and uncertainties T
Page 23 and 24: share capital Details of the change
Page 25 and 26: The Directors consider that in prep
Page 27 and 28: The Chief Executive, Alex snow, is
Page 29 and 30: The Committee observed that during
Page 31 and 32: appropriate and comprehensive proce
Page 33 and 34: The Board has delegated to the Remu
Page 35 and 36: The concept of a bonus ceiling does
Page 37 and 38: non-executive directors Non-executi
Page 39 and 40: On 8 April 2009, Alex snow was awar
Page 41 and 42: We have audited the Consolidated Fi
Page 43 and 44: ASSETS 2008 2007 Note £’000 £
Page 45 and 46: 2008 2007 £’000 £’000 (loss)/
Page 47: shareholding of more than one half
Page 51 and 52: (b) Share-based plans The Group’s
Page 53 and 54: Risk Reporting The Group Board rece
Page 55 and 56: Neither past Past due but not impai
Page 57 and 58: By business segment (continued) The
Page 59 and 60: 6. otHeR inCome Restated 2008 2007
Page 61 and 62: 11. aUditoRs’ RemUneRation During
Page 63 and 64: 14. inCome taX eXPense (CONTINuED)
Page 65 and 66: 18. intanGiBle assets notes to tHe
Page 67 and 68: 20. deFeRRed inCome taX (CONTINuED)
Page 69 and 70: 24. tRadinG PoRtFolio assets notes
Page 71 and 72: 31. Consolidated moVement in sHaReH
Page 73 and 74: 33. CasH FloW FRom oPeRatinG aCtiVi
Page 75 and 76: 38. emPloYee sHaRe sCHemes Movement
Page 77 and 78: 38. emPloYee sHaRe sCHemes (CONTINu
Page 79 and 80: THE EVOLuTION GROuP PLC PARENT COMP
Page 81 and 82: ASSETS ComPanY BalanCe sHeet AS AT
Page 83 and 84: statement oF ReCoGnised inCome and
Page 85 and 86: 1. aCCoUntinG PoliCies (CONTINuED)
Page 87 and 88: 2. FinanCial instRUments and RisK m
Page 89 and 90: 2. FinanCial instRUments and RisK m
Page 91 and 92: 5. inVestment in sUBsidiaRies notes
Page 93 and 94: 10. CasH and CasH eQUiValents 2008
Page 95 and 96: 17. Post BalanCe sHeet eVents There
Page 97 and 98: 19. emPloYee sHaRe sCHemes (CONTINu
Page 99 and 100:
19. emPloYee sHaRe sCHemes (CONTINu
Page 101 and 102:
FoR YoUR notes 99
Page 103 and 104:
DesiGneD AnD proDuceD BY BesT&co. l
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Annual Report for the year ended 31 December 2008

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