Following the transfer of a 50% interest in Pemba to Ore Hill's principals as part of the acquisition of a 50% interest in Ore Hill, a book gain of $48 million was recognised. Since this disposal, the credit markets have continued to deteriorate, which has severely affected the Pemba business. Accordingly, Pemba has been restructured and as part of this exercise, in February 2009, the Group took back its 50% shareholding from the Ore Hill principals at nil cost, with no further profit or loss arising.

This is offset by the recognition of an impairment charge of $214 million against the carrying value of the Ore Hill investment, following a deterioration in market conditions since the acquisition, and $75 million against the carrying value of the Group's interest in Ore Hill's Designated Investment portfolio. Further details of the gain and these impairments are included in Note 2 to the financial statements. In addition, the goodwill of $10 million relating to MTM was impaired.

Loss arising from residual interest in brokerage assets of $105 million primarily arose from the impairment of the Group's residual equity interest in MF Global (further details are given in Note 2).

Group profit before tax from continuing operations was down 64% to $743 million, reflecting a 62% decrease in net performance fee income to $358 million, a 23% decrease in net management fee income to $885 million compared to last year and non-recurring costs (adjusting items) of $500 million as detailed above. Adjusted Group profit before tax was down 40% to $1,243 million. Adjusted pre-tax margin was 52% compared with 64% last year, reflecting reduced performance fees partly offset by reduced compensation expenses.

The tax charge for the year amounts to $240 million. The effective tax rate on profits before the adjusting items is 20.3% (tax charge of $253 million on profit before the adjusting items of $1,243 million), compared with 17.4% last year. The prior year rate was lower principally as a result of favourable foreign exchange differences arising in the Group's Swiss entities, which did not recur in the current year. Additionally, in the current year the tax rate increased as a result of losses on seed investments, which are generally subject to lower tax rates, and a reduction in tax relief on employee share schemes, as a result of the fall in the Group's share price impacting on the related deferred tax asset. The effective tax rate for the year including the adjusting items is 32.3%. The primary reason for this higher rate is that in respect of the majority of the adjusting items, tax relief is not available or has not been recognised given the uncertainty of recoverability of the potential deferred tax asset.

Revenue margins

Gross management and other fees represent management fee income earned from funds under management, interest on loans to funds and other fees. Gross margins, before interest income earned from funds, are negotiated directly with institutional investors and distributors of the private investor products. These margins are also shown in the table below as this information is considered useful in analysing trends. Loans to funds are made to facilitate rebalance and investing activities. In the table below we have shown gross margins both including and excluding interest income earned on loans to funds.

Net margins are also shown to indicate the margin after deducting expenses (as explained below).

The gross management and other fees margin (before interest income) for private investors was 420bp, compared to 429bp for the prior year.The primary reasons for the reduction in the gross margin are:

• switch in the relative proportion of total private investor FUM relating to guaranteed products (relatively higher margin) and open-ended products (relatively lower margin) such that the proportion of open-ended products has increased compared to the prior year (impact: 7bp); and
• reduced fee loads on some MGS products prior to the MGS de-risk exercise (impact: 2bp).

The gross margin (excluding interest income) on guaranteed products is approximately 427bp and approximately 365bp on open-ended products.

The gross management and other fees margin for institutional investors was 94bp, compared with 100bp in the prior year. The decrease in this margin is primarily a result of a reduction in management fee income as some of our larger, long-standing investors switched into new, lower fee earning products. Excluding the margin impact of known redemptions from significant institutional investors, the gross management and other fees margin for institutional investors would have been slightly lower at 90bp.

The net management fees margin excludes net finance income, which principally relates to interest income earned on free cash deposits less finance costs on the Group's debt, and also the adjusting items, which are deemed to be non-recurring. The increase in compensation and other expenses has reduced net margins for private investors by around 11bp. This is partly the result of: a higher proportion of variable compensation being allocated to management fee income in periods of reduced performance fee income; and the acceleration of the amortisation charge relating to previously issued share awards. In addition, other expenses have increased, particularly in technology, to support the robustness of our infrastructure. Sales commissions have reduced the net margins for private investors by around 10bp, reflecting the higher amortisation charge on upfront sales commissions.

Revenue margins

	2009	H1 2009	2008	2007
Average FUM in period ($bn)
Average FUM in period ($bn)	38.4	44.2	39.6	33.5
Institutional	26.7	31.5	29.7	23.7
Private investor
Gross management and other fees1 ($m)	1,662	964	1,771	1,525
Interest income earned from funds ($m)	50	33	74	78
Net management fee income2 ($m)	737	458	898	787
Gross management fee margin (%)	4.33	4.36	4.47	4.55
Gross management fee margin before interest income from funds (%)	4.20	4.21	4.29	4.31
Net management fee margin (%)	1.92	2.07	2.27	2.35
Institutional
Gross management and other fees1 ($m)	252	146	297	269
Net management fee income2 ($m)	128	71	157	147
Gross management fee margin (%)	0.94	0.93	1.00	1.14
Net management fee margin (%)	0.48	0.45	0.53	0.62

1 Includes management and other fee income from associates.

2 Net management fee income is before net finance income and excludes adjusting items.