Final Results
Ashmore Group plc
6 September 2016
RESULTS FOR THE YEAR ENDING 30 JUNE 2016
Ashmore Group plc (Ashmore, the Group), the specialist Emerging Markets asset manager, today announces its audited results for the year ending 30 June 2016.
Overview
- Assets under management (AuM) of US$52.6 billion at the year end (30 June 2015: US$58.9 billion).
- Recovery in markets and investor sentiment in H2.
- Consistent investment process delivering: significant improvement in one year investment performance and outperformance maintained over three and five years.
- 69% of AuM outperforming benchmarks over one year, 63% over three years and 73% over five years (30 June 2015: 23%, 60% and 81%, respectively).
- Net revenues declined 18% to £232.5 million, with 22% lower average AuM level.
- FX translation gain of £21.0 million and performance fees of £10.4 million.
- Flexible business model delivers effective control of operating costs, reduced by 7% to £92.3 million.
- Adjusted EBITDA of £130.9 million, business model continues to deliver a high margin of 62%.
- PBT declined by 8% to £167.5 million.
- Strong seed capital returns contributed £24.6 million of mark-to-market gains to PBT.
- Diluted EPS reduced by 7% to 18.1p.
- Proposed final dividend per share of 12.1p, giving 16.65p total dividend per share for the year.
Commenting on the Group's results, Mark Coombs, Chief Executive Officer, Ashmore Group said:
"Ashmore's strategy and business model are designed to deal with the fluctuations of market cycles, and while the past few years have presented challenges to Emerging Markets, these results for the financial year demonstrate that the Group has maintained its high profitability and continued to generate cash. In weaker markets, Ashmore's consistent investment processes acquire risk and these actions usually provide strong outperformance for clients as markets recover.
"The rally in Emerging Markets asset prices and improving investor sentiment in 2016 is underpinned by solid economic fundamentals such as accelerating GDP growth, low and stable inflation, and responsible and effective fiscal and monetary policies. In contrast, the ongoing challenges in the developed world, such as high indebtedness, political risk and reluctance to reform, are seemingly not priced in, and therefore provide a clear incentive for investors to shift or increase allocations to Emerging Markets where there is a diversified range of investment opportunities offering highly attractive absolute and relative returns."
Analysts briefing
There will be a presentation for analysts at 9.30am on 6 September 2016 at the offices of Goldman Sachs International at Peterborough Court, 133 Fleet Street, London EC4A 2BB. A copy of the presentation will be made available on the Group's website at www.ashmoregroup.com.
Other information
Copies of the Company's Annual Report for the year ended 30 June 2016 and Notice of Annual General Meeting will be uploaded to the UK Financial Conduct Authority National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The documents will also be made available on the Group's website.
Ashmore will post its Annual Report and Notice of Annual General Meeting to shareholders on 19 September 2016. The Circular containing the Notice of Annual General Meeting contains a summary of the business of the resolutions to be proposed at the meeting and will be made available on the Group's website. The Company's Annual General Meeting will be held at 12.00pm on 21 October 2016 at Kingsway Hall, 66 Great Queen Street, London WC2B 5BX.
Contacts
For further information please contact:
Ashmore Group plc
Tom Shippey +44 (0)20 3077 6191
Group Finance Director
Paul Measday +44 (0)20 3077 6278
Investor Relations
FTI Consulting
Andrew Walton +44 (0)20 3727 1514
Kit Dunford +44 (0)20 3727 1143
Chairman's statement
My first year as Chairman has confirmed the impressions I had of Ashmore, initially from the perspective of an asset management industry participant and then while serving on the Board as a Non-executive Director. The opportunity presented by the increasing wealth of Emerging Markets is a substantial one, and Ashmore's strategy and business model position it well to capture this value on behalf of clients and shareholders.
Markets are cyclical, but there is virtue in following a consistent and well-defined investment philosophy. The strong performance of Ashmore's funds is testament to the ability of the Group's committee-based investment processes to deliver value to clients through market cycles. This successful investment track record derives from a deep and specialist knowledge of Emerging Markets that has been built up over more than two decades, and which is delivered to clients across a broad range of investment themes and product structures.
Similarly, the Group's business model is designed to cope with market fluctuations and to align interests between clients, shareholders and employees. This is primarily achieved by enforcing strict cost discipline and through the Group's distinctive and uniformly applied remuneration principles, that place an emphasis on variable and performance-related pay, with a bias towards long-term equity ownership. The Group's culture is therefore a collaborative one, with clients' interests and the creation of shareholder value, including for employee shareholders, the overarching factors for success. Even after three years of difficult market conditions, the commitment of Ashmore's employees and the resilience of its business model continue to deliver a high level of profitability.
Internal and independent external reviews have confirmed the effectiveness and efficiency of the Board and its committees, and I intend that my leadership will provide a consistent basis for this to continue. The Board's composition has an appropriate bias towards individuals with financial services experience, but also provides a wide variety of skills and opinions that are relevant to an active, specialist asset manager investing in Emerging Markets and operating in an increasingly complex industry. In that regard, I was pleased to welcome Clive Adamson to the Board in October, with his wide experience of the financial services regulatory environment.
Despite the impact of market conditions on profits, taking into account the Group's financial position and prospects, the Board believes it is appropriate to recommend a final dividend of 12.1 pence per share for the year ending 30 June 2016. Subject to shareholders' approval, the final dividend will be paid on 2 December 2016 to those shareholders on the register on 4 November 2016. This makes a total dividend of 16.65 pence per share for the year.
After serving on the Board for 10 years, Nick Land will retire at the AGM in October. On behalf of the Board and all Ashmore employees, I would like to thank Nick for his commitment and valuable contribution over the past decade.
I believe Ashmore has a highly talented group of employees that through market cycles have proven their commitment to delivering performance for clients. With a backdrop of improving conditions for Emerging Markets, this positions the Group well to continue to deliver value for shareholders.
Peter Gibbs
Chairman
5 September 2016
Chief Executive's review
Market conditions for the first half of the financial year were volatile and weak, with continued falls in commodity prices, a devaluation of the Chinese renminbi, fluctuating expectations for US monetary policy and concerns about global economic growth. Emerging Markets assets experienced distinct periods of weakness in August and September and then again in December and January. The second half of the financial year saw a sharp recovery in sentiment, however, as central banks in the developed world generally adopted dovish stances, commodity prices rallied and then stabilised, and economic and political conditions across Emerging Markets have generally proven resilient. The UK's referendum on EU membership at the end of the financial year had little direct effect on Emerging Markets, although the Group's non-Sterling denominated revenues and balance sheet positions benefited from the weaker exchange rate.
Ashmore's investment processes took advantage of volatile and weak market conditions, particularly in the first half of the financial year, such that investment performance over the period added US$1.2 billion to AuM and performance against benchmarks has been maintained. However, investor sentiment towards Emerging Markets remained weak for much of the period and therefore net outflows, while improving over the course of the year, led to an 11% reduction in the Group's AuM.
Against this backdrop, the Group continued to manage its costs effectively and generated an adjusted EBITDA margin of 62%. Lower operating costs, strong mark-to-market returns on seed capital, and the beneficial effect of a stronger US dollar against Sterling partially offset lower management fee income to deliver profit before tax of £167.5 million, 8% lower than the prior year.
AuM development
Assets under management declined by 11% over the year from US$58.9 billion to US$52.6 billion and, given the periods of pronounced market weakness in the first half of the year, average AuM fell by 22% from US$66.4 billion to US$52.1 billion. Investment performance added US$1.2 billion to AuM and there were net outflows of US$7.5 billion during the year, although there was an improving trend in both gross and net flows over the period.
Investment performance
A weaker Chinese currency, falling commodity prices and uncertainty about global growth prospects caused significant global market weakness in the first half of the financial year. Ashmore's investment processes added risk to portfolios during these periods, and consequently delivered strong outperformance when markets started to recover in February. When combined with the benefits of similar market patterns and investment opportunities in the prior financial year, as expected there has been a significant improvement in the proportion of AuM outperforming benchmarks over one year, from 23% as at 30 June 2015 to 69% as at 30 June 2016. This rapid and pronounced recovery in performance is typical for Ashmore's value-based investment approach, which continues to find profitable opportunities in the inefficient Emerging Markets universe.
The investment track record has been maintained over three and five years, with 63% and 73% of AuM outperforming relevant benchmarks, respectively (30 June 2015: 60% and 81%, respectively).
Financial performance
Revenue
Net revenue for the year of £232.5 million was 18% lower than in the prior year. This is principally the result of a 21% reduction in net management fees, which reflects 22% lower average AuM.
Performance fees of £10.4 million (FY2014/15: £13.3 million) were primarily delivered by investments in the alternatives theme. Funds with an August year end realised performance fees of £5.7 million in August 2016 that will be reflected in the FY2016/17 financial year.
The Group receives the majority of its fees in US dollars, which are sold as necessary to satisfy Sterling or other currency liabilities. The Group's cash held in currencies other than Sterling is marked to market at the balance sheet date and, primarily as a result of the US dollar strengthening against Sterling during the period from 1.5712 to 1.3234, there was a foreign exchange translation gain of £21.0 million (FY2014/15: £18.5 million).
Operating cost structure
The Group continues to manage its cost base effectively, ensuring sufficient investment for future growth opportunities while employing discipline in the light of the challenging market backdrop that has prevailed for several years. The majority of costs relate to staff and the Group maintains a relatively low cap on fixed salary costs and a strong bias towards variable performance-related remuneration. An emphasis is placed on long-term equity ownership. In the year to 30 June 2016, variable compensation as a percentage of earnings before variable compensation, interest and tax (VC/EBVCIT) was 20% (FY2014/15: 18.5%).
Total operating costs fell by 7% to £92.3 million (FY2014/15: £99.5 million).
Profitability
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was £130.9 million (FY2014/15: £176.6 million) and the adjusted EBITDA margin was 62% (FY2014/15: 67%).
Profit before tax for the year declined by 8% to £167.5 million (FY2014/15: £181.3 million) and diluted earnings per share for the year were 7% lower at 18.1p (FY2014/15: 19.3p).
Business and strategic developments
Ashmore continues to develop products as client demands evolve, and the Emerging Markets continually present new and differentiated investment opportunities. The Group has launched an absolute return product in SICAV form, which provides broader client access to a strategy that has previously been managed in segregated accounts. The short duration strategy that was launched two years ago now exceeds US$500 million AuM. With US dollar-denominated Emerging Markets bonds maturing in less than three years yielding more than 6%, this strategy is attracting investors seeking yield and has proven particularly popular through the retail intermediary channels in the US and Europe. The intermediary business in these regions generated net inflows over the year, which partially offset the expected redemptions from Japanese retail funds. Retail AuM has increased from 9% to 10% of the Group's total AuM.
After a period of asset realisations and capital returns to investors in the alternatives theme, approximately US$800 million of new capital was raised in the year, mainly in respect of private equity and senior debt infrastructure funds in Colombia, and private equity investments in the private healthcare markets in the Middle East. These are both long-term growth themes in Emerging Markets and Ashmore expects to grow its alternatives theme further over time, providing higher margin management fees derived from long-term, locked-up capital structures and often with the ability to earn carry or performance-related fees over their lives.
In November, Ashmore opened an office in Dubai to support its plans for growth in assets sourced and managed across the broader Gulf Cooperation Council (GCC) region.
The Group's range of mutual funds continues to develop, with 29 SICAVs managing US$8.6 billion and nine US 40-Act funds managing US$1.2 billion.
During the year, Ashmore agreed the terms of a transaction whereby Taiping Group, one of the largest insurance companies in China, will take a majority stake in Ashmore's Shanghai-based China fund management joint venture. Ashmore will retain a 15% interest in the joint venture and believes that the introduction of Taiping Group as a new shareholder will bring material benefits in the form of improved distribution access and support for product launches. The transaction received final regulatory approval in July.
Outlook
The volatility and weakness experienced recently in Emerging Markets assets, when set against improving economic fundamentals, has provided good investment opportunities for Ashmore's value-based processes. Sentiment towards Emerging Markets is improving and has been reflected in high frequency flow data, such as allocations to exchange-traded and mutual funds. While Ashmore has seen some early adopters in the past year, typically long-standing investors that understand the inefficiencies of Emerging Markets and can identify when value has been created by indiscriminate market weakness, most institutional investors take longer to react to improving market conditions. Therefore, a lag is likely between the recovery in asset prices and sentiment, and a broader and sustained recovery in investor appetite, and history suggests some investors that mis-timed the cycle may use a period of stronger asset prices to exit. Ultimately, though, the value available in Emerging Markets contrasts starkly with current pricing levels for many developed world markets, and this will encourage investors to address their weightings in Emerging Markets, resulting in stronger client flows over time.
UK referendum on EU membership
The immediate impact of the 'Brexit' referendum on Ashmore is known: the fall in the value of Sterling against the US dollar generated translation gains related to the balance sheet as at 30 June 2016, and provides a tailwind for the ongoing translation of non-Sterling denominated management fees, subject to any hedges in place. However, over the medium to longer term, the potential consequences are less easy to determine and will depend on the nature of the UK's relationship with the European Union and its individual member states. The Group has formed a senior management committee to monitor and manage the implications of Brexit, and is currently focused on three areas: the financial services passporting regime; counterparty relationships; and the very small number of UK-based employees that are potentially affected. Overall, the Group's view is that the operational implications of Brexit will be manageable.
People and culture
Ashmore's culture is characterised by the commitment of its employees through what has been a protracted period of volatility in Emerging Markets. Delivering investment performance for clients is central to the Group's success, and I would like to thank all employees for continuing to work hard throughout this period to deliver for clients.
Mark Coombs
Chief Executive Officer
5 September 2016
Market review
The first half of the Group's financial year generally saw weaker markets, reflecting concerns about global growth, the timing and effect of the first US rate increase, and lower commodity prices. The second half of the period was the inverse of the first half, with a recovery in the oil price, a fading of US dollar strength notwithstanding the US rate increase in December 2015, and a stabilisation or improvement in economic data. Against this backdrop of low growth, few inflationary risks and improved currency performance only towards the end of the year, Emerging Markets fixed income delivered stronger returns than equities, and US dollar-denominated debt outperformed local currency markets over the year.
External debt
The JP Morgan EMBI GD benchmark index delivered a good return over the year (+9.8%), and with high yield outperforming investment grade. It is notable that the highest returns came from the two countries that defaulted or restructured in the year: Argentina and Ukraine. This highlights the investment opportunities available in an inefficient asset class and the necessity to have strong, specialised credit analysis to identify where there is value, when security prices fall too far and become detached from fundamentals. Over three years, the Group's external debt broad composite has returned +6.9% annualised versus +7.2% for the benchmark.
While the concept of hard currency, typically US dollar-denominated, sovereign debt is straightforward, the complexity of the asset class and the need for active management derive from its diversity. The benchmark index contains 66 countries, and this is expected to increase as developing nations issue foreign currency debt for the first time. Importantly, with an index yield of around 5% there is a significant spread premium of approximately 350bps over 10-year US Treasuries to allow the index to perform even in a period of rising US interest rates.
Local currency
The continued strength of the US dollar for the first half of the year affected index returns, but this reversed in the second half such that the JP Morgan unhedged GBI-EM GD benchmark index increased by 2.0% over the 12 months. Over three years, the Group's local currency bonds composite has returned -3.2% annualised versus -3.6% for the benchmark.
The high positive yields available in local currency bonds are extremely attractive, particularly when compared with sovereign alternatives in the developed world, where many bonds offer negative yields. The strength of the US dollar over the past four years has affected returns from the local currency asset class, yet the outlook for Emerging Markets currencies against the US dollar is arguably now more balanced and the attractiveness of local currency bonds is therefore evident.
Local currency issuance by countries and companies continues to grow, which not only bolsters the resilience of Emerging Markets in the face of external shocks, but also provides significant and scalable investment opportunities for active investment managers. The opening to foreign investors of markets such as China will have important implications for benchmark indices, and over time, Ashmore expects this asset class to become its single largest theme on an 'as invested' basis.
Corporate debt
The JP Morgan CEMBI BD benchmark index performed well over the year (+5.3%), although in contrast to external debt, high yield slightly underperformed investment grade bonds. Over the past three years, the Group's corporate debt composite has returned +1.8% annualised versus +5.7% for the benchmark.
While the asset class naturally takes the US high yield credit market as a reference point for pricing, the second half of the period saw divergent fundamentals as defaults rose sharply in the US. Emerging Markets defaults have not followed suit, primarily due to two factors: Emerging Markets have greater geographic diversity (for example, there are 51 countries represented in the benchmark index), and the presence of explicit or implicit sovereign support, especially in the natural resources sector, which can be a factor to consider when assessing companies' ability and willingness to pay.
The asset class provides access to high yielding credit from a diverse range of issuers, and with shorter duration opportunities for investors looking to reduce rates risk. While demand is likely to remain focused on US dollar-denominated debt, over the longer term there are significant opportunities available in the much larger local currency corporate credit markets.
Blended debt
Reflecting the performance of the underlying asset classes, the standard blended debt benchmark generated a 5.1% return over the 12 month period.
There are powerful arguments for a dynamic allocation across Emerging Markets debt asset classes, including the wide range of annual investment returns and the ease with which an investor can achieve a broad allocation to Emerging Markets fixed income. Ashmore's long-term investment track records in each of the underlying asset classes, delivered by a consistent fixed income investment process, provide it with a strong insight into the relative value between the asset classes. This approach has delivered good returns for investors, with the Group's blended debt composite returning +4.0% annualised over the past three years versus +1.9% for the benchmark.
Equities
The Emerging Markets equity universe is large and diversified, and offers a broad range of investment opportunities for an active manager. As with fixed income, the indices can be a poor guide to the risk and returns available. For instance, the MSCI Frontier Market index is dominated by three countries: Kuwait, Argentina and Nigeria, which together account for nearly half (44%) of the index market capitalisation. Where benchmarks exist, however, the Group has typically delivered significant outperformance. Based on composites, more than half of the Group's equity AuM is outperforming benchmarks by at least 200bps annualised over three years and in some cases, such as the Group's India and Middle East funds, by more than 1000bps annualised.
Ashmore's Emerging Markets equity products provide a wide range of differentiated and uncorrelated returns, with significant growth potential in the underlying capital markets as they participate in the broader convergence trends and increasingly provide access to international investors. The Group's equities AuM today reflects a broad range of specialist funds, and over time the Group expects to grow its capabilities in the more scalable global Emerging Markets products.
Alternatives
Ashmore has identified several established growth trends in Emerging Markets, such as infrastructure development, renewable energy and private healthcare provision, that require long-term investment in illiquid assets. These projects can deliver attractive returns for investors who commit capital for multi-year periods. The Group has a long history of structuring funds, raising capital from a diversified investor base, managing projects and realising returns from such opportunities.
As described in the Chief Executive's review, the Group increased its alternatives AuM through capital raising in the period, and it believes there is a significant opportunity to replicate these initiatives in other Emerging Markets.
Multi-asset
The Group's multi-asset funds provide broad and diversified Emerging Markets exposure for both institutional and retail investors. As with blended debt, the asset allocation process draws on long investment track records in the underlying themes, and enables the Investment Committee to reflect an informed view of the relative value between the various fixed income, equity and alternatives asset classes. AuM in the period was stable, with positive investment performance offset by expected outflows from Japanese retail funds.
Overlay/liquidity
The Group's overlay product provides clients with the ability to manage the currency exposure of a portfolio of Emerging Markets assets. AuM development in this theme is determined by a number of external factors, such as the size and composition of the portfolios subject to hedging, asset allocation decisions, and the cost/benefit of hedging particular currencies.
Market outlook
More than three years of difficult conditions in Emerging Markets raises the question of whether the resultant asset prices reflect an opportunity to capture value or are a signal of further weakness. Ashmore believes there is substantial evidence to support the former, more optimistic view, and particularly so when considered against the relative lack of meaningful return opportunities in many Developed Markets.
Emerging Markets have faced several significant challenges over the past few years, starting with the Federal Reserve's 'taper tantrum' in 2013, an extended period of US dollar strength, elections and political upheaval in major economies, significant falls in the prices of commodities, and the start of the US interest rate cycle.
Yet there have been only two sovereign credit events, both of which can fairly be described as atypical and having very little to do with the factors listed above. The Emerging Markets corporate high-yield default rate is in line with its long-run average, and diverging from the US high yield market where defaults are rising sharply.
Why is this the case? The reasons inevitably depend upon specific circumstances but the broad common factors are that Emerging Markets have relatively low levels of debt (public or private), supportive demographics, responsible fiscal policies, less leverage in financial systems than in the developed world, high levels of FX reserves, more prudent monetary policies (and with greater capacity for stimulus with relatively high real interest rates and having not undertaken quantitative easing), and a greater tendency to reform.
Importantly, this backdrop has enabled policymakers to respond to weaker currencies by depressing domestic demand where necessary, which is leading to a significant improvement in external balances across Emerging Markets. This is feeding positively into FX reserves and GDP growth expectations, via net exports. Consequently, many market participants including the IMF expect an acceleration of GDP growth in Emerging Markets versus Developed Markets, for the first time since 2011.
It appears therefore that the weakness in Emerging Markets asset prices has created a clear opportunity, since the fundamentals are evidently more robust than implied by market prices. Furthermore, the opportunity cost of allocating to Emerging Markets has declined. In Developed Markets, the effects of QE have been to increase debt and raise asset prices, and in the absence of reforms productivity has fallen and GDP growth remains weak; the persistent strength of the US dollar over the past few years is now having a detrimental effect on the US economy, such that it is inhibiting the Fed's ability to raise rates; political and economic risks such as Brexit are not priced in; and the prevalence of negative bond yields in the developed world is also a powerful incentive to seek more attractive returns elsewhere, and potentially for lower risk.
The long-term Emerging Markets convergence trends are intact, and there is demonstrable absolute and relative value across the asset classes. As the headwinds of the past few years abate, and possibly even become tailwinds for Emerging Markets, sentiment is improving and allocations are likely to increase as global allocators move from the QE-inspired momentum trades, such as long US dollar and short European bonds, into value trades including Emerging Markets. Ashmore's proven expertise in delivering active, specialist investment management across the range of complex asset classes positions it well to benefit from this favourable outlook.
Business review
Ashmore's operating performance for the year reflects a 22% lower average AuM level compared with the prior year, a 7% reduction in total operating costs excluding consolidated funds and, therefore, a 26% decline in adjusted EBITDA compared with the prior year. The adjusted EBITDA margin has been maintained at a high level of 62%.
On a statutory basis, the positive effects of foreign exchange translation and mark-to-market returns on seed capital mean that profit before tax is 8% lower than the prior year at £167.5 million (FY2014/15: £181.3 million).
Summary non-GAAP financial performance
The table below reclassifies items relating to seed capital and the translation of non-Sterling balance sheet positions to aid clarity and comprehension of the Group's operating performance, and to provide a more meaningful comparison with the prior year. For the purposes
of presenting 'Adjusted' profits, operating expenses have been adjusted for the variable compensation on foreign exchange translation gains and losses.
|
|
|
Reclassification of |
|
|
|
|
£m |
FY2015/16 Statutory |
Seed capital-related items |
Foreign exchange translation |
FY2015/16 Adjusted |
FY2014/15 Adjusted |
|
Net revenue |
232.5 |
- |
(21.0) |
211.5 |
264.8 |
|
Investment securities |
(5.7) |
5.7 |
- |
- |
- |
|
Third-party interests |
3.4 |
(3.4) |
- |
- |
- |
|
Operating expenses |
(87.2) |
2.4 |
4.2 |
(80.6) |
(88.1) |
|
EBITDA |
143.0 |
4.7 |
(16.8) |
130.9 |
176.7 |
|
EBITDA margin |
62% |
- |
- |
62% |
67% |
|
Depreciation and amortisation |
(5.1) |
- |
- |
(5.1) |
(5.3) |
|
Operating profit |
137.9 |
4.7 |
(16.8) |
125.8 |
171.4 |
|
Net finance income/expense |
31.3 |
(9.8) |
(19.5) |
2.0 |
1.7 |
|
Associates and joint ventures |
(1.7) |
- |
- |
(1.7) |
(1.6) |
|
Seed capital-related items |
- |
5.1 |
- |
5.1 |
(0.4) |
|
Acquisition-related items |
- |
- |
- |
- |
- |
|
Profit before tax excluding FX translation |
167.5 |
- |
(36.3) |
131.2 |
171.1 |
|
Foreign exchange translation |
- |
- |
36.3 |
36.3 |
10.2 |
|
Profit before tax |
167.5 |
- |
- |
167.5 |
181.3 |
Assets under management
AuM declined by 11% over the year from US$58.9 billion to US$52.6 billion, through gross subscriptions of US$7.6 billion (FY2014/15: US$9.2 billion), gross redemptions of US$15.1 billion (FY2014/15: US$18.7 billion) and positive investment performance of US$1.2 billion (US$6.0 billion negative). Average assets under management declined by 22% versus the prior year, reflecting periods of pronounced market weakness and higher net outflows that occurred in the first half of the financial year.
Gross subscriptions represent 13% of opening AuM (FY2014/15: 12%) and gross redemptions represent 26% (FY2014/15: 25%). Both subscriptions and redemptions improved during the course of the year, as sentiment towards Emerging Markets started to recover after a prolonged period of weakness, and asset class returns improved.
Institutional subscriptions were diverse, by client type and location, and included incremental allocations by existing clients as well as new client mandates. Similarly, there was no particular pattern to institutional redemptions, although there was elevated activity by government-related clients in the first quarter of the financial year linked to the lower oil price, and redemptions in the local currency theme reflect the strength of the US dollar in recent years and notwithstanding good relative performance in this theme.
There were net inflows from retail clients through intermediary channels in the US and Europe, which partially offset expected redemptions from Japanese retail funds in the period. Japanese retail funds now account for just US$0.7 billion of Group AuM.
AuM movements by investment theme
The AuM by theme as classified by mandate is shown in the table below. Reclassifications typically occur when a fund's investment objectives, investment guidelines or performance benchmark change such that its characteristics cause it to be included in a different theme.
|
Theme |
AuM 30 June 2015 |
Performance US$bn |
Gross subscriptions US$bn |
Gross redemptions US$bn |
Net flows |
Reclassifications US$bn |
AuM 30 June 2016 |
|
External debt |
12.0 |
0.9 |
1.0 |
(2.7) |
(1.7) |
0.5 |
11.7 |
|
Local currency |
15.2 |
0.2 |
2.0 |
(4.1) |
(2.1) |
- |
13.3 |
|
Corporate debt |
7.2 |
(0.1) |
1.1 |
(2.5) |
(1.4) |
(0.7) |
5.0 |
|
Blended debt |
15.7 |
0.7 |
0.9 |
(3.8) |
(2.9) |
0.2 |
13.7 |
|
Equities |
3.8 |
(0.5) |
0.6 |
(0.8) |
(0.2) |
- |
3.1 |
|
Alternatives |
0.8 |
0.1 |
0.8 |
(0.2) |
0.6 |
- |
1.5 |
|
Multi-asset |
1.6 |
- |
0.2 |
(0.6) |
(0.4) |
- |
1.2 |
|
Overlay/liquidity |
2.6 |
(0.1) |
1.0 |
(0.4) |
0.6 |
- |
3.1 |
|
Total |
58.9 |
1.2 |
7.6 |
(15.1) |
(7.5) |
- |
52.6 |
AuM as invested
The following tables show AuM 'as invested' by underlying asset class, which adjusts from 'by mandate' to take account of the allocation into the underlying asset class of the multi-asset and blended debt themes; and of crossover investment from within certain external debt funds.
The Group's AuM by investment destination is diversified geographically and consistent with the prior year, with 36% in Latin America, 25% in Asia Pacific, 13% in the Middle East and Africa, and 26% in Eastern Europe.
AuM classified by mandate
|
|
30 June 2016 |
30 June 2015 |
|
External debt |
22 |
20 |
|
Local currency |
25 |
26 |
|
Corporate debt |
10 |
12 |
|
Blended debt |
26 |
27 |
|
Equities |
6 |
7 |
|
Alternatives |
3 |
1 |
|
Multi-asset |
2 |
3 |
|
Overlay/liquidity |
6 |
4 |
AuM as invested
|
|
30 June 2016 |
30 June 2015 |
|
External debt |
39 |
36 |
|
Local currency |
31 |
31 |
|
Corporate debt |
14 |
20 |
|
Equities |
7 |
7 |
|
Alternatives |
3 |
2 |
|
Overlay/liquidity |
6 |
4 |
Investor profile
The Group's client base is predominantly institutional in nature, with 90% (30 June 2015: 91%) of AuM from such clients. Ashmore has established direct, long-term relationships with its institutional clients, the most significant categories of which are government-related entities (such as central banks, sovereign wealth funds and pension schemes) and private and public pension plans, together accounting for 70% of AuM (30 June 2015: 70%). AuM sourced through intermediaries, which provide the Group with access to retail markets, amounts to 10% of the Group total (30 June 2015: 9%). Ongoing success in delivering flows to the US and European retail platforms partially offset the expected redemptions from Japanese retail funds.
AuM by investor type
|
|
30 June 2016 |
30 June 2015 |
|
Central banks |
18 |
21 |
|
Sovereign wealth funds |
10 |
10 |
|
Governments |
13 |
8 |
|
Pension plans |
29 |
31 |
|
Corporates/Financial institutions |
16 |
18 |
|
Funds/Sub-advisers |
2 |
1 |
|
Third-party intermediaries |
10 |
9 |
|
Foundations/Endowments |
2 |
2 |
AuM by investor geography
|
|
30 June 2016 |
30 June 2015 |
|
Americas |
22 |
21 |
|
Europe ex UK |
28 |
27 |
|
UK |
8 |
9 |
|
Middle East and Africa |
23 |
23 |
|
Asia Pacific |
19 |
20 |
Segregated accounts represent 70% of AuM (30 June 2015: 69%). The trend in demand for segregated accounts is well established and the Group expects this to continue as it reflects ongoing factors such as regulatory obligations, bespoke reporting requirements, and the application of specific investment guidelines.
Financial review
Revenues
Net revenue declined 18% from £283.3 million to £232.5 million as a result of lower net management fees commensurate with reduced average assets under management compared with the prior year. A higher contribution from foreign exchange translation balanced slightly lower performance fees.
Management fee income net of distribution costs declined 21% to £195.9 million (FY2014/15: £247.3 million), broadly in line with the 22% fall in average AuM. The average translation benefit of a stronger US dollar against Sterling offset the reduction in the net management fee margin to 55bps (FY2014/15: 59bps).
The movement in the margin has been influenced by two non-recurring factors, which together represent 1.5bps of the year-on-year decline: as previously described, in the prior year there was the release of an accrual relating to an equities distribution agreement; and in the financial year, the margin was adversely affected by fee rebates relating to prior years. The underlying reduction therefore is approximately two to three basis points, the majority of which is explained by changes in investment theme mix such as a higher proportion of average AuM in the external debt, local currency and overlay/liquidity themes. The margin will continue to be influenced by factors such as theme and product mix, competition, and long-term development of asset class returns.
Performance fees of £10.4 million (FY2014/15: £13.3 million) were generated in the period, mostly through the realisation of fees on investments in the alternatives theme. At 30 June 2016, 14% of the Group's AuM was eligible to earn performance fees (30 June 2015: 13%), of which a significant proportion is subject to rebate agreements.
Translation of the Group's non-Sterling assets and liabilities at the period end result in a foreign exchange gain of £21.0 million (FY2014/15: £18.5 million), reflecting US dollar strength against Sterling. The Group recognised net realised and unrealised hedging gains of £1.1 million (FY2014/15: £0.4 million loss).
Fee income and net management fee margin by investment theme
The table below summarises net management fee income after distribution costs, performance fee income, and average net management fee margin by investment theme, determined with reference to weighted average assets under management.
|
Theme |
Net management fees FY2015/16 £m |
Net management fees FY2014/15 £m |
Performance fees FY2015/16 £m |
Performance fees FY2014/15 £m |
Net management fee margin FY2015/16 bps |
Net management fee margin FY2014/15 bps |
|
External debt |
37.0 |
45.8 |
1.5 |
6.8 |
49 |
56 |
|
Local currency |
40.5 |
46.6 |
0.1 |
0.3 |
45 |
45 |
|
Corporate debt |
21.9 |
30.9 |
0.2 |
0.1 |
61 |
65 |
|
Blended debt |
52.3 |
63.6 |
0.1 |
0.1 |
54 |
54 |
|
Equities |
22.3 |
32.2 |
- |
0.3 |
104 |
105 |
|
Alternatives |
10.9 |
12.6 |
8.5 |
4.8 |
141 |
165 |
|
Multi-asset |
7.8 |
12.5 |
- |
0.9 |
94 |
95 |
|
Overlay/liquidity |
3.2 |
3.1 |
- |
- |
16 |
17 |
|
Total |
195.9 |
247.3 |
10.4 |
13.3 |
55 |
59 |
Operating costs
The Group continues to exercise cost discipline, resulting in a 7% decline in total operating costs from £99.5 million to £92.3 million. Excluding variable compensation, operating costs were 1% lower at £56.7 million (FY2014/15: £57.1 million).
Average headcount fell 5% from 293 to 277 employees principally through natural staff turnover and the Group's headcount at 30 June 2016 was 266 employees (30 June 2015: 285 employees). Fixed staff costs of £24.1 million were 3% lower than in the prior year (FY2014/15: £24.8 million), reflecting the lower average headcount and the mix of employee turnover in the period, with a net reduction in support roles and additional employees in local asset management businesses.
Other operating costs, excluding depreciation and amortisation, increased slightly to £27.5 million (FY2014/15: £27.0 million), reflecting non-recurring professional fees. Excluding these, operating costs would have fallen modestly as the Group continues to focus on controlling discretionary expenditure such as travel and the costs of third-party services.
The charge for variable compensation was £35.6 million, a decrease of 16% on the prior year (FY2014/15: £42.4 million), and representing 20% of earnings before variable compensation, interest and tax and excluding seed capital-related items (FY2014/15: 18.5%).
EBITDA
EBITDA for the period was £143.0 million (FY2014/15: £186.3 million). On an adjusted basis, reclassifying the effects of seed capital investments and foreign exchange translation, EBITDA was 26% lower at £130.9 million (FY2014/15: £176.7 million).
The EBITDA margin for the financial year was 62% (FY2014/15: 66%). On an adjusted basis, the EBITDA margin was 62% (FY2014/15: 67%).
Finance income
Net finance income of £31.3 million for the period (FY2014/15: £1.9 million) includes items relating to seed capital investments, which are described in more detail below. Excluding these items, net interest income for the year was £2.0 million (FY2014/15: £1.7 million).
Taxation
The majority of the Group's profit is subject to UK taxation; of the total current tax charge for the year of £38.8 million (FY2014/15: £41.3 million), £32.1 million (FY2014/15: £36.4 million) relates to UK corporation tax.
There is a £14.3 million net deferred tax asset on the Group's balance sheet as at 30 June 2016 (30 June 2015: £16.8 million), which arises principally as a result of timing differences in the recognition of the accounting expense and actual tax deduction in connection with (i) share-based payments, and (ii) goodwill and intangibles arising on the acquisition of Ashmore's equity business.
The Group's effective current tax rate for the year is 23.2% (FY2014/15: 22.8%), which is higher than the blended UK corporation tax rate of 20.0% (FY2014/15: 20.75%). Note 12 to the financial statements provides a full reconciliation of this deviation from the blended UK corporate tax rate.
Balance sheet, cash flow and foreign exchange
It is the Group's policy to maintain a strong balance sheet in order to support regulatory capital requirements, to meet the commercial demands of current and prospective clients, and to fulfil development needs across the business. These include funding establishment costs of distribution offices and local asset management ventures, seeding new funds, trading or investing in funds or other assets, and other strategic initiatives.
As at 30 June 2016, total equity attributable to shareholders of the parent was £676.7 million (30 June 2015: £656.1 million). There is no debt on the Group's balance sheet.
Cash
Ashmore's business model delivers a high conversion rate of operating profits to cash. From operating profit of £137.9 million for the period (FY2014/15: £181.0 million), the Group generated cash of £151.2 million before working capital changes (FY2014/15: £215.2 million) and £125.2 million of cash from operations (FY2014/15: £190.4 million).
Cash and cash equivalents by currency
|
|
30 June 2016 £m |
30 June 2015 £m |
|
Sterling |
212.6 |
205.0 |
|
US dollar |
123.2 |
152.7 |
|
Other |
28.2 |
23.1 |
|
Total |
364.0 |
380.8 |
Seed capital investments
As at 30 June 2016, the amount invested in seed capital was £207.4 million at cost, with a market value of £238.5 million (30 June 2015: £213.3 million at cost; £207.0 million market value). The 'at cost' investment represents 35% of Group net tangible equity (30 June 2015: 37%) and the majority of the Group's seed capital is held in liquid funds, such as daily-dealing SICAVs or US 40-Act mutual funds.
Seed capital by currency
|
|
30 June 2016 £m |
30 June 2015 £m |
|
US dollar |
189.2 |
150.1 |
|
Indonesian rupiah |
33.9 |
36.5 |
|
Brazilian real |
- |
7.0 |
|
Other |
15.4 |
13.4 |
|
Total market value |
238.5 |
207.0 |
The Group manages its seed capital positions actively. During the year it made new investments of £53.9 million, realised £60.9 million from previous investments, and made additional commitments of approximately £30 million, which were substantially undrawn at the year end. Market movements during the year added £38.5 million to the value of seed capital.
After a significant market recovery in the second half of the financial year and beneficial currency movements against Sterling at the financial year end, seed capital activity resulted in a profit before tax of £24.6 million (FY2014/15: £5.3 million loss), most of which was based on mark-to-market values and therefore unrealised at the year end.
The consolidation of funds in which the Group's seeding leads to a controlling interest resulted in a pre tax profit contribution of £nil (FY2014/15: £0.2 million loss). This comprises losses on investment securities of £5.7 million (FY2014/15: £3.6 million loss), change in third-party interests gain of £3.4 million (FY2014/15: £0.8 million gain), operating expenses of £2.4 million (FY2014/15: £2.7 million) and net finance income of £4.7 million (FY2014/15: £5.3 million).
The financial effects of seed capital held in other funds are reported as finance income or expense, and include a positive investment return of £5.1 million (FY2014/15: £0.2 million negative return) and a £19.5 million foreign exchange gain (FY2014/15: £4.9 million loss) arising on the translation of non-Sterling denominated seed capital positions, and principally those denominated in US dollar and Indonesian rupiah. Note 20 to the financial statements provides more details on the movements in seed capital items during the financial year.
Own shares held
The Group purchases and holds shares through an Employee Benefit Trust (EBT) in anticipation of the exercise of outstanding share options and the vesting of share awards. At 30 June 2016, the EBT owned 41,173,968 (30 June 2015: 37,889,347) ordinary shares, more than sufficient to cover employee share awards made to date.
Goodwill and intangible assets
At 30 June 2016, goodwill and intangible assets on the Group's balance sheet totalled £82.5 million (30 June 2015: £74.1 million) with the increase attributable to an amortisation charge of £3.9 million (FY2014/15: £4.0 million) and a foreign exchange revaluation gain through reserves of £12.3 million (FY2014/15: £5.9 million).
Foreign exchange
The majority of the Group's fee income is received in US dollars and it is the Group's established policy to hedge up to two-thirds of the notional value of up to two years' budgeted foreign currency-denominated net management fees, using either forward or option foreign exchange contracts. The Group's Foreign Exchange Management Committee determines the proportion of budgeted fee income to hedge by regular reference to expected non-US dollar, and principally Sterling, cash requirements. The hedging contracts effectively create a corridor outside of which the proportion of fee income is protected from movements in the GBP:USD exchange rate. When the contracts expire, either they deliver Sterling or the Group can sell the notional amount of US dollars for Sterling at the prevailing spot rate. The proportion of fee income received in foreign currency and not subject to hedging is held as cash or cash equivalents in the foreign currency and marked to market at the period end exchange rate.
Translation of the Group's non-Sterling denominated balance sheet resulted in a foreign exchange translation gain of £21.0 million, principally as a result of the strength of the US dollar against Sterling. The Group sold US$225 million of its US dollar cash holdings as the exchange rate moved in its favour during the year. Net realised and unrealised hedging gains of £1.1 million (FY2014/15: £0.4 million loss) were recognised for the period.
Regulatory capital
As a UK listed asset management group, Ashmore is subject to regulatory supervision by the Financial Conduct Authority (FCA) under the Prudential Sourcebook for Banks, Building Societies and Investment Firms. At the year end, the Group had two UK-regulated entities: Ashmore Investment Management Limited (AIML), and Ashmore Investment Advisors Limited (AIAL), on behalf of which half-yearly capital adequacy returns are filed. Both AIML and AIAL held excess capital resources relative to their requirements at all times during the period under review.
Since 1 January 2007, the Group has been subject to consolidated regulatory capital requirements, whereby the Board is required to assess the degree of risk across the Group's business, and is required to hold sufficient capital against these requirements.
The Board has assessed the amount of Pillar II capital required to cover such risks as £99.9 million (30 June 2015: £94.4 million). The net increase of £5.5 million compared with the prior year is a function of additional capital requirements for undrawn illiquid seed capital commitments, offset by lower market and operational risk charges. The Group has total capital resources of £590.8 million, giving a solvency ratio of 491%. Therefore the Board is satisfied that the Group is adequately capitalised.
Dividend
The Board intends to pay a progressive ordinary dividend over time, taking into consideration factors such as prospects for the Group's earnings, demands on the Group's financial resources, and the markets in which the Group operates.
In recognition of Ashmore's operating and financial performance during the period, its balance sheet strength, and the Board's confidence in the Group's future prospects, the Directors are recommending a final dividend of 12.1 pence per share for the year ending 30 June 2016, which, subject to shareholder approval, will be paid on 2 December 2016 to those shareholders who are on the register on 4 November 2016.
Tom Shippey
Group Finance Director
5 September 2016
Risk management
Risk management and internal control systems
In accordance with the principles of the 2014 version of the UK Corporate Governance Code, the Board is ultimately responsible for the Group's risk management and internal control systems and for reviewing their effectiveness. Such systems and their review are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.
The Group's principal risks that are most relevant to the implementation of its strategy and business model are listed in the table below, together with controls and mitigants. Reputational and conduct risks are common to most aspects of the strategy and business model.
Principal risks and their delegated owners, controls and mitigation
|
Principal risks |
|
Controls and mitigation include |
Strategic and business risks (Delegated owner: Ashmore Group plc Board)The medium and long-term profitability and/or reputation of the Group could be adversely impacted by the failure either to identify and implement the correct strategy, or to react appropriately to changes in the business environment. |
||
|
- Long-term downturn in Emerging Markets fundamentals/technicals/sentiment - Market capacity issues and increased competition - Appropriate communication with, and effective management of, existing and potential shareholders of Ashmore Group plc |
|
- Experienced Emerging Markets investment professionals participate in Investment Committees. Frequent and regular Board updates - Diversification of investment capabilities - Group strategy is approved by a Board with relevant - Regular capacity reviews - Dedicated investor relations position that reports to the Group Finance Director and Board - Group Media policies and list of approved spokespeople |
Client risks (Delegated owners: Distribution and Group Risk and Compliance Committee)Ineffective management of existing and potential investor base, including assessing client suitability, may lead to inefficient marketing and distribution capabilities and/or loss of investor confidence. Inadequate client oversight including a breach of client confidentiality, lack of support and Treating Customers Fairly (TCF) may result in financial and regulatory sanctions and/or damage to the Group's reputation. |
||
|
- Appropriate marketing strategy that includes effective management of potential and existing fund investor base - Adequate client oversight including alignment of interests |
|
- Product Committee meets frequently and regularly to review product suitability and appropriateness - Experienced Distribution team with appropriate geographic coverage - Investor education to ensure understanding of Ashmore investment themes and products - Monitoring of client-related issues including a formal complaints handling process - Compliance and Legal oversight to ensure clear and fair terms of business and disclosures, and appropriate client communications and financial promotions |
Treasury risks (Delegated owners: Chief Executive Officer and Group Finance Director)The Group's financial performance or position may be impacted if management does not appropriately mitigate balance sheet risks or exposures. |
||
|
- Financial projections and hedging of future cash flows and balance sheet, as well as adequate liquidity and regulatory capital provision for Group and subsidiaries |
|
- FX hedging policy and regular FX Management Committee meetings - Group liquidity policy. Cash flows are monitored and reviewed regularly - Seed capital is subject to strict monitoring by the Board within a framework of set limits including diversification |
Investment risks (Delegated owner: Group Investment Committees)The failure to deliver long-term investment performance may damage the prospects for winning and retaining clients, putting average management fee margins under pressure. Market liquidity provided by counterparties that the Group and its funds rely on may reduce. |
||
|
- Manager non-performance including i) ineffective leverage, cash and liquidity management and similar portfolios being managed inconsistently; ii) neglect of duty, market abuse; iii) inappropriate oversight of special purpose vehicles (SPVs) and related legal structures and compliance with law and regulations; iv) inappropriate oversight of market, liquidity, credit, counterparty and operational risks; v) insufficient number of trading counterparties; and vi) breaching investment guidelines or restrictions - Downturn in long-term performance |
|
- Funds in the same investment theme are managed by consistent investment management teams, and allocations approved by Investment Committees - Policies in place to cover conflicts, best execution and market abuse factors, such as insider trading - Tools to manage liquidity issues as a result of redemptions include restrictions on illiquid exposures, swing pricing and ability to use in specie redemptions - Consistent investment philosophy with dedicated Emerging - Group trading counterparty policy and regular counterparty reviews - Frequent and regular reviews of market, liquidity and credit risk - Legal team and use of external counsel to ensure appropriate documents are in place - Investment decisions are subject to pre-trade compliance |
Operational risks (Delegated owner: Group Risk and Compliance Committee)These risks are broad in nature and inherent in most business processes. They include the risk that operational flaws result from a lack of resources or planning, error or fraud, weaknesses in systems and controls, or incorrect accounting or tax treatment. |
||
|
- Security of information - Business continuity planning (BCP) covering people, buildings and systems - Accuracy and integrity of data including i) manual processes/reporting; and ii) transactions, static data and prices - Pre- and post-trade booking and settlements - Development of IT infrastructure to support business and product growth; failure or corruption of key IT system - Maintaining approved counterparties with regard to execution venues, legal documents, mandate restrictions, trading limits - Legal action, fraud or breach of contract perpetrated against the Group, funds or investments - Level of resources, which includes loss of key staff, or inability to attract staff constrains growth - Lack of understanding and compliance with global and local regulatory requirements, as well as conflicts of interest and treating customers fairly; and financial crime, which includes money laundering, bribery and corruption leading to high level publicity or regulatory sanction - Inappropriate accounting and/or tax practices lead to sanction - Oversight of Ashmore overseas entities - Mismanagement of or ineffective core services provided by third parties - Management, oversight and documentation of new and existing funds |
|
- Information security and data protection policies - BCP working group - Pricing Oversight Committee - All trades are required to be booked into front office trading/ accounting systems - Appropriate IT policies and procedures in place - Approved counterparty list - Independent Internal Audit department - Financial crime policy, which also covers service providers - Committee-based investment processes reduce key man risk - Resources regularly reviewed and updates provided to the Board - Appropriate remuneration policy and succession plan in place - Insurance policies in place to ensure appropriate coverage of aspects of litigation - Compliance policies in place and adopted by overseas offices. Adherence to regulatory requirements is closely managed through compliance monitoring programmes - Conflicts of interest policy and procedures in place. Conflicts of interest officer reports to the Board regularly - Anti-bribery and corruption procedures issued and adopted to investee companies where Ashmore has a controlling stake - Group accounting policies reviewed by Group Finance Director, - External auditor conducts interim review and annual audit - Group tax policy and dedicated in-house tax specialist - External tax advice sought where appropriate - Operating Committee has oversight of the global operating model. Local office functions report into local management and Group department heads - Due diligence on all new third parties, and regular meetings/reviews of third-party service providers - Frequent and regular product committee meetings |
Statement of Directors' responsibilities
The Directors are responsible for preparing the annual report and the Group and parent company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit and loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' report, Directors' remuneration report and corporate governance statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
- the Directors' report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
Peter Gibbs
Chairman
5 September 2016
Consolidated statement of comprehensive income
For the year ended 30 June 2016
|
|
Notes |
2016 |
2015 |
|
Management fees |
|
197.1 |
250.2 |
|
Performance fees |
|
10.4 |
13.3 |
|
Other revenue |
|
4.1 |
4.6 |
|
Total revenue |
|
211.6 |
268.1 |
|
Distribution costs |
|
(1.2) |
(2.9) |
|
Foreign exchange |
7 |
22.1 |
18.1 |
|
Net revenue |
|
232.5 |
283.3 |
|
|
|
|
|
|
Gains/(losses) on investment securities |
20 |
(5.7) |
(3.6) |
|
Change in third-party interests in consolidated funds |
20 |
3.4 |
0.8 |
|
Personnel expenses |
9 |
(59.7) |
(67.2) |
|
Other expenses |
11 |
(32.6) |
(32.3) |
|
Operating profit |
|
137.9 |
181.0 |
|
|
|
|
|
|
Finance income |
8 |
31.7 |
7.0 |
|
Finance expense |
8 |
(0.4) |
(5.1) |
|
Share of losses from associates and joint ventures |
27 |
(1.7) |
(1.6) |
|
Profit before tax |
|
167.5 |
181.3 |
|
|
|
|
|
|
Tax expense |
12 |
(38.8) |
(41.3) |
|
Profit for the year |
|
128.7 |
140.0 |
|
|
|
|
|
|
Other comprehensive income, net of related tax effect |
|
|
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
|
Foreign currency translation differences arising on foreign operations |
|
27.5 |
9.7 |
|
Fair value reserve (available-for-sale financial assets): |
|
|
|
|
Net change in fair value |
|
1.1 |
3.2 |
|
Net amount transferred to profit or loss |
|
0.3 |
(1.1) |
|
Cash flow hedge intrinsic value gains/(losses) |
|
(3.9) |
(1.9) |
|
Other comprehensive income, net of tax |
|
25.0 |
9.9 |
|
Total comprehensive income for the year |
|
153.7 |
149.9 |
|
|
|
|
|
|
Profit attributable to: |
|
|
|
|
Equity holders of the parent |
|
127.8 |
136.5 |
|
Non-controlling interests |
|
0.9 |
3.5 |
|
Profit for the year |
|
128.7 |
140.0 |
|
|
|
|
|
|
Total comprehensive income attributable to: |
|
|
|
|
Equity holders of the parent |
|
152.0 |
145.7 |
|
Non-controlling interests |
|
1.7 |
4.2 |
|
Total comprehensive income for the year |
|
153.7 |
149.9 |
|
|
|
|
|
|
Earnings per share |
|
|
|
|
Basic |
13 |
19.13p |
20.26p |
|
Diluted |
13 |
18.08p |
19.34p |
Consolidated balance sheet
As at 30 June 2016
|
|
Notes |
2016 |
2015 |
|
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill and intangible assets |
15 |
82.5 |
74.1 |
|
Property, plant and equipment |
16 |
2.2 |
2.5 |
|
Investment in associates and joint ventures |
27 |
6.3 |
7.3 |
|
Non-current asset investments |
20 |
11.7 |
8.9 |
|
Other receivables |
|
0.1 |
0.2 |
|
Deferred acquisition costs |
|
0.4 |
- |
|
Deferred tax assets |
18 |
19.5 |
20.3 |
|
|
|
122.7 |
113.3 |
|
Current assets |
|
|
|
|
Investment securities |
20 |
143.7 |
131.0 |
|
Available-for-sale financial assets |
20 |
8.8 |
10.6 |
|
Fair value through profit or loss investments |
20 |
68.2 |
61.8 |
|
Trade and other receivables |
17 |
61.2 |
64.0 |
|
Derivative financial instruments |
21 |
- |
0.3 |
|
Cash and cash equivalents |
|
364.0 |
380.8 |
|
|
|
645.9 |
648.5 |
|
|
|
|
|
|
Non-current assets held-for-sale |
20 |
106.7 |
31.7 |
|
Total assets |
|
875.3 |
793.5 |
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
Capital and reserves - attributable to equity holders of the parent |
|
|
|
|
Issued capital |
22 |
- |
- |
|
Share premium |
|
15.7 |
15.7 |
|
Retained earnings |
|
645.7 |
649.3 |
|
Foreign exchange reserve |
|
21.1 |
(5.6) |
|
Available-for-sale fair value reserve |
|
(1.8) |
(3.2) |
|
Cash flow hedging reserve |
|
(4.0) |
(0.1) |
|
|
|
676.7 |
656.1 |
|
Non-controlling interests |
|
3.3 |
14.0 |
|
Total equity |
|
680.0 |
670.1 |
|
Liabilities |
|
|
|
|
Non-current liabilities |
|
|
|
|
Deferred tax liabilities |
18 |
5.2 |
3.5 |
|
|
|
5.2 |
3.5 |
|
Current liabilities |
|
|
|
|
Current tax |
|
24.8 |
13.0 |
|
Third-party interests in consolidated funds |
20 |
75.6 |
41.5 |
|
Derivative financial instruments |
21 |
4.5 |
0.3 |
|
Trade and other payables |
25 |
55.4 |
54.1 |
|
|
|
160.3 |
108.9 |
|
|
|
|
|
|
Non-current liabilities held-for-sale |
20 |
29.8 |
11.0 |
|
Total liabilities |
|
195.3 |
123.4 |
|
Total equity and liabilities |
|
875.3 |
793.5 |
Approved by the Board on 5 September 2016 and signed on its behalf by:
Mark Coombs Tom Shippey
Chief Executive Officer Group Finance Director
Consolidated statement of changes in equity
For the year ended 30 June 2016
|
|
Attributable to equity holders of the parent |
|
|
||||||
|
|
Issued capital £m |
Share premium £m |
Retained earnings £m |
Foreign exchange reserve £m |
Available-for-sale reserve £m |
Cash flow hedging reserve £m |
Total |
Non-controlling interests £m |
Total equity |
|
Balance at 30 June 2014 |
- |
15.7 |
618.2 |
(14.6) |
(5.3) |
1.8 |
615.8 |
16.4 |
632.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
136.5 |
- |
- |
- |
136.5 |
3.5 |
140.0 |
|
Other comprehensive income/(loss): |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences arising on foreign operations |
- |
- |
- |
9.0 |
- |
- |
9.0 |
0.7 |
9.7 |
|
Net fair value gain on available-for-sale assets including tax |
- |
- |
- |
- |
3.2 |
- |
3.2 |
- |
3.2 |
|
Net gains reclassified from available-for-sale reserve to comprehensive income |
- |
- |
- |
- |
(1.1) |
- |
(1.1) |
- |
(1.1) |
|
Cash flow hedge intrinsic value losses |
- |
- |
- |
- |
- |
(1.9) |
(1.9) |
- |
(1.9) |
|
Total comprehensive income/(loss) |
- |
- |
136.5 |
9.0 |
2.1 |
(1.9) |
145.7 |
4.2 |
149.9 |
|
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
Purchase of own shares |
- |
- |
(11.4) |
- |
- |
- |
(11.4) |
- |
(11.4) |
|
Acquisition of non-controlling interests |
- |
- |
- |
- |
- |
- |
- |
(0.9) |
(0.9) |
|
Share-based payments |
- |
- |
19.9 |
- |
- |
- |
19.9 |
0.4 |
20.3 |
|
Proceeds received on exercise of vested options |
- |
- |
0.1 |
- |
- |
- |
0.1 |
- |
0.1 |
|
Dividends to equity holders |
- |
- |
(114.0) |
- |
- |
- |
(114.0) |
- |
(114.0) |
|
Dividends to non-controlling interests |
- |
- |
- |
- |
- |
- |
- |
(6.1) |
(6.1) |
|
Total contributions and distributions |
- |
- |
(105.4) |
- |
- |
- |
(105.4) |
(6.6) |
(112.0) |
|
Balance at 30 June 2015 |
- |
15.7 |
649.3 |
(5.6) |
(3.2) |
(0.1) |
656.1 |
14.0 |
670.1 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
127.8 |
- |
- |
- |
127.8 |
0.9 |
128.7 |
|
Other comprehensive income/(loss): |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences arising on foreign operations |
- |
- |
- |
26.7
|
-
|
- |
26.7 |
0.8 |
27.5
|
|
Net fair value gain on available-for-sale assets including tax |
- |
- |
- |
-
|
1.1
|
- |
1.1 |
- |
1.1
|
|
Net gains reclassified from available-for-sale reserve to comprehensive income |
- |
- |
- |
-
|
0.3
|
- |
0.3 |
- |
0.3
|
|
Cash flow hedge intrinsic value losses |
- |
- |
- |
- |
- |
(3.9) |
(3.9) |
- |
(3.9) |
|
Total comprehensive income/(loss) |
- |
- |
127.8 |
26.7 |
1.4 |
(3.9) |
152.0 |
1.7 |
153.7 |
|
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
Purchase of own shares |
- |
- |
(22.2) |
- |
- |
- |
(22.2) |
- |
(22.2) |
|
Acquisition of non-controlling interests |
- |
- |
(5.1) |
- |
- |
- |
(5.1) |
(1.2) |
(6.3) |
|
Sale to non-controlling interests |
- |
- |
- |
- |
- |
- |
- |
0.4 |
0.4 |
|
Share-based payments |
- |
- |
11.9 |
- |
- |
- |
11.9 |
(7.4) |
4.5 |
|
Proceeds received on exercise of vested options |
- |
- |
0.1 |
- |
- |
- |
0.1 |
- |
0.1 |
|
Dividends to equity holders |
- |
- |
(116.1) |
- |
- |
- |
(116.1) |
- |
(116.1) |
|
Dividends to non-controlling interests |
- |
- |
- |
- |
- |
- |
- |
(4.2) |
(4.2) |
|
Total contributions and distributions |
- |
- |
(131.4) |
- |
- |
- |
(131.4) |
(12.4) |
(143.8) |
|
Balance at 30 June 2016 |
- |
15.7 |
645.7 |
21.1 |
(1.8) |
(4.0) |
676.7 |
3.3 |
680.0 |
Consolidated cash flow statement
For the year ended 30 June 2016
|
|
2016 |
2015 |
|
Operating activities |
|
|
|
Operating profit |
137.9 |
181.0 |
|
Adjustments for non-cash items: |
|
|
|
Depreciation and amortisation |
5.1 |
5.3 |
|
Accrual for variable compensation |
35.6 |
42.4 |
|
Unrealised foreign exchange (gains)/losses |
(20.4) |
(17.7) |
|
Other non-cash items |
(7.0) |
4.2 |
|
Cash generated from operations before working capital changes |
151.2 |
215.2 |
|
Changes in working capital: |
|
|
|
Decrease in trade and other receivables |
2.9 |
5.7 |
|
Decrease/(increase) in derivative financial instruments |
4.5 |
2.4 |
|
Decrease in trade and other payables |
(33.4) |
(32.9) |
|
Cash generated from operations |
125.2 |
190.4 |
|
Taxes paid |
(26.7) |
(44.7) |
|
Net cash from operating activities |
98.5 |
145.7 |
|
|
|
|
|
Investing activities |
|
|
|
Interest received |
6.8 |
4.1 |
|
Dividends received |
- |
1.8 |
|
Proceeds on disposal of associates |
- |
0.6 |
|
Purchase of non-current asset investments |
(3.2) |
(0.3) |
|
Purchase of financial assets held-for-sale |
(42.6) |
(21.8) |
|
Purchase of available-for-sale financial assets |
(0.2) |
- |
|
Purchase of fair value through profit or loss investments |
(1.4) |
(2.0) |
|
Purchase of investment securities |
(55.7) |
(77.0) |
|
Sale of non-current asset investments |
- |
0.4 |
|
Sale of financial assets held-for-sale |
9.3 |
- |
|
Sale of available-for-sale financial assets |
3.3 |
20.8 |
|
Sale of fair value through profit or loss investments |
22.0 |
10.1 |
|
Sale of investment securities |
33.5 |
30.1 |
|
Net cash flow arising on initial consolidation/deconsolidation of seed capital investments |
1.5 |
(6.8) |
|
Purchase of property, plant and equipment |
(0.6) |
(0.7) |
|
Net cash used in investing activities |
(27.3) |
(40.7) |
|
|
|
|
|
Financing activities |
|
|
|
Dividends paid to equity holders |
(116.1) |
(114.0) |
|
Dividends paid to non-controlling interests |
(4.2) |
(6.1) |
|
Third-party subscriptions into consolidated funds |
49.1 |
34.0 |
|
Third-party redemptions from consolidated funds |
(11.0) |
(15.8) |
|
Distributions paid by consolidated funds |
(3.5) |
- |
|
Acquisition of non-controlling interests |
(1.2) |
(0.9) |
|
Sale of interest to non-controlling interests |
0.4 |
- |
|
Purchase of own shares |
(22.2) |
(11.4) |
|
Net cash used in financing activities |
(108.7) |
(114.2) |
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
(37.5) |
(9.2) |
|
|
|
|
|
Cash and cash equivalents at beginning of year |
380.8 |
372.2 |
|
Effect of exchange rate changes on cash and cash equivalents |
20.7 |
17.8 |
|
Cash and cash equivalents at end of year |
364.0 |
380.8 |
|
|
|
|
|
Cash and cash equivalents at end of year comprise: |
|
|
|
Cash at bank and in hand |
52.5 |
84.5 |
|
Daily dealing liquidity funds |
103.7 |
109.6 |
|
Deposits |
207.8 |
186.7 |
|
|
364.0 |
380.8 |
Company balance sheet
As at 30 June 2016
|
|
Notes |
2016 |
2015 |
|
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill |
15 |
4.1 |
4.1 |
|
Property, plant and equipment |
16 |
1.1 |
1.1 |
|
Investment in subsidiaries |
26 |
20.0 |
20.1 |
|
Deferred acquisition costs |
|
0.4 |
- |
|
Deferred tax assets |
18 |
8.2 |
9.0 |
|
|
|
33.8 |
34.3 |
|
Current assets |
|
|
|
|
Trade and other receivables |
17 |
285.4 |
451.8 |
|
Cash and cash equivalents |
|
301.4 |
114.5 |
|
|
|
586.8 |
566.3 |
|
Total assets |
|
620.6 |
600.6 |
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
Capital and reserves |
|
|
|
|
Issued capital |
22 |
- |
- |
|
Share premium |
|
15.7 |
15.7 |
|
Retained earnings |
|
554.8 |
547.0 |
|
Total equity attributable to equity holders of the Company |
|
570.5 |
562.7 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
25 |
50.1 |
37.9 |
|
|
|
50.1 |
37.9 |
|
Total equity and liabilities |
|
620.6 |
600.6 |
Approved by the Board on 5 September 2016 and signed on its behalf by:
Mark Coombs Tom Shippey
Chief Executive Officer Group Finance Director
Company statement of changes in equity
For the year ended 30 June 2016
|
|
Issued |
Share premium |
Retained earnings |
Total equity attributable to equity holders of the parent £m |
|
Balance at 30 June 2014 |
- |
15.7 |
495.5 |
511.2 |
|
|
|
|
|
|
|
Profit for the year |
- |
- |
158.9 |
158.9 |
|
Purchase of own shares |
- |
- |
(11.4) |
(11.4) |
|
Share-based payments |
- |
- |
18.0 |
18.0 |
|
Dividends to equity holders |
- |
- |
(114.0) |
(114.0) |
|
Balance at 30 June 2015 |
- |
15.7 |
547.0 |
562.7 |
|
|
|
|
|
|
|
Profit for the year |
- |
- |
125.1 |
125.1 |
|
Purchase of own shares |
- |
- |
(22.2) |
(22.2) |
|
Share-based payments |
- |
- |
21.0 |
21.0 |
|
Dividends to equity holders |
- |
- |
(116.1) |
(116.1) |
|
Balance at 30 June 2016 |
- |
15.7 |
554.8 |
570.5 |
Company cash flow statement
For the year ended 30 June 2016
|
|
2016 |
2015 |
|
Operating activities |
|
|
|
Cash generated from operations before working capital changes |
29.6 |
144.0 |
|
Changes in working capital: |
|
|
|
Decrease/(increase) in trade and other receivables |
49.8 |
(150.4) |
|
Increase/(decrease) in trade and other payables |
12.2 |
5.1 |
|
Cash generated from operations |
91.6 |
(1.3) |
|
Taxes paid |
(4.3) |
(21.6) |
|
Net cash from/(used in) operating activities |
87.3 |
(22.9) |
|
|
|
|
|
Investing activities |
|
|
|
Interest received |
0.8 |
0.4 |
|
Loans repaid by/(given to) subsidiaries |
16.6 |
(44.5) |
|
Dividends received from subsidiaries |
189.6 |
41.1 |
|
Purchase of property, plant and equipment |
(0.6) |
- |
|
Net cash from/(used in) investing activities |
206.4 |
(3.0) |
|
|
|
|
|
Financing activities |
|
|
|
Dividends paid |
(116.1) |
(114.0) |
|
Purchase of own shares |
(22.2) |
(11.4) |
|
Net cash used in financing activities |
(138.3) |
(125.4) |
|
|
|
|
|
Net decrease in cash and cash equivalents |
155.4 |
(151.3) |
|
|
|
|
|
Cash and cash equivalents at beginning of year |
114.5 |
249.1 |
|
Effect of exchange rate changes on cash and cash equivalents |
31.5 |
16.7 |
|
Cash and cash equivalents at end of year |
301.4 |
114.5 |
|
|
|
|
|
Cash and cash equivalents at end of year comprise: |
|
|
|
Cash at bank and in hand |
9.4 |
5.0 |
|
Daily dealing liquidity funds |
93.0 |
39.5 |
|
Deposits |
199.0 |
70.0 |
|
|
301.4 |
114.5 |
Notes to the financial statements
1) General information
Ashmore Group plc (the Company) is a public limited company listed on the London Stock Exchange and incorporated and domiciled in the United Kingdom. The consolidated financial statements of the Company and its subsidiaries (together the Group) for the year ended 30 June 2016 were authorised for issue by the Board of Directors on 5 September 2016.
2) Basis of preparation
The Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) effective for the Group's reporting for the year ended 30 June 2016 and applied in accordance with the provisions of the Companies Act 2006.
The financial statements have been prepared on a going concern basis under the historical cost convention, except for the measurement at fair value of certain financial assets that are available-for-sale or classified as fair value through profit or loss.
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 which allows it not to present its individual statement of comprehensive income and related notes.
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Further information about key assumptions and other key sources of estimation and areas of judgement are set out in note 32.
3) New standards and interpretations not yet adopted
At the date of authorisation of these consolidated financial statements the following standards and interpretations relevant to the Group's operations were issued by the IASB but are not yet mandatory:
- IFRS 9 Financial Instruments
- IFRS 15 Revenue from Contracts with Customers
- IFRS 16 Leases
The Group is assessing the impact of these standards on the Group's future consolidated financial statements.
- IFRS 9 Financial instruments was originally issued in November 2009, and the finalised version incorporating requirements for classification and measurement, impairment, general hedge accounting and derecognition, was issued in July 2014. IFRS 9 replaces the classification and measurement models for financial instruments in IAS 39 with three classification categories: amortised cost, fair value through profit or loss and fair value through other comprehensive income. Under IFRS 9, the Group's business model and the contractual cash flows arising from its investments in financial instruments will determine the appropriate classification. All equity investments within the scope of IFRS 9 are to be measured at fair value, with gains or losses reported either in the statement of comprehensive income or, by election, through other comprehensive income. However, where fair value gains and losses are recorded through other comprehensive income there will no longer be a requirement to transfer gains or losses to the statement of comprehensive income on impairment or disposal.
In addition, IFRS 9 introduces an expected loss model for the assessment of impairment. The current model under IAS 39 (incurred loss model) requires the Group to recognise impairment losses when there is objective evidence that an asset is impaired. Under the expected loss model, impairment losses are recorded if there is an expectation of credit losses, even in the absence of a default event. The Group does not anticipate that this will have a material impact on its reported results. IFRS 9 is effective for annual periods beginning on or after 1 January 2018 and has yet to be endorsed for use in the EU.
- IFRS 15 Revenue from Contracts with Customers deals with revenue recognition and establishes a single, principles-based model to be applied to all contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts and related interpretations. The Standard provides guidance on topics such as the point at which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters. New disclosures about revenue are also introduced. The Group does not anticipate that IFRS 15 will have a material impact on its reported results. IFRS 15 is effective for annual periods beginning on or after 1 January 2018 and has yet to be endorsed for use in the EU.
- IFRS 16 Leases was issued on 13 January 2016 and replaces IAS 17 Leases. IFRS 16 requires all operating leases in excess of one year, where the Group is the lessee, to be included on the Group's statement of financial position, and recognised as a right-of-use asset and a related lease liability representing the obligation to make lease payments. The right-of-use asset will be amortised on a straight-line basis with the lease liability being amortised using the effective interest method. Certain optional exemptions are available under IFRS 16 for short-term leases (lease term of less than 12 months) and for small-value leases. The Group does not anticipate that IFRS 16 will have a material impact on its reported results. The Standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted subject to EU endorsement.
No other standards or interpretations issued and not yet effective are expected to have an impact on the Group's consolidated financial statements.
4) Significant accounting policies
The following principal accounting policies have been applied consistently where applicable to all years presented in dealing with items which are considered material in relation to the Group and Company financial statements, unless otherwise stated.
Basis of consolidation
The consolidated financial statements of the Group comprise the financial statements of the Company and its subsidiaries, associates and joint ventures. This includes an Employee Benefit Trust (EBT) established for the employee share-based awards and consolidated investment funds.
Interests in subsidiaries
Subsidiaries are those entities, including investment funds, over which the Group has control as defined by IFRS 10. The Group has control if it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control ceases. The Group reassesses whether or not it controls an entity if facts and circumstances indicate that there are changes to one or more of the elements of control.
The profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to any non-controlling interests. Based on their nature, the interests of third-parties in consolidated funds are classified as liabilities and appear as 'Third-party interests in consolidated funds' on the Group's balance sheet. Associates and joint ventures are presented as single line items in the statement of comprehensive income and balance sheet (refer to note 27). Intercompany transactions and balances are eliminated on consolidation. Consistent accounting policies have been applied across the Group in the preparation of the consolidated financial statements as at 30 June 2016.
A change in the ownership interest of a consolidated entity that does not result in a loss of control by the Group is accounted for as an equity transaction. If the Group loses control over a consolidated entity, it derecognises the related assets, goodwill, liabilities, non-controlling interest and other components of equity, and any gain or loss is recognised in consolidated comprehensive income. Any investment retained is recognised at its fair value at the date of loss of control.
Interests in associates and joint arrangements
Associates are partly owned entities over which the Group has significant influence but no control. Joint ventures are entities through which the Group and other parties undertake an economic activity which is subject to joint control.
Investments in associates and interests in joint ventures are measured using the equity method of accounting. Under this method, the investments are initially recognised at cost, including attributable goodwill, and are adjusted thereafter for the post-acquisition changes in the Group's share of net assets. The Group's share of post-acquisition profit or loss is recognised in the statement of comprehensive income.
Where the Group's financial year is not coterminous with those of its associates or joint ventures, unaudited interim financial information is used after appropriate adjustments have been made.
Interests in consolidated structured entities
The Group acts as fund manager to investment funds that are considered to be structured entities. Structured entities are entities that have been designed so that voting or similar rights are not the dominant factor in deciding which party has control: for example, when any voting rights relate to administrative tasks only and the relevant activities of the entity are directed by means of contractual arrangements. The Group's assets under management are managed within structured entities. These structured entities typically consist of unitised vehicles such as Sociétés d'Investissement à Capital Variable (SICAVs), limited partnerships, unit trusts and open-ended and closed-ended vehicles which entitle third-party investors to a percentage of the vehicle's net asset value.
The Group has interests in structured entities as a result of the management of assets on behalf of its clients. Where the Group holds a direct interest in a closed-ended fund, private equity fund or open-ended pooled fund such as a SICAV, the interest is accounted for either as a consolidated structured entity or as a financial asset, depending on whether the Group has control over the fund or not.
Control is determined in accordance with IFRS 10, based on an assessment of the level of power and aggregate economic interest that the Group has over the fund, relative to third-party investors. Power is normally conveyed to the Group through the existence of an investment management agreement and/or other contractual arrangements. Aggregate economic interest is a measure of the Group's exposure to variable returns in the fund through a combination of direct interest, carried interest, expected management fees, fair value gains or losses, and distributions receivable from the fund.
The Group concludes that it acts as a principal when the power it has over the fund is deemed to be exercised for self-benefit, considering the level of aggregate economic exposure in the fund and the assessed strength of third-party investors' kick-out rights. The Group concludes that it acts as an agent when the power it has over the fund is deemed to be exercised for the benefit of third-party investors.
The Group concludes that it has control and, therefore, will consolidate a fund as if it were a subsidiary where the Group acts as a principal. If the Group concludes that it does not have control over the fund, the Group accounts for its interest in the fund as a financial asset.
Interests in unconsolidated structured entities
The Group classifies the following investment funds as unconsolidated structured entities:
- Segregated mandates and pooled funds managed where the Group does not hold any direct interest. In this case, the Group considers that its aggregate economic exposure is insignificant and, in relation to segregated mandates, the third-party investor has the practical ability to remove the Group from acting as fund manager, without cause. As a result, the Group concludes that it acts as an agent for third-party investors.
- Pooled funds managed by the Group where the Group holds a direct interest, for example seed capital investments, and the Group's aggregate economic exposure in the fund relative to third-party investors is less than 20% (i.e. the threshold established by the Group for determining agent versus principal classification). As a result, the Group concludes that it is an agent for third-party investors and, therefore, will account for its beneficial interest in the fund as a financial asset.
The disclosure of the AuM in respect of consolidated and unconsolidated structured entities is provided in note 28.
Foreign currency
The Group's financial statements are presented in Pounds Sterling (Sterling), which is also the Company's functional and presentation currency. Items included in the financial statements of each of the Group's entities are measured using the functional currency, which is the currency that prevails in the primary economic environment in which the entity operates.
Foreign currency transactions
Transactions in foreign currencies are translated into the respective functional currency of the Group entities at the spot exchange rates at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into the functional currency at the spot exchange rate at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Foreign currency differences arising on translation are generally recognised in comprehensive income. However, foreign currency differences arising from the translation of the following items are recognised in other comprehensive income:
- available-for-sale equity instruments; and
- qualifying cash flow hedges to the extent that the hedge is effective.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into Sterling at the spot exchange rates at the balance sheet date. The revenues and expenses of foreign operations are translated into Sterling at rates approximating to the foreign exchange rates ruling at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and accumulated in the foreign currency translation reserve, except to the extent that the translation difference is allocated to non-controlling interests.
When a foreign operation is disposed of such that control is lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is reclassified to comprehensive income as part of the gain or loss on disposal. If the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interests.
If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, then foreign currency differences arising on the item form part of the net investment in the foreign operation and are recognised in other comprehensive income, and accumulated in the foreign currency translation reserve within equity.
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
The consideration transferred for the acquisition is generally measured at the acquisition date fair value, as are the identifiable net assets acquired, liabilities incurred (including any asset or liability resulting from a contingent consideration arrangement) and equity instruments issued by the Group in exchange for control of the acquiree.
Acquisition-related costs are expensed as incurred, except if they are related to the issue of debt or equity securities.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequently, changes to the fair value of the contingent consideration that is deemed to be a liability will be recognised in accordance with IAS 39 in comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured and settlement is accounted for within equity.
If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree's employees (acquiree's awards) and relate to past services, then all or a portion of the amount of the acquirer's replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on market-based value of the replacement awards compared with the market-based value of the acquiree's awards and the extent to which the replacement awards relate to pre-combination service.
Goodwill
The cost of a business combination in excess of the fair value of net identifiable assets or liabilities acquired, including intangible assets identified, is recognised as goodwill and stated at cost less any accumulated impairment losses. Goodwill has an indefinite useful life, is not subject to amortisation and is tested annually for impairment or when there is an indication of impairment.
Intangible assets
The cost of intangible assets, such as management contracts and brand names, acquired as part of a business combination is their fair value as at the date of acquisition. The fair value at the date of acquisition is calculated using the discounted cash flow methodology and represents the valuation of the profits expected to be earned from the management contracts and brand name in place at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and impairment losses. Intangible assets are amortised, if appropriate, over their useful lives, which have been assessed as being eight years.
Non-controlling interests (NCI)
NCI are measured at their proportionate share of the acquiree's identifiable net assets at the acquisition date. Changes to the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost is determined on the basis of the direct and indirect costs that are directly attributable. Property, plant and equipment are depreciated using the straight-line method over the estimated useful lives, assessed to be five years for office equipment and four years for IT equipment. The residual values and useful lives of assets are reviewed at least annually.
Deferred acquisition costs
Costs that are directly attributable to securing an investment management contract are deferred if they can be identified separately and measured reliably and it is probable that they will be recovered. Deferred acquisition costs represent the contractual right to benefit from providing investment management services and are charged as the related revenue is recognised.
Financial instruments
Recognition and initial measurement
Financial instruments are recognised when the Group becomes party to the contractual provisions of an instrument, initially at fair value plus transaction costs except for financial assets classified at fair value through profit or loss. Purchases or sales of financial assets are recognised on the trade date, being the date that the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or been transferred or when the Group has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when the obligation under the liability has been discharged, cancelled or expires.
Subsequent measurement
The subsequent measurement of financial instruments depends on their classification in accordance with IAS 39 Financial instruments: recognition and measurement and IFRS 5 Non-current assets held-for-sale and discontinued operations.
Financial assets
The Group classifies its financial assets into the following categories: financial assets held-for-sale, investment securities designated as fair value through profit or loss (FVTPL), fair value through profit or loss investments, available-for-sale financial assets and non-current financial assets held-for-sale.
The Group may, from time to time, invest seed capital in funds where a subsidiary is the investment manager or an adviser. Where the holding in such investments is deemed to represent a controlling stake and is acquired exclusively with a view to subsequent disposal through sale or dilution, these seed capital investments are recognised as non-current financial assets held-for-sale in accordance with IFRS 5. The Group recognises 100% of the investment in the fund as a 'held-for-sale' asset and the interest held by other parties as a 'liability held-for-sale'. Where control is not deemed to exist, and the assets are readily realisable, they are recognised as financial assets at fair value through profit or loss in accordance with IAS 39. Where the assets are not readily realisable, they are recognised as non-current asset investments. If a seed capital investment remains under the control of the Group for more than one year from the original investment date, the underlying fund is consolidated line-by-line.
Investment securities designated as FVTPL
Investment securities represent securities, other than derivatives, held by consolidated funds. These securities are designated as fair value through profit or loss (FVTPL) and are measured at fair value with gains and losses recognised through the consolidated statement of comprehensive income.
Non-current financial assets held-for-sale (HFS)
Non-current financial assets held-for-sale are measured at the lower of their carrying amount and fair value less costs to sell except where measurement and remeasurement is outside the scope of IFRS 5. Where investments that have initially been recognised as non-current financial assets held-for-sale, because the Group has been deemed as holding a controlling stake, are subsequently disposed of or diluted such that the Group's holding is no longer deemed a controlling stake, the investment will subsequently be classified as fair value through profit or loss investments in accordance with IAS 39. Subsequent movements will be recognised in accordance with the Group's accounting policy for the newly adopted classification.
Available-for-sale financial assets (AFS)
Available-for-sale financial assets include readily realisable interests in seeded funds that are either allocated specifically to this category or cannot be assigned to any other category. They are carried at fair value and changes in fair value are recognised in other comprehensive income, until the asset is disposed of or impaired, at which time the cumulative gain or loss previously recognised in other comprehensive income is included in profit for the year as part of comprehensive income. Dividend income and impairment losses are recognised in the consolidated statement of comprehensive income.
Financial assets designated as FVTPL
Financial assets designated as FVTPL include certain readily realisable interests in seeded funds, non-current asset investments and derivatives. The Group designates financial assets as FVTPL when:
- the financial assets are managed, evaluated and reported internally on a fair value basis; and
- the classification at fair value eliminates or significantly reduces an accounting mismatch which would otherwise arise.
From the date the financial asset is designated as FVTPL all subsequent changes in fair value, foreign exchange differences, interest and dividends are reflected in the consolidated statement of comprehensive income and presented in finance income or expense.
(i) FVTPL investments
The Group classifies new readily realisable interests in seeded funds as FVTPL investments with fair value changes being directly recognised through the consolidated statement of comprehensive income. Fair value is measured based on the proportionate net asset value in the fund.
(ii) Non-current asset investments
Non-current asset investments include closed-end funds which are designated as FVTPL. They are held at fair value with changes in fair value being recognised through the consolidated statement of comprehensive income.
(iii) Derivatives
Derivatives include foreign exchange forward contracts and options used by the Group to manage its foreign currency exposures and those held in consolidated funds. Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and subsequently remeasured at fair value. Transaction costs are recognised immediately in the statement of comprehensive income. All derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly in comprehensive income, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income.
Trade and other receivables
Trade and other receivables are initially recorded at fair value plus transaction costs. The fair value on acquisition is normally the cost. Impairment losses with respect to the estimated irrecoverable amount are recognised through the statement of comprehensive income when there is appropriate evidence that trade and other receivables are impaired. However, if a longer-term receivable carries no interest, the fair value is estimated as the present value of all future cash payments or receipts discounted using the Group's weighted average cost of capital. The resulting adjustment is recognised as interest expense or interest income. Subsequent to initial recognition these assets are measured at amortised cost less any impairment.
Cash and cash equivalents
Cash represents cash at bank and in hand and cash equivalents comprise short-term deposits and investments in money market instruments with an original maturity of three months or less.
Financial liabilities
The Group classifies its financial liabilities into the following categories: non-current financial liabilities held-for-sale, financial liabilities designated as FVTPL and financial liabilities at amortised cost.
Non-current financial liabilities held-for-sale
Non-current financial liabilities represent interests held by other parties in funds in which the Group recognises 100% of the investment in the fund as a held-for-sale financial asset. These liabilities are carried at fair value with gains or losses recognised in the statement of comprehensive income within finance income or expense.
Financial liabilities at FVTPL
Financial liabilities at FVTPL include derivative financial instruments and third-party interests in consolidated funds. They are carried at fair value with gains or losses recognised in the consolidated statement of comprehensive income within finance income or expense.
Other financial liabilities
Other financial liabilities including trade and other payables are subsequently measured at amortised cost using the effective interest rate method.
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the 'exit price') in an orderly transaction between market participants at the measurement date. In determining fair value, the Group uses various valuation approaches and establishes a hierarchy for inputs used in measuring fair value that maximises the use of relevant observable inputs and minimises the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Group.
Unobservable inputs are inputs that reflect the Group's assumptions about the assumptions other market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances.
Securities listed on a recognised stock exchange or dealt on any other regulated market that operates regularly, recognised and open to the public, are valued at the last known available closing bid price. If a security is traded on several actively traded and organised financial markets, the valuation is made on the basis of the last known bid price on the main market on which the securities are traded. In the case of securities for which trading on an actively traded and organised financial market is not significant, but which are bought and sold on a secondary market with regulated trading among security dealers (with the effect that the price is set on a market basis), the valuation may be based on this secondary market.
Where instruments are not listed on any stock exchange or not traded on any regulated markets, valuation techniques are used by valuation specialists. These techniques include the market approach, the income approach or the cost approach for which sufficient and reliable data is available. The use of the market approach generally consists of using comparable market transactions or using techniques based on market observable inputs, while the use of the income approach generally consists of the net present value of estimated future cash flows, adjusted as deemed appropriate for liquidity, credit, market and/or other risk factors.
Investments in open-ended funds are valued on the basis of the last available NAV of the units or shares of such funds.
The fair value of the derivatives is their quoted market price at the balance sheet date.
Hedge accounting
The Group applies cash flow hedge accounting when the transactions meet the specified hedge accounting criteria. To qualify, the following conditions must be met:
- formal documentation of the relationship between the hedging instrument(s) and hedged item(s) must exist at inception;
- the hedged cash flows must be highly probable and must present an exposure to variations in cash flows that could ultimately affect comprehensive income;
- the effectiveness of the hedge can be reliably measured; and
- the hedge must be highly effective, with effectiveness assessed on an ongoing basis.
For qualifying cash flow hedges, the change in fair value of the effective hedging instrument is initially recognised in other comprehensive income and is released to comprehensive income in the same period during which the relevant financial asset or liability affects the Group's results.
Where the hedge is highly effective overall, any ineffective portion of the hedge is immediately recognised in comprehensive income. Where the instrument ceases to be highly effective as a hedge, or is sold, terminated or exercised, hedge accounting is discontinued.
Derecognition of financial assets and liabilities
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risk and rewards of ownership of the asset. The Group derecognises a financial liability when the Group's obligations are discharged, cancelled or they expire.
Impairment of financial assets
General
At each reporting date, the carrying amounts of the Group's assets are reviewed to assess whether there is any objective evidence of impairment in the value of financial assets classified as either available-for-sale or as trade and other receivables. Impairment losses are recognised if an event has occurred which will have an adverse impact on the expected future cash flows of an asset and the expected impact can be reliably estimated. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.
The recoverable amount of an asset is the higher of an asset's fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using the Group's weighted average cost of capital. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Impairment losses on available-for-sale financial assets are measured as the difference between cost and the current fair value. Where there is evidence that the available-for-sale financial asset is impaired, the cumulative loss that had been previously recognised in other comprehensive income is reclassified from the available-for-sale fair value reserve and recognised in the consolidated statement of comprehensive income.
Impairment losses in respect of assets other than goodwill are measured as the difference between the carrying amount of the financial asset and the present value of estimated cash flows discounted at the asset's original effective interest rate. Such impairment losses are recognised in the consolidated statement of other comprehensive income and are recognised against the carrying amount of the impaired asset on the consolidated statement of financial position. Interest on the impaired asset continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset.
Subsequent increases in fair value of previously impaired available-for-sale financial assets are reported as fair value gains in the available-for-sale fair value reserve through other comprehensive income and not separately identified as an impairment reversal.
For all other assets other than goodwill, if in a subsequent year the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, but is limited to the extent that the value of the asset may not exceed the original carrying amount that would have been determined, net of depreciation or amortisation, had no impairment occurred.
Goodwill
Goodwill is tested for impairment annually or whenever there is an indication that the carrying amount may not be recoverable based on management's judgements regarding the future prospects of the business, estimates of future cash flows and discount rates. When assessing the appropriateness of the carrying value of goodwill at year end, the recoverable amount is considered to be the greater of fair value less costs to sell or value in use. The pre-tax discount rate applied is based on the Group's weighted average cost of capital after making allowances for any specific risks.
The business of the Group is managed as a single unit, with asset allocations, research and other such operational practices reflecting the commonality of approach across all fund themes. Therefore, for the purpose of testing goodwill for impairment, the Group is considered to have one cash-generating unit to which all goodwill is allocated and, as a result, no further split of goodwill into smaller cash-generating units is possible and the impairment review is conducted for the Group as a whole.
An impairment loss in respect of goodwill is not reversed.
Revenue
Revenue comprises the fair value of the consideration received or receivable for the provision of investment management services, and includes management fees, performance fees and other revenue. Revenue is recognised in the statement of comprehensive income as and when the related services are provided. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Specific revenue recognition policies are:
Management fees
Management fees are presented net of rebates, and are calculated as a percentage of net fund assets managed in accordance with individual management agreements. Management fees are accrued over the period for which the service is provided. Where management fees are received in advance these are recognised over the period of the provision of the asset management service.
Performance fees
Performance fees are presented net of rebates, and are calculated as a percentage of the appreciation in the net asset value of a fund above a defined hurdle. Performance fees are recognised when the quantum of the fee can be estimated reliably and it is probable that the fee will crystallise. This is usually at the end of the performance period or upon early redemption by a client.
Other revenue
Other revenue includes transaction, structuring and administration fees, and reimbursement by funds of costs incurred by the Group. This revenue is recognised when the related services are provided.
Distribution costs
Distribution costs are cost of sales payable to third-parties and are recognised over the period for which the service is provided.
Employee benefits
Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of comprehensive income when payable in accordance with the scheme particulars.
Share-based payments
The Group issues share awards to its employees under share-based compensation plans.
For equity-settled awards, the fair value of the amounts payable to employees is recognised as an expense with a corresponding increase in equity over the vesting period after adjusting for the estimated number of shares that are expected to vest. The fair value is measured at the grant date using an appropriate valuation model, taking into account the terms and conditions upon which the instruments were granted. At each balance sheet date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management's best estimate of the awards that are ultimately expected to vest is calculated. The movement in cumulative expense is recognised in the statement of comprehensive income with a corresponding entry within equity.
For cash-settled awards, the fair value of the amounts payable to employees is recognised as an expense with a corresponding liability on the Group's balance sheet. The fair value is measured using an appropriate valuation model, taking into account the estimated number of awards that are expected to vest and the terms and conditions upon which the instruments were granted. During the vesting period, the liability recognised represents the portion of the vesting period that has expired at the balance sheet date multiplied by the fair value of the awards at that date. Movements in the liability are recognised in the statement of comprehensive income.
Operating leases
Payments payable under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are recognised on a straight-line basis over the lease term and are recorded as a reduction in premises costs.
Finance income and expense
Finance income includes interest receivable on the Group's cash and cash equivalents, realised gains on available-for-sale financial assets and both realised and unrealised gains on held-for-sale assets and investments measured at FVTPL.
Finance expense includes realised losses on available-for-sale financial assets and both realised and unrealised losses on held-for-sale assets and investments measured at FVTPL.
Taxation
Tax expense for the year comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year, and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the balance sheet date in the countries where the Group operates. Current tax also includes withholding tax arising from dividends.
Deferred tax
Deferred tax is recognised using the balance sheet liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following differences are not provided for:
- goodwill not deductible for tax purposes; and
- differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the balance sheet date.
Dividends
Dividends are recognised when shareholders' rights to receive payments have been established.
Equity shares
The Company's ordinary shares of 0.01 pence each are classified as equity instruments. Ordinary shares issued by the Company are recorded at the fair value of the consideration received or the market price at the day of issue. Direct issue costs, net of tax, are deducted from equity through share premium. When share capital is repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity.
Own shares
Own shares are held by the EBT. The holding of the EBT comprises own shares that have not vested unconditionally to employees of the Group. In both the Group and Company, own shares are recorded at cost and are deducted from retained earnings.
Treasury shares
Treasury shares are recognised in equity and are measured at cost. Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from the sale and original cost being taken to retained earnings.
Segmental information
Key management information, including revenues, margins, investment performance, distribution costs and AuM flows, which is relevant to the operation of the Group, is reported to and reviewed by the Board on the basis of the investment management business as a whole. Hence the Group's management considers that the Group's services and its operations are not run on a discrete geographic basis and comprise one business segment (being provision of investment management services).
Company-only accounting policies
In addition to the above accounting policies, the following specifically relates to the Company:
Investment in subsidiaries
Investments by the Company in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
5) Segmental information
The location of the Group's non-current assets at year end other than financial instruments, deferred tax assets and post-employment benefit assets is shown in the table below. Disclosures relating to revenue are in note 6.
Analysis of non-current assets by geography
|
|
2016 |
2015 |
|
United Kingdom |
12.1 |
12.4 |
|
United States |
78.8 |
70.9 |
|
Other |
0.5 |
0.6 |
6) Revenue
Management fees are accrued throughout the year in line with prevailing levels of assets under management and performance fees are recognised when they can be estimated reliably and it is probable that they will crystallise. The Group is not considered to be reliant on any single source of revenue. During the year, none of the Group's funds (FY2014/15: none) provided more than 10% of total revenue in the year respectively when considering management fees and performance fees on a combined basis.
Analysis of revenue by geography
|
|
2016 |
2015 |
|
United Kingdom earned revenue |
194.0 |
247.3 |
|
United States earned revenue |
9.2 |
14.4 |
|
Other revenue |
8.4 |
6.4 |
7) Foreign exchange
The foreign exchange rates which had a material impact on the Group's results are the US dollar, the Euro and Indonesian rupiah.
|
£1 |
Closing rate as at 30 June 2016 |
Closing rate as at 30 June 2015 |
Average rate year ended 30 June |
Average rate year ended |
|
US dollar |
1.3234 |
1.5712 |
1.4759 |
1.5822 |
|
Euro |
1.1970 |
1.4095 |
1.3359 |
1.3186 |
|
Indonesian rupiah |
17,482 |
20,970 |
20,172 |
19,713 |
Foreign exchange gains and losses are shown below.
|
|
2016 |
2015 |
|
Net realised and unrealised hedging gains/(losses) |
1.1 |
(0.4) |
|
Translation gains/(losses) on non-Sterling denominated monetary assets and liabilities |
21.0 |
18.5 |
|
Total foreign exchange gains/(losses) |
22.1 |
18.1 |
8) Finance income and expense
|
|
2016 |
2015 |
|
Finance income |
|
|
|
Interest income |
6.7 |
7.0 |
|
Net realised gains on seed capital investments measured at fair value |
1.4 |
- |
|
Net unrealised gains on seed capital investments measured at fair value |
23.4 |
- |
|
Total finance income |
31.5 |
7.0 |
|
Finance expense |
|
|
|
Net realised losses on disposal of available-for-sale financial assets |
(0.2) |
(0.2) |
|
Net realised losses on seed capital investments measured at fair value |
- |
(1.2) |
|
Net unrealised losses on seed capital investments measured at fair value |
- |
(3.7) |
|
Total finance expense |
(0.2) |
(5.1) |
|
Net finance income |
31.3 |
1.9 |
9) Personnel expenses
Personnel expenses during the year comprised the following:
|
|
2016 |
2015 |
|
Wages and salaries |
19.1 |
20.0 |
|
Performance-related cash bonuses |
24.9 |
17.3 |
|
Share-based payments |
10.7 |
24.5 |
|
Social security costs |
1.8 |
2.3 |
|
Pension costs |
1.6 |
1.6 |
|
Other costs |
1.6 |
1.5 |
|
Total personnel expenses |
59.7 |
67.2 |
Personnel expenses in respect of the year ended 30 June 2016 include an amount of £0.1 million (FY2014/15: £0.1 million) that has been waived by Directors and employees in earlier periods with an equivalent amount paid to charity in the financial year to 30 June 2016.
Number of employees
The number of employees of the Group (including Directors) during the reporting year was as follows:
|
|
Average for the year ended |
Average for the year ended |
At |
At |
|
Total employees |
277 |
293 |
266 |
285 |
Directors' remuneration
There are retirement benefits accruing to two Directors under a defined contribution scheme (FY2014/15: two).
10) Share-based payments
The total share-based payments-related cost recognised by the Group in the statement of comprehensive income is shown below:
|
Group |
2016 |
2015 |
|
Omnibus Plan |
25.8 |
25.0 |
|
Ashmore Equities Investment Management (US) L.L.C (AEIM) operating agreement |
0.1 |
1.6 |
|
Phantom Bonus Plan |
0.2 |
(2.1) |
|
Total related to compensation awards |
26.1 |
24.5 |
|
Related to acquisition of AEIM |
(15.4) |
- |
|
Total share-based payments expense |
10.7 |
24.5 |
The total expense recognised for the year in respect of equity-settled share-based payment transactions was £10.5 million (FY2014/15: £26.5 million).
The Ashmore First Discretionary Share Option Scheme (Option Scheme)
The Option Scheme was set up in October 2000. Options issued under the Option Scheme typically have a life of 10 years and vest after five years from date of grant. The pro rata proportion of the fair value of options at each reporting year end has been accounted for on an equity-settled basis. No further options will be issued under the Option Scheme. All outstanding options are fully vested.
Share options outstanding under the Option Scheme were as follows:
|
Group and Company |
2016 |
Weighted average exercise |
2015 |
Weighted average exercise |
|
At the beginning of the year |
175,000 |
£0.66 |
503,750 |
£0.35 |
|
Exercised |
(175,000) |
£0.66 |
(328,750) |
£0.19 |
|
Forfeited |
- |
- |
- |
- |
|
Options outstanding at year end |
- |
- |
175,000 |
£0.66 |
|
Options exercisable |
- |
- |
175,000 |
£0.66 |
175,000 share options were exercised during the year (FY2014/15: 328,750 options were exercised). The weighted average share price on the date options were exercised during the year was 253.30 pence.
There were no new share options granted during the year ended 30 June 2016 (FY2014/15: none).
The Executive Omnibus Incentive Plan (Omnibus Plan)
The Omnibus Plan was introduced prior to the Company listing in October 2006 and provides for the grant of share awards, market value options, premium cost options, discounted options, linked options, phantoms and/or nil-cost options to employees. The Omnibus Plan will also allow bonuses to be deferred in the form of share awards with or without matching shares. These elements can be used singly or in combination. Awards granted under the Omnibus Plan typically vest after five years from date of grant, with the exception of bonus awards which vest after the shorter of five years from date of grant or on the date of termination of employment. Awards under the Omnibus Plan are accounted for as equity-settled, with the exception of phantoms which are classified as cash-settled.
The share-based payments relating to the Omnibus Plan represent the combined cash and equity-settled payments.
Total expense by year awards were granted (excluding national insurance)
|
Group and Company Year of grant |
2016 |
2015 |
|
2010 |
- |
2.0 |
|
2011 |
2.8 |
3.0 |
|
2012 |
2.8 |
2.9 |
|
2013 |
3.8 |
4.0 |
|
2014 |
2.4 |
2.6 |
|
2015 |
3.0 |
8.4 |
|
2016 |
8.3 |
- |
|
Total omnibus share-based payments expense reported in comprehensive income |
23.1 |
22.9 |
Awards outstanding under the Omnibus Plan were as follows:
i) Equity-settled awards
|
Group and Company |
2016 |
2016 |
2015 |
2015 |
|
Restricted share awards |
|
|
|
|
|
At the beginning of the year |
20,524,634 |
£3.46 |
17,996,262 |
£3.50 |
|
Granted |
7,366,910 |
£2.43 |
5,386,125 |
£3.07 |
|
Vested |
(3,058,877) |
£3.19 |
(2,296,630) |
£2.86 |
|
Forfeited |
(1,903,493) |
£3.21 |
(561,123) |
£3.46 |
|
Awards outstanding at year end |
22,929,174 |
£3.18 |
20,524,634 |
£3.46 |
|
|
|
|
|
|
|
Bonus share awards |
|
|
|
|
|
At the beginning of the year |
7,404,574 |
£3.43 |
5,659,814 |
£3.55 |
|
Granted |
2,527,672 |
£2.43 |
2,422,401 |
£3.05 |
|
Vested |
(1,493,951) |
£3.18 |
(677,641) |
£3.03 |
|
Forfeited |
- |
- |
- |
- |
|
Awards outstanding at year end |
8,438,295 |
£3.15 |
7,404,574 |
£3.43 |
|
|
|
|
|
|
|
Matching share awards |
|
|
|
|
|
At the beginning of the year |
7,404,574 |
£3.43 |
5,659,814 |
£3.55 |
|
Granted |
2,527,672 |
£2.43 |
2,421,333 |
£3.05 |
|
Vested |
(1,401,866) |
£3.17 |
(605,548) |
£2.97 |
|
Forfeited |
(92,085) |
£3.32 |
(71,025) |
£3.58 |
|
Awards outstanding at year end |
8,438,295 |
£3.18 |
7,404,574 |
£3.43 |
|
Total |
39,805,764 |
£3.18 |
35,333,782 |
£3.44 |
ii) Cash-settled awards
|
Group and Company |
2016 |
2016 |
2015 |
2015 |
|
Restricted share awards |
|
|
|
|
|
At the beginning of the year |
582,848 |
£3.48 |
2,200,290 |
£3.50 |
|
Granted |
38,504 |
£2.43 |
15,161 |
£3.09 |
|
Vested |
(45,325) |
£3.50 |
(36,887) |
£3.94 |
|
Forfeited |
(306,273) |
£3.14 |
(1,595,716) |
£3.51 |
|
Awards outstanding at year end |
269,754 |
£3.72 |
582,848 |
£3.48 |
|
|
|
|
|
|
|
Bonus share awards |
|
|
|
|
|
At the beginning of the year |
382,985 |
£3.49 |
1,579,772 |
£3.50 |
|
Granted |
6,179 |
£2.43 |
- |
- |
|
Vested |
(198,588) |
£3.17 |
- |
- |
|
Forfeited |
- |
- |
(1,196,787) |
£3.51 |
|
Awards outstanding at year end |
190,576 |
£3.78 |
382,985 |
£3.49 |
|
|
|
|
|
|
|
Matching share awards |
|
|
|
|
|
At the beginning of the year |
382,985 |
£3.49 |
1,579,772 |
£3.50 |
|
Granted |
6,179 |
£2.43 |
- |
- |
|
Vested |
- |
- |
- |
- |
|
Forfeited |
(198,588) |
£3.17 |
(1,196,787) |
£3.51 |
|
Awards outstanding at year end |
190,576 |
£3.78 |
382,985 |
£3.49 |
|
Total |
650,906 |
£3.75 |
1,348,818 |
£3.49 |
iii) Total awards
|
Group and Company |
2016 |
2016 |
2015 |
2015 |
|
Restricted share awards |
|
|
|
|
|
At the beginning of the year |
21,107,482 |
£3.46 |
20,196,552 |
£3.50 |
|
Granted |
7,405,414 |
£2.43 |
5,401,286 |
£3.07 |
|
Vested |
(3,104,202) |
£3.20 |
(2,333,517) |
£2.88 |
|
Forfeited |
(2,209,766) |
£3.20 |
(2,156,839) |
£3.50 |
|
Awards outstanding at year end |
23,198,928 |
£3.19 |
21,107,482 |
£3.46 |
|
|
|
|
|
|
|
Bonus share awards |
|
|
|
|
|
At the beginning of the year |
7,787,559 |
£3.43 |
7,239,586 |
£3.54 |
|
Granted |
2,533,851 |
£2.43 |
2,422,401 |
£3.05 |
|
Vested |
(1,692,539) |
£3.18 |
(677,641) |
£3.03 |
|
Forfeited |
- |
- |
(1,196,787) |
£3.51 |
|
Awards outstanding at year end |
8,628,871 |
£3.17 |
7,787,559 |
£3.43 |
|
|
|
|
|
|
|
Matching share awards |
|
|
|
|
|
At the beginning of the year |
7,787,559 |
£3.43 |
7,239,586 |
£3.54 |
|
Granted |
2,533,851 |
£2.43 |
2,421,333 |
£3.05 |
|
Vested |
(1,401,866) |
£3.17 |
(605,548) |
£2.97 |
|
Forfeited |
(290,673) |
£3.22 |
(1,267,812) |
£3.51 |
|
Awards outstanding at year end |
8,628,871 |
£3.20 |
7,787,559 |
£3.43 |
|
Total |
40,456,670 |
£3.19 |
36,682,600 |
£3.45 |
The fair value of awards granted under the Omnibus Plan is determined by the average Ashmore Group plc closing share price for the five business days prior to grant.
Where the grant of restricted and matching share awards is linked to the annual bonus process the fair value of the awards is spread over a period including the current financial year and the subsequent five years to their vesting date when the grantee becomes unconditionally entitled to the underlying shares. The fair value of the remaining awards is spread over the period from the date of grant to the vesting date.
The liability arising from cash-settled awards under the Omnibus Plan at the end of the year and reported within trade and other payables on the consolidated balance sheet is £0.6 million (30 June 2015: £1.3 million) of which £nil (30 June 2015: £nil) relates to vested awards.
The Approved Company Share Option Plan (CSOP)
The CSOP was also introduced prior to the Company listing in October 2006 and is an option scheme providing for the grant of market value options to employees with the aggregate value of outstanding options not exceeding £30,000 per employee. The CSOP qualifies as a UK tax approved company share option plan and approval thereto has been obtained from HMRC. To date, there have been no awards made under the CSOP.
Other arrangements
AEIM operating agreement
Under the terms of AEIM's operating agreement, certain employees are eligible to receive part of their variable compensation in the form of partnership units. These awards, which typically vest five years from the date of grant depending on the satisfaction of service conditions, are accounted for as equity-settled share-based payments. The fair value of awards granted is based on the equity valuation of the subsidiary at the date of grant. Upon vesting, the holders are entitled to receive units in the subsidiary.
Share awards outstanding at year end under the operating arrangement were as follows:
|
Group |
2016 |
2016 |
2015 |
2015 |
|
At the beginning of the year |
73,721 |
$33.41 |
67,289 |
$31.88 |
|
Granted |
- |
- |
21,678 |
$41.11 |
|
Vested |
- |
- |
- |
- |
|
Forfeited |
(7,944) |
$18.80 |
(15,246) |
$37.60 |
|
Awards outstanding at year end |
65,777 |
$18.80 |
73,721 |
$33.41 |
The total expense recognised for the year in respect of the AEIM equity-settled share-based payment transactions was £0.1 million (FY2014/15: £1.5 million).
AEIM Phantom Bonus Plan
The Phantom Bonus Plan is a cash-settled share-based payment plan set up to provide long-term incentives to certain employees. The units typically vest after five years from date of grant, contingent upon continued employment. Units awarded under the plan carry no voting rights. The fair value of units granted under the plan is determined with reference to the equity valuation of the underlying employing entity.
Awards outstanding at year end under the Phantom Bonus Plan were as follows:
|
Group |
2016 |
2016 |
2015 |
2015 |
|
At the beginning of the year |
24,518 |
$41.11 |
22,041 |
$31.85 |
|
Granted |
26,290 |
$30.65 |
10,643 |
$41.11 |
|
Vested |
- |
- |
- |
- |
|
Lapsed |
(8,005) |
$18.80 |
(8,166) |
$41.11 |
|
Awards outstanding at year end |
42,803 |
$18.80 |
24,518 |
$41.11 |
During the year the phantom awards were modified from being cash-settled awards to equity-settled awards and the related liability of £0.4 million was reclassed to the share-based payments reserve (FY2014/15: £0.3 million phantom liability was recognised in trade and other payables of which £nil related to vested awards).
Prior period acquisition of AEIM
At the time of the acquisition of AEIM in May 2011, employees and management held unvested shares representing 17.9% of its partnership shares. These awards, which vest after five years depending on the satisfaction of service and performance conditions, were accounted for as equity-settled share-based payments in accordance with IFRS 2 Share-based payment, which results in an annual charge to the statement of comprehensive income during the period of vesting. On 31 May 2016 the full number of outstanding awards amounting to 232,300 units were forfeited and as a result £17.6 million of charges previously recognised in respect of these awards were credited to the consolidated statement of comprehensive income for the year (FY2014/15: 73,600 awards were forfeited and as a result £3.7 million of charges previously recognised in respect these awards were credited to the consolidated statement of comprehensive income).
11) Other expenses
Other expenses consist of the following:
|
|
2016 |
2015 |
|
Travel |
3.6 |
4.1 |
|
Professional fees |
4.6 |
3.3 |
|
Information technology and communications |
5.4 |
5.9 |
|
Amortisation of intangible assets (note 15) |
3.9 |
3.6 |
|
Impairment of intangible assets |
- |
0.4 |
|
Operating leases |
3.3 |
3.3 |
|
Premises-related costs |
1.2 |
0.9 |
|
Insurance |
1.1 |
1.1 |
|
Auditors' remuneration (see below) |
0.8 |
1.0 |
|
Depreciation of property, plant and equipment (note 16) |
1.2 |
1.3 |
|
Consolidated funds (note 20) |
2.4 |
2.7 |
|
Other expenses |
5.1 |
4.7 |
|
|
32.6 |
32.3 |
Auditors' remuneration
|
|
2016 |
2015 |
|
Fees for statutory audit services: |
|
|
|
- Fees payable to the Company's auditor for the audit of the Group's accounts |
0.2 |
0.2 |
|
- Fees payable to the Company's auditor and its associates for the audit of the Company's subsidiaries pursuant to legislation |
0.2 |
0.3 |
|
|
|
|
|
Fees for non-audit services: |
|
|
|
- Fees payable to the Company's auditor and its associates for tax services |
0.2 |
0.3 |
|
- Fees payable to the Company's auditor and its associates for other services |
0.2 |
0.2 |
|
|
0.8 |
1.0 |
12) Taxation
Analysis of tax charge for the year:
|
|
2016 |
2015 |
|
Current tax |
|
|
|
UK corporation tax on profits for the year |
31.4 |
37.6 |
|
Overseas corporation tax charge |
4.8 |
4.9 |
|
Adjustments in respect of prior years |
0.7 |
(1.2) |
|
|
36.9 |
41.3 |
|
Deferred tax |
|
|
|
Origination and reversal of temporary differences (see note 18) |
1.0 |
- |
|
Effect of changes in corporation tax rates |
0.9 |
- |
|
Tax expense for the year |
38.8 |
41.3 |
Factors affecting tax charge for the year
|
|
2016 |
2015 |
|
Profit before tax |
167.5 |
181.3 |
|
|
|
|
|
Profit on ordinary activities multiplied by the blended UK tax rate of 20.00% (FY2014/15: 20.75%) |
33.5 |
37.6 |
|
|
|
|
|
Effects of: |
|
|
|
Non-deductible expenses |
4.7 |
8.0 |
|
Deduction in respect of vested shares/exercised options (Part 12, Corporation Tax Act 2009) |
(2.8) |
(2.5) |
|
Different rate of taxes on overseas profits |
1.5 |
- |
|
Non-taxable income |
- |
(2.0) |
|
Tax relief on amortisation and impairment of goodwill and intangibles |
(1.2) |
(1.0) |
|
Effect of deferred tax balance from changes in the UK corporation tax rate |
0.9 |
- |
|
Other items |
1.5 |
2.4 |
|
Adjustments in respect of prior years |
0.7 |
(1.2) |
|
Tax expense for the year |
38.8 |
41.3 |
Non-deductible expenses include the tax impact of (i) non-deductible IFRS 2 accounting charges in respect of share-based payments of £2.1 million (FY 2014/15: £5.0 million) and (ii) non-deductible foreign exchange losses of £1.1 million.
Tax charge recognised in equity/other comprehensive income is a follows:
|
|
2016 |
2015 |
|
Current tax on foreign exchange gains |
0.9 |
- |
|
Deferred tax on seed capital investments |
1.0 |
- |
|
Tax expense recognised in equity/other comprehensive income |
1.9 |
- |
A reduction to the main rate of UK corporation tax from 21% to 20% was enacted in the Finance Act 2013 and became effective from 1 April 2015. The rate of 20% tax applied for the entire financial year. In addition, further reductions in the main rate of UK corporation tax to 19% and 18% were substantively enacted in the Finance Bill 2015, with effect from 1 April 2017 and 1 April 2020 respectively - these reductions have been used in the calculation of the Group's UK deferred tax assets and liabilities.
13) Earnings per share
Basic earnings per share at 30 June 2016 of 19.13 pence (30 June 2015: 20.26 pence) is calculated by dividing the profit after tax for the financial period attributable to equity holders of the parent of £127.8 million (FY2014/15: £136.5 million) by the weighted average number of ordinary shares in issue during the period, excluding own shares.
Diluted earnings per share is calculated based on basic earnings per share adjusted for all dilutive potential ordinary shares. There is no difference between the profit for the year attributable to equity holders of the parent used in the basic and diluted earnings per share calculations.
Reconciliation of the weighted average number of shares used in calculating basic and diluted earnings per share is shown below.
|
|
2016 |
2015 |
|
Weighted average number of ordinary shares used in the calculation of basic earnings per share |
667,777,465 |
674,424,923 |
|
Effect of dilutive potential ordinary shares - share awards |
38,958,842 |
31,986,209 |
|
Weighted average number of ordinary shares used in the calculation of diluted earnings per share |
706,736,307 |
706,411,132 |
14) Dividends
Dividends paid in the year
|
Company |
2016 |
2015 |
|
Final dividend for FY2014/15 - 12.10p (FY2013/14: 12.00p) |
84.5 |
82.7 |
|
Interim dividend for FY2015/16 - 4.55p (FY2014/15: 4.55p) |
31.6 |
31.3 |
|
|
116.1 |
114.0 |
In addition, the Group paid £4.2 million (FY2014/15: £6.1 million) of dividends to non-controlling interests.
Dividends declared/proposed in respect of the year
|
Company |
2016 |
2015 |
|
Interim dividend declared per share |
4.55 |
4.55 |
|
Final dividend proposed per share |
12.10 |
12.10 |
|
|
16.65 |
16.65 |
On 5 September 2016 the Board proposed a final dividend of 12.10 pence per share for the year ended 30 June 2016. This has not been recognised as a liability of the Group at the year end as it has not yet been approved by shareholders. Based on the number of shares in issue at the year end which qualify to receive a dividend, the total amount payable would be £84.5 million.
15) Goodwill and intangible assets
|
Group |
Goodwill |
Fund management relationships |
Total |
|
Cost - (at original exchange rate) |
|
|
|
|
At 30 June 2014, 30 June 2015 and 30 June 2016 |
57.5 |
39.5 |
97.0 |
|
|
|
|
|
|
Accumulated amortisation and impairment |
|
|
|
|
At 30 June 2014 |
- |
(23.2) |
(23.2) |
|
Amortisation charge for the year |
- |
(3.6) |
(3.6) |
|
Impairment charge for the year |
- |
(0.4) |
(0.4) |
|
At 30 June 2015 |
- |
(27.2) |
(27.2) |
|
Amortisation charge for the year |
- |
(3.9) |
(3.9) |
|
Impairment charge for the year |
- |
- |
- |
|
At 30 June 2016 |
- |
(31.1) |
(31.1) |
|
|
|
|
|
|
Net book value |
|
|
|
|
At 30 June 2014 |
55.7 |
16.5 |
72.2 |
|
Accumulated amortisation for the year |
- |
(4.0) |
(4.0) |
|
Foreign exchange revaluation through reserves* |
4.3 |
1.6 |
5.9 |
|
At 30 June 2015 |
60.0 |
14.1 |
74.1 |
|
Accumulated amortisation and impairment for the year |
- |
(3.9) |
(3.9) |
|
Foreign exchange revaluation through reserves* |
10.1 |
2.2 |
12.3 |
|
At 30 June 2016 |
70.1 |
12.4 |
82.5 |
* FX revaluation through reserves is a result of the retranslation of US dollar-denominated intangibles and goodwill.
|
Company |
Goodwill |
|
Cost |
|
|
At the beginning and end of the year |
4.1 |
|
Net carrying amount at 30 June 2015 and 2016 |
4.1 |
Goodwill
The Group's goodwill balance relates principally to the acquisition of AEIM in May 2011.
The Company's goodwill balance relates to the acquisition of the business from ANZ in 1999.
The annual impairment review of goodwill was undertaken for the year ending 30 June 2016. The Group consists of a single cash generating unit for the purpose of assessing the carrying value of goodwill. In performing the impairment review, management prepares a calculation of the recoverable amount of goodwill and compares this to the carrying value. The recoverable amount was based on a fair value less costs to sell calculation using the Company's year end share price. Based on management's assessment as at 30 June 2016, the recoverable amount was in excess of the carrying value of goodwill and no impairment was implied. No impairment losses have been recognised in the current or preceding years.
Fund management relationships
Intangible assets comprise fund management relationships related to profit expected to be earned from clients of AEIM.
An annual impairment review of the fund management relationships was undertaken for the year ending 30 June 2016. The recoverable amount was derived from the cumulative pre-tax net earnings anticipated to be generated over the remaining useful economic life, discounted to present value using the Group's weighted average cost of capital of 13.0% per annum. Cumulative net earnings associated with the fund management relationships intangible asset were derived from the annual operating profit contribution that would arise as a result of the remaining fund management relationships, adjusted for investment performance and investor attrition.
The recoverable amount of the fund management relationships intangible asset was determined to be higher than its carrying value as at 30 June 2016. Accordingly, no impairment charge was recognised during the year (FY2014/15: an impairment charge of £0.4 million was recognised and included within other expenses in the Group's consolidated statement of comprehensive income).
The remaining amortisation period for fund management relationships is three years (30 June 2015: four years).
16) Property, plant and equipment
|
Group |
2016 |
2015 |
|
Cost |
|
|
|
At the beginning of the year |
6.6 |
5.8 |
|
Additions |
0.8 |
0.7 |
|
Foreign exchange revaluation |
0.6 |
0.1 |
|
Disposals |
(0.2) |
- |
|
At the end of the year |
7.8 |
6.6 |
|
|
|
|
|
Accumulated depreciation |
|
|
|
At the beginning of the year |
4.1 |
2.8 |
|
Depreciation charge for the year |
1.2 |
1.3 |
|
Foreign exchange revaluation |
0.3 |
- |
|
Disposals |
- |
- |
|
At the end of the year |
5.6 |
4.1 |
|
Net book value at 30 June |
2.2 |
2.5 |
|
Company |
2016 |
2015 |
|
Cost |
|
|
|
At the beginning of the year |
3.0 |
2.7 |
|
Additions |
0.7 |
0.3 |
|
Disposals |
(0.1) |
- |
|
At the end of the year |
3.6 |
3.0 |
|
|
|
|
|
Accumulated depreciation |
|
|
|
At the beginning of the year |
1.9 |
1.2 |
|
Depreciation charge for year |
0.6 |
0.7 |
|
Disposals |
- |
- |
|
At the end of the year |
2.5 |
1.9 |
|
Net book value at 30 June |
1.1 |
1.1 |
17) Trade and other receivables
|
|
Group |
Company |
||
|
|
2016 |
2015 |
2016 |
2015 |
|
Current |
|
|
|
|
|
Trade debtors |
56.8 |
60.8 |
3.5 |
2.5 |
|
Prepayments |
3.0 |
2.3 |
1.7 |
1.4 |
|
Loans due from subsidiaries |
- |
- |
277.5 |
294.1 |
|
Amounts due from subsidiaries |
- |
- |
2.2 |
151.0 |
|
Other receivables |
1.4 |
0.9 |
0.5 |
2.8 |
|
Total trade and other receivables |
61.2 |
64.0 |
285.4 |
451.8 |
Group trade debtors include all billed and unbilled management fees due to the Group at 30 June 2016 in respect of investment management services provided up to that date. Included in amounts due from subsidiaries for the Company are intercompany loans related to seed capital investments held by subsidiaries and trading balances. Intercompany loans are issued on commercial terms and repayable on demand.
18) Deferred taxation
Deferred tax assets and liabilities recognised by the Group and Company at year end are attributable to the following:
|
|
2016 |
2015 |
||||
|
Group |
Other temporary differences £m |
Share-based payments |
Total |
Other temporary differences |
Share-based payments |
Total |
|
Deferred tax assets |
8.9 |
10.6 |
19.5 |
9.6 |
10.7 |
20.3 |
|
Deferred tax liabilities |
(5.2) |
- |
(5.2) |
(3.5) |
- |
(3.5) |
|
|
3.7 |
10.6 |
14.3 |
6.1 |
10.7 |
16.8 |
|
|
2016 |
2015 |
||||
|
Company |
Other temporary differences |
Share-based payments |
Total |
Other temporary differences |
Share-based payments |
Total |
|
Deferred tax assets |
0.1 |
8.1 |
8.2 |
0.3 |
8.7 |
9.0 |
Movement of deferred tax balances
The movement in the deferred tax balances between the balance sheet dates has been reflected in equity or the statement of comprehensive income as follows:
|
Group |
Other temporary differences |
Share-based payments |
Total |
|
At 30 June 2014 |
4.9 |
11.9 |
16.8 |
|
Credited/(charged) to the consolidated statement of comprehensive income |
1.2 |
(1.2) |
- |
|
At 30 June 2015 |
6.1 |
10.7 |
16.8 |
|
Credited/(charged) to the consolidated statement of comprehensive income |
(2.4) |
(0.1) |
(2.5) |
|
At 30 June 2016 |
3.7 |
10.6 |
14.3 |
|
Company |
Other temporary differences |
Share-based payments |
Total |
|
At 30 June 2014 |
0.3 |
11.9 |
12.2 |
|
Credited/(charged) to the statement of comprehensive income |
- |
(3.2) |
(3.2) |
|
At 30 June 2015 |
0.3 |
8.7 |
9.0 |
|
Credited/(charged) to the statement of comprehensive income |
(0.2) |
(0.6) |
(0.8) |
|
At 30 June 2016 |
0.1 |
8.1 |
8.2 |
Refer to the details in note 12 in relation to future changes to the UK corporation tax rate which have been reflected in the Group's deferred tax position.
19) Fair value of financial instruments
The Group has an established control framework with respect to the measurement of fair values. This framework includes a valuation team that has overall responsibility for all significant fair value measurements. It regularly reviews significant inputs and valuation adjustments. If third-party information is used to measure fair value, then the team assesses and documents the evidence obtained from the third parties to support such valuations. There are no material differences between the carrying amounts of financial assets and liabilities and their fair values at the balance sheet date.
Fair value hierarchy
The Group measures fair values using the following fair value hierarchy that reflects the significance of inputs used in making the measurements.
- Level 1: Valuation is based upon a quoted market price in an active market for an identical instrument. This fair value measure relates to the valuation of quoted and exchange traded equity and debt securities.
- Level 2: Valuation techniques are based upon observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This fair value measure relates to the valuation of quoted equity securities in inactive markets or in interests in unlisted funds whose net asset values are referenced to the fair values of the listed or exchange traded securities held by those funds.
- Level 3: Valuation techniques use significant unobservable inputs.
For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The fair value hierarchy of financial instruments which are carried at fair value at year end is summarised below:
|
|
2016 |
2015 |
||||||
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets |
|
|
|
|
|
|
|
|
|
Investment securities |
27.2 |
69.6 |
46.9 |
143.7 |
36.8 |
46.7 |
47.5 |
131.0 |
|
Non-current financial assets held-for-sale |
- |
78.6 |
28.1 |
106.7 |
- |
31.7 |
- |
31.7 |
|
Available-for-sale financial assets |
0.4 |
0.4 |
8.0 |
8.8 |
0.4 |
10.2 |
- |
10.6 |
|
Fair value through profit or loss investments |
- |
68.2 |
- |
68.2 |
- |
61.8 |
- |
61.8 |
|
Non-current asset investments |
- |
- |
11.7 |
11.7 |
- |
8.9 |
- |
8.9 |
|
Derivative financial instruments |
- |
- |
- |
- |
- |
0.3 |
- |
0.3 |
|
|
27.6 |
216.8 |
94.7 |
339.1 |
37.2 |
159.6 |
47.5 |
244.3 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
Third-party interests in consolidated funds |
11.0 |
36.2 |
28.4 |
75.6 |
15.0 |
8.7 |
17.8 |
41.5 |
|
Derivative financial instruments |
- |
4.5 |
- |
4.5 |
- |
0.3 |
- |
0.3 |
|
Non-current financial liabilities held-for-sale |
- |
29.8 |
- |
29.8 |
- |
11.0 |
- |
11.0 |
|
|
11.0 |
70.5 |
28.4 |
109.9 |
15.0 |
20.0 |
17.8 |
52.8 |
Certain investments within non-current assets and available-for-sale financial assets were transferred from Level 2 to Level 3 during the year. There were no transfers between Level 1 and Level 2 during the year (FY2014/15: none).
Changes in Level 3 financial assets and liabilities recognised at fair value on a recurring basis
|
|
Investment securities |
Non-current financial assets held- for-sale |
Available- for-sale financial assets |
Non-current asset investments |
Third-party interests in consolidated funds |
|
At 1 July 2015 |
- |
- |
- |
- |
- |
|
Additions |
47.6 |
- |
- |
- |
17.8 |
|
Losses recognised in consolidated comprehensive income |
(0.1) |
- |
- |
- |
- |
|
At 30 June 2015 |
47.5 |
- |
- |
- |
17.8 |
|
Additions |
22.0 |
- |
- |
1.1 |
10.0 |
|
Transfers in from Level 2 |
2.2 |
- |
7.9 |
9.4 |
- |
|
Transfers from Consolidated funds to HFS investments |
(26.0) |
26.0 |
- |
- |
- |
|
Gains recognised in consolidated comprehensive income |
1.2 |
2.1 |
0.1 |
1.2 |
0.6 |
|
At 30 June 2016 |
46.9 |
28.1 |
8.0 |
11.7 |
28.4 |
Valuation of Level 3 financial liabilities recognised at fair value on a recurring basis
The measurement of investment securities and third-party interests in consolidated funds classified within Level 3 relates to investments made during the year in closed-end private equity funds that are neither listed on any stock exchange nor traded on any regulated markets. The Group considered it is more appropriate to classify these investments within Level 3 as the valuation is based on valuation techniques as reflected within the net asset values of the funds as provided by the administrator.
Financial instruments not measured at fair value
Financial assets and liabilities that are not measured at fair value include cash and cash equivalents, trade and other receivables, and trade and other payables. The carrying value of financial assets and financial liabilities not measured at fair value is considered a reasonable approximation of fair value as at 30 June 2016 and 2015.
20) Seed capital investments
The Group considers itself a sponsor of an investment fund when it facilitates the establishment of the fund in which the Group is the investment manager. The Group ordinarily provides seed capital in order to provide initial scale and facilitate marketing of the funds to third-party investors. The fund is then financed through the issue of units to investors. Aggregate interests held by the Group include seed capital, management fees and performance fees. The Group generates management and performance fee income from managing the assets on behalf of third-party investors.
The movements of seed capital investments and related items during the year are as follows:
|
Group |
HFS investments |
AFS investments |
FVTPL investments |
Investment securities (relating to consolidated funds)* |
Other (relating to consolidated funds)** |
Third-party interests in consolidated funds |
Non-current asset investments |
Total |
|
Carrying amount at 30 June 2014 |
36.4 |
29.4 |
8.4 |
173.2 |
(1.6) |
(69.7) |
11.7 |
187.8 |
|
Net transfers: |
|
|
|
|
|
|
|
|
|
HFS to consolidated funds |
(22.8) |
- |
- |
30.7 |
- |
(7.9) |
- |
- |
|
HFS to FVTPL investments |
(13.3) |
- |
13.3 |
- |
- |
- |
- |
- |
|
Consolidated funds to FVTPL investments |
- |
- |
42.6 |
(116.9) |
- |
74.3 |
- |
- |
|
Net purchases, disposals and fair value changes |
20.4 |
(18.8) |
(2.5) |
44.0 |
17.1 |
(38.2) |
(2.8) |
19.2 |
|
Carrying amount at 30 June 2015 |
20.7 |
10.6 |
61.8 |
131.0 |
15.5 |
(41.5) |
8.9 |
207.0 |
|
Net transfers: |
|
|
|
|
|
|
|
|
|
HFS to consolidated funds |
(15.8) |
- |
- |
20.7 |
- |
(4.9) |
- |
- |
|
FVTPL to HFS investments |
7.6 |
- |
(7.6) |
- |
- |
- |
- |
- |
|
Consolidated funds to HFS investments |
26.9 |
- |
- |
(26.9) |
- |
- |
- |
- |
|
Consolidated funds to FVTPL investments |
- |
- |
18.3 |
(47.3) |
- |
29.0 |
- |
- |
|
Net purchases, disposals and fair value changes |
37.5 |
(1.8) |
(4.3) |
66.2 |
(10.7) |
(58.2) |
2.8 |
31.5 |
|
Carrying amount at 30 June 2016 |
76.9 |
8.8 |
68.2 |
143.7 |
4.8 |
(75.6) |
11.7 |
238.5 |
* Investment securities in consolidated funds are designated as FVTPL.
** Relates to cash and other assets in consolidated funds that are not investment securities.
a) Non-current assets and non-current liabilities held-for-sale
Where Group companies invest seed capital into funds operated and controlled by the Group and the Group is actively seeking to reduce its investment and it is considered highly probable that it will relinquish control within a year, the interests in the funds are treated as held-for-sale and are recognised as financial assets and liabilities held-for-sale. During the year, five funds (FY2014/15: eight) were seeded in this manner, met the above criteria, and consequently the assets and liabilities of these funds were initially classified as held-for-sale.
The non-current assets and liabilities held-for-sale at 30 June 2016 were as follows:
|
|
2016 |
2015 |
|
Non-current financial assets held-for-sale |
106.7 |
31.7 |
|
Non-current financial liabilities held-for-sale |
(29.8) |
(11.0) |
|
Seed capital investments classified as held-for-sale |
76.9 |
20.7 |
Investments cease to be classified as held-for-sale when they are no longer controlled by the Group. A loss of control may happen either through sale of the investment and/or dilution of the Group's holding. When investments cease to be classified as held-for-sale they are classified as financial assets designated as FVTPL. No such funds were transferred to the FVTPL category during the year (FY2014/15: two funds were transferred to the FVTPL category after the Group reduced its interests following investment inflows from third parties).
If the fund remains under the control of the Group for more than one year from the original investment date it will cease to be classified as held-for-sale, and will be consolidated line-by-line after it is assessed that the Group controls the investment fund in accordance with the requirements of IFRS 10. During the year, seven such funds (FY2014/15: six) with an aggregate carrying amount of £15.8 million (FY2014/15: £22.8 million) were transferred from the held-for-sale to consolidated funds category. There was no impact on net assets or comprehensive income as a result of the transfer.
Included within finance income are net gains of £4.2 million (FY2014/15: net gains of £2.1 million) in relation to held-for-sale investments.
As the Group considers itself to have one segment (refer to note 4), no additional segmental disclosure of held-for-sale assets or liabilities is applicable.
b) Available-for-sale financial assets
Available-for-sale financial assets at 30 June 2016 comprise shares held in debt and equity funds as follows:
|
|
2016 |
2015 |
|
Equities listed on stock exchange |
0.4 |
0.4 |
|
Equity funds |
8.4 |
7.9 |
|
Debt funds |
- |
2.3 |
|
Seed capital classified as available-for-sale |
8.8 |
10.6 |
Included within other comprehensive income are net gains of £1.1 million (FY2014/15: net gains of £3.2 million) in relation to available-for-sale investments.
c) Fair value through profit or loss investments
Fair value through profit or loss investments at 30 June 2016 comprise shares held in debt and equity funds as follows:
|
|
2016 |
2015 |
|
Equity funds |
46.6 |
31.9 |
|
Debt funds |
21.6 |
29.9 |
|
Seed capital classified as fair value through profit or loss investments |
68.2 |
61.8 |
Included within finance income are net gains of £16.3 million (FY2014/15: net losses of £2.7 million) on the Group's fair value through profit or loss investments.
d) Consolidated funds
The Group has consolidated 14 investment funds as at 30 June 2016 (30 June 2015: 12 investment funds), over which the Group is deemed to have control (refer to note 26). Consolidated funds represent seed capital investments where the Group has held its position for a period greater than one year and its interest represents a controlling stake in the fund in accordance with IFRS 10. Consolidated fund assets and liabilities are presented line by line after intercompany eliminations. The table below sets out an analysis of the carrying amounts of interests held by the Group in consolidated investment funds.
|
|
2016 |
2015 |
|
Investment securities |
143.7 |
131.0 |
|
Cash and cash equivalents |
5.6 |
15.7 |
|
Other |
(0.8) |
(0.2) |
|
Third-party interests in consolidated funds |
(75.6) |
(41.5) |
|
Consolidated seed capital investments |
72.9 |
105.0 |
Investment securities are designated as FVTPL and include listed and unlisted equities and debt securities. Other includes trade receivables, trade payables and accruals.
The maximum exposure to loss is the carrying amount of the assets held. The Group has not provided financial support or otherwise agreed to be responsible for supporting any consolidated fund financially.
Included within the consolidated statement of comprehensive income are net gains of £nil (FY2014/15: net losses of £0.2 million) relating to the Group's share of the results of the individual statements of comprehensive income for each of the consolidated funds, as follows:
|
|
2016 |
2015 |
|
Finance income |
4.7 |
5.3 |
|
Gains/(losses) on investment securities |
(5.7) |
(3.6) |
|
Change in third-party interests in consolidated funds |
3.4 |
0.8 |
|
Other expenses |
(2.4) |
(2.7) |
|
Net gains/(losses) on consolidated funds |
- |
(0.2) |
As of 30 June 2016, the Group's consolidated funds were domiciled in Indonesia, Luxembourg, Saudi Arabia, Turkey and the United States.
e) Non-current asset investments
Non-current asset investments relate to the Group's holding in closed-end funds and are designated as FVTPL. Fair value is assessed by taking account of the extent to which potential dilution of gains or losses may arise as a result of additional investors subscribing to the fund where the final close of a fund has not occurred.
|
|
2016 |
2015 |
|
Non-current asset investments |
11.7 |
8.9 |
Included within finance income are net losses of £0.4 million (FY2014/15: net losses of £2.9 million) on the Group's non-current asset investments.
21) Financial instrument risk management
Group
The Group is subject to strategic, business, client, investment, operational and treasury risks throughout its business as discussed in the Risk management section. This note discusses the Group's exposure to and management of the following principal risks which arise from the financial instruments it uses: credit risk, liquidity risk, interest rate risk, foreign exchange risk and price risk. Where the Group holds units in investment funds, classified either as held-for-sale, available-for-sale, FVTPL or non-current asset investment financial assets, the related financial instrument risk disclosures in the note below categorise exposures based on the Group's direct interest in those funds without looking through to the nature of underlying securities.
Risk management is the ultimate responsibility of the Board, as noted in the Risk management section.
Capital management
It is the Group's policy that all entities within the Group have sufficient capital to meet regulatory and working capital requirements and it conducts regular reviews of its capital requirements relative to its capital resources.
As the Group is regulated by the United Kingdom's FCA, it is required to maintain appropriate capital and perform regular calculations of capital requirements. This includes development of an Internal Capital Adequacy Assessment Process (ICAAP), based upon the FCA's methodologies under the Capital Requirements Directive. The Group's Pillar III disclosures can be found on the Group's website at www.ashmoregroup.com. These disclosures indicate that the Group had excess capital of £490.9 million as at 30 June 2016 (30 June 2015: excess capital of £485.4 million) over the level of capital required under a Pillar II assessment. The objective of the assessment is to check that the Group has adequate capital to manage identified risks and the process includes conducting stress tests to identify capital and liquidity requirements under different future scenarios including a potential downturn.
All regulated entities within the Group have complied with regulatory requirements and filings that apply in the jurisdictions they operate.
Credit risk
The Group has exposure to credit risk from its normal activities where the risk is that a counterparty will be unable to pay in full amounts when due.
Exposure to credit risk is monitored on an ongoing basis by senior management and the Group's Risk management and control function. The Group has a counterparty and cash management policy in place which, in addition to other controls, restricts exposure to any single counterparty by setting exposure limits and requiring approval and diversification of counterparty banks and other financial institutions. The Group's maximum exposure to credit risk is represented by the carrying value of its financial assets. The table below lists financial assets subject to credit risk.
|
|
Notes |
2016 |
2015 |
|
Investment securities |
19 |
143.7 |
131.0 |
|
Non-current financial assets held-for-sale |
19 |
106.7 |
31.7 |
|
Available-for-sale financial assets |
19 |
8.8 |
10.6 |
|
Fair value through profit or loss investments |
19 |
68.2 |
61.8 |
|
Derivative financial instruments |
19 |
- |
0.3 |
|
Trade and other receivables |
17 |
61.2 |
64.0 |
|
Cash and cash equivalents |
|
364.0 |
380.8 |
|
Total |
|
752.6 |
680.2 |
Investment securities, derivative financial instruments, non-current financial assets held-for-sale, available-for-sale financial assets and FVTPL investments expose the Group to credit risk from various counterparties, which is monitored and reviewed by the Group.
The Group's cash and cash equivalents, comprised of short-term deposits with banks and liquidity funds, are predominantly held with counterparties with credit ratings ranging from A to AAA as at 30 June 2016 (30 June 2015: AA- to AAA).
All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2015: none). They include fee debtors that arise principally within the Group's investment management business. They are monitored regularly and, historically, default levels have been insignificant, and, unless a client has withdrawn funds, there is an ongoing relationship between the Group and the client. There is no significant concentration of credit risk in respect of fees owing from clients.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or other financial assets.
In order to manage liquidity risk there is a Group Liquidity Policy to ensure that there is sufficient access to funds to cover all forecast committed requirements for the next 12 months.
The maturity profile of the Group's contractual undiscounted financial liabilities is as follows:
At 30 June 2016
|
|
Within 1 year |
1-5 years |
More than 5 years |
Total |
|
Non-current liabilities held-for-sale |
29.8 |
- |
- |
29.8 |
|
Third-party interests in consolidated funds |
75.6 |
- |
- |
75.6 |
|
Derivative financial instruments |
4.5 |
- |
- |
4.5 |
|
Current trade and other payables |
55.4 |
- |
- |
55.4 |
|
|
165.3 |
- |
- |
165.3 |
At 30 June 2015
|
|
Within 1 year |
1-5 years |
More than 5 years |
Total |
|
Non-current liabilities held-for-sale |
11.0 |
- |
- |
11.0 |
|
Third-party interests in consolidated funds |
41.5 |
- |
- |
41.5 |
|
Derivative financial instruments |
0.3 |
- |
- |
0.3 |
|
Current trade and other payables |
54.1 |
- |
- |
54.1 |
|
|
106.9 |
- |
- |
106.9 |
Details on leases and other commitments are provided in note 30.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates.
The principal interest rate risk is the risk that the Group will sustain a reduction in interest income through adverse movements in interest rates. This relates to bank deposits held in the ordinary course of business. The Group has a cash management policy which monitors cash levels and returns within set parameters on a continuing basis.
Bank and similar deposits held at year end are shown on the consolidated balance sheet as cash and cash equivalents. The effective interest earned on bank and similar deposits during the year is given in the table below:
Effective interest rates applicable to bank deposits
|
|
2016 |
2015 |
|
Deposits with banks and liquidity funds |
1.01 |
1.17 |
Deposits with banks and liquidity funds are repriced at intervals of less than one year.
At 30 June 2016, if interest rates over the year had been 50 basis points higher/lower with all other variables held constant, profit before tax for the year would have been £1.0 million higher/lower (FY2014/15: £0.7 million higher/lower), mainly as a result of higher/lower interest on cash balances. An assumption that the fair value of assets and liabilities will not be affected by a change in interest rates was used in the model to calculate the effect on profit before tax.
In addition, the Group is indirectly exposed to interest rate risk where the Group holds seed capital investments in funds which invest in debt securities.
Group
Foreign exchange risk
Foreign exchange risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in foreign exchange rates.
The Group's revenue is almost entirely denominated in US dollars, whilst the majority of the Group's costs are denominated in Sterling. Consequently, the Group has an exposure to movements in the GBP:USD exchange rate. In addition, the Group operates globally which means that it may enter into contracts and other arrangements denominated in local currencies in various countries. The Group also holds a number of seed capital investments which are denominated mainly in US dollars, Colombian peso and Indonesian rupiah.
The Group's policy is to hedge a proportion of the Group's revenue by using a combination of forward foreign exchange contracts and options for a period of up to two years forward. The Group also sells US dollars at spot rates when opportunities arise.
The table below shows the Group's sensitivity to a 1.0% exchange movement in the US dollar, Colombian peso and Indonesian rupiah, net of hedging activities.
|
|
2016 |
2015 |
||
|
Foreign currency sensitivity test |
Impact on profit |
Impact on equity |
Impact on profit |
Impact on equity |
|
US dollar +/- 1% |
2.6 |
2.7 |
2.4 |
2.6 |
|
Colombian peso +/- 1% |
0.1 |
0.1 |
0.1 |
0.1 |
|
Indonesian rupiah +/- 1% |
0.4 |
0.3 |
0.3 |
0.3 |
Price risk
Price risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of market changes.
Seed capital
The Group is exposed to the risk of changes in market prices in respect of seed capital investments. Such price risk is borne by the Group directly through interests in available-for-sale and non-current asset seed capital investments or indirectly either through line-by-line consolidation of underlying financial performance and positions held in certain funds or potential impairments when fair values less costs to sell of seed investments held-for-sale are less than carrying amounts. Details of seed capital investments held are given in note 20.
The Group has well defined procedures governing the appraisal, approval and monitoring of seed capital investments.
At 30 June 2016, a 5% movement in the fair value of these investments would have had a £11.9 million (FY2014/15: £10.4 million) impact on net assets and the impact on profit before tax would have been £7.8 million (FY2014/15: £4.6 million).
Management and performance fees
The Group is also indirectly exposed to price risk in connection with the Group's management fees, which are based on a percentage of value of AuM, and fees based on performance. Movements in market prices, exchange and interest rates could cause the AuM to fluctuate which in turn could affect fees earned. Performance fee revenues could also be reduced depending upon market conditions.
Management and performance fees are diversified across a range of investment themes and are not measurably correlated to any single market index in Emerging Markets. In addition, throughout Ashmore's history, the policy of having funds with year ends staged throughout the financial year has meant that in periods of steep market decline, some performance fees have still been recorded. The profitability impact is likely to be less than this, as cost mitigation actions would apply, including the reduction of the variable compensation paid to employees.
Using the year end AuM level of US$52.6 billion and applying the year's average net management fee rate of 55bps, a 5% movement in AuM would have a US$14.5 million (equivalent to £10.9 million using year end exchange rate of 1.3234) impact on management fee revenues (FY2014/15: using the year end AuM level of US$58.9 billion and applying the year's average net management fee rate of 59bps, a 5% movement in AuM would have a US$17.4 million (equivalent to £10.9 million using year end exchange rate of 1.5712) impact on management fee revenues).
Hedging activities
The Group uses forward and option contracts to hedge its exposure to foreign currency risk. These hedges, which have been assessed as effective cash flow hedges as at 30 June 2016, protect a proportion of the Group's revenue cash flows from foreign exchange movements. The cumulative fair value of the outstanding foreign exchange hedges liability at 30 June 2016 was £4.5 million (30 June 2015: £0.1 million foreign exchange hedges asset) and is included within the Group's derivative financial instrument assets.
The notional and fair values of foreign exchange hedging instruments were as follows:
|
|
2016 |
2015 |
||
|
|
Notional amount |
Fair value assets/ (liabilities) |
Notional amount |
Fair value assets/ (liabilities) |
|
Cash flow hedges |
|
|
|
|
|
Foreign exchange nil-cost option collars |
85.0 |
(4.5) |
97.0 |
0.1 |
|
|
85.0 |
(4.5) |
97.0 |
0.1 |
The maturity profile of the Group's outstanding hedges is shown below.
|
Notional amount of option collars maturing: |
2016 |
2015 |
|
Within 6 months |
40.0 |
52.0 |
|
6-12 months |
30.0 |
35.0 |
|
>12 months |
15.0 |
10.0 |
|
|
85.0 |
97.0 |
When hedges are assessed as effective, intrinsic value gains and losses are initially recognised in other comprehensive income and later reclassified to comprehensive income as the corresponding hedged cash flows crystallise. Time value in relation to the Group's hedges is excluded from being part of the hedging item and, as a result, the net unrealised loss related to the time value of the hedges is recognised in the consolidated statement of comprehensive income for the year.
A £3.9 million intrinsic loss (FY2014/15: £1.9 million intrinsic loss) on the Group's hedges has been recognised through other comprehensive income and £nil intrinsic value (FY2014/15: £nil) was reclassified from equity to the statement of comprehensive income in the year.
Included within the net realised and unrealised hedging gain of £1.1 million (note 7) recognised at 30 June 2016 (£0.4 million loss at 30 June 2015) are:
- a £0.6 million loss in respect of foreign exchange hedges covering net management fee income for the financial year ending 30 June 2016 (FY2014/15: £0.8 million loss in respect of foreign exchange hedges covering net management fee income for the financial year ended 30 June 2015); and
- a £1.7 million gain in respect of crystallised foreign exchange contracts (FY2014/15: £0.4 million gain).
Company
The risk management processes of the Company, including those relating to the specific risk exposures covered below, are aligned with those of the Group as a whole unless stated otherwise.
In addition, the risk definitions that apply to the Group are also relevant for the Company.
Credit risk
The Company's maximum exposure to credit risk is represented by the carrying value of its financial assets. The table below lists financial assets subject to credit risk by credit rating:
|
|
|
2016 |
2015 |
|
Cash and cash equivalents |
|
301.4 |
114.5 |
|
Trade and other receivables |
|
285.4 |
451.8 |
|
Total |
|
586.8 |
566.3 |
The Company's cash and cash equivalents comprise short-term deposits held with banks and liquidity funds which have credit ratings ranging from A to AAA as at 30 June 2016 (30 June 2015: A- to A+).
All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2015: none).
Liquidity risk
The contractual undiscounted cash flows relating to the Company's financial liabilities all fall due within one year.
Details on leases and other commitments are provided in note 30.
Company
Interest rate risk
The principal interest rate risk for the Company is that it could sustain a reduction in interest revenue from bank deposits held in the ordinary course of business through adverse movements in interest rates.
Bank and similar deposits held at year end are shown on the Company's balance sheet as cash and cash equivalents. The effective interest earned on bank and similar deposits during the year is given in the table below:
Effective interest rates applicable to bank deposits
|
|
2016 |
2015 |
|
Deposits with banks and liquidity funds |
0.59 |
1.06 |
Deposits with banks and liquidity funds are repriced at intervals of less than one year.
At 30 June 2016, if interest rates over the year had been 50 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been £0.5 million higher/lower (FY2014/15: £0.3 million higher/lower), mainly as a result of higher/lower interest on cash balances. An assumption that the fair value of assets and liabilities will not be affected by a change in interest rates was used in the model to calculate the effect on post-tax profits.
Foreign exchange risk
The Company is exposed primarily to foreign exchange risk in respect of US dollar cash balances and US dollar-denominated intercompany balances. However, such risk is not hedged by the Company.
At 30 June 2016, if the US dollar had strengthened/weakened by 1% against Sterling with all other variables held constant, profit before tax for the year would have increased/decreased by £3.4 million respectively (FY2014/15: increased/decreased by £2.6 million respectively).
22) Share capital
Authorised share capital
|
Group and Company |
2016 |
2016 |
2015 |
2015 |
|
Ordinary shares of 0.01p each |
900,000,000 |
90 |
900,000,000 |
90 |
Issued share capital - allotted and fully paid
|
Group and Company |
2016 |
2016 |
2015 |
2015 |
|
Ordinary shares of 0.01p each |
712,740,804 |
71 |
712,740,804 |
71 |
All the above ordinary shares represent equity of the Company and rank pari passu in respect of participation and voting rights.
At 30 June 2016 there were no options (30 June 2015: 175,000 options) in issue with contingent rights to the allotment of ordinary shares of 0.01p in the Company. There were also equity-settled share awards issued under the Omnibus Plan totalling 39,805,764 (30 June 2015: 35,333,782) shares that have release dates ranging from September 2016 to December 2020. Further details are provided in note 10.
23) Own shares
The Ashmore 2004 Employee Benefit Trust (EBT) acts as an agent to acquire and hold shares in Ashmore Group plc with a view to facilitating the recruitment and motivation of employees. As at the year end, the EBT owned 41,173,968 (30 June 2015: 37,889,347) ordinary shares of 0.01p with a nominal value of £4,117 (30 June 2015: £3,789) and shareholders' funds are reduced by £122.3 million (30 June 2015: £125.3 million) in this respect. It is the intention of the Directors to make these shares available to employees through the share-based compensation plans. The EBT is periodically funded by the Company for these purposes.
24) Treasury shares
Treasury shares held by the Company
|
|
2016 |
2015 |
||
|
Group and Company |
Number |
£m |
Number |
£m |
|
Ashmore Group plc ordinary shares |
5,368,331 |
6.9 |
5,368,331 |
6.9 |
Reconciliation of treasury shares
|
|
2016 |
2015 |
|
At the beginning and end of the year |
5,368,331 |
5,368,331 |
The market value of treasury shares was £16.0 million at the year end (30 June 2015: £15.5 million).
25) Trade and other payables
|
|
Group |
Group |
Company |
Company |
|
Current |
|
|
|
|
|
Trade and other payables |
19.9 |
26.7 |
39.9 |
29.7 |
|
Accruals and deferred income |
35.5 |
27.4 |
2.5 |
2.7 |
|
Amounts due to subsidiaries |
- |
- |
7.7 |
5.5 |
|
Total trade and other payables |
55.4 |
54.1 |
50.1 |
37.9 |
26) Interests in subsidiaries
Operating subsidiaries
Movements in investments in subsidiaries during the year were as follows:
|
Company |
2016 |
2015 |
|
Cost |
|
|
|
At 30 June 2015 |
20.1 |
20.1 |
|
Disposals |
(0.1) |
- |
|
At 30 June 2016 |
20.0 |
20.1 |
During the year the Company disposed of its investment in Ashmore Brasil Gestora de Recursos Limitada.
In the opinion of the Directors, the following subsidiary undertakings principally affected the Group's results or financial position at 30 June 2016. A full list of the Group's subsidiaries and all related undertakings is disclosed in note 33.
|
Name |
Country of incorporation/ formation and principal place of operation |
% of equity shares held by the Group |
|
Ashmore Investments (UK) Limited |
England |
100.00 |
|
Ashmore Investment Management Limited |
England |
100.00 |
|
Ashmore Investment Advisors Limited |
England |
100.00 |
|
Ashmore Management Company Limited |
Guernsey |
100.00 |
|
Ashmore Investment Management (Singapore) Pte. Ltd. |
Singapore |
100.00 |
|
AA Development Capital Investment Managers (Mauritius) LLC |
Mauritius |
55.00 |
|
Ashmore Investments (India) Limited |
Mauritius |
100.00 |
|
Ashmore Investments (Turkey) NV |
Netherlands |
92.50 |
|
Ashmore Investment Management (US) Corporation |
USA |
100.00 |
|
PT Ashmore Asset Management Indonesia |
Indonesia |
66.67 |
|
Ashmore Investments Saudi Arabia |
Saudi Arabia |
90.00 |
|
Ashmore Investments (Colombia) SL |
Spain |
100.00 |
|
Ashmore Japan Co. Limited |
Japan |
100.00 |
|
Ashmore Investment Consulting (Beijing) Co. Limited |
China |
100.00 |
|
Ashmore Equities Holding Corporation |
USA |
100.00 |
|
Ashmore Equities Investment Management (US) LLC* |
USA |
92.80 |
* Non-controlling interests (NCI) have an economic interest in AEIM of 15.8% as at 30 June 2016. The results and net assets of AEIM for the year ended 30 June 2016, prepared in accordance with IFRS and modified for fair value adjustments on acquisition, were: net profit of £12.2 million, of which £0.4 million was attributable to NCI and net assets of £18.3 million, of which £2.9 million was attributable to NCI (30 June 2015: net profit of £16.9 million, of which £3.0 million was attributable to NCI and net assets of £27.1 million, of which £11.7 million was attributable to NCI).
Consolidated funds
The Group consolidated the following investment funds as at 30 June 2016 over which the Group is deemed to have control:
|
Name |
Type of fund |
Country of incorporation/ principal place of operation |
% of net assets value held by the Group |
|
Ashmore Special Opportunities Fund LP |
Alternatives |
Guernsey |
39.06 |
|
Ashmore Emerging Markets Distressed Debt Fund |
Corporate debt |
Guernsey |
40.02 |
|
Turkey Equity Fund |
Corporate debt |
Turkey |
73.76 |
|
Ashmore SICAV 3 Chinese Debt Fund |
Local currency |
Luxembourg |
100.00 |
|
Ashmore SICAV 2 Global Bond Fund |
Local currency |
Luxembourg |
100.00 |
|
Ashmore Dana USD Equity Nusantara |
Equity |
Indonesia |
92.12 |
|
Ashmore SICAV Turkish Equity Fund |
Equity |
Luxembourg |
99.45 |
|
Ashmore SICAV 3 All Chinese Equity Fund |
Equity |
Luxembourg |
100.00 |
|
Ashmore Saudi Equity Fund |
Equity |
Saudi Arabia |
46.55 |
|
Ashmore Saudi GCC Equity Fund |
Equity |
Saudi Arabia |
38.50 |
|
Ashmore Emerging Markets Frontier Equity Fund |
Equity |
USA |
37.18 |
|
Ashmore Emerging Markets Equity Fund |
Equity |
USA |
58.71 |
|
Ashmore Dana USD Nusantara |
External debt |
Indonesia |
100.00 |
|
Ashmore Emerging Markets Hard Currency Debt Fund |
External debt |
USA |
95.15 |
27) Interests in associates and joint arrangements
The Group held interests in the following associates and joint ventures as at 30 June 2016:
|
Name |
Type |
Nature of business |
Country of incorporation/ formation and principal place of operation |
% of equity shares held by the Group |
|
VTB-Ashmore Capital Holdings Limited |
Associate |
Investment management |
Russia |
50% |
|
Everbright Ashmore* |
Associate |
Investment management |
China |
30% |
|
Ashmore-CCSC Fund Management Company Limited** |
Joint venture |
Investment management |
China |
49% |
* Everbright Ashmore includes three related investment management entities.
** Refer to note 31 for details of change of interest post balance sheet date.
The associates and the joint venture are unlisted.
Movements in investments in associates and joint ventures during the year were as follows:
|
|
2016 |
2015 |
|
||||
|
|
Associates |
Joint ventures |
Total |
Associates |
Joint |
Total |
|
|
At the beginning of the year |
1.4 |
5.9 |
7.3 |
2.3 |
7.4 |
9.7 |
|
|
Additions |
- |
- |
- |
- |
- |
- |
|
|
Share of profit/(loss) |
- |
(1.7) |
(1.7) |
(0.1) |
(1.5) |
(1.6) |
|
|
Distributions |
- |
- |
- |
(0.6) |
- |
(0.6) |
|
|
Foreign exchange revaluation |
0.2 |
0.5 |
0.7 |
(0.2) |
- |
(0.2) |
|
|
At the end of the year |
1.6 |
4.7 |
6.3 |
1.4 |
5.9 |
7.3 |
|
Associates
The summarised aggregate financial information on associates is shown below.
|
Group |
2016 |
2015 |
|
Total assets |
3.9 |
3.3 |
|
Total liabilities |
(0.3) |
(0.3) |
|
Net assets |
3.6 |
3.0 |
|
Group's share of net assets |
1.1 |
0.9 |
|
Revenue for the year |
0.5 |
0.7 |
|
Profit for the year |
- |
(0.3) |
|
Group's share of profit for the year |
- |
(0.1) |
The carrying value of the investments in associates includes attributable goodwill that arose on acquisition of the associates. Although the Group's share of net assets of the associates is currently below the aggregate carrying value of the associates reflected on the consolidated balance sheet, the Group has considered that this position is temporary. No permanent impairment is believed to exist relating to the associates.
The Group has undrawn capital commitments of £4.8 million (30 June 2015: £4.2 million) to investment funds managed by the associates. Further details are provided in note 28.
Joint ventures
The Group owns 49% interest in a fund management joint venture with Central China Securities Co. Limited in China. Under the terms of the agreement and upon being granted the required approvals by the China Securities Regulatory Commission and other relevant government authorities, the Group contributed its share of the initial capitalisation, equivalent to £9.9 million.
Summarised financial information on the Group's share in the joint venture is shown below:
|
|
2016 |
2015 |
|
Current assets |
1.9 |
5.6 |
|
Non-current assets |
- |
- |
|
Current liabilities |
(0.5) |
(0.3) |
|
Total equity |
1.4 |
5.3 |
|
Group's share of net assets |
0.7 |
2.6 |
|
Loss for the year |
(3.4) |
(1.5) |
|
Group's share of loss for the year |
(1.7) |
(0.7) |
28) Interests in structured entities
The Group has interests in structured entities as a result of the management of assets on behalf of its clients. Where the Group holds a direct interest in a closed-ended fund, private equity fund or open-ended pooled fund such as a SICAV, the interest is accounted for either as a consolidated structured entity or as a financial asset depending on whether the Group has control over the fund or not.
The Group's interest in structured entities is reflected in the Group's AuM. The Group is exposed to movements in AuM of structured entities through potential loss of fee income as a result of client withdrawals. Outflows from funds are dependent on market sentiment, asset performance and investor considerations. Further information on these risks can be found in the Business review.
Considering the potential for changes in AuM of structured entities, management has determined that the Group's unconsolidated structured entities include segregated mandates and pooled funds vehicles. Disclosure of the Group's exposure to unconsolidated structured entities has been made on this basis.
The reconciliation of AuM reported by the Group within unconsolidated structured entities is shown below.
|
|
Total AuM |
Less: AuM within consolidated funds |
AuM within unconsolidated structured entities |
|
30 June 2016 |
52.6 |
0.2 |
52.4 |
|
30 June 2015 |
58.9 |
0.2 |
58.7 |
Included in the Group's consolidated management fees of £197.1 million (FY2014/15: £250.2 million) are management fees amounting to £195.4 million (FY2014/15: £245.8 million) earned from unconsolidated structured entities.
The table below shows the carrying values of the Group's interests in unconsolidated structured entities, recognised in the Group balance sheet, which are equal to the Group's maximum exposure to loss from those interests.
|
|
2016 |
2015 |
|
Management fees receivable |
29.7 |
46.5 |
|
Trade and other receivables |
24.8 |
4.7 |
|
Seed capital investments |
165.6 |
102.0 |
|
Total exposure |
220.1 |
153.2 |
The main risk the Group faces from its beneficial interests in unconsolidated structured entities arises from a potential decrease in the fair value of seed capital investments. The Group's beneficial interests in seed capital investments are disclosed in note 20. Note 21 includes further information on the Group's exposure to market risk arising from seed capital investments.
The Group has undrawn investment commitments relating to structured entities as follows.
|
|
2016 |
2015 |
|
AA Development Capital India Fund 1 LLC |
1.2 |
1.0 |
|
Ashmore Emerging Markets Corporate Private Debt Fund |
1.0 |
1.2 |
|
Ashmore Emerging Markets Distressed Debt Fund |
- |
1.4 |
|
Ashmore I - CAF Colombian Infrastructure Senior Debt Fund |
15.2 |
- |
|
Ashmore I - FCP Colombia Infrastructure Fund |
0.8 |
2.3 |
|
Ashmore Special Opportunities Fund LP |
3.2 |
6.9 |
|
Everbright Ashmore China Real Estate Fund |
1.4 |
1.3 |
|
KCH Healthcare LLC |
5.2 |
- |
|
VTBC-Ashmore Real Estate Partners I, LP |
3.4 |
2.9 |
|
Total undrawn investment commitments |
31.4 |
17.0 |
29) Related party transactions
Related parties of the Group include key management personnel, close family members of key management personnel, subsidiaries, associates, joint ventures, Ashmore Funds, the EBT and the Ashmore Foundation.
Key management personnel - Group and Company
The compensation paid to or payable to key management personnel for employee services is shown below:
|
£m |
2016 |
2015 |
|
Short-term employee benefits |
0.9 |
1.4 |
|
Defined contribution pension costs |
- |
- |
|
Share-based payment benefits |
2.2 |
2.9 |
|
|
3.1 |
4.3 |
Share-based payment benefits represent the fair value charge to the statement of comprehensive income of current year share awards.
During the year, there were no other transactions entered into with key management personnel (FY2014/15: none). Aggregate key management personnel interests in consolidated funds at 30 June 2016 were £28.5 million (30 June 2015: £11.5 million).
Transactions with subsidiaries - Company
Details of transactions between the Company and its subsidiaries are shown below:
|
|
2016 |
2015 |
|
Transactions during the year |
|
|
|
Management fees |
73.7 |
78.8 |
|
Net dividends |
89.6 |
141.1 |
|
Loans (repaid by)/given to subsidiaries |
(16.6) |
44.5 |
Amounts receivable or payable to subsidiaries are disclosed in notes 17 and 25, respectively.
Transactions with Ashmore Funds - Group
During the year, the Group received £89.4 million of gross management fees and performance fees (FY2014/15: £137.7 million) from the 91 funds (FY2014/15: 96 funds) it manages and which are classified as related parties. As at 30 June 2016 the Group had receivables due from funds of £1.5 million (30 June 2015: £46.8 million) that are classified as related parties.
Transactions with the EBT - Group and Company
The EBT has been provided with a loan facility to allow it to acquire Ashmore shares in order to satisfy outstanding unvested shares awards. The EBT is included within the results of the Group and the Company. As at 30 June 2016 the loan outstanding was £112.6 million (30 June 2015: £149.0 million).
Transaction with the Ashmore Foundation - Group and Company
The Ashmore Foundation is a related party to the Group. The Foundation was set up to provide financial grants to worthwhile causes within the Emerging Markets countries in which Ashmore invests and/or operates with a view to giving back into the countries and communities. The Group donated £0.1 million to the Foundation during the year (FY2014/15: £0.1 million).
30) Commitments
Operating lease commitments
The Group and Company have entered into certain property leases. The leases have no escalation clauses or renewal or purchase options, and no restrictions imposed on them. The future aggregate minimum lease payments under these non-cancellable operating leases fall due as follows:
Group
|
|
2016 |
2015 |
|
Within 1 year |
3.2 |
2.3 |
|
Between 1 and 5 years |
9.9 |
8.5 |
|
Later than 5 years |
4.4 |
6.6 |
|
|
17.5 |
17.4 |
Company
|
|
2016 |
2015 |
|
Within 1 year |
1.2 |
1.2 |
|
Between 1 and 5 years |
4.6 |
4.6 |
|
Later than 5 years |
2.9 |
4.1 |
|
|
8.7 |
9.9 |
Operating lease expenses are disclosed in note 11.
Company
The Company has undrawn loan commitments to other Group entities totalling £124.5 million (30 June 2015: £58.9 million) to support their investment activities but has no investment commitments of its own (30 June 2015: none).
31) Post-balance sheet events
During the year, Ashmore agreed the terms of a transaction whereby Taiping Group, one of the largest insurance companies in China, will acquire a majority stake in Ashmore's Shanghai-based China fund management joint venture, Ashmore-CCSC Fund Management Company Limited. The transaction received its final regulatory approval on 27 July 2016 and is expected to be completed in the first quarter of FY2016/17. Post completion, Ashmore will retain a 15% stake in the joint venture. The regulatory approval of the transaction is a non-adjusting post balance sheet event.
32) Accounting estimates and judgements
Estimates and judgements used in preparing the financial statements are regularly evaluated and are based upon management's assessment of current and future events. The principal estimates and judgements that have a significant effect on the carrying amounts of assets and liabilities are discussed below.
Impairment of intangible assets
The Group tests goodwill and intangible assets annually for impairment. The recoverable amount for goodwill is determined in reference to the Group's market capitalisation, whereas the recoverable amount for intangible assets is determined based upon value in use calculations prepared on the basis of management's assumptions and estimates. The carrying value of goodwill and intangible assets on the Group's balance sheet at 30 June 2016 was £82.5 million (30 June 2015: £74.1 million). Management considers that reasonable possible changes in any of the key assumptions applied would not cause the carrying value of fund management relationships intangible asset to materially exceed its recoverable value. The recoverable amount of the intangible asset was determined to be higher than its carrying value as at 30 June 2016. Accordingly, no impairment charge was recognised during the year (see note 15).
Share-based payment transactions
The Group measures the cost of equity-settled and cash-settled share-based awards at fair value at the date of grant and expenses them over the vesting period based on the Group's estimate of the shares that will eventually vest. Market-related performance conditions are incorporated into the grant price of the awards. The estimation of the likelihood of the performance conditions being met is made at the time of granting the awards for equity-settled arrangements and also at each reporting date for cash-settled share-based arrangements.
Classification of seed capital investments
The Group invests seed capital from time to time to support the initial launch and growth of new products, such as SICAVs, private equity funds and alternative investment funds. The seed capital investments vary in duration depending on the nature of the product and the time expected to grow the funds to a size and track record required for participation by third-party investors. The Group reviews the size and nature of these investments to consider the level of control over the fund and to determine the appropriate classification for accounting either as full consolidation (where the Group concludes that it has control over the fund), using equity-method accounting (where the Group exercises significant influence or joint control), or as a financial asset classified as available-for-sale, held-for-sale or at fair value through profit or loss. In the case of seed capital investments, where the Group concludes that it does not have control over the fund, the Group is also not deemed to have significant influence over the fund, and therefore does not apply equity-method accounting. The Group would account for the seed capital investment as a financial asset, classified either as an available-for-sale financial asset, financial asset held-for-sale, or a financial asset at fair value through profit or loss. The Group considers that its seeding activity is intended to help establish a fund's track record and to provide initial scale until the fund has attracted sufficient third-party capital, at which stage the Group will actively seek to redeem and redeploy the seed capital.
Management exercises judgement to determine whether the Group controls an investment fund under IFRS 10, including making an assessment of whether the Group has power over the fund which the Group exercises primarily for self-benefit. Management also assesses the magnitude of the Group's aggregate economic interest in the fund (comprising direct interests, carried interests, expected management fees, fair value gains or losses, and distributions receivable from funds managed) relative to third-party investors, and whether third-party investors have substantive rights to remove the Group from acting as a fund manager without cause.
The Group has assessed and classified the following fund vehicles as unconsolidated structured entities:
- Segregated mandates and pooled funds managed where the Group does not hold any direct interest. In this case, the Group considers that its aggregate economic exposure is insignificant and, in relation to segregated mandates, the third-party investor has the practical ability to remove the Group from acting as fund manager, without cause. As a result, the Group concludes that it acts as an agent for third-party investors.
- Pooled funds managed by the Group where the Group holds a direct interest, for example seed capital investments, and the Group's aggregate economic exposure in the fund relative to third-party investors is less than 20% (i.e. the threshold established by the Group for determining agent versus principal classification). As a result, the Group concludes that it is an agent for third-party investors and, therefore, will account for its beneficial interest in the fund as a financial asset. Further details on the carrying values of these seed capital financial assets have been disclosed under note 20.
The disclosure of the AuM in respect of consolidated and unconsolidated structured entities is provided under note 28.
33) Subsidiaries and related undertakings
The following is a full list of the Ashmore Group plc subsidiaries and related undertakings as at 30 June 2016 pursuant to the requirements of Statutory Instrument 2015 No. 80 The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015. The list includes the Group's subsidiaries and related undertakings, all significant holdings (greater than 20% interest), associate undertakings, joint ventures and significant holdings in Ashmore sponsored public funds in which the Group has invested seed capital:
|
Name |
Country of incorporation/principal place of operation |
Classification |
% interest |
|
Ashmore Investment Consulting (Beijing) Co. Limited |
China |
Subsidiary |
100.00 |
|
Ashmore Management Company Colombia SAS |
Colombia |
Subsidiary |
61.00 |
|
Ashmore-CAF-AM Management Company SAS |
Colombia |
Subsidiary |
53.66 |
|
Ashmore Management (DIFC ) Limited |
United Arab Emirates |
Subsidiary |
100.00 |
|
Ashmore Investments (UK) Limited |
England and Wales |
Subsidiary |
100.00 |
|
Ashmore Investment Management Limited |
England and Wales |
Subsidiary |
100.00 |
|
Ashmore Investment Advisors Limited |
England and Wales |
Subsidiary |
100.00 |
|
Aldwych Administration Services Limited |
England and Wales |
Subsidiary |
100.00 |
|
Ashmore Asset Management Limited |
England and Wales |
Subsidiary |
100.00 |
|
Ashmore Emerging Markets Special Situation Opportunities Fund (GP) Limited |
Guernsey |
Subsidiary |
100.00 |
|
Ashmore Investments (Brasil) Limited (in liquidation) |
Guernsey |
Subsidiary |
100.00 |
|
Ashmore Management Company Limited |
Guernsey |
Subsidiary |
100.00 |
|
Ashmore Management Company Turkey Limited |
Guernsey |
Subsidiary |
100.00 |
|
Ashmore Private Equity Turkey Fund 1 (GP) Limited |
Guernsey |
Subsidiary |
100.00 |
|
Ashmore Global Special Situations Fund 3 (GP) Limited |
Guernsey |
Subsidiary |
100.00 |
|
Ashmore Global Special Situations Fund 4 (GP) Limited |
Guernsey |
Subsidiary |
100.00 |
|
Ashmore Global Special Situations Fund 5 (GP) Limited |
Guernsey |
Subsidiary |
100.00 |
|
Ashmore Special Opportunities (GP) Limited |
Guernsey |
Subsidiary |
100.00 |
|
AA Indian Development Capital Advisors Private Limited (in liquidation) |
India |
Subsidiary |
100.00 |
|
Ashmore Investment Advisors (India) Private Limited |
India |
Subsidiary |
99.82 |
|
Ashmore-Centrum India Opportunities Investment Advisers Private Limited (in liquidation) |
India |
Subsidiary |
51.00 |
|
Ashmore-Centrum Funds Trustee Company Private Limited (in liquidation) |
India |
Subsidiary |
51.00 |
|
PT Ashmore Asset Management Indonesia |
Indonesia |
Subsidiary |
66.67 |
|
Ashmore Japan Co. Limited |
Japan |
Subsidiary |
100.00 |
|
AA Development Capital Investment Managers (Mauritius) LLC |
Mauritius |
Subsidiary |
55.00 |
|
Ashmore Investments (India) Limited |
Mauritius |
Subsidiary |
100.00 |
|
Ashmore Investments (Turkey) NV |
Netherlands |
Subsidiary |
93.00 |
|
Ashmore Russia LLC (in liquidation) |
Russia |
Subsidiary |
100.00 |
|
Ashmore Investment Saudi Arabia |
Saudi Arabia |
Subsidiary |
90.00 |
|
Ashmore Investment Management (Singapore) Pte. Ltd. |
Singapore |
Subsidiary |
100.00 |
|
Ashmore Investments (Colombia) SL |
Spain |
Subsidiary |
100.00 |
|
Ashmore Portfoy Yonetimi Anonim Sirketi |
Turkey |
Subsidiary |
99.96 |
|
Ashmore Emlak ve Yatirim Ltd Sirketi |
Turkey |
Subsidiary |
100.00 |
|
Ashmore Investment Management (US) Corporation |
USA |
Subsidiary |
100.00 |
|
Ashmore Equities Holding Corporation |
USA |
Subsidiary |
100.00 |
|
Ashmore Equities Investment Management (US) LLC |
USA |
Subsidiary |
92.80 |
|
Everbright Ashmore Real Estate Partners Limited |
Cayman Islands |
Associate |
30.00 |
|
Everbright Ashmore Services and Consulting Limited |
Cayman Islands |
Associate |
30.00 |
|
Everbright Ashmore Investment Management Limited |
Cayman Islands |
Associate |
30.00 |
|
EA Team Investment Partners Limited |
Cayman Islands |
Associate |
30.00 |
|
Ashmore - CCSC Fund Management Company Limited |
China |
Joint venture |
49.00 |
|
VTB-Ashmore Capital Holdings Limited |
Russia |
Associate |
50.00 |
|
VTBC-Ashmore Investment Management Limited |
Guernsey |
Associate |
50.00 |
|
VTBC-Ashmore Partnership Management 1 Limited |
Guernsey |
Associate |
50.00 |
|
Name |
Country of incorporation/ principal place of business |
Classification |
% interest |
|
Ashmore Special Opportunities Fund LP |
Guernsey |
Consolidated fund |
39.06 |
|
Ashmore Emerging Markets Distressed Debt Fund |
Guernsey |
Consolidated fund |
40.02 |
|
Ashmore Dana USD Equity Nusantara |
Indonesia |
Consolidated fund |
92.12 |
|
Ashmore Dana USD Nusantara |
Indonesia |
Consolidated fund |
100.00 |
|
Ashmore SICAV Turkish Equity Fund |
Luxembourg |
Consolidated fund |
99.45 |
|
Ashmore SICAV 3 Chinese Debt Fund |
Luxembourg |
Consolidated fund |
100.00 |
|
Ashmore SICAV 3 All Chinese Equity Fund |
Luxembourg |
Consolidated fund |
100.00 |
|
Ashmore SICAV 2 Global Bond Fund |
Luxembourg |
Consolidated fund |
100.00 |
|
Ashmore Saudi Equity Fund |
Saudi Arabia |
Consolidated fund |
46.55 |
|
Ashmore Saudi GCC Equity Fund |
Saudi Arabia |
Consolidated fund |
38.50 |
|
Turkey Equity Fund |
Turkey |
Consolidated fund |
73.76 |
|
Ashmore Emerging Markets Hard Currency Debt Fund |
USA |
Consolidated fund |
95.15 |
|
Ashmore Emerging Markets Frontier Equity Fund |
USA |
Consolidated fund |
37.18 |
|
Ashmore Emerging Markets Equity Fund |
USA |
Consolidated fund |
58.71 |
|
Everbright Ashmore China Real Estate Fund |
China |
Available-for-sale financial assets |
22.78 |
|
Ashmore Dana Obligasi Nusantara |
Indonesia |
FVTPL investments |
35.83 |
|
Ashmore SICAV 3 EM Multi Strategy Fund |
Luxembourg |
FVTPL investments |
37.17 |
|
Ashmore SICAV Local Currency Bonds Broad Fund |
Luxembourg |
FVTPL investments |
25.05 |
|
Ashmore Debt and Currency Fund Limited |
Guernsey |
Non-current assets held-for-sale |
100.00 |
|
Ashmore SICAV Absolute Return Debt Fund |
Luxembourg |
Non-current assets held-for-sale |
100.00 |
|
Ashmore Emerging Markets Short Duration Fund |
USA |
Non-current assets held-for-sale |
58.09 |
|
Ashmore Emerging Markets Equity Opportunities Fund |
USA |
Non-current assets held-for-sale |
98.97 |
Cautionary statement regarding forward-looking statements
It is possible that this document could or may contain forward looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning.
Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward looking statements. There are several factors that could cause actual results to differ materially from those expressed or implied in forward looking statements. Among the factors that could cause actual results to differ materially from those described in the forward looking statements are changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. The Group undertakes no obligation to revise or update any forward looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.
Statutory accounts
The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 June 2016 or 30 June 2015. Statutory accounts for 2015 have been delivered to the registrar of companies, and those for 2016 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2015 or 2016.
This information is provided by RNS
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