TIDMASHM
RNS Number : 0139J
Ashmore Group PLC
06 September 2016
Ashmore Group plc
6 September 2016
RESULTS FOR THE YEARING 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 GBP232.5 million, with 22% lower
average AuM level.
- FX translation gain of GBP21.0 million and performance fees of
GBP10.4 million.
- Flexible business model delivers effective control of
operating costs, reduced by 7% to GBP92.3 million.
- Adjusted EBITDA of GBP130.9 million, business model continues
to deliver a high margin of 62%.
- PBT declined by 8% to GBP167.5 million.
- Strong seed capital returns contributed GBP24.6 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 GBP167.5 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 GBP232.5 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 GBP10.4 million (FY2014/15: GBP13.3 million)
were primarily delivered by investments in the alternatives theme.
Funds with an August year end realised performance fees of GBP5.7
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 GBP21.0 million (FY2014/15:
GBP18.5 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 GBP92.3 million (FY2014/15:
GBP99.5 million).
Profitability
Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) was GBP130.9 million (FY2014/15: GBP176.6
million) and the adjusted EBITDA margin was 62% (FY2014/15:
67%).
Profit before tax for the year declined by 8% to GBP167.5
million (FY2014/15: GBP181.3 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 GBP167.5
million (FY2014/15: GBP181.3 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
------------------------------
Seed Foreign
FY2015/16 capital-related exchange FY2015/16 FY2014/15
GBPm Statutory items translation Adjusted 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$0.7 billion of Group AuM.
AuM movements by investment theme
The AuM by theme as classified by mandate is shown in the table
below. Reclassifications typically occur when a fund's investment
objectives, investment guidelines or performance benchmark change
such that its characteristics cause it to be included in a
different theme.
AuM 30 AuM 30
June Gross Gross June
2015 Performance subscriptions redemptions Net flows Reclassifications 2016
Theme US$bn US$bn US$bn US$bn US$bn US$bn US$bn
------------------ ------ ----------- -------------- ------------ --------- ----------------- ------
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
30 June 2016 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
30 June 2016 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
30 June 2016 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
30 June 2016 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 GBP283.3 million to GBP232.5
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
GBP195.9 million (FY2014/15: GBP247.3 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 GBP10.4 million (FY2014/15: GBP13.3 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 GBP21.0
million (FY2014/15: GBP18.5 million), reflecting US dollar strength
against Sterling. The Group recognised net realised and unrealised
hedging gains of GBP1.1 million (FY2014/15: GBP0.4 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.
Net management Net management Performance Performance Net management Net management
fees fees fees fees fee margin fee margin
FY2015/16 FY2014/15 FY2015/16 FY2014/15 FY2015/16 FY2014/15
Theme GBPm GBPm GBPm GBPm bps 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 GBP99.5 million to GBP92.3
million. Excluding variable compensation, operating costs were 1%
lower at GBP56.7 million (FY2014/15: GBP57.1 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 GBP24.1 million were 3% lower than in the prior year
(FY2014/15: GBP24.8 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 GBP27.5 million (FY2014/15: GBP27.0 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 GBP35.6 million, a
decrease of 16% on the prior year (FY2014/15: GBP42.4 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 GBP143.0 million (FY2014/15: GBP186.3
million). On an adjusted basis, reclassifying the effects of seed
capital investments and foreign exchange translation, EBITDA was
26% lower at GBP130.9 million (FY2014/15: GBP176.7 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 GBP31.3 million for the period (FY2014/15:
GBP1.9 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 GBP2.0 million
(FY2014/15: GBP1.7 million).
Taxation
The majority of the Group's profit is subject to UK taxation; of
the total current tax charge for the year of GBP38.8 million
(FY2014/15: GBP41.3 million), GBP32.1 million (FY2014/15: GBP36.4
million) relates to UK corporation tax.
There is a GBP14.3 million net deferred tax asset on the Group's
balance sheet as at 30 June 2016 (30 June 2015: GBP16.8 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 GBP676.7 million (30 June 2015: GBP656.1 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 GBP137.9
million for the period (FY2014/15: GBP181.0 million), the Group
generated cash of GBP151.2 million before working capital changes
(FY2014/15: GBP215.2 million) and GBP125.2 million of cash from
operations (FY2014/15: GBP190.4 million).
Cash and cash equivalents by currency
30 June 2016 30 June 2015
GBPm GBPm
---------- ------------ ------------
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
GBP207.4 million at cost, with a market value of GBP238.5 million
(30 June 2015: GBP213.3 million at cost; GBP207.0 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
30 June 2016 2015
GBPm GBPm
------------------- ------------ -------
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 GBP53.9 million, realised
GBP60.9 million from previous investments, and made additional
commitments of approximately GBP30 million, which were
substantially undrawn at the year end. Market movements during the
year added GBP38.5 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 GBP24.6 million (FY2014/15: GBP5.3 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
GBPnil (FY2014/15: GBP0.2 million loss). This comprises losses on
investment securities of GBP5.7 million (FY2014/15: GBP3.6 million
loss), change in third-party interests gain of GBP3.4 million
(FY2014/15: GBP0.8 million gain), operating expenses of GBP2.4
million (FY2014/15: GBP2.7 million) and net finance income of
GBP4.7 million (FY2014/15: GBP5.3 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 GBP5.1 million (FY2014/15: GBP0.2 million
negative return) and a GBP19.5 million foreign exchange gain
(FY2014/15: GBP4.9 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 GBP82.5 million (30 June 2015: GBP74.1
million) with the increase attributable to an amortisation charge
of GBP3.9 million (FY2014/15: GBP4.0 million) and a foreign
exchange revaluation gain through reserves of GBP12.3 million
(FY2014/15: GBP5.9 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 GBP21.0
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 GBP1.1 million
(FY2014/15: GBP0.4 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 GBP99.9 million (30 June 2015: GBP94.4
million). The net increase of GBP5.5 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 GBP590.8 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 * Experienced Emerging Markets investment professionals
fundamentals/technicals/sentiment participate in Investment Committees. Frequent and
regular Board updates
* Market capacity issues and increased competition
constrain growth * Diversification of investment capabilities
* Appropriate communication with, and effective * Group strategy is approved by a Board with relevant
management of, existing and potential shareholders of industry experience
Ashmore Group plc
* 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 * Product Committee meets frequently and regularly to
effective management of potential and existing fund review product suitability and appropriateness
investor base
* Experienced Distribution team with appropriate
* Adequate client oversight including alignment of geographic coverage
interests
* 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 * FX hedging policy and regular FX Management Committee
flows and balance sheet, as well as adequate meetings
liquidity and regulatory capital provision for Group
and subsidiaries
* 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 * Funds in the same investment theme are managed by
leverage, cash and liquidity management and similar consistent investment management teams, and
portfolios being managed inconsistently; ii) neglect allocations approved by Investment Committees
of duty, market abuse; iii) inappropriate oversight
of special purpose vehicles (SPVs) and related legal
structures and compliance with law and regulations; * Policies in place to cover conflicts, best execution
iv) inappropriate oversight of market, liquidity, and market abuse factors, such as insider trading
credit, counterparty and operational risks; v)
insufficient number of trading counterparties; and
vi) breaching investment guidelines or restrictions * Tools to manage liquidity issues as a result of
redemptions include restrictions on illiquid
exposures, swing pricing and ability to use in specie
* Downturn in long-term performance redemptions
* Consistent investment philosophy with dedicated
Emerging Markets focus including country visits and
network of local Emerging Markets offices
* 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 * Information security and data protection policies
* Business continuity planning (BCP) covering people, * BCP working group
buildings and systems
* Pricing Oversight Committee
* Accuracy and integrity of data including i) manual
processes/reporting; and ii) transactions, static
data and prices * All trades are required to be booked into front
office trading/ accounting systems
* Pre- and post-trade booking and settlements
* Appropriate IT policies and procedures in place
* Development of IT infrastructure to support business
and product growth; failure or corruption of key IT * Approved counterparty list
system
* Independent Internal Audit department
* Maintaining approved counterparties with regard to
execution venues, legal documents, mandate
restrictions, trading limits * Financial crime policy, which also covers service
providers
* Legal action, fraud or breach of contract perpetrated
against the Group, funds or investments * Committee-based investment processes reduce key man
risk
* Level of resources, which includes loss of key staff,
or inability to attract staff constrains growth * Resources regularly reviewed and updates provided to
the Board
* Lack of understanding and compliance with global and
local regulatory requirements, as well as conflicts * Appropriate remuneration policy and succession plan
of interest and treating customers fairly; and in place
financial crime, which includes money laundering,
bribery and corruption leading to high level
publicity or regulatory sanction * Insurance policies in place to ensure appropriate
coverage of aspects of litigation
* Inappropriate accounting and/or tax practices lead to
sanction * Compliance policies in place and adopted by overseas
offices. Adherence to regulatory requirements is
closely managed through compliance monitoring
* Oversight of Ashmore overseas entities programmes
* Mismanagement of or ineffective core services * Conflicts of interest policy and procedures in place.
provided by third parties Conflicts of interest officer reports to the Board
regularly
* Management, oversight and documentation of new and
existing funds * 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, Head of Finance and external auditor;
signed off by external auditor and ARC
* 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
2016 2015
Notes GBPm GBPm
------------------------------------------------- ----- ------ ------
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
2016 2015
Notes GBPm GBPm
---------------------------------------------- ----- ----- ------
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
--------------------------------------------------------------------------
Cash
Foreign flow
Issued Share Retained exchange Available-for-sale hedging Non-controlling Total
capital premium earnings reserve reserve reserve Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ------- ------- -------- -------- ------------------ ------- ------- --------------- -------
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
GBPm GBPm
--------------------------------------------------------------- ------- -------
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
2016 2015
Notes GBPm GBPm
------------------------------------ ----- ----- -----
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
Total
equity
attributable
to equity
holders
Issued Share Retained of the
capital premium earnings parent
GBPm GBPm GBPm GBPm
---------------------------- -------- -------- --------- -------------
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
GBPm GBPm
----------------------------------------------------- ------- -------
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
GBPm GBPm
--------------- ----- ------
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
GBPm GBPm
------------------------------ ----- -----
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.
Average Average
Closing Closing rate rate
rate rate year year
as at as at ended ended
30 June 30 June 30 June 30 June
GBP1 2016 2015 2016 2015
------------------ -------- -------- -------- --------
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
GBPm GBPm
--------------------------------------------------- ----- -----
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
GBPm GBPm
-------------------------------------------------------- ----- -----
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
GBPm GBPm
--------------------------------- ----- -----
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 GBP0.1 million (FY2014/15: GBP0.1 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 Average
for the for the
year year
ended ended At At
30 June 30 June 30 June 30 June
2016 2015 2016 2015
Number Number Number Number
---------------- -------- -------- -------- --------
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:
2016 2015
Group GBPm GBPm
-------------------------------------------- ------ -----
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 GBP10.5 million
(FY2014/15: GBP26.5 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:
Weighted Weighted
2016 average 2015 average
Number exercise Number exercise
Group and Company of options price of options price
-------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 175,000 GBP0.66 503,750 GBP0.35
Exercised (175,000) GBP0.66 (328,750) GBP0.19
Forfeited - - - -
-------------------------------- ----------- --------- ----------- ---------
Options outstanding at year end - - 175,000 GBP0.66
Options exercisable - - 175,000 GBP0.66
-------------------------------- ----------- --------- ----------- ---------
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 2016 2015
Year of grant GBPm GBPm
------------------------------------------- ----- -----
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
2016 2016 2015 2015
Number Weighted Number Weighted
of shares average of shares average
subject share subject share
Group and Company to awards price to awards price
------------------------------- ----------- --------- ----------- ---------
Restricted share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 20,524,634 GBP3.46 17,996,262 GBP3.50
Granted 7,366,910 GBP2.43 5,386,125 GBP3.07
Vested (3,058,877) GBP3.19 (2,296,630) GBP2.86
Forfeited (1,903,493) GBP3.21 (561,123) GBP3.46
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 22,929,174 GBP3.18 20,524,634 GBP3.46
------------------------------- ----------- --------- ----------- ---------
Bonus share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 7,404,574 GBP3.43 5,659,814 GBP3.55
Granted 2,527,672 GBP2.43 2,422,401 GBP3.05
Vested (1,493,951) GBP3.18 (677,641) GBP3.03
Forfeited - - - -
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 8,438,295 GBP3.15 7,404,574 GBP3.43
------------------------------- ----------- --------- ----------- ---------
Matching share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 7,404,574 GBP3.43 5,659,814 GBP3.55
Granted 2,527,672 GBP2.43 2,421,333 GBP3.05
Vested (1,401,866) GBP3.17 (605,548) GBP2.97
Forfeited (92,085) GBP3.32 (71,025) GBP3.58
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 8,438,295 GBP3.18 7,404,574 GBP3.43
------------------------------- ----------- --------- ----------- ---------
Total 39,805,764 GBP3.18 35,333,782 GBP3.44
------------------------------- ----------- --------- ----------- ---------
ii) Cash-settled awards
2016 2016 2015 2015
Number Weighted Number Weighted
of shares average of shares average
subject share subject share
Group and Company to awards price to awards price
------------------------------- ---------- --------- ----------- ---------
Restricted share awards
------------------------------- ---------- --------- ----------- ---------
At the beginning of the year 582,848 GBP3.48 2,200,290 GBP3.50
Granted 38,504 GBP2.43 15,161 GBP3.09
Vested (45,325) GBP3.50 (36,887) GBP3.94
Forfeited (306,273) GBP3.14 (1,595,716) GBP3.51
------------------------------- ---------- --------- ----------- ---------
Awards outstanding at year end 269,754 GBP3.72 582,848 GBP3.48
------------------------------- ---------- --------- ----------- ---------
Bonus share awards
------------------------------- ---------- --------- ----------- ---------
At the beginning of the year 382,985 GBP3.49 1,579,772 GBP3.50
Granted 6,179 GBP2.43 - -
Vested (198,588) GBP3.17 - -
Forfeited - - (1,196,787) GBP3.51
------------------------------- ---------- --------- ----------- ---------
Awards outstanding at year end 190,576 GBP3.78 382,985 GBP3.49
------------------------------- ---------- --------- ----------- ---------
Matching share awards
------------------------------- ---------- --------- ----------- ---------
At the beginning of the year 382,985 GBP3.49 1,579,772 GBP3.50
Granted 6,179 GBP2.43 - -
Vested - - - -
Forfeited (198,588) GBP3.17 (1,196,787) GBP3.51
------------------------------- ---------- --------- ----------- ---------
Awards outstanding at year end 190,576 GBP3.78 382,985 GBP3.49
------------------------------- ---------- --------- ----------- ---------
Total 650,906 GBP3.75 1,348,818 GBP3.49
------------------------------- ---------- --------- ----------- ---------
iii) Total awards
2016 2016 2015 2015
Number Weighted Number Weighted
of shares average of shares average
subject share subject share
Group and Company to awards price to awards price
------------------------------- ----------- --------- ----------- ---------
Restricted share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 21,107,482 GBP3.46 20,196,552 GBP3.50
Granted 7,405,414 GBP2.43 5,401,286 GBP3.07
Vested (3,104,202) GBP3.20 (2,333,517) GBP2.88
Forfeited (2,209,766) GBP3.20 (2,156,839) GBP3.50
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 23,198,928 GBP3.19 21,107,482 GBP3.46
------------------------------- ----------- --------- ----------- ---------
Bonus share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 7,787,559 GBP3.43 7,239,586 GBP3.54
Granted 2,533,851 GBP2.43 2,422,401 GBP3.05
Vested (1,692,539) GBP3.18 (677,641) GBP3.03
Forfeited - - (1,196,787) GBP3.51
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 8,628,871 GBP3.17 7,787,559 GBP3.43
------------------------------- ----------- --------- ----------- ---------
Matching share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 7,787,559 GBP3.43 7,239,586 GBP3.54
Granted 2,533,851 GBP2.43 2,421,333 GBP3.05
Vested (1,401,866) GBP3.17 (605,548) GBP2.97
Forfeited (290,673) GBP3.22 (1,267,812) GBP3.51
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 8,628,871 GBP3.20 7,787,559 GBP3.43
------------------------------- ----------- --------- ----------- ---------
Total 40,456,670 GBP3.19 36,682,600 GBP3.45
------------------------------- ----------- --------- ----------- ---------
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 GBP0.6 million (30
June 2015: GBP1.3 million) of which GBPnil (30 June 2015: GBPnil)
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 GBP30,000 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:
2016 2015
2016 Weighted 2015 Weighted
Number average Number average
of shares share of shares share
subject price subject price
Group to awards (US dollars) to awards (US dollars)
------------------------------- ---------- ------------- ---------- -------------
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 GBP0.1 million
(FY2014/15: GBP1.5 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:
2016 2015
2016 Weighted 2015 Weighted
Number average Number average
of shares share of shares share
subject price subject price
Group to awards (US dollars) to awards (US dollars)
------------------------------- ---------- ------------- ---------- -------------
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 GBP0.4 million was reclassed to the share-based
payments reserve (FY2014/15: GBP0.3 million phantom liability was
recognised in trade and other payables of which GBPnil 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 GBP17.6 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 GBP3.7 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
GBPm GBPm
---------------------------------------------- ----- -----
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
GBPm GBPm
----------------------------------------------------------- ----- -----
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
GBPm GBPm
-------------------------------------------------- ----- -----
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
GBPm GBPm
-------------------------------------------------- ----- ------
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 GBP2.1 million (FY 2014/15: GBP5.0 million) and (ii)
non-deductible foreign exchange losses of GBP1.1 million.
Tax charge recognised in equity/other comprehensive income is a
follows:
2016 2015
GBPm GBPm
----------------------------------------------------- ----- -----
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 GBP127.8 million (FY2014/15: GBP136.5 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
Number Number
of ordinary of ordinary
shares shares
--------------------------------------------- ------------ ------------
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
2016 2015
Company GBPm GBPm
--------------------------------------------------- ----- -----
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 GBP4.2 million (FY2014/15: GBP6.1
million) of dividends to non-controlling interests.
Dividends declared/proposed in respect of the year
2016 2015
Company pence pence
------------------------------------ ------ ------
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 GBP84.5 million.
15) Goodwill and intangible assets
Fund
management
Goodwill relationships Total
Group GBPm GBPm GBPm
---------------------------------------- -------- -------------- -------
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.
Goodwill
Company GBPm
--------------------------------------------- --------
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
GBP0.4 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
2016 2015
Fixtures, Fixtures,
fittings fittings
and equipment and equipment
Group GBPm GBPm
--------------------------------- -------------- --------------
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
--------------------------------- -------------- --------------
2016 2015
Fixtures, Fixtures,
fittings fittings
and equipment and equipment
Company GBPm GBPm
----------------------------- -------------- --------------
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
GBPm GBPm GBPm GBPm
---------------------------------- ----- ------ ------ -----
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
-------------------------------- --------------------------------
Other Other
temporary Share-based temporary Share-based
differences payments Total differences payments Total
Group GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ ----------- ----- ------------ ----------- -----
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
-------------------------------- --------------------------------
Other Other
temporary Share-based temporary Share-based
differences payments Total differences payments Total
Company GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------------ ----------- ----- ------------ ----------- -----
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:
Other
temporary Share-based
differences payments Total
Group GBPm GBPm GBPm
--------------------------------------- ------------ ----------- -----
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
--------------------------------------- ------------ ----------- -----
Other
temporary Share-based
differences payments Total
Company GBPm GBPm GBPm
------------------------------------ ------------ ----------- ------
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 Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ----- ------ ----- ------ ----- ----- ----- -----
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
Non-current Available- Third-party
financial for-sale interests
Investment assets held- financial Non-current in consolidated
securities for-sale assets asset investments funds
GBPm GBPm GBPm GBPm GBPm
================================== ============ ============== ============ =================== ================
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:
Investment
securities Other Third-party
(relating (relating interests
to to in Non-current
HFS AFS FVTPL consolidated consolidated consolidated asset
investments investments investments funds)* funds)** funds investments Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ----------- ----------- ----------- ------------ ------------ ------------ ------------ ------
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
GBPm GBPm
----------------------------------------------------- ------- -------
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
GBP15.8 million (FY2014/15: GBP22.8 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 GBP4.2 million
(FY2014/15: net gains of GBP2.1 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
GBPm GBPm
---------------------------------------------- ----- ------
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
GBP1.1 million (FY2014/15: net gains of GBP3.2 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
GBPm GBPm
---------------------------------------------- ----- ------
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 GBP16.3 million
(FY2014/15: net losses of GBP2.7 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
GBPm GBPm
-------------------------------------------- ------- -------
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 GBPnil (FY2014/15: net losses of GBP0.2
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
GBPm GBPm
------------------------------------------------ ------ ------
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
GBPm GBPm
------------------------------ ----- -----
Non-current asset investments 11.7 8.9
------------------------------ ----- -----
Included within finance income are net losses of GBP0.4 million
(FY2014/15: net losses of GBP2.9 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 GBP490.9 million as at 30 June 2016
(30 June 2015: excess capital of GBP485.4 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.
2016 2015
Notes GBPm GBPm
---------------------------------------------- ----- ----- ------
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
More
Within than
1 year 1-5 years 5 years Total
GBPm GBPm GBPm GBPm
-------------------------------------------- ------- --------- --------- -----
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
More
Within than
1 year 1-5 years 5 years Total
GBPm GBPm GBPm GBPm
-------------------------------------- ------- --------- -------- -----
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 GBP1.0 million
higher/lower (FY2014/15: GBP0.7 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
---------------------- ----------------------
Impact Impact
on profit on profit
before Impact before Impact
tax on equity tax on equity
Foreign currency sensitivity test GBPm GBPm GBPm GBPm
---------------------------------- ---------- ---------- ---------- ----------
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 GBP11.9 million (FY2014/15: GBP10.4
million) impact on net assets and the impact on profit before tax
would have been GBP7.8 million (FY2014/15: GBP4.6 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 GBP10.9 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 GBP10.9 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 GBP4.5
million (30 June 2015: GBP0.1 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
------------------------ ------------------------
Fair Fair
value value
Notional assets/ Notional assets/
amount (liabilities) amount (liabilities)
GBPm GBPm GBPm GBPm
----------------------------------------- -------- -------------- -------- --------------
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.
2016 2015
Notional amount of option collars maturing: GBPm GBPm
-------------------------------------------- ----- -----
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 GBP3.9 million intrinsic loss (FY2014/15: GBP1.9 million
intrinsic loss) on the Group's hedges has been recognised through
other comprehensive income and GBPnil intrinsic value (FY2014/15:
GBPnil) was reclassified from equity to the statement of
comprehensive income in the year.
Included within the net realised and unrealised hedging gain of
GBP1.1 million (note 7) recognised at 30 June 2016 (GBP0.4 million
loss at 30 June 2015) are:
- a GBP0.6 million loss in respect of foreign exchange hedges
covering net management fee income for the financial year ending 30
June 2016 (FY2014/15: GBP0.8 million loss in respect of foreign
exchange hedges covering net management fee income for the
financial year ended 30 June 2015); and
- a GBP1.7 million gain in respect of crystallised foreign
exchange contracts (FY2014/15: GBP0.4 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
GBPm GBPm
---------------------------- ----- -----
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 GBP0.5 million
higher/lower (FY2014/15: GBP0.3 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 GBP3.4
million respectively (FY2014/15: increased/decreased by GBP2.6
million respectively).
22) Share capital
Authorised share capital
2016 2015
2016 Nominal 2015 Nominal
Number of value Number of value
Group and Company shares GBP'000 shares GBP'000
============================== =========== ======== =========== ========
Ordinary shares of 0.01p each 900,000,000 90 900,000,000 90
============================== =========== ======== =========== ========
Issued share capital - allotted and fully paid
2016 2015
2016 Nominal 2015 Nominal
Number of value Number of value
Group and Company shares GBP'000 shares GBP'000
============================== =========== ======== =========== ========
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 GBP4,117 (30 June
2015: GBP3,789) and shareholders' funds are reduced by GBP122.3
million (30 June 2015: GBP125.3 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 GBPm Number GBPm
---------------------------------- --------- ---- --------- ----
Ashmore Group plc ordinary shares 5,368,331 6.9 5,368,331 6.9
---------------------------------- --------- ---- --------- ----
Reconciliation of treasury shares
2016 2015
Number Number
------------------------------------- --------- ---------
At the beginning and end of the year 5,368,331 5,368,331
------------------------------------- --------- ---------
The market value of treasury shares was GBP16.0 million at the
year end (30 June 2015: GBP15.5 million).
25) Trade and other payables
Group Group Company Company
2016 2015 2016 2015
GBPm GBPm GBPm GBPm
------------------------------- ----- ----- ------- -------
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:
2016 2015
Company GBPm GBPm
---------------- ----- -----
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.
Country % of
of incorporation/ equity
formation shares
and principal held
place by the
Name of operation 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
Saudi
Ashmore Investments Saudi Arabia 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 GBP12.2 million, of which GBP0.4 million was
attributable to NCI and net assets of GBP18.3 million, of which
GBP2.9 million was attributable to NCI (30 June 2015: net profit of
GBP16.9 million, of which GBP3.0 million was attributable to NCI
and net assets of GBP27.1 million, of which GBP11.7 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:
% of
Country net assets
of incorporation/ value
principal held
Type of place by the
Name fund of operation Group
--------------------------------------- --------------- ------------------- -----------
Ashmore Special Opportunities Fund
LP Alternatives Guernsey 39.06
Ashmore Emerging Markets Distressed Corporate
Debt Fund debt Guernsey 40.02
Corporate
Turkey Equity Fund 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
Saudi
Ashmore Saudi Equity Fund Equity Arabia 46.55
Saudi
Ashmore Saudi GCC Equity Fund Equity Arabia 38.50
Ashmore Emerging Markets Frontier
Equity Fund Equity USA 37.18
Ashmore Emerging Markets Equity Fund Equity USA 58.71
External
Ashmore Dana USD Nusantara debt Indonesia 100.00
Ashmore Emerging Markets Hard Currency External
Debt Fund 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:
Country % of
of incorporation/ equity
formation shares
and principal held
Nature of place of by the
Name Type business operation Group
------------------------------------- -------------- ------------ ------------------- -------
Investment
VTB-Ashmore Capital Holdings Limited Associate management Russia 50%
Investment
Everbright Ashmore* Associate management China 30%
Ashmore-CCSC Fund Management Company Investment
Limited** Joint venture 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
---------------------------- --------------------- -----
Joint Joint
Associates ventures Total Associates ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---------- --------- ----- ---------- --------- -----
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.
2016 2015
Group GBPm GBPm
------------------------------------- ------ -----
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 GBP4.8 million (30
June 2015: GBP4.2 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 GBP9.9 million.
Summarised financial information on the Group's share in the
joint venture is shown below:
2016 2015
GBPm GBPm
----------------------------------- ----- -----
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.
AuM within
Less: AuM unconsolidated
within consolidated structured
Total AuM funds entities
US$bn US$bn US$bn
------------- --------- -------------------- ---------------
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 GBP197.1
million (FY2014/15: GBP250.2 million) are management fees amounting
to GBP195.4 million (FY2014/15: GBP245.8 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
GBPm GBPm
---------------------------- ----- -----
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
GBPm GBPm
--------------------------------------------- ----- -----
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:
2016 2015
GBPm GBPm GBPm
----------------------------------- ----- -----
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 GBP28.5 million (30 June 2015: GBP11.5 million).
Transactions with subsidiaries - Company
Details of transactions between the Company and its subsidiaries
are shown below:
2016 2015
GBPm GBPm
---------------------------------------- ------ -----
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 GBP89.4 million of gross
management fees and performance fees (FY2014/15: GBP137.7 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 GBP1.5 million (30 June 2015: GBP46.8
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
GBP112.6 million (30 June 2015: GBP149.0 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 GBP0.1 million to the
Foundation during the year (FY2014/15: GBP0.1 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
GBPm GBPm
---------------------- ----- -----
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
GBPm GBPm
---------------------- ----- -----
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 GBP124.5 million (30 June 2015: GBP58.9 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
GBP82.5 million (30 June 2015: GBP74.1 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:
Country of incorporation/principal
Name 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
------------------------------------------ ----------------------------------- --------------- ----------
Country of incorporation/
principal place
Name of business Classification % interest
---------------------------------------------- -------------------------- ---------------------- ----------
Consolidated
Ashmore Special Opportunities Fund LP Guernsey fund 39.06
Ashmore Emerging Markets Distressed Consolidated
Debt Fund Guernsey fund 40.02
Consolidated
Ashmore Dana USD Equity Nusantara Indonesia fund 92.12
Consolidated
Ashmore Dana USD Nusantara Indonesia fund 100.00
Consolidated
Ashmore SICAV Turkish Equity Fund Luxembourg fund 99.45
Consolidated
Ashmore SICAV 3 Chinese Debt Fund Luxembourg fund 100.00
Consolidated
Ashmore SICAV 3 All Chinese Equity Fund Luxembourg fund 100.00
Consolidated
Ashmore SICAV 2 Global Bond Fund Luxembourg fund 100.00
Consolidated
Ashmore Saudi Equity Fund Saudi Arabia fund 46.55
Consolidated
Ashmore Saudi GCC Equity Fund Saudi Arabia fund 38.50
Consolidated
Turkey Equity Fund Turkey fund 73.76
Ashmore Emerging Markets Hard Currency Consolidated
Debt Fund USA fund 95.15
Ashmore Emerging Markets Frontier Equity Consolidated
Fund USA fund 37.18
Consolidated
Ashmore Emerging Markets Equity Fund USA fund 58.71
Everbright Ashmore China Real Estate Available-for-sale
Fund China 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
Non-current
Ashmore Debt and Currency Fund Limited Guernsey assets held-for-sale 100.00
Non-current
Ashmore SICAV Absolute Return Debt Fund Luxembourg assets held-for-sale 100.00
Ashmore Emerging Markets Short Duration Non-current
Fund USA assets held-for-sale 58.09
Ashmore Emerging Markets Equity Opportunities Non-current
Fund USA 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
The company news service from the London Stock Exchange
END
FR LAMMTMBTMTBF
(END) Dow Jones Newswires
September 06, 2016 02:01 ET (06:01 GMT)
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