Ashmore Regulatory News (ASHM)

Ashmore Group PLC

10 September 2013

RESULTS FOR THE YEAR ENDED 30 JUNE 2013

Ashmore Group plc ("Ashmore", the "Group"), the specialist Emerging Markets asset manager, today announces its audited results for the year ended 30 June 2013.

Highlights

· Assets under management ("AuM") of US$77.4 billion at 30 June 2013, an increase of 22% during the period.

- Record gross subscriptions of US$27.2 billion (FY2011/12: US$13.0 billion).

- Net inflows of US$13.4 billion (FY2011/12: US$1.3 billion).

- Strong investment performance with 92% of AuM outperforming benchmarks over three years and 96% over one year.

· Total net revenue of £355.5 million, an increase of 7% on FY2011/12 (£333.3 million).

- Net management fees up 4% to £311.2 million.

- Performance fees of £33.4 million (FY2011/12: £25.4 million).

· EBITDA increased 7% to £252.2 million, resulting in a margin of 71% (FY2011/12: 71%).

· Basic earnings per share of 29.98p (FY2011/12: 26.82p).

· Proposed final dividend per share of 11.75p, making a full year dividend per share of 16.10p (FY2011/12: 15.00p).

Commenting on the Group's results, Mark Coombs, Chief Executive Officer, Ashmore Group plc said:

"These results demonstrate Ashmore's substantial achievements during the year in delivering outperformance for our clients across the full range of investment themes, as well as the investment in distribution and our operating platform returning record gross subscriptions over the period.

"Ashmore's experience from over two decades of investing solely in Emerging Markets is vital during periods of market volatility such as those experienced recently. It is therefore satisfying that Ashmore's client base is demonstrating its confidence in our long-standing processes through its resilience. Investors are increasingly recognising the strengths and competitive qualities of Emerging Markets in contrast to the structural challenges faced by Developed Markets, and finding that compelling risk-adjusted returns are available across a range of Emerging Markets fixed income and equity asset classes. Indeed, given the underlying strong, long-term fundamental trends, the recent re-pricing presents even greater investment opportunities.

"Ashmore's specialist expertise and broad product range mean the Group is well positioned to access these opportunities for clients and to deliver profitable growth for shareholders."

Analysts briefing

There will be a presentation for analysts at 09.00 on 10 September 2013 at the offices of Goldman Sachs International at Peterborough Court, 10th Floor, 133 Fleet Street, London EC4A 2BB. A copy of the presentation will be made available on the Group's website at www.ashmoregroup.com

Contacts

For further information please contact:

Ashmore Group plc

Paul Measday

Investor Relations +44 (0)20 3077 6278

FTI Consulting - PR to Ashmore Group plc

Andrew Walton +44 (0)20 7269 7204

Paul Marriott +44 (0)20 7269 7252

Chairman's statement

Market conditions were buoyant for most of the year, though in the last months there was a sharp and largely indiscriminate sell-off in risk assets across most of the Emerging Markets, largely caused by concerns over the timing of the withdrawal of quantitative easing by the US Federal Reserve. Ashmore's specialist knowledge and active investment management style come to the fore in such difficult periods.

Overall the Group has had a successful year with strong growth in assets under management, up by 22% to stand at US$77.4 billion, coming from both new and existing clients, and is a direct result of the investment we have made in our distribution activities. We have also continued to build our domestic asset management presence within Emerging Markets, establishing offices in Indonesia and in China.

The Group's financial performance was solid. Profitability was maintained at an industry-leading level, with an EBITDA margin of 71%. Profit before tax increased 6% to £257.6 million and diluted earnings per share rose 11% to 28.69p.

Recognising the financial performance achieved during the year, and the Board's confidence in future growth, the Directors are recommending a final dividend of 11.75p per share for the year ended 30 June 2013, which, subject to shareholders' approval, will be paid on 6 December, to those shareholders on the register on 8 November. The Board intends to pay a progressive 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.

Corporate governance

The Board considers corporate governance matters and adherence to codes of best practice to be of upmost importance. As Chairman of the Board, I believe that it has operated effectively through the year and that its role and its composition are well defined, appropriate and support the long-term development of the Group. As a unitary Board, one of our principal tasks is to ensure that our membership has the right skills and knowledge base relevant to our business, and to plan for succession, as existing directors come to the end of their tenures. These issues are a regular topic of discussion during the Board evaluation process, and, where we have a specific vacancy to fill or where we have decided to add further to the Board, the Nominations Committee will engage an independent search consultant, with no connection to the Group, to assist us in this process.

Jonathan Asquith retired at the Group's AGM in October and I should like to thank him for the contribution he made to the Board over four years. In February the Group announced the appointment to the Board of two Non-executive Directors: Dame Anne Pringle DCMG, and Charles Outhwaite. Dame Anne has considerable and valuable experience as a diplomat with the Foreign and Commonwealth Office, focusing in particular on the EU, Russia and Eastern Europe, including serving as Ambassador to the Russian Federation from 2008 to 2011. Charles has over 25 years of experience in corporate finance, with a particular focus on financial services. He is currently a senior advisor to Evercore Partners.

Both the new Directors have undertaken a full induction programme, with the support of the Board and senior management, to familiarise them with their duties and responsibilities and all relevant aspects of the Group's business. In due course they will be appointed to Board committees to suit their particular experience and expertise.

The Board now comprises eight members of whom six are non-executive and two are female; I am therefore pleased to report that the Board complies with the best practice recommendations of the Davies Report in respect of its composition. The Nominations Committee considers diversity, including the balance of skills, experience, gender and nationality amongst many other factors when reviewing the appointment of new Directors, but does not consider it appropriate to establish quotas or targets in this regard. Furthermore, and consistent with the emphasis the Board places on maintaining high standards of corporate governance, I am delighted that in May this year the Group became a signatory to the UN Principles for Responsible Investment.

Ashmore's investment processes, distribution platform and operational infrastructure are well placed to cope with the prevailing uncertain market conditions. Notwithstanding the accomplishments of the year, there remains much to do, to build out the Group's access to capital and investment opportunities around the world, and the Group faces this task with confidence.

The Board recognises and is grateful for the hard work and commitment of everyone across the Group's operations over the past year.

Michael Benson

Chairman

Chief Executive Officer's report

The results for the year ended 30 June 2013 illustrate the substantial progress made in building a more diversified business, with strong performance across the Group, record subscriptions following a period of investment in distribution, and an operational platform that is capable of processing and managing far higher levels of AuM. The experience of over two decades of investing solely in Emerging Markets, across equities, fixed income and alternatives, is invaluable in assessing the risks and opportunities inevitably presented by a period of market turbulence such as we witnessed towards the end of the financial year. During this period, Ashmore continued to outperform and to achieve strong client flows.

AuM development

Assets under management increased 22% from US$63.7 billion to US$77.4 billion during the year, with average AuM rising 13%, principally the result of strong net inflows of US$13.4 billion. Good investment performance over most of the year was offset by pronounced market weakness in late May and June.

Record gross subscriptions of US$27.2 billion (FY2011/12: US$13.0 billion) were primarily into the debt themes, and particularly local currency and corporate debt where the investment universe and potential investment returns are both attractive. Demand for blended debt is also strong, as it represents a natural first step for an Emerging Markets allocation as well as satisfying the increasing trend for clients to specify bespoke benchmarks against which to measure investment performance. Pleasingly, the Group's equities theme achieved gross subscriptions in each of the four quarters during the year.

Gross redemptions increased in absolute terms to US$13.8 billion (FY2011/12: US$11.7 billion) but at 19% of average AuM (FY2011/12: 18%) remained at a reasonable level and low by industry standards.

Investment performance

Investment performance contributed US$0.3 billion; however, this masks good performance for the majority of the year negated by the sharp market declines in the fourth quarter, catalysed primarily by concerns over a reduction in quantitative easing (QE) in the United States. Local currency assets were particularly affected in the sell-off, as technical factors, such as the presence of leveraged and speculative positions that were particularly sensitive to the Federal Reserve's tapering message in May, outweighed the largely benign fundamental backdrop. This served as a reminder that Emerging Markets still comprise a broad spread of relatively inefficient asset classes, where misconceptions abound. However, historically such a divergence between market movements and underlying fundamentals has provided good opportunities for Ashmore's value-based investment approach.

For the Group overall, the percentage of AuM outperforming benchmarks at 30 June 2013 was very good, at 92% over three years (30 June 2012: 86%) and 96% over one year (30 June 2012: 23%). It is particularly pleasing to note the improvement in the equities theme, with 39% of AuM outperforming over three years (30 June 2012: 21%) and 87% over one year (30 June 2012: 22%) as the specialist funds have continued to perform and the actions implemented to refine the Broad Global Active investment process have delivered.

The recent volatile market environment highlights once again the benefits of being a specialist active manager in Emerging Markets, and the investment returns described above demonstrate the benefits of bringing to bear over two decades of investment experience for the Group's clients.

Financial performance

Revenue

Net revenue for the year of £355.5 million was 7% higher than in the prior year. This resulted from a 4% increase in management fee income net of distribution costs to £311.2 million, driven by an increase in average AuM levels offset by a reduction of average net management fee margins by 6bps to 68bps.

The margin reduction was primarily the result of theme and client mix effects, together with notable success in winning relatively large mandates, particularly in the local currency theme, which naturally attract a lower revenue margin. Specifically, among the local currency mandate wins during the period was a number of segregated accounts over US$500 million in size. These funds earn an appropriate management fee margin and are efficient to manage. Some competition is also evident, although its nature and intensity varies by theme, and in the context of an asset class that is growing rapidly and where many investors, particularly those in the developed world, are profoundly underweight, the presence of other Emerging Markets advocates is welcome.

Performance fees increased to £33.4 million (FY2011/12: £25.4 million), with the second half contribution slightly stronger than expected due to continued market strength in the third quarter. Performance fees represented 9% of net revenues for the period, broadly in line with the prior year (FY2011/12: 8%).

Cost structure

Ashmore keeps a firm control over its cost base, while continuing to invest appropriately, including in the expansion of the international office network.

The structure of staff costs is a defining characteristic of the Group's business model, with a relatively low cap on basic salaries across the Group and a strong bias to performance-related variable compensation. The latter element places an emphasis on long-term equity ownership. In the year to 30 June 2013, variable compensation as a percentage of earnings before variable compensation, interest and tax (VC/EBVCIT) was 20% (FY2011/12: 18%).

Profitability

Operating profit for the year was £232.0 million (FY2011/12: £225.1 million).

EBITDA, defined as operating profit excluding depreciation and amortisation, for the year was £252.2 million (FY2011/12: £236.2 million). The EBITDA margin of 71% for the year was unchanged (FY2011/12: 71%) and, consistent with the view expressed in previous years, our expectation is that the Group's margin will move into the '60s' over time.Net finance income increased from £18.1 million to £25.7 million. As in the prior year, it includes several items relating to acquisition of AshmoreEMM, now operating under the Ashmore brand, and seed capital, on which more detail is provided in the Business review.

Profit before tax for the year increased 6% to £257.6 million (FY2011/12: £243.2 million). Earnings per share for the year were 29.98p (FY2011/12: 26.82p).

Strategic progress

Distribution

In previous periods we have invested to expand the Group's product range and to support rapid growth in distribution headcount. This year we demonstrated success from this investment through stronger gross and net subscriptions.

Gross subscriptions of US$27.2 billion represent a record for the Group and were sourced from a diversified range of clients, both existing and new, and were invested efficiently in a range of fixed income and equity products. The nature of our largely institutional business is that the pattern of client flows can be irregular, but the flows generated during the period are testament to the relationships established and developed by an enhanced distribution team, some of which can take many months, if not years, to come to fruition. Many of our clients are making long-term allocations to the Emerging Markets asset class, providing us with high-quality resilient assets to manage, and therefore we experienced relatively limited impact from the market weakness at the end of the year. Understandably in our view, some clients saw this re-pricing of assets as an investment opportunity and increased allocations accordingly.

To target particularly the third-party intermediary business, the Group established and expanded a range of open-ended fund conduits in late 2010 and through 2011, in the US and Europe, which over the course of the next financial year will establish three-year investment performance track records. This is of particular relevance to the US 40-Act mutual funds, which rely heavily on this factor to stimulate demand. Nonetheless, with a relatively small and focused distribution team, we are pleased to have raised AuM of nearly US$1 billion in the US intermediary market to date. We plan to modestly and steadily increase the headcount in our intermediary distribution teams to support growth in the 40-Act and SICAV funds as they reach their three-year milestones.

The distribution team's headcount at the end of the period was 45 (30 June 2012: 41) and while we will invest further in distribution on a selective basis, headcount increases in the foreseeable future are unlikely to be as marked as in previous periods. The Group's distribution priority is to continue to deliver diversified, profitable AuM growth onto its scalable operating platform.

Local asset management

The third phase of the Group's strategy seeks to benefit from the rapidly growing pools of investment capital within Emerging Markets, which are growing at rates far in excess of the equivalent, though today larger, pools of capital in the developed world. The traditional investor preference for deposit-based products, typically manufactured and distributed by banks, is being challenged as real interest rates have declined and regulators scrutinise the services provided by the incumbents. There is a clear opportunity for independent managers such as Ashmore to offer credible and attractive investment opportunities to domestic Emerging Markets investors.

During the year we established businesses in Indonesia and China. The subsidiary operation in Jakarta, Indonesia was established in July 2012 and launched three funds in the second half of the financial year: two equity funds (all-cap and small-cap) and a fixed income fund. The Group's strategy is to combine local talent with Ashmore's global asset management expertise; this approach will enable us to grow a leading business in the Indonesian asset management market, and in support of this ambition the Group has committed seed capital to the three funds.

In China, we acquired the maximum permitted 49% stake in a Shanghai-based fund management joint venture with Central China Securities Co. (CCSC), and we launched two equity-related funds towards the year end.

Today we manage approximately US$1 billion in our local Emerging Markets businesses and we aim to grow this substantially in the coming years, as previously high barriers to entry are broken down and the merits of allocating to an independent manager with a strong investment pedigree become increasingly apparent. The Group has an ongoing focus to develop the scale of existing domestic businesses and also envisages supplementing this growth with opportunities in further markets over time.

Seed capital

The ability to seed funds is an important competitive advantage for Ashmore, as it supports both entry into new markets and the development of new product structures and distribution channels, such as the US 40-Act funds, and can be considered to underpin future AuM growth. During the second half of the year the Group committed seed capital to support the launch of three funds in Indonesia. Other seed capital investments made during the period enabled the launch of investment grade blended debt funds as well as providing greater scale to enhance the distribution potential of several equity funds on the SICAV platform.

The seed capital programme is actively managed, has inherent value with funds recycled back into cash when appropriate, and is subject to strict monitoring by the Board within a framework of set limits. Its scale has grown materially, nearly tripling from £61.0 million invested three years ago to £170.6 million at 30 June 2013; during the financial year, £149.0 million was invested in 15 different funds and £129.9 million was recycled from investments previously made in a similar number of funds. While not its primary purpose, the active management of seed capital has generated profits for shareholders. The accounting treatment for seed capital is explained fully in the notes to the accounts, but for clarity the aggregate income statement contribution from seed capital-related activity was £17.2 million (FY2011/12: £1.7 million).

People and culture

The Group's headcount has increased to 291 at the end of the year (30 June 2012: 257) reflecting further investment in support functions and the Group's local fund management businesses.

The commitment, expertise and motivation of colleagues across the Group were manifest in the ability to source, invest and control the strong asset flows that Ashmore generated during the year. I should like to thank everyone for their tremendous effort over the past year, and I am confident that as a team we will continue to deliver for our clients and shareholders during the current financial year and beyond.

Outlook

The fundamental Emerging Markets story remains strong and resilient, and is represented by the established and powerful GDP per capita convergence trend. While Emerging Markets GDP per capita has grown rapidly, in absolute terms it is still only comparable to Developed Markets in 1980, with many economies at a far earlier stage of development. Across Emerging Markets, political and fiscal accountability is leading to improved economic stability, and capital markets and domestic pools of capital continue to deepen. As a consequence, the balance of world economic power is shifting in favour of Emerging Markets, such that it is increasingly difficult for investors to justify ignoring the asset class or to persist with a profoundly underweight position.

The factors behind this positive long-term view should not be confused with the noise that arises from the inevitable, but shorter-lived, volatility associated with the business cycle. In recent months, the cyclical slowdown in certain Emerging Markets has been extrapolated by the market into something abysmal; and at the same time, expectations of a sustained and inflation-less US economic recovery have increased, influenced by the Federal Reserve's signal in May of imminent QE tapering. Our expectation is that both of these projections will be wrong.

Developed markets remain structurally challenged. Their immense indebtedness will dampen economic recovery and will have to be addressed in due course through inflation and currency devaluation, with the US furthest down this path, albeit still with total public and private sector debt in excess of 400% of GDP.

In contrast, the ability of Emerging Markets to withstand cyclical and external stresses has improved dramatically over the past two decades. They have on average one-tenth the leverage of the US economy; the debt they have is overwhelmingly in local currency and owned by domestic institutions; they operate with increasingly orthodox and effective inflation policies; they control 80% of the world's foreign exchange reserves; and where it occurs, currency depreciation restores competitiveness.

Yet inefficiencies, misconceptions and prejudices still abound. Developments in one country or region are often extrapolated across the Emerging Markets asset class. The price volatility induced by these myopic swings in sentiment should not be mistaken for higher risk; economic fundamentals ultimately reassert themselves. Emerging Markets are not homogeneous, and the presence of idiosyncratic risks and rewards across more than 65 countries provides tremendous opportunities for a specialist, active investment manager.

Dedicated long-term investors recognise these characteristics of the Emerging Markets asset class, and can take advantage of the asset re-pricing that results from technical factors rather than a change in fundamentals. Demand for Emerging Markets themes with relatively low correlation to the US treasury market will continue: equities, local currency assets, blended debt and shorter duration, higher yielding corporate debt offer attractive prospective returns.

The market volatility of recent months should not mask the fact that the Emerging Markets opportunity is undiminished, and one that Ashmore purposefully seeks to capture on behalf of clients. The Group's investment experience over more than two decades is a powerful tool in this regard, and our long-term investment experience is strong. However, we are not complacent; we will continue to strive to generate outperformance for our clients, and to deliver profitable growth for our shareholders.

Mark Coombs

Chief Executive Officer

Business Review

The following Business Review provides a detailed account of the Group's activities and their financial impact in the period.

Key Performance Indicators

Ashmore Group results

The Group recorded operating profit before tax for the year ended 30 June 2013 of £232.0 million (FY2011/12: £225.1 million); EBITDA of £252.2 million (FY2011/12: £236.2 million); an EBITDA margin of 71% (FY2011/12: 71%); a profit before tax of £257.6 million (FY2011/12: £243.2 million); and a profit after tax of £201.6 million (FY2011/12: £185.7 million).

The table below reclassifies items relating to seed capital and acquisitions to aid clarity and comprehension of the Group's operating performance.

Summary non-GAAP financial performance

Adjusted EBITDA has been arrived at after deducting net gains on investment securities of £4.9 million (FY2011/12: £0.4 million loss), other expenses of £0.7 million (FY2011/12: £nil) and £1.2 million of changes in third-party interests in consolidated funds (FY2011/12: £0.4 million) from EBITDA. Adjusted operating profit is based on adjusted EBITDA less depreciation and amortisation, but excluding impairment of intangible assets relating to acquisitions.

The financial results, including the reclassified items, are analysed further below.

Assets under management and fund flows

During the year AuM increased by 22% from US$63.7 billion to US$77.4 billion, comprising net inflows of US$13.4 billion and a small contribution from investment performance of US$0.3 billion.

Ashmore achieved strong levels of gross subscriptions which totalled US$27.2 billion (FY2011/12: US$13.0 billion). Inflows from new and existing clients reflected in the main the investment the Group has made in its distribution platform over the previous few years, and the institutional nature of the majority of the Group's clients provided some resilience when markets weakened towards the end of the period.

During the financial year there was continued strong demand for local currency mandates, particularly, though not exclusively, from government-related institutions such as central banks and sovereign wealth funds. We believe this growth has a structural element to it in that such institutions will seek to diversify substantial US dollar-based asset holdings over time, and the strong fundamentals, growing issuance volumes and attractive yields available in Emerging Markets local currency markets will continue to influence allocations positively.

Similarly, corporate debt experienced strong AuM growth through net subscriptions, from a diversified range of new and existing clients. Strong new issuance levels, a benign default environment, and an appreciable yield pick-up versus equivalent-rated credits in Developed Markets all underpin continued growth in this asset class. Demand is concentrated in US dollar-denominated assets, but the Group can access the much larger local currency corporate debt market, which has had relatively little invested in it to date from international investors. The Group is also in the process of launching a private debt fund, thereby providing to clients one of the most comprehensive opportunity sets in this asset class.

Blended debt continues to be a natural starting point for new allocations to Emerging Markets fixed income, and is the most popular theme on the US 40-Act mutual fund platform. The theme is also attractive to clients that are invested elsewhere in the Emerging Markets universe and wish to define a bespoke performance benchmark, or to extend their investments beyond a pure external debt mandate. These factors were evident during the period in some of the outflows we experienced from external debt, that returned as subscriptions to blended debt funds.

During the period there was ongoing client demand for external debt exposure, across both public funds and segregated accounts. A proportion of the gross subscriptions reported in this theme arose from clients moving from public funds to segregated accounts, with corresponding gross redemptions also being recorded in the theme.

It is pleasing to report that demand for high-performing and higher-margin specialist equity funds was strong throughout the period from a wide range of clients, including public pensions and government-related entities.

The absolute levels of gross redemptions increased to US$13.8 billion (FY2011/12 US$11.7 billion) but were at a reasonable level of 19% of average AuM (FY2011/12: 18%) and remain low by industry standards.

Equities outflows were lower in the second half of the year compared with the first six months, as focus on and improvements to the Broad Global Active investment process have increasingly led to outperformance against the funds' benchmark.

Outflows from Japanese retail multi-strategy funds were also biased towards the first half of the year. Redemptions in the second half of the year were lower as Yen weakness benefited investment performance and quantitative easing led to greater investor risk appetite. However, this remains a market that is highly cyclical.

New funds and accounts

With record gross subscriptions, the year was a busy one for new account openings and fund launches. There were more than 30 segregated accounts and white label/dual brand mandates won during the period, across all debt themes and also equity and multi-strategy themes. The greater number of segregated mandates reflects increasing client demand for this structure, and we have seen a number of clients move existing capital from public funds to new segregated accounts. The investment made in operational support in recent periods ensured we were able to deliver the additional complexity that typically accompanies such funds. We also increased the public fund range, including three funds in Indonesia, and additional equity, local currency, corporate debt and blended debt funds on the SICAV platform. The Group ended the period with 177 funds (FY2011/12: 136 funds).

There continues to be client demand for investment grade assets, driven in some cases by regulatory requirements and therefore this is a trend that can be expected to persist. On a dedicated basis, such funds now represent 5% of the Group's AuM.

AuM movements by investment theme

In line with the interim results and the historically reported quarterly updates, the AuM by theme as classified by mandate is shown in the table below. This details gross subscriptions and redemptions, investment performance and average net management fee margins for each theme.

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. During the period this was particularly the case with clients that were previously invested in external debt funds and chose to define bespoke benchmarks incorporating other fixed income themes; these funds are then classified as blended debt.

AuM movements by investment theme as mandated

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-strategy and blended debt themes; and of cross-over investment from within certain external debt funds. This analysis continues to demonstrate the greater significance of the local currency and corporate debt themes, with the former being the largest single theme on an 'as invested' basis.

AUM as classified by mandate

AUM as invested

The Group's AuM 'as invested' remains diversified by geography, with 29% invested in Latin America, 29% in Asia Pacific, 12% in the Middle East and Africa, and 30% in Eastern Europe. The Emerging Markets universe comprises more than 65 countries and with substantial opportunities not covered by benchmarks, thus highlighting the benefits of being a specialist, active manager capable of investing with the support of a network of domestic platforms.

Investor profile

Investor type

The Group's AuM is predominantly institutional in nature (30 June 2013: 89%; 30 June 2012: 89%) and the most significant sub-categories of institutional investor are government-related entities and private and public pension plans, together accounting for 71% (30 June 2012: 67%) of AuM. Government-related entities account for 41% of Group AuM but this is diversified across central banks (18% of Group AuM), sovereign wealth funds (8% of Group AuM) and governments (15% of Group AuM).

The proportion of Group AuM sourced through third-party intermediaries - including electronic platforms, brokers and other distributors - was stable at 11%, and increased by US$1.4 billion to US$8.2 billion in absolute terms, notwithstanding the cyclical headwind from Japanese redemptions described above. Developing AuM sourced through such intermediaries, where the end customers are typically retail/high net worth individuals, is one of the Group's strategic objectives.

AuM by investor type

The appeal of the Emerging Markets asset class to investors globally is demonstrated by the Group's continued diverse geographic investor profile, in line with the prior period.

AuM by investor geography

Management fees and performance fees

As the Group's AuM are predominantly US dollar-based, the majority of management and performance fees are also US dollar-denominated. The table below sets out AuM, net management fees, net management fee margins, and performance fees, by theme in US dollars.

Underlying US dollar management and performance fees

Management fees

Management fee income net of distribution costs in Sterling terms increased by 4% to £311.2 million as a function of increased levels of average AuM (FY2012/13: US$72.2 billion; FY2011/12: US$63.9 billion), stable GBP/USD foreign exchange rates (FY2012/13: 1.57 effective; FY2011/12: 1.59 effective) and a reduction in average net management fee margins (FY2012/13: 68 bps; FY2011/12: 74 bps). The average net management fee margin reduction was the result of a number of factors. Theme and mix effects, including the respective weighting of the Group's higher and lower margin themes as they were differently affected by flows and performance, accounted for 2.5bps of the 6bps movement. The margin was also influenced by the winning of several relatively large mandates, particularly in the local currency theme, which naturally attract a lower revenue margin. Specifically, among the local currency mandate wins during the period was a number of segregated accounts over US$500 million in size. These funds earn an appropriate management fee margin and are efficient to manage.

Performance fees

Total performance fee income for the year was £33.4 million (FY2011/12: £25.4 million), earned across the investment themes and throughout the financial year, as the market correction occurred late in the period, thus not having an impact on the performance fees generated.

At the year end the Group was eligible to earn performance fees on only 18% of AuM (30 June 2012: 30%), or 31% of funds (30 June 2012: 37%). Of these funds, 56% (30 June 2012: 54%) of them, while able to generate performance fees in the future, were ineligible to do so in FY2012/13 either as a result of such fees only being available at the end of the multi-year fund life, such funds not earning a fee in the performance year, or as a result of rebate agreements.

Operating costs and EBITDA margin

The Group has maintained its tightly controlled cost structure, with a low proportion of recurring costs and a large proportion of variable performance-related costs. Closing headcount increased from 257 at 30 June 2012 to 291 at 30 June 2013, with the average headcount rising from 251 to 280. The 11% increase in wages and salaries to £20.0 million (FY2011/12: £18.0 million) is consistent with the increase in average headcount. There has been further recruitment this year to facilitate the future growth of the business, with continued focus on the expansion and development of our local fund management and operational support teams.

Variable compensation costs represent the majority of overall personnel expenses and consist of performance-related cash bonuses, share-based payments and associated social security costs. Variable compensation is calculated as a percentage of earnings before variable compensation, interest and tax. The rate of variable compensation applied in the year to 30 June 2013 increased to 20% (FY2011/12: 18%). The higher level of variable compensation from the prior year reflects continued good performance of the overall business over the year, and particularly strong relative investment performance and net asset raising.

The five-year trends of total employee numbers and total employment costs are shown below. These demonstrate how the Group's operating model has been maintained.

Year end headcount

Employee costs

The overall total for other expenses for the year to 30 June 2013 was £44.9 million (FY2011/12: £34.4 million) with the principal factor behind the year-on-year increase being a higher combined charge for amortisation and impairment of intangible assets of £16.1 million, described in the Goodwill and intangible assets section below, as other costs were broadly unchanged. The intangibles impairment charge was partially offset by a £10.8 million credit resulting from an adjustment to the contingent consideration payable for the equities acquisition, as described in the Finance income section below.

EBITDA of £252.2 million increased 7% compared with the prior year (FY2011/12: £236.2 million), and results in an EBITDA margin of 71% (FY2011/12: 71%). Reclassification of items relating to acquisitions and seed capital investments adds clarity and aids comprehension, and leads to adjusted EBITDA of £249.2 million, an increase of 5% compared with the prior year (FY2011/12: £237.0 million). The adjusted EBITDA margin is 70% (FY2011/12: 71%).

Finance income

Included in finance income are items relating to the equities acquisition. The main item is a £10.8 million credit (FY2011/12: £16.8 million) following an adjustment to the contingent consideration payable to reflect its fair value at the period end. The undiscounted value of the estimated payments in respect of the acquisition of AshmoreEMM has fallen to £0.6 million (30 June 2012: £12.5 million). The amount to be paid for the business will therefore be some £85 million less than the maximum possible under the terms of the acquisition, reflecting that the transaction structure, with its substantial emphasis on contingent consideration, provided significant protection for the Group and its shareholders.

Also included in finance income are items relating to seed capital investments, described in detail below.

Excluding the seed capital and acquisition-related items, the Group's net finance income was £1.6 million (FY2011/12: £2.5 million).

Taxation

Ashmore is committed to paying tax in accordance with all relevant laws and regulations and complying with all fiscal obligations in the territories in which we operate. To facilitate this, we work to create and maintain transparent and open working relationships with all tax authorities. As a Group, we aim to maximise value for our shareholders and customers by managing our businesses in a tax efficient and transparent manner, within the remit of the applicable tax rules.

The majority of the Group's profit is subject to UK taxation; of the total current tax charge for the year of £60.6 million, £56.7 million relates to UK corporation tax. The Group's effective tax rate for the year is 21.74% (FY2011/12: 23.7%) which is less than the blended UK corporation tax rate of 23.75% (FY2011/12: 25.5%). Account Note 12 provides a full reconciliation of this deviation from the blended UK corporation tax rate. Key reconciling items relate to (i) disallowable expenses relating to accounting entries that are not tax deductible; (ii) deferred tax credits arising on temporary differences between the accumulated amortisation and impairment charges booked in relation to certain intangible assets and the related tax deductions available; and (iii) current tax deductions in respect of share-based awards vesting during the period.

There is a £21.0 million deferred tax asset on the Group's balance sheet at 30 June 2013 (30 June 2012: £15.1 million), principally arising as a result of timing differences in the recognition of the accounting expense and actual tax deductions in connection with share price appreciation on share-based awards.

Balance sheet management and cash flow

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 investors, and to fulfil development needs across the business which include funding establishment costs of distribution offices and local asset management ventures, seeding new funds, trading or investment in funds or other assets and other strategic initiatives.

As at 30 June 2013, total equity attributable to shareholders of the parent was £628.7 million, as compared to £537.3 million at 30 June 2012. There is no debt on the Group's balance sheet.

Cash

The Group's cash and cash equivalents balance increased by £48.9 million in the year to £395.5 million. The Group continues to generate significant cash from operations, totalling £280.2 million in the year (FY2011/12: £238.8 million), from which it paid the following significant items: £110.9 million in cash dividends (FY2011/12: £106.9 million); £59.4 million of taxation (FY2011/12: £58.2 million); £21.2 million for net new seed capital investments (FY2011/12: £6.2 million); and £30.8 million for purchase of own shares to satisfy share awards (FY2011/12: £40.8 million).

The Group's cash balances are invested with the objective of optimising returns within a strict framework which emphasises capital preservation, security, liquidity and counterparty risk. 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 AAAm as at 30 June 2013 (2012: A to AAAm).

Seed capital investments

As at 30 June 2013 the amount invested was £170.6 million (at cost), with a market value of £182.2 million (30 June 2012: £140.1 million and £148.9 million, respectively). The at-cost investment represents 31% of Group tangible equity (30 June 2012: 32%). During the period the largest seed capital investments were made in support of the launch of three funds in Indonesia. Several seed capital investments made previously were recycled profitably during the year.

Further details of the movements of seed capital items during the year can be found in note 21 to the accounts. In aggregate, taking into account consolidated funds, held-for-sale assets, available-for-sale assets and non-current asset investments, the income statement includes total profits of £17.2 million (FY2011/12: £1.7 million) related to seed capital investments. This comprises operating expenses of £0.7 million (FY2011/12: £nil), gains on investment securities of £4.9 million (£0.4 million loss), third-party interests in consolidated funds of £1.2 million (£0.4 million), finance income of £1.6 million (£1.3 million) and other gains on seed capital investments of £12.6 million (£1.2 million).

Purchase of own shares

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 2013 the EBT owned 35,205,106 (30 June 2012: 32,668,764) ordinary shares.

Goodwill and intangible assets

Total goodwill and intangible assets on the Group's balance sheet at 30 June 2013 are £84.3 million (30 June 2012: £98.1 million). The year-on-year decrease of £13.8 million is explained by amortisation charges of £5.1 million (FY2011/12: £6.2 million), combined with an intangibles impairment charge of £11.0 million (FY2011/12: £1.2 million), partly offset by FX retranslation gains of £2.3 million arising on non-Sterling denominated goodwill and intangible assets (FY2011/12: £2.3 million). This gain is included within the Group's other comprehensive income.

As described in note 15 to the accounts, the intangibles impairment charge comprises £1.6 million in respect of the interim AshmoreEMM brand which was replaced in January 2013 by the Ashmore brand for the Group's equities business; and a £9.4 million charge in respect of the intangible value of fund management relationships to reflect the redemptions experienced in the equities theme.

Deferred acquisition costs (DAC)

The Group carries on its balance sheet unamortised deferred acquisition costs of £0.6 million (FY2011/12: £4.7 million) in respect of the launch of Ashmore Global Opportunities Limited (AGOL), a publicly listed closed-ended investment company incorporated in 2007.

Market sentiment towards listed vehicles with illiquid underlying assets such as AGOL remained weak during the year and AGOL's shares continued to trade at a discount to their NAV. In the light of these factors, Ashmore, the AGOL Board and its advisers consulted with AGOL shareholders upon a range of proposals with the objective of resolving the discount issue and delivering a positive outcome for shareholders. Subsequently a managed wind down of AGOL was proposed and approved by AGOL shareholders in March 2013. AGOL has since returned over US$100 million to shareholders representing over 20% of its NAV as at 31 December 2012. Under the terms of the wind down, Ashmore is entitled to receive a reimbursement of certain launch costs which were borne at the time of AGOL's IPO in 2007. As at 30 June 2013, US$3.7 million of such costs had been reimbursed.

Foreign exchange management

The Group's long-standing policy is to hedge up to two-thirds of the notional value of foreign exchange exposure in connection with its net management fee cash flows, using either forward foreign exchange contracts or options for up to two years forward. The GBP/USD exchange rate to 30 June 2013 ranged between GBP1.00:1.4979 - 1.6228USD.

The Group experienced an overall foreign exchange gain for the year to 30 June 2013 of £4.7 million (FY2011/12: £2.8 million gain), comprising a gain of £5.9 million (FY2011/12: gain of £2.7 million) on the translation of non-Sterling denominated assets and liabilities combined with a loss of £1.2 million (FY2011/12: gain of £0.1 million) on realised and unrealised hedging transactions.

The notional level of foreign exchange hedges in place at 30 June 2013 is US$141.0 million. This consists of options (US$136.0 million) and forwards (US$5.0 million) in respect of FY2013/14 and FY2014/15 net management fee cash flows.

The foreign exchange hedges protect the Sterling value of US$141.0 million of the Group's forecast management fee revenue cash flows for FY2013/14 and FY2014/15 from being impacted by currency movements (outside the contracted ranges for the nil-cost option collars).

The options and forwards have been marked-to-market at the year-end rate of GBP1:1.5213USD.

As designated hedges, the mark-to-market movement in the value of the options and forwards will be taken through reserves, until such time as they and the associated hedged revenues mature, so long as the hedges are assessed as being effective. If assessed as ineffective, the mark-to-market of the options and forwards will be taken through the income statement.

Dividend

In recognition of the Group's financial performance during the period, and of our confidence in the Group's future prospects, the Directors are recommending a final dividend of 11.75p per share for the year ended 30 June 2013, which, subject to shareholder approval, will be paid on 6 December 2013 to those shareholders who are on the register on 8 November 2013.

An interim dividend for the six-month period to 31 December 2012 of 4.35p per share (31 December 2011: 4.25p per share) was paid on 12 April 2013. Together, these result in a full-year dividend of 16.10p per share (2012: 15.00p per share), an increase of 7%.

Graeme Dell

Group Finance Director

Consolidated statement of comprehensive income

Year ended 30 June 2013

Consolidated balance sheet

As at June 2013

Approved by the Board on 9 September 2013 and signed on its behalf by:

Mark Coombs Graeme Dell

Chief Executive Officer Group Finance Director

Consolidated Statement of changes in equity

For the year ended 30 June 2013

Consolidated cash flow statement

For the year ended 30 June 2013

Company balance sheet

As at 30 June 2013

Approved by the Board on 9 September 2013 and signed on its behalf by:

Mark Coombs Graeme Dell

Chief Executive Officer Group Finance Director

Company statement of changes in equity

For the year ended 30 June 2013

Company cash flow statement

As at 30 June 2013

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 2013 were authorised for issue by the Board of Directors on 9 September 2013.

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 2013 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) Effects of new and amended IFRSs

New standard applied

The following amended IFRS has been adopted by the Group and the Company during the year:

- Amendment to IAS 1 Presentation of Items of Other Comprehensive Income impacts the Group's and Company's statements of comprehensive income by requiring the grouping of items presented in other comprehensive income based on whether or not they will be reclassified to profit or loss in future. Adoption of the amendment did not impact earnings per share.

New standards and interpretations not yet adopted

The International Accounting Standards Board (IASB) and International Financial Reporting Interpretations Committee has recently issued the following new standards and amendments which are effective for annual periods beginning on or after1 January 2014, unless stated otherwise, and have not been applied in preparing these consolidated financial statements.

- IFRS 9 Financial Instruments: Classification and Measurement which is the first phase of a wider project to replace IAS 39 Financial Instruments: Recognition and Measurement, replaces the current models for classification and measurement of financial instruments. Financial assets are to be classified into two measurement categories: fair value and amortised cost. Classification will depend on an entity's business model and the characteristics of contractual cash flow of the financial instrument. The standard is effective for annual periods beginning on or after 1 January 2015.

The Group will continue to measure all equity investments at fair value with an irrevocable option to recognise through equity fair value, gains and losses on equity investments that are not held for trading. However, gains and losses recognised through equity cannot be subsequently recycled to profit or loss on impairment or disposal of the investments as is the case for equity investments currently classified as available-for-sale.

As at the time of publication of these financial statements, the IASB is re-deliberating the requirements for classification and measurement in IFRS 9 while the requirements of latter phases of IFRS 9 are in development and therefore remain uncertain. The Group continues to monitor developments and will provide an impact assessment once the IASB has completed the project subject to endorsement by the EU.

- IFRS 10 Consolidated Financial Statements revises the concept of control to relate it to whether an investor has exercisable power over an investee and consequently has exposure or rights to variable returns. Consolidation procedures remain unchanged.

The expected impact of IFRS 10 is that some funds managed by the Group may have to be consolidated, resulting in a grossing up of the Group's assets and liabilities, but with minimal net impact on profit or net assets. The Group is currently assessing the full impact of the new standard.

- IFRS 12 Disclosure of Interests in Other Entities consolidates and enhances disclosure requirements relating to interests of an entity in other entities. It includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and unconsolidated structures.

The new standard is likely to result in increased disclosures regarding interests in other entities particularly in respect of significant judgments and assumptions made in determining control and the nature of, and changes in, the risks associated with such interests. The Group is currently assessing the full impact of the new standard.

The following new standards which are relevant for the Group are not expected to have a material impact.

- Amendment to IAS 32 Financial instruments: Presentation provides additional guidance for offsetting financial assets and liabilities while amendments to IFRS 7 Financial instruments: Disclosures set out corresponding new disclosure requirements. The amendment is effective for annual periods beginning on or after 1 January 2013.

- IFRS 11 Joint Arrangements requires joint ventures to be accounted for using the equity accounting method while joint operations are accounted for based on the rights and obligations of each party in the arrangement.

- IFRS 13 Fair Value Measurement aims to improve consistency and reduce complexity by providing guidance on how to measure fair value where fair value is required or permitted across IFRSs and enhances disclosures requirements (effective for annual periods beginning on or after 1 January 2013).

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

These financial statements consolidate the financial statements of the Company and its subsidiaries. Subsidiaries are those entities, including investment funds, over which the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control is transferred to the Group until the date that control ceases. Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. The results of subsidiaries acquired during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition.

Based on their nature, the interests of third-parties in funds that are consolidated ('consolidated funds') are classified as liabilities and appear as 'Third-party interests in consolidated funds' in the Group's balance sheet.

The Group has an Employee Benefit Trust (EBT) that acts as an agent for the purpose of the employee share-based compensation plans. Accordingly, the EBT is included within the Group and Company financial statements.

Associates and joint ventures

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 recognised 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.

Foreign currency translation

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 currency of the primary economic environment in which the entity operates; the functional currency. Transactions in foreign currencies are translated by the Group's entities at the foreign exchange rates ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the prevailing exchange rate. Foreign exchange differences arising on translation are recognised in the statement of comprehensive income. 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.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into Sterling at the foreign exchange rates ruling 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 exchange differences arising on translation are recognised directly in other comprehensive income.

Business combinations

Business combinations are accounted for using the purchase method (acquisition accounting). The cost of a business combination is the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, equity instruments issued by the acquirer and the amount of non-controlling interest in the acquiree. The fair value of a business combination is calculated at the acquisition date by recognising the acquiree's identifiable assets, liabilities and contingent liabilities that satisfy the recognition criteria, at their fair values at that date. Acquisition-related costs are expensed as incurred. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.

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 profit or loss. If the contingent consideration is classified as equity, it will not be re-measured.

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 are 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 net residual revenue stream arising 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 between 31 months and 10 years.

Property, plant and equipment

Property, plant and equipment is 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 is 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 assets

The Group may, from time to time, invest in funds where an Ashmore Group subsidiary is the investment manager or an advisor (seeding). 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 Non-current assets held-for-sale and discontinued operations. 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 available-for-sale financial assets. Where the assets are not readily realisable, they are recognised as non-current asset investments. If a seed capital investment remains under control of the Group for more than one year from the original investment date, the underlying fund is consolidated line by line.

Investment securities

Investment securities represent listed securities, other than derivatives, held by consolidated funds. These securities are held at fair value with gains and losses recognised through the consolidated statement of comprehensive income.

Non-current financial assets held-for-sale

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 re-measurement 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 an available-for-sale financial asset. Subsequent movements will be recognised in accordance with the Group's accounting policy for the newly adopted classification.

Available-for-sale financial assets

Available-for-sale financial assets are either financial assets allocated specifically to this category or are financial assets that cannot be assigned to any other category. They are carried at fair value and changes in fair values 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.

Other fair value through profit or loss (FVTPL) financial assets

FVTPL financial assets include non-current asset investments and derivatives.

Non-current asset investments include closed-end funds which are classified as FVTPL. They are held at fair value with changes in fair value being recognised through the consolidated statement of comprehensive income. 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.

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 and subsequently re-measured 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 profit or loss, 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

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 gain or losses recognised in the statement of comprehensive income within finance income or expenses.

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 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 estimation

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 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 profit and loss;

- 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 profit for the year as part of comprehensive income in the same period during which the relevant financial asset or liability affects profit or loss.

Where the hedge is highly effective overall, any ineffective portion of the hedge is immediately recognised in profit and loss. Where the instrument ceases to be highly effective as a hedge, or is sold, terminated or exercised, hedge accounting is discontinued.

Impairment

General

The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. 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. Impairment losses are recognised in the statement of comprehensive income.

The recoverable amount of assets is the greater of their fair value less costs to sell and 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.

In respect of assets other than goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

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 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 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 net of rebates 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 net of rebates relate to the performance of funds managed during the period and 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 estimated number of shares that are expected to vest. The fair value is measured at 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 computed. 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 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.

Finance income also includes adjustments in relation to the Group's contingent consideration liabilities related to acquisitions and charges in respect of unwinding of net present value discounts.

Finance expense includes the unwind of the discounts applied to contingent consideration liabilities on the Group's balance sheet using the effective interest method.

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the 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 is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date in the countries where the Group operates, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred tax is provided using the balance sheet liability method, providing for 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 balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

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 and, 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 relate 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

6) Revenue

Management fees are accrued throughout the year in line with fluctuations in the 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 provided more than 10% (FY2011/12: two funds provided 11.3% and 10.5%) of total revenue in the year respectively when considering management fees and performance fees on a combined basis.

Analysis of revenue by geography

7) Foreign exchange

The foreign exchange rates which had a material impact on the Group's results are the US dollar, the Brazilian real and Indonesian rupiah.

The Brazilian real and Indonesian rupiah did not have a material impact on the Group's results for the year ended 30 June 2012.

Foreign exchange differences arose as shown below.

8) Finance income and expense

Included within finance income is £10.8 million (FY2011/12: £16.8 million) in relation to the downward adjustment of the Group's contingent consideration liabilities, £nil (FY2011/12: £0.4 million) received as part of an acquisition-related purchase price adjustment and £12.6 million (FY2011/12: £0.4 million) in relation to realised gains on available-for-sale and both realised and unrealised gains on held-for-sale seed capital and non-current financial asset investments.

Included within finance expense is £0.9 million (FY2011/12: £4.1 million) in relation to the unwind of the discounts applied to contingent consideration liabilities on the Group's balance sheet.

9) Personnel expenses

Personnel expenses during the year comprised the following:

Personnel expenses in respect of the year ended 30 June 2013 include an amount of £0.6 million (FY2011/12: £0.6 million) that has been waived by Directors and employees in earlier periods with an equivalent amount to be paid to charity in the financial year to 30 June 2013.

Number of employees

The number of employees of the Group (including Directors) during the reporting year, all categorised as investment management personnel, was as follows:

There are retirement benefits accruing to two Directors under a defined contribution scheme (FY2011/12: 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:

The total expense recognised for the year in respect of equity-settled share-based payment transactions was £29.0 million (FY2011/12: £10.4 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 ten 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.

Share options outstanding under the Option Scheme were as follows:

The weighted average share price on the date options were exercised during the year ended 30 June 2013 was 363.48p (FY2011/12: 369.92p).

Weighted average remaining contractual life of outstanding options

Range of exercise prices for share options outstanding at the end of the year

There were no new share options granted during the year ended 30 June 2013 (FY2011/12: 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

Awards outstanding under the Omnibus Plan were as follows:

i) Equity-settled awards

ii) Cash-settled awards

iii) Total awards

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 release date when the grantee becomes unconditionally entitled to the underlying shares. The fair value of the remaining awards is spread over the period from date of grant to the release 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 in the consolidated balance sheet is £12.0million (30 June 2012: £8.7 million) of which £nil (30 June 2012: £nil) relates to vested awards.

The Approved Company Share Option Plan (CSOP)

The CSOP was also introduced prior to the Company listing in October 2006 and is an option scheme providing for the grant of market value options to employees with the aggregate value of outstanding options not exceeding £30,000 per employee. The CSOP qualifies as a UK tax approved company share option plan and approval thereto has been obtained from HMRC. To date, there have been no awards made under the CSOP.

Other arrangements

US subsidiary operating agreement

Under the terms of a US subsidiary'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: