Last checked at 7 Sep 2018 07:00
Ashmore Group plc
7 September 2018
RESULTS FOR THE YEAR ENDING 30 JUNE 2018
Ashmore Group plc (Ashmore, the Group), the specialist Emerging Markets asset manager, today announces its audited results for the year ending 30 June 2018.
- Strong operating and financial performance reflecting record net flows and continued cost efficiency; consistent strategy delivering strong growth in retail and local business AuM
- Broad-based growth in assets under management, +26% YoY from US$58.7 billion to US$73.9 billion
- Diversified client demand delivered record gross subscriptions of US$30.0 billion, twice the prior year level
- Record net inflows of US$16.9 billion, including strong retail demand with +47% YoY growth in AuM
- Consistent active investment approach delivering outperformance for clients
- 73% of AuM outperforming benchmarks over one year, 94% three years and 89% over five years
- Efficient business model delivering growth in adjusted EBITDA and higher margin
- Operating revenues increased +11% with 13% growth in net management fees and performance fees of £21.9 million
- Cost discipline maintained, generating 14% growth in adjusted EBITDA to £183.6 million
- Adjusted EBITDA margin increased to 66%
- Operating cash generated of £210.1 million, equivalent to 114% of adjusted EBITDA
- Balance sheet strength maintained, providing a source of strategic and commercial advantage
- Excess capital of £479.7 million over Pillar 2 requirement
- Continued investment in seed capital, with gains of £10.1 million in the year (FY2016/17: £27.6 million)
- Statutory profit before tax of £191.3 million and diluted EPS of 21.3p
- Proposed final dividend per share of 12.10p, giving total of 16.65p for the year
Commenting on the Group's results, Mark Coombs, Chief Executive Officer, Ashmore Group said:
"Ashmore has delivered a strong operating performance over the financial year, driven by continued investment outperformance, record inflows, an ongoing commitment to cost discipline and good cash generation. This performance reflects the effectiveness of Ashmore's business model and the success of key strategic initiatives such as growing retail AuM and developing scale and diversity in the Group's local asset management businesses.
"While asset prices were more volatile in the final quarter of the financial year, this largely reflected nervousness about a small number of emerging countries with particular issues such as Turkey, with the market extrapolating these concerns across the broad and highly diverse Emerging Markets universe of more than 70 countries. This mispricing therefore presents another very appealing entry point for investors. The combination of attractive Emerging Markets valuations with Ashmore's strong investment track record and underweight investor allocations means that the outlook remains positive."
Analysts briefing
There will be a presentation for analysts at 9.30am on 7 September 2018 at the offices of Goldman Sachs 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.
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 |
Laura Ewart | +44 (0)20 3727 1160 |
Chief Executive's review
Strong operating and financial performance
Ashmore has delivered a strong operating and financial performance and made further progress on strategic initiatives in this financial year. Significant investment outperformance combined with the Group's diverse client base and global distribution capabilities have resulted in record net flows in the period and strong growth in AuM. A continued focus on cost control means adjusted EBITDA grew faster than revenues and the adjusted EBITDA margin increased to 66%. Importantly, the investments made in local platforms and intermediary distribution channels are delivering strong AuM growth, and the Group's equity investment capabilities were enhanced over the period.
The progress made in 2018 is illustrated by the following developments:
- Ashmore's investment processes actively buy risk in periods of market dislocation and this consistent approach is delivering significant outperformance, with 73% of AuM outperforming over one year, 94% over three years and 89% over five years.
- Record gross and net inflows resulted in AuM growth of 26% as the Group's global distribution team capitalised on the strong performance and investors began to address their underweight positions in Emerging Markets.
- A continuous focus on cost control drove a 4% reduction in adjusted operating costs excluding variable compensation, and an inherently flexible remuneration policy means operating revenue growth of 11% resulted in adjusted EBITDA growth of 14%.
- Earnings are consistently converted to cash. In this period, operating cash flows excluding consolidated funds were £210.1 million and represented 114% of adjusted EBITDA.
- New seed capital investments of £65 million were made. This takes total investments over the past nine years to £640 million, of which 71% has been successfully redeemed and at a profit.
- The Group successfully managed the introduction of the Markets in Financial Instruments Directive II (MiFID II) in January 2018 and has achieved the cost control described above, notwithstanding the Group absorbing payments for broker research.
- Ashmore's balance sheet strength represents a source of strategic and competitive advantage through the cycle. Total net capital resources of £599.2 million are in excess of the Group's regulatory capital requirement of £119.5 million.
Market performance
As described in the Market review, Emerging Markets delivered strong returns for most of the financial year, reflecting the favourable economic trends underpinning the vast majority of countries. Global risk aversion increased in the final quarter, leading to a decline in Emerging Markets asset prices and so presenting attractive investment opportunities for active managers to exploit.
Strategic developments
Ashmore's three-phase strategy delivers growth and value for clients and shareholders through market cycles. In the financial year, progress was made on a number of important strategic initiatives.
Phase 1: Establish Emerging Markets asset class
Investor allocations to Emerging Markets are underweight but increasing steadily. The typical investor has an allocation below 10% compared to a global benchmark neutral weight of 15% to 20%.
This underweight positioning combined with compelling valuations available across Emerging Markets, strong outperformance across Ashmore's product range, and the global distribution team's extensive direct client relationships delivered record net inflows of US$16.9 billion in the year. Demand was broad-based across the Group's client base and investment themes, with the most significant flows into blended debt, local currency, short duration and specialist equity products.
Phase 2: Diversify investment themes and developed world capital sources
Ashmore is diversifying its revenue mix in order to provide greater revenue stability through the cycle. From a client mix perspective, the focus on building a larger retail business generated 47% growth in AuM sourced through intermediary channels. Retail clients now represent 14% of Group AuM.
Ashmore has also maintained the strength of its institutional client base with a balanced mix of client types and an average tenure of institutional client relationship of more than six years.
Product diversification continues to be important as Ashmore's objective is to provide clients with a full range of scalable Emerging Markets investment opportunities. During the year, the Group's global and specialist equities capabilities were enhanced through the recruitment of a number of senior investment professionals in London. Over the medium term, Ashmore's goal is to increase the proportion of AuM managed in equity strategies from 6% today.
In the alternatives theme, Ashmore recently acquired a majority stake in a Colombian real estate business with AuM of approximately US$300 million. This provides a platform to expand into other Latin American markets and, over time, to develop additional real estate businesses in other Emerging Markets.
Phase 3: Mobilise Emerging Markets capital
Local platforms' AuM grew by 26% in the year to US$4.9 billion AuM, or 7% of the Group's total AuM, and all contribute positively to operating profits. Importantly, they offer diversification benefits, through access to a local client base and by focusing on different underlying asset classes. For example, Colombia principally manages infrastructure funds and is growing a domestic listed equity business; Indonesia offers a broad range of equity and fixed income mutual funds; Saudi Arabia invests in listed and private equity opportunities; and the UAE business is focused on private equity financing of healthcare projects. The success of these businesses is increasingly recognised by Ashmore's global client base, and so in certain locations the locally sourced capital is managed alongside single-country or regional allocations from developed world investors.
Ashmore will continue to focus on building scale in the existing network of local asset management businesses, and will also consider additional markets as opportunities arise.
Active seed capital programme
Ashmore has used its balance sheet to seed its own funds since 2009, with the primary purpose to deliver growth in third-party AuM and thus to secure long-term revenues. This activity supports all three phases of the Group's strategy and continues through market cycles, with new investments and successful redemptions of previous commitments made on a regular basis subject to funds achieving scale and the investment generating a positive return.
Over the past nine years, Ashmore has invested £640 million in its funds and successfully redeemed £455 million or 71% of these investments to date. The primary measure of the success of this programme is that 14%, or more than US$10 billion, of the Group's AuM is in funds that have been seeded. Additionally, the seeding programme has contributed £103 million to the Group's pre tax profits over the past nine years.
The market value of the seed capital and commitments at 30 June 2018 is £261 million, broadly spread across investment themes, but with a focus on strategic growth initiatives in the equities and alternatives themes, which together represent two-thirds of the total market value.
Brexit
The two-year period to determine the terms of the UK's exit from the European Union ends in March 2019, however there remains substantial uncertainty regarding these terms and the implications for the financial services industry. In order to ensure continued access to EU-based institutional clients, subject to regulatory approval Ashmore is in the process of establishing an office in Ireland. Therefore, notwithstanding the uncertainty, the operational impact of Brexit is expected to be manageable and the financial impact immaterial.
People and culture
Ashmore's culture is supported and sustained by its specialist focus on the Emerging Markets asset classes, its distinctive remuneration philosophy and its committee-based approach to investment management. These factors result in a successful alignment of interests between clients, shareholders and employees through market cycles, and also mean that unplanned staff turnover remains at relatively low levels, such as the 8.6% experienced this year.
Outlook
The recent weakness in Emerging Markets asset prices has not, with one or two exceptions, been caused by a deterioration in economic fundamentals, but rather by a number of developed world events that have led to broader risk aversion in global markets. Asset prices have extrapolated the challenges faced by a small number of Emerging Markets countries across the broader universe. This therefore presents another highly attractive entry point with valuations back to levels seen 18 months ago immediately following the US election, and which underpinned a subsequent period of strong returns. For example, local currency bonds, which are predominantly investment grade, have an average real yield of 3%, far in excess of anything available from developed country bonds of similar quality and duration. External debt trades at more than 300 basis points over US Treasury bonds, compared with historical lows of 170 basis points. Corporate credit offers higher yields and lower default rates than the equivalent US high yield market, and equities trade at valuations that heavily discount the improving business and profit cycles across Emerging Markets. Through its consistent active investment processes, Ashmore is able to capitalise on these investment opportunities.
While the very strong net flows delivered in 2018 may not be repeated in the near term, attractive valuations, Ashmore's strong investment performance track record and investors' underweight allocations to Emerging Markets mean that the outlook remains positive.
Ashmore's experience of investing in Emerging Markets over more than 25 years, placing itself at the forefront of market developments, and establishing deep and long-standing client relationships, means it is well positioned to continue to deliver significant growth and value to clients and shareholders.
Mark Coombs
Chief Executive Officer
6 September 2018
Market review
Year in review
Emerging Markets assets produced consistently strong returns for most of the financial year, as economic growth continued to accelerate and momentum in capital flows followed suit, and notwithstanding the two US rate increases during the period.
For example, in the nine months to March 2018, local currency bonds delivered a total return of +9% and the MSCI EM equity index returned nearly +16%.
The final quarter saw some market weakness and volatility such that, overall, fixed income markets fell slightly over the full year period while equities delivered a small positive return.
Importantly, the decline in asset prices at the end of the period was not the result of any significant changes in the fundamental economic and political backdrop across the majority of emerging nations. The positive trends of faster GDP growth, low and stable inflation, improving current account positions, and supportive electoral cycles all remain intact.
Therefore a change in asset prices, influenced by risk aversion as a consequence of some events primarily in the developed world, for example weak European economic data and Italian political uncertainty resulting in a depreciation of the euro, presents an attractive opportunity for investors to capture value across the diverse range of Emerging Markets investment themes.
Of course there is a very small number of countries, such as Argentina and Turkey, that face challenges, whether through existing economic vulnerabilities or misguided policies, but these are not representative of the broader investable Emerging Markets universe that comprises more than 70 countries. The universe grew by 19% over the 12 months to December 2017, and now comprises US$53 trillion of publicly traded fixed income and equity securities.
Positive short-term outlook...
The period of market weakness experienced in the final quarter of the financial year was principally caused by increased risk aversion as a result of developed world events rather than a broad deterioration in Emerging Markets' prospects.
However, the popular narrative has focused on a small number of emerging countries that have specific and self-inflicted challenges, and has painted this picture across the broader Emerging Markets universe. The role of an active specialist investor is to challenge this simplistic view through in-depth analysis of the wide range of highly diversified investment opportunities across the Emerging Markets.
A correction in asset prices does not undermine the positive fundamental trends, such as accelerating GDP growth, increasing credit worthiness and the development of local capital markets that underpin the outlook for Emerging Markets. It does however provide the best entry point for several years, given the resultant valuations. Local currency bonds, an investment grade asset class, have a real yield of 3%, external debt trades at more than 300 basis points over US Treasuries, and equity valuations are at wide discounts to developed world prices and do not reflect improving business and profit cycles. These valuations were last seen in late 2016 after the US election and following which Emerging Markets performed strongly. The short-term outlook for investment returns is therefore positive.
...and attractive long-term prospects
The longer-term investment case for Emerging Markets remains strong, and centres on the convergence of social, political and economic factors with the developed world. Simply, the poorer and less developed countries of the world will become wealthier over time. The latent potential of these countries is characterised by their low indebtedness, propensity to reform, favourable demographics, and therefore higher trend economic growth rates than observed in developed countries.
The established trend of Emerging Markets' superior GDP per capita growth, allied with structural changes as institutions and markets evolve, underpins the opportunity to deliver attractive investment returns from an allocation to Emerging Markets.
Not all emerging countries will realise their full potential, perhaps because of political or economic mismanagement, but importantly there is a very large and growing universe of emerging nations with investable equity, fixed income and private markets, so active management can successfully avoid those countries that do not offer sufficiently attractive return opportunities. For example, Ashmore is currently invested in more than 70 countries across Emerging Markets and its investment committees express high conviction views resulting in significant active risk and strong investment performance across the Group's fixed income and equity portfolios.
Challenging the misperceptions
The scale of the Emerging Markets opportunity is increasing, yet investor allocations remain at extremely low levels relative to global benchmarks. The principal challenge in raising allocations to representative levels is to address investors' common misperceptions about the nature of, and risks associated with, Emerging Markets. Many of these views are outdated given the structural developments that have been delivered by emerging nations over the past two decades. As understanding increases then the growth and investment return potential can be appreciated.
Emerging Markets have turned vulnerability into resilience
The popular misperception of an Emerging Market is a country that is heavily indebted to foreign investors, with weak institutions, and therefore highly vulnerable to capital flight. While this was certainly true of many countries in the 1990s and prior, and can still be observed in a very small number of nations today, the majority of emerging countries have changed significantly over the past two decades and are now far more resilient to shocks, particularly external ones, than either in their history or compared with the popular misperception.
For example, Emerging Markets today:
- account for 59% of global GDP yet have issued only 22% of global debt, the majority of which is denominated in the country's own currency and is owned by domestic investors;
- control 76% (US$8.7 trillion) of the world's foreign exchange reserves;
- typically have floating or semi-pegged exchange rates, with monetary policy determined by independent central banks that successfully target inflation; and
- have successfully weathered the recent headwinds of rising US interest rates, a stronger US dollar, commodity price falls, and capital outflows, without major crises or defaults and thereby illustrating the enhanced resilience that challenges the popular misperceptions and underpins the Emerging Markets investment opportunity.
Trade is a diversified driver of economic growth
A further misperception of Emerging Markets is the notion that the countries have export-led economies focused on a narrow range of raw materials and sold primarily to developed nations and China. Again, the evidence refutes this view.
- trade between Emerging Markets is the fastest growing segment of world trade, amounts to nearly US$5 trillion, and accounts for more than 40% of all Emerging Markets trade. At the current growth rate, it will represent more than half of all Emerging Markets trade within the next decade;
- the growth in trade is widespread across emerging nations, with all regions growing rapidly and trading with each other;
- trade between emerging countries is typically more balanced and therefore more stable than trade with developed countries. The average trade imbalance between Emerging Markets is 3% compared with 8% between Emerging Markets and the developed world; and
- China is important, but it trades more with Developed Markets than it does with other emerging nations; it accounts for less than 10% of trade between Emerging Markets. Therefore as China continues to grow and to diversify its economy, other Emerging Markets can benefit by increasing their share of trade with China.
Price volatility is not the same as risk
The volatility of asset prices in Emerging Markets tends to be higher than in Developed Markets, although it is important not to confuse price volatility with risk, particularly in bond markets. Indeed, periods of heightened volatility and weaker asset prices typically present extremely attractive investment opportunities.
This price volatility demonstrates the inefficiencies of Emerging Markets asset classes, providing opportunities for the active investor. For example, uninformed or speculative investor flows, in part the result of the factors described above, and also structurally low index representation of the Emerging Markets asset classes, tend to cause short-term dislocations between market prices and underlying company or country fundamentals. Active management can capitalise on these periods of volatility to deliver superior risk-adjusted returns, as demonstrated by Ashmore's strong investment performance over one, three and five years.
Review by investment theme
External debt
The EMBI GD benchmark declined by 1.6% over the year, outperforming its reference 10-year US Treasury bond that returned -2.7%. The index continues to grow with two more countries added in the period to take the total to 67. This provides significant diversification, as illustrated in the wide range of country returns over the year from -39% to +11%, and therefore significant opportunities for an active manager to generate value.
Ashmore's relative performance is strong, with its external debt composite delivering three-year annualised gross returns of +7.1% compared with +4.6% for the benchmark index.
The outlook for the external debt asset class is positive. There are attractive spreads over US Treasuries and the possibility of more countries joining the index to increase diversification, raise credit quality and reduce volatility.
Local currency
The GBI-EM GD benchmark fell by 2.3% over the period, with a positive contribution from rates offset by weaker EM FX against the US dollar. As was the case with external debt, the diversity of the 18-member local currency index delivered a broad range of country returns over the year, from -44% to +10%.
Ashmore's local currency bonds composite has outperformed the index with three-year annualised gross returns of +3.3% compared with +2.0% for the index.
The recent correction in this asset class should be seen against the strong returns delivered since early 2016. The index yield of 6.8% is the same as it was when the Fed Funds rate was 5.25% prior to the global financial crisis, and also the same as immediately after the US election, following which the asset class rallied 15% in 12 months and attracted meaningful investor flows. Importantly, local currency bonds are predominantly investment grade and offer a real yield of 3%, comfortably in excess of that offered by developed world bonds of similar quality and duration. These characteristics underpin Ashmore's expectation of further demand for local currency funds from a broad range of institutional investors.
Corporate debt
The CEMBI BD benchmark was effectively unchanged over the year with a -0.1% return. The high yield (HY) index returned +0.2% and so underperformed the US HY index (+3.0%). The favourable economic backdrop and improving business cycle across Emerging Markets means that defaults continue to trend lower, declining from 2.2% to 1.7% over the year. Notably this is a lower level of default than seen in the US high yield market (3.0%).
Ashmore's three-year investment performance is strong, with +6.1% gross annualised returns by the corporate debt composite compared with +3.9% for the CEMBI BD benchmark.
Demand for corporate debt is underpinned by its attractive characteristics including diversification, with more than 600 issuers in 52 countries, higher spreads than offered by equivalently rated developed world companies, and leverage tends to be the result of operating requirements rather than LBOs or financial engineering.
Blended debt
The standard benchmark (50% external debt, 25% local currency bonds, 25% EM FX) delivered a return of -1.2% over the year.
Ashmore's investment process actively manages blended debt portfolios by determining the relative value between the constituent fixed income themes. This approach has delivered significant outperformance for clients with a gross annualised return of +5.9% over three years versus the benchmark return of +3.2%.
Ashmore expects continued demand for blended debt funds from both institutional and retail investors, wishing to gain broad access to the wide range of attractive investment opportunities available in the US$24 trillion Emerging Markets debt universe, with the benefit of active management to enhance returns.
Equities
Equity markets performed well over the 12-month period, delivering returns of +8.2%, +5.6% and +1.7% for the MSCI EM, MSCI EM Small Cap and MSCI Frontier Markets indices, respectively. This performance was underpinned by an ongoing recovery in the profit cycle combined with attractive ratings, particularly relative to developed world equity markets.
Ashmore has a comprehensive product range, including specialist products such as Frontier Markets through to all cap strategies and single country funds. Active management, and a combination of bottom-up security selection with top-down macro views, has delivered outperformance over three years. For example, the Frontier Markets composite has three-year annualised gross performance of +7.3% versus +2.2% for the MSCI Frontier Markets index.
The outlook for equities is supported by an attractively valued and highly diverse set of investment opportunities, many of which are driven by domestic or structural factors within Emerging Markets.
Alternatives
There are significant thematic growth opportunities associated with real or illiquid assets in Emerging Markets, such as real estate, infrastructure development and private healthcare provision. Ashmore's track record of structuring funds and raising long-term capital positions it well to capture these opportunities.
Growth in the alternatives theme can be successfully delivered through acquiring and aligning with local businesses that tie into these growth themes.
Multi-asset
Ashmore's multi-asset composite has returned +9.2% on a gross annualised basis over three years, significantly outperforming its benchmark (+5.3%). This demonstrates the benefit of applying active management to the diverse range of equity and fixed income markets.
Business review
Delivering financial performance
The benefits of Ashmore's business model were clearly demonstrated in the financial year with 14% growth in adjusted EBITDA generated through operating revenue growth of 11% and delivering an adjusted EBITDA margin of 66%. Lower performance fees and a reduced level of mark-to-market FX translation and seed capital gains meant that diluted EPS declined by 10% to 21.3p. The Group's strong and liquid balance sheet was maintained with net financial resources of £599.2 million and excess regulatory capital of £479.7 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, by excluding the mark-to-market volatility of these items, 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.
Non-GAAP alternative performance measures (APMs) are defined and explained below.
| Reclassification of | | | ||
£m | FY2017/18 Reported | Seed capital-related items | Foreign exchange translation | FY2017/18 Adjusted | FY2016/17 Adjusted |
Management fees net of distribution costs | 250.5 | - | - | 250.5 | 221.6 |
Performance fees | 21.9 | - | - | 21.9 | 28.3 |
Other revenue | 4.1 | - | - | 4.1 | 2.7 |
Foreign exchange | (0.2) | - | 2.0 | 1.8 | (2.8) |
Net revenue | 276.3 | - | 2.0 | 278.3 | 249.8 |
Investment securities | 3.0 | (3.0) | - | - | - |
Third-party interests | (2.4) | 2.4 | - | - | - |
Personnel expenses | (72.8) | - | (0.4) | (73.2) | (66.2) |
Other expenses excluding depreciation & amortisation | (22.6) | 1.1 | - | (21.5) | (22.5) |
EBITDA | 181.5 | 0.5 | 1.6 | 183.6 | 161.1 |
EBITDA margin | 66% | - | - | 66% | 65% |
Depreciation & amortisation | (5.0) | - | - | (5.0) | (5.5) |
Operating profit | 176.5 | 0.5 | 1.6 | 178.6 | 155.6 |
Net finance income/expense | 15.2 | (10.6) | - | 4.6 | 2.6 |
Associates & joint ventures | (0.4) | - | - | (0.4) | 0.8 |
Seed capital-related items | - | 10.1 | - | 10.1 | 27.6 |
Profit before tax excluding FX translation | 191.3 | - | 1.6 | 192.9 | 186.6 |
Foreign exchange translation | - | - | (1.6) | (1.6) | 19.6 |
Profit before tax | 191.3 | - | - | 191.3 | 206.2 |
Assets under management
AuM increased 26% over the year from US$58.7 billion to US$73.9 billion, reflecting net inflows of US$16.9 billion, the highest delivered by the Group in a financial year.
Gross subscriptions doubled to US$30.0 billion and were also at a record level (FY2016/17: US$14.8 billion). Gross redemptions of US$13.1 billion were at a similar level to last year in absolute terms, but lower as a proportion of opening AuM at 22% (FY2016/17: US$12.8 billion, 26%).
There was negative investment performance over the period of US$1.4 billion, which reflects a contribution of +US$3.8 billion from the strong market performance seen in the first nine months of the year, as described in the Market review, followed by the effects of market risk aversion in the final quarter. The 'other' movement in the overlay theme resulted from Ashmore's equity interest in Taiping Fund Management Company Limited reducing from 15% to 8.5% in August 2017.
Average assets under management increased by 26% to US$69.2 billion (FY2016/17: US$54.8 billion).
The gross subscriptions were broadly spread across investment themes. The most significant flows were into Ashmore's short duration strategy, particularly from European retail clients, local currency funds, blended debt and overlay. There was also strong demand for equity product in the form of single country institutional mandates and into mutual funds managed by the Group's local businesses such as Indonesia. There was a bias to institutional clients adding to mandates in the local currency and blended debt themes, and new clients were active in the external debt, corporate debt and equity themes.
Equally, there was no overriding trend in redemptions with a spread across the range of funds and client types. As the retail AuM grows it brings with it an anticipated uptick in redemption activity in the Group's mutual funds. The period also saw some profit-taking by institutions in the fixed income themes that have delivered strong performance over the past two years, such as local currency, blended debt and corporate debt.
Consistent with the gross subscriptions, net flows were strongest in the local currency, blended debt and corporate debt themes. By client type, retail intermediary channels delivered US$3.7 billion of net flows, and there were also strong net flows from pension funds (US$3.4 billion), government-related pension schemes (US$3.3 billion) and insurance companies (US$1.9 billion). Compared with the prior year, net flows reflect greater activity by a broader range of institutional clients and growth through intermediary channels.
AuM movements by investment theme
The AuM by theme as classified by mandate is shown in the table below. Reclassifications typically occur when a fund's investment objectives, investment guidelines or performance benchmark change such that its characteristics cause it to be included in a different theme.
Theme | AuM30 June 2017US$bn | PerformanceUS$bn | GrosssubscriptionsUS$bn | GrossredemptionsUS$bn | Net flowsUS$bn | Reclassifications /otherUS$bn | AuM30 June 2018US$bn |
External debt | 13.3 | (0.2) | 3.4 | (2.0) | 1.4 | - | 14.5 |
Local currency | 13.7 | (0.6) | 8.4 | (2.5) | 5.9 | (2.0) | 17.0 |
Corporate debt | 6.3 | - | 6.1 | (2.6) | 3.5 | - | 9.8 |
Blended debt | 14.6 | (0.5) | 6.5 | (2.9) | 3.6 | 2.0 | 19.7 |
Equities | 3.4 | (0.1) | 2.8 | (1.9) | 0.9 | - | 4.2 |
Alternatives | 1.5 | - | 0.1 | (0.1) | - | - | 1.5 |
Multi-asset | 1.1 | - | 0.1 | (0.2) | (0.1) | - | 1.0 |
Overlay/liquidity | 4.8 | - | 2.6 | (0.9) | 1.7 | (0.3) | 6.2 |
Total | 58.7 | (1.4) | 30.0 | (13.1) | 16.9 | (0.3) | 73.9 |
AuM as invested
The table below shows AuM 'as invested' by underlying investment theme, which adjusts from the 'by mandate' presentation to take account of the allocation into the underlying asset classes of the multi-asset and blended debt themes; and of crossover investment from within certain external debt funds.
AuM as invested
| 2018 (%) | 2017 (%) |
External debt | 38 | 39 |
Local currency | 29 | 30 |
Corporate debt | 15 | 16 |
Equities | 7 | 7 |
Alternatives | 2 | 3 |
Overlay/liquidity | 9 | 8 |
The Group's AuM by geography of investment is well diversified with 39% in Latin America, 24% in Asia Pacific, 15% in the Middle East and Africa, and 22% in Eastern Europe.
Investor profile
The Group's client base remains predominantly institutional, representing 86% of AuM (30 June 2017: 88%), with the proportion of assets originated through retail intermediary channels increasing from 12% to 14%.
Segregated accounts represent 61% of AuM (30 June 2017: 67%), the lower proportion resulting from several factors such as increased retail AuM and flows into mutual funds from smaller institutional clients.
There will continue to be demand for segregated accounts, for example from larger and more sophisticated institutional clients that are subject to regulatory obligations, or that wish to apply specific investment guidelines. However, subject to product demand in a particular period, the Group expects growth in segregated accounts to be balanced by retail and other institutional demand for mutual funds.
Ashmore's global mutual fund platforms continue to grow. The SICAV range of 26 funds increased AuM by 52% to US$14.2 billion at 30 June 2018 (30 June 2017: US$9.3 billion in 25 funds), with growth driven by short duration, local currency bonds, blended debt and corporate debt funds. The US 40-Act range of eight funds increased AuM by 26% to US$2.1 billion (30 June 2017: US$1.7 billion in 10 funds), with growth delivered in particular through the blended debt, short duration and frontier equity funds.
In total, 33% of the Group's AuM has been sourced from clients domiciled in Emerging Markets.
Financial review
Revenues
Net revenue increased by 7% to £276.3 million (FY2016/17: £257.6 million) reflecting strong growth in net management fee income, and lower performance fee income and foreign exchange translation revenues than in the prior year period. Operating revenues, excluding FX translation, grew by 11% to £278.3 million.
Management fee income net of distribution costs increased by 13% from £221.6 million to £250.5 million, with strong AuM growth partially offset by a lower fee margin of 49bps (FY2016/17: 52bps) and a 6% headwind from an unfavourable average GBP:USD exchange rate of 1.3464 for the period compared with the prior year (FY2016/17: 1.2766).
The movement in the Group's net management fee margin is largely explained by growth in large segregated accounts, which attract a lower net management fee margin due to their size, predominantly through clients adding to existing funds in addition to new client mandates. The growth in higher net margin retail intermediary assets added approximately 0.5bps to the margin, which was offset by other factors such as competition. There was no net impact on the margin in the period from changes in investment theme mix.
The Group generated performance fees of £21.9 million in the year (FY2016/17: £28.3 million) from a range of segregated accounts and mutual funds within the fixed income, equities and multi-asset investment themes. At 30 June 2018, 13% of the Group's AuM was eligible to earn performance fees (30 June 2017: 12%) of which a significant proportion is subject to rebate agreements.
Translation of the Group's non-Sterling assets and liabilities at the period end resulted in a foreign exchange loss of £2.0 million (FY2016/17: £7.8 million gain), caused principally by a recovery in the value of Sterling against the US dollar over the period. The Group recognised net realised and unrealised hedging gains of £1.8 million (FY2016/17: £2.8 million loss) to give a total foreign exchange loss in revenues of £0.2 million (FY2016/17: £5.0 million gain).
The growth in other revenue to £4.1 million (FY2016/17: £1.8 million) reflects higher transaction fees.
Fee income and net management fee margin by investment theme
The table below summarises net management fee income after distribution costs, performance fee income, and average net management fee margin by investment theme, determined with reference to weighted average assets under management.
Theme | Net managementfeesFY2017/18£m | Net managementfeesFY2016/17£m | PerformancefeesFY2017/18£m | PerformancefeesFY2016/17£m | Net management fee marginFY2017/18bps | Net management fee marginFY2016/17bps |
External debt | 50.7 | 48.9 | 3.1 | 9.4 | 46 | 50 |
Local currency | 46.6 | 42.8 | 12.9 | 11.9 | 42 | 41 |
Corporate debt | 35.8 | 25.9 | 0.9 | 1.8 | 59 | 62 |
Blended debt | 68.2 | 57.8 | 4.7 | 2.6 | 49 | 53 |
Equities | 23.3 | 21.5 | 0.1 | 0.9 | 81 | 90 |
Alternatives | 12.3 | 12.8 | - | 1.0 | 131 | 124 |
Multi-asset | 6.4 | 7.4 | 0.2 | 0.7 | 74 | 80 |
Overlay/liquidity | 7.2 | 4.5 | - | - | 17 | 15 |
Total | 250.5 | 221.6 | 21.9 | 28.3 | 49 | 52 |
Operating costs
Total operating costs of £100.4 million (FY2016/17: £100.7 million) include £1.1 million (FY2016/17: £4.9 million) of consolidated fund expenses. Excluding these costs, and notwithstanding the 7% increase in revenues, statutory operating expenses increased only 4% compared with the prior year as a direct result of Ashmore's flexible remuneration model and ongoing cost control.
The Group's average headcount was stable at 257 employees (FY2016/17: 256 employees) and at 30 June 2018 the Group had 253 employees (30 June 2017: 252 employees). Fixed staff costs reduced by 2% from £24.8 million to £24.2 million, largely the result of currency translation of staff costs in the Group's overseas offices.
Other operating costs, excluding depreciation and amortisation, were £22.6 million (FY2016/17: £27.4 million) and excluding consolidated fund expenses reduced by 4% to £21.5 million. This was primarily achieved through lower premises costs, for example the full year benefit of consolidating the Group's US offices, and a continued focus on controlling discretionary expenses.
The accrual for variable compensation was £48.6 million, an increase of 13% compared with the prior year (FY2016/17: £43.0 million), and representing 21.5% of EBVCIT (FY2016/17: 21%). Total personnel expenses for the financial year were therefore £72.8 million, 7% higher than £67.8 million reported for the prior year.
EBITDA
EBITDA increased by 5% to £181.5 million (FY2016/17: £172.3 million). On an adjusted basis, excluding the effects of foreign exchange translation and seed capital-related items, EBITDA increased by 14% from £161.1 million to £183.6 million.
The adjusted EBITDA margin increased from 65% to 66%, demonstrating the merits of the operating model and strict cost control in a period when operating revenues increased by 11%.
Finance income
Net finance income of £15.2 million includes seed capital-related items totalling £10.6 million. Excluding these items, the Group's net interest income for the period was £4.6 million (FY2016/17: £2.6 million), slightly higher than in the prior year as a result of higher prevailing market interest rates.
Taxation
The majority of the Group's profit is subject to UK taxation. Of the total current tax charge for the financial year of £38.2 million (FY2016/17: £40.7 million), £30.3 million relates to UK corporation tax (FY2016/17: £31.3 million).
There is an £18.5 million deferred tax asset on the Group's balance sheet as at 30 June 2018 (30 June 2017: £18.2 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 tax rate for the year is 19.8%, which is slightly higher than the prevailing UK corporation tax rate of 19.0% (FY2016/17: 17.8%). This reflects the blend of the varying rates that apply across the territories in which the Group operates as well as other effects. Note 12 to the financial statements provides a full reconciliation of this difference compared to the blended UK corporation tax rate.
Balance sheet
Ashmore's policy is to maintain a strong balance sheet in order to meet regulatory capital requirements, to support the commercial demands of current and prospective investors, and to fund strategic development opportunities across the business. These include establishing distribution offices and local asset management ventures, seeding and investing in funds and other assets, and other strategic initiatives.
Consistent with this policy, as at 30 June 2018, total equity attributable to shareholders of the parent was £759.2 million (30 June 2017: £724.4 million) and there is no debt on the Group's balance sheet.
Cash
Ashmore's business model consistently delivers a high conversion rate of earnings to cash. The Group generated cash of £213.5 million before working capital changes (FY2016/17: £177.0 million) and £206.6 million of cash from operations (FY2016/17: £171.3 million) from operating profit of £176.5 million for the period (FY2016/17: £166.8 million). On an adjusted basis, EBITDA of £183.6 million resulted in cash from operations excluding consolidated funds of £210.1 million, a conversion rate of 114% (FY2016/17: 109%).
Cash and cash equivalents by currency
30 June 2018£m | 30 June 2017£m | |
Sterling | 77.2 | 149.7 |
US dollar | 322.9 | 253.8 |
Other | 32.9 | 29.0 |
Total | 433.0 | 432.5 |
A greater proportion of cash is held in US dollars at the period end compared with the prior year end, reflecting active management of the Group's liquidity and foreign exchange exposures.
Seed capital investments
Ashmore has an active seed capital programme that supports growth in third-party assets under management and generates incremental profits for the Group. Approximately 14%, or more than US$10 billion, of the Group's assets under management are in funds that have been seeded.
Seed capital investments are subject to strict monitoring by the Board within a framework of set limits including diversification by investment theme and currency.
During the financial year, the Group made new seed investments of £65.0 million and successfully redeemed £55.8 million of previous investments. After market movements of £9.0 million, the market value of the Group's seed capital investments increased from £210.2 million to £228.3 million. Ashmore has also committed £32.5 million of seed capital to funds that was undrawn at the period end, giving a total committed value for the seed capital programme of £260.8 million.
New seed capital investments during the year were made primarily into alternatives and global equity products, in support of the Group's strategic growth initiatives. Redemptions were focused on frontier equity funds and locally managed mutual funds in Indonesia, which had achieved their scale targets.
The investment cost of the Group's current seed capital investments is £195.3 million (30 June 2017: £170.7 million), representing 29% of Group net tangible equity (30 June 2017: 33%).
Seed capital market value by currency
30 June 2018£m | 30 June 2017£m | |
US dollar | 203.9 | 188.3 |
Colombian peso | 13.6 | 9.6 |
Other | 10.8 | 7.3 |
Total | 228.3 | 210.2 |
The seed capital programme generated a pre-tax profit of £10.1 million for the year (FY2016/17: £41.0 million), comprising positive market and other movements of £14.0 million and a foreign exchange translation loss of £3.9 million (FY2016/17: £27.6 million gain and £13.4 million gain, respectively).
The table below summarises the principal IFRS line items to assist in the understanding of the financial impact of the Group's seed capital programme.
Financial impact of seed capital investments
FY2017/18£m | FY2016/17£m | |
Consolidated funds (note 20): | ||
Gains/(losses) on investment securities | 3.0 | 22.4 |
Change in third-party interests in consolidated funds | (2.4) | (12.5) |
Operating costs | (1.1) | (4.9) |
Interest and dividend income | 5.1 | 7.8 |
Sub-total: consolidated funds | 4.6 | 12.8 |
Unconsolidated funds (note 8): | ||
Market return | 9.4 | 14.8 |
Foreign exchange | (3.9) | 13.4 |
Sub-total: unconsolidated funds | 5.5 | 28.2 |
Total seed capital profit/(loss) | 10.1 | 41.0 |
- realised | 5.0 | 20.8 |
- unrealised | 5.1 | 20.2 |
Foreign exchange
The majority of the Group's fee income is received in US dollars and it is the Group's policy to hedge up to two-thirds of the notional value of budgeted foreign currency-denominated net management fees, using either forward or option foreign exchange contracts. Ashmore's Foreign Exchange Management Committee determines the proportion of budgeted fee income to hedge or sell by regular reference to expected non-US dollar, and principally Sterling, cash requirements. The proportion of fee income received in foreign currency and held as cash or cash equivalents is marked to market at the period end exchange rate through the statement of comprehensive income.
Translation of the Group's non-Sterling denominated balance sheet resulted in a foreign exchange loss of £2.0 million (FY2016/17: £7.8 million gain) reflecting the small strengthening of Sterling against the US dollar over the period. Net realised and unrealised hedging gains of £1.8 million (FY2016/17: £2.8m loss) were recognised for the financial year.
Goodwill and intangible assets
At 30 June 2018, goodwill and intangible assets on the Group's balance sheet totalled £74.2 million (30 June 2017: £79.9 million). The movement is the result of an amortisation charge of £4.3 million (FY2016/17: £4.5 million) and a foreign exchange revaluation loss through reserves of £1.4 million (FY2016/17: £1.9 million gain).
Own shares held
The Group purchases and holds shares through an Employee Benefit Trust (EBT) in anticipation of the vesting of share awards. At 30 June 2018, the EBT owned 36,679,643 ordinary shares (30 June 2017: 38,701,321 ordinary shares), representing 5.2% of the Group's issued share capital (30 June 2017: 5.5%).
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, Ashmore 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 the Group is required to hold sufficient capital against these risks.
The Board has therefore assessed the amount of Pillar II capital required to be £119.5 million (30 June 2017: £111.1 million). The increase compared to the prior year is principally the result of an increase in the amount of undrawn illiquid seed capital investments, for which a 100% deduction is taken, in addition to higher foreign exchange volatility leading to an increase in the capital required for market risk.
Ashmore currently forecasts that the adoption of IFRS 16 Leases will have an immaterial effect on its regulatory capital position.
The Group has total net capital resources of £599.2 million, equivalent to 85 pence per share, giving a solvency ratio of 401% and excess regulatory capital of £479.7 million. 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 and consequent strong cash generation, its balance sheet strength, and the Board's confidence in the Group's future prospects, the Directors are recommending a final dividend of 12.10 pence per share for the year ending 30 June 2018, which, subject to shareholder approval, will be paid on 7 December 2018 to shareholders who are on the register on 2 November 2018.
Tom Shippey
Group Finance Director
6 September 2018
Alternative performance measures
The Group discloses non-GAAP financial alternative performance measures in order to assist shareholders' understanding of the operational performance of the Group during the accounting period.
Net revenue
As shown on the face of the consolidated statement of comprehensive income, net revenue is total revenue less distribution costs and including foreign exchange. This provides a comprehensive view of the revenues recognised by the Group in the period.
Variable compensation ratio
The charge for employee variable compensation as a proportion of earnings before variable compensation, interest and tax (EBVCIT). The linking of variable annual pay awards to the Group's profitability is one of the principal methods by which the Group controls its operating costs. Variable compensation comprises performance-related cash bonuses and share-based payments (see note 9).
EBVCIT is defined as operating profit excluding the charge for variable compensation and seed capital-related items. The latter comprises gains/losses on investment securities; change in third-party interests in consolidated funds; and other expenses in respect of consolidated funds.
EBITDA
The standard definition of earnings before interest, tax, depreciation and amortisation is operating profit before depreciation and amortisation. It provides a view of the business before certain non-cash items, finance income and charges, and taxation.
Adjusted EBITDA, adjusted operating costs, and operating revenues
Adjusted figures, such as net revenues, EBITDA and operating costs, exclude items relating to foreign exchange translation and seed capital. Adjusted net revenues are also referred to as operating revenues. Adjusted operating costs include adjusted personnel expenses and adjusted other expenses excluding depreciation and amortisation.
This provides a better understanding of Ashmore's operational performance by excluding the mark-to-market volatility of foreign exchange translation and seed capital investments. These adjustments are merely reclassified within the adjusted profit and loss account, leaving statutory profit before tax unchanged.
Adjusted EBITDA margin
The ratio of Adjusted EBITDA to operating revenues, both of which are defined above. This is a fair measure of the Group's efficiency and its ability to generate returns for shareholders.
Conversion of adjusted earnings to cash
The cash-generative nature of Ashmore's business model is illustrated by the high conversion rate of earnings to cash, defined as the ratio of cash generated from operations excluding consolidated funds (see note 20) to adjusted EBITDA.
Risk management
Risk management and internal control systems
In accordance with the principles 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.
Ashmore considers a number of risks and has described in the table below those that it has assessed as being most significant in this period, together with examples of associated controls and mitigants. Reputational and conduct risks are common to most aspects of the strategy and business model.
Principal risks and associated controls and mitigants
Description of principal risks | | Examples of associated controls and mitigants |
Strategic and business risks (Responsibility: Ashmore Group plc Board) | ||
- Long-term downturn in Emerging Markets fundamentals / technicals / sentiment, and impact of broader industry changes - Market capacity issues and increased competitionconstrain growth
| - Group strategy is reviewed and approved by a Board with relevant industry experience - Experienced Emerging Markets investment professionals participate in Investment Committees, and provide quarterly updates to the Board - Diversification of investment themes and capabilities, and periodic capacity reviews - Operating Committee meets quarterly - Strong balance sheet with no borrowing - Barriers to entry remain high, e.g. demonstration of long-term investment track record | |
Client risks (Responsibility: Product Committee and Group Risk and Compliance Committee) | ||
- Inappropriate marketing strategy and/or ineffective management of existing and potential fund investors and distributors, including impact of net outflows and fee margin pressure - Inadequate client oversight including alignment of interests | - Frequent and regular Product Committee meetings review product suitability and appropriateness - Experienced distribution team with appropriate geographic coverage - Investor education to ensure understanding of Ashmore investment themes and products - Monitoring of client-related issues including a formal complaints handling process - Compliance and legal oversight to ensure clear and fair terms of business and disclosures, and appropriate client communications and financial promotions - ESG working group | |
Treasury risks (Responsibility: Chief Executive Officer and Group Finance Director) | ||
- Inaccurate financial projections and hedging of future cash flows and balance sheet | - Defined risk appetite, and risk appetite measures updated quarterly - Group FX hedging policy and FX Management Committee
| |
Investment risks (Responsibility: Group Investment Committees) | ||
- Downturn in long-term performance - Manager non-performance including i) ineffective leverage, cash and liquidity management and similar portfolios being managed inconsistently; and ii) neglect of duty, market abuse - Insufficient number of trading counterparties | - Consistent investment philosophy over more than 25 years and numerous market cycles, with dedicated Emerging Markets focus including country visits and network of local offices - Funds in the same investment theme are managed by consistent investment management teams, and allocations approved by Investment Committees - Comprehensive policies in place to cover, for example, conflicts, best execution, market abuse and client order handling - Tools to manage liquidity issues as a result of redemptions including restrictions on illiquid exposures and ability to use in specie redemptions - Group Trading counterparty policy and sufficient counterparties to provide access to liquidity | |
Description of principal risks | | Examples of associated controls and mitigants |
Operational risks (Responsibility: Group Risk and Compliance Committee) | ||
- Security of information including cyber security - Inadequate business continuity planning (BCP) - Inaccurate or invalid data including manual processes/reporting - Breach of investment guidelines or restrictions - Failure to book, process and settle trades appropriately - Failure of IT infrastructure, including inability to support business growth - Trading with unauthorised counterparty - Legal action, fraud or breach of contract perpetrated against the Group, its funds or investments - Insufficient resources, including loss of key staff or inability to attract staff, which hampers growth or the Group's ability to execute its strategy - Lack of understanding and compliance with global and local regulatory requirements, as well as conflicts of interest and not treating customers fairly; and financial crime, which includes money laundering, bribery and corruption, leading to high level publicity or regulatory sanction - Inadequate tax oversight or advice - Inadequate oversight of Ashmore overseas offices - Ineffective or mismanaged third-party services - Inappropriate governance and oversight of people, departments and committees - Ineffective implementation of strategic initiatives or changes to the Group's business or operating model
| - Information security and data protection policies - Annual review of information security including cyber security - BCP working group and periodic updates to Group RCC - Dedicated teams responsible for Transaction Processing, Fund Administration, and Pricing and Data Management - Pricing Oversight and Pricing Methodology and Valuation Committees, with PMVC valuations subject to external audit - Annual ISAE 3402 process and report - Investment decisions subject to pre-trade compliance - Compliance includes Global Investment Restrictions Coding (GIRC) function - Front office systems require trade booking and authorisation - IT Steering Group and appropriate IT policies with annual review cycle - IT systems and environmental monitoring - Approved counterparty list - Independent internal audit function that considers risk of fraud in each audit - Financial crime policy covering the Group and its service providers - Compliance oversees whistle blowing procedure - Due diligence on all new, and regular reviews of existing, service providers - Insurance policies to ensure appropriate client litigation cover - Committee-based investment management reduces key man risk - Appropriate remuneration policy with emphasis on performance-related pay and long-dated deferral of equity awards - Regulatory Development Working Group and compliance monitoring programme, which covers money laundering and bribery risks - Compliance policies covering global and local offices. Compliance monitoring programme covers financial crime risks such as money laundering, bribery and corruption - Conflicts of interest policy and regular reports to the Board - Conduct and Culture risks considered on a monthly basis by the Group RCC and on an annual basis by the Board - Dedicated in-house tax specialist and Group Tax Policy covering all Group entities - Group Finance Director has oversight responsibility for overseas offices, and Operating Committee has oversight of the operating model with annual reviews. Senior staff take local Board/advisory positions - Local RCCs held and Group RCC receives updates - Annual review of joint venture governance arrangements with reports to Group RCC - Compliance maintains register of core policies. Policies and committee terms of reference reviewed annually - Strategic and business decisions are approved by the Board and executives | |
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 International Financial Reporting Standards (IFRSs) as adopted by the European Union (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, relevant and reliable;
- state whether they have been prepared in accordance with IFRSs as adopted by the EU;
- assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
- use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
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 are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and 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 Strategic 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
6 September 2018
Consolidated statement of comprehensive income
For the year ended 30 June 2018
Notes | 2018£m | 2017£m | |
Management fees | 259.7 | 226.2 | |
Performance fees | 21.9 | 28.3 | |
Other revenue | 4.1 | 2.7 | |
Total revenue | 285.7 | 257.2 | |
Distribution costs | (9.2) | (4.6) | |
Foreign exchange | 7 | (0.2) | 5.0 |
Net revenue | 276.3 | 257.6 | |
Gains/(losses) on investment securities | 20 | 3.0 | 22.4 |
Change in third-party interests in consolidated funds | 20 | (2.4) | (12.5) |
Personnel expenses | 9 | (72.8) | (67.8) |
Other expenses | 11 | (27.6) | (32.9) |
Operating profit | 176.5 | 166.8 | |
Finance income | 8 | 15.2 | 38.6 |
Profit on disposal of joint ventures and subsidiaries | - | 1.6 | |
Share of losses from associates and joint ventures | 27 | (0.4) | (0.8) |
Profit before tax | 191.3 | 206.2 | |
Tax expense | 12 | (37.8) | (36.7) |
Profit for the year | 153.5 | 169.5 | |
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 | (4.5) | (16.7) | |
Fair value reserve (available-for-sale financial assets): | |||
Net change in fair value | 2.6 | 2.9 | |
Net amount transferred to profit or loss | (3.3) | - | |
Cash flow hedge intrinsic value gains/(losses) | 0.2 | 3.8 | |
Other comprehensive income, net of tax | (5.0) | (10.0) | |
Total comprehensive income for the year | 148.5 | 159.5 | |
Profit attributable to: | |||
Equity holders of the parent | 151.4 | 167.6 | |
Non-controlling interests | 2.1 | 1.9 | |
Profit for the year | 153.5 | 169.5 | |
Total comprehensive income attributable to: | |||
Equity holders of the parent | 146.6 | 157.8 | |
Non-controlling interests | 1.9 | 1.7 | |
Total comprehensive income for the year | 148.5 | 159.5 | |
Earnings per share | |||
Basic | 13 | 22.59p | 25.07p |
Diluted | 13 | 21.30p | 23.71p |
Consolidated balance sheet
As at 30 June 2018
Notes | 2018£m | 2017£m | |
Assets | |||
Non-current assets | |||
Goodwill and intangible assets | 15 | 74.2 | 79.9 |
Property, plant and equipment | 16 | 1.1 | 1.6 |
Investment in associates and joint ventures | 27 | 1.7 | 2.3 |
Non-current asset investments | 20 | 43.9 | 22.5 |
Other receivables | - | 0.1 | |
Deferred acquisition costs | 0.9 | 0.6 | |
Deferred tax assets | 18 | 26.2 | 27.4 |
148.0 | 134.4 | ||
Current assets | |||
Investment securities | 20 | 219.1 | 231.2 |
Available-for-sale financial assets | 20 | 5.6 | 11.3 |
Fair value through profit or loss investments | 20 | 23.5 | 36.0 |
Trade and other receivables | 17 | 71.2 | 70.9 |
Derivative financial instruments | 21 | - | 0.3 |
Cash and cash equivalents | 433.0 | 432.5 | |
752.4 | 782.2 | ||
|
|
|
|
Non-current assets held for sale | 20 | 7.6 | 7.1 |
Total assets | 908.0 | 923.7 | |
|
|
|
|
Equity and liabilities | |||
Capital and reserves - attributable to equity holders of the parent | |||
Issued capital | 22 | - | - |
Share premium | 15.7 | 15.7 | |
Retained earnings | 742.8 | 703.2 | |
Foreign exchange reserve | 0.3 | 4.6 | |
Available-for-sale fair value reserve | 0.4 | 1.1 | |
Cash flow hedging reserve | - | (0.2) | |
759.2 | 724.4 | ||
Non-controlling interests | 1.3 | 2.3 | |
Total equity | 760.5 | 726.7 | |
Liabilities | |||
Non-current liabilities | |||
Deferred tax liabilities | 18 | 7.7 | 9.2 |
7.7 | 9.2 | ||
Current liabilities | |||
Current tax | 5.5 | 14.7 | |
Third-party interests in consolidated funds | 20 | 76.1 | 108.9 |
Derivative financial instruments | 21 | 0.1 | - |
Trade and other payables | 25 | 57.3 | 64.2 |
139.0 | 187.8 | ||
|
|
|
|
Non-current liabilities held for sale | 20 | 0.8 | - |
Total liabilities | 147.5 | 197.0 | |
Total equity and liabilities | 908.0 | 923.7 |
Approved by the Board on 6 September 2018 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 2018
Attributable to equity holders of the parent | |||||||||
Issued capital £m | Share premium £m | Retained earnings£m | Foreign exchange reserve£m | Available-for-sale reserve£m | Cash flow hedging reserve£m | Total£m | Non-controlling interests£m | Totalequity £m | |
Balance at 30 June 2016 | - | 15.7 | 645.7 | 21.1 | (1.8) | (4.0) | 676.7 | 3.3 | 680.0 |
Profit for the year | - | - | 167.6 | - | - | - | 167.6 | 1.9 | 169.5 |
Other comprehensive income/(loss): | |||||||||
Foreign currency translation differences arising on foreign operations | - | - | - | (16.5) | - | - | (16.5) | (0.2) | (16.7) |
Net fair value gain on available-for-sale assets including tax | - | - | - | - | 2.9 | - | 2.9 | - | 2.9 |
Cash flow hedge intrinsic value gains | - | - | - | - | - | 3.8 | 3.8 | - | 3.8 |
Total comprehensive income/(loss) | - | - | 167.6 | (16.5) | 2.9 | 3.8 | 157.8 | 1.7 | 159.5 |
Transactions with owners: | |||||||||
Purchase of own shares | - | - | (11.8) | - | - | - | (11.8) | - | (11.8) |
Acquisition of non-controlling interests | - | - | - | - | - | - | - | (0.4) | (0.4) |
Share-based payments | - | - | 18.3 | - | - | - | 18.3 | - | 18.3 |
Dividends to equity holders | - | - | (116.6) | - | - | - | (116.6) | - | (116.6) |
Dividends to non-controlling interests | - | - | - | - | - | - | - | (2.3) | (2.3) |
Total contributions and distributions | - | - | (110.1) | - | - | - | (110.1) | (2.7) | (112.8) |
Balance at 30 June 2017 | - | 15.7 | 703.2 | 4.6 | 1.1 | (0.2) | 724.4 | 2.3 | 726.7 |
Profit for the year | - | - | 151.4 | - | - | - | 151.4 | 2.1 | 153.5 |
Other comprehensive income/(loss): | |||||||||
Foreign currency translation differences arising on foreign operations |
- |
- | - | (4.3) | - | - | (4.3) | (0.2) | (4.5) |
Net fair value gain on available-for-sale assets including tax | - | - | - | - | 2.6 | - | 2.6 | - | 2.6 |
Net gains reclassified from available-for-sale reserve to comprehensive income | - | - | - | - | (3.3) | - | (3.3) | - | (3.3) |
Cash flow hedge intrinsic value gains | - | - | - | - | - | 0.2 | 0.2 | - | 0.2 |
Total comprehensive income/(loss) | - | - | 151.4 | (4.3) | (0.7) | 0.2 | 146.6 | 1.9 | 148.5 |
Transactions with owners: | - | - | |||||||
Purchase of own shares | - | - | (18.0) | - | - | - | (18.0) | - | (18.0) |
Acquisition of non-controlling interests | - | - | - | - | - | - | - | (0.4) | (0.4) |
Share-based payments | - | - | 23.6 | - | - | - | 23.6 | - | 23.6 |
Dividends to equity holders | - | - | (117.4) | - | - | - | (117.4) | - | (117.4) |
Dividends to non-controlling interests | - | - | - | - | - | - | - | (2.5) | (2.5) |
Total contributions and distributions | - | - | (111.8) | - | - | - | (111.8) | (2.9) | (114.7) |
Balance at 30 June 2018 | - | 15.7 | 742.8 | 0.3 | 0.4 | - | 759.2 | 1.3 | 760.5 |
Consolidated cash flow statement
For the year ended 30 June 2018
2018£m | 2017£m | |
Operating activities | ||
Operating profit | 176.5 | 166.8 |
Adjustments for non-cash items: | ||
Depreciation and amortisation | 5.0 | 5.5 |
Accrual for variable compensation | 28.0 | 24.4 |
Unrealised foreign exchange gains | 1.4 | (8.7) |
Other non-cash items | 2.6 | (11.0) |
Cash generated from operations before working capital changes | 213.5 | 177.0 |
Changes in working capital: | ||
Decrease/(increase) in trade and other receivables | (0.3) | (9.7) |
Decrease/(increase) in derivative financial instruments | 0.3 | (4.8) |
Increase/(decrease) in trade and other payables | (6.9) | 8.8 |
Cash generated from operations | 206.6 | 171.3 |
Taxes paid | (47.3) | (48.0) |
Net cash from operating activities | 159.3 | 123.3 |
|
|
|
Investing activities | ||
Interest received | 9.6 | 8.8 |
Dividends received | 0.2 | 0.4 |
Proceeds on disposal of joint ventures and subsidiaries | - | 4.8 |
Purchase of non-current asset investments | (19.2) | (8.8) |
Purchase of financial assets held for sale | (14.4) | (26.9) |
Purchase of available-for-sale financial assets | (0.1) | - |
Purchase of fair value through profit or loss investments | - | (14.0) |
Purchase of investment securities | - | (17.0) |
Sale of non-current asset investments | 0.4 | 0.5 |
Sale of financial assets held for sale | - | 47.9 |
Sale of available-for-sale financial assets | 8.4 | - |
Sale of fair value through profit or loss investments | 22.1 | 43.2 |
Sale of investment securities | 15.8 | 28.1 |
Net cash from initial consolidation of seed capital investments | 0.1 | 8.1 |
Purchase of property, plant and equipment | (0.2) | (0.4) |
Net cash generated/(used) in investing activities | 22.7 | 74.7 |
Financing activities | ||
Dividends paid to equity holders | (117.4) | (116.6) |
Dividends paid to non-controlling interests | (2.5) | (2.3) |
Third-party subscriptions into consolidated funds | 19.4 | 18.7 |
Third-party redemptions from consolidated funds | (47.4) | (8.6) |
Distributions paid by consolidated funds | (1.7) | (3.1) |
Acquisition of interest from non-controlling interests | (0.4) | (0.4) |
Purchase of own shares | (18.0) | (11.8) |
Net cash used in financing activities | (168.0) | (124.1) |
|
|
|
Net increase/(decrease) in cash and cash equivalents | 14.0 | 73.9 |
|
|
|
Cash and cash equivalents at beginning of year | 432.5 | 364.0 |
Effect of exchange rate changes on cash and cash equivalents | (13.5) | (5.4) |
Cash and cash equivalents at end of year | 433.0 | 432.5 |
|
|
|
Cash and cash equivalents at end of year comprise: | ||
Cash at bank and in hand | 68.6 | 71.1 |
Daily dealing liquidity funds | 300.3 | 216.5 |
Deposits | 64.1 | 144.9 |
433.0 | 432.5 |
Company balance sheet
As at 30 June 2018
Notes | 2018£m | 2017£m | |
Assets | |||
Non-current assets | |||
Goodwill | 15 | 4.1 | 4.1 |
Property, plant and equipment | 16 | 0.5 | 0.7 |
Investment in subsidiaries | 26 | 19.9 | 19.9 |
Deferred acquisition costs | 0.9 | 0.7 | |
Deferred tax assets | 18 | 13.0 | 11.5 |
38.4 | 36.9 | ||
Current assets | |||
Trade and other receivables | 17 | 467.9 | 398.0 |
Cash and cash equivalents | 159.2 | 229.7 | |
627.1 | 627.7 | ||
Total assets | 665.5 | 664.6 | |
Equity and liabilities | |||
Capital and reserves | |||
Issued capital | 22 | - | - |
Share premium | 15.7 | 15.7 | |
Retained earnings | 573.8 | 580.3 | |
Total equity attributable to equity holders of the Company | 589.5 | 596.0 | |
Liabilities | |||
Current liabilities | |||
Trade and other payables | 25 | 76.0 | 68.6 |
76.0 | 68.6 | ||
Total equity and liabilities | 665.5 | 664.6 |
Approved by the Board on 6 September 2018 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 2018
Issuedcapital£m | Sharepremium£m | Retained earnings £m | Total equity attributable to equity holders of the parent £m | |
Balance at 30 June 2016 | - | 15.7 | 554.8 | 570.5 |
Profit for the year | - | - | 140.5 | 140.5 |
Purchase of own shares | - | - | (11.8) | (11.8) |
Share-based payments | - | - | 13.4 | 13.4 |
Dividends to equity holders | - | - | (116.6) | (116.6) |
Balance at 30 June 2017 | - | 15.7 | 580.3 | 596.0 |
Profit for the year | - | - | 113.1 | 113.1 |
Purchase of own shares | - | - | (18.0) | (18.0) |
Share-based payments | - | - | 15.8 | 15.8 |
Dividends to equity holders | - | - | (117.4) | (117.4) |
Balance at 30 June 2018 | - | 15.7 | 573.8 | 589.5 |
Company cash flow statement
For the year ended 30 June 2018
2018£m | 2017£m | |
Operating activities | ||
Operating profit | 113.7 | 145.0 |
Adjustments for: | ||
Depreciation and amortisation | 0.5 | 0.5 |
Accrual for variable compensation | 14.5 | 15.4 |
Unrealised foreign exchange losses/(gains) | 6.8 | (5.9) |
Dividends received from subsidiaries | (118.4) | (99.2) |
Cash generated from operations before working capital changes | 17.1 | 55.8 |
Changes in working capital: | ||
Decrease/(increase) in trade and other receivables | 30.5 | (36.0) |
Increase/(decrease) in trade and other payables | 7.4 | 18.5 |
Cash generated from operations | 55.0 | 38.3 |
Taxes paid | (10.4) | (8.8) |
Net cash from operating activities | 44.6 | 29.5 |
Investing activities | ||
Interest received | 1.2 | 1.7 |
Loans advanced to subsidiaries | (180.7) | (278.7) |
Loans repaid by subsidiaries | 80.3 | 202.1 |
Dividends received from subsidiaries | 118.4 | 92.3 |
Purchase of property, plant and equipment | (0.2) | (0.1) |
Net cash from investing activities | 19.0 | 17.3 |
Financing activities | ||
Dividends paid | (117.4) | (116.6) |
Purchase of own shares | (18.0) | (11.8) |
Net cash used in financing activities | (135.4) | (128.4) |
Net increase/(decrease) in cash and cash equivalents | (71.8) | (81.6) |
Cash and cash equivalents at beginning of year | 229.7 | 301.4 |
Effect of exchange rate changes on cash and cash equivalents | 1.3 | 9.9 |
Cash and cash equivalents at end of year | 159.2 | 229.7 |
Cash and cash equivalents at end of year comprise: | ||
Cash at bank and in hand | 38.4 | 19.3 |
Daily dealing liquidity funds | 70.8 | 80.4 |
Deposits | 50.0 | 130.0 |
159.2 | 229.7 |
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 inthe United Kingdom. The consolidated financial statements of the Company and its subsidiaries (together the Group) for the year ended 30 June 2018 were authorised for issue by the Board of Directors on 6 September 2018.
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 2018 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 at fair value through profit or loss.
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 that 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 International Accounting Standards Board (IASB) but are not yet mandatory and have not been early adopted by the Group.
Overall, the Group does not expect the implementation of these standards to have a material impact on its reported results, net assets or regulatory capital requirements. However, the Group expects to update the relevant accounting policies when these standards are adopted.
IFRS 9 Financial Instruments
The Group has reviewed its financial assets and liabilities and is expecting the following impact from the adoption of the new standard on 1 July 2018:
- The Group's seed capital investments that are currently classified as available-for-sale financial (AFS) assets valued at £5.6 million will have to be reclassified to financial assets at fair value through profit or loss (FVTPL). The related accumulated fair value gains of £0.4 million are therefore expected to be transferred from the available-for-sale fair value reserve to retained earnings on 1 July 2018. There will be no other changes in the classification and measurement of any of the Group's financial assets or liabilities.
- The new impairment model under IFRS 9 requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39 that requires the Group to recognise impairment losses when there is objective evidence that an asset is impaired. The new impairment model is not applicable for financial assets held at fair value through profit or loss or investments in associates. Therefore the expected loss model only applies to the Group's receivables from funds managed, primarily management fee and performance fee receivables (note 17), which do not have a history of credit default or expected future credit default. Accordingly, the Group does not expect a change in the carrying value of its assets as a result of adopting the new standard.
- The new hedge accounting rules will align the accounting for hedging instruments more closely with the Group's risk management practices. The Group has confirmed that its current cash-flow hedge relationships (note 21) qualify as continuing hedges upon the adoption of IFRS 9 without measurement or classification adjustments.
- The Group will apply IFRS 9 from 1 July 2018, with the practical expedients permitted under the standard. Comparative financial information will not be restated except for changes in presentation.
IFRS 15 Revenue from Contracts with Customers
The Group will adopt the standard from 1 July 2018 using the modified retrospective approach which means that the cumulative impact of the adoption will be recognised in retained earnings as at 1 July 2018 and that comparatives will not be restated.
- The new standard replaces IAS 18 Revenue and IAS 11 Construction Contracts and related interpretations, and is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard provides more prescriptive guidance on revenue recognition criteria, with certain specific requirements including topics such as the point at which revenue is recognised, accounting for variable consideration such as performance-based incentive fees that will only be recognised if the amount of revenue would not be subject to significant future reversals, and costs related to obtaining and fulfilling investment management contracts. The standard also introduces new disclosure requirements.
- The Group has assessed the impact of applying the new standard on its existing investment management agreements with respect to the timing and measurement of management and performance fee recognition, and has concluded that IFRS 15 will not result in a material change to the measurement and recognition of fee revenue. Management fee revenue is accrued on a monthly basis as the underlying fund management services are being provided. The management contracts do not include other performance obligations that would require the allocation of fee revenue to match performance obligations. Performance fee revenue is recognised when it 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, at which time the performance fee is due and payable and cannot be clawed-back.
IFRS 16 Leases
IFRS 16 is effective for periods beginning on or after 1 January 2019, with earlier adoption permitted. The Group will adopt the standard from 1 July 2019 and intends to apply the simplified transition approach that will be applied without restating comparative amounts.
- The standard will affect primarily the accounting for the Group's operating leases that have a term in excess of one year at the time of adoption, that will need to be capitalised and recognised on the consolidated statement of financial position as a right-of-use (ROU) asset and a related lease liability representing the obligation to make lease payments.
- Based on a review of operating leases likely to be in place as of 1 July 2019, the Group has estimated that approximately £16.6 million will be recognised as ROU assets with corresponding lease liabilities of £16.9 million under the new standard on 1 July 2019. This figure represents less than 2% of the consolidated total assets and approximately 11% of consolidated total liabilities.
- The Group will complete a detailed calculation including assessing the impact on consolidated profit or loss and classification of cash flows closer to the adoption of IFRS 16, after taking account of other adjustments, if any, for example lease term extension, termination options and discount rates.
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 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 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 Company 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 2018.
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 currencies 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, 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, 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, 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 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 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 to hold 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
Available-for-sale financial assets (AFS) 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 investmentsThe 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 investmentsNon-current asset investments include closed-end funds that 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) DerivativesDerivatives 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. 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, is 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 net asset value 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
- 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
At each reporting date the Group assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.
Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.
Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, is removed from equity and recognised in profit or loss.
Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.
Impairment of other assets
For all other assets other than goodwill, an impairment test is performed whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
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. Net revenue is total revenue less distribution costs and including foreign exchange. 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, they 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.
Rebates
Rebates relate to repayments of management and performance fees charged subject to a rebate agreement, typically with institutional investors, and are accounted for on an accruals basis. Where such agreements exist, management and performance fees are presented on a net basis in the consolidated statement of comprehensive income.
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 external intermediaries for marketing and investor servicing. Distribution costs are variable with fund assets managed and the associated management fee revenue, and are expensed over the period in 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 due 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 Employee Benefit Trust (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 Group's operations are reported to and reviewed by the Board on the basis of the investment management business as a whole, hence the Group is treated as a single segment. The key management information considered is adjusted EBITDA, which is £183.6 million for the year as reconciled in the Business review (FY2016/17: adjusted EBITDA of £161.1 million was derived by adjusting operating profit by £5.5 million of depreciation and amortisation expense, £5.0 million of income related to seed capital and £6.2 million of foreign exchange gains). The key reconciling items between EBITDA and adjusted EBITDA are foreign exchange translation and seed capital-related items amounting to £2.1 million expense (FY2016/17: £11.2 million income). The disclosures below are supplementary, and provide the location of the Group's non-current assets at year end other than financial instruments, deferred tax assets and post-employment benefit assets. Disclosures relating to revenue by location are in note 6.
Analysis of non-current assets by geography
2018£m | 2017£m | |
United Kingdom | 7.3 | 7.8 |
United States | 70.1 | 76.1 |
Other | 0.5 | 0.5 |
Total non-current assets | 77.9 | 84.4 |
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 (FY2016/17: 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
2018£m | 2017£m | |
United Kingdom | 256.5 | 232.8 |
United States | 5.4 | 8.7 |
Other | 23.8 | 15.7 |
Total revenue | 285.7 | 257.2 |
7) Foreign exchange
The foreign exchange rates which had a material impact on the Group's results are the US dollar, the Euro, the Indonesian rupiah and the Colombian peso.
£1 | Closing rate as at 30 June 2018 | Closing rateas at 30 June2017 | Average rate year ended30 June2018 | Average rate year ended30 June 2017 |
US dollar | 1.3200 | 1.2946 | 1.3464 | 1.2766 |
Euro | 1.1303 | 1.1426 | 1.1306 | 1.1671 |
Indonesian rupiah | 18,843 | 17,340 | 18,329 | 16,918 |
Colombian peso | 3,872 | 3,965 | 3,943 | 3,788 |
Foreign exchange gains and losses are shown below.
2018£m | 2017£m | |
Net realised and unrealised hedging gains/(losses) | 1.8 | (2.8) |
Translation gains/(losses) on non-Sterling denominated monetary assets and liabilities | (2.0) | 7.8 |
Total foreign exchange gains/(losses) | (0.2) | 5.0 |
8) Finance income
2018£m | 2017£m | |
Finance income | ||
Interest income | 9.7 | 10.4 |
Net realised gains on disposal of available-for-sale financial assets | 3.3 | - |
Net realised gains on seed capital investments measured at fair value | 1.7 | 20.8 |
Net unrealised gains on seed capital investments measured at fair value | 0.5 | 7.4 |
Total finance income | 15.2 | 38.6 |
Interest income above includes £5.1 million of interest and dividend income on consolidated funds (Note 20d).
Included within net realised and unrealised gains on seed capital investments measured at fair value are £0.4 million gains in relation to held for sale investments (note 20a), £1.3 million gains on FVTPL investments (note 20c) and £2.8 million gains on non-current asset investments (note 20e), offset by £2.3 million of fair value movements on investment securities within consolidated funds.
9) Personnel expenses
Personnel expenses during the year comprised the following:
2018£m | 2017£m | |
Wages and salaries | 18.5 | 19.6 |
Performance-related cash bonuses | 20.6 | 18.5 |
Share-based payments | 28.0 | 24.4 |
Social security costs | 1.6 | 1.8 |
Pension costs | 1.6 | 1.6 |
Other costs | 2.5 | 1.9 |
Total personnel expenses | 72.8 | 67.8 |
Number of employees
The number of employees of the Group (including Executive Directors) during the reporting year was as follows:
Average for the year ended30 June 2018Number | Average for the yearended30 June 2017Number | At30 June 2018Number | At30 June 2017Number | |
Total employees | 257 | 256 | 253 | 252 |
10) Share-based payments
The cost related to share-based payments recognised by the Group in the statement of comprehensive income is shown below:
Group | 2018£m | 2017£m |
Omnibus Plan | 27.4 | 24.2 |
Phantom Bonus Plan | 0.6 | 0.2 |
Total share-based payments expense | 28.0 | 24.4 |
The total expense recognised for the year in respect of equity-settled share-based payment awards was £25.8 million (FY2016/17: £21.3 million).
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. 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 CompanyYear of grant | 2018£m | 2017£m |
2012 | - | 2.6 |
2013 | 3.6 | 3.7 |
2014 | 2.2 | 2.3 |
2015 | 3.5 | 3.5 |
2016 | 2.9 | 3.4 |
2017 | 4.5 | 6.0 |
2018 | 9.7 | - |
Total Omnibus share-based payments expense reported in comprehensive income | 26.4 | 21.5 |
Awards outstanding under the Omnibus Plan were as follows:
i) Equity-settled awards
Group and Company | 2018Number of shares subject to awards | 2018Weighted averageshare price | 2017Number of shares subject to awards | 2017 Weighted averageshare price |
Restricted share awards | ||||
At the beginning of the year | 22,038,100 | £3.14 | 22,929,174 | £3.18 |
Granted | 5,448,753 | £3.26 | 4,378,988 | £3.40 |
Vested | (4,450,091) | £3.29 | (3,426,172) | £3.87 |
Forfeited | (880,873) | £3.14 | (1,843,890) | £3.32 |
Awards outstanding at year end | 22,155,889 | £3.14 | 22,038,100 | £3.14 |
Bonus share awards | ||||
At the beginning of the year | 8,268,336 | £3.10 | 8,438,295 | £3.15 |
Granted | 2,392,022 | £3.24 | 1,569,761 | £3.39 |
Vested | (1,473,233) | £3.28 | (1,739,720) | £3.86 |
Forfeited | (35,133) | £3.20 | - | - |
Awards outstanding at year end | 9,151,992 | £3.12 | 8,268,336 | £3.10 |
Matching share awards | ||||
At the beginning of the year | 8,273,435 | £3.14 | 8,438,295 | £3.18 |
Granted | 2,397,050 | £3.24 | 1,574,860 | £3.39 |
Vested | (1,113,239) | £3.29 | (1,116,079) | £3.92 |
Forfeited | (395,127) | £3.23 | (623,641) | £3.75 |
Awards outstanding at year end | 9,162,119 | £3.15 | 8,273,435 | £3.14 |
Total | 40,470,000 | £3.14 | 38,579,871 | £3.18 |
ii) Cash-settled awards
Group and Company | 2018Number of shares subject to awards | 2018Weighted averageshare price | 2017Number of shares subject to awards | 2017 Weighted averageshare price |
Restricted share awards | ||||
At the beginning of the year | 134,984 | £3.72 | 269,754 | £3.72 |
Granted | 45,003 | £3.24 | 27,700 | £3.40 |
Vested | - | - | - | - |
Forfeited | (36,445) | £3.29 | (162,470) | £3.94 |
Awards outstanding at year end | 143,542 | £3.37 | 134,984 | £3.72 |
Bonus share awards | ||||
At the beginning of the year | 80,254 | £3.78 | 190,576 | £3.78 |
Granted | 33,753 | £3.24 | 11,530 | £3.40 |
Vested | (27,334) | £3.29 | (121,852) | £3.94 |
Forfeited | - | - | - | - |
Awards outstanding at year end | 86,673 | £3.44 | 80,254 | £3.78 |
Matching share awards | ||||
At the beginning of the year | 80,254 | £3.78 | 190,576 | £3.78 |
Granted | 33,753 | £3.24 | 11,530 | £3.40 |
Vested | - | - | - | - |
Forfeited | (27,334) | £3.29 | (121,852) | £3.94 |
Awards outstanding at year end | 86,673 | £3.44 | 80,254 | £3.78 |
Total | 316,888 | £3.41 | 295,492 | £3.75 |
iii) Total awards
Group and Company | 2018 Number of shares subject to awards | 2018Weighted averageshare price | 2017 Number of shares subject to awards | 2017 Weighted averageshare price |
Restricted share awards | ||||
At the beginning of the year | 22,173,084 | £3.14 | 23,198,928 | £3.19 |
Granted | 5,493,756 | £3.26 | 4,406,688 | £3.40 |
Vested | (4,450,091) | £3.29 | (3,426,172) | £3.87 |
Forfeited | (917,318) | £3.15 | (2,006,360) | £3.37 |
Awards outstanding at year end | 22,299,431 | £3.14 | 22,173,084 | £3.14 |
Bonus share awards | ||||
At the beginning of the year | 8,348,590 | £3.11 | 8,628,871 | £3.17 |
Granted | 2,425,775 | £3.24 | 1,581,291 | £3.39 |
Vested | (1,500,567) | £3.28 | (1,861,572) | £3.87 |
Forfeited | (35,133) | £3.20 | - | - |
Awards outstanding at year end | 9,238,665 | £3.12 | 8,348,590 | £3.11 |
Matching share awards | ||||
At the beginning of the year | 8,353,689 | £3.14 | 8,628,871 | £3.20 |
Granted | 2,430,803 | £3.24 | 1,586,390 | £3.39 |
Vested | (1,113,239) | £3.29 | (1,116,079) | £3.92 |
Forfeited | (422,461) | £3.23 | (745,493) | £3.78 |
Awards outstanding at year end | 9,248,792 | £3.15 | 8,353,689 | £3.14 |
Total | 40,786,888 | £3.14 | 38,875,363 | £3.13 |
The weighted average share price of awards granted to employees under the Omnibus Plan during the year was £3.25 (FY2016/17: £3.40), as determined by the average Ashmore Group plc closing share price for the five business days prior to grant. For Executive Directors, the fair value of awards also takes into account the performance conditions set out in the Remuneration report.
Where the grant of restricted and matching share awards is linked to the annual bonus process, the fair value of the awards is spread over a period including the current financial year and the subsequent five years to their vesting date when the grantee becomes unconditionally entitled to the underlying shares. The fair value of the remaining awards is spread over the period from the date of grant to the vesting date.
The liability arising from cash-settled awards under the Omnibus Plan at the end of the year and reported within trade and other payables on the consolidated balance sheet is £0.6 million (30 June 2017: £0.4 million) of which £nil (30 June 2017: £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.
11) Other expenses
Other expenses consist of the following:
2018£m | 2017£m | |
Travel | 1.9 | 2.2 |
Professional fees | 4.2 | 4.9 |
Information technology and communications | 5.9 | 5.2 |
Amortisation of intangible assets (note 15) | 4.3 | 4.5 |
Operating leases | 2.6 | 3.5 |
Premises-related costs | 1.2 | 1.2 |
Insurance | 0.9 | 1.0 |
Auditor's remuneration (see below) | 0.5 | 0.6 |
Depreciation of property, plant and equipment (note 16) | 0.7 | 1.0 |
Consolidated funds (note 20) | 1.1 | 4.9 |
Other expenses | 4.3 | 3.9 |
27.6 | 32.9 |
Auditor's remuneration
2018£m | 2017£m | |
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 pursuantto legislation | 0.2 | 0.2 |
Fees for non-audit services: | ||
- Fees payable to the Company's auditor and its associates for other services | 0.1 | 0.2 |
0.5 | 0.6 |
12) Taxation
Analysis of tax charge for the year:
2018£m | 2017£m | |
Current tax | ||
UK corporation tax on profits for the year | 30.3 | 31.3 |
Overseas corporation tax charge | 8.5 | 7.9 |
Adjustments in respect of prior years | (0.6) | 1.5 |
38.2 | 40.7 | |
Deferred tax | ||
Origination and reversal of temporary differences (see note 18) | (1.7) | (3.2) |
Effect on deferred tax balance of changes in corporation tax rates | 1.3 | (0.8) |
Tax expense | 37.8 | 36.7 |
Factors affecting tax charge for the year
2018£m | 2017£m | |
Profit before tax | 191.3 | 206.2 |
Profit on ordinary activities multiplied by the blended UK tax rate of 19.00% (FY2016/17: 19.75%) | 36.3 | 40.7 |
Effects of: | ||
Non-deductible expenses | 0.1 | 0.2 |
Deduction in respect of vested shares/exercised options (Part 12, Corporation Tax Act 2009) | (0.3) | (2.8) |
Different rate of taxes on overseas profits | 1.2 | 1.4 |
Non-taxable income | (1.0) | (4.1) |
Effect on deferred tax balance of changes in corporation tax rates | 2.0 | (0.8) |
Other items | 0.1 | 0.5 |
Adjustments in respect of prior years | (0.6) | 1.6 |
Tax expense | 37.8 | 36.7 |
Non-taxable income relates to the impact of local tax exemptions on realised investment income in certain jurisdictions in which the Group operates.
The tax charge recognised in equity/other comprehensive income is as follows:
2018£m | 2017£m | |
Current tax (credit)/expense on foreign exchange gains | (0.3) | 0.1 |
Deferred tax on seed capital investments | - | - |
Tax (credit)/expense recognised in equity/other comprehensive income | (0.3) | 0.1 |
Finance (No. 2) Act 2015 introduced legislation to reduce the UK corporation tax rate to 19% from 1 April 2017. Finance Act 2016 further reduces the tax rate to 17% from 1 April 2020. These tax rate reductions have been taken into account in the calculation of the Group's UK deferred tax assets and liabilities as at 30 June 2018.
13) Earnings per share
Basic earnings per share at 30 June 2018 of 22.59 pence (30 June 2017: 25.07 pence) is calculated by dividing the profit after tax for the financial period attributable to equity holders of the parent of £151.4 million (FY2016/17: £167.6 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.
2018Number of ordinary shares | 2017Number of ordinary shares | |
Weighted average number of ordinary shares used in the calculation of basic earnings per share | 671,063,954 | 668,488,046 |
Effect of dilutive potential ordinary shares - share awards | 40,645,005 | 38,451,642 |
Weighted average number of ordinary shares used in the calculation of diluted earnings per share | 711,708,959 | 706,939,688 |
14) Dividends
Dividends paid in the year
Company | 2018£m | 2017£m |
Final dividend for FY2016/17 - 12.10p (FY2015/16: 12.10p) | 85.4 | 84.9 |
Interim dividend for FY2017/18 - 4.55p (FY2016/17: 4.55p) | 32.0 | 31.7 |
117.4 | 116.6 |
In addition, the Group paid £2.5 million (FY2016/17: £2.3 million) of dividends to non-controlling interests.
Dividends declared/proposed in respect of the year
Company | 2018pence | 2017pence |
Interim dividend per share paid | 4.55 | 4.55 |
Final dividend per share proposed | 12.10 | 12.10 |
16.65 | 16.65 |
On 6 September 2018, the Board proposed a final dividend of 12.10 pence per share for the year ended 30 June 2018. 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 that qualify to receive a dividend, the total amount payable would be £85.7 million.
15) Goodwill and intangible assets
Group | Goodwill£m | Fund management relationships£m | Total£m |
Cost (at original exchange rate) | |||
At 30 June 2016, 30 June 2017 and 30 June 2018 | 57.5 | 39.5 | 97.0 |
Accumulated amortisation and impairment | |||
At 30 June 2016 | - | (31.1) | (31.1) |
Amortisation charge for the year | - | (4.5) | (4.5) |
At 30 June 2017 | - | (35.6) | (35.6) |
Amortisation charge for the year | - | (4.3) | (4.3) |
At 30 June 2018 | - | (39.9) | (39.9) |
Net book value | |||
At 30 June 2016 | 70.1 | 12.4 | 82.5 |
Accumulated amortisation for the year | - | (4.5) | (4.5) |
Foreign exchange revaluation through reserves* | 1.5 | 0.4 | 1.9 |
At 30 June 2017 | 71.6 | 8.3 | 79.9 |
Accumulated amortisation for the year | - | (4.3) | (4.3) |
Foreign exchange revaluation through reserves* | (1.3) | (0.1) | (1.4) |
At 30 June 2018 | 70.3 | 3.9 | 74.2 |
* Foreign exchange revaluation through reserves is a result of the retranslation of US dollar-denominated intangibles and goodwill.
Company | Goodwill£m |
Cost | |
At the beginning and end of the year | 4.1 |
Net carrying amount at 30 June 2017 and 2018 | 4.1 |
Goodwill
The Group's goodwill balance relates principally to the acquisition of the equities business 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 2018. 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 with 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 2018, 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 Ashmore Equities Investment Management (US) LLC.
An annual impairment review of the fund management relationships was undertaken for the year ending 30 June 2018. 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 2018. Accordingly, no impairment charge was recognised during the year (FY2016/17: no impairment charge recognised).
The remaining amortisation period for fund management relationships is one year (30 June 2017: two years).
16) Property, plant and equipment
Group | 2018Fixtures,fittings and equipment£m | 2017Fixtures,fittings and equipment£m |
Cost | ||
At the beginning of the year | 6.4 | 7.8 |
Additions | 0.2 | 0.4 |
Foreign exchange revaluation | (0.1) | 0.1 |
Disposals | - | (1.9) |
At the end of the year | 6.5 | 6.4 |
Accumulated depreciation | ||
At the beginning of the year | 4.8 | 5.6 |
Depreciation charge for the year | 0.7 | 1.0 |
Foreign exchange revaluation | (0.1) | - |
Disposals | - | (1.8) |
At the end of the year | 5.4 | 4.8 |
Net book value at 30 June | 1.1 | 1.6 |
Company | 2018Fixtures,fittings and equipment£m | 2017Fixtures,fittings and equipment£m |
Cost | ||
At the beginning of the year | 3.7 | 3.6 |
Additions | 0.2 | 0.1 |
Disposals | - | - |
At the end of the year | 3.9 | 3.7 |
Accumulated depreciation | ||
At the beginning of the year | 3.0 | 2.5 |
Depreciation charge for year | 0.4 | 0.5 |
Disposals | - | - |
At the end of the year | 3.4 | 3.0 |
Net book value at 30 June | 0.5 | 0.7 |
17) Trade and other receivables
Group | Company | |||
2018£m | 2017£m | 2018£m | 2017£m | |
Current | ||||
Trade debtors | 67.5 | 67.2 | 5.0 | 3.6 |
Prepayments | 2.8 | 2.9 | 1.2 | 1.6 |
Loans due from subsidiaries | - | - | 454.5 | 354.1 |
Amounts due from subsidiaries | - | - | 7.1 | 38.1 |
Other receivables | 0.9 | 0.8 | 0.1 | 0.6 |
Total trade and other receivables | 71.2 | 70.9 | 467.9 | 398.0 |
Group trade debtors include all billed and unbilled management fees due to the Group at 30 June 2018 in respect of investment management services provided up to that date. Loans and amounts due from subsidiaries for the Company include 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:
2018 | 2017 | |||||
Group | Other temporary differences£m | Share-based payments£m | Total£m | Other temporary differences£m | Share-based payments£m | Total£m |
Deferred tax assets | 11.4 | 14.8 | 26.2 | 13.4 | 14.0 | 27.4 |
Deferred tax liabilities | (7.7) | - | (7.7) | (9.2) | - | (9.2) |
3.7 | 14.8 | 18.5 | 4.2 | 14.0 | 18.2 | |
2018 | 2017 | |||||
Company | Other temporary differences£m | Share-based payments£m | Total£m | Other temporary differences£m | Share-based payments£m | Total£m |
Deferred tax assets | 0.2 | 12.8 | 13.0 | 0.2 | 11.3 | 11.5 |
Movement of deferred tax balances
The movement in the deferred tax balances between the balance sheet dates has been reflected in equity or the statement of comprehensive income as follows:
Group | Other temporary differences£m | Share-based payments£m | Total£m |
At 30 June 2016 | 3.7 | 10.6 | 14.3 |
Credited/(charged) to the consolidated statement of comprehensive income | 0.5 | 3.4 | 3.9 |
At 30 June 2017 | 4.2 | 14.0 | 18.2 |
Credited/(charged) to the consolidated statement of comprehensive income | (0.5) | 0.8 | 0.3 |
At 30 June 2018 | 3.7 | 14.8 | 18.5 |
Company | Other temporary differences£m | Share-based payments£m | Total£m |
At 30 June 2016 | 0.1 | 8.1 | 8.2 |
Credited/(charged) to the statement of comprehensive income | 0.1 | 3.2 | 3.3 |
At 30 June 2017 | 0.2 | 11.3 | 11.5 |
Credited/(charged) to the statement of comprehensive income | - | 1.5 | 1.5 |
At 30 June 2018 | 0.2 | 12.8 | 13.0 |
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 committees that have overall responsibility for all significant fair value measurements. Each committee regularly reviews significant inputs and valuation adjustments. If third-party information is used to measure fair value, 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. Fair value measurements are derived by applying appropriate valuation techniques that include inputs for the asset or liability that are not based on observable market data and principally comprise investments in private equity funds.
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:
2018 | 2017 | |||||||
Level 1£m | Level 2£m | Level 3£m | Total£m | Level 1£m | Level 2£m | Level 3£m | Total£m | |
Financial assets | ||||||||
Investment securities | 110.6 | 38.8 | 69.7 | 219.1 | 60.8 | 85.5 | 84.9 | 231.2 |
Non-current financial assets held for sale | - | 7.6 | - | 7.6 | - | 7.1 | - | 7.1 |
Available-for-sale financial assets | - | - | 5.6 | 5.6 | - | 0.1 | 11.2 | 11.3 |
Fair value through profit or loss investments | - | 23.5 | - | 23.5 | - | 36.0 | - | 36.0 |
Non-current asset investments | - | 20.0 | 23.9 | 43.9 | - | 4.5 | 18.0 | 22.5 |
Derivative financial instruments | - | - | - | - | - | 0.3 | - | 0.3 |
110.6 | 89.9 | 99.2 | 299.7 | 60.8 | 133.5 | 114.1 | 308.4 | |
Financial liabilities | ||||||||
Third-party interests in consolidated funds | 25.8 | 17.6 | 32.7 | 76.1 | 30.9 | 42.4 | 35.6 | 108.9 |
Derivative financial instruments | - | 0.1 | - | 0.1 | - | - | - | - |
Non-current financial liabilities held for sale | - | 0.8 | - | 0.8 | - | - | - | - |
25.8 | 18.5 | 32.7 | 77.0 | 30.9 | 42.4 | 35.6 | 108.9 | |
There were no transfers between Level 1, Level 2 and Level 3 during the year (FY2016/17: no transfers).
Fair value measurements using significant unobservable inputs (Level 3)
The following table presents the changes in Level 3 items for the periods ending 30 June 2018 and 2017:
Investment securities£m | Non-current financialassets heldfor sale£m | Available-for-sale financialassets£m | Non-current asset investments£m | Third-party interests in consolidated funds£m | |
At 30 June 2016 | 46.9 | 28.1 | 8.0 | 11.7 | 28.4 |
Additions | - | - | - | 4.5 | - |
Reclassification from consolidated funds to HFS investments | 28.1 | (28.1) | - | - | - |
Unrealised gains recognised in finance income | 9.9 | - | - | 1.8 | 7.2 |
Unrealised gains recognised in other comprehensive income | - | - | 3.2 | - | - |
At 30 June 2017 | 84.9 | - | 11.2 | 18.0 | 35.6 |
Additions/(disposals) | (13.0) | - | (4.9) | 4.1 | (0.6) |
Unrealised gains/(losses) recognised in finance income | (1.3) | - | - | 1.8 | (2.3) |
Unrealised gains/(losses) recognised in other comprehensive income | (0.9) | - | (0.7) | - | - |
At 30 June 2018 | 69.7 | - | 5.6 | 23.9 | 32.7 |
Valuation of Level 3 financial assets and liabilities recognised at fair value on a recurring basis using valuation techniques
Investments valued using valuation techniques include financial investments which, by their nature, do not have an externally quoted price based on regular trades, and financial investments for which markets are no longer active as a result of market conditions e.g. market illiquidity. The valuation techniques used include comparison to recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and, if applicable, enterprise valuation.
These techniques may include a number of assumptions relating to variables such as interest rate and price earnings multiples. Changes in assumptions relating to these variables could positively or negatively impact the reported fair value of these instruments. When determining the inputs into the valuation techniques used priority is given to publicly available prices from independent sources when available, but overall the source of pricing is chosen with the objective of arriving at a fair value measurement that reflects the price at which an orderly transaction would take place between market participants on the measurement date.
The fair value estimates are made at a specific point in time, based upon available market information and judgements about the financial instruments, including estimates of the timing and amount of expected future cash flows. Such estimates do not typically reflect any premium or discount that could result from offering for sale at one time the Group's entire holdings of a particular financial instrument, nor do they typically consider the tax impact of the realisation of unrealised gains or losses from selling the financial instrument being fair valued. In some cases the disclosed value cannot be realised in immediate settlement of the financial instrument.
The total value of Level 3 financial assets valued using valuation techniques is £69.4 million as at 30 June 2018 (30 June 2017: £84.8 million). The remaining Level 3 investments are valued using third-party pricing information without adjustment.
The following table shows the valuation techniques and the key unobservable inputs used in the determination of fair value for the Level 3 investments:
Assets | Fair value at 30 June 2018 £m | Valuation technique | Significant unobservable inputs | Range of estimates for unobservable inputs | The estimated fair value would increase if: |
Listed securities | 15.4 | Adjusted market value | Marketability adjustment | 10% - 30% | Marketability adjustment is lower |
Unlisted securities | 54.0 | Market approach using comparable traded multiples | EBITDA multiple | 5x-10x | EBITDA multiple is higher |
Marketability adjustment | 10%-30% | Marketability adjustment is lower | |||
Recent transactions, Market multiples | Market multiple | 5x-10x | Market multiple is higher | ||
Discounted cash flows | Weighted average cost of capital (WACC) | 10%-20% | WACC is lower | ||
Marketability adjustment | 10%-30% | Marketability adjustment is lower | |||
Adjusted value | Marketability adjustment | 10%-35% | Marketability adjustment is lower | ||
Discount to indicative bid | Marketability adjustment | 10%-30% | Marketability adjustment is lower | ||
Broker quote | Inputs to broker model | - | - | ||
Total | 69.4 |
20) Seed capital investments
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 2018 and 2017.
The Group considers itself a sponsor of an investment fund when it facilitates the establishment of a fund in which the Group is the investment manager. The Group ordinarily provides seed capital in order to provide initial scale and facilitate marketing of the funds to third-party investors. The fund is then financed through the issue of units to investors. Aggregate interests held by the Group include seed capital, management fees and performance fees. The Group generates management and performance fee income from managing the assets on behalf of third-party investors.
The movements of seed capital investments and related items during the year are as follows:
Group | HFS investments£m | AFS investments£m | FVTPL investments£m | Investment securities (relating to consolidated funds)*£m | Other (relating to consolidated funds)**£m | Third-party interests in consolidated funds***£m | Non-current asset investments£m | Total£m |
Carrying amount at 30 June 2016 | 76.9 | 8.8 | 68.2 | 143.7 | 4.8 | (75.6) | 11.7 | 238.5 |
Reclassification: | ||||||||
HFS to consolidated funds | (49.3) | - | - | 52.8 | - | (3.5) | - | - |
FVTPL to HFS investments | (8.8) | - | 8.8 | - | - | - | - | - |
Consolidated funds to HFS investments | - | - | (23.2) | 60.3 | - | (37.1) | - | - |
Consolidated funds to FVTPL investments | - | - | 1.8 | (6.0) | - | 4.2 | - | - |
Net purchases, disposals and fair value changes | (11.7) | 2.5 | (19.6) | (19.6) | 6.2 | 3.1 | 10.8 | (28.3) |
Carrying amount at 30 June 2017 | 7.1 | 11.3 | 36.0 | 231.2 | 11.0 | (108.9) | 22.5 | 210.2 |
Reclassification: | ||||||||
HFS investments to consolidated funds | (15.1) | - | - | 24.9 | - | (9.8) | - | - |
Consolidated funds to FVTPL investments | - | - | 8.2 | (16.6) | - | 8.4 | - | - |
Net purchases, disposals and fair value changes | 14.8 | (5.7) | (20.7) | (20.4) | (5.5) | 34.2 | 21.4 | 18.1 |
Carrying amount at 30 June 2018 | 6.8 | 5.6 | 23.5 | 219.1 | 5.5 | (76.1) | 43.9 | 228.3 |
* Investment securities in consolidated funds are designated as FVTPL.
** Relates to cash and other assets in consolidated funds that are not investment securities.
*** Included in net purchases, disposals and fair value changes are third party subscriptions of £19.4 million, redemptions of £47.4 million and fair value movements of £6.2 million in relation to consolidated funds.
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, two funds (FY2016/17: three) 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 2018 were as follows:
2018£m | 2017£m | |
Non-current financial assets held for sale | 7.6 | 7.1 |
Non-current financial liabilities held for sale | (0.8) | - |
Seed capital investments classified as held for sale | 6.8 | 7.1 |
Investments cease to be classified as held for sale when they are no longer controlled by the Group. A loss of control may happen 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 fund was transferred to the FVTPL category during the year (FY2016/17: one fund was 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, two such funds (FY2016/17: two) with an aggregate carrying amount of £15.1 million (FY2016/17: £12.5 million) were transferred from 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 gains of £0.4 million (FY2016/17: gains of £9.3 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 2018 comprise shares held in equity funds as follows:
2018£m | 2017£m | |
Equity funds | 5.6 | 11.3 |
Seed capital classified as available-for-sale | 5.6 | 11.3 |
Included within other comprehensive income are gains of £2.6 million (FY2016/17: gains of £2.5 million) in relation to available-for-sale investments. During the year gains of £3.3 million (FY2016/17: £nil) were reclassified from the available-for-sale reserve to comprehensive income following the disposal of available-for-sale financial assets.
From 1 July 2019 the AFS category will no longer exist and the Group will reclassify all available-for-sale financial assets and measure them as FVTPL investments following the adoption of IFRS 9. The related accumulated fair value gains of £0.4 million will be reclassified from the available-for-sale fair value reserve to retained earnings on transition, and any future fair value movement will be recognised directly in profit or loss.
c) Fair value through profit or loss investments
FVTPL investments at 30 June 2018 comprise shares held in debt and equity funds as follows:
2018£m | 2017£m | |
Equity funds | 14.5 | 30.2 |
Debt funds | 9.0 | 5.8 |
Seed capital classified as FVTPL investments | 23.5 | 36.0 |
Included within finance income are gains of £1.3 million (FY2016/17: gains of £9.6 million) on the Group's FVTPL investments.
d) Consolidated funds
The Group has consolidated 11 investment funds as at 30 June 2018 (30 June 2017: 13 investment funds), over which the Group is deemedto 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.
2018£m | 2017£m | |
Investment securities* | 219.1 | 231.2 |
Cash and cash equivalents | 6.2 | 12.4 |
Other** | (0.7) | (1.4) |
Third-party interests in consolidated funds | (76.1) | (108.9) |
Consolidated seed capital investments | 148.5 | 133.3 |
* Investment securities represent trading securities held by consolidated investment funds and are designated as at FVTPL. Note 26 provides a list of the consolidated funds by asset class, and further detailed information at the security level is available in the individual fund financial statements.
** 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 or unconsolidated funds financially.
Included within the consolidated statement of comprehensive income are net gains of £4.6 million (FY2016/17: £12.8 million gains) relating to the Group's share of the results of the individual statements of comprehensive income for each of the consolidated funds, as follows:
2018£m | 2017£m | |
Interest and dividend income | 5.1 | 7.8 |
Gains/(losses) on investment securities | 3.0 | 22.4 |
Change in third-party interests in consolidated funds | (2.4) | (12.5) |
Other expenses | (1.1) | (4.9) |
Net gains/(losses) on consolidated funds | 4.6 | 12.8 |
Included in the Group's cash generated from operations is £3.5 million cash utilised in operations (FY2016/17: £3.5 million cash utilised in operations) relating to consolidated funds.
As of 30 June 2018, the Group's consolidated funds were domiciled in Guernsey, Indonesia, Luxembourg, Saudi Arabia, 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.
2018£m | 2017£m | |
Non-current asset investments | 43.9 | 22.5 |
Included within finance income are gains of £2.8 million (FY2016/17: gains of £2.5 million) on the Group's non-current asset investments.
21) Financial instrument risk management
Group
The Group is subject to strategic and business, client, investment, treasury and operational 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.
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 Financial Conduct Authority (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 £479.7 million as at 30 June 2018 (30 June 2017: excess capital of £448.3 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.
Credit risk
The Group has exposure to credit risk from its normal activities where the risk is that a counterparty will be unable to pay in full amounts when due.
Exposure to credit risk is monitored on an ongoing basis by senior management and the Group's Risk Management and Control function. The Group has a counterparty and cash management policy in place which, in addition to other controls, restricts exposure to any single counterparty by setting exposure limits and requiring approval and diversification of counterparty banks and other financial institutions. The Group's maximum exposure to credit risk is represented by the carrying value of its financial assets. The table below lists financial assets subject to credit risk.
Notes | 2018£m | 2017£m | |
Investment securities | 19 | 219.1 | 231.2 |
Non-current financial assets held for sale | 19 | 7.6 | 7.1 |
Available-for-sale financial assets | 19 | 5.6 | 11.3 |
Fair value through profit or loss investments | 19 | 23.5 | 36.0 |
Derivative financial instruments | 19 | - | 0.3 |
Trade and other receivables | 17 | 71.2 | 70.9 |
Cash and cash equivalents | 433.0 | 432.5 | |
Total | 760.0 | 789.3 |
Ashmore recognises investment securities by virtue of including consolidated funds on its balance sheet on a line-by-line basis. The risk management policies and procedures for the consolidated funds is the responsibility of the governing bodies of the funds. The associated exposures on credit risk, market risk and foreign exchange risk on the investment securities are monitored by the Group's Risk Management and Control function.
In addition, 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, comprising short-term deposits with banks and liquidity funds, are predominantly held with counterparties with credit ratings ranging from A+ to AA- as at 30 June 2018 (30 June 2017: A+ to AAA).
All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2017: 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 2018
Within 1 year£m | 1-5 years£m | More than5 years£m | Total£m | |
Non-current liabilities held-for-sale | 0.8 | - | - | 0.8 |
Third-party interests in consolidated funds | 33.2 | 42.9 | - | 76.1 |
Derivative financial instruments | 0.1 | - | - | 0.1 |
Current trade and other payables | 57.3 | - | - | 57.3 |
91.4 | 42.9 | - | 134.3 |
At 30 June 2017
Within 1 year£m | 1-5 years£m | More than5 years£m | Total£m | |
Third-party interests in consolidated funds | 53.8 | 55.1 | - | 108.9 |
Current trade and other payables | 64.2 | - | - | 64.2 |
118.0 | 55.1 | - | 173.1 |
Details of 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
2018% | 2017% | |
Deposits with banks and liquidity funds | 1.04 | 0.67 |
Deposits with banks and liquidity funds are repriced at intervals of less than one year.
At 30 June 2018, 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 £2.2 million higher/lower (FY2016/17: £2.0 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 that invest in debt securities.
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, while 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 denominated mainly in US dollars, Colombian pesos 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 the Euro.
2018 | 2017 | |||
Foreign currency sensitivity test | Impact on profitbefore tax£m | Impact on equity£m | Impact on profitbefore tax£m | Impact on equity£m |
US dollar +/- 1% | 1.4 | 2.6 | 1.8 | 2.6 |
Euro +/- 1% | 0.1 | 0.1 | 0.1 | 0.1 |
Colombian peso +/- 1% | 0.2 | 0.1 | 0.1 | 0.1 |
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 capitalThe 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 2018, a 5% movement in the fair value of these investments would have had a £11.4 million (FY2016/17: £10.5 million) impact on net assets and the impact on profit before tax would have been £2.0 million (FY2016/17: £3.3 million).
Management and performance feesThe 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, 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$73.9 billion and applying the year's average net management fee rate of 49bps, a 5% movement in AuM would have a US$18.1 million impact, equivalent to £13.7 million using year end exchange rate of 1.3200, on management fee revenues (FY2016/17: using the year end AuM level of US$58.7 billion and applying the year's average net management fee rate of 52bps, a 5% movement in AuM would have a US$15.3 million impact, equivalent to £11.8 million using year end exchange rate of 1.2946, 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 2018, 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 2018 was £0.1 million (30 June 2017: £0.3 million foreign exchange hedges asset) and is included within the Group's derivative financial instrument liabilities.
The notional and fair values of foreign exchange hedging instruments were as follows:
2018 | 2017 | |||
Notional amount£m | Fair value assets/(liabilities)£m | Notional amount£m | Fair value assets/(liabilities)£m | |
Cash flow hedges | ||||
Foreign exchange nil-cost option collars | 70.0 | (0.1) | 60.0 | 0.3 |
70.0 | (0.1) | 60.0 | 0.3 | |
The maturity profile of the Group's outstanding hedges is shown below.
Notional amount of option collars maturing: | 2018£m | 2017£m |
Within 6 months | 70.0 | 30.0 |
6-12 months | - | 30.0 |
70.0 | 60.0 |
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 £0.2 million intrinsic gain (FY2016/17: £3.8 million intrinsic gain) on the Group's hedges has been recognised through other comprehensive income and £1.2 million intrinsic value gain (FY2016/17: £3.7 million intrinsic value loss) was reclassified from equity to the statement of comprehensive income in the year.
Included within the net realised and unrealised hedging gain of £1.8 million (note 7) recognised at 30 June 2018 (£2.8 million loss at 30 June 2017) are:
- a £0.6 million gain in respect of foreign exchange hedges covering net management fee income for the financial year ending 30 June 2018 (FY2016/17: £0.9 million gain in respect of foreign exchange hedges covering net management fee income for the financial year ended 30 June 2017); and
- a £1.2 million gain in respect of crystallised foreign exchange contracts (FY2016/17: £3.7 million loss).
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:
2018£m | 2017£m | ||
Cash and cash equivalents | 159.2 | 229.7 | |
Trade and other receivables | 467.9 | 398.0 | |
Total | 627.1 | 627.7 |
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 AA- as at 30 June 2018 (30 June 2017: A+ to AAA).
All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2017: 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.
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
2018% | 2017% | |
Deposits with banks and liquidity funds | 0.67 | 0.30 |
Deposits with banks and liquidity funds are repriced at intervals of less than one year.
At 30 June 2018, 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 £1.6 million higher/lower (FY2016/17: £1.1 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 2018, 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 £4.8 million (FY2016/17: increased/decreased by £3.9 million).
22) Share capital
Authorised share capital
Group and Company | 2018Number of shares | 2018Nominalvalue£'000 | 2017Numberof shares | 2017 Nominalvalue£'000 |
Ordinary shares of 0.01p each | 900,000,000 | 90 | 900,000,000 | 90 |
Issued share capital - allotted and fully paid
Group and Company | 2018Number of shares | 2018Nominalvalue£'000 | 2017Numberof shares | 2017Nominalvalue£'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 2018, there were equity-settled share awards issued under the Omnibus Plan totalling 40,470,000 (30 June 2017: 38,579,871) shares that have release dates ranging from September 2018 to December 2022. Further details are provided in note 10.
23) Own shares
The Trustees of The Ashmore 2004 Employee Benefit Trust (EBT) acquire and hold shares in Ashmore Group plc with a view to facilitating the vesting of share awards. As at the year end, the EBT owned 36,679,643 (30 June 2017: 38,701,321) ordinary shares of 0.01p with a nominal value of £3,668 (30 June 2017: £3,870) and shareholders' funds are reduced by £112.4 million (30 June 2017: £115.4 million) in this respect. The EBT is periodically funded by the Company for these purposes.
24) Treasury shares
Treasury shares held by the Company
2018 | 2017 | |||
Group and Company | Number | £m | Number | £m |
Ashmore Group plc ordinary shares | 5,368,331 | 6.9 | 5,368,331 | 6.9 |
Reconciliation of treasury shares
2018Number | 2017Number | |
At the beginning and end of the year | 5,368,331 | 5,368,331 |
The market value of treasury shares was £20.0 million at the year end (30 June 2017: £19.0 million).
25) Trade and other payables
Group2018£m | Group 2017£m | Company2018£m | Company2017£m | |
Current | ||||
Trade and other payables | 23.4 | 29.5 | 27.1 | 26.7 |
Accruals and deferred income | 33.9 | 34.7 | 2.1 | 1.9 |
Amounts due to subsidiaries | - | - | 46.8 | 40.0 |
Total trade and other payables | 57.3 | 64.2 | 76.0 | 68.6 |
26) Interests in subsidiaries
Operating subsidiaries
Movements in investments in subsidiaries during the year were as follows:
Company | 2018£m | 2017£m |
Cost | ||
At 30 June 2017 | 19.9 | 20.0 |
Disposals | - | (0.1) |
At 30 June 2018 | 19.9 | 19.9 |
In the opinion of the Directors, the following subsidiary undertakings principally affected the Group's results or financial position at 30 June 2018. A full list of the Group's subsidiaries and all related undertakings is disclosed in note 33.
Name | Country of incorporation/ formation and principal place of operation | % of equity shares held by the Group |
Ashmore Investments (UK) Limited | England | 100.00 |
Ashmore Investment Management Limited | England | 100.00 |
Ashmore Investment Advisors Limited | England | 100.00 |
Ashmore Management Company Colombia SAS | Colombia | 61.38 |
Ashmore CAF-AM Management Company SAS | Colombia | 53.66 |
Ashmore Management Company Limited | Guernsey | 100.00 |
PT Ashmore Asset Management Indonesia | Indonesia | 66.67 |
Ashmore Japan Co. Limited | Japan | 100.00 |
AA Development Capital Investment Managers (Mauritius) LLC | Mauritius | 55.00 |
Ashmore Investments (Holdings) Limited | Mauritius | 100.00 |
Ashmore Investments Saudi Arabia | Saudi Arabia | 90.00 |
Ashmore Investment Management (Singapore) Pte. Ltd. | Singapore | 100.00 |
Ashmore Investment Management (US) Corporation | USA | 100.00 |
Ashmore Investment Advisors (US) Corporation | USA | 100.00 |
Ashmore Equities Investment Management (US) LLC | USA | 100.00 |
Consolidated funds
The Group consolidated the following investment funds as at 30 June 2018 over which the Group is deemed to have control:
Name | Type of fund | Country of incorporation/ principal place of operation | % of netassets value held by the Group |
Ashmore Special Opportunities Fund LP | Alternatives | Guernsey | 50.00 |
Ashmore Emerging Markets Distressed Debt Fund | Corporate debt | Guernsey | 40.05 |
Ashmore Emerging Markets Debt and Currency Fund Limited | Blended debt | Guernsey | 100.00 |
Ashmore Dana USD Nusantara | External debt | Indonesia | 61.72 |
Ashmore SICAV 2 Global Bond Fund | Local currency | Luxembourg | 100.00 |
Ashmore SICAV Multi Asset Fund | Multi-asset | Luxembourg | 51.71 |
Ashmore SICAV Investment Grade Total Return Fund | Blended debt | Luxembourg | 78.92 |
Ashmore SICAV Global Small-Cap Equity Fund | Equity | Luxembourg | 44.74 |
Ashmore Saudi Equity Fund | Equity | Saudi Arabia | 65.62 |
Ashmore Emerging Markets Equity Fund | Equity | USA | 98.08 |
Ashmore Emerging Markets Active Equity Fund | Equity | USA | 99.38 |
27) Interests in associates
The Group held interests in the following associates as at 30 June 2018 that are unlisted:
Name | Type | Nature of business | Country of incorporation/formation and principalplace of operation | % of equity shares held by the Group |
VTB-Ashmore Capital Holdings Limited | Associate | Investment management | Russia | 50% |
Everbright Ashmore* | Associate | Investment management | China | 30% |
Ashmore Investment Management India LLP | Associate | Investment management | India | 30% |
Taiping Fund Management Company | Associate | Investment management | China | 8.5% |
* Everbright Ashmore includes four related entities.
Movements in investments in associates during the year were as follows:
2018 | 2017 |
| |||
Associates£m | Associates£m | Joint ventures£m | Total£m | ||
At the beginning of the year | 2.3 | 1.6 | 4.7 | 6.3 | |
Additions/(disposals) | - | 0.1 | (3.0) | (2.9) | |
Share of profit/(loss) | (0.4) | - | (0.8) | (0.8) | |
Distributions | (0.2) | (0.4) | - | (0.4) | |
Reclassification from joint venture to associate | - | 0.9 | (0.9) | - | |
Foreign exchange revaluation | - | 0.1 | - | 0.1 | |
At the end of the year | 1.7 | 2.3 | - | 2.3 | |
The summarised aggregate financial information on associates is shown below.
Group | 2018£m | 2017£m |
Total assets | 25.4 | 3.3 |
Total liabilities | (5.7) | (0.3) |
Net assets | 19.7 | 3.0 |
Group's share of net assets | 2.2 | 0.9 |
Revenue for the year | 10.9 | 8.9 |
Profit/(loss) for the year | (3.2) | (4.5) |
Group's share of profit/(loss) for the year | (0.4) | (0.8) |
The carrying value of the investments in associates includes attributable goodwill that arose on acquisition of the associates. No permanent impairment is believed to exist relating to the associates.
The Group has undrawn capital commitments of £5.0 million (30 June 2017: £4.9 million) to investment funds managed by the associates. Further details are provided in note 28.
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 the potential loss of fee income as a result of client withdrawals. Outflows from funds are dependent on market sentiment, asset performance and investor considerations. Further information on these risks can be found in the Business review.
Considering the potential for changes in AuM of structured entities, management has determined that the Group's unconsolidated structured entities include segregated mandates and pooled funds vehicles. Disclosure of the Group's exposure to unconsolidated structured entities has been made on this basis.
The reconciliation of AuM reported by the Group within unconsolidated structured entities is shown below.
Total AuMUS$bn | Less:AuM within consolidated fundsUS$bn | AuM withinunconsolidated structured entitiesUS$bn | |
30 June 2018 | 73.9 | 0.3 | 73.6 |
30 June 2017 | 58.7 | 0.3 | 58.4 |
Included in the Group's consolidated management fees of £259.7 million (FY2016/17: £226.2 million) are management fees amounting to £258.0 million (FY2016/17: £225.4 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.
2018£m | 2017£m | |
Management fees receivable | 38.3 | 35.0 |
Trade and other receivables | 24.3 | 30.0 |
Seed capital investments | 79.8 | 76.9 |
Total exposure | 142.4 | 141.9 |
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:
2018£m | 2017£m | |
AA Development Capital India Fund 1 LLC | 1.2 | 1.2 |
Ashmore Andean Fund II, LP | 1.4 | 1.8 |
Ashmore Emerging Markets Corporate Private Debt Fund | 0.3 | 0.3 |
Ashmore I - CAF Colombian Infrastructure Senior Debt Fund | 13.8 | 15.0 |
Ashmore I - FCP Colombia Infrastructure Fund | - | 0.1 |
Ashmore Special Opportunities Fund LP | 9.0 | 1.6 |
Everbright Ashmore China Real Estate Fund | 1.4 | 1.4 |
KCH Healthcare LLC | 1.8 | 4.5 |
VTBC-Ashmore Real Estate Partners I, LP | 3.6 | 3.5 |
Total undrawn investment commitments | 32.5 | 29.4 |
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 is shown below:
2018£m | 2017£m | |
Short-term benefits | 1.7 | 1.4 |
Defined contribution pension costs | - | - |
Share-based payment benefits | 1.2 | 4.8 |
2.9 | 6.2 |
Short-term benefits include salary and fees, benefits and cash bonus.
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 (FY2016/17: none). Aggregate key management personnel interests in consolidated funds at 30 June 2018 were £37.8 million (30 June 2017: £42.4 million).
Transactions with subsidiaries - Company
Details of transactions between the Company and its subsidiaries are shown below:
2018£m | 2017£m | |
Transactions during the year | ||
Management fees | 81.9 | 110.3 |
Net dividends | 118.4 | 99.2 |
Loans advanced to/(repaid by) subsidiaries | 100.4 | 76.6 |
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 £133.0 million of gross management fees and performance fees (FY2016/17: £111.6 million) from the 91 funds (FY2016/17: 86 funds) it manages and which are classified as related parties. As at 30 June 2018, the Group had receivables due from funds of £5.5 million (30 June 2017: £5.1 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 share awards. The EBT is included within the results of the Group and the Company. As at 30 June 2018, the loan outstanding was £102.7 million (30 June 2017: £103.5 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 to the countries and communities. The Group donated £0.1 million to the Foundation during the year (FY2016/17: £0.1 million).
30) Commitments
Operating lease commitments
The Group and Company have entered into certain property leases. The future aggregate minimum lease payments under non-cancellable operating leases, taking account of escalation clauses and renewal options, fall due as follows:
Group
2018£m | 2017£m | |
Within 1 year | 2.5 | 3.0 |
Between 1 and 5 years | 3.5 | 7.3 |
Later than 5 years | 2.3 | 3.3 |
8.3 | 13.6 |
Company
2018£m | 2017£m | |
Within 1 year | 0.9 | 1.2 |
Between 1 and 5 years | - | 4.6 |
Later than 5 years | - | 1.8 |
0.9 | 7.6 |
Operating lease expenses are disclosed in note 11.
Company
The Company has undrawn loan commitments to other Group entities totalling £53.2 million (30 June 2017: £77.5 million) to support their investment activities but has no investment commitments of its own (30 June 2017: none).
31) Post-balance sheet events
On 18 July 2018 the Group acquired a 56% controlling interest in Ashmore Avenida Investments (Real Estate) LLP, the holding company of a Colombian real estate investment management firm, for a total consideration of US$14.5 million. The consideration was settled partly in cash and partly in shares of Ashmore Group plc, with US$800,000 as contingent consideration subject to certain performance criteria being met on fund raising. The acquisition provides the Group with additional AuM of US$300 million and a platform to expand into other Latin American markets, and over time, develop additional real estate businesses in other Emerging Markets.
The transaction is a non-adjusting post-balance sheet event, full details of the account impact of the transaction will be reported in the Interim Report at December 2018.
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.
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 vest. Market-related performance conditions are incorporated into the grant price of the awards. The share-based payment expense for executive awards require the estimation of the likelihood of the performance conditions being met (including total shareholder return (TSR), investment outperformance, growth in assets under management and profitability targets) that are made at the time of granting the awards for equity-settled arrangements and also at the time of vesting of awards. The Group utilises a third-party service provider to estimate the TSR performance conditions.
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.
Management also exercises judgement where 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. Such investments cease to be classified as held for sale when management has considered that they are no longer controlled by the Group. A loss of control may happen 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. 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.
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 in note 20.
The disclosure of the AuM in respect of consolidated and unconsolidated structured entities is provided in note 28.
Rebates calculations
Management fee rebates payable to customers is an area of focus as individual rebate agreements include bespoke, complex rebate calculations. Although there is no significant estimation or judgement involved, the calculation of rebates is complex and requires correct application of the agreed formula within each rebate agreement. The Group has an automated system to calculate the majority of management fee rebates. The rebate rates are subject to periodic amendments, as a result, transactions in the financial statements require complete and accurate communication of rebate rates between several teams. In addition, the assets under management used for rebate calculations are sourced from different parties including outsourced service organisations and internal teams. The reconciliation of assets under management used in calculating rebates are regularly reviewed by management.
33) Subsidiaries and related undertakings
The following is a full list of the Ashmore Group plc subsidiaries and related undertakings as at 30 June 2018 pursuant to the requirements of Statutory Instrument 2015 No. 80 The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015. The list includes the Group's subsidiaries and related undertakings, all significant holdings (greater than 20% interest), associate undertakings, joint ventures and significant holdings in Ashmore sponsored public funds in which the Group has invested seed capital:
Name | Classification | % interest | Registered address |
Ashmore Investments (UK) Limited | Subsidiary | 100.00 | 61 Aldwych, London WC2B 4AE United Kingdom |
Ashmore Investment Management Limited | Subsidiary | 100.00 | |
Ashmore Investment Advisors Limited | Subsidiary | 100.00 | |
Aldwych Administration Services Limited | Subsidiary | 100.00 | |
Ashmore Asset Management Limited | Subsidiary | 100.00 | |
Ashmore Investment Management (US) Corporation | Subsidiary | 100.00 | 475 Fifth Avenue, 15th FloorNew York, 10017USA |
Ashmore Investment Advisors (US) Corporation | Subsidiary | 100.00 | |
Ashmore Equities Investment Management (US) LLC | Subsidiary | 100.00 | |
Ashmore Investment Management (Singapore) Pte. Ltd. | Subsidiary | 100.00 | 1 George Street#15-04, Singapore 049145 |
PT Ashmore Asset Management Indonesia | Subsidiary | 66.67 | 18 Parc SCBD Tower E, 8th FloorJl. Jend. Sudirman Kav.52-53Jakarta 12190, Indonesia |
Ashmore Dana USD Nusantara | Consolidated fund | 61.72 | |
Ashmore Dana USD Equity Nusantara | Significant holding | 22.66 | |
Ashmore Management Company Colombia SAS | Subsidiary | 61.38 | Carrera 7 No. 75 -66, Office 702 Bogotá, Colombia |
Ashmore-CAF-AM Management Company SAS | Subsidiary | 53.66 | |
Ashmore Japan Co. Limited | Subsidiary | 100.00 | 11F, Shin Marunouchi Building 1-5-1 Marunouchi Chiyoda-ku Tokyo Japan 100-6511 |
Ashmore Investments (Colombia) SL | Subsidiary | 100.00 | c/ Hermosilla 11, 4ºA28001 Madrid, Spain |
Ashmore Management (DIFC ) Limited | Subsidiary | 100.00 | Office 105, Gate Village 03, Level 1 Dubai International Financial Centre Dubai, UAE |
AA Indian Development Capital Advisors Private Limited (in liquidation) | Subsidiary | 100.00 | 507A Kakad ChambersDr Annie Besant RoadWorliMumbai 400 018India |
Ashmore Investment Advisors (India) Private Limited | Subsidiary | 99.82 | |
Ashmore-Centrum India Opportunities Investment Advisers Private Limited (in liquidation) | Subsidiary | 51.00 | |
Ashmore-Centrum Funds Trustee Company Private Limited(in liquidation) | Subsidiary | 51.00 | |
Ashmore Investment Saudi Arabia | Subsidiary | 90.00 | 3rd Floor Tower B Olaya TowersOlaya Main StreetRiyadh, Saudi Arabia |
Ashmore Saudi Equity Fund | Consolidated fund | 65.62 | |
AA Development Capital Investment Managers (Mauritius) LLC | Subsidiary | 55.00 | Les Cascades Building33 Edith Cavell Street, Port LouisMauritius |
Ashmore Investments (Holdings) Limited | Subsidiary | 100.00 | |
Ashmore Emerging Markets Special Situation Opportunities Fund(GP) Limited | Subsidiary | 100.00 | Trafalgar CourtLes BanquesSt Peter PortGY1 3QLGuernsey |
Ashmore Management Company Limited | Subsidiary | 100.00 | |
Ashmore Global Special Situations Fund 3 (GP) Limited | Subsidiary | 100.00 | |
Ashmore Global Special Situations Fund 4 (GP) Limited | Subsidiary | 100.00 | |
Ashmore Global Special Situations Fund 5 (GP) Limited | Subsidiary | 100.00 | |
Ashmore Special Opportunities (GP) Limited | Subsidiary | 100.00 | |
Ashmore Special Opportunities Fund LP | Consolidated fund | 50.00 | |
Ashmore Emerging Markets Distressed Debt Fund | Consolidated fund | 40.05 | |
Ashmore Emerging Markets Debt and Currency Fund Limited | Consolidated fund | 100.00 |
Name | Classification | % interest | Registered address |
Ashmore SICAV Absolute Return Debt Fund | Significant holding | 27.69 | 6 rue Lou HemmerL - 1748 SenningerbergGrand-Duchy of Luxembourg |
Ashmore SICAV 2 Global Bond Fund | Consolidated fund | 100.00 | |
Ashmore SICAV Multi-Asset Fund | Consolidated fund | 51.71 | |
Ashmore SICAV Active Equity Fund | Significant holding | 28.41 | |
Ashmore SICAV Investment Grade Total Return Fund | Consolidated fund | 78.92 | |
Ashmore Emerging Markets Equity Fund | Consolidated fund | 98.08 | 475 Fifth Avenue, 15th FloorNew York, 10017USA |
Ashmore Emerging Markets Active Equity Fund | Consolidated fund | 99.38 | |
Ashmore Investment Consulting (Beijing) Co. Limited (in liquidation) | Subsidiary | 100.00 | Room 3401, Tower 1, China World Trade Center Office, No.1 Jian Wai Da Jie, Chaoyang DistrictBeijing, China |
Everbright Ashmore China Real Estate Fund | Significant holding | 22.78 | 89 Nexus WayCamana Bay, Grand CaymanKY1-9007, Cayman Islands |
Everbright Ashmore Services and Consulting Limited | Associate | 30.00 | c/o Appleby Trust (Cayman) Ltd.,Clifton House, 75 Fort StreetPO Box 1350, Grand CaymanKY-1108, Cayman Islands |
EA Team Investment Partners Limited | Associate | 30.00 | |
Everbright Ashmore Real Estate Partners Limited | Associate | 30.00 | 190 Elgin Avenue, George Town,Grand CaymanKY1-9007, Cayman Islands |
Everbright Ashmore Investment Management Limited | Associate | 30.00 | |
Ashmore Investment Management India LLP | Associate | 30.00 | 507A Kakad ChambersDr Annie Besant RoadWorli, Mumbai 400 018India |
Taiping Fund Management Company Limited | Associate | 8.50 | Unit 101, Building No.5, 135 Handan Road, Shanghai, China |
VTB-Ashmore Capital Holdings Limited | Associate | 50.00 | Trafalgar CourtLes BanquesSt Peter PortGY1 3QLGuernsey |
VTBC-Ashmore Investment Management Limited | Associate | 50.00 | |
VTBC-Ashmore Partnership Management 1 Limited | Associate | 50.00 |
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 2018 or 30 June 2017. Statutory accounts for 2017 have been delivered to the registrar of companies, and those for 2018 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 2017 or 2018.