RNS Number : 5727N
Ashmore Group PLC
10 September 2013
 



Ashmore Group PLC

10 September 2013

RESULTS FOR THE YEAR ENDED 30 JUNE 2013

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

Highlights

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

Analysts briefing

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

Contacts

For further information please contact:

Ashmore Group plc

Paul Measday

Investor Relations                                   +44 (0)20 3077 6278

 

FTI Consulting - PR to Ashmore Group plc

Andrew Walton                                       +44 (0)20 7269 7204

Paul Marriott                                            +44 (0)20 7269 7252

 



 

Chairman's statement

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

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

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

Recognising the financial performance achieved during the year, and the Board's confidence in future growth, the Directors are recommending a final dividend of 11.75p per share for the year ended 30 June 2013, which, subject to shareholders' approval, will be paid on 6 December, to those shareholders on the register on 8 November. The Board intends to pay a progressive dividend over time, taking into consideration factors such as prospects for the Group's earnings, demands on the Group's financial resources, and the markets in which the Group operates.

Corporate governance

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

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

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

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

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

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

Michael Benson

Chairman



 

Chief Executive Officer's report

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

AuM development

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

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

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

Investment performance

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

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

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

Financial performance

Revenue

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

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

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

Cost structure

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

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

Profitability

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

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

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

Strategic progress

Distribution

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

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

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

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

Local asset management

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

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

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

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

Seed capital

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

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

People and culture

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

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



 

Outlook

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

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

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

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

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

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

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

Mark Coombs

Chief Executive Officer

Business Review

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

Key Performance Indicators


Year ended
30 June 2013

Year ended
30 June 2012

Year end AuM

US$77.4 bn

US$63.7 bn

Average AuM

US$72.2 bn

US$63.6 bn

Average net management fee margins (bps)

68 bps

74 bps

EBITDA margin

71%

71%

Variable compensation ("VC")/ EBVCIT

20%

18%

Year end headcount

291

257

 

Ashmore Group results

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

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

Summary non-GAAP financial performance

 

FY2012/13
£m

FY2011/12
£m

Net revenue

355.5

333.3

Adjusted EBITDA

249.2

237.0

Adjusted operating profit

240.0

227.1

Net interest income

1.6

2.5

Seed capital-related items

17.2

1.7

Acquisition-related items

(1.1)

11.9

Profit before tax

257.6

243.2

 

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

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

Assets under management and fund flows

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

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

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

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

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

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

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

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

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

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

New funds and accounts

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

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

AuM movements by investment theme

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

Reclassifications typically occur when a fund's investment objectives, investment guidelines or performance benchmark change such that its characteristics cause it to be included in a different theme. During the period this was particularly the case with clients that were previously invested in external debt funds and chose to define bespoke benchmarks incorporating other fixed income themes; these funds are then classified as blended debt.

AuM movements by investment theme as mandated

Theme

AuM

30 Jun 12

(US$bn)

Performance

(US$bn)

Gross subscriptions

(US$bn)

Gross

redemptions

(US$bn)

Net flows

(US$bn)

Reclassification

(US$bn)

AuM

30 Jun 13

(US$bn)

Average net management fee margins

(bps)

External debt

15.9

0.1

4.1

(4.5)

(0.4)

(1.1)

14.5

65

Local currency

10.0

(0.4)

9.5

(1.5)

8.0

-

17.6

60

Corporate debt

2.4

(0.1)

4.7

(0.9)

3.8

-

6.1

93

Blended debt

12.4

0.1

3.5

(0.5)

3.0

2.1

17.6

55

Equities

6.2

0.6

1.0

(2.3)

(1.3)

-

5.5

73

Alternatives

2.6

(0.1)

0.3

(0.5)

(0.2)

0.4

2.7

240

Multi-strategy

5.6

0.0

1.9

(2.4)

(0.5)

(1.4)

3.7

118

Overlay/Liquidity

8.6

0.1

2.2

(1.2)

1.0

-

9.7

17

Total

63.7

0.3

27.2

(13.8)

13.4

-

77.4

68

 

AuM - as invested

The following tables show AuM 'as invested' by underlying asset class which adjusts from 'by mandate' to take account of the allocation into the underlying asset class of the multi-strategy and blended debt themes; and of cross-over investment from within certain external debt funds. This analysis continues to demonstrate the greater significance of the local currency and corporate debt themes, with the former being the largest single theme on an 'as invested' basis.

AUM as classified by mandate


FY2012/13

FY2011/12

Theme

AuM (US$bn)

%

AuM (US$bn)

%

External debt

14.5

19

15.9

25

Local currency

17.6

23

10.0

16

Corporate debt

6.1

8

2.4

4

Blended debt

17.6

23

12.4

19

Equities

5.5

7

6.2

10

Alternatives

2.7

3

2.6

4

Multi-strategy

3.7

5

5.6

9

Overlay / Liquidity

9.7

12

8.6

13

Total

77.4

100

63.7

100

 

AUM as invested


FY2012/13

FY2011/12

Theme

AuM (US$bn)

%

AuM (US$bn)

%

External debt

20.4

26

21.1

33

Local currency

23.1

30

14.0

22

Corporate debt

14.4

19

8.7

14

Equities

6.5

8

7.0

11

Alternatives

3.3

4

4.2

7

Overlay / Liquidity

9.8

13

8.7

13

Total

77.4

100

63.7

100

 

 

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

Investor profile

Investor type

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

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

AuM by investor type

Type

30 June 2013
%

30 June 2012
 %

Government-related

41

37

Pension plans

30

30

Corporates/Financial institutions

12

13

Funds/Sub-advisers

4

7

Third-party intermediaries

11

11

Foundations/Endowments

2

2

Total

100

100

 

 

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

AuM by investor geography

Geography

30 June 2013
%

30 June 2012
 %

Americas

19

20

Europe ex UK

20

21

UK

12

12

Middle East & Africa

19

18

Asia Pacific

30

29

Total

100

100

 

 

Management fees and performance fees

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

Underlying US dollar management and performance fees

Theme

AuM

30 Jun 2012

(US$bn)

AuM

30 Jun 2013

(US$bn)

Net management fees

FY2012/13

(US$m)

Average management

fee margin

(bps)

Performance

fees

FY2012/13

(US$m)

External debt

15.9

14.5

100.8

65

25.2

Local currency

10.0

17.6

85.0

60

10.8

Corporate debt

2.4

6.1

34.7

93

4.9

Blended debt

12.4

17.6

87.2

55

2.2

Equities

6.2

5.5

43.9

73

1.5

Alternatives

2.6

2.7

61.8

240

0.6

Multi-strategy

5.6

3.7

58.7

118

7.5

Overlay/Liquidity

8.6

9.7

15.7

17

 -

Total

63.7

77.4

487.8

68

52.7

 

Management fees

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

Performance fees

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

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

Operating costs and EBITDA margin

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

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

 

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

Year end headcount


FY2012/13

FY2011/12

FY2010/11

FY2009/10

FY2008/09

Global asset management

240

217

207

120

106

Local asset management

51

40

39

45

36

Total

291

257

246

165

142

 

Support staff

195

166

157

99

87

Investment professionals

96

91

89

66

55

Total

291

257

246

165

142

 

Employee costs


FY2012/13

FY2011/12

FY2010/11

FY2009/10

FY2008/09

Variable compensation

57.2

49.4

56.2

46.0

24.5

Fixed personnel costs

25.1

23.6

15.3

12.8

11.5

Total

82.3

73.0

71.5

58.8

36.0

 

 

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

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

Finance income

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

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

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

Taxation           

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

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

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

Balance sheet management and cash flow

It is the Group's policy to maintain a strong balance sheet in order to support regulatory capital requirements, to meet the commercial demands of current and prospective investors, and to fulfil development needs across the business which include funding establishment costs of distribution offices and local asset management ventures, seeding new funds, trading or investment in funds or other assets and other strategic initiatives.

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

Cash

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

The Group's cash balances are invested with the objective of optimising returns within a strict framework which emphasises capital preservation, security, liquidity and counterparty risk. The Group's cash and cash equivalents, comprised of short-term deposits with banks and liquidity funds, are predominantly held with counterparties with credit ratings ranging from A- to AAAm as at 30 June 2013 (2012: A to AAAm).

Seed capital investments

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

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

Purchase of own shares

The Group purchases and holds shares through an Employee Benefit Trust (EBT) in anticipation of the exercise of outstanding share options and the vesting of share awards. At 30 June 2013 the EBT owned 35,205,106 (30 June 2012: 32,668,764) ordinary shares.

Goodwill and intangible assets

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

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

Deferred acquisition costs (DAC)

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

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

Foreign exchange management

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

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

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

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

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

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

Dividend

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

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

Graeme Dell

Group Finance Director

Consolidated statement of comprehensive income

Year ended 30 June 2013


Notes

2013
£m

2012
£m

Management fees


316.0

302.6

Performance fees


33.4

25.4

Other revenue


6.2

6.2

Total revenue


355.6

334.2

Distribution costs


(4.8)

(3.7)

Foreign exchange

7

4.7

2.8

Net revenue


355.5

333.3





Gains/(losses) on investment securities

21

4.9

(0.4)

Change in third-party interests in consolidated funds

21

(1.2)

(0.4)

Personnel expenses

9

(82.3)

(73.0)

Other expenses

11

(44.9)

(34.4)

Operating profit


232.0

225.1





Finance income

8

26.6

22.2

Finance expense

8

(0.9)

(4.1)

Share of profit from associates and a joint venture

28

(0.1)

-

Profit before tax


257.6

243.2





Tax expense

12

(56.0)

(57.5)

Profit for the year


201.6

185.7





Other comprehensive income, net of related tax effect




Items that may be reclassified subsequently to profit or loss:




Exchange adjustments on translation of foreign operations


2.6

0.1

Net fair value movements on available-for-sale financial assets including tax


(1.8)

(4.2)

Cash flow hedge intrinsic value (losses)/gains including tax


(0.4)

0.1

Total comprehensive income for the year


202.0

181.7





Profit attributable to:




Equity holders of the parent


202.2

181.5

Non-controlling interests


(0.6)

4.2

Profit for the year


201.6

185.7





Total comprehensive income attributable to:




Equity holders of the parent


202.2

177.2

Non-controlling interests


(0.2)

4.5

Total comprehensive income for the year


202.0

181.7





Earnings per share




Basic

13

29.98p

26.82p

Diluted

13

28.69p

25.80p


Consolidated balance sheet

As at June 2013


Notes

2013
£m

2012
£m

Assets




Non-current assets




Goodwill and intangible assets

15

84.3

98.1

Property, plant and equipment

16

3.7

4.2

Investment in associates and joint ventures

28

11.8

2.3

Non-current asset investments

21

9.1

5.6

Other receivables


0.1

0.7

Deferred acquisition costs

17

0.6

4.7

Deferred tax assets

19

21.0

15.1



130.6

130.7

Current assets




Investment securities

21

49.7

60.6

Available-for-sale financial assets

21

55.6

54.6

Trade and other receivables

18

77.3

64.1

Derivative financial instruments

22

-

0.5

Cash and cash equivalents


395.5

346.6



578.1

526.4





Non-current assets held-for-sale

21

104.9

49.9

Total assets


813.6

707.0





Equity and liabilities




Capital and reserves - attributable to equity holders of the parent




Issued capital

23

-

-

Share premium


15.7

15.7

Retained earnings


608.0

516.6

Foreign exchange reserve


5.3

3.1

Available-for-sale fair value reserve


0.7

2.5

Cash flow hedging reserve


(1.0)

(0.6)



628.7

537.3

Non-controlling interests


17.1

20.8

Total equity


645.8

558.1

Liabilities




Non-current liabilities




Trade and other payables

26

-

5.8

Deferred tax liabilities

19

3.0

1.0



3.0

6.8

Current liabilities




Current tax


28.9

27.9

Third-party interests in consolidated funds

21

12.8

10.5

Derivative financial instruments

22

2.1

1.5

Trade and other payables

26

94.1

87.1



137.9

127.0





Non-current liabilities held-for-sale

21

26.9

15.1

Total liabilities


167.8

148.9

Total equity and liabilities


813.6

707.0

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

Mark Coombs                                                      Graeme Dell

Chief Executive Officer                                           Group Finance Director


Consolidated Statement of changes in equity

For the year ended 30 June 2013


Attributable to equity holders of the parent




Issued capital £m

Share premium
 £m

Retained earnings
£m

Foreign exchange reserve
£m

Available-for-sale (AFS) reserve
£m

Cash flow hedging reserve
£m

Total
£m

Non-controlling interests
£m

Total
equity
 £m

Balance at 30 June 2011

-

15.7

473.5

3.3

6.7

(0.7)

498.5

16.4

514.9











Non-controlling interests arising on establishment of a subsidiary

-

-

-

-

-

-

-

0.1

0.1

Profit for the year

-

-

181.5

-

-

-

181.5

4.2

185.7

Other comprehensive income:










Translation adjustments on foreign  operations

-

-

-

(0.2)

-

-

(0.2)

0.3

0.1

Net loss on AFS assets including tax

-

-

-

-

(3.8)

-

(3.8)

-

(3.8)

Gains on AFS previously recognised in equity

-

-

-

-

(0.4)

-

(0.4)

-

(0.4)

Cash flow hedge intrinsic  value gains

-

-

-

-

-

0.1

0.1

-

0.1

Purchase of own shares

-

-

(40.8)

-

-

-

(40.8)

-

(40.8)

Share-based payments

-

-

4.6

-

-

-

4.6

5.7

10.3

Deferred tax related to share-based payments

-

-

(1.7)

-

-

-

(1.7)

-

(1.7)

Proceeds received on exercise of vested options

-

-

0.5

-

-

-

0.5

-

0.5

Dividends to equity holders

-

-

(101.0)

-

-

-

(101.0)

-

(101.0)

Dividends to non-controlling interests

-

-

-

-

-

-

-

(5.9)

(5.9)

Balance at 30 June 2012

-

15.7

516.6

3.1

2.5

(0.6)

537.3

20.8

558.1











Profit for the year

-

-

202.2

-

-

-

202.2

(0.6)

201.6

Other comprehensive income:










Translation adjustments on foreign operations

-

-

-

2.2

-

-

2.2

0.4

2.6

Net gain on AFS assets including tax

-

-

-

-

0.1

-

0.1

-

0.1

Gains on AFS previously recognised in equity

-

-

-

-

(1.9)

-

(1.9)

-

(1.9)

Cash flow hedge intrinsic value losses

-

-

-

-

-

(0.4)

(0.4)

-

(0.4)

Purchase of own shares

-

-

(30.8)

-

-

-

(30.8)

(1.3)

(32.1)

Share-based payments

-

-

25.5

-

-

-

25.5

3.5

29.0

Deferred tax related to share-based payments

-

-

(0.7)

-

-

-

(0.7)

-

(0.7)

Proceeds received on exercise of
vested options

-

-

0.4

-

-

-

0.4

-

0.4

Dividends to equity holders

-

-

(105.2)

-

-

-

(105.2)

-

(105.2)

Dividends to non-controlling interests

-

-

-

-

-

-

-

(5.7)

(5.7)

Balance at 30 June 2013

-

15.7

608.0

5.3

0.7

(1.0)

628.7

17.1

645.8


Consolidated cash flow statement

For the year ended 30 June 2013


2013
£m

2012
£m

Operating activities



Cash receipts from customers

358.7

329.1

Cash paid to suppliers and employees

(78.5)

(90.3)

Cash generated from operations

280.2

238.8

Taxes paid

(59.4)

(58.2)

Net cash from operating activities

220.8

180.6




Investing activities



Interest received

2.7

3.3

Dividends received

1.7

0.3

Acquisitions

(9.0)

-

Contingent consideration payments

(8.6)

-

Changes in upfront consideration relating to acquisitions

-

0.4

Purchase of non-current asset investments

(3.5)

(10.3)

Purchase of non-current financial assets held-for-sale

(102.6)

(59.9)

Purchase of available-for-sale financial assets

(42.9)

(5.5)

Purchase of investment securities

(62.0)

(161.3)

Sale of non-current asset investments

0.2

-

Sale of held-for-sale financial assets

32.5

-

Sale of available-for-sale financial assets

73.5

13.5

Sale of investment securities

51.1

160.0

Net cash flow arising on initial consolidation/deconsolidation of seed capital investments

(0.9)

1.9

Purchase of property, plant and equipment

(1.9)

(2.6)

Net cash used in investing activities

(69.7)

(60.2)




Financing activities



Dividends paid to equity holders

(105.2)

(101.0)

Dividends paid to non-controlling interests

(5.7)

(5.9)

Subscriptions into consolidated funds

42.3

6.3

Redemptions from consolidated funds

(7.9)

(5.2)

Distributions paid by consolidated funds

(1.0)

--

Purchase of own shares

(30.8)

(40.8)

Net cash used in financing activities

(108.3)

(146.6)




Net increase/(decrease) in cash and cash equivalents

42.8

(26.2)




Cash and cash equivalents at beginning of year

346.6

369.0

Effect of exchange rate changes on cash and cash equivalents

6.1

3.8

Cash and cash equivalents at end of year

395.5

346.6




Cash and cash equivalents at end of year comprise:



Cash at bank and in hand

78.4

157.0

Daily dealing liquidity funds

317.1

189.6


395.5

346.6

 


Company balance sheet

As at 30 June 2013


Notes

2013
£m

2012
£m

Assets




Non-current assets




Goodwill and intangible assets

15

4.1

4.1

Property, plant and equipment

16

1.4

2.5

Investment in subsidiaries

27

20.1

20.1

Loans due from subsidiaries

18

18.9

17.3

Deferred tax assets

19

13.7

13.7



58.2

57.7

Current assets




Trade and other receivables

18

257.8

215.2

Cash and cash equivalents


271.7

210.6



529.5

425.8

Total assets


587.7

483.5





Equity and liabilities




Capital and reserves




Issued capital

23

-

-

Share premium


15.7

15.7

Retained earnings


526.2

419.5

Total equity attributable to equity holders of the Company


541.9

435.2





Liabilities




Current liabilities




Current tax


-

1.8

Trade and other payables

26

45.8

46.5



45.8

48.3

Total liabilities


45.8

48.3

Total equity and liabilities


587.7

483.5

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

Mark Coombs                                                      Graeme Dell

Chief Executive Officer                                           Group Finance Director


Company statement of changes in equity

For the year ended 30 June 2013


Issued
capital
£m

Share
premium
£m

Retained earnings
 £m

Total equity attributable to equity holders of the parent £m

Balance at 30 June 2011

-

15.7

356.4

372.1






Profit for the year

-

-

201.7

201.7

Purchase of own shares

-

-

(40.8)

(40.8)

Share-based payments

-

-

4.6

4.6

Deferred tax related to share-based payments

-

-

(1.9)

(1.9)

Proceeds received on exercise of vested options

-

-

0.5

0.5

Dividends to equity holders

-

-

(101.0)

(101.0)

Balance at 30 June 2012

-

15.7

419.5

435.2

Profit for the year

-

-

220.2

220.2

Purchase of own shares

-

-

(30.9)

(30.9)

Share-based payments

-

-

22.9

22.9

Deferred tax related to share-based payments

-

-

(0.7)

(0.7)

Proceeds received on exercise of vested options

-

-

0.4

0.4

Dividends to equity holders

-

-

(105.2)

(105.2)

Balance at 30 June 2013

-

15.7

526.2

543.6

 


Company cash flow statement

As at 30 June 2013


2013
£m

2012
£m

Operating activities



Cash receipts from customers and other Group companies

79.7

66.8

Cash paid to suppliers and employees and other Group companies

(47.6)

(54.8)

Net cash from operating activities

32.1

12.0




Investing activities



Interest received

0.8

1.2

Loans to subsidiaries

(34.6)

(85.5)

Dividends received from subsidiaries

196.7

194.8

Purchase of property, plant and equipment

(0.7)

(1.3)

Net cash from investing activities

162.2

109.2




Financing activities



Dividends paid

(105.2)

(101.0)

Purchase of own shares

(30.8)

(40.8)

Net cash used in financing activities

(136.0)

(141.8)




Net increase/(decrease) in cash and cash equivalents

58.3

(20.6)




Cash and cash equivalents at beginning of year

210.6

231.2

Effect of exchange rate changes on cash and cash equivalents

2.8

-

Cash and cash equivalents at end of year

271.7

210.6




Cash and cash equivalents at end of year comprise:



Cash at bank and in hand

7.6

54.1

Daily dealing liquidity funds

264.1

156.5


271.7

210.6


Notes to the financial statements

 

1)   General information

Ashmore Group plc (the 'Company') is a public limited company listed on the London Stock Exchange and incorporated and domiciled in the United Kingdom. The consolidated financial statements of the Company and its subsidiaries (together the 'Group') for the year ended 30 June 2013 were authorised for issue by the Board of Directors on 9 September 2013.

2)   Basis of preparation

The Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) effective for the Group's reporting for the year ended 30 June 2013 and applied in accordance with the provisions of the Companies Act 2006.

The financial statements have been prepared on a going concern basis under the historical cost convention, except for the measurement at fair value of certain financial assets that are available-for-sale or classified as fair value through profit or loss.

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 which allows it not to present its individual statement of comprehensive income and related notes.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Further information about key assumptions and other key sources of estimation and areas of judgement are set out in note 32.

3)   Effects of new and amended IFRSs

New standard applied

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

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

New standards and interpretations not yet adopted

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

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

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

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

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

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

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

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



 

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

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

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

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

4)   Significant accounting policies

The following principal accounting policies have been applied consistently where applicable to all years presented in dealing with items which are considered material in relation to the Group and Company financial statements, unless otherwise stated.

Basis of consolidation

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

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

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

Associates and joint ventures

Associates are partly owned entities over which the Group has significant influence but no control. Joint ventures are entities through which the Group and other parties undertake an economic activity which is subject to joint control.

Investments in associates and interests in joint ventures are recognised using the equity method of accounting. Under this method, the investments are initially recognised at cost, including attributable goodwill, and are adjusted thereafter for the post-acquisition changes in the Group's share of net assets. The Group's share of post-acquisition profit or loss is recognised in the statement of comprehensive income.

Where the Group's financial year is not coterminous with those of its associates or joint ventures, unaudited interim financial information is used after appropriate adjustments have been made.

Foreign currency translation

The Group's financial statements are presented in Pounds Sterling (Sterling), which is also the Company's functional and presentation currency. Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates; the functional currency. Transactions in foreign currencies are translated by the Group's entities at the foreign exchange rates ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the prevailing exchange rate. Foreign exchange differences arising on translation are recognised in the statement of comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into Sterling at the foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated into Sterling at rates approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on translation are recognised directly in other comprehensive income.

Business combinations

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

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequently, changes to the fair value of the contingent consideration that is deemed to be a liability will be recognised in accordance with IAS 39 in profit or loss. If the contingent consideration is classified as equity, it will not be re-measured.

Goodwill

The cost of a business combination in excess of the fair value of net identifiable assets or liabilities acquired, including intangible assets identified, is recognised as goodwill and stated at cost less any accumulated impairment losses. Goodwill has an indefinite useful life, is not subject to amortisation and is tested annually for impairment or when there is an indication of impairment.

Intangible assets

The cost of intangible assets, such as management contracts and brand names, acquired as part of a business combination are their fair value as at the date of acquisition. The fair value at the date of acquisition is calculated using the discounted cash flow methodology and represents the valuation of the net residual revenue stream arising from the management contracts and brand name in place at the date of acquisition.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and impairment losses. Intangible assets are amortised, if appropriate, over their useful lives which have been assessed as being between 31 months and 10 years.

Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses.

Cost is determined on the basis of the direct and indirect costs that are directly attributable. Property, plant and equipment is depreciated using the straight-line method over the estimated useful lives, assessed to be five years for office equipment and four years for IT equipment. The residual values and useful lives of assets are reviewed at least annually.

Deferred acquisition costs

Costs that are directly attributable to securing an investment management contract are deferred if they can be identified separately and measured reliably and it is probable that they will be recovered. Deferred acquisition costs represent the contractual right to benefit from providing investment management services and are charged as the related revenue is recognised.

Financial instruments

Recognition and initial measurement

Financial instruments are recognised when the Group becomes party to the contractual provisions of an instrument, initially at fair value plus transaction costs except for financial assets classified at fair value through profit or loss. Purchases or sales of financial assets are recognised on the trade date, being the date that the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or been transferred or when the Group has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when the obligation under the liability has been discharged, cancelled or expires.

Subsequent measurement

The subsequent measurement of financial instruments depends on their classification in accordance with IAS 39.

Financial assets

The Group may, from time to time, invest in funds where an Ashmore Group subsidiary is the investment manager or an advisor (seeding). Where the holding in such investments is deemed to represent a controlling stake and is acquired exclusively with a view to subsequent disposal through sale or dilution, these seed capital investments are recognised as non-current financial assets held-for-sale in accordance with IFRS 5 Non-current assets held-for-sale and discontinued operations. The Group recognises 100% of the investment in the fund as a "held-for-sale" asset and the interest held by other parties as a "liability held-for-sale". Where control is not deemed to exist, and the assets are readily realisable, they are recognised as available-for-sale financial assets. Where the assets are not readily realisable, they are recognised as non-current asset investments. If a seed capital investment remains under control of the Group for more than one year from the original investment date, the underlying fund is consolidated line by line.

Investment securities

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

Non-current financial assets held-for-sale

Non-current financial assets held-for-sale are measured at the lower of their carrying amount and fair value less costs to sell except where measurement and re-measurement is outside the scope of IFRS 5. Where investments that have initially been recognised as non-current financial assets held-for-sale, because the Group has been deemed as holding a controlling stake, are subsequently disposed of or diluted such that the Group's holding is no longer deemed a controlling stake, the investment will subsequently be classified as an available-for-sale financial asset. Subsequent movements will be recognised in accordance with the Group's accounting policy for the newly adopted classification.

Available-for-sale financial assets

Available-for-sale financial assets are either financial assets allocated specifically to this category or are financial assets that cannot be assigned to any other category. They are carried at fair value and changes in fair values are recognised in other comprehensive income, until the asset is disposed of or impaired, at which time the cumulative gain or loss previously recognised in other comprehensive income is included in profit for the year as part of comprehensive income.

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

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



 

(i)    Non-current asset investments

Non-current asset investments include closed-end funds which are classified as FVTPL. They are held at fair value with changes in fair value being recognised through the consolidated statement of comprehensive income. Fair value is assessed by taking account of the extent to which potential dilution of gains or losses may arise as a result of additional investors subscribing to the fund where the final close of a fund has not occurred.

(ii)   Derivatives

Derivatives include foreign exchange forward contracts and options used by the Group to manage its foreign currency exposures and those held in consolidated funds.

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered and subsequently re-measured at fair value. Transaction costs are recognised immediately in the statement of comprehensive income. All derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives are taken directly in profit or loss, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income.

Trade and other receivables

Trade and other receivables are initially recorded at fair value plus transaction costs. The fair value on acquisition is normally the cost. Impairment losses with respect to the estimated irrecoverable amount are recognised through the statement of comprehensive income when there is appropriate evidence that trade and other receivables are impaired. However, if a longer-term receivable carries no interest, the fair value is estimated as the present value of all future cash payments or receipts discounted using the Group's weighted average cost of capital. The resulting adjustment is recognised as interest expense or interest income. Subsequent to initial recognition these assets are measured at amortised cost less any impairment.

Cash and cash equivalents

Cash represents cash at bank and in hand and cash equivalents comprise short-term deposits and investments in money market instruments with an original maturity of three months or less.

Financial liabilities

Non-current financial liabilities held-for-sale

Non-current financial liabilities represent interests held by other parties in funds in which the Group recognises 100% of the investment in the fund as a held-for-sale financial asset. These liabilities are carried at fair value with gain or losses recognised in the statement of comprehensive income within finance income or expenses.

Financial liabilities at FVTPL

Financial liabilities at FVTPL include derivative financial instruments and third-party interests in consolidated funds. They are carried at fair value with gains or losses recognised in the statement of comprehensive income within  finance income or expense.

Other financial liabilities

Other financial liabilities including trade and other payables are subsequently measured at amortised cost using the effective interest rate method.

Fair value estimation

Securities listed on a recognised stock exchange or dealt on any other regulated market that operates regularly, recognised and open to the public, are valued at the last known available closing bid price. If a security is traded on several actively traded and organised financial markets, the valuation is made on the basis of the last known bid price on the main market on which the securities are traded. In the case of securities for which trading on an actively traded and organised financial market is not significant, but which are bought and sold on a secondary market with regulated trading among security dealers (with the effect that the price is set on a market basis), the valuation may be based on this secondary market.

Where instruments are not listed on any stock exchange or not traded on any regulated markets, valuation techniques are used by valuation specialists. These techniques include the market approach, the income approach or the cost approach for which sufficient and reliable data is available. The use of the market approach generally consists of using comparable market transactions or using techniques based on market observable inputs, while the use of the income approach generally consists of the net present value of estimated future cash flows, adjusted as deemed appropriate for liquidity, credit, market and/or other risk factors.

Investments in open-ended funds are valued on the basis of last available NAV of the units or shares of such funds.

The fair value of the derivatives is their quoted market price at the balance sheet date.

Hedge accounting

The Group applies cash flow hedge accounting when the transactions meet the specified hedge accounting criteria.
To qualify, the following conditions must be met:

formal documentation of the relationship between the hedging instrument(s) and hedged item(s) must exist at inception;

the hedged cash flows must be highly probable and must present an exposure to variations in cash flows that could ultimately affect profit and loss;

the effectiveness of the hedge can be reliably measured; and

the hedge must be highly effective, with effectiveness assessed on an ongoing basis.

For qualifying cash flow hedges, the change in fair value of the effective hedging instrument is initially recognised in other comprehensive income and is released to profit for the year as part of comprehensive income in the same period during which the relevant financial asset or liability affects profit or loss.

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

Impairment

General

The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income.

The recoverable amount of assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using the Group's weighted average cost of capital. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

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

Goodwill

Goodwill is tested for impairment annually or whenever there is an indication that the carrying amount may not be recoverable based on management's judgements regarding the future prospects of the business, estimates of future cash flows and discount rates. When assessing the appropriateness of the carrying value of goodwill at year end, the recoverable amount is considered to be the greater of fair value less costs to sell or value in use The pre-tax discount rate applied is based on the Group's weighted average cost of capital after making allowances for specific risks.

The business of the Group is managed as a single unit, with asset allocations, research and other such operational practices reflecting the commonality of approach across all fund themes. Therefore, for the purpose of testing goodwill for impairment, the Group is considered to have one cash-generating unit to which all goodwill is allocated and, as a result, no further split of goodwill into smaller cash-generating units is possible and the impairment review is conducted for the Group as a whole.

An impairment loss in respect of goodwill is not reversed.

Revenue

Revenue comprises management fees, performance fees and other revenue. Revenue is recognised in the statement of comprehensive income as and when the related services are provided. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Specific revenue recognition policies are:

Management fees

Management fees net of rebates are accrued over the period for which the service is provided. Where management fees are received in advance these are recognised over the period of the provision of the asset management service.

Performance fees

Performance fees net of rebates relate to the performance of funds managed during the period and are recognised when the quantum of the fee can be estimated reliably and it is probable that the fee will crystallise. This is usually at the end of the performance period or upon early redemption by a client.

Other revenue

Other revenue includes transaction, structuring and administration fees, and reimbursement by funds of costs incurred by the Group. This revenue is recognised when the related services are provided.

Distribution costs

Distribution costs are cost of sales payable to third parties and are recognised over the period for which the service is provided.

Employee benefits

Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of comprehensive income when payable in accordance with the scheme particulars.

Share-based payments

The Group issues share awards to its employees under share-based compensation plans.

For equity-settled awards the fair value of the amounts payable to employees is recognised as an expense with a corresponding increase in equity, over the vesting period after adjusting for estimated number of shares that are expected to vest. The fair value is measured at grant date using an appropriate valuation model, taking into account the terms and conditions upon which the instruments were granted. At each balance sheet date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management's best estimate of the awards that are ultimately expected to vest is computed. The movement in cumulative expense is recognised in the statement of comprehensive income with a corresponding entry within equity.

For cash-settled awards the fair value of the amounts payable to employees is recognised as an expense with a corresponding liability on the Group's balance sheet. The fair value is measured using an appropriate valuation model, taking into account the estimated number of awards that are expected to vest and the terms and conditions upon which the instruments were granted. During the vesting period, the liability recognised represents the portion of the vesting period that has expired at balance sheet date multiplied by the fair value of the awards at that date. Movements in the liability are recognised in the statement of comprehensive income.

Operating leases

Payments payable under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are recognised on a straight-line basis over the lease term and are recorded as a reduction in premises costs.

Finance income and expense

Finance income includes interest receivable on the Group's cash and cash equivalents, realised gains on available-for-sale financial assets and both realised and unrealised gains on held-for-sale assets.

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

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

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax

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

Deferred tax

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following differences are not provided for:

goodwill not deductible for tax purposes; and

differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

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

Dividends

Dividends are recognised when shareholders' rights to receive payments have been established.

Equity shares

The Company's ordinary shares of 0.01 pence each are classified as equity instruments. Ordinary shares issued by the Company are recorded at the fair value of the consideration received or the market price at the day of issue. Direct issue costs, net of tax, are deducted from equity through share premium. When share capital is repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity.

Own shares

Own shares are held by the EBT. The holding of the EBT comprises own shares that have not vested unconditionally to employees of the Group. In both the Group and Company, own shares are recorded at cost and are deducted from retained earnings.

Treasury shares

Treasury shares are recognised in equity and are measured at cost. Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from the sale and original cost being taken to retained earnings.

Segmental information

Key management information, including revenues, margins, investment performance, distribution costs and AuM flows, which is relevant to the operation of the Group, is reported to and reviewed by the Board on the basis of the investment management business as a whole and, hence, the Group's management considers that the Group's services and its operations are not run on a discrete geographic basis and comprise one business segment (being provision of investment management services).

Company-only accounting policies

In addition to the above accounting policies, the following specifically relate to the Company

Investment in subsidiaries

Investments by the Company in subsidiaries are stated at cost less, where appropriate, provisions for impairment.

 


5)   Segmental information

The location of the Group's non-current assets at year end other than financial instruments, deferred tax assets and post-employment benefit assets is shown in the table below. Disclosures relating to revenue are in note 6.

Analysis of non-current assets by geography


2013
£m

 2012
£m

United Kingdom

16.9

12.3

United States

82.6

96.8

Other

0.9

0.9

6)   Revenue

Management fees are accrued throughout the year in line with fluctuations in the levels of assets under management and performance fees are recognised when they can be estimated reliably and it is probable that they will crystallise. The Group is not considered to be reliant on any single source of revenue. During the year, none of the Group's funds provided more than 10% (FY2011/12: two funds provided 11.3% and 10.5%) of total revenue in the year respectively when considering management fees and performance fees on a combined basis.

Analysis of revenue by geography


2013
£m

2012
£m

United Kingdom earned revenue

320.1

294.8

United States earned revenue

27.9

34.7

Other revenue

7.6

3.8

7)   Foreign exchange

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


Closing rate as at 30 June 2013

Closing rate as at 30 June
2012

Average rate year ended
30 June
2013

Average rate year ended
30 June
 2012

US dollar

1.5213

1.5707

1.5690

1.5901

Brazilian real

3.3907

n/a

3.2216

n/a

Indonesian rupiah

15,258

n/a

15,183

n/a

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

Foreign exchange differences arose as shown below.


2013
£m

2012
£m

Net realised and unrealised hedging (losses)/gains

(1.2)

0.1

Translation gains on non-Sterling denominated monetary assets and liabilities

5.9

2.7

Total foreign exchange gains

4.7

2.8

8)   Finance income and expense


 2013
£m

2012
£m

Finance income



Interest on cash and cash equivalents

3.2

3.7

Finance income

23.4

18.5


26.6

22.2

Finance expense

(0.9)

(4.1)

Net finance income

25.7

18.1

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

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



 

9)   Personnel expenses

Personnel expenses during the year comprised the following:


2013
£m

2012
£m

Wages and salaries

20.0

18.0

Performance-related cash bonuses

25.9

34.1

Share-based payments

28.4

14.3

Social security costs

4.2

2.2

Pension costs

1.2

1.5

Other costs

2.6

2.9

Total personnel expenses

82.3

73.0

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

Number of employees

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


Average for the year ended
30 June 2013
Number

Average for the year ended
30 June 2012
Number

At

30 June 2013
Number

At

30 June 2012
Number

Total employees

280

251

291

257

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

10) Share-based payments

The total share-based payments-related cost recognised by the Group in the statement of comprehensive income is shown below:

Group

2013
£m

2012
£m

Omnibus Plan

24.8

8.9

US subsidiary operating agreement

0.3

-

Total related to compensation awards

25.1

8.9

Related to acquisition of Ashmore Equities Investment Management (US) L.L.C. (formerly Ashmore EMM L.L.C.)

3.3

5.4

Total share-based payments expense

28.4

14.3

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

The Ashmore First Discretionary Share Option Scheme (Option Scheme)

The Option Scheme was set up in October 2000. Options issued under the Option Scheme typically have a life of ten years and vest after five years from date of grant. The pro rata proportion of the fair value of options at each reporting year end has been accounted for on an equity-settled basis. No further options will be issued under the Option Scheme.

Share options outstanding under the Option Scheme were as follows:

Group and Company

2013
 Number of options

Weighted average exercise price pence

2012
 Number of options

Weighted average exercise price pence

At the beginning of the year

1,898,221

33.20

4,229,071

26.15

Exercised

(1,394,471)

32.51

(2,330,850)

20.42

Forfeited

-

-

-

-

Options outstanding at year end

503,750

35.11

1,898,221

33.20

Options exercisable

503,750

      35.11

1,898,221

33.20

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



 

Weighted average remaining contractual life of outstanding options

Group and Company

At 30 June 2013

At 30 June
2012

Outstanding options

503,750

1,898,221

Weighted average exercise price

35.11p

33.20p

Weighted average remaining contracted life (years)

2.63

3.56

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

Group and Company

Exercise price per share (p)

Exercise periods

2013
Number

2012
Number

10.00-20.00

9 December 2010 - 8 December 2015

328,750

1,578,750

20.00-30.00

27 April 2011 - 26 April 2016

125,000

143,000

170.00-180.00

8 December 2011 - 7 December 2016

50,000

176,471



503,750

1,898,221

There were no new share options granted during the year ended 30 June 2013 (FY2011/12: none).

The Executive Omnibus Incentive Plan (Omnibus Plan)

The Omnibus Plan was introduced prior to the Company listing in October 2006 and provides for the grant of share awards, market value options, premium cost options, discounted options, linked options, phantoms and/or nil cost options to employees. The Omnibus Plan will also allow bonuses to be deferred in the form of share awards with or without matching shares. These elements can be used singly or in combination. Awards granted under the Omnibus Plan typically vest after five years from date of grant, with the exception of bonus awards which vest after the shorter of five years from date of grant or on the date of termination of employment. Awards under the Omnibus Plan are accounted for as equity-settled, with the exception of phantoms which are classified as cash-settled.

The share-based payments relating to the Omnibus Plan represent the combined cash and equity-settled payments.

Total expense by year awards were granted

Group and Company

Year of grant

2013
£m

2012
£m

2007

-

(2.4)

2008

1.0

(1.1)

2009

1.0

0.5

2010

1.8

1.7

2011

3.3

(2.1)

2012

1.8

12.3

2013

15.9

-


24.8

8.9



 

Awards outstanding under the Omnibus Plan were as follows:

i)    Equity-settled awards

Group and Company

2013 Number of shares subject to awards

2013
Weighted average share price

2012
Number of shares subject to awards

2012
 Weighted average share price

Restricted share awards





At the beginning of the year

15,877,630

£2.90

15,988,966

£2.42

Granted

4,836,236

£3.29

4,834,808

£3.93

Vested

(2,333,276)

£3.72

(1,108,813)

£3.33

Forfeited

(309,784)

£3.45

(3,837,331)

£2.39

Awards outstanding at year end

18,070,806

£2.98

15,877,630

£2.90






Bonus share awards





At the beginning of the year

4,906,912

£3.01

3,450,279

£2.61

Granted

1,430,420

£3.29

1,559,408

£3.93

Vested

(1,203,234)

£3.80

(102,775)

£3.73

Forfeited

-

-

-

-

Awards outstanding at year end

5,134,098

£3.10

4,906,912

£3.01






Matching share awards





At the beginning of the year

4,906,912

£3.01

3,450,279

£2.61

Granted

1,430,420

£3.29

1,559,408

£3.93

Vested

(1,162,885)

£3.81

(5,213)

£3.61

Forfeited

(40,349)

£2.95

(97,562)

£3.34

Awards outstanding at year end           

5,134,098

£3.10

4,906,912

£3.01

Total

28,339,002

£3.02

25,691,454

£2.95

ii)   Cash-settled awards

Group and Company

2013 Number of shares subject to awards

2013
Weighted average share price

2012
Number of shares subject to awards

2012
 Weighted average share price

Restricted share awards





At the beginning of the year

1,806,068

£3.54

1,265,622

£2.92

Granted

409,405

£3.29

908,239

£3.93

Vested

(1,985)

£3.31

(108,225)

£3.29

Forfeited

(8,170)

£3.94

(259,568)

£2.54

Awards outstanding at year end

2,205,318

£3.49

1,806,068

£3.54






Bonus share awards





At the beginning of the year

1,300,075

£3.55

700,151

£3.15

Granted

296,120

£3.29

638,116

£3.93

Vested

-

-

-

-

Forfeited

-

-

(38,192)

£2.70

Awards outstanding at year end

1,596,195

£3.50

1,300,075

£3.55






Matching share awards





At the beginning of the year

1,300,075

£3.55

700,151

£3.15

Granted

296,120

£3.29

638,116

£3.93

Vested

-

-

-

-

Forfeited

-

-

(38,192)

£2.70

Awards outstanding at year end

1,596,195

£3.50

1,300,075

£3.55

Total

5,397,708

£3.50

4,406,218

£3.55

iii)   Total awards

Group and Company

2013 Number of shares subject to awards

2013
Weighted average share price

2012
Number of shares subject to awards

2012
 Weighted average share price

Restricted share awards





At the beginning of the year

17,683,698

£2.96

17,254,588

£2.46

Granted

5,245,641

£3.29

5,743,047

£3.93

Vested

(2,335,261)

£2.72

(1,217,038)

£3.33

Forfeited

(317,954)

£3.46

(4,096,899)

£2.40

Awards outstanding at year end

20,276,124

£3.04

17,683,698

£2.96






Bonus share awards





At the beginning of the year

6,206,987

£3.12

4,150,430

£2.70

Granted

1,726,540

£3.29

2,197,524

£3.93

Vested

(1,203,234)

£3.80

(102,775)

£3.73

Forfeited

-

-

(38,192)

£2.70

Awards outstanding at year end

6,730,293

£3.19

6,206,987

£3.12






Matching share awards





At the beginning of the year

6,206,987

£3.12

4,150,430

£2.70

Granted

1,726,540

£3.29

2,197,524

£3.93

Vested

(1,162,885)

£3.81

(5,213)

£3.61

Forfeited

(40,349)

£2.95

(135,754)

£3.16

Awards outstanding at year end

6,730,293

£3.19

6,206,987

£3.12

Total

33,736,710

£3.10

30,097,672

£3.04

The fair value of awards granted under the Omnibus Plan is determined by the average Ashmore Group plc closing share price for the five business days prior to grant.

Where the grant of restricted and matching share awards is linked to the annual bonus process the fair value of the awards is spread over a period including the current financial year and the subsequent five years to their release date when the grantee becomes unconditionally entitled to the underlying shares. The fair value of the remaining awards is spread over the period from date of grant to the release date.

The liability arising from cash-settled awards under the Omnibus Plan at the end of the year and reported within trade and other payables in the consolidated balance sheet is £12.0million (30 June 2012: £8.7 million) of which £nil (30 June 2012: £nil) relates to vested awards.

The Approved Company Share Option Plan (CSOP)

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



Other arrangements

US subsidiary operating agreement

Under the terms of a US subsidiary's operating agreement, certain employees are eligible to receive part of their variable compensation in the form of partnership units. These awards, which typically vest five years from the date of grant depending on the satisfaction of service conditions, are accounted for as equity-settled share-based payments. The fair value of awards granted is based on the equity valuation of the subsidiary at the date of grant. Upon vesting, the holders are entitled to receive units in the subsidiary.

Share awards outstanding at year end under the operating arrangement were as follows:

Group

2013
Number of shares subject to awards

2013
Weighted average share price

(US dollars)

2012
Number of shares subject to awards

2012
Weighted average share price

(US dollars)

At the beginning of the year

-

-

-

-

Granted

54,352

$32.05

--

-

Vested

-

-

-

-

Forfeited

-

-

-

-

Awards outstanding at year end

54,352

$32.05

-

-

 

Phantom Bonus Plan

In August 2012, the Phantom Bonus Plan, a cash-settled share-based payment plan, was set up to provide long-term incentives to certain employees. The units typically vest after 5 years from date of grant, contingent upon continued employment. Units awarded under the plan carry no voting rights. The fair value of units granted under the plan is determined with reference to the equity valuation of the underlying employing entity.

13,229 awards were granted during the year and none were forfeited or vested during the year. As at 30 June 2013, 13,229 awards were outstanding and the related liability reported within trade and other payables in the consolidated and Company balance sheet is £0.1 million of which £nil relates to vested awards.

Acquisition of Ashmore Equities Investment Management (US) L.L.C. (formerly Ashmore EMM L.L.C.)

On acquisition of Ashmore Equities Investment Management (US) L.L.C., employees and management held unvested shares representing 17.9% of its partnership shares. These awards, which vest after five years depending on the satisfaction of service conditions, are accounted for as equity-settled share-based payments in accordance with IFRS 2 Share-based payment which results in an annual charge to the statement of comprehensive income during the period of vesting. Upon vesting, the holders are entitled to receive shares in Ashmore Equities Investment Management (US) L.L.C. which may be exchanged for shares in Ashmore Group plc or cash at the discretion of the Group. The grant date fair value was based on the intrinsic value proportionate with the value implied from the purchase consideration paid by the Group to acquire Ashmore Equities Investment Management (US) L.L.C..

During the year, no awards were granted (FY2011/12: none), 5,463 awards vested (FY2011/12: none) and 71,587 awards (FY2011/12: 16,760 awards) were forfeited. 317,400 awards (30 June 2012: 394,450 awards) are outstanding as at year end.

11) Other expenses

Other expenses consist of the following:


 2013
£m

2012
£m

Travel

6.0

5.9

Professional fees

2.9

4.0

Information technology and communications

5.2

4.3

Deferred acquisition costs (note 17)

1.7

2.1

Amortisation of intangible assets (note 15)

5.1

6.2

Impairment of intangible assets (note 15)

11.0

1.2

Operating leases

3.5

2.8

Premises-related costs

1.2

1.7

Insurance

0.9

0.9

Auditors' remuneration (see below)

1.1

0.9

Depreciation of property, plant and equipment (note 16)

2.4

1.6

Other expenses

3.9

2.8


44.9

34.4

 



 

Auditors' remuneration


2013
£m

2012
£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 pursuant to legislation

0.3

0.2




Fees for non-audit services:



- Fees payable to the Company's auditor and its associates for tax services

0.3

0.2

- Fees payable to the Company's auditor and its associates for other services

0.3

0.3


1.1

0.9

12) Taxation

Analysis of tax charge for the year


2013
£m

2012
£m

Current tax



UK corporation tax on profits for the year

56.7

56.5

Overseas corporation tax charge

3.9

2.4

Adjustments in respect of prior years

-

(1.6)


60.6

57.3

Deferred tax



Origination and reversal of temporary differences (see note 19)

(5.2)

-

Adjustments in respect of prior year


0.2

Effect of changes in corporation tax rates

0.6

-

Tax expense for the year

56.0

57.5

Factors affecting tax charge for the year


2013
£m

2012
£m

Profit before tax

257.6

243.2




Profit on ordinary activities multiplied by the blended UK tax rate of 23.75% (FY2011/12: 25.5%)

61.2

62.0




Effects of:



Non-deductible expenses

10.6

2.1

Deduction in respect of vested shares/exercised options (Part 12, Corporation Tax Act 2009)

(4.1)

(0.1)

Deferred tax arising from origination and reversal of temporary differences

(5.2)

-

Overseas taxes, net of overseas tax relief

(1.3)

2.4

Non-taxable income



Write-off of contingent consideration

(2.6)

(5.9)

Other non-taxable income

(2.2)

-

Tax relief on amortisation and impairment of goodwill and intangibles

(1.7)

(1.6)

Effect of deferred tax balance from changes in the UK corporation tax rate

0.6

-

Other items

0.7

-

Adjustments in respect of prior years

-

(1.4)

Tax expense for the year

56.0

57.5

Non-deductible expenses mainly comprise non-deductible IFRS 2 accounting charges with respect to share-based compensation of £6.1 million and disallowable amortisation and impairment of intangibles charges of £4.0 million.

 



 

Charge recognised in equity/other comprehensive income


2013
£m

2012
£m

Current tax on available-for-sale financial assets

-

0.1

Deferred tax on available-for-sale financial assets

-

0.2

Deferred tax on share-based payments

0.7

1.7


0.7

2.0

A reduction to the main rate of UK corporation tax from 24% to 23% was substantively enacted on 3 July 2012 and became effective from 1 April 2013. The effect of this rate reduction has been reflected in the figures set out above and the 23% rate used in the calculation of the UK's deferred tax assets and liabilities. The rate is set to fall to 21% with effect from 1 April 2014 and thereafter to 20% from 1 April 2015. These rate reductions were substantively enacted on 2 July 2013.

13) Earnings per share

Basic earnings per share is calculated by dividing the profit after tax for the financial period attributable to equity holders of the parent of £202.2 million (FY2011/12: £181.5 million) by the weighted average number of ordinary shares in issue during the period, excluding own shares.

Diluted earnings per share is 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.


2013
Number of

ordinary shares

2012
Number of ordinary shares

Weighted average number of ordinary shares used in the calculation of basic earnings per share

674,777,956

676,460,821

Effect of dilutive potential ordinary shares - share options/awards

30,328,790

26,845,937

Weighted average number of ordinary shares used in the calculation of diluted earnings per share

705,106,746

703,306,758

14) Dividends

Dividends paid in the year

Company

2013
£m

2012
£m

Final dividend for FY2011/12 - 10.75p (FY2010/11: 10.34p)

75.0

71.6

Interim dividend for FY2012/13 - 4.35p (FY2011/12: 4.25p)

30.2

29.4


105.2

101.0

In addition, the Group paid £5.7 million (FY2011/12: £5.9 million) of dividends to non-controlling interests.

Dividends declared/proposed in respect of the year

Company

2013
pence

2012
pence

Interim dividend declared per share

4.35

4.25

Final dividend proposed per share

11.75

10.75


16.10

15.00

On 9 September 2013 the Board proposed a final dividend of 11.75p per share for the year ended 30 June 2013. This has not been recognised as a liability of the Group at the year end as it has not yet been approved by shareholders. Based on the number of shares in issue at the year end which qualify to receive a dividend, the total amount payable would be £81.2 million.


15) Goodwill and intangible assets

Group

Goodwill
£m

Fund management relationships
£m

Brand

name
£m

Other
intangible assets
£m

Total
£m

Cost






At 30 June 2011, 30 June 2012 and 30 June 2013

57.5

39.5

1.8

2.6

101.4







Accumulated amortisation and impairment






At 30 June 2011

-

(0.4)

-

(0.1)

(0.5)

Amortisation charge for year

-

(5.1)

(0.2)

(0.9)

(6.2)

Impairment charge for the year

-

-

-

(1.2)

(1.2)

At 30 June 2012

-

(5.5)

(0.2)

(2.2)

(7.9)

Amortisation charge for the year

-

(4.8)

-

(0.3)

(5.1)

Impairment charge for the year

-

(9.4)

(1.6)

-

(11.0)

At 30 June 2013


(19.7)

(1.8)

(2.5)

(24.0)







Net book value






At 30 June 2011

58.7

40.1

1.8

2.6

103.2

Accumulated amortisation and impairment movement for the year

-

(5.1)

(0.2)

(2.1)

(7.4)

FX revaluation through reserves*

1.3

0.8

0.1

0.1

2.3

At 30 June 2012

60.0

35.8

1.7

0.6

98.1

Accumulated amortisation and impairment movement for the year

-

(14.2)

(1.6)

(0.3)

(16.1)

FX revaluation through reserves*

1.7

0.7

(0.1)

-

2.3

At 30 June 2013

61.7

22.3

-

0.3

84.3

* FX 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 2012 and 2013

4.1

Goodwill

The goodwill balance within the Group relates principally to the acquisition of Ashmore Equities Investment Management (US) L.L.C. in May 2011.

The goodwill balance within the Company 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 2013. The recoverable amount of the cash-generating unit to which goodwill has been allocated was determined by a value in use calculation. The calculation was based on the forecast future profitability and cash flow projections of the cash-generating unit over a 10-year period which management believes is the most appropriate timescale to review and consider performance. Budgets and plans approved by management cover the first three years of the 10-year projections. A pre-tax discount rate of 13.0% based on the Group's cost weighted cost of capital was used in calculating value in use. Adjustments required in determining the discount rate from the weighted cost of capital were not considered to have a material impact. No growth was assumed in determining projected cash flows beyond the period covered by the approved budgets and plans.

Based on management's value in use calculation, the recoverable amount was in excess of the carrying amount and no impairment was therefore deemed necessary. An increase in the discount rate by 5.0% (30 June 2012: 5.0%) would not result in the recoverable amount being lower than the carrying amount.

Fund management relationships and the brand name

Intangible assets are comprised of fund management relationships related to profit expected to be earned from clients of Ashmore Equities Investment Management (US) L.L.C. acquired in 2011 and its brand name.

During the year to 30 June 2013, as a result of the impairment indicator of the loss of certain historical fund management clients and rebranding of the equities business, it was identified that some of the Group's fund management relationships and brand name were likely to be impaired. As a result, a review of the recoverable amounts of the fund management relationships and the brand name intangible assets was undertaken during the year. The recoverable amount of each intangible asset 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. Cumulative net earnings associated with the brand name intangible asset were derived from the forecast annual royalties that would be earned as a result of the remaining assets under management, adjusted for investment performance and investor attrition.

Both intangible assets were determined to be impaired as a result of the recoverable amounts being lower than the carrying values at the date of the impairment test and consequently impaired.

A combined impairment charge of £11.0 million during the year (FY2011/12: £nil) has been included within other expenses in the Group's consolidated statement of comprehensive income. Individual impairment charges in the year for the fund management relationships and the brand name intangible assets were £9.4 million (FY2011/12: £nil) and £1.6 million (FY2011/12: £nil) respectively.

The remaining amortisation period for fund management relationships is six years (30 June 2012: seven years).

Other intangible assets

In addition, in order to incentivise Amundi, who were formerly a shareholder in Ashmore Equities Investment Management (US) L.L.C., to retain existing AuM within the business and to further increase AuM, there is an incentive fee payable after three years tied to the level of such AuM at that time. As the purpose of this is to benefit the Group going forward, a corresponding intangible asset was recognised. During the year to 30 June 2013 there has been no downward adjustment to the net present value of the incentive fee payable to Amundi at the end of the agreement. Consequently management have concluded that the associated intangible asset is not impaired. No  impairment charge (FY2011/12: £1.2 million) has been included within other expenses in the Group's consolidated statement of comprehensive income, reducing the carrying value of the intangible asset to its recoverable amount.

Other intangible assets are being amortised over a three-year period up to May 2014.

16) Property, plant and equipment

Group

2013

Fixtures, fittings and equipment
£m

2012

 Fixtures, fittings and equipment
£m

Cost



At the beginning of the year

10.4

8.1

Additions

1.9

2.6

Disposals

(1.2)

(0.3)

At the end of the year

11.1

10.4




Accumulated depreciation



At the beginning of the year

6.2

4.7

Depreciation charge for the year

2.4

1.6

Disposals

(1.2)

(0.1)

At the end of the year

7.4

6.2

Net book value at 30 June

3.7

4.2

 

Company

2013

Fixtures, fittings and equipment
£m

2012

Fixtures, fittings and equipment
£m

Cost



At the beginning of the year

6.8

5.5

Additions

0.7

1.3

At the end of the year

7.5

6.8




Accumulated depreciation



At the beginning of the year

4.3

3.2

Depreciation charge for year

1.8

1.1

At the end of the year

6.1

4.3

Net book value at 30 June

1.4

2.5



 

17) Deferred acquisition costs

Group

2013
£m

2012
£m

Cost



At the beginning of the year

14.3

14.4

Deferred acquisition costs recovered

(2.4)

(0.1)

At the end of the year

11.9

14.3




Accumulated charge



At the beginning of the year

9.6

7.5

Charge for the year (note 11)

1.7

2.1

At the end of the year

11.3

9.6

Carrying value at the end of the year

0.6

4.7

The deferred acquisition costs shown above are in respect of the launch of Ashmore Global Opportunities Limited (AGOL), a publicly listed closed-ended investment company incorporated in 2007, and are being charged to the Group's statement of comprehensive income over seven years.

During the year, the Group recovered £2.4 million of deferred acquisition costs related to the managed wind down of AGOL which was proposed and approved by AGOL shareholders in March 2013. The wind down entitles the Group to receive a reimbursement of certain launch costs which were borne at the time of AGOL's IPO in 2007.

18) Trade and other receivables


Group

Company


2013
£m

2012
£m

2013
£m

2012
£m

Current





Trade debtors

71.0

55.8

1.8

2.6

Prepayments

2.8

2.1

1.7

1.0

Loans due from subsidiaries

-

-

249.5

199.8

Amounts due from subsidiaries

-

-

2.0

6.8

Other receivables

3.5

6.2

2.8

5.0


77.3

64.1

257.8

215.2

Non-current





Loans due from subsidiaries

-

-

18.9

17.3


-

-

18.9

17.3

Total trade and other receivables

77.3

64.1

276.7

232.5

Group trade debtors include all billed and unbilled management fees due to the Group at 30 June 2013 in respect of investment management services provided to that date.



19) Deferred taxation

Deferred tax assets and liabilities recognised by the Group and Company at year end are attributable to the following:


2013

2012

Group

Other temporary differences
£m

Share-based payments
£m

Total
£m

Other temporary differences
£m

Share-based payments
£m

Total
£m

Deferred tax assets

7.7

13.3

21.0

1.4

13.7

15.1

Deferred tax liabilities

(3.0)

-

(3.0)

(1.0)

-

(1.0)


4.7

13.3

18.0

0.4

13.7

14.1

               


2013

2012

Company

Other temporary differences
£m

Share-based payments
£m

Total
£m

Other temporary differences
£m

Share-based payments
£m

Total
£m

Deferred tax assets

0.4

13.3

13.7

-

13.7

13.7

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 1 July 2011

(1.6)

17.9

16.3

Credited/(charged) to the consolidated statement of comprehensive income

2.2

(2.5)

(0.3)

Charged to equity

(0.2)

(1.7)

(1.9)

At 30 June 2012

0.4

13.7

14.1

Credited to the consolidated statement of comprehensive income

4.3

0.3

4.6

Charged to equity

-

(0.7)

(0.7)

At 30 June 2013

4.7

13.3

18.0

 

Company

Other temporary differences
£m

Share-based payments

£m

Total
£m

At 1 July 2011

-

17.9

17.9

Charged to the statement of comprehensive income

-

(2.3)

(2.3)

Charged to equity

-

(1.9)

(1.9)

At 30 June 2012

-

13.7

13.7

Credited to the statement of comprehensive income

0.4

0.3

0.7

Charged to equity

-

(0.7)

(0.7)

At 30 June 2013

0.4

13.3

13.7

Please refer to the details in note 12 in relation to future changes to the UK corporation tax rate. The overall effect of a further tax reduction in this rate from 23% to 20%, if applied to the deferred tax balance above as at 30 June 2013, would be to further decrease the Group deferred tax assets by approximately £1.8 million and the Company deferred tax assets by £1.8 million.



20) Fair value of financial instruments

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.

Level 2: Valuation techniques are based upon observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Valuation techniques use significant unobservable inputs.

The fair value hierarchy of financial instruments which are carried at fair value at year end is summarised below:


2013

2012


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

40.7

9.0

-

49.7

27.8

32.8

-

60.6

Non-current financial assets held-for-sale

-

104.9

-

104.9

-

49.9

-

49.9

Available-for-sale financial assets

0.4

55.2

-

55.6

0.4

54.2

-

54.6

Non-current asset investments

-

9.1

-

9.1

-

5.6

-

5.6

Derivative financial instruments

-

-

-

-

-

0.5

-

0.5


41.1

178.2

-

219.3

28.2

143.0

-

171.2

Financial liabilities









Third-party interests in consolidated funds

9.0

3.8

-

12.8

4.8

5.7

-

10.5

Derivative financial instruments

-

2.1

-

2.1


1.5

-

1.5

Non-current financial liabilities held-for-sale

-

26.9

-

26.9

-

15.1

-

15.1

Contingent consideration

-

-

0.5

0.5

-

-

10.7

10.7


9.0

32.8

0.5

42.3

4.8

22.3

10.7

37.8

Level 3 financial liabilities relate to contingent consideration payable in connection with the acquisition of Ashmore Equities Investment Management (US) L.L.C. in 2011. The movement and valuation techniques used to estimate its fair value is described
in note 26.

There were no transfers between Level 1, Level 2 and Level 3 during the year (FY2011/12: none).

There were no material unlisted investment securities requiring use of valuation techniques.



21) Seed capital investments

Seed capital investments represent interests taken up by the Group in funds for which the Group is the investment manager to provide initial scale and facilitate marketing of the funds to third-party investors. The movements of seed capital investments and related items during the year ended 30 June 2013 are as follows:

Group

Net

non-current financial assets held-for-sale

£m

Available-for-sale financial assets
£m

Investment securities (relating to consolidated funds)
£m

Other

(relating to consolidated funds)*

£m

Third-party interests in consolidated funds
£m

Non-current investments
£m

Carrying amount at 30 June 2011

46.2

41.4

-

-

-

3.5

Net transfers - held-for-sale to available-for-sale

(10.0)

10.0

-

-

-

-

Net transfers - held-for-sale to consolidated funds

(32.4)

-

36.1

3.8

(7.5)

-

Net purchases, disposals and fair value changes

31.0

3.2

24.5

-

(3.0)

2.1

Carrying amount at 30 June 2012

34.8

54.6

60.6

3.8

(10.5)

5.6

Net transfers - held-for-sale to consolidated funds

(25.2)

-

29.3

0.7

(4.8)

-

Net transfers - held-for-sale to available-for-sale

(4.8)

4.8

-

-

-

-

Net transfers - consolidated funds to available-for-sale

-

23.6

(55.0)

(2.0)

33.4

-

Net purchases, disposals and fair value changes

73.2

(27.4)

14.8

0.7

(30.9)

3.5

Carrying amount at 30 June 2013

78.0

55.6

49.7

3.2

(12.8)

9.1

*Relates to cash, derivatives and other assets contained in consolidated funds that are not investment securities.

a) Non-current assets and non-current liabilities held-for-sale

Where Group companies inject 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, six funds (FY2011/12: 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 2013 were as follows:


2013
£m

2012
£m

Non-current financial assets held-for-sale

104.9

49.9

Non-current financial liabilities held-for-sale

(26.9)

(15.1)

Seed capital investments classified as being held-for-sale

78.0

34.8

Investments held for less than a year cease to be classified as held-for-sale when they are no longer controlled by the Group. A loss of control may happen either through sale of the investment and/or dilution of the Group's holding. When investments cease to be classified as held-for-sale they are classified as available-for-sale financial assets (see below). One such investment (FY2011/12: two) was transferred to available-for-sale assets after the Group reduced its interests following investment inflows from third parties. There was no impact on net assets or profit or loss as a result of the reclassification.

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 considering the proximity of loss of control and the extent to which consolidation of the fund on a line by line basis would be material to the presentation of the Group's financial statements. During the year, two such funds (FY2011/12: six) with an aggregate carrying amount of £25.2 million (FY2011/12: £32.4 million) were transferred to consolidated funds. There was no impact on net assets or profit or loss as a result of the transfer.

As the Group considers itself to have one segment (refer to note 1), no additional segmental disclosure of held-for-sale assets or liabilities is applicable.

Gains and losses in relation to held-for-sale investments are included within finance income and expenses respectively (refer to note 8).

b) Consolidated funds

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. These funds are consolidated line by line.


2013
£m

2012
£m

Investment securities

49.7

60.6

Cash and cash equivalents

1.6

2.6

Net derivative financial instruments

-

0.3

Other

1.6

0.9

Third-party interests in consolidated funds

(12.8)

(10.5)

Consolidated seed capital investments

40.1

53.9



Investment securities include listed and unlisted equities and debt securities. Other includes trade receivables, trade payables and accruals.

Included within the consolidated statement of comprehensive income is a net gain of £4.6 million (FY2011/12: £0.5 million) relating to the Group's share of the results of the individual statements of comprehensive income for each of the consolidated funds. This includes finance income of £1.6 million (FY2011/12: £1.3 million) and £4.9 million gain (FY2011/12: £0.4 million loss) on investment securities offset by £1.2 million (FY2011/12: £0.4 million) allocated to third-party interests in consolidated funds and expenses of £0.7 million (FY2011/12: £nil).

As of 30 June 2013, the Group's consolidated funds were domiciled in Brazil, Luxembourg and the United States.

c) Available-for-sale financial assets

Available-for-sale financial assets held at fair value at 30 June 2013 comprised the following:


2013
£m

2012
£m

Equities - listed

0.4

0.4

Equity funds - unlisted

10.6

3.0

Debt funds - unlisted

44.6

51.2

Seed capital classified as available-for-sale

55.6

54.6

d) Non-current asset investments

Non-current asset investments relate to the Group's holding in closed-end funds and are classified as financial assets at fair value through profit or loss.


2013
£m

2012
£m

Non-current asset investments at fair value

9.1

5.6

Non-current asset investments relate to the Group's holding in closed-end funds and are classified as financial assets at fair value through profit or loss. 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.

Included within finance income is £1.2 million (FY2011/12: £0.7 million) of gains on the Group's non-current asset investments.

22) Financial instrument risk management

Group

The Group is subject to strategic, business, investment, operational and treasury risks throughout its business as discussed in the Business Review. This note discusses the Group's exposure to and management of the following principal risks which arise from 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 as either held-for-sale, available-for-sale 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.

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 conducts regular reviews of its capital requirements relative to its capital resources.

As the Group is regulated by the United Kingdom's 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. An overview of the ICAAP can be found on our website at www.ashmoregroup.com.The Group's Pillar 3 disclosures covering the year to 30 June 2013 indicated that the Group had surplus capital of £453.6 million (year to 30 June 2012: surplus of £381.8 million) over the level of capital required to meet operational risks under a Pillar II assessment. The objective of the assessment is to check that the Group has adequate capital to manage identified risks and the process includes conducting stress tests to identify capital and liquidity requirements under different future scenarios including a potential downturn.

All regulated entities with the Group have complied with regulatory requirements and filings that apply in the jurisdictions they operate.

Equity, as referred to in the Group's balance sheet, is the capital for the business.



 

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 team. 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

2013
£m

2012
£m

Investment securities

21

49.7

60.6

Non-current financial assets held-for-sale

21

104.9

49.9

Available-for-sale financial assets

21

55.6

54.6

Derivative financial instruments


-

0.5

Trade and other receivables

18

77.3

64.1

Cash and cash equivalents


395.5

346.6

Total


683.0

576.3

Investment securities, derivative financial instruments, non-current financial assets held-for-sale and available-for-sale financial assets expose the Group to credit risk from various counterparties which is monitored and reviewed by the Group.

The Group's cash and cash equivalents, comprised of short-term deposits with banks and liquidity funds, are predominantly held with counterparties with credit ratings ranging from A- to AAAm as at 30 June 2013 (30 June 2012: A to AAAm).

All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2012: 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 cannot meet its obligations as they fall due or can only do so at a cost.

In order to manage inherent liquidity risk there is a liquidity policy within the Group 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 2013


Within 1 year
£m

1-5 years
£m

 More than
5 years
£m

Total
£m

Non-current liabilities held-for-sale

26.9

-

-

26.9

Third-party interests in consolidated funds

12.8

-

-

12.8

Derivative financial instruments

2.1

-

-

2.1

Non-current trade and other payables

-

-

-

0.5

Current trade and other payables

94.1

-

-

94.1


135.9

-

-

135.9

 

At 30 June 2012


Within 1 year
£m

1-5 years
£m

More than
5 years
£m

Total
£m

Non-current liabilities held-for-sale

15.1

-

-

15.1

Third-party interests in consolidated funds

10.5

-

-

10.5

Derivative financial instruments

1.5

-

-

1.5

Non-current trade and other payables

-

5.8

-

5.8

Current trade and other payables

87.1

-

-

87.1


114.2

5.8

-

120.0

Details on leases and other commitments are provided in note 30.



 

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates.

The principal interest rate risk is the risk that the Group will sustain a reduction in interest revenue 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 requires management to monitor 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


2013
%

2012
%

Deposits with banks and liquidity funds

0.85

0.79

Deposits with banks and liquidity funds are repriced at intervals of less than one year.

At 30 June 2013, if interest rates over the year had been 50 basis points higher or 50 basis points lower (30 June 2012: 50 basis points higher or 50 basis points lower) with all other variables held constant, post-tax profit for the year would have been £1.5 million higher/£1.5 million lower (FY2011/12: £1.3 million higher/£1.3 million 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.

The Group is also exposed to interest rate risk from seed capital investments. The following table provides a summary of the Group's direct exposure to interest rate risk from investments held by the Group as investment securities in consolidated funds.

 

Investment securities


Fixed rate
£m

Floating rate
£m

Other
£m

Total
£m

As at 30 June 2013

-

-

49.7

49.7

As at 30 June 2012

43.4

3.7

13.5

60.6

The Group is indirectly exposed to interest rate risk from units in funds which invest in debt securities and the Group holds seed capital investments in those funds.

 

Foreign exchange risk

Foreign exchange risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in foreign exchange rates.

The Group's revenue is almost entirely denominated in US dollars, whilst the majority of the Group's costs are Sterling-based. 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 geographic areas. The Group also holds a number of seed capital investments which are denominated mainly in either US dollars, Brazilian real or Indonesian rupiah.

The Group's policy is to hedge the Group's revenue by using a combination of forward foreign exchange contracts and options for 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, Brazilian real and Indonesian rupiah, net of hedging activities.


2013

2012

Currency sensitivity test

Impact on profit
 before tax
£m

Impact on equity
£m

Impact on

profit
 before tax
£m

Impact on equity
£m

US dollar +/- 1%

2.9

2.7

1.1

1.8

Brazilian real +/- 1%

0.1

0.2

0.2

0.2

Indonesian rupiah +/-1%

0.5

0.4

n/a

n/a

Price risk

Price risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of market changes.



 

Seed capital

The Group is exposed to the risk of changes in market prices in respect of seed capital investments. Such price risk is borne by the Group directly through interests in available-for-sale and non-current asset seed capital investments or indirectly either through line by line consolidation of underlying financial performance and positions held in certain funds or potential impairments when fair values less costs to sell of seed investments held-for-sale are less than carrying amounts. Details of seed capital investments held at year end are given in note 21.

The Group has well defined procedures governing the appraisal and approval as well monitoring the performance of seed capital investments.

At 30 June 2013, a 5% movement in the fair value of these investments would have had a £7.7 million (FY2011/12: £7.3 million) impact on net assets and impact on profit before tax would have been £4.9 million (FY2011/12: £3.3 million).

Management fees

The Group is also indirectly exposed to price risk in connection with the Group's management fees which are based on a percentage of value of AuM and fees based on performance. Movements in market prices, exchange and interest rates could cause the AuM to fluctuate which in turn could affect fees earned. Performance fee revenues could also be reduced in severe market conditions.

Management and performance fees are diversified across a range of investment themes and are not measurably correlated to any single market indices in Emerging Markets. In addition, throughout Ashmore's history, the policy of having funds with year ends staged throughout the financial year has meant that in periods of steep market decline, some performance fees have still been recorded. The profitability impact is likely to be less than this, as cost mitigation actions would apply, including the reduction of the variable compensation paid to employees.

Based on the year end AuM of US$77.4 billion and the year's average net management fee rate of 68bps, a 5% movement in assets under management would have a US$26.3 million impact on management fee revenues (FY2011/12: based on assets under management of $63.7 billion and an average net management fee rate of 74bps, a 5% movement in assets under management would have had a US$23.6 million impact on management fee revenues).

Hedging activities

The Group uses forward exchange contracts and options to hedge its exposure to foreign currency risk. These hedges, which have been assessed as effective cash flow hedges as at 30 June 2013, protect a proportion of the Group's revenue cash flows from foreign exchange movements and occur consistently throughout the year. The cumulative fair value of the outstanding foreign exchange hedges liability at 30 June 2013 was £2.1 million (30 June 2012: £1.3 million) and is included within the Group's derivative financial instrument liabilities.


2013

2012


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

89.4

(1.3)

73.8

(0.7)

Foreign exchange forward contracts

3.3

(0.1)

30.3

(0.6)


92.7

(1.4)

104.1

(1.3)

The maturity profile of the Group's outstanding hedges is shown below.


Notional amount with maturity date (£m)


2013

2012


Collars

Forward contracts

Total

Collars

Forward contracts

Total

Within 6 months

38.1

3.3

41.4

34.3

13.6

47.9

6 - 12 months

41.4

-

41.4

30.2

13.6

43.8

>12 months

9.9

-

9.9

9.3

3.1

12.4


89.4

3.3

92.7

73.8

30.3

104.1

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 £0.4 million intrinsic loss (FY2011/12: £0.1 million gain) on the Group's hedges has been recognised through other comprehensive income and £nil intrinsic value (FY2011/12: £nil) was reclassified from equity to the statement of comprehensive income in the year.

Included within the realised and unrealised hedging loss of £1.2 million (note 7) recognised at 30 June 2013 (£0.1 million gain at 30 June 2012) are:

a £0.5 million loss in respect of foreign exchange hedges covering net management fee income for the financial year ending 30 June 2014 (FY2011/12: £0.5 million loss in respect of foreign exchange hedges covering net management fee income for the financial year ended 30 June 2013); and

a £0.7 million loss in respect of crystallised foreign exchange contracts (FY2011/12: £0.6 million gain).

Company

The risk management processes of the Company including those relating to the specific risk exposures covered below are aligned with those of the Group as a whole unless stated otherwise.

In addition, the risk definitions that apply to the Group are also relevant for the Company.

Credit risk

The Company's maximum exposure to credit risk is represented by the carrying value of its financial assets. The table below lists financial assets subject to credit risk by credit rating:


Notes

2013
£m

2012
£m

Cash and cash equivalents


271.7

210.6

Trade and other receivables


276.7

232.5

Total


548.4

443.1

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 AAAm as at 30 June 2013 (30 June 2012: A to AAAm).

All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2012: 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


 2013
%

2012
%

Deposits with banks and liquidity funds

0.34

0.61

Deposits with banks and liquidity funds are repriced at intervals of less than one year.

At 30 June 2013, if interest rates over the year had been 30 basis points higher/30 basis points lower (30 June 2012: 50 basis points higher/50 basis points lower) with all other variables held constant, post-tax profit for the year would have been £0.4 million higher/£0.4 million lower (FY2011/12: £0.6 million higher/£0.6 million 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 to foreign exchange risk in respect of US dollar cash balances and primarily US dollar-denominated intercompany balances. However, such risk is not hedged by the Company.

At 30 June 2013, if the US dollar had strengthened/weakened by 10 cents against Sterling with all other variables held constant, profit before tax for the year would have increased/decreased by £24.9 million/£21.8 million respectively (FY2011/12: increased/decreased by £11.6 million/£10.2 million).

23) Share capital

Authorised share capital

Group and Company

2013
Number of shares

2013
Nominal
value
£'000

2012
Number
of shares

2012
 Nominal
value
£'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

2013
 Number of shares

2013
Nominal
 value
£'000

2012
Number
of shares

2012
Nominal
 value
£'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.

During the year, no (FY2011/12: 543,633) ordinary shares were cancelled as part of an acquisition-related purchase price adjustment. The nominal value of cancelled shares is credited to a capital redemption reserve which is not presented on the face of the consolidated balance sheet as it is de minimis.

At 30 June 2013 there were 503,750 (30 June 2012: 1,898,221) options in issue with contingent rights to the allotment of ordinary
shares of 0.01p in the Company. There were also equity-settled share awards issued under the Omnibus Plan totalling 28,339,002 (30 June 2012: 25,691,454) shares that have release dates ranging from October 2013 to October 2017. Further details are provided in note 10.

24) Own shares

The EBT was established to act as an agent to facilitate the acquisition and holding of shares in the Company with a view to facilitating the recruitment and motivation of the employees of the Company. As at the year end, the EBT owned 35,205,106 (30 June 2012: 32,668,764) ordinary shares of 0.01p with a nominal value of £3,520 (30 June 2012: £3,267) and shareholders' funds are reduced by £115.8 million (30 June 2012: £88.9 million) in this respect. It is the intention of the Directors to make these shares available to employees by way of sale through the share-based compensation plans. The EBT is periodically funded by the Company for these purposes.

25) Treasury shares

Treasury shares held by the Company


2013

2012

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


2013
Number

2012
Number

At the beginning and end of the year

5,368,331

5,368,331

The market value of treasury shares was £18.4 million (30 June 2012: £18.7 million) at year end.

26) Trade and other payables


Group
2013
£m

Group
2012
£m

Company
2013
£m

Company
2012
£m

Current





Trade and other payables

45.5

29.6

40.3

26.3

Accruals and deferred income

48.1

52.6

5.3

18.4

Amounts due to subsidiaries

-

-

0.2

1.8

Contingent consideration

0.5

4.9

-

-


94.1

87.1

45.8

46.5

Non-current





Contingent consideration

-

5.8

-

-

Other non-current liabilities

-

-

-

-


-

5.8

-

-

Total trade and other payables

94.1

92.9

45.8

46.5

 



 

Contingent consideration

The Group's contingent consideration liabilities comprise amounts payable in future periods subject to achievement of agreed milestone targets by the relevant maturity date of 31 May 2014. The total contingent consideration liability of £0.5 million is considered to be payable in less than one year and classified as a current liability.

Movement of contingent consideration


Contingent consideration
£m

At 30 June 2011

32.0

Net present value discount unwind

4.1

Fair value adjustment

(16.8)

Consideration that crystallised during the year

(9.5)

FX revaluation

0.9

At 30 June 2012

10.7

Net present value discount unwind

0.9

Fair value adjustment

(10.8)

Consideration that crystallised during the year

-

FX revaluation

(0.3)

At 30 June 2013

0.5

The Group's contingent consideration liabilities were adjusted down at the end of the year, in line with accounting standards, to reflect its fair value. Such a movement in fair value was driven principally by the levels of equities AuM managed by Ashmore Equities Investment Management (US) L.L.C. at 30 June 2013, compared with the relatively higher levels forecast when the fair values of the contingent consideration liabilities were established.

The fall in the fair value of contingent consideration liabilities at 30 June 2013 resulted in a downward adjustment £10.8 million (FY2011/12: £16.8 million) at that date. The reduction of the discounted liability, the corresponding entry to which is reported within finance income, reflects a reduction in the Group's expected payments as a result of performance against contingent consideration milestones to date.

The potential undiscounted value of future annual payments that the Group could be required to make under contingent consideration arrangements is between £nil and a maximum of £40.7 million/US$61.9 million (30 June 2012: nil and £65.3 million/US$102.5 million). In addition to the annual earn-out payments, the Group could be required to pay a further £44.4 million/US$67.5 million (FY2011/12: £17.1 million/US$26.9 million) as a result of catch up provisions relating to prior periods. The fair value of the contingent consideration was calculated by reference to forecast management fee earnings over the remaining period to 31 May 2014 and discounted using the Group's weighted average cost of capital of 13.0%. The assumptions are reviewed on a regular basis to assess the potential sensitivities and impact on the Group. The undiscounted value of the estimated payments was £0.6 million/US$0.9 million (30 June 2012: £12.5 million/US$ 19.7 million). At maturity, contingent consideration will be settled using a combination of cash and new Ashmore ordinary shares at the prevailing market price. The current estimate of the undiscounted contingent consideration is all due to be settled in cash, with no further option for Ashmore to settle in equity (30 June 2012: £3.0 million/US$4.7 million of the then estimate of the undiscounted contingent consideration amount could be settled with equity). The discount applied to the contingent consideration will unwind until the time when the final payment is made in May 2014.

It is management's judgement that a 10.0% movement in key assumptions would not materially impact the value of contingent consideration liabilities.

 



27) Subsidiaries

Operating subsidiaries

Movements in investments in subsidiaries during the year were as follows:

Company

2013
£m

2012
£m

Cost



At the beginning and end of the year

20.1

20.1

In the opinion of the directors, the following subsidiary undertakings principally affected the Group's results or financial position. A full list of subsidiary undertakings at 30 June 2013 will be annexed to the next annual return of Ashmore Group plc filed with the Registrar of Companies.

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 Management Company Limited

Guernsey

100.00

Ashmore Investment Management (Singapore) Pte. Ltd.

Singapore

100.00

AA Development Capital Investment Managers (Mauritius) LLC

Mauritius

55.00

Ashmore Investments (Brasil) Limited

Guernsey

91.25

Ashmore Investments (India) Limited

Mauritius

100.00

Ashmore Investments (Turkey) NV

Netherlands

91.20

Ashmore Investment Management (US) Corporation

USA

100.00

PT Ashmore Asset Management Indonesia (formerly PT Buana Megah Abadi)

Indonesia

73.91

Ashmore Investments (Colombia) SL

Spain

100.00

Ashmore Japan Co. Limited

Japan

100.00

Ashmore Investment Consulting (Beijing) Co. Limited

China

100.00

Ashmore EMM Holding Corp.*

USA

100.00

Ashmore EMM L.L.C.*

USA

63.63

* With effect from 1 July 2013, the names of Ashmore EMM Holding Corp. and Ashmore EMM L.L.C. changed to Ashmore Equities Holding Corporation and Ashmore Equities Investment Management (US) L.L.C. respectively.

Consolidated funds

The following investment funds, over which the Group is deemed to have control, have been consolidated into the Group's results.

Name

Type of fund

Country of incorporation/ formation and principal place of operation

% of net
assets value held by the Group

Ashmore Emerging Markets Equity Fund

Equity

USA

65.7%

Ashmore Emerging Markets Small-Cap Equity Fund

Equity

USA

73.0%

Ashmore Brasil Ações FIC FIA

Equity

Brazil

72.3%

Ashmore SICAV 3 Multi Strategy Fund

Multi-strategy

Luxembourg

82.7%

 



28) Investments in associates and joint ventures

Group

Movements in investments in associates and joint ventures during the year were as follows:


2013

2012


Associates
£m

Joint ventures
£m

Total
£m

Associates
£m

Joint ventures
£m

Total
£m

At the beginning of the year

2.3

-

2.3

2.3

-

2.3

Additions

-

9.9

9.9

-

-

-

Share of profit

0.3

(0.4)

(0.1)




Distributions

(0.3)


(0.3)

-

-

-

At the end of the year

2.3

9.5

11.8

2.3

-

2.3

During the year, the Group entered into an agreement to acquire a 49% interest in a fund management joint venture with Central China Securities Co. Ltd. in China. Under the terms of the agreement and upon being granted the required approvals by the China Securities Regulatory Commission and other relevant government authorities, the Group contributed its share of the initial capitalisation, equivalent to £9.9 million, by January 2013.

The list of associates and joint ventures in which the Group holds interests at year end are shown below.

Associates and joint ventures at 30 June 2013

Name

Type

Nature of business

Country of incorporation/

formation and principal

place of operation

% of equity shares held by the Group

VTB-Ashmore Capital Holdings Limited

Associate

Investment management

Russia

50%

Everbright Ashmore

Associate

Investment management

China

30%

Central China Securities Co. Limited

Joint venture

Investment management

China

49%

The associates and the joint venture are unlisted.

Associates

The summarised aggregate financial information on associates is shown below.

Group

2013
£m

2012
£m

Total assets

4.7

4.4

Total liabilities

(1.4)

(1.4)

Net assets

3.4

3.0

Group's share of net assets

1.1

0.9

Revenue for the year to 30 June 2013

4.9

3.2

Profit for the year to 30 June 2013

1.1

0.4

Group's share of profit for the year

0.3

0.1

The carrying value of the investments in associates include attributable goodwill that arose on acquisition of the associates. Although the Group's share of net tangible assets of the associates is currently below the aggregate carrying value of the associates reflected on the consolidated balance sheet, the Group has considered that this position, which has arisen as the associates progress through initial establishment phases, is temporary. No permanent impairment is believed to exist relating to the associates.

The Group has undrawn capital commitments of £6.4 million (30 June 2012: £9.6 million) to investment funds managed by the associates.

Further details are provided in note 30.



 

Joint ventures

Summarised financial information on the Group's share in the joint venture is shown below:


2013
£m

2012
£m

Current assets

5.7

-

Non-current assets

0.1

-

Current liabilities

(0.1)

-

Non-current liabilities

-

-

Total equity

5.7

-


Income

0.4

-

Expenses

(0.8)

-

Loss for the year

(0.4)

-

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 for employee services is shown below:

£m

2013
£m

2012
£m

Short-term employee benefits

2.7

2.7

Defined contribution pension costs

-

-

Share-based payment benefits

1.7

2.6


4.4

5.2

Share-based payment benefits represent the fair value charge to the statement of comprehensive income of share awards.

During the year, there were no other transactions entered into with key management personnel (FY2011/12: none). Aggregate key management personnel interests in consolidated funds at 30 June 2013 was £3.5 million (30 June 2012: £nil).

Transactions with subsidiaries - Company

Details of transactions between the Company and its subsidiaries are shown below:       


2013
£m

2012
£m

Transactions during the year



Management fees received

79.1

65.4

Net dividends received

196.7

194.8

Loans given to subsidiaries

51.3

96.1

Amounts receivable or payable to subsidiaries are disclosed in notes 18 and 26.

Transactions with Ashmore Funds - Group

During the year, the Group received £337.0 million gross management fees and performance fees (FY2011/12: £270.4 million) from the 75 funds (FY2011/12: 72 funds) it manages and which are classified as related parties. As at 30 June the Group has receivables due from funds of £57.6 million (30 June 2012: £50.3 million).

Transactions with the EBT - Group and Company

The EBT, which acts as an agent for the purpose of the employee share-based compensation plans, has been provided a loan facility to allow it to acquire Ashmore shares in order to satisfy outstanding unvested shares awards. The EBT is included within the results of the Group and the Company. As at year end the loan outstanding was £112.7 million (30 June 2012: £82.7 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 geographies in which Ashmore operates with a view to giving back into the countries and communities in which the Group invests and which contribute to Ashmore's income and profitability. The Group donated £0.1 million to the Foundation during the year (FY2011/12: £0.1 million).



 

30) Commitments

Operating lease commitments

The Group and Company have entered into certain property leases. The leases have no escalation clauses or renewal or purchase options, and no restrictions imposed on them. The future aggregate minimum lease payments under these non-cancellable operating leases fall due as follows:

Group


2013
£m

2012
£m

Within 1 year

2.9

2.9

Between 1 and 5 years

8.5

9.2

Later than 5 years

6.7

7.9


18.1

20.0

Company


2013
£m

2012
£m

Within 1 year

1.2

1.2

Between 1 and 5 years

4.6

4.6

Later than 5 years

6.3

7.5


12.1

13.3

Operating lease expenses are disclosed in note 11.

Undrawn investment commitments


2013
£m

2012
£m

VTBC-Ashmore Real Estate Partners I, L.P.

3.4

3.4

Everbright Ashmore China Real Estate Fund

3.0

6.2

Ashmore I - FCP Colombia Infrastructure Fund

4.9

8.8

Company

The Company has undrawn loan commitments to other Group entities totalling £94.5 million (30 June 2012: £31.3 million) to support their investment activities but has no investment commitments of its own (30 June 2012: none).

31) Post-balance sheet events

There were no post-balance sheet events that required adjustment of or disclosure in the financial statements for the year ended
30 June 2013. 

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.

Goodwill

The Group tests goodwill and intangible assets annually for impairment. The recoverable amount is determined based upon value in use calculations prepared on the basis of management's assumptions and estimates. The carrying value of goodwill and intangibles on the Group's balance sheet at 30 June 2013 was £84.3 million (30 June 2012: £98.1 million). Management considers that reasonable possible changes in any of the key assumptions applied would not cause the carrying value of goodwill to materially exceed its recoverable value.

Performance fees

The Group assesses the recognition of performance fees to determine whether receipt of the fees is considered probable and the amount reliable. The assessment is made using management's judgement of the circumstances relevant to each performance fee entitlement.

There were no outstanding performance fees receivable at 30 June 2013 (30 June 2012: none).

Earnout arrangements

The Group assesses the expected payments to be made under earnout arrangements to determine whether the estimates are reasonable based on current information. The assessment is made using management's judgement of the likelihood of the conditions of the earnout being met taking into account the revenue earning capability of the underlying AuM. The fair value of the contingent consideration is then calculated by reference to those estimates, weighted according to management's estimates of their probabilities and discounted using the Group's weighted average cost of capital. The combined liability of all earnout arrangements on the Group's balance sheet at 30 June 2013 was £0.5 million (30 June 2012: £10.7 million) (refer to note 26).

Contingent consideration

A number of assumptions are made in deriving the estimated fair value of the contingent consideration, including assumptions around future net management fee margins, net subscriptions, market performance and the average cost of capital. While the Group believes that a set of prudent assumptions and estimates have been used that best reflect current market conditions, there remains a degree of uncertainty. In the event that future results or revised assumptions contribute to an upward revision in the contingent consideration, the reduction recognised during the period, reported within finance income, could be partially or fully reversed.

33) 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 the 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.

 

34) Statutory accounts

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 June 2013 or 2012. Statutory accounts for 2012 have been delivered to the registrar of companies, and those for 2013 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 2012 or 2013.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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