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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ashmore Global Opportunities Limited | LSE:AGOL | London | Ordinary Share | GG00BJJMSL63 | ORD NPV (GBP) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.52 | 1.42 | 1.62 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMAGOL TIDMAGOU
NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES,
CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION
Ashmore Global Opportunities Limited ("AGOL", or the "Company")
a Guernsey incorporated and registered limited liability closed-ended
investment company with a Premium Listing of its US Dollar and Sterling share
classes on the Official List.
Annual Results
For the year ended 31 December 2016
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the year ended 31 December 2016. All figures
are based on the audited financial statements for the year ended 31 December
2016.
The financial information for the year ended 31 December 2016 is derived from
the financial statements delivered to the UK Listing Authority. The Auditors
reported on those accounts, their report was unqualified and did not contain a
statement under Section 263(2) and 263(3) of The Companies (Guernsey) Law,
2008.
The announcement is prepared on the same basis as will be set out in the annual
accounts.
The Annual Report and Audited Financial Statements will be available on the
Company website: www.agol.com
Financial Highlights
31 December 2016 31 December 2015
Total Net Assets US$53,604,913 US$75,649,932
Net Asset Value per Share
US$ shares US$5.08 US$5.06
GBP shares GBP4.91 GBP4.98
Closing-Trade Share Price
US$ shares US$3.73 US$3.86
GBP shares GBP3.88 GBP3.82
Discount to Net Asset Value
US$ shares (26.57)% (23.72)%
GBP shares (20.98)% (23.29)%
Chairman's Statement
The Company continues with the process of realising its final assets, albeit
the process is taking longer than expected for reasons detailed below.
Distributions to shareholders from the realisation of investments totalled
US$18.7 million in 2016, the most significant of which was paid in January 2016
following the December 2015 sale of Fenix, a power plant held by AEI. Other
realisations during 2016 included the sale of residual positions in MCX and
ISM; the spin out and sale of a small subsidiary of Microvast; receipt of the
final tranche of Pacnet sales proceeds; and receipt of an earn-out payment
relating to the GEMS/Utileco sale from 2014.
The most important assets left in the portfolio are Bedfordbury, Microvast, and
AEI. The planned realisation of Bedfordbury had to be aborted in 2016 due to a
dispute with the partner in the underlying asset. The dispute, concerning
Bedfordbury's share of the underlying asset, has now gone to arbitration, with
a Singapore court hearing expected in Q1 2018. As a result, the sale has been
further delayed. Microvast performed well in 2016 and is looking at a number of
capital raising options to fund growth. These may provide an opportunity for
existing stakeholders (including AGOL) to realise part of their investment
during 2017. Following the sale of Fenix, AEI now has one power plant remaining
(Jaguar) which is located in Guatemala. The Board expects the sale process for
Jaguar to complete during the course of 2017. Further details on the underlying
exposures of the Company are provided in the Investment Manager's report.
As at 31 December 2016, the Net Asset Value ("NAV") of the Company was
US$53.6m. The NAVs per share increased/decreased from US$5.06 and GBP4.98 at the
end of 2015 to US$5.08 and GBP4.91 at the end of 2016. The share prices stood at
US$3.73 and GBP3.88 as at 31 December 2016, a decrease of 3.37% and an increase
of 1.57% respectively compared with 31 December 2015 levels.
Quarterly
Distributions
Quarter End Date % of 31 December 2012 % of 31 December 2012
Distributions
(US$) NAV Market Capitalisation
31 March 2013 92,500,000 19% 28%
30 June 2013 13,000,000 3% 4%
30 September 2013 26,000,000 5% 8%
31 December 2013 36,900,000 8% 11%
30 June 2014 7,250,000 2% 2%
30 September 2014 21,500,000 5% 7%
31 December 2014 40,500,000 8% 12%
31 March 2015 19,500,000 4% 6%
30 June 2015 27,250,000 6% 8%
31 December 2015 16,200,000 3% 5%
31 March 2016 2,500,000 0% 1%
Total 303,100,000 63% 92%
The Board regrets that there were not more asset sales in 2016 but expects
realisations to materialise during 2017. The resulting distributions to
shareholders will further diminish the NAV of the Company and the Board is
carefully controlling operating costs. To this end, the Board continues to
consider the costs and benefits of listing the shares of the Company on the
London Stock Exchange.
There were no changes to the composition of the Board of AGOL during the year.
I would like to thank everyone involved with AGOL for their hard work.
Richard Hotchkis
20 April 2017
Investment Manager's Report
Performance
As at 31 December 2016, the NAVs per share of the US$ and GBP classes stood at
US$5.08 and GBP4.91 respectively, representing returns of 0.40% and -1.41% over
the twelve months to 31 December 2016.
Portfolio Review
Ashmore Global Opportunities Limited (AGOL) paid out US$18.7m to investors
during the twelve months to 31 December 2016, including the Q4 2015
distribution of US$16.2m paid to investors on 5 February 2016. The latter
related to the sale of the Fenix power plant in Peru (one of the last two
remaining assets in the AEI stable) for which AEI achieved a sale price at a
significant premium over the prevailing book value. The Q1 2016 distribution
was triggered by the receipt of Pacnet sale proceeds from Telstra. Investors
received 85% of the Pacnet sales proceeds in 2015 (on the sale date), with the
remaining balance deferred to be paid in two tranches. The first tranche was
received in April 2016 and a final tranche of US$3m was received by the Ashmore
Funds in November 2016.
The three largest investee company exposures, namely; Bedfordbury, Microvast
and AEI now account for around 75% of AGOL's NAV.
As reported in previous publications, Ashmore Funds had been working on exiting
the ABC development land bank in Manila Bay. However, due to a dispute over the
percentage share ownership, Ashmore Funds have had to initiate arbitration
proceedings in Singapore with Bedfordbury's partner in the land bank. Given a
backlog of cases in Singapore the procedural timeline now envisages the hearing
to take place in Singapore in Q1 2018. This process is expected to push back
the realisation of this asset, until either a settlement is reached allowing
the Ashmore funds to exit or the arbitration process is completed.
Microvast continues to supply batteries for pure e-bus and plug-in hybrid
electric vehicles ("PHEV") to a large number of Chinese original equipment
manufacturers ("OEMs"), with these being deployed in over thirty cities in
China. Follow-on orders continue to be received by Wright Bus for the London
market and Microvast expects more orders from the European bus market. The
Company is achieving healthy margins, with projected revenues up on previous
years'. Production capacity has been increased in order to meet future demand,
with management also adding new facilities. The Company is considering raising
new capital in order to expand production capacity further, and there is a
possibility that such a capital event may also allow for a partial realisation
by existing shareholders, including Ashmore Funds.
Jaguar, the greenfield project in Guatemala, is now the only operating entity
within AEI. Jaguar is being prepared for sale, with an investment bank
appointed to lead the process. Management are targeting a sale of the asset in
2017, and following such a sale, it is the intention of the company's directors
to wind up AEI.
The price of vanadium pentoxide continues to recover, allowing Largo to ramp up
production to a record 800 tonnes per month. Largo also announced that it
intends to produce, qualify and sell its vanadium products at the
specifications required for use in the aerospace alloy market sector, with the
aim of breaking into higher margin sectors.
Numero Uno is one of India's leading Jeanswear brands with over 700 retail
outlets throughout India. The Company continues to perform well, having
consolidated its operations from Gurgaon to Selaqui, resulting in significant
cost savings. In November however, the Government announced the demonetisation
of 500 and 1000 Rupee banknotes, which led to a sudden shortage of banknotes as
holders rushed to exchange them for new, valid 500 and 2000 Rupee notes. This
created significant disruption throughout the economy and saw sales at Numero
Uno fall sharply. Notwithstanding this, margins remain healthy and Numero Uno
continues to explore exit options.
ZIM Laboratories, headquartered in Nagpur, is engaged in the research and
manufacture of a wide range of off-patent (generic) pharmaceutical products,
the value of which is enhanced via new drug delivery mechanisms. ZIM continues
to perform well, having initiated expansion into western markets such as
Canada, Poland and the Netherlands. The company has also applied for a number
of patents in various countries around the world and has started to see
approvals come through. ZIM has initiated expansion into Iran and Syria,
markets which have typically put off Western manufacturers.
The macroeconomic environment in Nigeria remains challenging for GZi (the
Nigerian aluminium can producer). That said, company performance was resilient
with GZi increasing its market share through quality and timely production
facilities. It is also looking to expand its operations, possibly into South
Africa or Kenya.
Outlook
As described above, the focus remains on realising AGOL's remaining investments
in an orderly manner. The general sentiment towards Emerging Markets is
improving, thus providing a more positive backdrop to realisations.
Nevertheless, realisations are very much influenced by the attraction and
circumstances of each individual asset.
Details on the Top 10 Underlying Holdings (on a look through basis)
The table below shows the top 10 underlying investments as at 31 December 2016
excluding the cash balance (cash was 1.85% as at 31 December 2016).
Investment Country Business Description
Name % of NAV
Bedfordbury 36.48% Philippines Real estate development company
Microvast 19.22% China Electric battery and battery systems
supplier
AEI 17.82% Guatemala Power generation in Latin America
Kulon 8.65% Russia Real estate development company
Numero Uno 4.78% India Branded apparel manufacturers and retailers
ZIM 3.14% India Pharmaceutical research and manufacturing
Laboratories
Ltd
Everbright 2.76% China Real estate development company
Largo Resources 2.04% Brazil Brazilian provider of mining services
GZ Industries 1.54% Nigeria Aluminium can manufacturer
Ltd
Seedinfo 0.92% India Enterprise software company
The tables below show the country and industry allocations of underlying
investments over 1% at the end of December 2016:
Country % of NAV Industry % of NAV
Philippines 36.48% Real Estate 47.90%
China 22.07% Electrical Components and 19.22%
Equipment
Guatemala 17.82% Electric 17.82%
India 9.87% Retail 4.78%
Russia 8.65% Pharmaceuticals 3.14%
Brazil 2.04% Mining 2.04%
Nigeria 1.54% Miscellaneous Manufacturing 1.54%
These tables form an integral part of the financial statements.
Details on a Selection of the Underlying Holdings
Bedfordbury
Industry: Real estate development company
Country: Philippines
Website: n/a
Company Status: Private
Investment Risk: Equity
Exit strategy and timing
§ We initiated Singapore arbitration proceedings against Bedfordbury's partner
in the land bank in Q4 2016. Given a backlog of cases in Singapore, the
procedural timeline envisages the hearing to take place in Q1 2018
Microvast
Industry: Technology/Clean-tech
Country: China
Website: www.microvast.com
Company Status: Private
Investment Risk: Equity
Operational update
§ Microvast supplies batteries for both pure e-bus and plug in
hybrid-electronic ("PHEVs") to a large number of Chinese original equipment
manufacturers ("OEMs"), with the resultant buses being deployed in over 30
cities in China. Follow-on orders continue to be received via Wright Bus for
the London market and Microvast expects further orders from the European bus
market
§ Microvast is achieving gross margins of circa 35% and net margins of circa
16%, and its projected FY2016 revenues are US$208m yielding net income of
US$35m. The committed order backlog at the end of December (Chinese customers
account for 90% of this) is supportive of FY2017 being another growth year,
although there may be margin pressure in 2017 as a result of the Chinese
government lowering its e-bus subsidies
§ Production capacity has been successfully increased to 2GWh per annum. Any
further increases will require external financing
§ Microvast is working on Lithium-ion battery (Li-B) systems for passenger
vehicles with some of the leading Chinese auto OEMs. A leading European car
company is also in testing
2017 operational strategy/priorities
§ Manage growth by adding new facilities, increasing production capacity and
hiring/training new employees
§ Build large scale production of Li-B systems for passenger vehicles, and
growing the international business
§ Meet short order timeframes from Chinese bus OEMs and ensuring customers can
claim Chinese New Energy Vehicle ("NEV") subsidies
Key risks
§ Overcapacity in both Chinese and global battery companies
§ Warranty claims arising from defective cells or modules
§ Unfavourable changes to the Chinese government's New Energy Vehicle policy
Exit strategy
§ Block sale pre- or post-IPO
AEI
Industry: Power generation
Country: Guatemala
Website: www.aeienergy.com
Company Status: Private
Investment Risk: Equity
Operational update
§ The only operating entity remaining is Jaguar, the greenfield project in
Guatemala, which is now being prepared for sale
§ Jefferies have been appointed as the investment bank to lead the sale process
§ China Machine New Energy Corporation ("CMNEC") are appealing an arbitration
award
Key risks
§ CMNEC arbitration appeal
§ Sale process
Exit strategy
§ Sale of Jaguar with a target closure date during 2017
§ Wind up of AEI post the Jaguar sale
Kulon
Industry: Real estate
Country: Russia
Website: n/a
Company Status: Private
Investment Risk: Equity
Operational update
§ Gross rental income for 2016 was 0.7% lower than in 2015 primarily due to
foreign exchange movements
§ Expenses for 2016 were 18.7% lower than in 2015 due to reduced land taxes
(following a review of the cadastral value), lower legal fees and reduced
non-recoverable capex
§ Overall net operating income was 14.0% higher than in 2015 due to the factors
mentioned above
Key risks
§ Foreign exchange rates
Exit strategy
§ Exit the investment by selling the shares in the holding company
GZI
Industry: Aluminium can manufacturing
Country: Nigeria
Website: www.gzican.com
Company Status: Private
Investment Risk: Equity
Operational update
§ In 2016 the business proved resilient considering the deterioration in the
Nigerian macroeconomic environment
§ Quality, timely production and delivery gave GZI a larger market share than
expected after reaching its budgeted targets
§ GZI finalised the refinancing of its loans into Naira, reducing its US$
exposure
§ Volumes have been slowing with clients looking for cheaper alternatives but
GZI is countering this via different offerings and an export strategy
§ GZI is analysing both South Africa and Kenya as expansion opportunities and
will make a decision by the end of Q1 on which to pursue
2017 operational strategy/priorities
§ Establish a plant in South Africa or Kenya
§ Continue to support the new CEO in stabilising the business
§ Manage foreign exchange exposures/requirements
§ Export cans in the region to expand sales and earn foreign currency
Key risks
§ Continued slowdown in the African beverages markets
§ Clients opting for cheaper alternatives
§ Access to US$/local currency depreciation
§ Recruitment/talent sourcing
Exit strategy and timing
§ 2018 exit through IPO or strategic sale
Ashmore Investment Advisors Limited
Investment Manager
20 April 2017
Board Members
As at 31 December 2016, the Board consisted of four non-executive Directors.
The Directors are responsible for the determination of the investment policy of
Ashmore Global Opportunities Limited (the "Company" or "AGOL") and have overall
responsibility for the Company's activities. As required by the Association of
Investment Companies Code on Corporate Governance (the "AIC Code"), the
majority of the Board of Directors are independent of the Investment Manager.
In preparing this annual report, the independence of each Director has been
considered.
Richard Hotchkis, Independent Chairman, (Guernsey resident) appointed 18 April
2011
Richard Hotchkis has 40 years of investment experience. Until 2006, he was an
investment manager at the Co-operative Insurance Society, where he started his
career in 1976. He has a breadth of investment experience in both UK and
overseas equities, including in emerging markets, and in particular, investment
companies and other closed-ended funds, offshore funds, hedge funds and private
equity funds. Richard is currently a director of a number of funds, including
Aberdeen Frontier Markets Company (formerly Advance Frontier Markets Fund
Limited).
Steve Hicks, Non-Independent Director (connected to the Investment Manager),
(UK resident) appointed 16 January 2014
Steve Hicks, who is a qualified UK lawyer, has held a number of legal and
compliance roles over a period of more than 25 years. From June 2010 until
January 2014 he was the Ashmore Group Head of Compliance. Prior thereto he was
Director, Group Compliance at the London listed private equity company 3i Group
plc.
Nigel de la Rue, Independent Director, (Guernsey resident) appointed 16 October
2007
Nigel de la Rue graduated in 1978 from Pembroke College, Cambridge with a
degree in Social and Political Sciences. He is qualified as an Associate of the
Chartered Institute of Bankers, as a Member of the Society of Trust and Estate
Practitioners (STEP) and as a Member of the Institute of Directors. He was
employed for 23 years by Baring Asset Management's Financial Services Division,
where he was responsible for the group's Fiduciary Division and sat on the
Executive Committee. He left Baring in December 2005, one year after that
Division was acquired by Northern Trust. He has served on the Guernsey
Committees of the Chartered Institute of Bankers and STEP, and on the Guernsey
Association of Trustees, and currently holds a number of directorships in the
financial services sector.
Christopher Legge, Independent Director, (Guernsey resident) appointed 27
August 2010
Christopher Legge has over 25 years' experience in financial services. He
qualified as a Chartered Accountant in London in 1980 and spent the majority of
his career based in Guernsey with Ernst & Young, including being the Senior
Partner of Ernst & Young in the Channel Islands. Christopher retired from Ernst
& Young in 2003 and currently holds a number of directorships in the financial
sector. Until 24 June 2016, he was Senior Independent Director and chaired the
Audit Committee at BH Macro Limited.
Disclosure of Directorships in Public Companies Listed on Recognised Stock
Exchanges
The following summarises the Directors' directorships in other public
companies:
Company Name
Exchange
Richard Hotchkis
Aberdeen Frontier Markets Company (formerly Advance
AIM
Frontier Markets Fund Limited)
Steve Hicks
Nil
Nigel de la Rue
Nil
Christopher Legge
Baring Vostok Investments PCC Limited (until 27 April 2016)
TISE (formerly CISE)
BH Macro Limited (until 24 June 2016)
London, Bermuda and Dubai
John Laing Environmental Assets Group Limited
London
Sherborne Investors (Guernsey) B Limited
London
Third Point Offshore Investors Limited
London
TwentyFour Select Monthly Income Fund Limited
London
Directors' Report
The Directors submit their Report together with the Company's audited financial
statements for the year ended 31 December 2016, which have been prepared in
accordance with International Financial Reporting Standards ("IFRS") as issued
by the IASB and are in agreement with the accounting records, which have been
properly kept in compliance with section 238 of the Companies (Guernsey) Law,
2008.
The Company
The Company was incorporated with limited liability in Guernsey, Channel
Islands as an authorised closed-ended investment company on 21 June 2007. The
Company was launched on 7 December 2007 and the Company's shares were admitted
to the Official Listing of the London Stock Exchange on 12 December 2007,
pursuant to Chapter 14 of the Listing Rules. Following changes to the Listing
Rules on 6 April 2010, the listing became a Standard Listing. On 27 April 2011,
the UK Listing Authority confirmed the transfer of the Company from a Standard
Listing to a Premium Listing under Chapter 15 of the Listing Rules. The
Company's US$ shares and GBP shares are included in the FTSE All-Share Index.
Investment Strategy
Prior to the Extraordinary General Meeting ("EGM") of shareholders on 13 March
2013, the Company's investment objective was to deploy capital in a diversified
portfolio of global emerging market strategies and actively manage these with a
view to maximising total returns. This was implemented by investing across
various investment themes (Alternatives including Special Situations and Real
Estate, External Debt, Local Currency, Equities, Corporate Debt and
Multi-Strategy), with a principal focus on Special Situations.
The Company employed a dynamic allocation of its assets across Ashmore's
investment themes with a principal focus on Special Situations, seeking to
create value for shareholders and target total return through active portfolio
management. The Investment Manager employed a predominantly top-down and
value-driven investment approach coupled with the bottom-up selection of
investments in those Ashmore Funds ("Funds") where corporate and Special
Situations assets were more significant. Through investing in the Funds, the
Company sought to build a globally diverse portfolio of investments and to
benefit from the Investment Manager's experience in investing globally in
emerging markets countries (including in distressed and Special Situations
assets) and in the resolution or restructuring of such investments.
On 12 December 2012, the Board announced, following its review and in
conjunction with its independent financial and legal advisers, options to
address the structural issue of the discount to net asset value at which the
shares were trading, which included proposals to shareholders: to amend the
investment strategy to make no new Special Situations investments (with any new
investments to be shorter term in nature); to realise the Company's assets for
cash over the next few years; and to return cash realised from the investment
portfolio to shareholders (the "Managed Wind-Down"). Shareholders approved
these proposals at an EGM held on 13 March 2013. The Board believes that the
revised investment strategy is the best way of realising the value of the
Company.
Going Concern
The Board of Directors called an EGM, which was held on 13 March 2013, to
approve proposals for a managed wind-down of the Company`s portfolio. All
proposals were duly passed at the EGM and accordingly the Board:
1. changed the investment objective of the Company to the realisation of the
Company's assets in an orderly manner in order to return cash to shareholders;
2. amended the Articles of Incorporation to facilitate a regular, quarterly
return of cash to shareholders;
3. amended the Articles of Incorporation in relation to the removal of the
continuation vote;
4. amended the Articles of Incorporation to reduce the minimum number of
Directors from five to one; and
5. amended the terms of the Investment Management Agreement ("IMA") between
the Company and Ashmore Investment Advisors Limited (the "Investment Manager").
The Directors have examined significant areas of possible going concern risk
and are satisfied that no material exposures exist. The Directors consider that
the Company has adequate resources to continue in operational existence for the
foreseeable future and believe it is appropriate to adopt the going concern
basis in preparing the financial statements, despite the managed wind-down of
the Company over the next few years.
Long Term Viability Statement
In accordance with the AIC Code, Directors are required to assess the prospects
of the Company over a longer period than the 12 months minimum required by the
'Going Concern' provision. The Company is expected to realise its remaining
assets over the next few years. The principal risk affecting the Company is
market price risk as it seeks to realise its remaining portfolio. Once the
underlying investments have been sold and the investee funds have been
liquidated, the Board will propose that the Company enters into voluntary
liquidation. The Directors consider that the Company has sufficient cash and
liquid resources to complete its wind down and liquidation in an orderly manner
including paying all associated expenses.
Results and Dividends
The results for the year are set out in the Statement of Comprehensive Income
and are discussed in more detail in the Chairman's Statement and the Investment
Manager's Report. The Company is returning cash to investors via regular
compulsory partial redemptions and is therefore not paying dividends.
Compulsory Partial Redemptions
Following the approval by the Company's shareholders of the wind-down proposal
as described in the circular published on 20 February 2013, during the year
ended 31 December 2016, management announced returns of capital to shareholders
by way of compulsory partial redemptions of shares, with the following
redemption dates:
· 29 January 2016, US$16.2m using the 31 December 2015 Net Asset Value; and
· 29 April 2016, US$2.5m using the 31 March 2016 Net Asset Value.
Between the end of the reporting year and the date when the financial
statements were authorised for issue, there were no returns of capital to
shareholders by way of compulsory partial redemptions of shares.
The amounts applied to the partial redemptions of shares comprised monies from
dividends received and from the realisation of the Company's investments up to
and including the reference NAV calculation dates pursuant to the wind-down of
the Company.
Share Capital
The number of shares in issue at the year end is disclosed in note 8 to the
financial statements.
The Board
The Board of Directors has overall responsibility for safeguarding the
Company's assets, for the determination of the investment policy of the
Company, for reviewing the performance of the service providers and for the
Company's activities. The Directors, all of whom are non-executive, are listed
in the Board Members section.
In accordance with Article 18.3 of the Company's Articles of Incorporation, at
each Annual General Meeting one-third of the Directors shall retire from office
via rotation and be put forward for re-election based on continued satisfactory
performance. Any Director who serves nine years on the Board, will thereafter
be put forward for re-election on an annual basis. Nigel de la Rue reached nine
years of service in October 2016 and will be put forward for re-election at the
next Annual General Meeting.
The Board holds Board meetings at least four times a year. At Board meetings,
the Directors review the management of the Company's assets and all other
significant matters so as to ensure that the Directors maintain overall control
and supervision of the Company's affairs. The Board is responsible for the
appointment and monitoring of all service providers to the Company, following
updates and recommendations from the Management Engagement Committee. Between
these formal meetings there is regular contact with the Investment Manager. The
Directors are kept fully informed of investment and financial controls and
other matters that are relevant to the business of the Company and should be
brought to the attention of the Directors. The Directors also have access to
the Secretary and, where necessary in the furtherance of their duties, to
independent professional advice at the expense of the Company.
The table below sets out the number of Board, Audit and Management Engagement
Committee meetings during the year ended 31 December 2016:
Board meetings Audit Committee Management Engagement
attended meetings Committee meeting
attended attended
Richard Hotchkis 4 3 1
Steve Hicks 4 N/A N/A
Nigel de la Rue 4 3 1
Christopher Legge 4 3 1
No. of meetings during the 4 3 1
year
In addition to the meetings above, five other committee meetings were held
during the year. Any Directors who are not members of Board Committees are
invited to attend meetings of such committees as necessary.
Directors' Interests
As at 31 December 2016, three Directors, Nigel de la Rue, Christopher Legge and
Richard Hotchkis, had beneficial interests in the Company representing 785, 490
and 295 GBP shares respectively.
The Company has adopted a code of Directors' dealings in shares, which is based
on the Model Code for directors' dealings contained in the LSE's Listing Rules.
Directors' Indemnity
Directors' and officers' liability insurance cover is in place in favour of the
Directors. The Directors entered into indemnity agreements with the Company
which provide for, subject to the provisions of the Companies (Guernsey) Law,
2008, an indemnity for Directors in respect of costs which they may incur
relating to the defence of proceedings brought against them arising out of
their positions as Directors, in which they are acquitted or judgement is given
in their favour by the Court. The agreement does not provide for any
indemnification for liability which attaches to the Directors in connection
with any negligence, unfavourable judgements, or breach of duty or trust in
relation to the Company.
Corporate Governance
To comply with the UK Listing Regime, the Company must comply with the
requirements of the UK Corporate Governance Code. The Company is also required
to comply with the Code of Corporate Governance issued by the Guernsey
Financial Services Commission.
The Company is a member of the Association of Investment Companies ("AIC") and,
by complying with the AIC Code, it is deemed to comply with both the UK
Corporate Governance Code and Guernsey Code of Corporate Governance.
The Guernsey Financial Services Commission's Code of Corporate Governance (the
"GFSC Code") provides a framework that applies to all entities licensed by the
Guernsey Financial Services Commission or which are registered or authorised as
a collective investment scheme in Guernsey. Companies reporting against the UK
Corporate Governance Code or the AIC Code are deemed to comply with the GFSC
Code.
The Board of the Company has considered the principles and recommendations of
the AIC Code by reference to the AIC Corporate Governance Guide for Investment
Companies ("AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses
all the principles set out in the UK Corporate Governance Code, as well as
setting out additional principles and recommendations on issues that are of
specific relevance to the Company.
The AIC released an updated Guide and Code in July 2016. The Company reports
against the updated AIC Code and Guide in this annual report.
The Board considers that reporting against the principles and recommendations
of the AIC Code, by reference to the AIC Guide (which incorporates the UK
Corporate Governance Code), will help ensure that information provided to
shareholders is of a high standard. To ensure ongoing compliance with these
principles, the Board receives and reviews a report from the Secretary, at each
quarterly meeting, identifying whether the Company is in compliance and
recommending any changes that are necessary.
The Company has complied with the recommendations of the AIC Code and the
relevant provisions of the UK Corporate Governance Code, except as set out
below:
The UK Corporate Governance Code includes provisions relating to:
* the role of the chief executive;
* executive Directors' remuneration;
* the need for an internal audit function;
* whistle-blowing policies;
* nomination committees;
* remuneration committees;
* Auditor's tenure and re-appointment.
For the reasons set out in the AIC Guide, and as explained in the UK Corporate
Governance Code, the Board considers that these provisions are not relevant to
the position of the Company as an investment company. The Company has therefore
not reported further in respect of these provisions. The Directors are
non-executive and the Company does not have employees, hence no whistle-blowing
policy is required. The Directors have satisfied themselves that the Company's
key service providers have appropriate whistle-blowing policies and procedures
and seek regular confirmation from the service providers that nothing has
arisen under those policies and procedures which should be brought to the
attention of the Board. Details of compliance with the AIC code are noted in
the succeeding pages. The Company has not followed the provisions in relation
to auditor's tenure and re-appointment due to the fact that the Company is in
managed wind-down. There have been no instances of non-compliance, other than
those noted above.
Details and biographies for all the Directors can be found in the Board Members
section of this annual report, and on the Company's website (www.agol.com). In
considering the independence of the Chairman, the Board has taken note of the
provisions of the Code relating to independence and has determined that Richard
Hotchkis is an Independent Director. As the Chairman is an Independent
Director, no appointment of a Senior Independent Director has been made.
The Board has a breadth of experience relevant to the Company and the Directors
believe that any changes to the Board's composition can be managed without
undue disruption.
The Board, Audit Committee and Management Engagement Committee undertake an
evaluation of their own performance and that of the individual Directors on an
annual basis. In order to review their effectiveness, the Board, Audit
Committee and Management Engagement Committee carry out a process of formal
self-appraisal in order to consider how they function as a whole and also to
review the individual performance of their members. This process is conducted
by the respective Chairman reviewing the Directors' performance, contribution
and commitment to the Company. Given that the Company is in a managed
wind-down, the Board considers that it would not be justified in incurring the
expense of an independent evaluation of the Board's performance.
With the appointment to the Board of any new Director, consideration will be
given as to whether an induction process is appropriate. The Chairman regularly
reviews and agrees with each Director their training and development needs.
Ongoing Charges
Ongoing charges for the year ended 31 December 2016 have been prepared in
accordance with the AIC's recommended methodology and amounted to 1.15% of the
NAV (31 December 2015: 0.49%).
Audit Committee
An Audit Committee has been established and holds meetings at least twice a
year for the purpose, amongst others, of considering the appointment,
independence, effectiveness and remuneration of the auditor and to review and
recommend the statutory annual report and interim report to the Board of
Directors. Full details of its functions and activities are set out in the
Report of the Audit Committee.
Nomination Committee
The Board as a whole fulfils the function of a nomination committee. The Board
considers that, given the size of the Board and that the Company has no
executives, it would not be appropriate to establish a separate nomination
committee as anticipated by the AIC Code. Neither external search consultancy
nor open advertising have been used when appointing the Chairman or the
non-executive Directors because of the specialist nature of the appointments
and the knowledge amongst existing Directors and the Investment Manager.
Conversion Committee
The Company has established a Conversion Committee, which consists of Nigel de
la Rue, Christopher Legge and Richard Hotchkis. The Conversion Committee holds
meetings in order to determine the terms of monthly/quarterly share
conversions, based on shareholders' requests received by the Company. The date
on which conversion of the shares takes place (the "Conversion Date") is
determined by the Conversion Committee, being not more than 20 business days
after the relevant Conversion Calculation Date.
The Directors approved a number of conversions during the year, the details of
which can be found in note 8 to the financial statements. Conversions approved
by the Directors subsequent to the year end are detailed in note 19 to the
financial statements.
Disclosure Committee
The Company has established a Disclosure Committee with formally delegated
duties and functions. The Disclosure Committee meets when required to consider
any potential disclosures to be made by the Company through a Regulatory
Information Service provider, in compliance with the Company's obligations
under the Disclosure and Transparency Rules. The Disclosure Committee is
comprised of Richard Hotchkis, Christopher Legge and Chairman, Nigel de la Rue.
The principal duty of the Disclosure Committee is to consider and approve
announcements and disclosures to be made on behalf of the Company in accordance
with the Company's ongoing compliance with applicable law.
Management Engagement Committee
The function of the Management Engagement Committee, comprised of three
independent Directors (Christopher Legge, Richard Hotchkis and Nigel de la
Rue), is to ensure that the Company's Investment Management Agreement is
competitive and reasonable for the shareholders, along with the Company's
agreements with all other third-party service providers (other than the
external auditor). The Committee also reviews the performance of the Investment
Manager and the other third-party service providers on a periodic basis.
The Company has entered into an agreement with the Investment Manager, Ashmore
Investment Advisors Limited. This sets out the Investment Manager's key
responsibilities, which include proposing an investment strategy to the Board
and, within certain authority limits, selecting investments for acquisition and
disposal and arranging appropriate lending facilities. The Investment Manager
is also responsible for all issues pertaining to asset management. The
Management Engagement Committee reviews the performance, fees and terms of the
Investment Management Agreement on an annual basis.
Despite the performance of the Company since incorporation, at its October 2015
and October 2016 meetings it was the view of the Management Engagement
Committee that it is in the best interests of the shareholders to continue with
the current appointment of the Investment Manager. At the date of this report,
the Board continues to expect that Ashmore Investment Advisors Limited will
remain the Investment Manager for the remaining life of the Company.
Remuneration Committee
As all the Directors are non-executive, the Board has resolved that it is not
appropriate to form a Remuneration Committee and remuneration is reviewed and
discussed by the Board as a whole (with each Director abstaining when approving
any changes to their own fee), with independent advice from the Administrator
and the Broker. Details on Directors' remuneration can be found in the
Directors' Remuneration Report.
The terms of reference of all the existing committees are made available by the
Company to shareholders upon request.
Internal Controls
The Board is ultimately responsible for the Company's system of internal
control and for reviewing its effectiveness. The Board confirms that there is
an ongoing process for identifying, evaluating and managing the significant
risks faced by the Company. This process has been in place for the year under
review and up to the date of approval of this annual report and accords with
the Turnbull guidance. The Code requires Directors to conduct, at least
annually, a review of the Company's system of internal control, covering all
controls, including: financial, operational, compliance and risk management.
The risk matrix is subject to an annual review by the Board. The Board has
reviewed the effectiveness of the systems of internal control. In particular,
it has reviewed and updated the process for identifying and evaluating the
significant risks affecting the Company and the policies by which these risks
are managed. The internal control systems are designed to meet the Company's
particular needs and the risks to which it is exposed. Accordingly, the
internal control systems are designed to manage rather than eliminate the risk
of failure to achieve business objectives and by their nature can only provide
reasonable and not absolute assurance against misstatement and loss.
Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive ("AIFMD") establishes an
EU-wide harmonised framework for monitoring and supervising risks relating to
collective investment undertakings that are not subject to the Undertaking for
Collective Investment in Transferable Securities ("UCITS") regime. AGOL meets
the definition of an Alternative Investment Fund ("AIF") under this legislation
and is subject to the AIFMD framework.
Ashmore Investment Advisors Limited ("AIAL") was authorised as an Alternative
Investment Fund Manager ("AIFM") by the Financial Conduct Authority ("FCA") on
18 July 2014. Effective 18 July 2014, the Board appointed AIAL as the Company's
AIFM and AIAL assumed the role of Investment Manager to the Company from
Ashmore Investment Management Limited ("AIML"), pursuant to a Novation of the 5
November 2007 Investment Management Agreement. Prior to 18 July 2014, AIML
served as Investment Manager to the Company. The investment advisory services
provided to the Company were novated to AIAL to comply with the new AIFMD
legislation.
AIAL and AIML are both wholly-owned subsidiaries of Ashmore Investments (UK)
Limited, which is a wholly-owned subsidiary of the Ashmore Group plc ("Ashmore
Group"). The novation of the Investment Management Agreement with the Company
did not result in any change in: (i) the manner in which investment management
services are provided (including the manner in which the Company is managed or
operated) as contemplated by the Investment Management Agreement; (ii) the
personnel who are responsible for providing or supervising the provision of
investment management services (including those responsible for the management,
portfolio management and operation of the Company); or (iii) the personnel
ultimately responsible for overseeing such provision of services.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act ("FATCA") is aimed at determining the
ownership of US assets in foreign accounts and improving US tax compliance with
respect to those assets. The legislation is wide-encompassing and affects all
non-US funds, albeit some more than others. On 13 December 2013, the States of
Guernsey entered into an Inter-Governmental Agreement ("IGA") with the US
Treasury in order to facilitate the requirements of FATCA through local
legislation. The IGA and the associated guidance notes set out the requirements
and obligations of the Company under the rules. For the purposes of this
agreement, the Company registered with the US Internal Revenue Services ("IRS")
as a Guernsey reporting Foreign Financial Institution ("FFI"), received a
Global Intermediary Identification Number (28C9PC.99999.SL.831), and can be
found on the IRS FFI list.
UK Guernsey Intergovernmental Agreement
The Organisation for Economic Co-operation and Development ("OECD") introduced
the Common Reporting Standard ("CRS") which acts as the single global standard
governing the automatic exchange of financial account information between tax
authorities of tax jurisdictions that have signed up to the standard. The CRS
has been adopted by Guernsey and came into effect on 1 January 2016. It
replaced the intergovernmental agreement between the UK and Guernsey to improve
international tax compliance that had previously applied in respect of 2014 and
2015. The first report for CRS will be made to the Director of Income Tax by 30
June 2017.
The Board takes the necessary actions to ensure that the Company is compliant
with Guernsey regulations and guidance in this regard.
Relations with Shareholders
The Investment Manager maintains a regular dialogue with institutional
shareholders, the feedback from which is reported to the Board. In addition,
Board members are available to respond to shareholders' questions at the Annual
General Meeting.
The Company announces its Net Asset Value on a monthly basis to the London
Stock Exchange. Shareholders who wish to communicate with the Board should
contact the Administrator in the first instance, whose contact details can be
found on the Company's website.
Significant Shareholders
As at 31 December 2016, the following entities had significant shareholdings in
the Company:
Significant Shareholder US$ shares GBP shares % holding in
held held Company
State Street Nominees Limited 3,382,594 1 32.04%
Goldman Sachs Securities Nominees Limited 1,517,650 93,166 15.43%
Chase Nominees Limited 11,621 1,337,149 15.25%
Nortrust Nominees Limited 895,754 64,388 9.21%
Lynchwood Nominees Limited 269,412 362,076 6.65%
Nordea Bank Danmark A/S 538,490 - 5.10%
Vidacos Nominees Limited 384,237 3,433 3.68%
UBS Private Banking Nominees Limited - 297,641 3.37%
HSBC Global Custody Nominee (UK) Limited 205,906 44,022 2.45%
Signed on behalf of the Board of Directors on 20 April 2017
Richard Hotchkis Christopher Legge
Chairman Chairman of
the Audit Committee
Report of the Audit Committee
On the following pages, we present the Audit Committee (the "Committee") Report
for 2016, setting out the Committee's structure and composition, principal
duties and key activities during the year. As in previous years, the Committee
has reviewed the Company's financial reporting, the independence and
effectiveness of the independent auditor and the internal control and risk
management systems of the Company's service providers.
Structure and Composition
The Audit Committee consists of Nigel de la Rue, Richard Hotchkis and Chairman
Christopher Legge. Appointment to the Audit Committee is for a period of up to
three years, which may be extended for two further three-year periods provided
that the majority of the Audit Committee remains independent of the Investment
Manager. Nigel de la Rue, Christopher Legge and Richard Hotchkis are currently
serving their fourth, third and second, three-year terms respectively. Nigel de
la Rue reached nine years of service in October 2016 and will be put forward
for re-election. An induction programme is provided for new Audit Committee
members and ongoing training is available for all members as required.
The Audit Committee conducts formal meetings at least twice a year. The first
table of the Directors' Report sets out the number of Audit Committee meetings
held during the year ended 31 December 2016 and the number of such meetings
attended by each Committee member. The independent auditor is invited to attend
meetings at which the annual and interim reports are presented to the Committee
as well as the annual audit planning meeting.
Principal Duties
The role of the Committee includes:
· to monitor the integrity of the financial statements of the Company and any
formal announcements relating to the Company's financial performance, reviewing
significant financial reporting judgements contained therein;
· to review the Company's internal financial controls and, unless expressly
addressed by the Board itself, to review the Company's internal control and
risk management systems;
· to make recommendations to the Board, and for them to be subsequently put
to shareholders for their approval at the Annual General Meeting, in relation
to the appointment, re-appointment or removal of the external auditor and to
approve the remuneration and terms of engagement of the external auditor;
· to review and monitor the external auditor's independence and objectivity
and the effectiveness of the audit process, taking into consideration relevant
UK professional and regulatory requirements;
· to develop and implement policy on the engagement of the external auditor
to supply non-audit services, taking into account relevant ethical guidance
regarding the provision of non-audit services by the external audit firm; and
to report to the Board, identifying any matters in respect of which it
considers that action or improvement is needed, making recommendations as to
the steps to be taken; and
· to report to the Board on how it has discharged its responsibilities.
The complete details of the Committee's formal duties and responsibilities are
set out in the Committee's terms of reference, which can be obtained from the
Company's administrator.
Independent Auditor (Independence and Effectiveness)
KPMG Channel Islands Limited ("KPMG") have expressed their willingness to
continue in office as auditor and a resolution proposing their re-appointment
will be submitted at the Annual General Meeting.
The independence and objectivity of the independent auditor is reviewed by the
Audit Committee, which also reviews the terms under which the independent
auditor is appointed to perform non-audit services. The Audit Committee has
also established pre-approval policies and procedures for the engagement of
KPMG to provide audit, assurance and tax services.
The audit and non-audit fees proposed by the auditor each year are reviewed by
the Committee taking into account the Company's structure, operations and other
requirements during the year, and the Committee makes recommendations to the
Board.
Committee Evaluations during the Year
The following sections discuss the assessments made by the Committee during the
year.
Effectiveness of the Audit
The Committee had formal meetings with KPMG during the course of the year: 1)
before the start of the audit to discuss formal planning, to discuss any
potential significant issues and to agree the scope of the audit, and 2) after
the audit work was concluded to discuss any significant issues encountered.
The Board reviewed the effectiveness and independence of KPMG by using a number
of qualitative measures, including but not limited to:
· the audit plan presented before the start of the audit;
· the post audit report and presentation, including deviations from the
original plan;
· any changes to audit personnel;
· the auditor's own internal procedures to identify threats to
independence;
· feedback from both the Investment Manager and the Administrator.
Further to the above, on the conclusion of the 2016 audit, the Committee
performed a specific evaluation of the performance of the independent auditor.
This covered qualitative areas such as the quality of the audit team, business
understanding, audit approach and management.
There were no significant adverse findings from this evaluation.
Significant Financial Statement Issues
The Committee's review of the interim and annual financial statements focused
on the following areas:
The financial statements have been prepared on the going concern basis, despite
the managed wind-down of the Company which was approved by the shareholders
during the EGM of 13 March 2013. The Directors discussed the rationale for this
accounting basis and they noted that they had examined significant areas of
going concern risk, and were satisfied that no material exposures existed.
The valuation of the Company's investment portfolio, given it represents the
majority of the total assets of the Company requires the use of significant
judgement for unlisted investments. The Directors are satisfied with the
Investment Manager's Pricing Methodology and Valuation Committee ("PMVC")'s
controls, and the appropriateness of the valuation techniques, inputs and
assumptions used in relation to valuation of unlisted investments. The
foregoing matters were discussed during the planning and testing stages of the
audit and there were no significant disagreements noted between management and
the independent auditor.
The Committee is satisfied that the significant assumptions used for
determining the value of assets and liabilities have been appropriately
scrutinised and challenged and are sufficiently robust. The Committee further
concludes that the financial statements, taken as a whole, are fair, balanced
and understandable and provide the information necessary for shareholders to
assess the Company's performance, business model and strategy.
The Independent Auditor reported to the Committee that no material unadjusted
misstatements were found in the course of its work. Furthermore, both the
Investment Manager and the Administrator confirmed to the Committee that they
were not aware of any material unadjusted misstatements, including matters
relating to presentation. The Committee confirms that it is satisfied that the
Independent Auditor has fulfilled its responsibilities with regard to diligence
and professional scepticism.
Audit Fees and Safeguards for Non-Audit Services
Where non-audit services are to be provided to the Company by its auditor, full
consideration of the financial and other implications for the independence of
the auditor arising from any such engagement are considered prior to
proceeding.
The table below summarises the remuneration of KPMG Channel Islands Limited and
of other KPMG affiliates for audit and non-audit services provided to the
Company for the years ended 31 December 2016 and 31 December 2015:
Year ended Year ended
31 December 2016 31 December 2015
US$ US$
Audit and audit related
services
- Annual audit 53,475 65,140
Internal Control
The Audit Committee has reviewed the need for an internal audit function. Based
on reviews of control reports, the Audit Committee has concluded that the
systems and procedures employed by the Administrator and the Investment
Manager, including their internal audit functions, provide sufficient assurance
that a sound system of internal control which safeguards the Company's assets
is maintained. An internal audit function specific to the Company is therefore
considered unnecessary.
Conclusions and Recommendations
The Audit Committee is satisfied that the external auditor remains independent
and confirms that the Audit Committee also met with the external auditor
without the Investment Manager or Administrator (Northern Trust International
Fund Administration Services (Guernsey) Limited) being present, so as to
provide a forum for the external auditor to raise any matters of concern in
confidence.
Consequent to the review process on the effectiveness of the independent audit
and the review of the audit and non-audit services that the Independent Auditor
delivers, the Committee has recommended that KPMG be reappointed for the coming
financial year.
For any questions on the activities of the Committee not addressed in the
foregoing, a member of the Audit Committee remains available to attend each
Annual General Meeting to respond to such questions.
Christopher Legge
Chairman of the Audit Committee
20 April 2017
Statement of Directors' Responsibility in respect of the Annual Report and
Audited Financial Statements
The Directors are responsible for preparing the Directors' Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with International Financial Reporting Standards as
issued by the IASB and applicable law.
The financial statements are required by law to give a true and fair view of
the state of affairs of the Company and of the profit or loss of the Company
for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable and prudent;
· state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
and
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with
the Companies (Guernsey) Law, 2008. They have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets of the
Company and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website and for
the preparation and dissemination of financial statements. Legislation in
Guernsey governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors have carried out a robust assessment of the principal risks
facing the Company, including those that would threaten its business model,
future performance, solvency or liquidity.
Disclosure of Information to the Auditor
The Directors who held office at the date of approval of the financial
statements confirm that, so far as they are each aware:
· there is no relevant audit information of which the Company's auditor is
unaware; and
· each Director has taken all the steps that they ought to have taken as a
Director to make themselves aware of any relevant audit information and to
establish that the Company's auditor is aware of that information.
Statement under the Disclosure Guidance and Transparency Rules 4.1.12
We confirm that to the best of our knowledge and belief:
· the financial statements, prepared in accordance with International
Financial Reporting Standards as issued by the IASB, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company;
· the annual report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for the
shareholders to assess the Company's performance, business model and strategy;
and
· the Chairman's Statement, the Investment Manager's Report and the
Directors' Report include a fair review of the development and performance of
the business and the position of the Company. A description of the principal
risks and uncertainties that the Company faces is provided in note 14 of the
financial statements.
Signed on behalf of the Board of Directors on 20 April 2017
Richard Hotchkis Christopher Legge
Chairman Chairman of
the Audit Committee
Directors' Remuneration Report
Introduction
An ordinary resolution for the approval of the annual remuneration report will
be put to shareholders at the Annual General Meeting.
Remuneration Policy
As all the Directors are non-executive, the Board has resolved that it is not
appropriate to form a Remuneration Committee and remuneration is reviewed and
discussed by the Board as a whole. Directors' remuneration is considered on a
periodic basis.
The Company's policy is that the fees payable to the Directors should reflect
the time spent by the Directors on the Company's affairs in addition to the
responsibilities borne by the Directors, and should be sufficient to attract,
retain and motivate Directors of the quality required to run the Company
successfully. The Chairman of the Board is paid a higher fee in recognition of
his additional responsibilities, as is the Chairman of the Audit Committee. The
policy is to review fee rates periodically, although such a review will not
necessarily result in any changes to the rates, and account is taken of fees
paid to the Directors of comparable companies.
There are no long-term incentive schemes provided by the Company and no
performance fees are paid to Directors.
In accordance with Article 18.3 of the Company's Articles of Incorporation, at
each Annual General Meeting one-third of the Directors retire from office via
rotation and are put forward for re-election based on continued satisfactory
performance. Any Director who serves nine years on the Board will thereafter be
put forward for re-election on an annual basis. Directors' appointments can
also be terminated in accordance with the Articles. Should shareholders vote
against a Director standing for re-election, the Director affected will not be
entitled to any compensation. There are no set notice periods and a Director
may resign by giving notice in writing to the Board at any time.
As Steve Hicks is connected to the Investment Manager and is therefore deemed
not to be an Independent Director, he shall be put forward for re-election on
an annual basis.
Directors' Fees
Directors are remunerated in the form of fees, payable monthly in arrears, to
the Directors personally. No other remuneration or compensation was paid or
payable by the Company during the year to any of the Directors apart from the
reimbursement of allowable expenses.
The fees payable by the Company in respect of each of the Directors who served
during the years ended 31 December 2016 and 2015, were as follows:
Year ended Year ended
31 December 2016 31 December 2015
GBP GBP
Richard Hotchkis 28,350 31,500
Steve Hicks* - -
Christopher Legge 28,350 31,500
Nigel de la Rue 26,730 29,700
Total 83,430 92,700
* Non-Independent Director
Signed on behalf of the Board of Directors on 20 April 2017
Richard Hotchkis Christopher Legge
Chairman Chairman of
the Audit Committee
Independent Auditor's Report to the Members of Ashmore Global Opportunities
Limited
Opinions and conclusions arising from our audit
Opinion on financial statements
We have audited the financial statements of Ashmore Global Opportunities
Limited (the "Company") for the year ended 31 December 2016 which comprise the
schedule of investments, the statement of financial position, the statement of
comprehensive income, the statement of changes in equity, the statement of cash
flows and the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial
Reporting Standards as issued by the IASB. In our opinion, the financial
statements:
· give a true and fair view of the state of the Company's affairs as at 31
December 2016 and of its total comprehensive income for the year ended 31
December 2016;
· have been properly prepared in accordance with International Financial
Reporting Standards as issued by the IASB ; and
· comply with the Companies (Guernsey) Law, 2008.
Our assessment of risks of material misstatement
The risks of material misstatement detailed in this section of this report are
those risks that we have deemed, in our professional judgement, to have had the
greatest effect on: the overall audit strategy; the allocation of resources in
our audit; and directing the efforts of the engagement team. Our audit
procedures relating to these risks were designed in the context of our audit of
the financial statements as a whole. Our opinion on the financial statements is
not modified with respect to any of these risks, and we do not express an
opinion on these individual risks.
In arriving at our audit opinion above on the financial statements, the risks
of material misstatements that had the greatest effect on our audit were as
follows:
Valuation of unlisted investments (US$53.6 million)
Refer to the Report of the Audit Committee, note 2d accounting policies and
notes 4 and 7 disclosures.
· The risk - The valuation estimation of unlisted investments. As
described in the Report from the Audit Committee, the valuation of the
Company's investments, which are unlisted or in an inactive market and are
subject to estimation risk, is a significant risk as those investments
represent the majority of the Company's net assets.
· Our response - Our audit procedures with respect to the valuation of
unlisted investments included, but were not limited to the following:
We tested the design and implementation of the Investment Manager's Pricing
Methodology and Valuation Committee ("PMVC")'s controls in relation to the
valuation of unlisted direct investments; we evaluated the work performed by
the Company's third party valuation agent, and we assessed the appropriateness
of the valuation techniques, inputs and assumptions used.
For unlisted direct investments into underlying investees (11% of net assets
(US$ 5.7m)), we used our own valuations specialist to evaluate the
methodologies applied by considering the nature of the investments and accepted
industry practices as well as challenging key assumptions applied by the
Investment Manager and its PMVC by reference to independent market data and
information and industry expectations. We evaluated the competence of the
Company's third party valuation agent in the context of their ability to
appropriately challenge and review the fair value of the investments prepared
by the Company, by assessing their professional qualifications, experience and
independence from the Company.
For unlisted investments in other funds (27% of net assets (US$ 14.7m)) we
obtained net asset value per share confirmations directly from the underlying
funds' administrators and inspected the latest audited financial statements of
these underlying funds in order to evaluate the nature of the investments held
by the underlying funds, the financial reporting standards applied in the
preparation of the underlying funds' financial statements and any modifications
to audit reports and other disclosures which may be relevant to the valuation
of the Company's investments.
For investments in other Ashmore special situation investment funds, which are
also audited by KPMG Channel Islands Limited (all with coterminous year ends),
(62% of net assets (US$ 33.2m)) we undertook discussions on key audit findings
with the audit teams of those funds and examined their coterminous audited
financial statements to evaluate the nature of the investments held by the
underlying funds, the financial reporting standards applied in the preparation
of the underlying funds' financial statements and any modifications to audit
reports and other disclosures which may be relevant to the valuation of the
Company's investments.
We have also considered the Company's disclosures (see note 2d) in relation to
the use of estimates and judgements regarding fair value of investments and the
Company's valuation policies adopted and fair value disclosures in note 7 for
compliance with International Financial Reporting Standards as issued by the
IASB.
Going concern
· The risk - At an Extraordinary General Meeting in March 2013, the
shareholders approved proposals for a managed wind-down of the Company's
investment portfolio changing the investment objective of the Company to the
realisation of the Company's assets in an orderly manner in order to return
cash to shareholders. Refer to the Report of the Audit Committee and note 2b
accounting policies.
· Our response - Our audit procedures with respect to going concern
included, but were not limited to, holding discussions with the Board of
Directors and the Investment Manager to understand the proposed investment
portfolio realisation programme and to assess the implications of the managed
wind-down on the financial statements. We also challenged management's
assessment of the Company's ability to continue as a going concern against our
other audit findings.
We also considered the Company's going concern disclosure in note 2b of the
financial statements for compliance with International Financial Reporting
Standards as issued by the IASB and other appropriate technical guidance.
Our application of materiality and an overview of the scope of our audit
Materiality is a term used to describe the acceptable level of precision in
financial statements. Auditing standards describe a misstatement or an omission
as "material" if it could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements. The auditor
has to apply judgement in identifying whether a misstatement or omission is
material and to do so the auditor identifies a monetary amount as "materiality
for the financial statements as a whole".
Materiality for the financial statements as a whole was set at US$ 1.58m. This
has been calculated using a benchmark of the Company's net asset value (of
which it represents approximately 3%) which we believe is the most appropriate
benchmark as net asset value is considered to be one of the principal
considerations for members of the Company in assessing the financial
performance of the Company.
We agreed with the audit committee to report to it all corrected and
uncorrected misstatements we identified through our audit with a value in
excess of US$79k, in addition to other audit misstatements below that threshold
that we believe warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified
above, which has informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those areas as
detailed above.
Whilst the audit process is designed to provide reasonable assurance of
identifying material misstatements or omissions it is not guaranteed to do so.
Rather we plan the audit to determine the extent of testing needed to reduce to
an appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements does not exceed materiality for the financial
statements as a whole. This testing requires us to conduct significant depth of
work on a broad range of assets, liabilities, income and expense as well as
devoting significant time of the most experienced members of the audit team, in
particular the Responsible Individual, to subjective areas of the accounting
and reporting process.
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are
appropriate to the Company's circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting
estimates made by the Board of Directors; and the overall presentation of the
financial statements. In addition, we read all the financial and non-financial
information in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge
acquired by us in the course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications
for our report.
Disclosures of principal risks
Based on the knowledge we acquired during our audit, we have nothing material
to add or draw attention to in relation to:
· the Directors' statement of longer-term viability, concerning the
principal risks, their management, and, based on that, the Directors'
assessment and expectations of the Company's continuing in operation; or
· the disclosures in note 2b of the financial statements concerning the
use of the going concern basis of accounting.
Matters on which we are required to report by exception
Under International Standards on Auditing [ISAs] (UK and Ireland) we are
required to report to you if, based on the knowledge we acquired during our
audit, we have identified other information in the Annual Report that contains
a material inconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
· we have identified material inconsistencies between the knowledge we
acquired during our audit and the Directors' statement that they consider that
the Annual Report and financial statements taken as a whole is fair, balanced
and understandable and provides the information necessary for members to assess
the Company's performance, business model and strategy; or
· the Report of the Audit Committee does not appropriately address matters
communicated by us to the audit committee.
Under the Companies (Guernsey) Law, 2008, we are required to report to you if,
in our opinion:
· the Company has not kept proper accounting records; or
· the financial statements are not in agreement with the accounting
records; or
· we have not received all the information and explanations, which to the
best of our knowledge and belief are necessary for the purpose of our audit.
Under the Listing Rules we are required to review the part of the Corporate
Governance Statement relating to the Company's compliance with the eleven
provisions of the UK Corporate Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
The purpose of this report and restrictions on its use by persons other than
the Company's members as a body
This report is made solely to the Company's members, as a body, in accordance
with section 262 of the Companies (Guernsey) Law, 2008 and, in respect of any
further matters on which we have agreed to report, on terms we have agreed with
the Company. Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in an
auditor's report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company
and the Company's members, as a body, for our audit work, for this report, or
for the opinions we have formed.
Respective responsibilities of Directors and auditor
As explained more fully in the Directors' Responsibilities Statement, the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit, and express an opinion on, the financial statements in accordance
with applicable law and ISAs (UK and Ireland). Those standards require us to
comply with the UK Ethical Standards for Auditors.
Steven D. Stormonth
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
20 April 2017
Schedule of Investments
As at 31 December 2016
Description of investment Fair value % of
US$ net assets
Ashmore Global Special Situations Fund 4 LP 22,791,962 42.52
Ashmore Global Special Situations Fund 5 LP 8,459,545 15.78
AEI Inc - Equity 5,771,581 10.77
AA Development Capital India Fund 1, LLC 5,245,652 9.79
Ashmore Asian Recovery Fund 3,705,319 6.91
VTBC Ashmore Real Estate Partners 1 LP 4,046,889 7.55
Ashmore Global Special Situations Fund 3 LP 1,529,191 2.85
Everbright Ashmore China Real Estate Fund LP 1,497,184 2.79
Ashmore Global Special Situations Fund 2 Limited 395,854 0.74
Ashmore Asian Special Opportunities Fund Limited 203,643 0.38
Ashmore SICAV 2 Global Liquidity US$ Fund 930 -
Total investments at fair value 53,647,750 100.08
Net other current liabilities (42,837) (0.08)
Total net assets 53,604,913 100.00
Statement of Financial Position
As at 31 December 2016
31 December 2016 31 December 2015
Note US$ US$
Assets
Cash and cash equivalents 956,920 16,505,657
Other financial assets 6 8,181 401,845
Financial assets at fair value through 4 53,653,286 60,344,945
profit or loss
Total assets 54,618,387 77,252,447
Equity
Capital and reserves attributable to
equity holders
of the Company
Special reserve 8 410,583,457 429,283,586
Retained earnings (356,978,544) (353,633,654)
Total equity 53,604,913 75,649,932
Liabilities
Current liabilities
Other financial liabilities 6 914,223 650,710
Financial liabilities at fair value 4 99,251 951,805
through profit or loss
Total liabilities 1,013,474 1,602,515
Total equity and liabilities 54,618,387 77,252,447
Net asset values
Net assets per US$ share 9 US$5.08 US$5.06
Net assets per GBP share 9 GBP4.91 GBP4.98
The financial statements were approved by the Board of Directors on 20 April
2017, and were signed on its behalf by:
Richard Hotchkis Christopher Legge
Chairman Chairman of
the Audit Committee
The accompanying notes form an integral part of these financial statements.
Statement of Comprehensive Income
For the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
Note US$ US$
Interest income 10 2,323 1,986
Dividend income 10 1,975,957 40,935,262
Net foreign currency gain/(loss) 64,502 (56,228)
Other net changes in fair value on 5 (4,739,070) (49,123,049)
financial assets and liabilities at fair
value through profit or loss
Total net loss (2,696,288) (8,242,029)
Expenses
Investment management fees 11a (84,180) (134,400)
Incentive fees 11a (271,667) (165,157)
Directors' remuneration 11b (113,883) (144,758)
Fund administration fees 11c (10,515) (12,639)
Custody fees 11d (5,429) (11,031)
Other operating expenses 12 (162,928)
428,088*
Total operating expenses (648,602) (39,897)
Loss for the year (3,344,890) (8,281,926)
Total comprehensive loss for the year (3,344,890) (8,281,926)
Earnings per share
Basic and diluted gain/(loss) per US$ 13 US$0.04 US$(0.20)
share
Basic and diluted loss per GBP share 13 US$(1.16) US$(0.85)
* The credit to other expenses represents the reversal of accruals as a result
of a reduction in expenses as the Company continues to wind down.
All items derive from continuing activities.
The accompanying notes form an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 31 December 2016
Special Retained
reserve earnings Total
Note US$ US$ US$
Total equity as at 1 January 2016 429,283,586 (353,633,654) 75,649,932
Total comprehensive loss for the - (3,344,890) (3,344,890)
year
Capital distribution 8 (18,700,129) - (18,700,129)
Total equity as at 31 December 410,583,457 (356,978,544) 53,604,913
2016
Total equity as at 1 January 2015 515,783,066 (345,351,728) 170,431,338
Total comprehensive loss for the - (8,281,926) (8,281,926)
year
Capital distribution 8 (86,499,480) - (86,499,480)
Total equity as at 31 December 429,283,586 (353,633,654) 75,649,932
2015
The accompanying notes form an integral part of these financial statements.
Statement of Cash Flows
For the year ended 31 December 2016
Year ended Year ended
31 December 2016 31 December 2015
US$ US$
Cash flows from operating activities
Net bank interest received 2,323 1,986
Dividends received 1,975,957 58,110,856
Net operating expenses charged 8,575 (2,389,277)
Net cash from operating activities 1,986,855 55,723,565
Cash flows from investment activities
Sales of investments 8,191,075 116,082,349
Purchases of investments in liquidity Funds (2,503,311) (80,003,622)
Net cash flows on derivative instruments and (4,523,227) (3,323,187) *
foreign exchange
Net cash from investment activities 1,164,537 32,755,540 *
Cash flows from financing activities
Capital distributions (18,700,129) (86,499,480)
Net cash used in financing activities (18,700,129) (86,499,480)
Net (decrease)/increase in cash and cash (15,548,737) 1,979,625 *
equivalents
Reconciliation of net cash flows to movement in cash and cash
equivalents
Cash and cash equivalents at the beginning of 16,505,657 14,383,849
the year
(Decrease)/increase in cash and cash equivalents (15,548,737) 1,979,625 *
Currency translation differences - 142,183 *
Cash and cash equivalents at the end of the year 956,920 16,505,657
* The prior year comparatives have been amended to disclose the currency
translation differences on the face of the Statement of Cash Flows.
The accompanying notes form an integral part of these financial statements.
Notes to the Financial Statements
1. General Information
Ashmore Global Opportunities Limited (the "Company" or "AGOL") is an authorised
closed ended investment company incorporated in Guernsey on 21 June 2007 with
an indefinite life and a listing on the London Stock Exchange. As an existing
closed ended Company, AGOL is deemed to have been granted an authorisation in
accordance with section 8 of the Protection of Investors (Bailiwick of
Guernsey) Law, 1987, as amended, and rule 7.02(2) of the Authorised Closed
Ended Investment Schemes Rules 2008 on the same date as the Company obtained
consent under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959
to 1989. AGOL's investment objective is the realisation of the Company's assets
in an orderly manner in order to return cash to shareholders.
The Company was launched on 7 December 2007 and the Company's shares were
admitted to the Official Listing of the London Stock Exchange on 12 December
2007, pursuant to Chapter 14 of the Listing Rules. Following changes to the
Listing Rules on 6 April 2010, the listing became a Standard Listing. On 27
April 2011, the UK Listing Authority confirmed the transfer of the Company from
a Standard Listing to a Premium Listing under Chapter 15 of the Listing Rules.
On 20 February 2013, the Board of Directors proposed a managed wind-down of the
Company following consultation with the Investment Manager and the main
shareholders. The proposal was accepted during the Extraordinary General
Meeting ("EGM") of shareholders on 13 March 2013.
The Directors have assessed the impact of the AIFMD on the financial statements
of the Company and have concluded that the Company is exempt from following
Chapter V, Section 1, Articles 103 - 111 of the European Commission's Level 2
Delegated Regulation on the basis of the operations of the Company: it being
(i) a Non-EEA AIF, and (ii) not being marketed in the European Union, as
defined by the Directive.
Investment Strategy
Prior to the Extraordinary General Meeting ("EGM") of shareholders on 13 March
2013, the Company's investment objective was to deploy capital in a diversified
portfolio of global emerging market strategies and actively manage these with a
view to maximising total returns. This was implemented by investing across
various investment themes (Alternatives including Special Situations and Real
Estate, External Debt, Local Currency, Equities, Corporate Debt and
Multi-Strategy), with a principal focus on Special Situations.
The Company is domiciled in Guernsey, Channel Islands. Most of the Company's
income is from investment entities incorporated in Guernsey.
Significant Shareholders
The Company has a diversified shareholder population. As at 31 December 2016
and 2015, State Street Nominees Limited, Goldman Sachs Securities Nominees
Limited and Chase Nominees Limited held more than 10% of the Company's Net
Asset Value. Significant shareholders are listed in the Directors' Report.
2. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these financial
statements are set out below. These policies have been consistently applied for
the years presented, unless otherwise stated.
a) Statement of Compliance
These audited financial statements, which give a true and fair view, are
prepared in accordance with: International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board;
interpretations issued by the IFRS Interpretations Committee; and the Listing
Rules of the UK Listing Authority. They comply with the Companies (Guernsey)
Law, 2008 (the "Law").
b) Basis of Preparation
These audited financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and financial
liabilities at fair value through profit or loss.
These audited financial statements have been prepared on the going concern
basis, despite the managed wind-down of the Company approved by the
shareholders on 13 March 2013. The factors surrounding this are detailed in the
Directors' Report. The Board has concluded that the managed wind-down of the
Company has no significant impact on the valuation of the Company's investments
or its ability to meet liabilities as they fall due for the foreseeable future,
including for at least 12 months from the date of this report.
The preparation of financial statements in conformity with IFRS requires
judgements, estimates and assumptions that affect the application of policies
and the reported amounts of assets, liabilities, income and expenses.
These estimates and their 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 judgements
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
The estimates and their underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period, or in the
period of revision and future periods if the revision affects both current and
future periods.
The key estimates made by management in the application of IFRS that have a
significant effect on the financial statements and that have a significant risk
of material adjustment relate to the valuation of unquoted financial
instruments as described in note 2d.
c) Foreign Currency
i) Functional and presentation currency
These audited financial statements have been prepared in US dollars (US$),
which is the Company's functional and presentation currency, rounded to the
nearest US dollar. The Board of Directors considers the US dollar to be the
currency that most faithfully represents the economic effect on the Company of
the underlying transactions, events and conditions. The US dollar is the
currency in which the Company measures its performance and reports its results.
This determination also considers the competitive environment in which the
Company is compared to other investment products.
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the date of the transaction. Foreign currency
monetary assets and liabilities are translated into the functional currency
using the exchange rate prevailing at the Statement of Financial Position date.
Foreign exchange gains and losses arising from translation are included in net
foreign currency gain/(loss) in the Statement of Comprehensive Income.
Foreign exchange gains and losses relating to the financial assets and
liabilities carried at fair value through profit or loss are presented in the
Statement of Comprehensive Income within "Other net changes in fair value on
financial assets and liabilities at fair value through profit or loss".
d) Financial Assets and Financial Liabilities
i) Classification
The Company has classified financial assets and financial liabilities into the
following categories:
- Financial assets and financial liabilities at fair value through
profit or loss:
Financial assets and liabilities held for trading:
Financial assets or financial liabilities classified as held for trading are
those acquired or incurred principally for the purpose of selling or
repurchasing in the short term. Derivatives, including forward foreign currency
contracts, are categorised as financial assets or financial liabilities held
for trading.
Financial :
Financial assets and financial liabilities designated at fair value through
profit or loss at inception are financial instruments that are not classified
as held for trading but are managed, and whose performance is evaluated on a
fair value basis in accordance with the Company's documented investment
strategy. These financial instruments include direct debt or equity investments
and investments in quoted and unquoted Ashmore Funds ("Funds").
- Financial assets and financial liabilities at amortised cost:
Loans and receivables
This includes cash and cash equivalents and other receivables.
Other financial liabilities
This includes other payables.
ii) Initial recognition
Regular purchases and sales of financial assets and liabilities are initially
recognised on the trade date - the date on which the Company becomes a party to
the contractual provisions of the instrument. Other financial assets and
liabilities are recognised on the date they are originated.
Financial assets and financial liabilities at fair value through profit or loss
are initially recognised at fair value, with transaction costs recognised as
expenses in the Statement of Comprehensive Income. Financial assets or
financial liabilities not at fair value through profit or loss are initially
recognised at fair value and include transaction costs that are directly
attributable to their acquisition or issue.
iii) Subsequent measurement
- Fair value measurement
Subsequent to initial recognition, all financial assets and financial
liabilities at fair value through profit or loss are measured at fair value.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date.
Gains and losses arising from changes in the fair value of financial assets or
financial liabilities at fair value through profit or loss are presented in the
Statement of Comprehensive Income within "Other net changes in the fair value
of financial assets and liabilities at fair value through profit or loss" in
the period in which they arise and can be unrealised or realised.
Unrealised gains and losses comprise changes to the fair value of financial
instruments for the year and the reversal of prior period unrealised gains and
losses for financial instruments which were realised in the reporting period.
Realised gains and losses on the disposal of financial instruments classified
as at fair value through profit or loss are calculated using the average cost
method.
- Valuation of investments in Funds
Investments in quoted open ended Funds are valued by reference to the most
recent prices quoted on a recognised investment exchange. Investments in
unquoted Funds are valued on the basis of the latest Net Asset Value provided
by the administrator of the unquoted Fund in question, as at the close of
business on the relevant valuation day.
- Valuation of direct investments
Direct investments may be effected via holding vehicles. The valuations of such
positions are based on the valuation of the underlying investments. Where
possible the fair values of direct debt or equity investments are based on
their quoted market prices at the Statement of Financial Position date, without
any deduction for estimated future selling costs. If a quoted market price is
not available on a recognised stock exchange or from a broker/dealer for
non-exchange traded financial instruments, the fair value is estimated using
valuation techniques, as described in note 7.
- Valuation of forward foreign currency contracts
Open forward foreign currency contracts at the Statement of Financial Position
date are valued at forward currency rates prevailing on that date. The change
in the fair value of open forward foreign currency contracts is calculated as
the difference between the contract rate and the forward currency rate as at
the Statement of Financial Position date.
The Company does not apply hedge accounting.
iv) Impairment of financial assets classified as loans and receivables
At each reporting date, the Company assesses whether there is objective
evidence that financial assets classified as loans and receivables are
impaired. As at 31 December 2016 and 2015, the Company's loans and receivables
were not impaired.
Objective evidence of impairment may include: significant financial difficulty
of the borrower or issuer, default or delinquency by a borrower or issuer,
restructuring of a loan or advance by the Company on terms that the Company
would not otherwise consider, indications that a borrower or issuer will enter
bankruptcy or other observable data relating to a group of assets such as
adverse changes in the payment status of borrowers or issuers in the group or
economic conditions that correlate with defaults in the group.
Impairment losses on loans and receivables are measured as the difference
between the carrying amount of the financial asset and the present value of the
estimated future cash flows from the asset discounted at its original effective
interest rate. Impairment losses are recognised in profit or loss in the
Statement of Comprehensive Income and reflected in the Statement of Financial
Position as an allowance account against loans and receivables. Interest on
impaired assets continues to be recognised through the unwinding of the
discount. The Company writes off loans and receivables when they are determined
to be uncollectible.
When a subsequent event causes the amount of impairment loss to decrease, the
decrease in impairment is reversed through profit or loss.
v) Derecognition
Financial assets are derecognised when the contractual rights to receive cash
flows from the assets have expired or the Company has transferred substantially
all the risks and rewards of ownership. Financial liabilities are derecognised
when their contractual obligations are discharged, cancelled or expire.
vi) Offsetting
Financial assets and liabilities are offset and the net amount presented in the
Statement of Financial Position when, and only when, the Company has a legal
right to offset the recognised amounts and it intends either to settle on a net
basis or to realise the asset and settle the liability simultaneously.
The Company has adopted the amendments to IAS 32 on offsetting. These
amendments clarify the offsetting criteria in IAS 32 by explaining when an
entity currently has a legally enforceable right to set-off and when gross
settlement is considered to be equivalent to net settlement.
The Company does not hold any financial assets or financial liabilities that
are subject to master netting agreements or similar agreements and, as such,
has not presented any financial assets or liabilities net on the Statement of
Financial Position. There were no financial assets or financial liabilities
that are offset in the Statement of Financial Position.
Income and expenses are presented on a net basis only when permitted under
IFRS.
e) Amounts due from and due to Brokers
Amounts due from and due to brokers represent receivables for securities sold
and payables for securities purchased that have been contracted for but not yet
settled or delivered on the Statement of Financial Position date respectively.
The accounting policy for the recognition of amounts due from and due to
brokers is discussed in note 2d.
f) Cash and Cash Equivalents
Cash and cash equivalents may comprise current deposits with banks, bank
overdrafts and other short-term highly liquid investments that: are readily
convertible to known amounts of cash; are subject to insignificant changes in
value; and are held for the purpose of meeting short-term cash commitments
rather than for investment or other purposes. Cash, deposits with banks and
bank overdrafts are stated at their principal amount.
g) Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are included in equity as a
deduction from issue proceeds, net of tax.
h) Interest Income and Dividend Income
Interest income is recognised in the Statement of Comprehensive Income as it
accrues, on a time-proportionate basis using the effective interest rate
method. It includes interest income from cash and cash equivalents and from
debt securities at fair value though profit or loss.
Income distributions from quoted Funds are recognised in the Statement of
Comprehensive Income as dividend income when declared. Dividend income from
unquoted Funds and private equity investments is recognised when the right to
receive payment is established.
i) Earnings per Share
The Company presents basic and diluted earnings per share ("EPS") data for each
class of its ordinary shares. The basic EPS of each share class is calculated
by dividing the profit or loss attributable to the ordinary shareholders of
each share class by the weighted average number of ordinary shares outstanding
for the respective share class during the period. Where dilutive instruments
are in issue, diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of
ordinary shares outstanding for the effects of the dilutive instruments.
j) Expenses
All expenses are recognised in the Statement of Comprehensive Income on an
accruals basis.
k) Segmental Reporting
Although the Company has two classes of shares and invests in various
investment themes, it is organised and operates as one business and one
geographical segment, as the principal focus is on emerging market strategies,
mainly achieved via investments in funds domiciled in Europe but investing
globally. Accordingly, all significant operating decisions are based upon
analysis of the Company as one segment. The financial results from this segment
are equivalent to the financial statements of the Company as a whole.
Additionally, the Company's performance is evaluated on an overall basis. The
Company's management receives financial information prepared under IFRS and, as
a result, the disclosure of separate segmental information is not required.
l) Consolidation
The Company is not required to consolidate any of the investments listed in the
Schedule of Investments or the underlying investments of the Funds held, as it
does not control them and given that the Company is an investment entity under
IFRS 10 - Investment Entities. All investments including those effected via
holding vehicles are valued at fair value through profit or loss.
i) Disclosure of Interests in Other Entities
As a result of the application of IFRS 12, Disclosure of Interests in Other
Entities, the Company has made disclosures about its involvement with
unconsolidated structured entities in note 16.
The Company has concluded that unlisted Funds in which it invests, but which it
does not consolidate, meet the definition of structured entities for the
following reasons:
· the voting rights attached to the Funds are not considered to be dominant
rights as the holder is unable to control the Funds. The rights relate only to
influence over administrative tasks;
· each Fund's activities are restricted by its prospectus; and
· the Funds have narrow and well-defined objectives to provide investment
opportunities to investors.
ii) Investment Entities
The Company has adopted the accounting standards on Investment Entities
(amendments to IFRS 10, IFRS 12, and IAS 27) and management has concluded that
the Company meets the definition of an investment entity. All investments of
the Company in underlying Funds are measured at fair value through profit and
loss.
m) Related Parties
Annual Improvements to IFRSs 2010-2012 Cycle - Amendments to IAS 24, issued in
December 2013 and applied for the first time in the annual report and financial
statements for the year ended 31 December 2015, extends the definition of a
related party to include a management entity that provides key management
personnel services to the reporting entity. The amendments specify that if key
management personnel services are provided by a management entity, then the
reporting entity is required to separately disclose the amounts incurred for
the provision of key management personnel services that are provided by that
management entity. For further information, please refer to Supplementary
Information (Unaudited) - Remuneration Disclosure.
n) New Standards and Interpretations not yet Adopted
A number of new standards, amendments to standards and interpretations are
effective for annual periods beginning after 1 January 2016. The only new
standard relevant to the Company is IFRS 9 Financial Instruments, which is
discussed below.
i) IFRS 9 Financial Instruments
IFRS 9, published in July 2014, will replace the existing guidance in IAS 39.
It includes revised guidance on the classification and measurement of financial
instruments, including a new expected credit loss model for calculating
impairment on financial assets, and new general hedge accounting requirements.
It also carries forward the guidance on recognition and derecognition of
financial instruments from IAS 39.
IFRS 9 is effective for annual reporting periods beginning on or after 1
January 2018, with early adoption permitted. The Company does not plan to adopt
IFRS 9 early.
3. Taxation
The Director of Income Tax in Guernsey has confirmed that, for the year ended
31 December 2016, the Company is exempt from Guernsey Income Tax under the
Income Tax (Exempt bodies) (Guernsey) Ordinance 1989, and that any surplus
income of the Company may be distributed without the deduction of Guernsey
Income Tax. Pursuant to the exemption granted under the above-mentioned
ordinance, the Company is subject to an annual fee, currently GBP1,200, payable
to the States of Guernsey Income Tax. The Company is exposed to other taxes in
its countries of investment.
4. Financial Assets and Liabilities at Fair Value through Profit or Loss
31 December 2016 31 December
2015
US$ US$
Financial assets held for trading:
- Derivative financial assets 5,536 10,540
Total financial assets held for trading 5,536 10,540
Designated at fair value through profit or loss at
inception:
- Equity investments 53,647,750 60,334,405
Total designated at fair value through profit or loss at 53,647,750 60,334,405
inception
Total financial assets at fair value through profit or 53,653,286 60,344,945
loss
During the years ended 31 December 2016 and 2015, the Company invested in the
Ashmore SICAV 2 Global Liquidity US$ Fund. There were no other significant
changes to the Company's direct equity and debt investments other than
valuation movements.
As at 31 December 2016, derivative financial assets comprised forward foreign
currency contracts as follows:
Currency Amount Currency Amount Maturity Unrealised
Bought Bought Sold Sold Date Gain
US$ 473,013 GBP 377,880 17/02/2017 5,536
Derivative financial assets 5,536
As at 31 December 2015, derivative financial assets comprised forward foreign
currency contracts as follows:
Currency Amount Currency Amount Maturity Unrealised
Bought Bought Sold Sold Date Gain
US$ 468,965 GBP 311,000 12/02/2016 10,540
Derivative financial assets 10,540
31 December 2016 31 December
2015
US$ US$
Financial liabilities held for trading:
- Derivative financial liabilities (99,251) (951,805)
Total financial liabilities held for trading (99,251) (951,805)
As at 31 December 2016, derivative financial liabilities comprised forward
foreign currency contracts as follows:
Currency Amount Currency Amount Maturity Unrealised
Bought Bought Sold Sold Date Loss
GBP 12,999,408 US$ 16,180,884 17/02/2017 (99,251)
Derivative financial liabilities (99,251)
As at 31 December 2015, derivative financial liabilities comprised forward
foreign currency contracts as follows:
Currency Amount Currency Amount Maturity Unrealised
Bought Bought Sold Sold Date Loss
GBP 25,395,430 US$ 38,385,574 12/02/2016 (951,805)
Derivative financial liabilities (951,805)
5. Net Gain/Loss from Financial Assets and Liabilities at Fair Value through
Profit or Loss
31 December 2016 31 December
2015
US$ US$
Other net changes in fair value through profit or loss:
- Realised gains on investments 1,668,136 11,204,812 *
- Realised losses on investments (44,097,665) (23,236,471) *
- Realised gains on forward foreign currency contracts 867,009 2,533,964 *
- Realised losses on forward foreign currency contracts (5,454,738) (5,658,740) *
- Change in unrealised gains on investments 44,074,611 22,184,725 *
- Change in unrealised losses on investments (2,643,973) (55,732,515) *
- Change in unrealised gains on forward foreign 957,341 549,411 *
exchange contracts
- Change in unrealised losses on forward foreign (109,791) (968,235) *
exchange contracts
Total loss (4,739,070) (49,123,049)
Other net changes in fair value on derivative assets (3,740,179) (3,543,600)
held for trading
Other net changes in fair value on assets designated at (998,891) (45,579,449)
fair value through profit or loss
Total net loss (4,739,070) (49,123,049)
* The prior year comparatives have been amended to conform with the current
year's presentation whereby gains and losses from financial assets and
liabilities at fair value through profit or loss have been broken down to show
the gross gains and losses for each type of financial asset and liability.
6. Other Financial Assets and Liabilities
a) Other financial assets:
Other financial assets relate to accounts receivable and prepaid expenses, and
comprise the following:
31 December 2016 31 December
2015
US$ US$
Prepaid Directors' insurance fees 6,833 9,112
Prepaid regulatory fees - 1,915
Other receivables and prepaid expenses 1,348 390,818
8,181 401,845
b) Other financial liabilities:
Other financial liabilities relate to accounts payable and accrued expenses,
and comprise the following:
31 December 2016 31 December
2015
US$ US$
Investment management fees payable (4,731) (5,337)
Incentive fees payable (795,093) (523,426)
Other accruals (114,399) (121,947)
(914,223) (650,710)
7. Financial Instruments
a) Carrying amounts versus fair values
As at 31 December 2016, the carrying values of financial assets and liabilities
presented in the Statement of Financial Position approximate their fair values.
The table below sets out the classifications of the carrying amounts of the
Company's financial assets and financial liabilities into categories of
financial instruments as at 31 December 2016.
Held for Designated Loans and Other Total
trading at fair receivables financial
value liabilities
Cash and cash equivalents - - - 956,920
956,920
Non-pledged financial assets at - -
fair value 5,536 53,647,750 53,653,286
through profit or loss
Other receivables - - 8,181 - 8,181
Total 5,536 53,647,750 965,101 - 54,618,387
Financial liabilities at fair (99,251) - - - (99,251)
value
through profit or loss
Other payables - - - (914,223) (914,223)
Total (99,251) - - (914,223) (1,013,474)
The table below sets out the classifications of the carrying amounts of the
Company's financial assets and financial liabilities into categories of
financial instruments as at 31 December 2015.
Held for Designated Loans and Other Total
trading at fair receivables financial
value liabilities
Cash and cash equivalents - - 16,505,657 - 16,505,657
Non-pledged financial assets at 10,540 - -
fair value 60,334,405 60,344,945
through profit or loss
Other receivables - - 401,845 * - * 401,845
Total 10,540 60,334,405 16,907,502 * - * 77,252,447
Financial liabilities at fair (951,805) - - - (951,805)
value
through profit or loss
Other payables - - - (650,710) (650,710)
Total (951,805) - - (650,710) (1,602,515)
* The prior year comparatives have been amended to conform with the current
year's presentation.
b) Financial instruments carried at fair value - fair value hierarchy
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability (i.e. the exit price) in an orderly transaction
between market participants at the measurement date.
For certain of the Company's financial instruments including cash and cash
equivalents, prepaid/accrued expenses and other creditors, their carrying
amounts approximate fair value due to the immediate or short-term nature of
these financial instruments. The Company's investments and financial derivative
instruments are carried at market value, which approximates fair value.
The Company classifies financial instruments within a fair value hierarchy that
prioritises the inputs to valuation techniques used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The three levels
of the fair value hierarchy are as follows:
Level 1 inputs are unadjusted quoted prices in active markets for identical
assets or liabilities that the reporting entity has the ability to access at
the measurement date.
Level 2 inputs are observable inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly or
indirectly, including:
- quoted prices for similar assets or liabilities in active markets;
- quoted prices for identical or similar assets or liabilities in markets that
are not active;
- inputs other than quoted prices that are observable for the asset or
liability;
- inputs that are derived principally from or corroborated by an observable
market.
Level 3 inputs are unobservable inputs for the asset or liability.
Inputs are used in applying various valuation techniques and broadly refer to
the assumptions that market participants use to make valuation decisions,
including assumptions about risk. Inputs may include price information,
volatility statistics, specific and broad credit data, liquidity statistics,
and other factors. A financial instrument's level within the fair value
hierarchy is based on the lowest level of any input that is significant to the
fair value measurement. However, the determination of what constitutes
"observable" requires significant judgement. The Company considers observable
data to be that market data which is readily available, regularly distributed
or updated, reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant market.
The categorisation of a financial instrument within the hierarchy is based upon
the pricing transparency of the instrument and does not necessarily correspond
to the Company's perceived risk of that instrument.
Investments: Investments whose values are based on quoted market prices in
active markets, and are therefore classified within Level 1, include active
listed equities, certain U.S. government and sovereign obligations, and certain
money market securities. The Company does not generally adjust the quoted price
for such instruments, even in situations where it holds a large position and a
sale could reasonably impact the quoted price.
Investments that trade in markets that are not considered to be active, but are
valued based on quoted market prices, dealer quotations or alternative pricing
sources supported by observable inputs are classified within Level 2. These may
include government and sovereign obligations, government agency securities,
corporate bonds, and municipal and provincial obligations.
Investments classified within Level 3 have significant unobservable inputs, as
they trade infrequently or not at all. Level 3 instruments may include private
equity investments, certain loan agreements, less-liquid corporate debt
securities (including distressed debt instruments) and collateralised debt
obligations. Also included in this category are government and sovereign
obligations, government agency securities and corporate bonds for which
independent broker prices are used and information relating to the inputs of
the price models is not observable.
When observable prices are not available; e.g. if an asset does not trade
regularly, the Company may rely on information provided by any person, firm or
entity including any professional person whom the Directors consider to be
suitably qualified to provide information in respect of the valuation of
investments and who is approved by the Custodian (an "Approved Person").
Approved Persons may include certain brokers and the Pricing Methodology and
Valuation Committee ("PMVC") of the Investment Manager.
The PMVC may provide assistance to the Administrator in determining the
valuation of assets where the Administrator cannot determine a valuation from
another source. These assets, which are classified within Level 3, may
include all asset types but are frequently 'Special Situations' type
investments, typically incorporating distressed, illiquid or private
investments.
For these hard-to-value investments, the methodology and models used to
determine fair value are created in accordance with the International Private
Equity and Venture Capital Valuation (IPEV) guidelines. Smaller investments may
be valued directly by the PMVC but material investments are valued by
experienced personnel at an independent third-party valuation specialist. Such
valuations are subject to review, amendment if necessary, then approval by the
PMVC. The valuations are ultimately approved by the Directors and the auditors
as they make up part of the NAV in the financial statements.
Valuation techniques used include the market approach, the income approach or
the cost approach depending on the availability of reliable information. The
market approach generally consists of using; comparable transactions, earnings
before interest, tax, depreciation and amortisation (EBITDA) multiples; or
enterprise value (EV) multiples (based on comparable public company
information). 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.
Inputs used in estimating the value of investments may include the original
transaction price, recent transactions in the same or similar instruments,
completed or pending third-party transactions in the underlying investment or
comparable issuers, subsequent rounds of financing, recapitalisations and other
transactions across the capital structure, offerings in the equity or debt
capital markets and bids received from potential buyers.
For the determination of the Net Asset Value, Level 3 investments may be
adjusted to reflect illiquidity and/or non-transferability. However, any such
adjustments are typically reversed in the financial statements where it is
determined that this is required by the accounting standards.
The Company believes that its estimates of fair value are appropriate, however
estimates and assumptions concerning the future, by definition, seldom equal
the actual results and the estimated value may not be realised in a current
sale or immediate settlement of the asset or liability. The use of different
methodologies, assumptions or inputs would lead to different measurements of
fair value and given the number of different factors affecting the estimate,
specific sensitivity analysis cannot be reliably quantified. It is reasonably
possible, on the basis of existing knowledge, that outcomes within the next
financial year that are different from the assumptions used could require a
material adjustment to the carrying amounts of affected assets.
Financial Derivative Instruments: Financial derivative instruments can be
exchange-traded or privately negotiated over-the-counter ("OTC").
Exchange-traded derivatives, such as futures contracts and exchange-traded
option contracts, are typically classified within Level 1 or Level 2 of the
fair value hierarchy depending on whether or not they are deemed to be actively
traded.
OTC derivatives, including forwards, credit default swaps, interest rate swaps
and currency swaps, are valued by the Company using observable inputs, such as
quotations received from the counterparty, dealers or brokers, whenever these
are available and considered reliable. In instances where models are used, the
value of an OTC derivative depends upon the contractual terms of, and specific
risks inherent in, the instrument as well as the availability and reliability
of observable inputs. Such inputs include market prices for reference
securities, yield curves, credit curves, measures of volatility, prepayment
rates and correlations of such inputs. Certain OTC derivatives, such as generic
forwards, swaps and options, have inputs which can generally be corroborated by
market data and are therefore classified within Level 2.
Those OTC derivatives that have less liquidity or for which inputs are
unobservable are classified within Level 3. While the valuations of these less
liquid OTC derivatives may utilise some Level 1 and/or Level 2 inputs, they
also include other unobservable inputs which are considered significant to the
fair value determination. At each measurement date, the Company updates the
Level 1 and Level 2 inputs to reflect observable inputs, though the resulting
gains and losses are reflected within Level 3 due to the significance of the
unobservable inputs.
The Company recognises transfers between Levels 1, 2 and 3 based on the date of
the event or change in circumstances that caused the transfer. This policy on
the timing of recognising transfers is the same for transfers into a level as
for transfers out of a level. There were no transfers between the three levels
during the years ended 31 December 2016 and 2015.
The following table analyses within the fair value hierarchy the Company's
financial assets and liabilities at fair value through profit and loss (by
class) measured at fair value as at 31 December 2016:
Level 1 Level 2 Level 3 Total balance
Financial assets at fair value
through profit and loss
Financial assets held for trading:
- Derivative financial assets - 5,536 - 5,536
Financial assets designated at
fair value through profit or loss
at inception:
- Equity investments 930 - 53,646,820 53,647,750
Total 930 5,536 53,646,820 53,653,286
Financial liabilities at fair
value
through profit and loss
Financial liabilities held for
trading:
- Derivative financial liabilities - (99,251) - (99,251)
Total - (99,251) - (99,251)
The following table analyses within the fair value hierarchy the Company's
financial assets and liabilities at fair value through profit and loss (by
class) measured at fair value as at 31 December 2015:
Level 1 Level 2 Level 3 Total balance
Financial assets at fair value
through profit and loss
Financial assets held for trading:
- Derivative financial assets - 10,540 - 10,540
Financial assets designated at
fair value through profit or loss
at inception:
- Equity investments 4,674,087 - 55,660,318 60,334,405
Total 4,674,087 10,540 55,660,318 60,344,945
Financial liabilities at fair
value
through profit and loss
Financial liabilities held for
trading:
- Derivative financial liabilities - (951,805) - (951,805)
Total - (951,805) - (951,805)
Level 1 assets include the Ashmore SICAV 2 Global Liquidity US$ Fund (31
December 2015: Aginyx Ordinary Shares (MCX) and the Ashmore SICAV 2 Global
Liquidity US$ Fund).
Level 2 assets and liabilities include forward foreign currency contracts that
are calculated internally using observable market data.
Level 3 assets include all unquoted Funds, limited partnerships and unquoted
investments. Investments in unquoted Funds and limited partnerships are valued
on the basis of the latest Net Asset Value, which represents the fair value, as
provided by the administrator of the unquoted Fund at the close of business on
the relevant valuation day. Unquoted Funds have been classified as Level 3
assets after consideration of their underlying investments, lock-up periods and
liquidity.
The following tables present the movement in Level 3 instruments for the years
ended 31 December 2016 and 2015:
Equity investments
Opening balance as at 1 January 55,660,318
2016
Sales and returns of capital (1,216,935)
Gains and losses recognised in profit and loss (796,563)
*
Closing balance as at 31 December 53,646,820
2016
Equity investments
Opening balance as at 1 January 125,668,272
2015
Sales and returns of capital (24,263,542)
Gains and losses recognised in profit and (45,744,412)
loss *
Closing balance as at 31 December 55,660,318
2015
* Gains and losses recognised in profit and loss include net unrealised losses
on existing assets as at
31 December 2016 of US$359,068,294 (31 December 2015: net unrealised losses of
U$390,867,509).
Total gains and losses included in the Statement of Comprehensive Income are
presented in "Other net changes in the fair value of financial assets and
financial liabilities at fair value through profit and loss".
The following tables show the valuation techniques and the key unobservable
inputs used in the determination of fair value for the Level 3 investments:
Balance as at Valuation
31 December 2016
US$ methodology Unobservable inputs
Equity in 5,771,581 Discounted Cash - Forecast annual revenue
private Flows / Comparable growth rate
companies listed company EV/ - Forecast EBITDA margin
EBITDA multiples - Risk adjusted discount rate
- Market multiples
Investments 47,875,239 Net Asset Value Inputs to Net Asset Value*
in unlisted
Funds
* Management has assessed whether there are any discounts in relation to
lock-in periods that are impacting liquidity. There were no discounts in
relation to lock-in periods as at 31 December 2016.
Balance as at Valuation
31 December 2015
US$ methodology Unobservable inputs
Equity in 4,413,248 Discounted Cash Flows - Forecast annual revenue
private / Comparable listed growth rate
companies company EV/EBITDA - Forecast EBITDA margin
multiples - Risk adjusted discount rate
- Market multiples
Investments in 51,247,070 Net Asset Value Inputs to Net Asset Value*
unlisted Funds
* Management has assessed whether there are any discounts in relation to
lock-in periods that are impacting liquidity. There were no discounts in
relation to lock-in periods as at 31 December 2015.
The Company believes that its estimates of fair value are appropriate; however
the use of different methodologies or assumptions could lead to different
measurements of fair value. For fair value investments in Level 3, changing one
or more of the assumptions used to alternative assumptions could result in an
increase or decrease in net assets attributable to investors. Due to the
numerous different factors affecting the assets, the impact cannot be reliably
quantified. It is reasonably possible, on the basis of existing knowledge, that
outcomes within the next financial year that are different from the assumptions
used could require a material adjustment to the carrying amounts of affected
assets.
8. Capital and Reserves
The Company's capital is represented by two classes of ordinary shares, namely
the US$ share class and the GBP share class. The holders of ordinary shares are
entitled to dividends as declared from time to time and have no redemption
rights.
The total comprehensive gain or loss during the year is allocated
proportionately to each share class except for the results of hedging the US
dollar exposure of the assets attributable to the Pound Sterling-denominated GBP
share class, which are allocated solely to this share class.
The Company is authorised to issue an unlimited number of US$ and GBP shares at
no par value.
Ordinary Shares
The following table presents a summary of changes in the number of shares
issued and fully paid during the year ended 31 December 2016:
US$ shares GBP shares
Shares outstanding as at 31 December 7,739,867 4,971,508
2015
Share conversions 1,669,534 (1,199,388)
Compulsory redemptions (1,943,923) (1,185,832)
Shares outstanding as at 31 December 7,465,478 2,586,288
2016
The following table presents a summary of changes in the number of shares
issued and fully paid during the year ended 31 December 2015:
US$ shares GBP shares
Shares outstanding as at 31 December 12,948,641 12,572,050
2014
Share conversions 2,120,817 (1,399,879)
Compulsory redemptions (7,329,591) (6,200,663)
Shares outstanding as at 31 December 7,739,867 4,971,508
2015
Share Conversion
A shareholder has the right, as the Directors may determine for this purpose at
each "Conversion Calculation Date", to elect to convert some or all of the
shares of any class they hold into a different class of shares by giving at
least five business days' notice to the Company before the relevant Conversion
Calculation Date. Prior to the 2011 AGM, shareholders were able to convert
their shares on a quarterly basis at the NAV Calculation Dates in March, June,
September and December. As per the amended Articles of Incorporation dated 18
April 2011, shareholders were able to convert their shares on a monthly basis.
On 30 August 2013, the Directors of the Company announced that share conversion
opportunities would be offered at the end of February, May, August and
November. Share conversion opportunities for all other month ends were no
longer offered and this decision was taken due to the timings and processes
surrounding the anticipated returns of capital as part of the orderly wind-down
of the Company.
The following share conversions took place during the year ended 31 December
2016:
Transfers from Transfers to Number of shares Number of shares
to switch out to switch in
GBP shares US$ shares 1,201,320 1,671,997
US$ shares GBP shares 2,463 1,932
The following share conversions took place during the year ended 31 December
2015:
Transfers from Transfers to Number of shares Number of shares
to switch out to switch in
GBP shares US$ shares 1,406,329 2,130,530
US$ shares GBP shares 9,713 6,450
Compulsory Partial Redemptions
Following the approval by the Company's shareholders of the wind-down proposal
as described in the circular published on 20 February 2013, during the year
ended 31 December 2016, management announced partial returns of capital to
shareholders by way of compulsory partial redemptions of shares with the
following redemption dates:
· 29 January 2016, US$16.2m using the 31 December 2015 Net Asset Value; and
· 29 April 2016, US$2.5m using the 31 March 2016 Net Asset Value.
During the year ended 31 December 2015, management announced partial returns of
capital to shareholders by way of compulsory partial redemptions of shares with
the following redemption dates:
· 30 January 2015, US$40.5m using the 31 December 2014 Net Asset Value;
· 1 May 2015, US$19.5m using the 31 March 2015 Net Asset Value; and
· 7 August 2015, US$27.25m using the 30 June 2015 Net Asset Value.
The amounts applied to the partial redemptions of shares comprised monies from
dividends received and from the realisation of the Company's investments up to
and including the reference NAV calculation dates pursuant to the wind-down of
the Company.
During the year ended 31 December 2016, the following shares were redeemed by
way of compulsory partial redemptions of shares (consideration in US$ has been
determined using the exchange rates at the redemption date):
Number of ordinary Consideration in US$
shares redeemed
US$ shares 1,943,923 9,940,243
GBP shares 1,185,832 8,759,886
18,700,129
During the year ended 31 December 2015, the following shares were redeemed by
way of compulsory partial redemptions of shares (consideration in US$ has been
determined using the exchange rates at the date of the official announcement):
Number of ordinary Consideration in US$
shares redeemed
US$ shares 7,329,591 38,102,605
GBP shares 6,200,663 48,396,875
86,499,480
Voting rights
The voting rights each share is entitled to in a poll at any general meeting of
the Company (applying the Weighted Voting Calculation as described in the
Prospectus published by the Company on 6 November 2007) are as follows:
US$ shares: 1.0000
GBP shares: 2.0288
The above figures may be used by shareholders as the denominator for
calculations to determine if they are required to notify their interest in, or
a change to their interest in the Company under the FCA's Disclosure and
Transparency Rules.
Special Reserve
On 5 November 2007, the Company passed a special resolution that, subject to
the admission of the Company's shares to the London Stock Exchange becoming
unconditional and with the approval of the Royal Court, the amount standing to
the credit of the share premium account of the Company following completion of
the offering be cancelled and the amount of the share premium account so
cancelled be credited as a distributable reserve to be established in the books
of account of the Company. This reserve is able to be applied in any manner in
which the Company's profits available for distribution (as determined in
accordance with the Laws) are able to be applied, including in the purchase of
the Company's own shares and in the payment of dividends.
Distribution Policy
Subject to the Laws and the Listing Rules, the Company may by ordinary
resolution from time to time declare dividends. No dividend shall exceed the
amount recommended by the Board.
No dividends were declared during the year ended 31 December 2016 or the year
ended 31 December 2015.
Following the EGM on 13 March 2013, shareholders approved proposals to
distribute surplus cash held by the Company on a quarterly basis by way of pro
rata compulsory partial redemptions of shares.
9. Net Asset Value
The Net Asset Value of each US$ and GBP Share is determined by dividing the total
net assets of the Company attributable to the US$ and GBP Share classes by the
number of US$ and GBP shares in issue respectively at the year end as follows:
As at 31 December Net assets Shares in issue Net assets Net assets
2016 attributable to per share per share
each in US$ in local
share class in US$ currency
US$ shares 37,910,997 7,465,478 5.08 5.08
GBP shares 15,693,916 2,586,288 6.07 4.91
53,604,913
As at 31 December Net assets Shares in issue Net assets Net assets
2015 attributable to per share per share
each in US$ in local
share class in US$ currency
US$ shares 39,168,725 7,739,867 5.06 5.06
GBP shares 36,481,207 4,971,508 7.34 4.98
75,649,932
The allocation of the Company's Net Asset Value between share classes is
further described in the Company's Prospectus.
10. Dividend and Interest Income
Year ended Year ended
31 December 31 December
2016 2015
Interest income US$ US$
Cash and cash equivalents 2,323 1,986
Total interest income 2,323 1,986
Dividend income
Equity investments designated at 1,975,957 40,935,262
fair value through profit or loss
Total dividend income 1,975,957 40,935,262
11. Significant Agreements
a) Investment Manager
Effective 18 July 2014, the Board appointed Ashmore Investment Advisors Limited
("AIAL") as the Company's Alternative Investment Fund Manager ("AIFM") and AIAL
assumed the role of Investment Manager to the Company pursuant to a Novation of
the 5 November 2007 Investment Management Agreement.
The Investment Manager is remunerated at a monthly rate of one twelfth of 1% of
the Net Asset Value excluding investments made in Funds (calculated before
deduction of the investment management fee for that month and before the
deduction of any accrued incentive fee). In relation to investments made in the
Funds, the Investment Manager is entitled only to management fees at the rate
charged by it to the Funds.
The net investment management fees during the year were as follows:
Year ended Year ended
31 December 31 December
2016 2015
US$ US$
Investment management fee expense (84,180) (134,400)
(84,180) (134,400)
The investment management fee expense for the year ended 31 December 2015
includes an adjustment of US$57,957 of the investment management fee expense
relating to the year ended 31 December 2014.
The Investment Manager is entitled to incentive fees based on the performance
of investments other than investments in Funds, if those investments achieve a
return in excess of 6% per annum compounded annually. Provided that the 6%
return hurdle is cleared, the residual return is allocated to the Investment
Manager until it has received the incentive fee which is calculated as 20% of
the aggregate of (i) the amount received by the Company in excess of the cost
of investment and (ii) the returns achieved on investments above 6% per annum
compounded annually. Incentive fees are payable only upon the realisation of
investments. During the year, incentive fees of US$nil were paid and US$271,667
were charged (31 December 2015: US$1,368,447 paid and US$165,157 charged).
b) Directors' Remuneration
During the years ended 31 December 2016 and 2015, Directors' remuneration was
as follows:
Year ended Year ended
31 December 2016 31 December 2015
Chairman: GBP28,350 per annum GBP31,500 per annum
Chairman of the Audit Committee: GBP28,350 per annum GBP31,500 per annum
Independent Directors: GBP26,730 per annum GBP29,700 per annum
Non-Independent Directors: waived waived
The Directors agreed to reduce their Directors' fees by 10% with effect from 31
December 2015.
c) Administrator
The Administrator, Northern Trust International Fund Administration Services
(Guernsey) Limited, performs administrative duties for which it is remunerated
at an annual rate of 0.02% of the Company's Total Net Assets.
d) Custodian
Northern Trust (Guernsey) Limited (the "Custodian") is remunerated at an annual
rate of 0.01% of the Company's Total Net Assets.
12. Other Operating Expenses
Year ended Year ended
31 December 2016 31 December 2015
US$ US$
Audit fees (53,475) (65,140)
Professional fees (5,096) 261,960
Legal fees 1,326 (23,248)
Miscellaneous fees (105,683) 254,516
(162,928) 428,088
The credits to other operating expenses for the years ended 31 December 2016
and 31 December 2015 represent the reversal of accruals as a result of a
reduction in expenses as the Company continues to wind down.
13. Earnings per Share (EPS)
The calculation of the earnings per US$ and GBP share is based on the gain/loss
for the year attributable to US$ and GBP shareholders and the respective weighted
average number of shares in issue for each share class during the year.
The loss attributable to each share class for the year ended 31 December 2016
was as follows:
US$ share GBP share
Issued shares at the beginning of 7,739,867 4,971,508
the year
Effect on the weighted average number of shares:
- Conversion of shares 1,115,687 (804,641)
- Compulsory partial redemption of (1,714,898) (1,059,434)
shares
Weighted average number of shares 7,140,656 3,107,433
Gain/(loss) per share class (US$) 270,386 (3,615,276)
EPS (US$) 0.04 (1.16)
There were no dilutive instruments in issue during the year.
The loss attributable to each share class for the year ended 31 December 2015
was as follows:
US$ share GBP share
Issued shares at the beginning of 12,948,641 12,572,050
the year
Effect on the weighted average number of shares:
- Conversion of shares 1,185,523 (778,219)
- Compulsory partial redemption of (4,854,171) (4,293,112)
shares
Weighted average number of shares 9,279,993 7,500,719
Loss per share class (US$) (1,890,532) (6,391,394)
EPS (US$) (0.20) (0.85)
There were no dilutive instruments in issue during the year.
14. Financial Risk Management
The Company's activities expose it to a variety of financial and operational
risks which include: market risk (including currency risk, interest rate risk
and price risk), credit risk and liquidity risk.
The Company is also exposed to certain risk factors peculiar to investing in
Emerging Markets. These require the consideration of matters not usually
associated with investing in the securities of issuers in the developed capital
markets of North America, Japan or Western Europe. The economic and political
conditions in Emerging Markets differ from those in developed markets, and
offer less social, political and economic stability. The value of investments
in Emerging Markets may be affected by changes in exchange regulations, tax
laws, withholding taxes or economic and monetary policies. The absence, in many
cases until relatively recently, of any move towards capital markets structures
or to a free market economy means investing in Emerging Markets may be
considered more risky than investing in developed markets.
The Company puts policies and processes in place to measure and manage the
various types of risk to which it is exposed; these are explained below.
Market Risk
All of the Company's investments are recognised at fair value, and changes in
market conditions directly affect net investment income.
i) Currency Risk
The Company's principal exposure to currency risk arises from underlying
investments denominated in currencies other than US dollars and from the
exposure of its underlying portfolio companies to local currencies in their
countries of operation. The value of such investments may be affected
favourably or unfavourably by fluctuations in exchange rates, notwithstanding
any efforts made to hedge such exposures. The Company's largest indirect
foreign currency exposure is through the land bank held by Bedfordbury which is
expected to be realised in Phillipine pesos.
The Investment Manager may hedge currency exposures by reference to the most
recent Net Asset Value of the Company's underlying investments via the use of
forward foreign currency contracts or similar instruments.
As at the Statement of Financial Position date, the Company is not exposed to
any significant direct currency risk arising on its financial assets and
liabilities, as all direct investments of the Company are denominated in US$,
and a sensitivity analysis of currency risk is not meaningful at this time.
However, the Company has put in place hedging mechanisms to hedge the currency
risk arising on the GBP share class.
Shares in the Company are denominated in US$ and GBP. The base currency is the US
dollar, and therefore non-US dollar subscription monies for shares are
typically converted into US dollars for operational purposes. The costs and any
benefit of hedging the foreign currency exposure of the assets attributable to
shares denominated in Pound Sterling against the US dollar is allocated solely
to the GBP share class. This may result in variations in the Net Asset Values of
the two classes of shares as expressed in US dollars.
As at 31 December 2016, the net foreign currency exposure on the GBP share class
was as follows:
US$ % of net assets
Currency exposure of GBP share class 15,693,916 29.28
Nominal value of currency hedges (15,707,871) (29.30)
Net foreign currency exposure (13,955) (0.02)
As at 31 December 2015, the net foreign currency exposure on the GBP share class
was as follows:
US$ % of net assets
Currency exposure of GBP share class 36,481,207 48.22
Nominal value of currency hedges (37,916,609) (50.12)
Net foreign currency exposure (1,435,402) (1.90)
ii) Interest Rate Risk
The majority of the Company's financial assets and liabilities are non-interest
bearing (31 December 2016: 98.19%, 31 December 2015: 78.18%). As at 31 December
2016, interest-bearing financial assets comprised cash and cash equivalents of
US$956,920 (31 December 2015: US$16,505,657). The Company's investment
portfolio is composed entirely of non-interest bearing assets as at 31 December
2016 (31 December 2016: 100%, 31 December 2015: 100%). As a result, the Company
is subject to limited direct exposure to interest rate risk through
fluctuations in the prevailing levels of market interest rates and a
sensitivity analysis of interest rate risk is not meaningful at this time.
iii) Other Price Risk
Other price risk is the risk that the value of financial instruments will
fluctuate as a result of changes in market prices (other than those arising
from interest rate risk or currency risk), whether caused by factors specific
to an individual investment, its issuer or any other relevant factors.
The Company's strategy for the management of price risk is to seek to maximise
the exit prices that it obtains for its direct and indirect investments.
The table below summarises the sensitivity of the Company's net assets
attributable to equity holders to investment price movements as at the
Statement of Financial Position date. The analysis is based on the assumption
that the prices of the investments increase by 5% (2015: 5%), with all other
variables held constant.
31 December 31 December
2016 2015
US$ US$
Equity investments 2,682,388 3,016,720
2,682,388 3,016,720
A 5% decrease in prices of the investments would result in an equal but
opposite effect on the net assets attributable to equity holders, on the basis
that all other variables remain constant. The price risk sensitivity analysis
provided is a relative estimate of risk rather than a precise and accurate
number.
Credit Risk
The Company is exposed to credit risk, which is the risk that a counterparty to
a financial instrument will fail to discharge an obligation or commitment that
it has entered into with the Company.
The Company's financial instruments include non-exchange traded financial
instruments. Credit risk for non-exchange traded financial instruments is
generally higher because the counterparty for the instrument is not backed by
an exchange clearing house.
The Company's financial instruments include direct and indirect holdings of
securities and other obligations of companies that are experiencing significant
financial or business distress, including companies involved in bankruptcy or
other reorganisation and liquidation proceedings. Although such holdings may
result in significant returns, they involve a substantial degree of risk. The
level of analytical sophistication, both financial and legal, necessary for
successful investment in companies experiencing significant business and
financial distress is unusually high. There is no assurance that the Investment
Manager will correctly evaluate the nature and magnitude of the various factors
that could affect the prospects for a successful reorganisation or similar
action. The completion of debt and/or equity exchange offers, restructurings,
reorganisations, mergers, takeover offers and other transactions can be
prevented or delayed, or the terms changed, by a variety of factors. If a
proposed transaction appears likely not to be completed or in fact is not
completed or is delayed, the market price of the investments held by the
Company may decline sharply and result in losses which could have a material
adverse effect on the performance of the Company and returns to shareholders.
The administrative costs in connection with a bankruptcy or restructuring
proceeding are frequently high and will be paid out of the debtor's assets
prior to any return to creditors (other than out of assets or proceeds thereof,
which may be subject to valid and enforceable liens and other security
interests) and equity holders. In addition, certain claims that have priority
by law over the claims of other creditors (for example, claims for taxes) may
reduce any entitlement of the Company. In any reorganisation or liquidation
proceeding relating to a company or sovereign issuance in which the Company
invests, the Company may lose its entire investment or may be required to
accept cash or securities with a value less than its original investment. Under
such circumstances, the returns generated from such investments may not
compensate investors adequately for the risks assumed, which could have a
material adverse effect on the performance of the Company and returns to
shareholders.
It is frequently difficult to obtain accurate information as to the condition
of distressed entities. Such investments may be adversely affected by laws
relating to, among other things, fraudulent transfers and other voidable
transfers or payments, lender liability and the bankruptcy court's power to
disallow, reduce, subordinate or disenfranchise particular claims. The market
prices of such securities are subject to abrupt and erratic market movements
and above-average price volatility, and the spread between the bid and offer
prices of such securities may be greater than those prevailing in other
securities markets.
Securities issued by distressed companies may have a limited trading market,
resulting in limited liquidity. As a result, the Company may have difficulties
in valuing or liquidating positions, which could have a material adverse effect
on the performance of the Company and returns to shareholders.
As at the Statement of Financial Position date, the maximum exposure to direct
credit risk before any credit enhancements is the carrying amount of the
financial assets, as set out below. This excludes credit risk relating to
underlying debt instruments held by the Funds.
31 December 31 December
2016 2015
US$ US$
Cash and cash equivalents* 956,920 16,505,657
Forward currency contracts* 5,536 10,540
962,456 16,516,197
* Held with Northern Trust (Guernsey) Limited, which is an indirect
wholly-owned subsidiary of the Northern Trust Corporation, with a credit rating
of A+ as at 31 December 2016 (31 December 2015: A+).
None of these assets are impaired nor past due but not impaired.
The Investment Manager monitors the credit ratings of the Company's
counterparties, maintains an approved counterparty list and periodically
reviews all counterparty limits.
The credit risk arising on transactions with brokers relates to transactions
awaiting settlement. The risk relating to unsettled transactions is considered
small due to the short settlement period involved.
Substantially all of the assets of the Company are held with the Custodian;
Northern Trust (Guernsey) Limited, which is an indirect wholly-owned subsidiary
of the Northern Trust Corporation. Bankruptcy or insolvency of the Custodian
may cause the Company's rights with respect to cash and securities held by the
Custodian to be delayed or limited. This risk is managed by monitoring the
credit quality and financial positions of the Custodian. The credit rating of
the Northern Trust Corporation as at the year-end date was A+ (2015: A+).
Depending on the requirements of the jurisdictions in which the investments of
the Company are issued, the Custodian may use the services of one or more
sub-custodians.
Concentration Risk
Due to the managed wind-down, the Company is in the process of reducing the
number and diversification of assets held and as such is considered to have
exposure to concentration risk. The concentration of underlying assets is set
out in the "Details on Top 10 Underlying Holdings". Country and industry
concentrations are also set out in the "Details on Top 10 Underlying Holdings".
Liquidity Risk
Liquidity risk is the risk that the Company may not be able to generate
sufficient cash resources to settle its obligations in full as they fall due or
can only do so on terms that are materially disadvantageous.
The Company is not exposed to any significant liquidity risk arising from
redemptions because shareholders do not have the right to redeem.
Most of the investments of the Company are traded only on over the counter
markets and there may not be an organised public market for such securities.
The effect of this is to increase the difficulty of valuing the investments and
certain investments may generally be illiquid. There may be no established
secondary market for certain of the investments made by the Company. Reduced
secondary market liquidity may adversely affect the market price of the
investments and the Company's ability to dispose of particular investments. Due
to the lack of adequate secondary market liquidity for certain securities, it
may be more difficult to obtain accurate security valuations for the purposes
of valuing the Company. Valuations may only be available from a limited number
of sources and may not represent firm bids for actual sales. In addition, the
current or future regulatory regime may adversely affect liquidity.
All residual maturities of the financial liabilities of the Company in US$ as
at 31 December 2016 and 2015 are less than three months, except for incentive
fees payable to the Investment Manager on realisation of investments.
Liquidity risk is primarily related to outstanding commitments and recallable
distributions from investments in limited partnerships. The outstanding
investment commitments of the Company are disclosed in note 18.
Operational Risk
Operational risk is the risk of direct or indirect loss arising from a wide
variety of causes associated with the Company's processes and infrastructure,
or from external factors other than market, credit, or liquidity issues, such
as those arising from legal or regulatory requirements and generally accepted
standards of corporate behaviour. Operational risks arise from all of the
Company's operations.
Capital Management
The Company is not subject to externally imposed capital requirements. The
shares issued by the Company provide an investor with the right to require
redemption for cash at a value proportionate to the investor's share in the
Company's net assets at redemption date and are classified as equity. See note
8 for a description of the terms of the shares issued by the Company. The
Company's objective is to realise the assets in orderly manner to return cash
to shareholders. The Articles of Incorporation of the Company were amended to
facilitate regular returns of cash to shareholders.
15. Ultimate Controlling Party
In the opinion of the Directors on the basis of shareholdings advised to them,
the Company has no ultimate controlling party.
16. Involvement with Unconsolidated Structured Entities
The table below describes the types of structured entities that the Company
does not consolidate but in which it holds an interest.
Type of structured Nature and purpose Interest held by the Company
entity
Investment Funds To manage assets on behalf Investments in units issued
of third party investors. by the Funds
These vehicles are financed
through the issue of units
to investors.
The table below sets out interests held by the Company in unconsolidated
structured entities as at 31 December 2016.
Investment in unlisted Number of Total net Carrying amount % of net assets
investment Funds investee assets included in of underlying
Funds "Financial Funds
assets at fair
value through
profit or loss"
Special Situations Private 7 232,690,290 42,331,166 18.19
Equity Funds
Real Estate Funds 2 56,241,827 5,544,073 9.86
The table below sets out interests held by the Company in unconsolidated
structured entities as at 31 December 2015.
Investment in unlisted Number of Total net Carrying amount % of net assets
investment Funds investee assets included in of underlying
Funds "Financial Funds
assets at fair
value through
profit or loss"
Special Situations Private 8 238,241,154 45,530,993 19.11
Equity Funds
Real Estate Funds 2 59,976,204 5,716,077 9.53
The maximum exposure to loss is the carrying amount of the financial assets
held.
During the year, the Company did not provide financial support to these
unconsolidated structured entities and has no intention of providing financial
or any other support, except for the outstanding commitments as disclosed in
note 18 to the financial statements.
17. Related Party Transactions
Parties are considered to be related if one party has the ability to control
the other party or to exercise significant influence over the other party in
making financial or operational decisions.
The Directors are responsible for the determination of the investment policy of
the Company and have overall responsibility for the Company's activities. The
Company's investment portfolio is managed by AIAL.
The Company and the Investment Manager entered into an Investment Management
Agreement under which the Investment Manager has been given responsibility for
the day-to-day discretionary management of the Company's assets (including
uninvested cash) in accordance with the Company's investment objectives and
policies, subject to the overall supervision of the Directors and in accordance
with the investment restrictions in the Investment Management Agreement and the
Articles of Incorporation.
During the year ended 31 December 2016, the Company engaged in the following
related party transactions:
Expense Payable
Related Party Nature US$ US$
AIAL Investment management (84,180) (4,731)
fees
AIAL Incentive fees (271,667) (795,093)
Board of Directors Directors' remuneration (113,883) (17,134)
Investment
Activity
Related Party Nature US$
Related Funds Sales 1,216,935
Related Funds Dividends 1,899,184
Ashmore SICAV 2 Global Liquidity US$ Purchases (2,500,000)
Fund
Ashmore SICAV 2 Global Liquidity US$ Sales 5,306,007
Fund
Ashmore SICAV 2 Global Liquidity US$ Dividends 3,311
Fund
During the year ended 31 December 2015, the Company engaged in the following
related party transactions:
Expense Payable
Related Party Nature US$ US$
AIAL Investment management (134,400) (5,337)
fees
AIAL Incentive fees (165,157) (523,426)
Board of Directors Directors' remuneration (144,758) (16,877)
Investment
Activity
US$
Related Funds Sales 12,725,019
Related Funds Dividends 40,277,940
Ashmore SICAV 2 Global Liquidity US$ Purchases (80,000,000)
Fund
Ashmore SICAV 2 Global Liquidity US$ Sales 81,200,000
Fund
Ashmore SICAV 2 Global Liquidity US$ Dividends 3,622
Fund
Related Funds are other Funds managed by Ashmore Investment Advisors Limited or
its associates.
Purchases and sales of the Ashmore SICAV 2 Global Liquidity US$ Fund ("Global
Liquidity Fund") were solely related to the cash management of US dollars on
account. Funds are swept into the S&P AAAm rated Global Liquidity Fund and
returned as and when required for asset purchases or distributions. The Global
Liquidity Fund is managed under the dual objectives of the preservation of
capital and the provision of daily liquidity, investing exclusively in very
highly rated short-term liquid money market securities.
The Directors had the following beneficial interests in the Company:
31 December 2016 31 December 2015
GBP ordinary shares GBP ordinary shares
Nigel de la Rue 785 1,040
Christopher Legge 490 650
Richard Hotchkis 295 391
18. Commitments
During the year ended 31 December 2010, the Company entered into a subscription
agreement with Everbright Ashmore China Real Estate Fund LP for a total
commitment of US$10 million. As at 31 December 2016, the outstanding commitment
was US$529,455 (31 December 2015: US$529,455).
During the year ended 31 December 2011, the Company increased its commitment to
VTBC Ashmore Real Estate Partners 1 LP to a total of EUR11.4 million. As at 31
December 2016, the outstanding commitment was EUR243,474
(31 December 2015: EUR243,474).
During the year ended 31 December 2011, the Company entered into a subscription
agreement with AA Development Capital India Fund LP for an initial commitment
of US$4,327,064, which was subsequently increased to US$23,851,027. AA
Development Capital India Fund LP was dissolved by its General Partner on 28
June 2013 with all outstanding commitments transferred to AA Development
Capital India Fund 1 LLC. As at 31 December 2016, the outstanding commitment
was US$6,261,340 (31 December 2015: US$6,261,340).
19. Subsequent Events
Share Conversion
The following share conversions occurred subsequent to 31 December 2016:
Transfers from Transfers to Number of shares Number of shares
to switch out to switch in
GBP shares US$ shares 196,572 236,301
US$ shares GBP shares 3,718 3,093
Supplementary Information (Unaudited)
Remuneration Disclosure
Ashmore Investment Advisors Limited ("AIAL") is a full-scope UK Alternative
Investment Fund Manager ("AIFM") that manages many alternative investment funds
("AIFs"). These AIFs implement a number of investment strategies including;
equity, fixed income and alternatives; and invest in many different regions and
industry sectors. AIAL manages both open-ended and closed-ended AIFs, several
of its AIFs are leveraged and some are listed on regulated markets. Its assets
under management were approximately US$8.5 billion as at 30 June 2016.
AIAL's parent company ("Ashmore") is listed on a regulated market, counts
fourteen offices worldwide and has a number of subsidiaries both in the UK and
abroad. Taking into account guidance from the UK Financial Conduct Authority
("FCA"), AIAL has complied with the full AIFM Remuneration Code.
AIAL does not have any direct employees, and as such the amount of remuneration
paid to staff by AIAL is zero. All AIAL AIFM Remuneration Code Staff are
employed and paid by Ashmore. Ashmore's remuneration principles have remained
unchanged since it was listed, and are designed to align all employees with the
long-term success of the business. These include significant levels of
deferral, a clear link between performance and levels of remuneration and
strong alignment of executive directors and employees with shareholders and
clients through significant employee share ownership. The culture is therefore
a collaborative one, with clients' interests and the creation of shareholder
value, including for employee shareholders, the overarching factors for
success.
Executive directors, members of the investment team, and indeed all other
employees, participate in a single capped incentive pool and are paid under a
similar structure, with an annual cash bonus and share award, meaning that all
employees are long-term shareholders in the business.
The policy includes:
- a capped basic salary to contain the fixed cost base;
- a cap on the total variable compensation including any awards made under
Ashmore's share plan, available for all employees at 25% of profits, which to
date has not been fully utilised; and
- a deferral for five years of a substantial portion of variable compensation
into Ashmore shares (or equivalent), which, in the case of executive directors
in lieu of a separate LTIP, is also partly subject to additional performance
conditions measured over five years.
AIAL's board of directors reviews the general principles of the remuneration
policy and is responsible for its implementation with regard to AIAL's AIFM
Remuneration Code Staff. Ashmore's Remuneration Committee periodically reviews
the ongoing appropriateness and relevance of the remuneration policy, including
in connection with the provision of services to AIAL. Ashmore employs the
services of; McLagan to provide advice on remuneration benchmarking; Deloitte
to provide advice on tax compliance, share plan design and administration; and
the Remuneration Committee's advisors are Hewitt New Bridge Street. The
Remuneration Committee's terms of reference can be found here:
http://www.ashmoregroup.com/investor-relations/corporate-governance
Performance assessment for AIAL's AIFM Remuneration Code Staff for their work
relating to AIAL is based on a combination of quantitative and qualitative
criteria related to the performance of AIAL, the performance of relevant AIF(s)
or business units and the performance of the individual. Qualitative criteria
include adherence to Ashmore Group plc's risk and compliance policies. This
performance assessment is adjusted for relevant current and future risks
related to the AIFs managed by AIAL.
The compensation of control function staff is based on function specific
objectives and is independent from the performance of AIAL and/or the AIFs
managed by AIAL. The remuneration of the senior officers in AIAL's control
functions is directly overseen by the Remuneration Committee.
Variable remuneration awarded to AIAL's Remuneration Code Staff in respect of
AIFMD work is subject to performance adjustment which allows Ashmore to reduce
the deferred amount, including to nil, in light of the ongoing financial
situation and/or performance of Ashmore, AIAL, the AIFs that AIAL manages and
the individual concerned.
The total contribution of AIAL's AIFM Remuneration Code Staff to the business
of Ashmore is apportioned between work carried out for AIAL and work carried
out for the other businesses and subsidiaries of Ashmore. Their remuneration is
similarly apportioned between AIAL and the other businesses and subsidiaries
where required.
The remuneration attributable to AIAL for its AIFMD identified staff for the
financial year ended 30 June 2016 was as follows:
Number of Variable Fixed Total
beneficiaries remuneration remuneration remuneration
Ashmore Global Opportunities 20 GBP 6,976 GBP 2,059 GBP 9,035
Limited
Total AIAL 20 GBP 1,294,129 GBP 243,968 GBP 1,538,097
All of the remuneration above was attributable to senior management who have a
material impact on the funds risk profile. The Company's allocation of the AIAL
remuneration has been made on the basis of NAV.
Corporate Information
Directors Custodian
Richard Hotchkis Northern Trust (Guernsey) Limited
Nigel de la Rue PO Box 71
Christopher Legge Trafalgar Court
Steve Hicks Les Banques
St Peter Port
Guernsey
GY1 3DA
Channel Islands
Registered Office Auditor
PO Box 255 KPMG Channel Islands Limited
Trafalgar Court Glategny Court
Les Banques Glategny Esplanade
St Peter Port St Peter Port
Guernsey Guernsey
GY1 3QL GY1 1WR
Channel Islands Channel Islands
Administrator, Secretary and Registrar Advocates to the Company
Northern Trust International Fund Carey Olsen
Administration Services (Guernsey) Carey House
Limited Les Banques
PO Box 255 St Peter Port
Trafalgar Court Guernsey
Les Banques GY1 4BZ
St Peter Port Channel Islands
Guernsey
GY1 3QL
Channel Islands
Alternative Investment Fund Manager UK Solicitor to the Company
Ashmore Investment Advisors Limited Slaughter and May
61 Aldwych One Bunhill Row
London London
WC2B 4AE EC1Y 8YY
United Kingdom United Kingdom
Brokers UK Transfer Agent
J.P. Morgan Cazenove Computershare Investor Services PLC
20 Moorgate The Pavilions
London Bridgewater Road
EC2R 6DA Bristol
United Kingdom BS13 8AE
United Kingdom
Jefferies International Limited
Vintners Place Website
68 Upper Thames Street Performance and portfolio
London information for shareholders can be
EC4V 3BJ found at:
United Kingdom www.agol.com
END
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