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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 2017
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the year ended 31 December 2017. All figures
are based on the audited financial statements for the year ended 31 December
2017.
The financial information for the year ended 31 December 2017 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 2017 31 December 2016
Total Net Assets US$62,515,991 US$53,604,913
Net Asset Value per Share
US$ shares US$6.08 US$5.08
GBP shares GBP5.82 GBP4.91
Closing-Trade Share Price
US$ shares US$3.80 US$3.73
GBP shares GBP3.90 GBP3.88
Discount to Net Asset Value
US$ shares (37.50)% (26.57)%
GBP shares (32.99)% (20.98)%
Chairman's Statement
As at 31 December 2017, the Net Asset Value ("NAV") of the Company was US$62.5m
compared to US$53.6m at 31 December 2016. In addition, the Company distributed
US$3.0m to Shareholders during 2017. The NAVs per share were US$6.08 and GBP5.82
as at 31 December 2017, up from US$5.08 and GBP4.91 respectively at the end of
2016. The share prices stood at US$3.80 and GBP3.90 as at 31 December 2017.
The main contributors to performance were unrealised gains in the values of AEI
and Microvast. These unrealised gains were the result of strong operating
performance and discussions on the realisations of these assets by the Company.
Further details on the underlying exposures of the Company are given in the
Investment Manager's Report.
The US$3.0m distribution to Shareholders during the period was primarily the
proceeds of a partial realisation in Microvast. The Investment Manager is
working towards the sale of the remaining assets, with a particular focus on
the three largest exposures of the Company, namely; Bedfordbury, Microvast and
AEI. Further details on these are given in the Investment Manager's Report.
Your Board receives regular updates on progress with the sales and remains
confident that further realisations are likely to occur in 2018.
Post reporting period, the Board of Directors of the Company has become aware
of the sale of substantially all of the assets of Bedfordbury, the Company's
largest asset, to which it has an indirect exposure through its Fund
investments. The agreed price of the sale was marginally above the latest
valuation attributed to the asset by the Company. All cash proceeds have been
received by Bedfordbury, and it is anticipated that cash will be upstreamed to
AGOL via its Fund investments during Q2 2018. The indirect exposure to
Bedfordbury represents just over 32% of the Company's NAV as at 31 December
2017.
Below is an overview of the distributions made since February 2013 when
Shareholders voted to wind up the Company in an orderly fashion.
Quarterly
Distributions
Quarter End Date Distributions % of 31 December 2012 % of 31 December 2012
(US$) 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%
30 September 2017 3,000,000 1% 1%
Total 306,100,000 64% 93%
The Board continues to be in active dialogue with the Investment Manager on
completion of the asset sales, and subsequent winding up of the Company. As
further sales are realised, the Board will review again the benefits and costs
of the listing of the Company on the London Stock Exchange.
I would like to thank everyone involved with Ashmore Global Opportunities
Limited (the "Company" or "AGOL") for their hard work.
Richard Hotchkis
19 April 2018
Investment Manager's Report
Performance
As at 31 December 2017, the NAVs per share of the US$ and GBP classes stood at
US$6.08 and GBP5.82 respectively, representing returns of 19.69% and 18.53% over
the calendar year 2017.
Portfolio Review
Strong operating performance, in particular by AEI and Microvast, led to upward
revisions in their valuations and thus of the NAV of the Company.
There was a partial realisation of the investment in Microvast in June and July
2017, the proceeds of which were distributed to shareholders in Q4 2017.
The three largest investee company exposures, Bedfordbury, Microvast and AEI
now account for around 75% of AGOL's NAV.
For Bedfordbury, post reporting period, we agreed a sale of our stake in the
last remaining asset, a land bank in Manila Bay, Manila, Philippines, in Q1
2018, for cash. The agreed price was marginally above the latest valuation of
the company. All cash proceeds from the sale have been received and will be
upstreamed to AGOL via its Fund investments during Q2 2018. As part of this
sale agreement we have also terminated the pending arbitration case against our
partner in this asset.
Microvast continues to grow strongly. New capital was raised in February from a
third party investor in China at a significantly higher valuation. Our
valuation of this asset was increased in March, in June, and again in December,
due to strong operating performance, and the availability of new capital to
finance further expansion. A partial exit in the secondary market was executed
in June and July 2017, the proceeds of which were distributed to shareholders.
A full exit of this asset will probably be through an IPO in 2018 or 2019.
Jaguar, the power plant in Guatemala owned by AEI, is operating normally. The
sale process is progressing but has not yet resulted in the anticipated
agreement. We continue to pursue this, and will also consider other options.
Once this last operating asset has been sold, the intention is to wind up AEI.
The Everbright Ashmore China Real Estate Fund sold one of its two remaining
assets in Q1 2018.
Further details on the smaller holdings in the Company are given later in this
Investment Manager's report.
Outlook
As described above, the focus remains on realising AGOL's remaining investments
in an orderly manner, and we expect to make progress on this later this year.
The general sentiment towards Emerging Markets (EM) 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 2017
excluding the cash balance (cash was -1.18% as at 31 December 2017).
Investment Name % of NAV Country Business Description
Bedfordbury 32.58% Philippines Real estate development company
Microvast 23.64% China Electric battery and battery systems
supplier
AEI 18.42% Guatemala Power generation in Latin America
Kulon 7.71% Russia Real estate development company
Largo Resources 5.27% Brazil Brazilian provider of mining services
ZIM Laboratories 5.20% India Pharmaceutical research and manufacturing
Ltd
Everbright 3.79% China Real estate development company
Numero Uno 3.02% India Branded apparel manufacturers and retailers
GZ Industries Ltd 0.97% Nigeria Aluminium can manufacturer
Siesta Logistics 0.34% India Enterprise software company
The tables below show the country and industry allocations of underlying
investments over 1% at the end of December 2017:
Country % of NAV Industry % of NAV
Philippines 32.58% Real Estate 44.09%
China 27.47% Electrical Components and 23.64%
Equipment
Guatemala 18.42% Electrical 18.42%
India 8.80% Mining 5.27%
Russia 7.71% Pharmaceuticals 5.20%
Brazil 5.27% Retail 3.02%
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 and timing
* For Bedfordbury, post reporting period, we agreed a sale of our stake in
the last remaining asset, a land bank in Manila Bay, Manila, Philippines,
in Q1 2018, for cash. The agreed price was marginally above the latest
valuation of the company. All cash proceeds from the sale have been
received and will be upstreamed to AGOL via its Fund investments during Q2
2018. As part of this sale agreement we have also terminated the pending
arbitration case against our partner in this asset.
Microvast
Industry: Technology/Clean-tech
Country: China
Website: www.microvast.com
Company Status: Private
Investment Risk: Equity
Operational update
* 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 30 cities in China.
Follow-on orders continue to be received for the European bus market
* Microvast's gross margins have fallen due to lower prices under the new
e-bus subsidy policy. It is expected the full year 2017 revenues will come
in around US$210m at a c. 30% gross margin. There may be further margin
pressure in 2018 as a result of the Chinese Government introducing further
e-bus subsidy changes
* Production capacity has been successfully increased to 3.5GWh per annum.
Any further increases will require external financing. The Company recently
raised USD400m in primary equity capital from a Citic Securities led group
of investors which will be used to fund the capacity expansions over the
next three years
* 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
2018 operational strategy/priorities
* Managing growth by adding new facilities, increasing production capacity
and hiring/training new employees. Building large scale production of Li-B
systems for passenger vehicles, growing the International business and
innovating battery safety and energy density
* Funding the capex programme and IPO/Exit planning
* Meeting 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
* All shareholders sold pro rata in a US$140m secondary sale of a 10.77%
minority stake in Microvast to a Chinese PE Fund in June/July 2017
* 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 in AEI is Jaguar, in Guatemala, which
is currently being marketed for sale
* The appeal by China Machine New Energy Corporation (CMNC) against the
arbitration award took place before the Singapore High Court in November
2017. A court decision is expected during Q2 2018
Key risks
* CMNC arbitration appeal
* Sale process
Exit strategy
* Sale of Jaguar with a target closure date during 2018
* 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
* The Office and Warehouse spaces are fully leased. The lease with the anchor
tenant has been renewed for another seven years, and we have taken on
additional tenants this year. The Moscow market remains competitive and
rents are under pressure
* The Russian Central bank has kept a firm lid on inflation, bringing it to a
little over 2% in January 2018. This in turn has allowed the reduction in
the key rate from 10% to 7.5%, which is supportive for Rouble-denominated
fixed income assets such as this. At the same time, the rouble has traded
in a relatively narrow band of 56-61 to USD, keeping valuations stable for
external investors
Key risks
* Pressure on rental yields
Exit strategy
* Trade sale by selling the shares in the holding company
* The Russian economy is recovering from a recent recession, and the sale of
the asset is actively being pursued
GZI
Industry: Aluminium can manufacturing
Country: Nigeria
Website: www.gzican.com
Company Status: Private
Investment Risk: Equity
Operational update
* YTD management accounts show EBITDA 30% ahead of budget as we see signs of
improvement in the Nigerian market
* The market has stabilised in terms of both volumes and price
* Going forward the outlook is brighter than was initially forecasted for the
year, and we remain cautiously optimistic
2018 operational strategy/priorities
* Establish a plant in South Africa
* 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 USD / local currency depreciation
* Recruitment / talent sourcing
Exit strategy and timing
* 2020 exit through IPO or strategic sale. May be brought forward
Largo
Industry: Metals and mining
Country: Brazil
Website: www.largoresources.com
Company Status: Public
Investment Risk: Equity
Operational/Corporate update
* Vanadium prices have rebounded significantly over the year and costs have
been levelling out due to operational leverage
* Vanadium demand has outstripped supply and put upward pressure on price
* This has been reflected in strong share price performance in 2017
* Largo's vanadium production has qualified as aviation grade
* Monthly average production at 840T per month, which is 5% above nameplate
capacity
* Additional equity raise has helped pay down debt and provide further
liquidity
2018 operational strategy/priorities
* To continue consistent production at nameplate capacity
* Restructure the company's debt obligations to provide further liquidity
* Renegotiate and seek out richer offtake agreements
Key risks
* A decrease in vanadium pricing
* A drop in production or a decrease in the quality of vanadium
Exit strategy and timing
* Block sales and/or strategic sale in 2018
Numero Uno
Industry: Retail
Country: India
Website: www. numerounojeanswear.com
Company Status: Private
Investment Risk: Equity
Operational update and priorities
* EBITDA has grown 30% year on year (yoy) for several years. This halted
during the financial year to 31 March 2017 due to the de-monetisation
policy implemented by the Indian Government
* Recent results have been picking up. Alternative distribution channels are
being pursued
Key risks
* Cash payments remain important to the company and any new tightening of
liquidity conditions could impact revenues
Exit strategy and timing
* Previous exit discussions ceased as the temporary drop in revenues as
described above affected valuations of the company
* The company will seek to achieve a few quarters of new growth post the
completion of the de-monetisation policy, in order to drive up the value of
the company, before re-embarking on the sales process
ZIM Laboratories
Industry: Pharmaceuticals
Country: India
Website: zimlab.in
Company Status: Private
Investment Risk: Equity
Operational update and priorities
* The company continues to perform well in its existing pharmaceutical lines
* It is expanding its global presence and introducing new products such as
oral dispensing strips
Exit strategy and timing
* The IPO process is proceeding for completion later this calendar year. In
addition, a sale prior to IPO is also being pursued
Ashmore Investment Advisors Limited
Investment Manager
19 April 2018
Board Members
As at 31 December 2017, the Board consisted of four non-executive Directors.
The Directors are responsible for the determination of the investment policy of
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, (French resident) appointed 18 April
2011
Richard Hotchkis has over 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 and was a
director of Aberdeen Frontier Markets Company (formerly Advance Frontier
Markets Fund Limited) until the end of March 2017.
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. He was appointed to the Board of Sherborne Investors (Guernsey) C
Limited on 25 May 2017. He was also appointed as a non-executive director of NB
Distressed Debt Investment Fund Limited with effect from 12 April 2018.
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) (until end of March 2017
Steve Hicks Nil
Nigel de la Rue Nil
Christopher Legge
John Laing Environmental Assets Group Limited London
NB Distressed Debt Investment Fund Limited (from 12 London
April 2018) London
Sherborne Investors (Guernsey) B Limited London (from 12 July 2017)
Sherborne Investors (Guernsey) C Limited (from 25 May London
2017) London
Third Point Offshore Investors Limited
TwentyFour Select Monthly Income Fund Limited
Directors' Report
The Directors submit their Report together with the Company's audited financial
statements for the year ended 31 December 2017, 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 2017, management announced returns of capital to shareholders
by way of compulsory partial redemption of shares, with the following
redemption date:
* 1 September 2017, US$3.0m using the 31 August 2017 NAV.
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 was re-elected as a Director of the
Company at the Annual General Meeting held on 20 July 2017.
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 2017:
Management Engagement
Board meeting Audit Committee Committee meeting
sattended meetings attended
attended
Richard Hotchkis 4 3 1
Steve Hicks 4 2 1
Nigel de la Rue 4 3 1
Christopher Legge 3 3 1
No. of meetings during the 4 3 1
year
In addition to the meetings above, four 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 2017, three Directors, Nigel de la Rue, Christopher Legge and
Richard Hotchkis, had beneficial interests in the Company representing 779, 487
and 293 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 2017 have been prepared in
accordance with the AIC's recommended methodology and amounted to 0.86% of the
NAV (31 December 2016: 1.15%).
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 2016
and October 2017 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 of this annual 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
or 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 was 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.
Criminal Finances Act
In respect of the Criminal Finances Act 2017 which has introduced a new
corporate criminal offence ("CCO") of 'failing to take reasonable steps to
prevent the facilitation of tax evasion', the Board confirms that they are
committed to zero tolerance towards the criminal facilitation of tax evasion.
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 2017, the following entities had significant shareholdings in
the Company:
Significant Shareholder US$ shares GBP shares % holding in
held held Company
State Street Nominees Limited 3,221,583 5,021 31.40%
Chase Nominees Limited 3,275 1,264,401 15.95%
Goldman Sachs Securities Nominees Limited 1,445,422 88,217 15.17%
Nortrust Nominees Limited 853,118 61,325 9.07%
Lynchwood Nominees Limited 487,111 327,891 8.87%
Nordea Bank Danmark A/S 512,858 - 4.99%
Vidacos Nominees Limited 365,946 2,574 3.59%
HSBC Global Custody Nominee (UK) Limited 196,106 41,953 2.44%
UBS Private Banking Nominees Limited - 96,259 1.21%
Signed on behalf of the Board of Directors on 19 April 2018
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 2017, 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. Despite Nigel de la Rue's tenure being extended on three occasions, it
was deemed appropriate to extend his membership in the Audit Committee due to
the Company being in wind-down. Nigel de la Rue, Christopher Legge and Richard
Hotchkis are currently serving their fourth, third and third, three-year terms
respectively. Nigel de la Rue reached nine years of service in October 2016 and
was re-elected as a Director of the Company at the Annual General Meeting held
on 20 July 2017. 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 2017 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 2017 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 2017 and 31 December 2016:
Year ended Year ended
31 December 2017 31 December 2016
US$ US$
Audit and audit related
services
- Annual audit 41,145 53,475
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
19 April 2018
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;
* assess the Company's ability to continue as going concern, disclosing, as
applicable, matters related to going concern; and
* use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
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 are responsible for such internal
control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error, and have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the 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 19 April 2018
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 2017 and 2016, were as follows:
Year ended Year ended
31 December 2017 31 December 2016
GBP GBP
Richard Hotchkis 28,350 28,350
Steve Hicks* - -
Christopher Legge 28,350 28,350
Nigel de la Rue 26,730 26,730
Total 83,430 83,430
* Non-Independent Director
Signed on behalf of the Board of Directors on 19 April 2018
Richard Hotchkis Christopher Legge
Chairman Chairman of
the Audit Committee
Independent Auditor's Report to the Members of Ashmore Global Opportunities
Limited
Our opinion is unmodified
We have audited the financial statements (the "financial statements") of
Ashmore Global Opportunities Limited (the "Company") for the year ended 31
December 2017, which comprise the statement of financial position, the
statement of comprehensive income, the statement of changes in equity and the
statement of cash flows, and notes, comprising significant accounting policies
and other explanatory information including schedule of investments.
In our opinion, the accompanying financial statements:
* give a true and fair view of the financial position of the Company as at 31
December 2017, and of the Company's financial performance and the Company's
cash flows for the year then ended;
* are prepared in accordance with International Financial Reporting Standards
(IFRS); and
* comply with the Companies (Guernsey) Law, 2008.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities are described below.
We have fulfilled our ethical responsibilities under, and are independent of
the Company in accordance with, UK ethical requirements including FRC Ethical
Standards as applied to listed entities. We believe that the audit evidence we
have obtained is a sufficient and appropriate basis for our opinion.
Key Audit Matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of
most significance in the audit of the financial statements and include the most
significant assessed risks of material misstatement (whether or not due to
fraud) identified by us, including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters were as follows
(unchanged from 2016):
The risk Our response
Valuation of financial assets at fair value through profit or loss
US$ 62.4m; (2016: US$ 53.7m)
Refer to page 23 of the Report of the Audit Committee, note 2d accounting
policy and note 7 disclosures
Basis: Our audit procedures included:
The Company invests in an unlisted
private equity investment and a Control evaluation:
portfolio of open and closed ended We tested the design and implementation of the
investment funds (the "investment Investment Manager's Pricing Methodology and
portfolio"). Valuation Committee ("PMVC")'s controls in
relation to the valuation of the unlisted private
The investment portfolio represents equity investment.
the most significant balance on the
statement of financial position and Challenging managements' assumptions and inputs
is the principal driver of the including use of KPMG Specialists:
Company's net asset value ("NAV") For the investment into the unlisted private
(2017: 99.8%; 2016: 100.1%). equity investment (10.9% of NAV (US$ 6.8m)), we
used our own valuations specialist to evaluate
The Company's investment in an the methodology applied by PMVC and challenge the
unlisted private equity investment key assumptions used in preparing the valuation
is valued with the assistance of by reference to independent market data and
the Company's third party valuation information and industry expectations. We
agent based on a valuation model evaluated the competence of the Company's third
following the International Private party valuation agent in the context of their
Equity and Venture Capital ability to appropriately challenge and review the
Valuation ("IPEV") guidelines. fair value of the investment valuation, by
assessing their professional qualifications,
The Company's investments in experience and independence from the Company.
unquoted investment funds are
valued on the basis of the latest For unlisted investments in other funds (19.0% of
NAV provided by the administrator NAV (US$ 11.9m)) we obtained net asset value per
of the unquoted investment fund. share confirmations directly from the underlying
funds' administrators. We inspected the latest
Risk: audited financial statements of these underlying
The valuation of the Company's funds in order to assess the appropriateness of
investments is considered a the accounting framework utilized, any
significant area of our audit, modifications to the audit opinion and other
given that it represents the disclosures which may be relevant to the
majority of the net assets of the valuation of the Company's investments.
Company and in view of the
significance of estimates and For investments in other Ashmore special
judgments that may be involved in situation investment funds, which are also
the determination of fair value. audited by KPMG Channel Islands Limited (all with
coterminous year ends), (69.7% of NAV (US$
43.5m)) we undertook discussions on key audit
findings with the audit teams of those funds and
examined their coterminous audited financial
statements to assess the appropriateness of the
accounting framework utilized, any modifications
to the audit opinion and other disclosures which
may be relevant to the valuation of the Company's
investments.
Assessing disclosures:
We have also assessed 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 IFRS.
Ability to continue as a going concern entity
Refer to page 23 of the Report of the Audit Committee and note 2b accounting
policies
Basis: Our audit procedures included:
At an Extraordinary General Meeting Holding discussions with the Board of Directors
in March 2013, the shareholders and the Investment Manager to understand the
approved proposals for a managed proposed investment portfolio realisation
wind-down of the Company's programme and to assess the implications of the
investment portfolio, changing the managed wind-down on the financial statements. We
investment objective of the Company also challenged the Board of Directors' and
to the realisation of the Company's Investment Manager's assessment of the Company's
assets in an orderly manner in ability to continue as a going concern against
order to return cash to our own audit knowledge and expectations about
shareholders. the Company.
Risk:
There is a risk that the Directors Assessing disclosures:
may not be able to achieve the
wind-down in an orderly manner and We also considered the Company's going concern
if this was the case then it would disclosure in note 2b of the financial statements
impact their ability to continue as for compliance with IFRS.
a going concern.
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at US$ 1.87m,
determined with reference to a benchmark of NAV of US$ 62.52m, of which it
approximately represents 3% (2016: 3%).
We reported to the Audit Committee any corrected or uncorrected identified
misstatements exceeding US$ 93,960, in addition to other identified
misstatements that 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.
We have nothing to report on going concern
We are required to report to you if we have anything material to add or draw
attention to in relation to the directors' statement in note 2b to the
financial statements on the use of the going concern basis of accounting with
no material uncertainties that may cast significant doubt over the Company's
use of that basis for a period of at least twelve months from the date of
approval of the financial statements. We have nothing to report in this
respect.
We have nothing to report on the other Information in the Annual Report
The directors are responsible for the other information presented in the Annual
Report together with the financial statements. Our opinion on the financial
statements does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether, based on our financial statements audit work, the information therein
is materially misstated or inconsistent with the financial statements or our
audit knowledge. Based solely on that work we have not identified material
misstatements in the other information.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we
have nothing material to add or draw attention to in relation to:
* the directors' confirmation within longer-term viability on page 16 that
they 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;
* the Principal Risks disclosures describing these risks and explaining how
they are being managed or mitigated;
* the directors' explanation in the longer-term viability on page 16 as to
how they have assessed the prospects of the Company, over what period they
have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the group
will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Corporate governance disclosures
We are required to report to you if:
* we have identified material inconsistencies between the knowledge we
acquired during our financial statements 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 shareholders to assess the Company's position and
performance, business model and strategy; or
* the section of the annual report describing the work of the Audit Committee
does not appropriately address matters communicated by us to the Audit
Committee;
We are required to report to you if the Corporate Governance Statement does not
properly disclose a departure from the eleven provisions of the 2016 UK
Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report to you in these respects.
We have nothing to report on other matters on which we are required to report
by exception
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008 requires us 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.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 25, the Directors
are responsible for: the preparation of the Financial Statements including
being satisfied that they give a true and fair view; such internal control as
they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error;
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going concern basis
of accounting unless they either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor's report. Reasonable
assurance is a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of
the financial statements.
A fuller description of our responsibilities is provided on the FRC's website
at www.frc.org.uk/auditorsresponsibilities.
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. 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.
Steven D. Stormonth
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors, Guernsey
19 April 2018
Statement of Financial Position
As at 31 December 2017
31 December 2017 31 December 2016
Note US$ US$
Assets
Cash and cash equivalents 673,736 956,920
Other financial assets 6 12,928 8,181
Financial assets at fair value through 4 62,924,603 53,653,286
profit or loss
Total assets 63,611,267 54,618,387
Equity
Capital and reserves attributable to
equity holders
of the Company
Special reserve 8 407,583,513 410,583,457
Retained earnings (345,067,522) (356,978,544)
Total equity 62,515,991 53,604,913
Liabilities
Current liabilities
Other financial liabilities 6 1,095,276 914,223
Financial liabilities at fair value 4 - 99,251
through profit or loss
Total liabilities 1,095,276 1,013,474
Total equity and liabilities 63,611,267 54,618,387
Net asset values
Net assets per US$ share 9 US$6.08 US$5.08
Net assets per GBP share 9 GBP5.82 GBP4.91
The financial statements were approved by the Board of Directors on 19 April
2018, and were signed on its behalf by:
Richard Hotchkis Christopher Legge
Chairman Chairman of
the Audit Committee
The notes form an integral part of these financial statements.
Statement of Comprehensive Income
For the year ended 31 December 2017
Year ended Year ended
31 December 2017 31 December 2016
Note US$ US$
Interest income 10 7,989 2,323
Dividend income 10 2,647,585 1,975,957
Net foreign currency gain/(loss) (27,548 64,502
Other net changes in fair value on 5 9,795,820 (4,739,070)
financial assets and liabilities at fair
value through profit or loss
Total net gain/(loss) 12,423,846 (2,696,288)
Expenses
Investment management fees 11a (64,866) (84,180)
Incentive fees 11a (213,105) (271,667)
Directors' remuneration 11b (89,668) (113,883)
Fund administration fees 11c (13,114) (10,515)
Custody fees 11d (7,093) (5,429)
Other operating expenses 12 (124,978)
(162,928)
Total operating expenses (512,824) (648,602)
Gain/(Loss) for the year 11,911,022 (3,344,890)
Total profit and comprehensive gain/ 11,911,022 (3,344,890)
(loss) for the year
Earnings per share
Basic and diluted gain per US$ share 13 US$1.01 US$0.04
Basic and diluted gain/(loss) per GBP share 13 US$1.77 US$(1.16)
All items derive from continuing activities.
The notes form an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 31 December 2017
Special Retained
reserve earnings Total
Note US$ US$ US$
Total equity as at 1 January 2017 410,583,457 (356,978,544) 53,604,913
Total comprehensive loss for the - 11,911,022 11,911,022
year
Capital distribution 8 (2,999,944) - (2,999,944)
Total equity as at 31 December 407,583,513 (345,067,522) 62,515,991
2017
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
The notes form an integral part of these financial statements.
Statement of Cash Flows
For the year ended 31 December 2017
Year ended Year ended
31 December 2017 31 December 2016
US$ US$
Cash flows from operating activities
Net bank interest received 7,989 2,323
Dividends received 2,647,578 1,975,957
Net operating expenses (charged)/received (336,519) 8,575
Net cash from operating activities 2,319,048 1,986,855
Cash flows from investment activities
Sales of investments - 8,191,075
Purchases of investments in liquidity Funds (301,531) * (2,503,311)
Net cash flows on derivative instruments and 699,243 (4,523,227) *
foreign exchange
Net cash from investment activities 397,712 1,164,537 *
Cash flows from financing activities
Capital distributions (2,999,944) (18,700,129)
Net cash used in financing activities (2,999,944) (18,700,129)
Net decrease in cash and cash equivalents (283,184) (15,548,737) *
Reconciliation of net cash flows to movement in cash and cash
equivalents
Cash and cash equivalents at the beginning of 956,920 16,505,657
the year
Decrease in cash and cash equivalents (283,184) (15,548,737) *
Cash and cash equivalents at the end of the year 673,736 956,920
*This amount represents a drawdown of committed capital in AA Development
Capital India Fund 1, LLC on 7 September 2017 (see note 18). This is not the
purchase of a new investment.
The notes form an integral part of these financial statements.
Notes to the Financial Statements - Schedule of Investments
As at 31 December 2017
Description of investment Fair value % of
US$ net assets
Ashmore Global Special Situations Fund 4 LP 27,066,520 43.30
Ashmore Global Special Situations Fund 5 LP 10,262,134 16.42
AEI Inc - Equity 6,837,105 10.94
AA Development Capital India Fund 1, LLC 5,775,794 9.24
VTBC Ashmore Real Estate Partners 1 LP 4,156,177 6.65
Ashmore Asian Recovery Fund 3,734,415 5.97
Everbright Ashmore China Real Estate Fund LP 2,297,317 3.67
Ashmore Global Special Situations Fund 3 LP 1,624,910 2.60
Ashmore Global Special Situations Fund 2 Limited 459,605 0.74
Ashmore Asian Special Opportunities Fund Limited 188,289 0.29
Ashmore SICAV 2 Global Liquidity US$ Fund 938 -
Total investments at fair value 62,403,204 99.82
Net other current assets 112,787 0.18
Total net assets 62,515,991 100.00
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 2017
and 2016, State Street Nominees Limited, Chase Nominees Limited and Goldman
Sachs Securities Nominees Limited held more than 10% of the Company's Net Asset
Value ("NAV"). 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"); 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 and judgements 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 notes 2d and 7b.
c) Foreign Currency
i) Functional and presentational currency
These audited financial statements have been prepared in US dollars ("US$"),
which is the Company's functional and presentational currency, rounded to the
nearest US$. The Board of Directors considers the US$ to be the currency that
most faithfully represents the economic effect on the Company of the underlying
transactions, events and conditions. The US$ 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
(the "reporting 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 assets and liabilities designated at fair value through profit or
loss at inception:
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 in other
financial assets.
Other financial liabilities
This relates to accounts payable and accrued expenses.
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 NAV 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 reporting 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 reporting 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 reporting 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 2017 and 2016, 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 expired.
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 reporting 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.
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.
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, extended 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 2017. The only new
standards and interpretations relevant to the Company are IFRS 9 Financial
Instruments and IFRIC 23 Uncertainty over Income Tax Treatments, which are
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. The Company does not anticipate a significant impact upon
adoption of the standard.
ii) IFRIC 23 Uncertainty over Income Tax Treatments
On 7 June 2017, the International Accounting Standards Board issued IFRIC
Interpretation 23 - Uncertainty over Income Tax Treatments (the
"Interpretation"). The Interpretation clarifies application of recognition and
measurement requirements in IAS 12 Income Taxes when there is uncertainty over
income tax treatments. The Interpretation is effective for annual reporting
periods beginning on or after 1 January 2019, but certain transition reliefs
are available. The Company does not anticipate a significant impact upon
adoption of the standard. The Company does not plan to adopt IFRIC 23 early.
3. Taxation
The Director of Income Tax in Guernsey has confirmed that, for the year ended
31 December 2017, 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 (2016: GBP
1,200), 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 2017 31 December
2016
US$ US$
Financial assets held for trading:
- Derivative financial assets 521,399 5,536
Total financial assets held for trading 521,399 5,536
Designated at fair value through profit or loss at
inception:
- Equity investments 62,403,204 53,647,750
Total designated at fair value through profit or loss at 62,403,204 53,647,750
inception
Total financial assets at fair value through profit or 62,924,603 53,653,286
loss
During the years ended 31 December 2017 and 2016, 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 2017, derivative financial assets comprised forward foreign
currency contracts as follows:
Currency Amount Currency Amount Maturity Unrealised
Bought Bought Sold Sold Date Gain
GBP 13,000,749 US$ 17,091,562 16/02/2018 521,399
Derivative financial assets 521,399
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
31 December 2017 31 December
2016
US$ US$
Financial liabilities held for trading:
- Derivative financial liabilities - (99,251)
Total financial liabilities held for trading - (99,251)
As at 31 December 2017, there were no derivative financial liabilities.
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)
5. Other Net Changes in Fair Value through Profit or Loss
31 December 2017 31 December
2016
US$ US$
Other net changes in fair value through profit or loss:
- Realised gains on investments - 1,668,136
- Realised losses on investments - (44,097,665)
- Realised gains on forward foreign currency contracts 880,485 867,009
- Realised losses on forward foreign currency contracts (153,694) (5,454,738)
- Change in unrealised gains on investments 8,469,270 44,074,611
- Change in unrealised losses on investments (15,355) (2,643,973)
- Change in unrealised gains on forward foreign 620,650 957,341
currency contracts
- Change in unrealised losses on forward foreign (5,536) (109,791)
currency contracts
Total gain/(loss) 9,795,820 (4,739,070)
Other net changes in fair value on derivative assets 1,341,905 (3,740,179)
held for trading
Other net changes in fair value on assets designated at 8,453,915 (998,891)
fair value through profit or loss
Total net gain/(loss) 9,795,820 (4,739,070)
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 2017 31 December
2016
US$ US$
Prepaid Directors' insurance fees 6,387 6,833
Other receivables and prepaid expenses 6,541 1,348
12,928 8,181
b) Other financial liabilities:
Other financial liabilities relate to accounts payable and accrued expenses,
and comprise the following:
31 December 2017 31 December
2016
US$ US$
Investment management fees payable (5,432) (4,731)
Incentive fees payable (1,008,198) (795,093)
Other accruals (81,646) (114,399)
(1,095,276) (914,223)
7. Financial Instruments
a) Carrying amounts versus fair values
As at 31 December 2017, 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 2017.
Held for Designated Loans and Other Total
trading at fair receivables financial
value liabilities
Cash and cash equivalents - - 673,736 - 673,736
Non-pledged financial
assets at fair value
through profit or loss 521,399 62,403,204 - - 62,924,603
Other receivables - - 12,928 - 12,928
Total 521,399 62,403,204 686,664 - 63,611,267
Financial liabilities at fair
value - - - - -
through profit or loss
Other payables - - - (1,095,276) (1,095,276)
Total - - - (1,095,276) (1,095,276)
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
through profit or loss 5,536 53,647,750 - - 53,653,286
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)
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 debtors and 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, may 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, upon request, provide assistance to the Administrator in
determining a methodology for valuing assets where the Administrator cannot
determine a price or methodology from another source. It is the Administrator's
responsibility to determine whether to use any such assistance provided by the
PMVC. 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 reviewed by
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 NAV, 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 by
the auditors 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.
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 2017 and 2016.
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 2017:
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 - 521,399 - 521,399
Financial assets designated at
fair value through profit or loss
at inception:
- Equity investments 938 - 62,402,266 62,403,204
Total 938 521,399 62,402,266 62,924,603
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 - 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)
Level 1 assets include the Ashmore SICAV 2 Global Liquidity US$ Fund (31
December 2016: 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 NAV, 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 2017 and 2016:
Equity investments
Opening balance as at 1 January 53,646,820
2017
Purchases (drawdown of committed 301,531
capital)
Gains and losses recognized in profit and 8,453,915
loss *
Closing balance as at 31 December 62,402,266
2017
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 (45,744,412)
loss *
Closing balance as at 31 December 53,646,820
2016
* Gains and losses recognised in profit and loss include net unrealised losses
on existing assets as at
31 December 2017 of US$350,614,379 (31 December 2016: net unrealised losses of
U$359,068,294).
Total gains and losses included in the Statement of Comprehensive Income are
presented in "Other net changes in the fair value of financial assets and
financial liabilities at fair value through profit and loss".
The following tables show the valuation techniques and the key unobservable
inputs used in the determination of fair value for the Level 3 investments:
Balance as Valuation Significant Range of Sensitivity to changes
at 31 technique unobservable estimates in significant
December inputs for unobservable
2017 unobservable inputs
US$ inputs
Equity in a 6,837,105 Discounted Liquidity - ** The estimated fair
private Cash Flows discount at value would increase
company adjusted if:
equity level - the liquidity
discount were lower
Market Listed - ** - the EV/EBITDA
approach company EV/ multiples were higher
using EBITDA
comparable multiple
traded
multiples
Investments 55,565,161 Unadjusted Inputs to NAV US$0.04 - The estimated fair
in unlisted NAV * US$52.25 value would increase if
Funds the NAV was higher
* The Company has assessed whether there are any discounts in relation to
lock-in periods that are impacting liquidity. There were no discounts in
relation to lock-in periods as at 31 December 2017.
** Information has not been included as these are commercially sensitive.
Balance as Valuation Significant Range of Sensitivity to changes
at 31 technique unobservable estimates in significant
December inputs for unobservable
2016 unobservable inputs
US$ inputs
Equity in a 5,771,581 Discounted Liquidity - ** The estimated fair
private Cash Flows discount at value would increase
company adjusted if:
equity level - the liquidity
discount were lower
Market Listed - ** - the EV/EBITDA
approach company EV/ multiples were higher
using EBITDA
comparable multiple
traded
multiples
Investments 47,875,239 Unadjusted Inputs to NAV US$0.04 - The estimated fair
in unlisted NAV * US$56.51 value would increase if
Funds the NAV was higher
* The Company has assessed whether there are any discounts in relation to
lock-in periods that are impacting liquidity. There were no discounts in
relation to lock-in periods as at 31 December 2016.
** Information has not been included as these are commercially sensitive.
Unobservable inputs are developed as follows:
* EBITDA and revenue multiples represent amounts that market participants
would use when pricing an investment. These multiples are selected from
comparable publicly listed companies based on geographic location, industry
size, target markets and other factors that are considered to be
reasonable. The traded multiples for the comparable companies are
determined by dividing its respective enterprise value by its EBITDA or
revenue.
* The Company used a combination of market multiples and discounted cash
flows methodologies to derive the fair value.
The Company believes that its estimates of fair value are appropriate; however
the use of different methodologies or assumptions could lead to different
measurements of fair value. For fair value investments in Level 3, changing one
or more of the assumptions used to alternative assumptions could result in an
increase or decrease in net assets attributable to investors. Due to the
numerous different factors affecting the assets, the impact cannot be reliably
quantified. It is reasonably possible, on the basis of existing knowledge, that
outcomes within the next financial year that are different from the assumptions
used could require a material adjustment to the carrying amounts of affected
assets.
8. Capital and Reserves
The Company's capital is represented by two classes of ordinary shares, namely
the US$ 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$
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 2017:
US$ shares GBP shares
Shares outstanding as at 1 January 7,465,478 2,586,288
2017
Share conversions 258,550 (213,504)
Compulsory redemptions (366,410) (113,838)
Shares outstanding as at 31 December 7,357,618 2,258,946
2017
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 1 January 7,739,867 4,971,508
2016
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
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
2017:
Transfers from Transfers to Number of shares Number of shares
to switch out to switch in
GBP shares US$ shares 216,617 262,294
US$ shares GBP shares 3,744 3,113
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
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 2017, management announced partial returns of capital to
shareholders by way of compulsory partial redemption of shares with the
following redemption date:
* 1 September 2017, US$3.0m using the 31 August 2017 NAV.
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 NAV; and
* 29 April 2016, US$2.5m using the 31 March 2016 NAV.
The amounts applied to the partial redemptions of shares comprised monies from
dividends received and from the realisation of the Company's investments up to
and including the reference NAV calculation dates pursuant to the wind-down of
the Company.
During the year ended 31 December 2017, the following shares were redeemed by
way of compulsory partial redemptions of shares (consideration in US$ has been
determined using the exchange rates at the redemption date):
Number of ordinary Consideration in US$
shares redeemed
US$ shares 366,410 2,166,241
GBP shares 113,838 833,703
2,999,944
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 date of the official announcement):
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
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 2017 or the year
ended 31 December 2016.
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 NAV 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
2017 attributable to per share per share
each in US$ in local
share class in US$ currency
US$ shares 44,735,598 7,357,618 6.08 6.08
GBP shares 17,780,393 2,258,946 7.87 5.82
62,515,991
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
The allocation of the Company's NAV between share classes is further described
in the Company's Prospectus.
10. Dividend and Interest Income
Year ended Year ended
31 December 31 December
2017 2016
Interest income US$ US$
Cash and cash equivalents 7,989 2,323
Total interest income 7,989 2,323
Dividend income
Equity investments designated at 2,647,585 1,975,957
fair value through profit or loss
Total dividend income 2,647,585 1,975,957
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 NAV 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
2017 2016
US$ US$
Investment management fee expense (64,866) (84,180)
(64,866) (84,180)
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$213,105
were charged (31 December 2016: US$nil paid and US$271,667 charged).
b) Directors' Remuneration
During the years ended 31 December 2017 and 2016, Directors' remuneration was
as follows:
Year ended Year ended
31 December 2017 31 December 2016
Chairman: GBP28,350 per annum GBP28,350 per annum
Chairman of the Audit Committee: GBP28,350 per annum GBP28,350 per annum
Independent Directors: GBP26,730 per annum GBP26,730 per annum
Non-Independent Directors: waived waived
c) Administrator
The Administrator, Northern Trust International Fund Administration Services
(Guernsey) Limited, performs administrative duties for which it is remunerated
at an annual rate of 0.02% of the Company's Total Net Assets.
d) Custodian
Northern Trust (Guernsey) Limited (the "Custodian") is remunerated at an annual
rate of 0.01% of the Company's Total Net Assets.
12. Other Operating Expenses
Year ended Year ended
31 December 2017 31 December 2016
US$ US$
Audit fees (41,145) (53,475)
Professional fees 3,420 (5,096)
Legal fees 854 1,326
Miscellaneous fees (88,107) (105,683)
(124,978) (162,928)
The credits to other operating expenses for the years ended 31 December 2017
and 31 December 2016 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 profit/
(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 gain attributable to each share class for the year ended 31 December 2017
was as follows:
US$ share GBP share
Issued shares at the beginning of 7,465,478 2,586,288
the year
Effect on the weighted average number of shares:
- Conversion of shares 174,703 (145,315)
- Compulsory partial redemption of (91,603) (28,460)
shares
Weighted average number of shares 7,548,578 2,412,513
Profit for the year attributable to each class of 7,648,402 4,262,623
shareholders (US$)
EPS (US$) 1.01 1.77
There were no dilutive instruments in issue during the year.
The gain/(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
Profit/(loss) for the year attributable to each class of 270,386 (3,615,276)
shareholders (US$)
EPS (US$) 0.04 (1.16)
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$ 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 NAV of the Company's underlying investments via the use of forward
foreign currency contracts or similar instruments.
As at the reporting 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$, and therefore non-US$ subscription monies for shares are typically
converted into US$ 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$ is allocated solely to the GBP
share class. This may result in variations in the NAVs of the two classes of
shares as expressed in US$.
As at 31 December 2017, the net foreign currency exposure on the GBP share class
was as follows:
US$ % of net assets
Currency exposure of GBP share class 17,780,393 28.44
Nominal value of currency hedges (17,091,562) (27.34)
Net foreign currency exposure 688,831 1.10
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)
ii) Interest Rate Risk
The majority of the Company's financial assets and liabilities are non-interest
bearing (31 December 2017: 98.92%, 31 December 2016: 98.19%). As at 31 December
2017, interest-bearing financial assets comprised cash and cash equivalents of
US$673,736 (31 December 2016: US$956,920). The Company's investment portfolio
is composed entirely of non-interest bearing assets as at 31 December 2017 (31
December 2016: 100%). As a result, the Company is subject to limited direct
exposure to interest rate risk through fluctuations in the prevailing levels of
market interest rates and a sensitivity analysis of interest rate risk is not
meaningful at this time.
iii) Other Price Risk
Other price risk is the risk that the value of financial instruments will
fluctuate as a result of changes in market prices (other than those arising
from interest rate risk or currency risk), whether caused by factors specific
to an individual investment, its issuer or any other relevant factors.
The Company's strategy for the management of price risk is to seek to maximise
the exit prices that it obtains for its direct and indirect investments.
The table below summarises the sensitivity of the Company's net assets
attributable to equity holders to investment price movements as at the
reporting date. The analysis is based on the assumption that the prices of the
investments increase by 5% (2016: 5%), with all other variables held constant.
31 December 31 December
2017 2016
US$ US$
Equity investments 3,120,160 2,682,388
3,120,160 2,682,388
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 reporting 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
2017 2016
US$ US$
Cash and cash equivalents* 673,736 956,920
Forward currency contracts* 521,399 5,536
1,195,135 962,456
* 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 2017 (31 December 2016: 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
assigned by S&P to the Northern Trust Corporation as at the year-end date was
A+ (2016: 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 2017 and 2016 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 2017.
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 7 265,540,533 49,111,667 18.49
Equity Funds
Real Estate Funds 2 69,329,227 6,453,494 9.31
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 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 2017, the Company engaged in the following
related party transactions:
Expense Payable
Related Party Nature US$ US$
AIAL Investment management (64,866) (5,432)
fees
AIAL Incentive fees (213,105) (1,008,198)
Board of Directors Directors' remuneration (89,668) -
Investment
Activity
Related Party Nature US$
Ashmore SICAV 2 Global Liquidity US$ Dividends 2,646,471
Fund
Ashmore SICAV 2 Global Liquidity US$ Dividends 7
Fund
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
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
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$ 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 2017 31 December 2016
GBP ordinary shares GBP ordinary shares
Nigel de la Rue 779 785
Christopher Legge 487 490
Richard Hotchkis 293 295
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 2017, the outstanding commitment
was US$529,455 (31 December 2016: 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 2017, the outstanding commitment was EUR243,474
(31 December 2016: 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 2017, the outstanding commitment
was US$5,959,809 (31 December 2016: US$6,261,340).
19. Subsequent Events
Share Conversion
The following share conversions occurred subsequent to 31 December 2017:
Transfers from Transfers to Number of shares Number of shares
to switch out to switch in
US$ shares GBP shares 3,79718 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 ("AUM") was approximately US$5.2 billion as at 30 June 2017.
AIAL's parent company ("Ashmore") is listed on a regulated market, counts ten
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 2017 was as follows:
Number of Variable Fixed Total
beneficiaries remuneration remuneration remuneration
Ashmore Global Opportunities 20 GBP11,188 GBP1,392 GBP12,580
Limited
Total AIAL 20 GBP2,010,863 GBP179,762 GBP2,190,625
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 Independent 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) Limited Carey House
PO Box 255 Les Banques
Trafalgar Court St Peter Port
Les Banques Guernsey
St Peter Port GY1 4BZ
Guernsey Channel Islands
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 information
London for shareholders can be found at:
EC4V 3BJ www.agol.com
United Kingdom
END
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