NOT FOR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, IN OR INTO THE UNITED
STATES, CANADA,
AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO
WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION
Ashmore Global Opportunities Limited
(“AGOL”, or the “Company”)
a Guernsey incorporated and registered limited
liability closed-ended investment company with a Premium Listing of
its US Dollar and Sterling share classes on the Official List.
Annual Results
For the year ended
31 December 2016
The financial information set out in this announcement does not
constitute the Company's statutory accounts for the year ended
31 December 2016. All figures are
based on the audited financial statements for the year ended
31 December 2016.
The financial information for the year ended 31 December 2016 is derived from the financial
statements delivered to the UK Listing Authority. The Auditors
reported on those accounts, their report was unqualified and did
not contain a statement under Section 263(2) and 263(3) of The
Companies (Guernsey) Law,
2008.
The announcement is prepared on the same basis as will be set
out in the annual accounts.
The Annual Report and Audited Financial Statements will be
available on the Company website: www.agol.com
Financial Highlights
|
|
31
December 2016 |
|
31
December 2015 |
|
|
|
|
|
Total Net Assets |
|
US$53,604,913 |
|
US$75,649,932 |
|
|
|
|
|
Net Asset Value per
Share |
|
|
|
|
US$ shares |
|
US$5.08 |
|
US$5.06 |
£ shares |
|
£4.91 |
|
£4.98 |
|
|
|
|
|
Closing-Trade Share
Price |
|
|
|
|
US$ shares |
|
US$3.73 |
|
US$3.86 |
£ shares |
|
£3.88 |
|
£3.82 |
|
|
|
|
|
Discount to Net Asset
Value |
|
|
|
|
US$ shares |
|
(26.57)% |
|
(23.72)% |
£ shares |
|
(20.98)% |
|
(23.29)% |
Chairman’s Statement
The Company continues with the process of realising its final
assets, albeit the process is taking longer than expected for
reasons detailed below. Distributions to shareholders from the
realisation of investments totalled US$18.7
million in 2016, the most significant of which was paid in
January 2016 following the
December 2015 sale of Fenix, a power
plant held by AEI. Other realisations during 2016 included the sale
of residual positions in MCX and ISM; the spin out and sale of a
small subsidiary of Microvast; receipt of the final tranche of
Pacnet sales proceeds; and receipt of an earn-out payment relating
to the GEMS/Utileco sale from 2014.
The most important assets left in the portfolio are Bedfordbury,
Microvast, and AEI. The planned realisation of Bedfordbury had to
be aborted in 2016 due to a dispute with the partner in the
underlying asset. The dispute, concerning Bedfordbury’s share of
the underlying asset, has now gone to arbitration, with a
Singapore court hearing expected
in Q1 2018. As a result, the sale has been further delayed.
Microvast performed well in 2016 and is looking at a number of
capital raising options to fund growth. These may provide an
opportunity for existing stakeholders (including AGOL) to realise
part of their investment during 2017. Following the sale of Fenix,
AEI now has one power plant remaining (Jaguar) which is located in
Guatemala. The Board expects the
sale process for Jaguar to complete during the course of 2017.
Further details on the underlying exposures of the Company are
provided in the Investment Manager’s report.
As at 31 December 2016, the Net
Asset Value (“NAV”) of the Company was US$53.6m. The NAVs per share increased/decreased
from US$5.06 and £4.98 at the end of
2015 to US$5.08 and £4.91 at the end
of 2016. The share prices stood at US$3.73 and £3.88 as at 31
December 2016, a decrease of 3.37% and an increase of 1.57%
respectively compared with 31 December
2015 levels.
Quarterly
Distributions |
|
|
|
|
|
|
|
Quarter
End Date |
Distributions |
% of 31 December 2012 |
% of 31
December 2012 |
|
(US$) |
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% |
|
|
|
|
Total |
303,100,000 |
63% |
92% |
|
|
|
|
|
|
The Board regrets that there were not more asset sales in 2016
but expects realisations to materialise during 2017. The resulting
distributions to shareholders will further diminish the NAV of the
Company and the Board is carefully controlling operating costs. To
this end, the Board continues to consider the costs and benefits of
listing the shares of the Company on the London Stock Exchange.
There were no changes to the composition of the Board of AGOL
during the year.
I would like to thank everyone involved with AGOL for their hard
work.
Richard
Hotchkis
20 April 2017
Investment Manager’s Report
Performance
As at 31 December 2016, the NAVs
per share of the US$ and £ classes stood at US$5.08 and £4.91 respectively, representing
returns of 0.40% and -1.41% over the twelve months to 31 December 2016.
Portfolio Review
Ashmore Global Opportunities Limited (AGOL) paid out
US$18.7m to investors during the
twelve months to 31 December 2016,
including the Q4 2015 distribution of US$16.2m paid to investors on 5 February 2016. The latter related to the sale
of the Fenix power plant in Peru
(one of the last two remaining assets in the AEI stable) for which
AEI achieved a sale price at a significant premium over the
prevailing book value. The Q1 2016 distribution was triggered by
the receipt of Pacnet sale proceeds from Telstra. Investors
received 85% of the Pacnet sales proceeds in 2015 (on the sale
date), with the remaining balance deferred to be paid in two
tranches. The first tranche was received in April 2016 and a final tranche of US$3m was received by the Ashmore Funds in
November 2016.
The three largest investee company exposures, namely;
Bedfordbury, Microvast and AEI now account for around 75% of AGOL’s
NAV.
As reported in previous publications, Ashmore Funds had been
working on exiting the ABC development land bank in Manila Bay.
However, due to a dispute over the percentage share ownership,
Ashmore Funds have had to initiate arbitration proceedings in
Singapore with Bedfordbury’s
partner in the land bank. Given a backlog of cases in Singapore the procedural timeline now
envisages the hearing to take place in Singapore in Q1 2018. This process is expected
to push back the realisation of this asset, until either a
settlement is reached allowing the Ashmore funds to exit or the arbitration
process is completed.
Microvast continues to supply batteries for pure e-bus and
plug-in hybrid electric vehicles (“PHEV”) to a large number of
Chinese original equipment manufacturers (“OEMs”), with these being
deployed in over thirty cities in China. Follow-on orders continue to be
received by Wright Bus for the London market and Microvast expects more
orders from the European bus market. The Company is achieving
healthy margins, with projected revenues up on previous years’.
Production capacity has been increased in order to meet future
demand, with management also adding new facilities. The Company is
considering raising new capital in order to expand production
capacity further, and there is a possibility that such a capital
event may also allow for a partial realisation by existing
shareholders, including Ashmore Funds.
Jaguar, the greenfield project in Guatemala, is now the only operating entity
within AEI. Jaguar is being prepared for sale, with an investment
bank appointed to lead the process. Management are targeting a sale
of the asset in 2017, and following such a sale, it is the
intention of the company’s directors to wind up AEI.
The price of vanadium pentoxide continues to recover, allowing
Largo to ramp up production to a record 800 tonnes per month. Largo
also announced that it intends to produce, qualify and sell its
vanadium products at the specifications required for use in the
aerospace alloy market sector, with the aim of breaking into higher
margin sectors.
Numero Uno is one of India’s leading Jeanswear brands with over
700 retail outlets throughout India. The Company continues to perform well,
having consolidated its operations from Gurgaon to Selaqui,
resulting in significant cost savings. In November however, the
Government announced the demonetisation of 500 and 1000 Rupee banknotes, which led to a sudden
shortage of banknotes as holders rushed to exchange them for new,
valid 500 and 2000 Rupee notes. This
created significant disruption throughout the economy and saw sales
at Numero Uno fall sharply. Notwithstanding this, margins remain
healthy and Numero Uno continues to explore exit options.
ZIM Laboratories, headquartered in Nagpur, is engaged in the
research and manufacture of a wide range of off-patent (generic)
pharmaceutical products, the value of which is enhanced via new
drug delivery mechanisms. ZIM continues to perform well, having
initiated expansion into western markets such as Canada, Poland and the
Netherlands. The company has also applied for a number of
patents in various countries around the world and has started to
see approvals come through. ZIM has initiated expansion into
Iran and Syria, markets which have typically put off
Western manufacturers.
The macroeconomic environment in Nigeria remains challenging for GZi (the
Nigerian aluminium can producer). That said, company performance
was resilient with GZi increasing its market share through quality
and timely production facilities. It is also looking to expand its
operations, possibly into South
Africa or Kenya.
Outlook
As described above, the focus remains on realising AGOL's
remaining investments in an orderly manner. The general sentiment
towards Emerging Markets is improving, thus providing a more
positive backdrop to realisations. Nevertheless, realisations are
very much influenced by the attraction and circumstances of each
individual asset.
Details on the Top 10 Underlying
Holdings (on a look through basis)
The table below shows the top 10 underlying investments as at
31 December 2016 excluding the cash
balance (cash was 1.85% as at 31 December
2016).
Investment
Name % of NAV |
|
Country |
Business
Description |
Bedfordbury |
36.48% |
Philippines |
Real estate
development company |
Microvast |
19.22% |
China |
Electric battery and
battery systems supplier |
AEI |
17.82% |
Guatemala |
Power generation in
Latin America |
Kulon |
8.65% |
Russia |
Real estate
development company |
Numero Uno |
4.78% |
India |
Branded apparel
manufacturers and retailers |
ZIM Laboratories
Ltd |
3.14% |
India |
Pharmaceutical
research and manufacturing |
Everbright |
2.76% |
China |
Real estate
development company |
Largo Resources |
2.04% |
Brazil |
Brazilian provider of
mining services |
GZ Industries Ltd |
1.54% |
Nigeria |
Aluminium can
manufacturer |
Seedinfo |
0.92% |
India |
Enterprise software
company |
The tables below show the country and industry allocations of
underlying investments over 1% at the end of December 2016:
Country |
% of
NAV |
|
Industry |
% of
NAV |
Philippines |
36.48% |
|
Real Estate |
47.90% |
China |
22.07% |
|
Electrical Components
and Equipment |
19.22% |
Guatemala |
17.82% |
|
Electric |
17.82% |
India |
9.87% |
|
Retail |
4.78% |
Russia |
8.65% |
|
Pharmaceuticals |
3.14% |
Brazil |
2.04% |
|
Mining |
2.04% |
Nigeria |
1.54% |
|
Miscellaneous
Manufacturing |
1.54% |
These tables form an integral part of the financial
statements.
Details on a Selection of the Underlying Holdings
Bedfordbury
Industry: Real estate development company
Country: Philippines
Website: n/a
Company Status: Private
Investment Risk: Equity
Exit strategy and timing
§ We initiated Singapore
arbitration proceedings against Bedfordbury’s partner in the land
bank in Q4 2016. Given a backlog of cases in Singapore, the procedural timeline envisages
the hearing to take place in Q1 2018
Microvast
Industry: Technology/Clean-tech
Country: China
Website: www.microvast.com
Company Status: Private
Investment Risk: Equity
Operational update
§ Microvast supplies batteries for both pure e-bus and plug in
hybrid-electronic (“PHEVs”) to a large number of Chinese original
equipment manufacturers (“OEMs”), with the resultant buses being
deployed in over 30 cities in China. Follow-on orders continue to be
received via Wright Bus for the London market and Microvast expects further
orders from the European bus market
§ Microvast is achieving gross margins of circa 35% and net
margins of circa 16%, and its projected FY2016 revenues are
US$208m yielding net income of
US$35m. The committed order backlog
at the end of December (Chinese customers account for 90% of this)
is supportive of FY2017 being another growth year, although there
may be margin pressure in 2017 as a result of the Chinese
government lowering its e-bus subsidies
§ Production capacity has been successfully increased to 2GWh
per annum. Any further increases will require external
financing
§ Microvast is working on Lithium-ion battery (Li-B) systems for
passenger vehicles with some of the leading Chinese auto OEMs. A
leading European car company is also in testing
2017 operational
strategy/priorities
§ Manage growth by adding new facilities, increasing production
capacity and hiring/training new employees
§ Build large scale production of Li-B systems for passenger
vehicles, and growing the international business
§ Meet short order timeframes from Chinese bus OEMs and ensuring
customers can claim Chinese New Energy Vehicle (“NEV”)
subsidies
Key risks
§ Overcapacity in both Chinese and global battery companies
§ Warranty claims arising from defective cells or modules
§ Unfavourable changes to the Chinese government’s New Energy
Vehicle policy
Exit strategy
§ Block sale pre- or post-IPO
AEI
Industry: Power generation
Country: Guatemala
Website: www.aeienergy.com
Company Status: Private
Investment Risk: Equity
Operational update
§ The only operating entity remaining is Jaguar, the greenfield
project in Guatemala, which is now
being prepared for sale
§ Jefferies have been appointed as the investment bank to lead
the sale process
§ China Machine New Energy Corporation (“CMNEC”) are appealing
an arbitration award
Key risks
§ CMNEC arbitration appeal
§ Sale process
Exit strategy
§ Sale of Jaguar with a target closure date during 2017
§ Wind up of AEI post the Jaguar sale
Kulon
Industry: Real estate
Country: Russia
Website: n/a
Company Status: Private
Investment Risk: Equity
Operational update
§ Gross rental income for 2016 was 0.7% lower than in 2015
primarily due to foreign exchange movements
§ Expenses for 2016 were 18.7% lower than in 2015 due to reduced
land taxes (following a review of the cadastral value), lower legal
fees and reduced non-recoverable capex
§ Overall net operating income was 14.0% higher than in 2015 due
to the factors mentioned above
Key risks
§ Foreign exchange rates
Exit strategy
§ Exit the investment by selling the shares in the holding
company
GZI
Industry: Aluminium can manufacturing
Country: Nigeria
Website: www.gzican.com
Company Status: Private
Investment Risk: Equity
Operational update
§ In 2016 the business proved resilient considering the
deterioration in the Nigerian macroeconomic environment
§ Quality, timely production and delivery gave GZI a larger
market share than expected after reaching its budgeted targets
§ GZI finalised the refinancing of its loans into Naira,
reducing its US$ exposure
§ Volumes have been slowing with clients looking for cheaper
alternatives but GZI is countering this via different offerings and
an export strategy
§ GZI is analysing both South
Africa and Kenya as
expansion opportunities and will make a decision by the end of Q1
on which to pursue
2017 operational
strategy/priorities
§ Establish a plant in South
Africa or Kenya
§ Continue to support the new CEO in stabilising the
business
§ Manage foreign exchange exposures/requirements
§ Export cans in the region to expand sales and earn foreign
currency
Key risks
§ Continued slowdown in the African beverages markets
§ Clients opting for cheaper alternatives
§ Access to US$/local currency depreciation
§ Recruitment/talent sourcing
Exit strategy and timing
§ 2018 exit through IPO or strategic sale
Ashmore Investment Advisors
Limited
Investment Manager
20 April 2017
Board Members
As at 31 December 2016, the Board
consisted of four non-executive Directors. The Directors are
responsible for the determination of the investment policy of
Ashmore Global Opportunities Limited (the “Company” or “AGOL”) and
have overall responsibility for the Company’s activities. As
required by the Association of Investment Companies Code on
Corporate Governance (the “AIC Code”), the majority of the Board of
Directors are independent of the Investment Manager. In preparing
this annual report, the independence of each Director has been
considered.
Richard Hotchkis,
Independent Chairman, (Guernsey resident) appointed 18 April 2011
Richard Hotchkis has 40 years of
investment experience. Until 2006, he was an investment manager at
the Co-operative Insurance Society, where he started his career in
1976. He has a breadth of investment experience in both UK and
overseas equities, including in emerging markets, and in
particular, investment companies and other closed-ended funds,
offshore funds, hedge funds and private equity funds. Richard
is currently a director of a number of funds, including Aberdeen
Frontier Markets Company (formerly Advance Frontier Markets Fund
Limited).
Steve Hicks, Non-Independent
Director (connected to the Investment Manager), (UK resident)
appointed 16 January 2014
Steve Hicks, who is a qualified
UK lawyer, has held a number of legal and compliance roles over a
period of more than 25 years. From June
2010 until January 2014 he was
the Ashmore Group Head of Compliance. Prior thereto he was
Director, Group Compliance at the London listed private equity company 3i Group
plc.
Nigel de la Rue, Independent
Director, (Guernsey resident)
appointed 16 October 2007
Nigel de la Rue graduated in 1978
from Pembroke College,
Cambridge with a degree in Social
and Political Sciences. He is qualified as an Associate of the
Chartered Institute of Bankers, as a Member of the Society of Trust
and Estate Practitioners (STEP) and as a Member of the Institute of
Directors. He was employed for 23 years by Baring Asset
Management’s Financial Services Division, where he was responsible
for the group’s Fiduciary Division and sat on the Executive
Committee. He left Baring in December
2005, one year after that Division was acquired by Northern
Trust. He has served on the Guernsey Committees of the Chartered
Institute of Bankers and STEP, and on the Guernsey Association of
Trustees, and currently holds a number of directorships in the
financial services sector.
Christopher Legge, Independent
Director, (Guernsey resident)
appointed 27 August 2010
Christopher Legge has over 25
years’ experience in financial services. He qualified as
a Chartered Accountant in London in 1980 and spent the majority of
his career based in Guernsey with
Ernst & Young, including being the Senior Partner of
Ernst & Young in the Channel Islands. Christopher
retired from Ernst & Young in 2003 and currently holds a
number of directorships in the financial sector. Until 24 June 2016, he was Senior Independent Director
and chaired the Audit Committee at BH Macro Limited.
Disclosure of Directorships in Public
Companies Listed on Recognised Stock Exchanges
The following summarises the Directors’ directorships in other
public companies:
Company Name
Exchange
Richard
Hotchkis
Aberdeen Frontier Markets Company (formerly Advance
AIM
Frontier Markets Fund
Limited)
Steve Hicks
Nil
Nigel de la Rue
Nil
Christopher
Legge
Baring Vostok Investments PCC Limited
(until 27 April
2016)
TISE (formerly CISE)
BH Macro Limited (until 24 June 2016)
London, Bermuda and Dubai
John Laing Environmental Assets Group
Limited
London
Sherborne Investors (Guernsey) B
Limited
London
Third Point Offshore Investors
Limited
London
TwentyFour Select Monthly Income Fund
Limited
London
Directors’ Report
The Directors submit their Report together with the Company’s
audited financial statements for the year ended 31 December
2016, which have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the IASB and
are in agreement with the accounting records, which have been
properly kept in compliance with section 238 of the Companies
(Guernsey) Law, 2008.
The Company
The Company was incorporated with limited liability in
Guernsey, Channel Islands as an authorised closed-ended
investment company on 21 June 2007.
The Company was launched on 7 December
2007 and the Company’s shares were admitted to the Official
Listing of the London Stock Exchange on 12
December 2007, pursuant to Chapter 14 of the Listing Rules.
Following changes to the Listing Rules on 6
April 2010, the listing became a Standard Listing. On
27 April 2011, the UK Listing
Authority confirmed the transfer of the Company from a Standard
Listing to a Premium Listing under Chapter 15 of the Listing Rules.
The Company’s US$ shares and £ shares are included in the FTSE
All-Share Index.
Investment Strategy
Prior to the Extraordinary General Meeting (“EGM”) of
shareholders on 13 March 2013, the
Company’s investment objective was to deploy capital in a
diversified portfolio of global emerging market strategies and
actively manage these with a view to maximising total returns. This
was implemented by investing across various investment themes
(Alternatives including Special Situations and Real Estate,
External Debt, Local Currency, Equities, Corporate Debt and
Multi-Strategy), with a principal focus on Special Situations.
The Company employed a dynamic allocation of its assets across
Ashmore’s investment themes with a principal focus on Special
Situations, seeking to create value for shareholders and target
total return through active portfolio management. The Investment
Manager employed a predominantly top-down and value-driven
investment approach coupled with the bottom-up selection of
investments in those Ashmore Funds (“Funds”) where corporate and
Special Situations assets were more significant. Through investing
in the Funds, the Company sought to build a globally diverse
portfolio of investments and to benefit from the Investment
Manager’s experience in investing globally in emerging markets
countries (including in distressed and Special Situations assets)
and in the resolution or restructuring of such investments.
On 12 December 2012, the Board
announced, following its review and in conjunction with its
independent financial and legal advisers, options to address the
structural issue of the discount to net asset value at which the
shares were trading, which included proposals to shareholders: to
amend the investment strategy to make no new Special Situations
investments (with any new investments to be shorter term in
nature); to realise the Company’s assets for cash over the next few
years; and to return cash realised from the investment portfolio to
shareholders (the “Managed Wind-Down”). Shareholders approved these
proposals at an EGM held on 13 March
2013. The Board believes that the revised investment
strategy is the best way of realising the value of the Company.
Going Concern
The Board of Directors called an EGM, which was held on
13 March 2013, to approve proposals
for a managed wind-down of the Company`s portfolio. All proposals
were duly passed at the EGM and accordingly the Board:
1. changed the investment objective of the Company
to the realisation of the Company’s assets in an orderly manner in
order to return cash to shareholders;
2. amended the Articles of Incorporation to
facilitate a regular, quarterly return of cash to shareholders;
3. amended the Articles of Incorporation in relation
to the removal of the continuation vote;
4. amended the Articles of Incorporation to reduce
the minimum number of Directors from five to one; and
5. amended the terms of the Investment Management
Agreement (“IMA”) between the Company and Ashmore Investment
Advisors Limited (the “Investment Manager”).
The Directors have examined significant areas of possible going
concern risk and are satisfied that no material exposures exist.
The Directors consider that the Company has adequate resources to
continue in operational existence for the foreseeable future and
believe it is appropriate to adopt the going concern basis in
preparing the financial statements, despite the managed wind-down
of the Company over the next few years.
Long Term Viability Statement
In accordance with the AIC Code, Directors are required to
assess the prospects of the Company over a longer period than the
12 months minimum required by the ‘Going Concern’ provision. The
Company is expected to realise its remaining assets over the next
few years. The principal risk affecting the Company is market price
risk as it seeks to realise its remaining portfolio. Once the
underlying investments have been sold and the investee funds have
been liquidated, the Board will propose that the Company enters
into voluntary liquidation. The Directors consider that the Company
has sufficient cash and liquid resources to complete its wind down
and liquidation in an orderly manner including paying all
associated expenses.
Results and Dividends
The results for the year are set out in the Statement of
Comprehensive Income and are discussed in more detail in the
Chairman’s Statement and the Investment Manager’s Report. The
Company is returning cash to investors via regular compulsory
partial redemptions and is therefore not paying dividends.
Compulsory Partial Redemptions
Following the approval by the Company’s shareholders of the
wind-down proposal as described in the circular published on
20 February 2013, during the year
ended 31 December 2016, management
announced returns of capital to shareholders by way of compulsory
partial redemptions of shares, with the following redemption
dates:
· 29 January
2016, US$16.2m using the
31 December 2015 Net Asset Value;
and
· 29 April
2016, US$2.5m using the
31 March 2016 Net Asset Value.
Between the end of the reporting year and the date when the
financial statements were authorised for issue, there were no
returns of capital to shareholders by way of compulsory partial
redemptions of shares.
The amounts applied to the partial redemptions of shares
comprised monies from dividends received and from the realisation
of the Company’s investments up to and including the reference
NAV calculation dates pursuant to the wind-down of the Company.
Share Capital
The number of shares in issue at the year end is disclosed in
note 8 to the financial statements.
The Board
The Board of Directors has overall responsibility for
safeguarding the Company’s assets, for the determination of the
investment policy of the Company, for reviewing the performance of
the service providers and for the Company’s activities. The
Directors, all of whom are non-executive, are listed in the Board
Members section.
In accordance with Article 18.3 of the Company’s Articles of
Incorporation, at each Annual General Meeting one-third of the
Directors shall retire from office via rotation and be put forward
for re-election based on continued satisfactory performance. Any
Director who serves nine years on the Board, will thereafter be put
forward for re-election on an annual basis. Nigel de la Rue reached nine years of service in
October 2016 and will be put forward
for re-election at the next Annual General Meeting.
The Board holds Board meetings at least four times a year. At
Board meetings, the Directors review the management of the
Company’s assets and all other significant matters so as to ensure
that the Directors maintain overall control and supervision of the
Company’s affairs. The Board is responsible for the appointment and
monitoring of all service providers to the Company, following
updates and recommendations from the Management Engagement
Committee. Between these formal meetings there is regular contact
with the Investment Manager. The Directors are kept fully informed
of investment and financial controls and other matters that are
relevant to the business of the Company and should be brought to
the attention of the Directors. The Directors also have access to
the Secretary and, where necessary in the furtherance of their
duties, to independent professional advice at the expense of the
Company.
The table below sets out the number of Board, Audit and
Management Engagement Committee meetings during the year ended
31 December 2016:
|
Board
meetings attended |
Audit
Committee meetings
attended |
Management Engagement Committee meeting attended |
Richard
Hotchkis |
4 |
3 |
1 |
Steve
Hicks |
4 |
N/A |
N/A |
Nigel de la
Rue |
4 |
3 |
1 |
Christopher
Legge |
4 |
3 |
1 |
|
|
|
|
|
|
|
|
No. of meetings
during the year |
4 |
3 |
1 |
In addition to the meetings above, five other committee meetings
were held during the year. Any Directors who are not members of
Board Committees are invited to attend meetings of such committees
as necessary.
Directors’ Interests
As at 31 December 2016, three
Directors, Nigel de la Rue,
Christopher Legge and Richard Hotchkis, had beneficial interests in
the Company representing 785, 490 and 295 £ shares
respectively.
The Company has adopted a code of Directors’ dealings in shares,
which is based on the Model Code for directors’ dealings contained
in the LSE’s Listing Rules.
Directors’ Indemnity
Directors’ and officers’ liability insurance cover is in place
in favour of the Directors. The Directors entered into indemnity
agreements with the Company which provide for, subject to the
provisions of the Companies (Guernsey) Law, 2008, an indemnity for
Directors in respect of costs which they may incur relating to the
defence of proceedings brought against them arising out of their
positions as Directors, in which they are acquitted or judgement is
given in their favour by the Court. The agreement does not provide
for any indemnification for liability which attaches to the
Directors in connection with any negligence, unfavourable
judgements, or breach of duty or trust in relation to the
Company.
Corporate Governance
To comply with the UK Listing Regime, the Company must comply
with the requirements of the UK Corporate Governance Code. The
Company is also required to comply with the Code of Corporate
Governance issued by the Guernsey Financial Services
Commission.
The Company is a member of the Association of Investment
Companies (“AIC”) and, by complying with the AIC Code, it is deemed
to comply with both the UK Corporate Governance Code and Guernsey
Code of Corporate Governance.
The Guernsey Financial Services Commission’s Code of Corporate
Governance (the “GFSC Code”) provides a framework that applies to
all entities licensed by the Guernsey Financial Services Commission
or which are registered or authorised as a collective investment
scheme in Guernsey. Companies
reporting against the UK Corporate Governance Code or the AIC Code
are deemed to comply with the GFSC Code.
The Board of the Company has considered the principles and
recommendations of the AIC Code by reference to the AIC Corporate
Governance Guide for Investment Companies (“AIC Guide”). The AIC
Code, as explained by the AIC Guide, addresses all the principles
set out in the UK Corporate Governance Code, as well as setting out
additional principles and recommendations on issues that are of
specific relevance to the Company.
The AIC released an updated Guide and Code in July 2016. The Company reports against the
updated AIC Code and Guide in this annual report.
The Board considers that reporting against the principles and
recommendations of the AIC Code, by reference to the AIC Guide
(which incorporates the UK Corporate Governance Code), will help
ensure that information provided to shareholders is of a high
standard. To ensure ongoing compliance with these principles, the
Board receives and reviews a report from the Secretary, at each
quarterly meeting, identifying whether the Company is in compliance
and recommending any changes that are necessary.
The Company has complied with the recommendations of the AIC
Code and the relevant provisions of the UK Corporate Governance
Code, except as set out below:
The UK Corporate Governance Code includes provisions relating
to:
• the role of the chief executive;
• executive Directors’ remuneration;
• the need for an internal audit function;
• whistle-blowing policies;
• nomination committees;
• remuneration committees;
• Auditor’s tenure and re-appointment.
For the reasons set out in the AIC Guide, and as explained in
the UK Corporate Governance Code, the Board considers that these
provisions are not relevant to the position of the Company as an
investment company. The Company has therefore not reported further
in respect of these provisions. The Directors are non-executive and
the Company does not have employees, hence no whistle-blowing
policy is required. The Directors have satisfied themselves that
the Company’s key service providers have appropriate
whistle-blowing policies and procedures and seek regular
confirmation from the service providers that nothing has arisen
under those policies and procedures which should be brought to the
attention of the Board. Details of compliance with the AIC code are
noted in the succeeding pages. The Company has not followed the
provisions in relation to auditor’s tenure and re-appointment due
to the fact that the Company is in managed wind-down. There have
been no instances of non-compliance, other than those noted
above.
Details and biographies for all the Directors can be found in
the Board Members section of this annual report, and on the
Company’s website (www.agol.com). In considering the independence
of the Chairman, the Board has taken note of the provisions of the
Code relating to independence and has determined that Richard Hotchkis is an Independent Director. As
the Chairman is an Independent Director, no appointment of a Senior
Independent Director has been made.
The Board has a breadth of experience relevant to the Company
and the Directors believe that any changes to the Board’s
composition can be managed without undue disruption.
The Board, Audit Committee and Management Engagement Committee
undertake an evaluation of their own performance and that of the
individual Directors on an annual basis. In order to review their
effectiveness, the Board, Audit Committee and Management Engagement
Committee carry out a process of formal self-appraisal in order to
consider how they function as a whole and also to review the
individual performance of their members. This process is conducted
by the respective Chairman reviewing the Directors’ performance,
contribution and commitment to the Company. Given that the Company
is in a managed wind-down, the Board considers that it would not be
justified in incurring the expense of an independent evaluation of
the Board’s performance.
With the appointment to the Board of any new Director,
consideration will be given as to whether an induction process is
appropriate. The Chairman regularly reviews and agrees with each
Director their training and development needs.
Ongoing Charges
Ongoing charges for the year ended 31
December 2016 have been prepared in accordance with the
AIC’s recommended methodology and amounted to 1.15% of the NAV
(31 December 2015: 0.49%).
Audit Committee
An Audit Committee has been established and holds meetings at
least twice a year for the purpose, amongst others, of considering
the appointment, independence, effectiveness and remuneration of
the auditor and to review and recommend the statutory annual report
and interim report to the Board of Directors. Full details of its
functions and activities are set out in the Report of the Audit
Committee.
Nomination Committee
The Board as a whole fulfils the function of a nomination
committee. The Board considers that, given the size of the Board
and that the Company has no executives, it would not be appropriate
to establish a separate nomination committee as anticipated by the
AIC Code. Neither external search consultancy nor open advertising
have been used when appointing the Chairman or the non-executive
Directors because of the specialist nature of the appointments and
the knowledge amongst existing Directors and the Investment
Manager.
Conversion Committee
The Company has established a Conversion Committee, which
consists of Nigel de la Rue,
Christopher Legge and Richard Hotchkis. The Conversion Committee holds
meetings in order to determine the terms of monthly/quarterly share
conversions, based on shareholders’ requests received by the
Company. The date on which conversion of the shares takes place
(the “Conversion Date”) is determined by the Conversion Committee,
being not more than 20 business days after the relevant Conversion
Calculation Date.
The Directors approved a number of conversions during the year,
the details of which can be found in note 8 to the financial
statements. Conversions approved by the Directors subsequent to the
year end are detailed in note 19 to the financial statements.
Disclosure Committee
The Company has established a Disclosure Committee with formally
delegated duties and functions. The Disclosure Committee meets when
required to consider any potential disclosures to be made by the
Company through a Regulatory Information Service provider, in
compliance with the Company’s obligations under the Disclosure and
Transparency Rules. The Disclosure Committee is comprised of
Richard Hotchkis, Christopher Legge and Chairman, Nigel de la Rue. The principal duty of the
Disclosure Committee is to consider and approve announcements and
disclosures to be made on behalf of the Company in accordance with
the Company’s ongoing compliance with applicable law.
Management Engagement Committee
The function of the Management Engagement Committee, comprised
of three independent Directors (Christopher
Legge, Richard Hotchkis and
Nigel de la Rue), is to ensure that
the Company’s Investment Management Agreement is competitive and
reasonable for the shareholders, along with the Company’s
agreements with all other third-party service providers (other than
the external auditor). The Committee also reviews the performance
of the Investment Manager and the other third-party service
providers on a periodic basis.
The Company has entered into an agreement with the Investment
Manager, Ashmore Investment Advisors Limited. This sets out the
Investment Manager’s key responsibilities, which include proposing
an investment strategy to the Board and, within certain authority
limits, selecting investments for acquisition and disposal and
arranging appropriate lending facilities. The Investment Manager is
also responsible for all issues pertaining to asset management. The
Management Engagement Committee reviews the performance, fees and
terms of the Investment Management Agreement on an annual
basis.
Despite the performance of the Company since incorporation, at
its October 2015 and October 2016 meetings it was the view of the
Management Engagement Committee that it is in the best interests of
the shareholders to continue with the current appointment of the
Investment Manager. At the date of this report, the Board continues
to expect that Ashmore Investment Advisors Limited will remain the
Investment Manager for the remaining life of the Company.
Remuneration Committee
As all the Directors are non-executive, the Board has resolved
that it is not appropriate to form a Remuneration Committee and
remuneration is reviewed and discussed by the Board as a whole
(with each Director abstaining when approving any changes to their
own fee), with independent advice from the Administrator and the
Broker. Details on Directors’ remuneration can be found in the
Directors’ Remuneration Report.
The terms of reference of all the existing committees are made
available by the Company to shareholders upon request.
Internal Controls
The Board is ultimately responsible for the Company’s system of
internal control and for reviewing its effectiveness. The Board
confirms that there is an ongoing process for identifying,
evaluating and managing the significant risks faced by the Company.
This process has been in place for the year under review and up to
the date of approval of this annual report and accords with the
Turnbull guidance. The Code requires Directors to conduct, at least
annually, a review of the Company’s system of internal control,
covering all controls, including: financial, operational,
compliance and risk management.
The risk matrix is subject to an annual review by the Board. The
Board has reviewed the effectiveness of the systems of internal
control. In particular, it has reviewed and updated the process for
identifying and evaluating the significant risks affecting the
Company and the policies by which these risks are managed. The
internal control systems are designed to meet the Company’s
particular needs and the risks to which it is exposed. Accordingly,
the internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance
against misstatement and loss.
Alternative Investment Fund Managers
Directive
The Alternative Investment Fund Managers Directive (“AIFMD”)
establishes an EU-wide harmonised framework for monitoring and
supervising risks relating to collective investment undertakings
that are not subject to the Undertaking for Collective Investment
in Transferable Securities (“UCITS”) regime. AGOL meets the
definition of an Alternative Investment Fund (“AIF”) under this
legislation and is subject to the AIFMD framework.
Ashmore Investment Advisors Limited (“AIAL”) was authorised as
an Alternative Investment Fund Manager (“AIFM”) by the Financial
Conduct Authority (“FCA”) on 18 July
2014. Effective 18 July 2014,
the Board appointed AIAL as the Company’s AIFM and AIAL assumed the
role of Investment Manager to the Company from Ashmore Investment
Management Limited (“AIML”), pursuant to a Novation of the
5 November 2007 Investment Management
Agreement. Prior to 18 July 2014,
AIML served as Investment Manager to the Company. The investment
advisory services provided to the Company were novated to AIAL to
comply with the new AIFMD legislation.
AIAL and AIML are both wholly-owned subsidiaries of Ashmore
Investments (UK) Limited, which is a wholly-owned subsidiary of the
Ashmore Group plc (“Ashmore Group”). The novation of the Investment
Management Agreement with the Company did not result in any change
in: (i) the manner in which investment management services are
provided (including the manner in which the Company is managed or
operated) as contemplated by the Investment Management Agreement;
(ii) the personnel who are responsible for providing or supervising
the provision of investment management services (including those
responsible for the management, portfolio management and operation
of the Company); or (iii) the personnel ultimately responsible for
overseeing such provision of services.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (“FATCA”) is aimed at
determining the ownership of US assets in foreign accounts and
improving US tax compliance with respect to those assets. The
legislation is wide-encompassing and affects all non-US funds,
albeit some more than others. On 13 December
2013, the States of Guernsey entered into an Inter-Governmental
Agreement (“IGA”) with the US Treasury in order to facilitate the
requirements of FATCA through local legislation. The IGA and the
associated guidance notes set out the requirements and obligations
of the Company under the rules. For the purposes of this agreement,
the Company registered with the US Internal Revenue Services
(“IRS”) as a Guernsey reporting
Foreign Financial Institution (“FFI”), received a Global
Intermediary Identification Number (28C9PC.99999.SL.831), and can
be found on the IRS FFI list.
UK Guernsey Intergovernmental
Agreement
The Organisation for Economic Co-operation and Development
(“OECD”) introduced the Common Reporting Standard (“CRS”) which
acts as the single global standard governing the automatic exchange
of financial account information between tax authorities of tax
jurisdictions that have signed up to the standard. The CRS has been
adopted by Guernsey and came into
effect on 1 January 2016. It replaced
the intergovernmental agreement between the UK and Guernsey to improve international tax
compliance that had previously applied in respect of 2014 and 2015.
The first report for CRS will be made to the Director of Income Tax
by 30 June 2017.
The Board takes the necessary actions to ensure that the Company
is compliant with Guernsey
regulations and guidance in this regard.
Relations with Shareholders
The Investment Manager maintains a regular dialogue with
institutional shareholders, the feedback from which is reported to
the Board. In addition, Board members are available to respond to
shareholders’ questions at the Annual General Meeting.
The Company announces its Net Asset Value on a monthly basis to
the London Stock Exchange. Shareholders who wish to communicate
with the Board should contact the Administrator in the first
instance, whose contact details can be found on the Company’s
website.
Significant Shareholders
As at 31 December 2016, the
following entities had significant shareholdings in the
Company:
Significant
Shareholder |
US$
shares
held |
£
shares
held |
%
holding in
Company |
State Street Nominees
Limited |
3,382,594 |
1 |
32.04% |
Goldman Sachs
Securities Nominees Limited |
1,517,650 |
93,166 |
15.43% |
Chase Nominees
Limited |
11,621 |
1,337,149 |
15.25% |
Nortrust Nominees
Limited |
895,754 |
64,388 |
9.21% |
Lynchwood Nominees
Limited |
269,412 |
362,076 |
6.65% |
Nordea Bank Danmark
A/S |
538,490 |
- |
5.10% |
Vidacos Nominees
Limited |
384,237 |
3,433 |
3.68% |
UBS Private Banking
Nominees Limited |
- |
297,641 |
3.37% |
HSBC Global Custody
Nominee (UK) Limited |
205,906 |
44,022 |
2.45% |
Signed on behalf of the Board of Directors on 20 April 2017
Richard
Hotchkis
Christopher Legge
Chairman
Chairman of the Audit Committee
Report of the Audit Committee
On the following pages, we present the Audit Committee (the
“Committee”) Report for 2016, setting out the Committee’s structure
and composition, principal duties and key activities during the
year. As in previous years, the Committee has reviewed the
Company’s financial reporting, the independence and effectiveness
of the independent auditor and the internal control and risk
management systems of the Company’s service providers.
Structure and Composition
The Audit Committee consists of Nigel de
la Rue, Richard Hotchkis and
Chairman Christopher Legge.
Appointment to the Audit Committee is for a period of up to three
years, which may be extended for two further three-year periods
provided that the majority of the Audit Committee remains
independent of the Investment Manager. Nigel de la Rue, Christopher Legge and Richard Hotchkis are currently serving their
fourth, third and second, three-year terms respectively.
Nigel de la Rue reached nine years
of service in October 2016 and will
be put forward for re-election. An induction programme is provided
for new Audit Committee members and ongoing training is available
for all members as required.
The Audit Committee conducts formal meetings at least twice a
year. The first table of the Directors’ Report sets out the number
of Audit Committee meetings held during the year ended 31 December 2016 and the number of such meetings
attended by each Committee member. The independent auditor is
invited to attend meetings at which the annual and interim reports
are presented to the Committee as well as the annual audit planning
meeting.
Principal Duties
The role of the Committee includes:
· to monitor the integrity of the financial
statements of the Company and any formal announcements relating to
the Company’s financial performance, reviewing significant
financial reporting judgements contained therein;
· to review the Company’s internal financial
controls and, unless expressly addressed by the Board itself, to
review the Company’s internal control and risk management
systems;
· to make recommendations to the Board, and for them
to be subsequently put to shareholders for their approval at the
Annual General Meeting, in relation to the appointment,
re-appointment or removal of the external auditor and to approve
the remuneration and terms of engagement of the external
auditor;
· to review and monitor the external auditor’s
independence and objectivity and the effectiveness of the audit
process, taking into consideration relevant UK professional and
regulatory requirements;
· to develop and implement policy on the engagement
of the external auditor to supply non-audit services, taking into
account relevant ethical guidance regarding the provision of
non-audit services by the external audit firm; and to report to the
Board, identifying any matters in respect of which it considers
that action or improvement is needed, making recommendations as to
the steps to be taken; and
· to report to the Board on how it has discharged
its responsibilities.
The complete details of the Committee’s formal duties and
responsibilities are set out in the Committee’s terms of reference,
which can be obtained from the Company’s administrator.
Independent Auditor (Independence and
Effectiveness)
KPMG Channel Islands Limited (“KPMG”) have expressed their
willingness to continue in office as auditor and a resolution
proposing their re-appointment will be submitted at the Annual
General Meeting.
The independence and objectivity of the independent auditor is
reviewed by the Audit Committee, which also reviews the terms under
which the independent auditor is appointed to perform non-audit
services. The Audit Committee has also established pre-approval
policies and procedures for the engagement of KPMG to provide
audit, assurance and tax services.
The audit and non-audit fees proposed by the auditor each year
are reviewed by the Committee taking into account the Company’s
structure, operations and other requirements during the year, and
the Committee makes recommendations to the Board.
Committee Evaluations during the
Year
The following sections discuss the assessments made by the
Committee during the year.
Effectiveness of the Audit
The Committee had formal meetings with KPMG during the course of
the year: 1) before the start of the audit to discuss formal
planning, to discuss any potential significant issues and to agree
the scope of the audit, and 2) after the audit work was concluded
to discuss any significant issues encountered.
The Board reviewed the effectiveness and independence of KPMG by
using a number of qualitative measures, including but not limited
to:
· the audit plan presented before the
start of the audit;
· the post audit report and
presentation, including deviations from the original plan;
· any changes to audit personnel;
· the auditor’s own internal procedures
to identify threats to independence;
· feedback from both the Investment
Manager and the Administrator.
Further to the above, on the conclusion of the 2016 audit, the
Committee performed a specific evaluation of the performance of the
independent auditor. This covered qualitative areas such as the
quality of the audit team, business understanding, audit approach
and management.
There were no significant adverse findings from this
evaluation.
Significant Financial Statement
Issues
The Committee’s review of the interim and annual financial
statements focused on the following areas:
The financial statements have been prepared on the going concern
basis, despite the managed wind-down of the Company which was
approved by the shareholders during the EGM of 13 March 2013. The Directors discussed the
rationale for this accounting basis and they noted that they had
examined significant areas of going concern risk, and were
satisfied that no material exposures existed.
The valuation of the Company’s investment portfolio, given it
represents the majority of the total assets of the Company requires
the use of significant judgement for unlisted investments. The
Directors are satisfied with the Investment Manager’s Pricing
Methodology and Valuation Committee (“PMVC”)’s controls, and the
appropriateness of the valuation techniques, inputs and assumptions
used in relation to valuation of unlisted investments. The
foregoing matters were discussed during the planning and testing
stages of the audit and there were no significant disagreements
noted between management and the independent auditor.
The Committee is satisfied that the significant assumptions used
for determining the value of assets and liabilities have been
appropriately scrutinised and challenged and are sufficiently
robust. The Committee further concludes that the financial
statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company’s performance, business model and strategy.
The Independent Auditor reported to the Committee that no
material unadjusted misstatements were found in the course of its
work. Furthermore, both the Investment Manager and the
Administrator confirmed to the Committee that they were not aware
of any material unadjusted misstatements, including matters
relating to presentation. The Committee confirms that it is
satisfied that the Independent Auditor has fulfilled its
responsibilities with regard to diligence and professional
scepticism.
Audit Fees and Safeguards for
Non-Audit Services
Where non-audit services are to be provided to the Company by
its auditor, full consideration of the financial and other
implications for the independence of the auditor arising from any
such engagement are considered prior to proceeding.
The table below summarises the remuneration of KPMG Channel
Islands Limited and of other KPMG affiliates for audit and
non-audit services provided to the Company for the years ended
31 December 2016 and 31 December 2015:
|
|
Year
ended |
Year
ended |
|
|
31
December 2016 |
31
December 2015 |
|
|
US$ |
US$ |
Audit and audit
related services |
|
|
|
- Annual
audit |
|
53,475 |
65,140 |
Internal Control
The Audit Committee has reviewed the need for an internal audit
function. Based on reviews of control reports, the Audit Committee
has concluded that the systems and procedures employed by the
Administrator and the Investment Manager, including their internal
audit functions, provide sufficient assurance that a sound system
of internal control which safeguards the Company’s assets is
maintained. An internal audit function specific to the Company is
therefore considered unnecessary.
Conclusions and Recommendations
The Audit Committee is satisfied that the external auditor
remains independent and confirms that the Audit Committee also met
with the external auditor without the Investment Manager or
Administrator (Northern Trust International Fund Administration
Services (Guernsey) Limited) being
present, so as to provide a forum for the external auditor to raise
any matters of concern in confidence.
Consequent to the review process on the effectiveness of the
independent audit and the review of the audit and non-audit
services that the Independent Auditor delivers, the Committee has
recommended that KPMG be reappointed for the coming financial
year.
For any questions on the activities of the Committee not
addressed in the foregoing, a member of the Audit Committee remains
available to attend each Annual General Meeting to respond to such
questions.
Christopher
Legge
Chairman of the Audit Committee
20 April 2017
Statement of Directors’ Responsibility
in respect of the Annual Report and Audited Financial
Statements
The Directors are responsible for preparing the Directors’
Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with
International Financial Reporting Standards as issued by the IASB
and applicable law.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Company and of the profit
or loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
· select suitable accounting policies and then apply
them consistently;
· make judgements and estimates that are reasonable
and prudent;
· state whether applicable accounting standards have
been followed, subject to any material departures disclosed and
explained in the financial statements; and
· prepare the financial statements on the going
concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that
the financial statements comply with the Companies (Guernsey) Law, 2008. They have general
responsibility for taking such steps as are reasonably open to them
to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website and for the preparation and dissemination of
financial statements. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
The Directors have carried out a robust assessment of the
principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or
liquidity.
Disclosure of Information to the
Auditor
The Directors who held office at the date of approval of the
financial statements confirm that, so far as they are each
aware:
· there is no relevant audit information of which
the Company’s auditor is unaware; and
· each Director has taken all the steps that they
ought to have taken as a Director to make themselves aware of any
relevant audit information and to establish that the Company’s
auditor is aware of that information.
Statement under the Disclosure
Guidance and Transparency Rules 4.1.12
We confirm that to the best of our knowledge and belief:
· the financial statements, prepared in accordance
with International Financial Reporting Standards as issued by the
IASB, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company;
· the annual report and financial statements, taken
as a whole, are fair, balanced and understandable and provide the
information necessary for the shareholders to assess the Company’s
performance, business model and strategy; and
· the Chairman’s Statement, the Investment Manager’s
Report and the Directors’ Report include a fair review of the
development and performance of the business and the position of the
Company. A description of the principal risks and uncertainties
that the Company faces is provided in note 14 of the financial
statements.
Signed on behalf of the Board of Directors on 20 April 2017
Richard
Hotchkis
Christopher Legge
Chairman
Chairman of the Audit Committee
Directors’ Remuneration Report
Introduction
An ordinary resolution for the approval of the annual
remuneration report will be put to shareholders at the Annual
General Meeting.
Remuneration Policy
As all the Directors are non-executive, the Board has resolved
that it is not appropriate to form a Remuneration Committee and
remuneration is reviewed and discussed by the Board as a whole.
Directors’ remuneration is considered on a periodic basis.
The Company’s policy is that the fees payable to the Directors
should reflect the time spent by the Directors on the Company’s
affairs in addition to the responsibilities borne by the Directors,
and should be sufficient to attract, retain and motivate Directors
of the quality required to run the Company successfully. The
Chairman of the Board is paid a higher fee in recognition of his
additional responsibilities, as is the Chairman of the Audit
Committee. The policy is to review fee rates periodically, although
such a review will not necessarily result in any changes to the
rates, and account is taken of fees paid to the Directors of
comparable companies.
There are no long-term incentive schemes provided by the Company
and no performance fees are paid to Directors.
In accordance with Article 18.3 of the Company’s Articles of
Incorporation, at each Annual General Meeting one-third of the
Directors retire from office via rotation and are put forward for
re-election based on continued satisfactory performance. Any
Director who serves nine years on the Board will thereafter be put
forward for re-election on an annual basis. Directors’ appointments
can also be terminated in accordance with the Articles. Should
shareholders vote against a Director standing for re-election, the
Director affected will not be entitled to any compensation. There
are no set notice periods and a Director may resign by giving
notice in writing to the Board at any time.
As Steve Hicks is connected to
the Investment Manager and is therefore deemed not to be an
Independent Director, he shall be put forward for re-election on an
annual basis.
Directors’ Fees
Directors are remunerated in the form of fees, payable monthly
in arrears, to the Directors personally. No other remuneration or
compensation was paid or payable by the Company during the year to
any of the Directors apart from the reimbursement of allowable
expenses.
The fees payable by the Company in respect of each of the
Directors who served during the years ended 31 December 2016 and 2015, were as follows:
|
Year
ended
31 December 2016 |
Year
ended
31 December 2015 |
|
£ |
£ |
Richard Hotchkis |
28,350 |
31,500 |
Steve Hicks* |
- |
- |
Christopher Legge |
28,350 |
31,500 |
Nigel de la Rue |
26,730 |
29,700 |
Total |
83,430 |
92,700 |
* Non-Independent Director
Signed on behalf of the Board of Directors on 20 April 2017
Richard
Hotchkis
Christopher Legge
Chairman
Chairman of the Audit Committee
Independent Auditor’s Report to the
Members of Ashmore Global Opportunities Limited
Opinions and conclusions arising from
our audit
Opinion on
financial statements
We have audited the financial statements of Ashmore Global
Opportunities Limited (the “Company”) for the year ended
31 December 2016 which comprise the
schedule of investments, the statement of financial position, the
statement of comprehensive income, the statement of changes in
equity, the statement of cash flows and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards as issued by the IASB. In our opinion, the financial
statements:
· give a true and fair view of the
state of the Company’s affairs as at 31
December 2016 and of its total comprehensive income for the
year ended 31 December 2016;
· have been properly prepared in
accordance with International Financial Reporting Standards as
issued by the IASB ; and
· comply with the Companies
(Guernsey) Law, 2008.
Our assessment of
risks of material misstatement
The risks of material misstatement detailed in this section of
this report are those risks that we have deemed, in our
professional judgement, to have had the greatest effect on: the
overall audit strategy; the allocation of resources in our audit;
and directing the efforts of the engagement team. Our audit
procedures relating to these risks were designed in the context of
our audit of the financial statements as a whole. Our opinion on
the financial statements is not modified with respect to any of
these risks, and we do not express an opinion on these individual
risks.
In arriving at our audit opinion above on the financial
statements, the risks of material misstatements that had the
greatest effect on our audit were as follows:
Valuation of unlisted investments
(US$53.6 million)
Refer to the Report of the Audit Committee, note 2d accounting
policies and notes 4 and 7 disclosures.
· The risk – The valuation
estimation of unlisted investments. As described in the Report from
the Audit Committee, the valuation of the Company’s investments,
which are unlisted or in an inactive market and are subject to
estimation risk, is a significant risk as those investments
represent the majority of the Company’s net assets.
· Our response – Our audit
procedures with respect to the valuation of unlisted investments
included, but were not limited to the following:
We tested the design and implementation of the Investment
Manager’s Pricing Methodology and Valuation Committee (“PMVC”)’s
controls in relation to the valuation of unlisted direct
investments; we evaluated the work performed by the Company’s third
party valuation agent, and we assessed the appropriateness of the
valuation techniques, inputs and assumptions used.
For unlisted direct investments into underlying investees (11%
of net assets (US$ 5.7m)), we used
our own valuations specialist to evaluate the methodologies applied
by considering the nature of the investments and accepted industry
practices as well as challenging key assumptions applied by the
Investment Manager and its PMVC by reference to independent market
data and information and industry expectations. We evaluated the
competence of the Company’s third party valuation agent in the
context of their ability to appropriately challenge and review the
fair value of the investments prepared by the Company, by assessing
their professional qualifications, experience and independence from
the Company.
For unlisted investments in other funds (27% of net assets
(US$ 14.7m)) we obtained net asset
value per share confirmations directly from the underlying funds’
administrators and inspected the latest audited financial
statements of these underlying funds in order to evaluate the
nature of the investments held by the underlying funds, the
financial reporting standards applied in the preparation of the
underlying funds’ financial statements and any modifications to
audit reports and other disclosures which may be relevant to the
valuation of the Company’s investments.
For investments in other Ashmore special situation investment funds,
which are also audited by KPMG Channel Islands Limited (all with
coterminous year ends), (62% of net assets (US$ 33.2m)) we undertook discussions on key audit
findings with the audit teams of those funds and examined their
coterminous audited financial statements to evaluate the nature of
the investments held by the underlying funds, the financial
reporting standards applied in the preparation of the underlying
funds’ financial statements and any modifications to audit reports
and other disclosures which may be relevant to the valuation of the
Company’s investments.
We have also considered the Company’s disclosures (see note 2d)
in relation to the use of estimates and judgements regarding fair
value of investments and the Company’s valuation policies adopted
and fair value disclosures in note 7 for compliance with
International Financial Reporting Standards as issued by the
IASB.
Going concern
· The risk – At an
Extraordinary General Meeting in March
2013, the shareholders approved proposals for a managed
wind-down of the Company’s investment portfolio changing the
investment objective of the Company to the realisation of the
Company’s assets in an orderly manner in order to return cash to
shareholders. Refer to the Report of the Audit Committee and note
2b accounting policies.
· Our response – Our audit
procedures with respect to going concern included, but were not
limited to, holding discussions with the Board of Directors and the
Investment Manager to understand the proposed investment portfolio
realisation programme and to assess the implications of the managed
wind-down on the financial statements. We also challenged
management’s assessment of the Company’s ability to continue as a
going concern against our other audit findings.
We also considered the Company’s going concern disclosure in
note 2b of the financial statements for compliance with
International Financial Reporting Standards as issued by the IASB
and other appropriate technical guidance.
Our application of
materiality and an overview of the scope of our audit
Materiality is a term used to describe the acceptable level of
precision in financial statements. Auditing standards describe a
misstatement or an omission as “material” if it could reasonably be
expected to influence the economic decisions of users taken on the
basis of the financial statements. The auditor has to apply
judgement in identifying whether a misstatement or omission is
material and to do so the auditor identifies a monetary amount as
“materiality for the financial statements as a whole”.
Materiality for the financial statements as a whole was set at
US$ 1.58m. This has been calculated
using a benchmark of the Company’s net asset value (of which it
represents approximately 3%) which we believe is the most
appropriate benchmark as net asset value is considered to be one of
the principal considerations for members of the Company in
assessing the financial performance of the Company.
We agreed with the audit committee to report to it all corrected
and uncorrected misstatements we identified through our audit with
a value in excess of US$79k, in
addition to other audit misstatements below that threshold that we
believe warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
Whilst the audit process is designed to provide reasonable
assurance of identifying material misstatements or omissions it is
not guaranteed to do so. Rather we plan the audit to determine the
extent of testing needed to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements does not exceed materiality for the financial
statements as a whole. This testing requires us to conduct
significant depth of work on a broad range of assets, liabilities,
income and expense as well as devoting significant time of the most
experienced members of the audit team, in particular the
Responsible Individual, to subjective areas of the accounting and
reporting process.
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Board of Directors;
and the overall presentation of the financial statements. In
addition, we read all the financial and non-financial information
in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that
is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Disclosures of
principal risks
Based on the knowledge we acquired during our audit, we have
nothing material to add or draw attention to in relation to:
· the Directors’ statement of
longer-term viability, concerning the principal risks, their
management, and, based on that, the Directors’ assessment and
expectations of the Company’s continuing in operation; or
· the disclosures in note 2b of
the financial statements concerning the use of the going concern
basis of accounting.
Matters on which
we are required to report by exception
Under International Standards on Auditing [ISAs] (UK and
Ireland) we are required to report
to you if, based on the knowledge we acquired during our audit, we
have identified other information in the Annual Report that
contains a material inconsistency with either that knowledge or the
financial statements, a material misstatement of fact, or that is
otherwise misleading.
In particular, we are required to report to you if:
· we have identified material
inconsistencies between the knowledge we acquired during our audit
and the Directors’ statement that they consider that the Annual
Report and financial statements taken as a whole is fair, balanced
and understandable and provides the information necessary for
members to assess the Company’s performance, business model and
strategy; or
· the Report of the Audit
Committee does not appropriately address matters communicated by us
to the audit committee.
Under the Companies (Guernsey)
Law, 2008, we are required to report to you if, in our opinion:
· the Company has not kept proper
accounting records; or
· the financial statements are not
in agreement with the accounting records; or
· we have not received all the
information and explanations, which to the best of our knowledge
and belief are necessary for the purpose of our audit.
Under the Listing Rules we are required to review the part of
the Corporate Governance Statement relating to the Company’s
compliance with the eleven provisions of the UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
Scope of report and
responsibilities
The purpose of this report and
restrictions on its use by persons other than the Company’s members
as a body
This report is made solely to the Company’s members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law, 2008 and, in respect of any
further matters on which we have agreed to report, on terms we have
agreed with the Company. Our audit work has been undertaken so that
we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of
Directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit, and express an
opinion on, the financial statements in accordance with applicable
law and ISAs (UK and Ireland).
Those standards require us to comply with the UK Ethical Standards
for Auditors.
Steven D. Stormonth
For and on behalf of KPMG Channel
Islands Limited
Chartered Accountants and Recognised
Auditors
Guernsey
20 April 2017
Schedule of Investments
As at 31 December 2016
Description of
investment |
Fair
value
US$ |
|
%
of
net assets |
|
|
|
|
Ashmore Global Special
Situations Fund 4 LP |
22,791,962 |
|
42.52 |
Ashmore Global Special
Situations Fund 5 LP |
8,459,545 |
|
15.78 |
AEI Inc - Equity |
5,771,581 |
|
10.77 |
AA Development Capital
India Fund 1, LLC |
5,245,652 |
|
9.79 |
Ashmore Asian Recovery
Fund |
3,705,319 |
|
6.91 |
VTBC Ashmore Real
Estate Partners 1 LP |
4,046,889 |
|
7.55 |
Ashmore Global Special
Situations Fund 3 LP |
1,529,191 |
|
2.85 |
Everbright Ashmore
China Real Estate Fund LP |
1,497,184 |
|
2.79 |
Ashmore Global Special
Situations Fund 2 Limited |
395,854 |
|
0.74 |
Ashmore Asian Special
Opportunities Fund Limited |
203,643 |
|
0.38 |
Ashmore SICAV 2 Global
Liquidity US$ Fund |
930 |
|
- |
|
|
|
|
Total investments
at fair value |
53,647,750 |
|
100.08 |
|
|
|
|
Net other current
liabilities |
(42,837) |
|
(0.08) |
|
|
|
|
Total net
assets |
53,604,913 |
|
100.00 |
Statement of Financial Position
As at 31 December 2016
|
|
31
December 2016 |
|
31
December 2015 |
|
Note |
US$ |
|
US$ |
Assets |
|
|
|
|
Cash and cash
equivalents |
|
956,920 |
|
16,505,657 |
Other financial
assets |
6 |
8,181 |
|
401,845 |
Financial assets at
fair value through profit or loss |
4 |
53,653,286 |
|
60,344,945 |
Total
assets |
|
54,618,387 |
|
77,252,447 |
|
|
|
|
|
Equity |
|
|
|
|
Capital and
reserves attributable to equity holders
of the Company |
|
|
|
|
Special reserve |
8 |
410,583,457 |
|
429,283,586 |
Retained earnings |
|
(356,978,544) |
|
(353,633,654) |
Total
equity |
|
53,604,913 |
|
75,649,932 |
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities |
|
|
|
|
Other financial
liabilities |
6 |
914,223 |
|
650,710 |
Financial liabilities
at fair value through profit or loss |
4 |
99,251 |
|
951,805 |
Total
liabilities |
|
1,013,474 |
|
1,602,515 |
Total equity and
liabilities |
|
54,618,387 |
|
77,252,447 |
|
|
|
|
|
Net asset
values |
|
|
|
|
Net assets per US$
share |
9 |
US$5.08 |
|
US$5.06 |
Net assets per £
share |
9 |
£4.91 |
|
£4.98 |
The financial statements were approved by the Board of Directors
on 20 April 2017, and were signed on
its behalf by:
Richard
Hotchkis
Christopher Legge
Chairman
Chairman of the Audit Committee
The accompanying notes form an integral part of these financial
statements.
Statement of Comprehensive Income
For the year ended 31 December
2016
|
|
Year
ended
31 December 2016 |
|
Year
ended
31 December 2015 |
|
|
Note |
US$ |
|
US$ |
|
|
|
|
|
|
|
Interest income |
10 |
2,323 |
|
1,986 |
|
Dividend income |
10 |
1,975,957 |
|
40,935,262 |
|
Net foreign currency
gain/(loss) |
|
64,502 |
|
(56,228) |
|
Other net changes in
fair value on financial assets and liabilities at fair value
through profit or loss |
5 |
(4,739,070) |
|
(49,123,049) |
|
Total net
loss |
|
(2,696,288) |
|
(8,242,029) |
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
Investment management
fees |
11a |
(84,180) |
|
(134,400) |
|
Incentive fees |
11a |
(271,667) |
|
(165,157) |
|
Directors’
remuneration |
11b |
(113,883) |
|
(144,758) |
|
Fund administration
fees |
11c |
(10,515) |
|
(12,639) |
|
Custody fees |
11d |
(5,429) |
|
(11,031) |
|
Other operating
expenses |
12 |
(162,928) |
|
428,088* |
Total operating
expenses |
|
(648,602) |
|
(39,897) |
|
|
|
|
|
|
|
Loss for the
year |
|
(3,344,890) |
|
(8,281,926) |
|
|
|
|
|
|
|
Total comprehensive
loss for the year |
|
(3,344,890) |
|
(8,281,926) |
|
|
|
|
|
|
|
Earnings per
share |
|
|
|
|
|
Basic and diluted
gain/(loss) per US$ share |
13 |
US$0.04 |
|
US$(0.20) |
|
Basic and diluted
loss per £ share |
13 |
US$(1.16) |
|
US$(0.85) |
|
* The credit to other expenses represents the reversal of
accruals as a result of a reduction in expenses as the Company
continues to wind down.
All items derive from continuing activities.
The accompanying notes form an integral part of these financial
statements.
Statement of Changes in Equity
For the year ended 31 December
2016
|
|
|
Special |
|
Retained |
|
|
|
|
|
reserve |
|
earnings |
|
Total |
|
Note |
|
US$ |
|
US$ |
|
US$ |
|
|
|
|
|
|
|
|
Total equity as at
1 January 2016 |
|
|
429,283,586 |
|
(353,633,654) |
|
75,649,932 |
Total comprehensive
loss for the year |
|
|
- |
|
(3,344,890) |
|
(3,344,890) |
Capital
distribution |
8 |
|
(18,700,129) |
|
- |
|
(18,700,129) |
Total equity as at
31 December 2016 |
|
|
410,583,457 |
|
(356,978,544) |
|
53,604,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity as at
1 January 2015 |
|
|
515,783,066 |
|
(345,351,728) |
|
170,431,338 |
Total comprehensive
loss for the year |
|
|
- |
|
(8,281,926) |
|
(8,281,926) |
Capital
distribution |
8 |
|
(86,499,480) |
|
- |
|
(86,499,480) |
Total equity as at
31 December 2015 |
|
|
429,283,586 |
|
(353,633,654) |
|
75,649,932 |
The accompanying notes form an integral part of these financial
statements.
Statement of Cash Flows
For the year ended 31 December
2016
|
Year
ended
31 December 2016 |
|
Year
ended
31 December 2015 |
|
|
US$ |
|
US$ |
|
Cash flows from
operating activities |
|
|
|
|
Net bank interest
received |
2,323 |
|
1,986 |
|
Dividends
received |
1,975,957 |
|
58,110,856 |
|
Net operating expenses
charged |
8,575 |
|
(2,389,277) |
|
Net cash from
operating activities |
1,986,855 |
|
55,723,565 |
|
|
|
|
|
|
Cash flows from
investment activities |
|
|
|
|
Sales of
investments |
8,191,075 |
|
116,082,349 |
|
Purchases of
investments in liquidity Funds |
(2,503,311) |
|
(80,003,622) |
|
Net cash flows on
derivative instruments and foreign exchange |
(4,523,227) |
|
(3,323,187) |
* |
Net cash from
investment activities |
1,164,537 |
|
32,755,540 |
* |
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
Capital
distributions |
(18,700,129) |
|
(86,499,480) |
|
Net cash used in
financing activities |
(18,700,129) |
|
(86,499,480) |
|
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents |
(15,548,737) |
|
1,979,625 |
* |
|
|
|
|
|
Reconciliation of net cash flows to movement in cash and cash
equivalents |
|
|
|
|
|
|
|
|
Cash and cash
equivalents at the beginning of the year |
16,505,657 |
|
14,383,849 |
|
(Decrease)/increase in
cash and cash equivalents |
(15,548,737) |
|
1,979,625 |
* |
Currency translation
differences |
- |
|
142,183 |
* |
Cash and cash
equivalents at the end of the year |
956,920 |
|
16,505,657 |
|
* The prior year comparatives have been amended to disclose the
currency translation differences on the face of the Statement of
Cash Flows.
The accompanying notes form an integral part of these financial
statements.
Notes to the Financial Statements
1. General Information
Ashmore Global Opportunities Limited (the “Company” or “AGOL”)
is an authorised closed ended investment company incorporated in
Guernsey on 21 June 2007 with an indefinite life and a
listing on the London Stock Exchange. As an existing closed ended
Company, AGOL is deemed to have been granted an authorisation in
accordance with section 8 of the Protection of Investors (Bailiwick
of Guernsey) Law, 1987, as
amended, and rule 7.02(2) of the Authorised Closed Ended Investment
Schemes Rules 2008 on the same date as the Company obtained consent
under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959 to 1989. AGOL’s
investment objective is the realisation of the Company’s assets in
an orderly manner in order to return cash to shareholders.
The Company was launched on 7 December
2007 and the Company’s shares were admitted to the Official
Listing of the London Stock Exchange on 12
December 2007, pursuant to Chapter 14 of the Listing Rules.
Following changes to the Listing Rules on 6
April 2010, the listing became a Standard Listing. On
27 April 2011, the UK Listing
Authority confirmed the transfer of the Company from a Standard
Listing to a Premium Listing under Chapter 15 of the Listing
Rules.
On 20 February 2013, the Board of
Directors proposed a managed wind-down of the Company following
consultation with the Investment Manager and the main shareholders.
The proposal was accepted during the Extraordinary General Meeting
(“EGM”) of shareholders on 13 March
2013.
The Directors have assessed the impact of the AIFMD on the
financial statements of the Company and have concluded that the
Company is exempt from following Chapter V, Section 1, Articles 103
– 111 of the European Commission’s Level 2 Delegated Regulation on
the basis of the operations of the Company: it being (i) a Non-EEA
AIF, and (ii) not being marketed in the European Union, as defined
by the Directive.
Investment Strategy
Prior to the Extraordinary General Meeting (“EGM”) of
shareholders on 13 March 2013, the
Company’s investment objective was to deploy capital in a
diversified portfolio of global emerging market strategies and
actively manage these with a view to maximising total returns. This
was implemented by investing across various investment themes
(Alternatives including Special Situations and Real Estate,
External Debt, Local Currency, Equities, Corporate Debt and
Multi-Strategy), with a principal focus on Special Situations.
The Company is domiciled in Guernsey, Channel
Islands. Most of the Company’s income is from investment
entities incorporated in Guernsey.
Significant Shareholders
The Company has a diversified shareholder population. As at
31 December 2016 and 2015, State
Street Nominees Limited, Goldman Sachs Securities Nominees Limited
and Chase Nominees Limited held more than 10% of the Company’s Net
Asset Value. Significant shareholders are listed in the Directors’
Report.
2. Summary of Significant
Accounting Policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied for the years presented, unless otherwise
stated.
a) Statement of Compliance
These audited financial statements, which give a true and fair
view, are prepared in accordance with: International Financial
Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board; interpretations issued by the IFRS
Interpretations Committee; and the Listing Rules of the UK Listing
Authority. They comply with the Companies (Guernsey) Law, 2008 (the “Law”).
b) Basis of Preparation
These audited financial statements have been prepared under the
historical cost convention, as modified by the revaluation of
financial assets and financial liabilities at fair value through
profit or loss.
These audited financial statements have been prepared on the
going concern basis, despite the managed wind-down of the Company
approved by the shareholders on 13 March
2013. The factors surrounding this are detailed in the
Directors’ Report. The Board has concluded that the managed
wind-down of the Company has no significant impact on the valuation
of the Company’s investments or its ability to meet liabilities as
they fall due for the foreseeable future, including for at least 12
months from the date of this report.
The preparation of financial statements in conformity with IFRS
requires judgements, estimates and assumptions that affect the
application of policies and the reported amounts of assets,
liabilities, income and expenses.
These estimates and their associated assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form
the basis of making judgements about the carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and their underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision
affects only that period, or in the period of revision and future
periods if the revision affects both current and future
periods.
The key estimates made by management in the application of IFRS
that have a significant effect on the financial statements and that
have a significant risk of material adjustment relate to the
valuation of unquoted financial instruments as described in note
2d.
c) Foreign Currency
i) Functional and presentation
currency
These audited financial statements have been prepared in US
dollars (US$), which is the Company’s functional and presentation
currency, rounded to the nearest US dollar. The Board of Directors
considers the US dollar to be the currency that most faithfully
represents the economic effect on the Company of the underlying
transactions, events and conditions. The US dollar is the currency
in which the Company measures its performance and reports its
results. This determination also considers the competitive
environment in which the Company is compared to other investment
products.
ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary assets and liabilities are
translated into the functional currency using the exchange rate
prevailing at the Statement of Financial Position date.
Foreign exchange gains and losses arising from translation are
included in net foreign currency gain/(loss) in the Statement of
Comprehensive Income.
Foreign exchange gains and losses relating to the financial
assets and liabilities carried at fair value through profit or loss
are presented in the Statement of Comprehensive Income within
“Other net changes in fair value on financial assets and
liabilities at fair value through profit or loss”.
d) Financial Assets and Financial Liabilities
i)
Classification
The Company has classified financial assets and financial
liabilities into the following categories:
-
Financial assets and financial liabilities at fair value through
profit or loss:
Financial assets and liabilities held
for trading:
Financial assets or financial liabilities classified as held for
trading are those acquired or incurred principally for the purpose
of selling or repurchasing in the short term. Derivatives,
including forward foreign currency contracts, are categorised as
financial assets or financial liabilities held for trading.
Financial :
Financial assets and financial liabilities designated at fair
value through profit or loss at inception are financial instruments
that are not classified as held for trading but are managed, and
whose performance is evaluated on a fair value basis in accordance
with the Company’s documented investment strategy. These financial
instruments include direct debt or equity investments and
investments in quoted and unquoted Ashmore Funds (“Funds”).
-
Financial assets and financial liabilities at amortised cost:
Loans and receivables
This includes cash and cash equivalents and other
receivables.
Other financial liabilities
This includes other payables.
ii) Initial
recognition
Regular purchases and sales of financial assets and liabilities
are initially recognised on the trade date – the date on which the
Company becomes a party to the contractual provisions of the
instrument. Other financial assets and liabilities are recognised
on the date they are originated.
Financial assets and financial liabilities at fair value through
profit or loss are initially recognised at fair value, with
transaction costs recognised as expenses in the Statement of
Comprehensive Income. Financial assets or financial liabilities not
at fair value through profit or loss are initially recognised at
fair value and include transaction costs that are directly
attributable to their acquisition or issue.
iii) Subsequent measurement
-
Fair value measurement
Subsequent to initial recognition, all financial assets and
financial liabilities at fair value through profit or loss are
measured at fair value. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date.
Gains and losses arising from changes in the fair value of
financial assets or financial liabilities at fair value through
profit or loss are presented in the Statement of Comprehensive
Income within “Other net changes in the fair value of financial
assets and liabilities at fair value through profit or loss” in the
period in which they arise and can be unrealised or realised.
Unrealised gains and losses comprise changes to the fair value
of financial instruments for the year and the reversal of prior
period unrealised gains and losses for financial instruments which
were realised in the reporting period.
Realised gains and losses on the disposal of financial
instruments classified as at fair value through profit or loss are
calculated using the average cost method.
-
Valuation of investments in Funds
Investments in quoted open ended Funds are valued by reference
to the most recent prices quoted on a recognised investment
exchange. Investments in unquoted Funds are valued on the basis of
the latest Net Asset Value provided by the administrator of the
unquoted Fund in question, as at the close of business on the
relevant valuation day.
-
Valuation of direct investments
Direct investments may be effected via holding vehicles. The
valuations of such positions are based on the valuation of the
underlying investments. Where possible the fair values of direct
debt or equity investments are based on their quoted market prices
at the Statement of Financial Position date, without any deduction
for estimated future selling costs. If a quoted market price is not
available on a recognised stock exchange or from a broker/dealer
for non-exchange traded financial instruments, the fair value is
estimated using valuation techniques, as described in note 7.
-
Valuation of forward foreign currency contracts
Open forward foreign currency contracts at the Statement of
Financial Position date are valued at forward currency rates
prevailing on that date. The change in the fair value of open
forward foreign currency contracts is calculated as the difference
between the contract rate and the forward currency rate as at the
Statement of Financial Position date.
The Company does not apply hedge accounting.
iv) Impairment of financial
assets classified as loans and receivables
At each reporting date, the Company assesses whether there is
objective evidence that financial assets classified as loans and
receivables are impaired. As at 31 December
2016 and 2015, the Company’s loans and receivables were not
impaired.
Objective evidence of impairment may include: significant
financial difficulty of the borrower or issuer, default or
delinquency by a borrower or issuer, restructuring of a loan or
advance by the Company on terms that the Company would not
otherwise consider, indications that a borrower or issuer will
enter bankruptcy or other observable data relating to a group of
assets such as adverse changes in the payment status of borrowers
or issuers in the group or economic conditions that correlate with
defaults in the group.
Impairment losses on loans and receivables are measured as the
difference between the carrying amount of the financial asset and
the present value of the estimated future cash flows from the asset
discounted at its original effective interest rate. Impairment
losses are recognised in profit or loss in the Statement of
Comprehensive Income and reflected in the Statement of Financial
Position as an allowance account against loans and receivables.
Interest on impaired assets continues to be recognised through the
unwinding of the discount. The Company writes off loans and
receivables when they are determined to be uncollectible.
When a subsequent event causes the amount of impairment loss to
decrease, the decrease in impairment is reversed through profit or
loss.
v) Derecognition
Financial assets are derecognised when the contractual rights to
receive cash flows from the assets have expired or the Company has
transferred substantially all the risks and rewards of ownership.
Financial liabilities are derecognised when their contractual
obligations are discharged, cancelled or expire.
vi) Offsetting
Financial assets and liabilities are offset and the net amount
presented in the Statement of Financial Position when, and only
when, the Company has a legal right to offset the recognised
amounts and it intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
The Company has adopted the amendments to IAS 32 on offsetting.
These amendments clarify the offsetting criteria in IAS 32 by
explaining when an entity currently has a legally enforceable right
to set-off and when gross settlement is considered to be equivalent
to net settlement.
The Company does not hold any financial assets or financial
liabilities that are subject to master netting agreements or
similar agreements and, as such, has not presented any financial
assets or liabilities net on the Statement of Financial Position.
There were no financial assets or financial liabilities that are
offset in the Statement of Financial Position.
Income and expenses are presented on a net basis only when
permitted under IFRS.
e) Amounts due from and due to Brokers
Amounts due from and due to brokers represent receivables for
securities sold and payables for securities purchased that have
been contracted for but not yet settled or delivered on the
Statement of Financial Position date respectively. The accounting
policy for the recognition of amounts due from and due to brokers
is discussed in note 2d.
f) Cash and Cash Equivalents
Cash and cash equivalents may comprise current deposits with
banks, bank overdrafts and other short-term highly liquid
investments that: are readily convertible to known amounts of cash;
are subject to insignificant changes in value; and are held for the
purpose of meeting short-term cash commitments rather than for
investment or other purposes. Cash, deposits with banks and bank
overdrafts are stated at their principal amount.
g) Share Capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
included in equity as a deduction from issue proceeds, net of
tax.
h) Interest Income and Dividend Income
Interest income is recognised in the Statement of Comprehensive
Income as it accrues, on a time-proportionate basis using the
effective interest rate method. It includes interest income from
cash and cash equivalents and from debt securities at fair value
though profit or loss.
Income distributions from quoted Funds are recognised in the
Statement of Comprehensive Income as dividend income when declared.
Dividend income from unquoted Funds and private equity investments
is recognised when the right to receive payment is established.
i) Earnings per Share
The Company presents basic and diluted earnings per share
(“EPS”) data for each class of its ordinary shares. The basic EPS
of each share class is calculated by dividing the profit or loss
attributable to the ordinary shareholders of each share class by
the weighted average number of ordinary shares outstanding for the
respective share class during the period. Where dilutive
instruments are in issue, diluted EPS is determined by adjusting
the profit or loss attributable to ordinary shareholders and the
weighted average number of ordinary shares outstanding for the
effects of the dilutive instruments.
j) Expenses
All expenses are recognised in the Statement of Comprehensive
Income on an accruals basis.
k) Segmental Reporting
Although the Company has two classes of shares and invests in
various investment themes, it is organised and operates as one
business and one geographical segment, as the principal focus is on
emerging market strategies, mainly achieved via investments in
funds domiciled in Europe but
investing globally. Accordingly, all significant operating
decisions are based upon analysis of the Company as one segment.
The financial results from this segment are equivalent to the
financial statements of the Company as a whole. Additionally, the
Company’s performance is evaluated on an overall basis. The
Company’s management receives financial information prepared under
IFRS and, as a result, the disclosure of separate segmental
information is not required.
l) Consolidation
The Company is not required to consolidate any of the
investments listed in the Schedule of Investments or the underlying
investments of the Funds held, as it does not control them and
given that the Company is an investment entity under IFRS 10 –
Investment Entities. All investments including those
effected via holding vehicles are valued at fair value through
profit or loss.
i) Disclosure of Interests in Other
Entities
As a result of the application of IFRS 12, Disclosure of
Interests in Other Entities, the Company has made disclosures about
its involvement with unconsolidated structured entities in note
16.
The Company has concluded that unlisted Funds in which it
invests, but which it does not consolidate, meet the definition of
structured entities for the following reasons:
· the voting rights attached to the Funds are
not considered to be dominant rights as the holder is unable to
control the Funds. The rights relate only to influence over
administrative tasks;
· each Fund’s activities are restricted by its
prospectus; and
· the Funds have narrow and well-defined
objectives to provide investment opportunities to investors.
ii) Investment
Entities
The Company has adopted the accounting standards on Investment
Entities (amendments to IFRS 10, IFRS 12, and IAS 27) and
management has concluded that the Company meets the definition of
an investment entity. All investments of the Company in underlying
Funds are measured at fair value through profit and loss.
m) Related Parties
Annual Improvements to IFRSs 2010-2012 Cycle – Amendments to
IAS 24, issued in December 2013
and applied for the first time in the annual report and financial
statements for the year ended 31 December
2015, extends the definition of a related party to include a
management entity that provides key management personnel services
to the reporting entity. The amendments specify that if key
management personnel services are provided by a management entity,
then the reporting entity is required to separately disclose the
amounts incurred for the provision of key management personnel
services that are provided by that management entity. For further
information, please refer to Supplementary Information (Unaudited)
– Remuneration Disclosure.
n) New Standards and Interpretations not yet
Adopted
A number of new standards, amendments to standards and
interpretations are effective for annual periods beginning after
1 January 2016. The only new standard
relevant to the Company is IFRS 9 Financial Instruments,
which is discussed below.
i) IFRS 9 Financial
Instruments
IFRS 9, published in July 2014,
will replace the existing guidance in IAS 39. It includes revised
guidance on the classification and measurement of financial
instruments, including a new expected credit loss model for
calculating impairment on financial assets, and new general hedge
accounting requirements. It also carries forward the guidance on
recognition and derecognition of financial instruments from IAS
39.
IFRS 9 is effective for annual reporting periods beginning on or
after 1 January 2018, with early
adoption permitted. The Company does not plan to adopt IFRS 9
early.
3. Taxation
The Director of Income Tax in Guernsey has confirmed that, for the year
ended 31 December 2016, the Company
is exempt from Guernsey Income Tax under the Income Tax (Exempt
bodies) (Guernsey) Ordinance 1989,
and that any surplus income of the Company may be distributed
without the deduction of Guernsey Income Tax. Pursuant to the
exemption granted under the above-mentioned ordinance, the Company
is subject to an annual fee, currently £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 2016 |
31
December 2015 |
|
|
|
|
|
|
US$ |
US$ |
Financial
assets held for trading: |
|
|
|
-
Derivative financial assets |
|
5,536 |
10,540 |
Total
financial assets held for trading |
|
5,536 |
10,540 |
|
|
|
|
|
|
|
|
Designated
at fair value through profit or loss at inception: |
|
|
|
- Equity
investments |
|
53,647,750 |
60,334,405 |
Total
designated at fair value through profit or loss at
inception |
|
53,647,750 |
60,334,405 |
Total
financial assets at fair value through profit or loss |
|
53,653,286 |
60,344,945 |
|
|
|
|
|
|
|
|
|
|
During the years ended 31 December
2016 and 2015, the Company invested in the Ashmore SICAV 2
Global Liquidity US$ Fund. There were no other significant changes
to the Company’s direct equity and debt investments other than
valuation movements.
As at 31 December 2016, derivative
financial assets comprised forward foreign currency contracts as
follows:
Currency
Bought |
Amount
Bought |
|
Currency
Sold |
Amount
Sold |
|
Maturity
Date |
Unrealised
Gain |
US$ |
473,013 |
|
GBP |
377,880 |
|
17/02/2017 |
5,536 |
Derivative financial assets |
|
|
5,536 |
As at 31 December 2015, derivative
financial assets comprised forward foreign currency contracts as
follows:
Currency
Bought |
Amount
Bought |
|
Currency
Sold |
Amount
Sold |
|
Maturity
Date |
Unrealised
Gain |
US$ |
468,965 |
|
GBP |
311,000 |
|
12/02/2016 |
10,540 |
Derivative financial assets |
|
|
10,540 |
|
|
|
|
|
|
31
December 2016 |
31
December 2015 |
|
|
|
|
|
|
US$ |
US$ |
Financial
liabilities held for trading: |
|
|
|
-
Derivative financial liabilities |
|
(99,251) |
(951,805) |
Total
financial liabilities held for trading |
|
(99,251) |
(951,805) |
As at 31 December 2016, derivative
financial liabilities comprised forward foreign currency contracts
as follows:
Currency
Bought |
Amount
Bought |
|
Currency
Sold |
Amount
Sold |
|
Maturity
Date |
Unrealised
Loss |
GBP |
12,999,408 |
|
US$ |
16,180,884 |
|
17/02/2017 |
(99,251) |
Derivative financial liabilities |
|
|
(99,251) |
As at 31 December 2015, derivative
financial liabilities comprised forward foreign currency contracts
as follows:
Currency
Bought |
Amount
Bought |
|
Currency
Sold |
Amount
Sold |
|
Maturity
Date |
Unrealised
Loss |
GBP |
25,395,430 |
|
US$ |
38,385,574 |
|
12/02/2016 |
(951,805) |
Derivative financial liabilities |
|
|
(951,805) |
5. Net Gain/Loss from
Financial Assets and Liabilities at Fair Value through Profit or
Loss
|
|
|
|
|
31 December 2016 |
31
December 2015 |
|
|
|
|
|
|
|
US$ |
US$ |
|
Other net
changes in fair value through profit or loss: |
|
|
|
|
- Realised
gains on investments |
|
1,668,136 |
11,204,812 |
* |
- Realised
losses on investments |
|
(44,097,665) |
(23,236,471) |
* |
- Realised
gains on forward foreign currency contracts |
|
867,009 |
2,533,964 |
* |
- Realised
losses on forward foreign currency contracts |
|
(5,454,738) |
(5,658,740) |
* |
- Change
in unrealised gains on investments |
|
44,074,611 |
22,184,725 |
* |
- Change
in unrealised losses on investments |
|
(2,643,973) |
(55,732,515) |
* |
- Change
in unrealised gains on forward foreign exchange contracts |
|
957,341 |
549,411 |
* |
- Change
in unrealised losses on forward foreign exchange contracts |
|
(109,791) |
(968,235) |
* |
Total
loss |
|
(4,739,070) |
(49,123,049) |
|
|
|
|
|
|
|
|
|
|
Other net
changes in fair value on derivative assets held for trading |
(3,740,179) |
(3,543,600) |
|
Other net
changes in fair value on assets designated at fair value through
profit or loss |
(998,891) |
(45,579,449) |
|
Total
net loss |
|
(4,739,070) |
(49,123,049) |
|
* The prior year comparatives have been amended to conform with
the current year’s presentation whereby gains and losses from
financial assets and liabilities at fair value through profit or
loss have been broken down to show the gross gains and losses for
each type of financial asset and liability.
6. Other Financial Assets
and Liabilities
a) Other financial assets:
Other financial assets relate to accounts receivable and prepaid
expenses, and comprise the following:
|
|
|
|
|
31 December 2016 |
31
December 2015 |
|
|
|
|
|
|
US$ |
US$ |
Prepaid
Directors’ insurance fees |
|
6,833 |
9,112 |
Prepaid
regulatory fees |
|
- |
1,915 |
Other
receivables and prepaid expenses |
|
1,348 |
390,818 |
|
|
|
|
|
|
8,181 |
401,845 |
b) Other financial liabilities:
Other financial liabilities relate to accounts payable and
accrued expenses, and comprise the following:
|
|
|
|
|
31 December 2016 |
31
December 2015 |
|
|
|
|
|
|
US$ |
US$ |
Investment
management fees payable |
|
(4,731) |
(5,337) |
Incentive
fees payable |
|
(795,093) |
(523,426) |
Other
accruals |
|
(114,399) |
(121,947) |
|
|
|
|
|
|
(914,223) |
(650,710) |
7. Financial
Instruments
a) Carrying amounts versus fair values
As at 31 December 2016, the
carrying values of financial assets and liabilities presented in
the Statement of Financial Position approximate their fair
values.
The table below sets out the classifications of the carrying
amounts of the Company’s financial assets and financial liabilities
into categories of financial instruments as at 31 December 2016.
|
Held
for trading |
Designated at fair value |
Loans
and receivables |
|
Other
financial
liabilities |
|
Total |
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 value
through profit or loss |
(99,251) |
- |
- |
|
- |
|
(99,251) |
Other payables |
- |
- |
- |
|
(914,223) |
|
(914,223) |
Total |
(99,251) |
- |
- |
|
(914,223) |
|
(1,013,474) |
The table below sets out the classifications of the carrying
amounts of the Company’s financial assets and financial liabilities
into categories of financial instruments as at 31 December 2015.
|
Held
for trading |
Designated at fair value |
Loans
and receivables |
|
Other
financial
liabilities |
|
Total |
Cash and cash
equivalents |
- |
- |
16,505,657 |
|
- |
|
16,505,657 |
Non-pledged financial
assets at fair value
through profit or loss |
10,540 |
60,334,405 |
- |
|
- |
|
60,344,945 |
Other receivables |
- |
- |
401,845 |
* |
- |
* |
401,845 |
Total |
10,540 |
60,334,405 |
16,907,502 |
* |
- |
* |
77,252,447 |
|
|
|
|
|
|
|
|
Financial liabilities
at fair value
through profit or loss |
(951,805) |
- |
- |
|
- |
|
(951,805) |
Other payables |
- |
- |
- |
|
(650,710) |
|
(650,710) |
Total |
(951,805) |
- |
- |
|
(650,710) |
|
(1,602,515) |
* The prior year comparatives have been amended to conform with
the current year’s presentation.
b) Financial instruments carried at fair value - fair value
hierarchy
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability (i.e. the exit price)
in an orderly transaction between market participants at the
measurement date.
For certain of the Company’s financial instruments including
cash and cash equivalents, prepaid/accrued expenses and other
creditors, their carrying amounts approximate fair value due to the
immediate or short-term nature of these financial instruments. The
Company’s investments and financial derivative instruments are
carried at market value, which approximates fair value.
The Company classifies financial instruments within a fair value
hierarchy that prioritises the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of the
fair value hierarchy are as follows:
Level 1 inputs are unadjusted quoted prices in active
markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date.
Level 2 inputs are observable inputs other than quoted
prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly, including:
- quoted prices for similar assets or liabilities in active
markets;
- quoted prices for identical or similar assets or liabilities
in markets that are not active;
- inputs other than quoted prices that are observable for the
asset or liability;
- inputs that are derived principally from or corroborated by an
observable market.
Level 3 inputs are unobservable inputs for the asset or
liability.
Inputs are used in applying various valuation techniques and
broadly refer to the assumptions that market participants use to
make valuation decisions, including assumptions about risk. Inputs
may include price information, volatility statistics, specific and
broad credit data, liquidity statistics, and other factors. A
financial instrument’s level within the fair value hierarchy is
based on the lowest level of any input that is significant to the
fair value measurement. However, the determination of what
constitutes “observable” requires significant judgement. The
Company considers observable data to be that market data which is
readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources
that are actively involved in the relevant market.
The categorisation of a financial instrument within the
hierarchy is based upon the pricing transparency of the instrument
and does not necessarily correspond to the Company’s perceived risk
of that instrument.
Investments: Investments whose values are based on quoted
market prices in active markets, and are therefore classified
within Level 1, include active listed equities, certain U.S.
government and sovereign obligations, and certain money market
securities. The Company does not generally adjust the quoted price
for such instruments, even in situations where it holds a large
position and a sale could reasonably impact the quoted price.
Investments that trade in markets that are not considered to be
active, but are valued based on quoted market prices, dealer
quotations or alternative pricing sources supported by observable
inputs are classified within Level 2. These may include government
and sovereign obligations, government agency securities, corporate
bonds, and municipal and provincial obligations.
Investments classified within Level 3 have significant
unobservable inputs, as they trade infrequently or not at all.
Level 3 instruments may include private equity investments, certain
loan agreements, less-liquid corporate debt securities (including
distressed debt instruments) and collateralised debt obligations.
Also included in this category are government and sovereign
obligations, government agency securities and corporate bonds for
which independent broker prices are used and information relating
to the inputs of the price models is not observable.
When observable prices are not available; e.g. if an asset does
not trade regularly, the Company may rely on information provided
by any person, firm or entity including any professional person
whom the Directors consider to be suitably qualified to provide
information in respect of the valuation of investments and who is
approved by the Custodian (an “Approved Person”). Approved Persons
may include certain brokers and the Pricing Methodology and
Valuation Committee (“PMVC”) of the Investment Manager.
The PMVC may provide assistance to the Administrator in
determining the valuation of assets where the Administrator cannot
determine a valuation from another source. These assets, which are
classified within Level 3, may
include all asset types but are frequently ‘Special Situations’
type investments, typically incorporating distressed, illiquid or
private investments.
For these hard-to-value investments, the methodology and models
used to determine fair value are created in accordance with the
International Private Equity and Venture Capital Valuation (IPEV)
guidelines. Smaller investments may be valued directly by the PMVC
but material investments are valued by experienced personnel at an
independent third-party valuation specialist. Such valuations are
subject to review, amendment if necessary, then approval by the
PMVC. The valuations are ultimately approved by the Directors and
the auditors as they make up part of the NAV in the financial
statements.
Valuation techniques used include the market approach, the
income approach or the cost approach depending on the availability
of reliable information. The market approach generally consists of
using; comparable transactions, earnings before interest, tax,
depreciation and amortisation (EBITDA) multiples; or enterprise
value (EV) multiples (based on comparable public company
information). The use of the income approach generally consists of
the net present value of estimated future cash flows, adjusted as
deemed appropriate for liquidity, credit, market and/or other risk
factors.
Inputs used in estimating the value of investments may include
the original transaction price, recent transactions in the same or
similar instruments, completed or pending third-party transactions
in the underlying investment or comparable issuers, subsequent
rounds of financing, recapitalisations and other transactions
across the capital structure, offerings in the equity or debt
capital markets and bids received from potential buyers.
For the determination of the Net Asset Value, Level 3
investments may be adjusted to reflect illiquidity and/or
non-transferability. However, any such adjustments are typically
reversed in the financial statements where it is determined that
this is required by the accounting standards.
The Company believes that its estimates of fair value are
appropriate, however estimates and assumptions concerning the
future, by definition, seldom equal the actual results and the
estimated value may not be realised in a current sale or immediate
settlement of the asset or liability. The use of different
methodologies, assumptions or inputs would lead to different
measurements of fair value and given the number of different
factors affecting the estimate, specific sensitivity analysis
cannot be reliably quantified. It is reasonably possible, on the
basis of existing knowledge, that outcomes within the next
financial year that are different from the assumptions used could
require a material adjustment to the carrying amounts of affected
assets.
Financial Derivative Instruments: Financial derivative
instruments can be exchange-traded or privately negotiated
over-the-counter (“OTC”). Exchange-traded derivatives, such as
futures contracts and exchange-traded option contracts, are
typically classified within Level 1 or Level 2 of the fair value
hierarchy depending on whether or not they are deemed to be
actively traded.
OTC derivatives, including forwards, credit default swaps,
interest rate swaps and currency swaps, are valued by the Company
using observable inputs, such as quotations received from the
counterparty, dealers or brokers, whenever these are available and
considered reliable. In instances where models are used, the value
of an OTC derivative depends upon the contractual terms of, and
specific risks inherent in, the instrument as well as the
availability and reliability of observable inputs. Such inputs
include market prices for reference securities, yield curves,
credit curves, measures of volatility, prepayment rates and
correlations of such inputs. Certain OTC derivatives, such as
generic forwards, swaps and options, have inputs which can
generally be corroborated by market data and are therefore
classified within Level 2.
Those OTC derivatives that have less liquidity or for which
inputs are unobservable are classified within Level 3. While the
valuations of these less liquid OTC derivatives may utilise some
Level 1 and/or Level 2 inputs, they also include other unobservable
inputs which are considered significant to the fair value
determination. At each measurement date, the Company updates the
Level 1 and Level 2 inputs to reflect observable inputs, though the
resulting gains and losses are reflected within Level 3 due to the
significance of the unobservable inputs.
The Company recognises transfers between Levels 1, 2 and 3 based
on the date of the event or change in circumstances that caused the
transfer. This policy on the timing of recognising transfers is the
same for transfers into a level as for transfers out of a level.
There were no transfers between the three levels during the years
ended 31 December 2016 and 2015.
The following table analyses within the fair value hierarchy the
Company’s financial assets and liabilities at fair value through
profit and loss (by class) measured at fair value as at
31 December 2016:
|
Level
1 |
Level
2 |
Level
3 |
Total
balance |
Financial assets at
fair value
through profit and loss |
|
|
|
|
Financial assets held
for trading: |
|
|
|
|
- Derivative financial
assets |
- |
5,536 |
- |
5,536 |
Financial assets
designated at fair value through profit or loss at inception: |
|
|
|
|
- Equity
investments |
930 |
- |
53,646,820 |
53,647,750 |
Total |
930 |
5,536 |
53,646,820 |
53,653,286 |
|
|
|
|
|
Financial
liabilities at fair value
through profit and loss |
|
|
|
|
Financial liabilities
held for trading: |
|
|
|
|
- Derivative financial
liabilities |
- |
(99,251) |
- |
(99,251) |
Total |
- |
(99,251) |
- |
(99,251) |
The following table analyses within the fair value hierarchy the
Company’s financial assets and liabilities at fair value through
profit and loss (by class) measured at fair value as at
31 December 2015:
|
Level
1 |
Level
2 |
Level
3 |
Total
balance |
Financial assets at
fair value
through profit and loss |
|
|
|
|
Financial assets held
for trading: |
|
|
|
|
- Derivative financial
assets |
- |
10,540 |
- |
10,540 |
Financial assets
designated at fair value through profit or loss at inception: |
|
|
|
|
- Equity
investments |
4,674,087 |
- |
55,660,318 |
60,334,405 |
Total |
4,674,087 |
10,540 |
55,660,318 |
60,344,945 |
|
|
|
|
|
Financial
liabilities at fair value
through profit and loss |
|
|
|
|
Financial liabilities
held for trading: |
|
|
|
|
- Derivative financial
liabilities |
- |
(951,805) |
- |
(951,805) |
Total |
- |
(951,805) |
- |
(951,805) |
Level 1 assets include the Ashmore SICAV 2 Global
Liquidity US$ Fund (31 December 2015:
Aginyx Ordinary Shares (MCX) and the Ashmore SICAV 2 Global
Liquidity US$ Fund).
Level 2 assets and liabilities include forward foreign
currency contracts that are calculated internally using observable
market data.
Level 3 assets include all unquoted Funds, limited
partnerships and unquoted investments. Investments in unquoted
Funds and limited partnerships are valued on the basis of the
latest Net Asset Value, which represents the fair value, as
provided by the administrator of the unquoted Fund at the close of
business on the relevant valuation day. Unquoted Funds have been
classified as Level 3 assets after consideration of their
underlying investments, lock-up periods and liquidity.
The following tables present the movement in Level 3 instruments
for the years ended 31 December 2016
and 2015:
|
|
Equity investments |
Opening balance as at
1 January 2016 |
|
|
|
55,660,318 |
Sales and returns of
capital |
|
|
|
(1,216,935) |
Gains and
losses recognised in profit and loss * |
|
|
(796,563) |
Closing balance as
at 31 December 2016 |
|
|
|
53,646,820 |
|
|
Equity investments |
Opening balance as at
1 January 2015 |
|
|
|
125,668,272 |
Sales and returns of
capital |
|
|
|
(24,263,542) |
Gains and
losses recognised in profit and loss * |
|
|
(45,744,412) |
Closing balance as
at 31 December 2015 |
|
|
|
55,660,318 |
* Gains and losses recognised in profit and loss include
net unrealised losses on existing assets as at
31 December 2016 of US$359,068,294 (31
December 2015: net unrealised losses of U$390,867,509).
Total gains and losses included in the Statement of
Comprehensive Income are presented in “Other net changes in the
fair value of financial assets and financial liabilities at fair
value through profit and loss”.
The following tables show the valuation techniques and the key
unobservable inputs used in the determination of fair value for the
Level 3 investments:
|
Balance as at
31 December 2016 |
Valuation |
|
|
US$ |
methodology |
Unobservable
inputs |
Equity in private
companies |
5,771,581 |
Discounted Cash Flows
/ Comparable listed company EV/EBITDA multiples |
- Forecast annual
revenue growth rate
- Forecast EBITDA margin
- Risk adjusted discount rate
- Market multiples |
Investments in
unlisted Funds |
47,875,239 |
Net Asset Value |
Inputs to Net Asset
Value* |
* Management has assessed whether there are any discounts in
relation to lock-in periods that are impacting liquidity. There
were no discounts in relation to lock-in periods as at 31 December 2016.
|
Balance as at
31 December 2015 |
Valuation |
|
|
US$ |
methodology |
Unobservable
inputs |
Equity in private
companies |
4,413,248 |
Discounted Cash Flows
/ Comparable listed company EV/EBITDA multiples |
- Forecast annual
revenue growth rate
- Forecast EBITDA margin
- Risk adjusted discount rate
- Market multiples |
Investments in
unlisted Funds |
51,247,070 |
Net Asset Value |
Inputs to Net Asset
Value* |
* Management has assessed whether there are any discounts in
relation to lock-in periods that are impacting liquidity. There
were no discounts in relation to lock-in periods as at 31 December 2015.
The Company believes that its estimates of fair value are
appropriate; however the use of different methodologies or
assumptions could lead to different measurements of fair value. For
fair value investments in Level 3, changing one or more of the
assumptions used to alternative assumptions could result in an
increase or decrease in net assets attributable to investors. Due
to the numerous different factors affecting the assets, the impact
cannot be reliably quantified. It is reasonably possible, on the
basis of existing knowledge, that outcomes within the next
financial year that are different from the assumptions used could
require a material adjustment to the carrying amounts of affected
assets.
8. Capital and
Reserves
The Company’s capital is represented by two classes of ordinary
shares, namely the US$ share class and the £ share class. The
holders of ordinary shares are entitled to dividends as declared
from time to time and have no redemption rights.
The total comprehensive gain or loss during the year is
allocated proportionately to each share class except for the
results of hedging the US dollar exposure of the assets
attributable to the Pound Sterling-denominated £ share class, which
are allocated solely to this share class.
The Company is authorised to issue an unlimited number of US$
and £ shares at no par value.
Ordinary Shares
The following table presents a summary of changes in the number
of shares issued and fully paid during the year ended 31 December 2016:
|
|
US$
shares |
|
£
shares |
Shares
outstanding as at 31 December 2015 |
7,739,867 |
|
4,971,508 |
Share conversions |
|
1,669,534 |
|
(1,199,388) |
Compulsory
redemptions |
(1,943,923) |
|
(1,185,832) |
Shares
outstanding as at 31 December 2016 |
7,465,478 |
|
2,586,288 |
The following table presents a summary of changes in the number
of shares issued and fully paid during the year ended 31 December 2015:
|
|
US$
shares |
|
£
shares |
Shares
outstanding as at 31 December 2014 |
12,948,641 |
|
12,572,050 |
Share conversions |
|
2,120,817 |
|
(1,399,879) |
Compulsory
redemptions |
(7,329,591) |
|
(6,200,663) |
Shares
outstanding as at 31 December 2015 |
7,739,867 |
|
4,971,508 |
Share Conversion
A shareholder has the right, as the Directors may determine for
this purpose at each “Conversion Calculation Date”, to elect to
convert some or all of the shares of any class they hold into a
different class of shares by giving at least five business days’
notice to the Company before the relevant Conversion Calculation
Date. Prior to the 2011 AGM, shareholders were able to convert
their shares on a quarterly basis at the NAV Calculation Dates in
March, June, September and December. As per the amended Articles of
Incorporation dated 18 April 2011,
shareholders were able to convert their shares on a monthly
basis.
On 30 August 2013, the Directors
of the Company announced that share conversion opportunities would
be offered at the end of February, May, August and November. Share
conversion opportunities for all other month ends were no longer
offered and this decision was taken due to the timings and
processes surrounding the anticipated returns of capital as part of
the orderly wind-down of the Company.
The following share conversions took place during the year ended
31 December 2016:
Transfers from |
Transfers to |
Number
of shares
to switch out |
|
Number
of shares
to switch in |
£ shares |
US$ shares |
1,201,320 |
|
1,671,997 |
US$ shares |
£ shares |
2,463 |
|
1,932 |
The following share conversions took place during the year ended
31 December 2015:
Transfers from |
Transfers to |
Number
of shares
to switch out |
|
Number
of shares
to switch in |
£ shares |
US$ shares |
1,406,329 |
|
2,130,530 |
US$ shares |
£ shares |
9,713 |
|
6,450 |
Compulsory Partial Redemptions
Following the approval by the Company’s shareholders of the
wind-down proposal as described in the circular published on
20 February 2013, during the year
ended 31 December 2016, management
announced partial returns of capital to shareholders by way of
compulsory partial redemptions of shares with the following
redemption dates:
· 29 January
2016, US$16.2m using the
31 December 2015 Net Asset Value;
and
· 29 April
2016, US$2.5m using the
31 March 2016 Net Asset Value.
During the year ended 31 December
2015, management announced partial returns of capital to
shareholders by way of compulsory partial redemptions of shares
with the following redemption dates:
· 30 January
2015, US$40.5m using the
31 December 2014 Net Asset Value;
· 1 May
2015, US$19.5m using the
31 March 2015 Net Asset Value;
and
· 7 August
2015, US$27.25m using the
30 June 2015 Net Asset Value.
The amounts applied to the partial redemptions of
shares comprised monies from dividends received and from
the realisation of the Company’s investments up to and
including the reference NAV calculation dates pursuant to the
wind-down of the Company.
During the year ended 31 December
2016, the following shares were redeemed by way of
compulsory partial redemptions of shares (consideration in US$ has
been determined using the exchange rates at the redemption
date):
|
|
Number
of ordinary shares redeemed |
|
Consideration in US$ |
US$ shares |
|
1,943,923 |
|
9,940,243 |
£ shares |
|
1,185,832 |
|
8,759,886 |
|
|
|
|
18,700,129 |
During the year ended 31 December
2015, the following shares were redeemed by way of
compulsory partial redemptions of shares (consideration in US$ has
been determined using the exchange rates at the date of the
official announcement):
|
|
Number
of ordinary shares redeemed |
|
Consideration in US$ |
US$ shares |
|
7,329,591 |
|
38,102,605 |
£ shares |
|
6,200,663 |
|
48,396,875 |
|
|
|
|
86,499,480 |
Voting rights
The voting rights each share is entitled to in a poll at any
general meeting of the Company (applying the Weighted Voting
Calculation as described in the Prospectus published by the Company
on 6 November 2007) are as
follows:
US$ shares: |
1.0000 |
£ shares: |
2.0288 |
The above figures may be used by shareholders as the denominator
for calculations to determine if they are required to notify their
interest in, or a change to their interest in the Company under the
FCA’s Disclosure and Transparency Rules.
Special Reserve
On 5 November 2007, the Company
passed a special resolution that, subject to the admission of the
Company’s shares to the London Stock Exchange becoming
unconditional and with the approval of the Royal Court, the amount
standing to the credit of the share premium account of the Company
following completion of the offering be cancelled and the amount of
the share premium account so cancelled be credited as a
distributable reserve to be established in the books of account of
the Company. This reserve is able to be applied in any manner in
which the Company’s profits available for distribution (as
determined in accordance with the Laws) are able to be applied,
including in the purchase of the Company’s own shares and in the
payment of dividends.
Distribution Policy
Subject to the Laws and the Listing Rules, the Company may by
ordinary resolution from time to time declare dividends. No
dividend shall exceed the amount recommended by the Board.
No dividends were declared during the year ended 31 December 2016 or the year ended 31 December 2015.
Following the EGM on 13 March
2013, shareholders approved proposals to distribute surplus
cash held by the Company on a quarterly basis by way of pro rata
compulsory partial redemptions of shares.
9. Net Asset Value
The Net Asset Value of each US$ and £ Share is determined by
dividing the total net assets of the Company attributable to the
US$ and £ Share classes by the number of US$ and £ shares in issue
respectively at the year end as follows:
As at 31 December
2016 |
Net
assets
attributable to each
share class in US$ |
Shares in issue |
Net
assets
per share
in US$ |
Net
assets
per share
in local currency |
US$ shares |
37,910,997 |
7,465,478 |
5.08 |
5.08 |
£ shares |
15,693,916 |
2,586,288 |
6.07 |
4.91 |
|
53,604,913 |
|
|
|
As at 31 December
2015 |
Net
assets
attributable to each
share class in US$ |
Shares in issue |
Net
assets
per share
in US$ |
Net
assets
per share
in local currency |
US$ shares |
39,168,725 |
7,739,867 |
5.06 |
5.06 |
£ shares |
36,481,207 |
4,971,508 |
7.34 |
4.98 |
|
75,649,932 |
|
|
|
The allocation of the Company’s Net Asset Value between share
classes is further described in the Company’s Prospectus.
10. Dividend and Interest Income
|
|
|
Year
ended
31 December 2016 |
|
Year
ended
31 December 2015 |
Interest
income |
|
|
US$ |
|
US$ |
Cash and cash
equivalents |
|
|
2,323 |
|
1,986 |
Total interest
income |
|
|
2,323 |
|
1,986 |
|
|
|
|
|
|
Dividend
income |
|
|
|
|
|
Equity investments
designated at fair value through profit or loss |
|
|
1,975,957 |
|
40,935,262 |
Total dividend
income |
|
|
1,975,957 |
|
40,935,262 |
11. Significant Agreements
a) Investment Manager
Effective 18 July 2014, the Board
appointed Ashmore Investment Advisors Limited (“AIAL”) as the
Company’s Alternative Investment Fund Manager (“AIFM”) and AIAL
assumed the role of Investment Manager to the Company pursuant to a
Novation of the 5 November 2007
Investment Management Agreement.
The Investment Manager is remunerated at a monthly rate of one
twelfth of 1% of the Net Asset Value excluding investments made in
Funds (calculated before deduction of the investment management fee
for that month and before the deduction of any accrued incentive
fee). In relation to investments made in the Funds, the Investment
Manager is entitled only to management fees at the rate charged by
it to the Funds.
The net investment management fees during the year were as
follows:
|
|
|
Year
ended
31 December 2016 |
|
Year
ended
31 December 2015 |
|
|
|
US$ |
|
US$ |
Investment management
fee expense |
|
|
(84,180) |
|
(134,400) |
|
|
|
(84,180) |
|
(134,400) |
The investment management fee expense for the year ended
31 December 2015 includes an
adjustment of US$57,957 of the
investment management fee expense relating to the year ended
31 December 2014.
The Investment Manager is entitled to incentive fees based on
the performance of investments other than investments in Funds, if
those investments achieve a return in excess of 6% per annum
compounded annually. Provided that the 6% return hurdle is cleared,
the residual return is allocated to the Investment Manager until it
has received the incentive fee which is calculated as 20% of the
aggregate of (i) the amount received by the Company in excess of
the cost of investment and (ii) the returns achieved on investments
above 6% per annum compounded annually. Incentive fees are payable
only upon the realisation of investments. During the year,
incentive fees of US$nil were paid and US$271,667 were charged (31 December 2015: US$1,368,447 paid and US$165,157 charged).
b) Directors’ Remuneration
During the years ended 31 December
2016 and 2015, Directors’ remuneration was as follows:
|
Year
ended
31 December 2016 |
Year
ended
31 December 2015 |
|
Chairman: |
£28,350
per annum |
£31,500
per annum |
|
Chairman of the Audit
Committee: |
£28,350
per annum |
£31,500
per annum |
|
Independent
Directors: |
£26,730
per annum |
£29,700
per annum |
|
Non-Independent
Directors: |
waived |
waived |
|
The Directors agreed to reduce their Directors’ fees by 10% with
effect from 31 December 2015.
c) Administrator
The Administrator, Northern Trust International Fund
Administration Services (Guernsey)
Limited, performs administrative duties for which it is remunerated
at an annual rate of 0.02% of the Company’s Total Net Assets.
d) Custodian
Northern Trust (Guernsey)
Limited (the “Custodian”) is remunerated at an annual rate of 0.01%
of the Company’s Total Net Assets.
12. Other Operating Expenses
|
|
Year ended
31 December 2016 |
Year ended
31 December 2015 |
|
|
|
US$ |
|
US$ |
Audit fees |
|
|
(53,475) |
|
(65,140) |
Professional fees |
|
|
(5,096) |
|
261,960 |
Legal fees |
|
|
1,326 |
|
(23,248) |
Miscellaneous
fees |
|
|
(105,683) |
|
254,516 |
|
|
|
(162,928) |
|
428,088 |
The credits to other operating expenses for the years ended
31 December 2016 and 31 December 2015 represent the reversal of
accruals as a result of a reduction in expenses as the Company
continues to wind down.
13. Earnings per Share (EPS)
The calculation of the earnings per US$ and £ share is based on
the gain/loss for the year attributable to US$ and £ shareholders
and the respective weighted average number of shares in issue for
each share class during the year.
The loss attributable to each share class for the year ended
31 December 2016 was as follows:
|
|
|
US$
share |
|
£
share |
Issued shares at the
beginning of the year |
|
|
7,739,867 |
|
4,971,508 |
Effect on
the weighted average number of shares: |
|
|
|
|
- Conversion of
shares |
|
|
1,115,687 |
|
(804,641) |
- Compulsory partial
redemption of shares |
|
|
(1,714,898) |
|
(1,059,434) |
Weighted average
number of shares |
|
|
7,140,656 |
|
3,107,433 |
Gain/(loss) per
share class (US$) |
|
|
270,386 |
|
(3,615,276) |
EPS (US$) |
|
|
0.04 |
|
(1.16) |
There were no dilutive instruments in issue during the year.
The loss attributable to each share class for the year ended
31 December 2015 was as follows:
|
|
|
US$
share |
|
£
share |
Issued shares at the
beginning of the year |
|
|
12,948,641 |
|
12,572,050 |
Effect on
the weighted average number of shares: |
|
|
|
|
- Conversion of
shares |
|
|
1,185,523 |
|
(778,219) |
- Compulsory partial
redemption of shares |
|
|
(4,854,171) |
|
(4,293,112) |
Weighted average
number of shares |
|
|
9,279,993 |
|
7,500,719 |
Loss per share
class (US$) |
|
|
(1,890,532) |
|
(6,391,394) |
EPS (US$) |
|
|
(0.20) |
|
(0.85) |
There were no dilutive instruments in issue during the year.
14. Financial Risk Management
The Company’s activities expose it to a variety of financial and
operational risks which include: market risk (including currency
risk, interest rate risk and price risk), credit risk and liquidity
risk.
The Company is also exposed to certain risk factors peculiar to
investing in Emerging Markets. These require the consideration of
matters not usually associated with investing in the securities of
issuers in the developed capital markets of North America, Japan or Western
Europe. The economic and political conditions in Emerging
Markets differ from those in developed markets, and offer less
social, political and economic stability. The value of investments
in Emerging Markets may be affected by changes in exchange
regulations, tax laws, withholding taxes or economic and monetary
policies. The absence, in many cases until relatively recently, of
any move towards capital markets structures or to a free market
economy means investing in Emerging Markets may be considered more
risky than investing in developed markets.
The Company puts policies and processes in place to measure and
manage the various types of risk to which it is exposed; these are
explained below.
Market Risk
All of the Company’s investments are recognised at fair value,
and changes in market conditions directly affect net investment
income.
i) Currency Risk
The Company’s principal exposure to currency risk arises from
underlying investments denominated in currencies other than US
dollars and from the exposure of its underlying portfolio companies
to local currencies in their countries of operation. The value of
such investments may be affected favourably or unfavourably by
fluctuations in exchange rates, notwithstanding any efforts made to
hedge such exposures. The Company’s largest indirect foreign
currency exposure is through the land bank held by Bedfordbury
which is expected to be realised in Phillipine pesos.
The Investment Manager may hedge currency exposures by reference
to the most recent Net Asset Value of the Company’s underlying
investments via the use of forward foreign currency contracts or
similar instruments.
As at the Statement of Financial Position date, the Company is
not exposed to any significant direct currency risk arising on its
financial assets and liabilities, as all direct investments of the
Company are denominated in US$, and a sensitivity analysis of
currency risk is not meaningful at this time. However, the Company
has put in place hedging mechanisms to hedge the currency risk
arising on the £ share class.
Shares in the Company are denominated in US$ and £. The base
currency is the US dollar, and therefore non-US dollar subscription
monies for shares are typically converted into US dollars for
operational purposes. The costs and any benefit of hedging the
foreign currency exposure of the assets attributable to shares
denominated in Pound Sterling against the US dollar is allocated
solely to the £ share class. This may result in variations in the
Net Asset Values of the two classes of shares as expressed in US
dollars.
As at 31 December 2016, the net
foreign currency exposure on the £ share class was as follows:
|
|
|
US$ |
|
% of net
assets |
Currency exposure of £
share class |
|
|
15,693,916 |
|
29.28 |
Nominal value of
currency hedges |
|
|
(15,707,871) |
|
(29.30) |
Net foreign currency
exposure |
|
|
(13,955) |
|
(0.02) |
As at 31 December 2015, the net
foreign currency exposure on the £ share class was as follows:
|
|
|
US$ |
|
% of net
assets |
Currency exposure of £
share class |
|
|
36,481,207 |
|
48.22 |
Nominal value of
currency hedges |
|
|
(37,916,609) |
|
(50.12) |
Net foreign currency
exposure |
|
|
(1,435,402) |
|
(1.90) |
ii) Interest Rate Risk
The majority of the Company’s financial assets and liabilities
are non-interest bearing (31 December
2016: 98.19%, 31 December
2015: 78.18%). As at 31 December
2016, interest-bearing financial assets comprised cash and
cash equivalents of US$956,920
(31 December 2015: US$16,505,657). The Company’s investment
portfolio is composed entirely of non-interest bearing assets as at
31 December 2016 (31 December 2016: 100%, 31
December 2015: 100%). As a result, the Company is subject to
limited direct exposure to interest rate risk through fluctuations
in the prevailing levels of market interest rates and a sensitivity
analysis of interest rate risk is not meaningful at this time.
iii) Other Price Risk
Other price risk is the risk that the value of financial
instruments will fluctuate as a result of changes in market prices
(other than those arising from interest rate risk or currency
risk), whether caused by factors specific to an individual
investment, its issuer or any other relevant factors.
The Company’s strategy for the management of price risk is to
seek to maximise the exit prices that it obtains for its direct and
indirect investments.
The table below summarises the sensitivity of the Company’s net
assets attributable to equity holders to investment price movements
as at the Statement of Financial Position date. The analysis is
based on the assumption that the prices of the investments increase
by 5% (2015: 5%), with all other variables held constant.
|
|
|
31
December 2016 |
|
31
December 2015 |
|
|
|
US$ |
|
US$ |
Equity
investments |
|
|
2,682,388 |
|
3,016,720 |
|
|
|
2,682,388 |
|
3,016,720 |
A 5% decrease in prices of the investments would result in an
equal but opposite effect on the net assets attributable to equity
holders, on the basis that all other variables remain constant. The
price risk sensitivity analysis provided is a relative estimate of
risk rather than a precise and accurate number.
Credit Risk
The Company is exposed to credit risk, which is the risk that a
counterparty to a financial instrument will fail to discharge an
obligation or commitment that it has entered into with the
Company.
The Company’s financial instruments include non-exchange traded
financial instruments. Credit risk for non-exchange traded
financial instruments is generally higher because the counterparty
for the instrument is not backed by an exchange clearing house.
The Company’s financial instruments include direct and indirect
holdings of securities and other obligations of companies that are
experiencing significant financial or business distress, including
companies involved in bankruptcy or other reorganisation and
liquidation proceedings. Although such holdings may result in
significant returns, they involve a substantial degree of risk. The
level of analytical sophistication, both financial and legal,
necessary for successful investment in companies experiencing
significant business and financial distress is unusually high.
There is no assurance that the Investment Manager will correctly
evaluate the nature and magnitude of the various factors that could
affect the prospects for a successful reorganisation or similar
action. The completion of debt and/or equity exchange offers,
restructurings, reorganisations, mergers, takeover offers and other
transactions can be prevented or delayed, or the terms changed, by
a variety of factors. If a proposed transaction appears likely not
to be completed or in fact is not completed or is delayed, the
market price of the investments held by the Company may decline
sharply and result in losses which could have a material adverse
effect on the performance of the Company and returns to
shareholders.
The administrative costs in connection with a bankruptcy or
restructuring proceeding are frequently high and will be paid out
of the debtor’s assets prior to any return to creditors (other than
out of assets or proceeds thereof, which may be subject to valid
and enforceable liens and other security interests) and equity
holders. In addition, certain claims that have priority by law over
the claims of other creditors (for example, claims for taxes) may
reduce any entitlement of the Company. In any reorganisation or
liquidation proceeding relating to a company or sovereign issuance
in which the Company invests, the Company may lose its entire
investment or may be required to accept cash or securities with a
value less than its original investment. Under such circumstances,
the returns generated from such investments may not compensate
investors adequately for the risks assumed, which could have a
material adverse effect on the performance of the Company and
returns to shareholders.
It is frequently difficult to obtain accurate information as to
the condition of distressed entities. Such investments may be
adversely affected by laws relating to, among other things,
fraudulent transfers and other voidable transfers or payments,
lender liability and the bankruptcy court’s power to disallow,
reduce, subordinate or disenfranchise particular claims. The market
prices of such securities are subject to abrupt and erratic market
movements and above-average price volatility, and the spread
between the bid and offer prices of such securities may be greater
than those prevailing in other securities markets.
Securities issued by distressed companies may have a limited
trading market, resulting in limited liquidity. As a result, the
Company may have difficulties in valuing or liquidating positions,
which could have a material adverse effect on the performance of
the Company and returns to shareholders.
As at the Statement of Financial Position date, the maximum
exposure to direct credit risk before any credit enhancements is
the carrying amount of the financial assets, as set out below. This
excludes credit risk relating to underlying debt instruments held
by the Funds.
|
|
|
31
December 2016 |
|
31
December 2015 |
|
|
|
US$ |
|
US$ |
Cash and cash
equivalents* |
|
|
956,920 |
|
16,505,657 |
Forward currency
contracts* |
|
|
5,536 |
|
10,540 |
|
|
|
962,456 |
|
16,516,197 |
* Held with Northern Trust (Guernsey) Limited, which is an indirect
wholly-owned subsidiary of the Northern Trust Corporation, with a
credit rating of A+ as at 31 December
2016 (31 December 2015:
A+).
None of these assets are impaired nor past due but not
impaired.
The Investment Manager monitors the credit ratings of the
Company’s counterparties, maintains an approved counterparty list
and periodically reviews all counterparty limits.
The credit risk arising on transactions with brokers relates to
transactions awaiting settlement. The risk relating to unsettled
transactions is considered small due to the short settlement period
involved.
Substantially all of the assets of the Company are held with the
Custodian; Northern Trust (Guernsey) Limited, which is an indirect
wholly-owned subsidiary of the Northern Trust Corporation.
Bankruptcy or insolvency of the Custodian may cause the Company’s
rights with respect to cash and securities held by the Custodian to
be delayed or limited. This risk is managed by monitoring the
credit quality and financial positions of the Custodian. The credit
rating of the Northern Trust Corporation as at the year-end date
was A+ (2015: A+). Depending on the requirements of the
jurisdictions in which the investments of the Company are issued,
the Custodian may use the services of one or more
sub-custodians.
Concentration
Risk
Due to the managed wind-down, the Company is in the process of
reducing the number and diversification of assets held and as such
is considered to have exposure to concentration risk. The
concentration of underlying assets is set out in the “Details on
Top 10 Underlying Holdings”. Country and industry concentrations
are also set out in the “Details on Top 10 Underlying
Holdings”.
Liquidity Risk
Liquidity risk is the risk that the Company may not be able to
generate sufficient cash resources to settle its obligations in
full as they fall due or can only do so on terms that are
materially disadvantageous.
The Company is not exposed to any significant liquidity risk
arising from redemptions because shareholders do not have the right
to redeem.
Most of the investments of the Company are traded only on over
the counter markets and there may not be an organised public market
for such securities. The effect of this is to increase the
difficulty of valuing the investments and certain investments may
generally be illiquid. There may be no established secondary market
for certain of the investments made by the Company. Reduced
secondary market liquidity may adversely affect the market price of
the investments and the Company’s ability to dispose of particular
investments. Due to the lack of adequate secondary market liquidity
for certain securities, it may be more difficult to obtain accurate
security valuations for the purposes of valuing the Company.
Valuations may only be available from a limited number of sources
and may not represent firm bids for actual sales. In addition, the
current or future regulatory regime may adversely affect
liquidity.
All residual maturities of the financial liabilities of the
Company in US$ as at 31 December 2016
and 2015 are less than three months, except for incentive fees
payable to the Investment Manager on realisation of
investments.
Liquidity risk is primarily related to outstanding commitments
and recallable distributions from investments in limited
partnerships. The outstanding investment commitments of the Company
are disclosed in note 18.
Operational
Risk
Operational risk is the risk of direct or indirect loss arising
from a wide variety of causes associated with the Company’s
processes and infrastructure, or from external factors other than
market, credit, or liquidity issues, such as those arising from
legal or regulatory requirements and generally accepted standards
of corporate behaviour. Operational risks arise from all of the
Company’s operations.
Capital
Management
The Company is not subject to externally imposed capital
requirements. The shares issued by the Company provide an investor
with the right to require redemption for cash at a value
proportionate to the investor’s share in the Company’s net assets
at redemption date and are classified as equity. See note 8 for a
description of the terms of the shares issued by the Company. The
Company’s objective is to realise the assets in orderly manner to
return cash to shareholders. The Articles of Incorporation of the
Company were amended to facilitate regular returns of cash to
shareholders.
15. Ultimate Controlling Party
In the opinion of the Directors on the basis of shareholdings
advised to them, the Company has no ultimate controlling party.
16. Involvement with Unconsolidated
Structured Entities
The table below describes the types of structured entities that
the Company does not consolidate but in which it holds an
interest.
Type of structured
entity |
Nature and
purpose |
|
Interest held by the
Company |
Investment Funds |
To manage assets on
behalf of third party investors. These vehicles are financed
through the issue of units to investors. |
|
Investments in units
issued by the Funds |
The table below sets out interests held by the Company in
unconsolidated structured entities as at 31
December 2016.
Investment in unlisted
investment Funds |
Number
of
investee Funds |
Total net
assets |
Carrying
amount included in "Financial assets at fair value through profit
or loss" |
% of net
assets of underlying Funds |
Special Situations
Private Equity Funds |
7 |
232,690,290 |
42,331,166 |
18.19 |
Real Estate Funds |
2 |
56,241,827 |
5,544,073 |
9.86 |
The table below sets out interests held by the Company in
unconsolidated structured entities as at 31
December 2015.
Investment in unlisted
investment Funds |
Number
of
investee Funds |
Total net
assets |
Carrying
amount included in "Financial assets at fair value through profit
or loss" |
% of net
assets of underlying Funds |
Special Situations
Private Equity Funds |
8 |
238,241,154 |
45,530,993 |
19.11 |
Real Estate Funds |
2 |
59,976,204 |
5,716,077 |
9.53 |
The maximum exposure to loss is the carrying amount of the
financial assets held.
During the year, the Company did not provide financial support
to these unconsolidated structured entities and has no intention of
providing financial or any other support, except for the
outstanding commitments as disclosed in note 18 to the financial
statements.
17. Related Party Transactions
Parties are considered to be related if one party has the
ability to control the other party or to exercise significant
influence over the other party in making financial or operational
decisions.
The Directors are responsible for the determination of the
investment policy of the Company and have overall responsibility
for the Company’s activities. The Company’s investment portfolio is
managed by AIAL.
The Company and the Investment Manager entered into an
Investment Management Agreement under which the Investment Manager
has been given responsibility for the day-to-day discretionary
management of the Company’s assets (including uninvested cash) in
accordance with the Company’s investment objectives and policies,
subject to the overall supervision of the Directors and in
accordance with the investment restrictions in the Investment
Management Agreement and the Articles of Incorporation.
During the year ended 31 December
2016, the Company engaged in the following related party
transactions:
|
|
Expense |
Payable |
Related
Party |
Nature |
US$ |
US$ |
AIAL |
Investment management
fees |
(84,180) |
(4,731) |
AIAL |
Incentive fees |
(271,667) |
(795,093) |
Board of
Directors |
Directors’
remuneration |
(113,883) |
(17,134) |
|
|
|
|
|
|
Investment Activity |
|
Related
Party |
Nature |
US$ |
|
Related Funds |
Sales |
1,216,935 |
|
Related Funds |
Dividends |
1,899,184 |
|
Ashmore SICAV 2 Global
Liquidity US$ Fund |
Purchases |
(2,500,000) |
|
Ashmore SICAV 2 Global
Liquidity US$ Fund |
Sales |
5,306,007 |
|
Ashmore SICAV 2 Global
Liquidity US$ Fund |
Dividends |
3,311 |
|
During the year ended 31 December
2015, the Company engaged in the following related party
transactions:
|
|
Expense |
Payable |
Related
Party |
Nature |
US$ |
US$ |
AIAL |
Investment management
fees |
(134,400) |
(5,337) |
AIAL |
Incentive fees |
(165,157) |
(523,426) |
Board of
Directors |
Directors’
remuneration |
(144,758) |
(16,877) |
|
|
|
|
|
|
Investment Activity |
|
|
|
US$ |
|
Related Funds |
Sales |
12,725,019 |
|
Related Funds |
Dividends |
40,277,940 |
|
Ashmore SICAV 2 Global
Liquidity US$ Fund |
Purchases |
(80,000,000) |
|
Ashmore SICAV 2 Global
Liquidity US$ Fund |
Sales |
81,200,000 |
|
Ashmore SICAV 2 Global
Liquidity US$ Fund |
Dividends |
3,622 |
|
Related Funds are other Funds managed by Ashmore Investment
Advisors Limited or its associates.
Purchases and sales of the Ashmore SICAV 2 Global Liquidity US$
Fund (“Global Liquidity Fund”) were solely related to the cash
management of US dollars on account. Funds are swept into the
S&P AAAm rated Global Liquidity Fund and returned as and when
required for asset purchases or distributions. The Global Liquidity
Fund is managed under the dual objectives of the preservation of
capital and the provision of daily liquidity, investing exclusively
in very highly rated short-term liquid money market securities.
The Directors had the following beneficial interests in the
Company:
|
31
December 2016 |
31
December 2015 |
|
£
ordinary shares |
£
ordinary shares |
Nigel de la Rue |
785 |
1,040 |
Christopher Legge |
490 |
650 |
Richard Hotchkis |
295 |
391 |
18. Commitments
During the year ended 31 December
2010, the Company entered into a subscription agreement with
Everbright Ashmore China Real Estate Fund LP for a total commitment
of US$10 million. As at 31 December 2016, the outstanding commitment was
US$529,455 (31
December 2015: US$529,455).
During the year ended 31 December
2011, the Company increased its commitment to VTBC Ashmore
Real Estate Partners 1 LP to a total of €11.4 million. As at
31 December 2016, the outstanding
commitment was €243,474
(31 December 2015: €243,474).
During the year ended 31 December
2011, the Company entered into a subscription agreement with
AA Development Capital India Fund LP for an initial commitment of
US$4,327,064, which was subsequently
increased to US$23,851,027. AA
Development Capital India Fund LP was dissolved by its General
Partner on 28 June 2013 with all outstanding
commitments transferred to AA Development Capital India Fund 1 LLC.
As at 31 December 2016, the
outstanding commitment was US$6,261,340 (31 December
2015: US$6,261,340).
19. Subsequent Events
Share Conversion
The following share conversions occurred subsequent to
31 December 2016:
Transfers from |
Transfers to |
Number
of shares
to switch out |
|
Number
of shares
to switch in |
£ shares |
US$ shares |
196,572 |
|
236,301 |
US$ shares |
£ shares |
3,718 |
|
3,093 |
Supplementary Information
(Unaudited)
Remuneration Disclosure
Ashmore Investment Advisors Limited (“AIAL”) is a full-scope UK
Alternative Investment Fund Manager (“AIFM”) that manages many
alternative investment funds (“AIFs”). These AIFs implement a
number of investment strategies including; equity, fixed income and
alternatives; and invest in many different regions and industry
sectors. AIAL manages both open-ended and closed-ended AIFs,
several of its AIFs are leveraged and some are listed on regulated
markets. Its assets under management were approximately
US$8.5 billion as
at 30 June 2016. AIAL’s
parent company (“Ashmore”) is listed on a regulated market, counts
fourteen offices worldwide and has a number of subsidiaries both in
the UK and abroad. Taking into account guidance from the UK
Financial Conduct Authority (“FCA”), AIAL has complied with the
full AIFM Remuneration Code.
AIAL does not have any direct employees, and as such the amount
of remuneration paid to staff by AIAL is zero. All AIAL AIFM
Remuneration Code Staff are employed and paid by Ashmore. Ashmore’s remuneration principles
have remained unchanged since it was listed, and are designed to
align all employees with the long-term success of the business.
These include significant levels of deferral, a clear link between
performance and levels of remuneration and strong alignment of
executive directors and employees with shareholders and clients
through significant employee share ownership. The culture is
therefore a collaborative one, with clients’ interests and the
creation of shareholder value, including for employee shareholders,
the overarching factors for success.
Executive directors, members of the investment team, and indeed
all other employees, participate in a single capped incentive pool
and are paid under a similar structure, with an annual cash bonus
and share award, meaning that all employees are long-term
shareholders in the business.
The policy includes:
- a capped basic salary to contain the fixed cost base;
- a cap on the total variable compensation including any awards
made under Ashmore’s share plan, available for all employees at 25%
of profits, which to date has not been fully utilised; and
- a deferral for five years of a substantial portion of variable
compensation into Ashmore shares
(or equivalent), which, in the case of executive directors in lieu
of a separate LTIP, is also partly subject to additional
performance conditions measured over five years.
AIAL’s board of directors reviews the general principles of the
remuneration policy and is responsible for its implementation with
regard to AIAL’s AIFM Remuneration Code Staff. Ashmore’s
Remuneration Committee periodically reviews the ongoing
appropriateness and relevance of the remuneration policy, including
in connection with the provision of services to AIAL. Ashmore employs the services of; McLagan to
provide advice on remuneration benchmarking; Deloitte to provide
advice on tax compliance, share plan design and administration; and
the Remuneration Committee’s advisors are Hewitt New Bridge Street. The Remuneration
Committee’s terms of reference can be found here:
http://www.ashmoregroup.com/investor-relations/corporate-governance
Performance assessment for AIAL’s AIFM Remuneration Code Staff
for their work relating to AIAL is based on a combination of
quantitative and qualitative criteria related to the performance of
AIAL, the performance of relevant AIF(s) or business units and the
performance of the individual. Qualitative criteria include
adherence to Ashmore Group plc’s risk and compliance policies. This
performance assessment is adjusted for relevant current and future
risks related to the AIFs managed by AIAL.
The compensation of control function staff is based on function
specific objectives and is independent from the performance of AIAL
and/or the AIFs managed by AIAL. The remuneration of the senior
officers in AIAL’s control functions is directly overseen by the
Remuneration Committee.
Variable remuneration awarded to AIAL’s Remuneration Code Staff
in respect of AIFMD work is subject to performance adjustment which
allows Ashmore to reduce the
deferred amount, including to nil, in light of the ongoing
financial situation and/or performance of Ashmore, AIAL, the AIFs that AIAL manages and
the individual concerned.
The total contribution of AIAL’s AIFM Remuneration Code Staff to
the business of Ashmore is
apportioned between work carried out for AIAL and work carried out
for the other businesses and subsidiaries of Ashmore. Their remuneration is similarly
apportioned between AIAL and the other businesses and subsidiaries
where required.
The remuneration attributable to AIAL for its AIFMD identified
staff for the financial year ended 30 June
2016 was as follows:
|
Number of
beneficiaries |
Variable
remuneration |
Fixed remuneration |
Total
remuneration |
Ashmore Global
Opportunities Limited |
20 |
£ 6,976 |
£ 2,059 |
£ 9,035 |
Total AIAL |
20 |
£ 1,294,129 |
£ 243,968 |
£ 1,538,097 |
All of the remuneration above was attributable to senior
management who have a material impact on the funds risk profile.
The Company’s allocation of the AIAL remuneration has been made on
the basis of NAV.
Corporate Information
Directors
Richard Hotchkis
Nigel de la Rue
Christopher Legge
Steve Hicks |
Custodian
Northern Trust (Guernsey) Limited
PO Box 71
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3DA
Channel Islands |
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Channel Islands |
Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Channel Islands |
Administrator, Secretary and Registrar
Northern Trust International Fund
Administration Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Channel Islands |
Advocates to the Company
Carey Olsen
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
Channel Islands |
Alternative Investment Fund Manager
Ashmore Investment Advisors Limited
61 Aldwych
London
WC2B 4AE
United Kingdom |
UK
Solicitor to the Company
Slaughter and May
One Bunhill Row
London
EC1Y 8YY
United Kingdom |
Brokers
J.P. Morgan Cazenove
20 Moorgate
London
EC2R 6DA
United Kingdom
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
United Kingdom |
UK
Transfer Agent
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
United Kingdom
Website
Performance and portfolio information for shareholders can be found
at:
www.agol.com |