Ashmore Global Opportunities Limited Annual Report For the year ended 31 December 2012
Ashmore Global Opportunities Limited
Table of Contents
1 Financial Highlights 2 Chairman’s Statement 5 Investment Manager’s Report 20 Schedule of Investments 21 Board Members 22 Directors’ Report 29 Directors’ Remuneration Report 31 Independent Auditor’s Report to the Members of Ashmore Global Opportunities Limited 32 Statement of Financial Position 33 Statement of Comprehensive Income 34 Statement of Changes in Equity 35 Statement of Cash Flows 36 Notes to the Financial Statements 60 Corporate Information
Ashmore Global Opportunities Limited
Financial Highlights
31 December 2012 31 December 2011
Total Net Assets
US$480,034,269 US$512,819,581
Net Asset Value per Share
US$ Shares
€ Shares*
£ Shares
US$7.92 US$8.61 –
€8.24
£7.77 £8.48
Closing-Trade Share Price
US$ Shares
€ Shares*
£ Shares
Discount to Net Asset Value
US$ Shares
€ Shares*
£ Shares
US$5.25
US$6.45
–
€6.38
£5.43 £6.45 (33.71)% (25.09)% – (22.57)% (30.12)% (23.94)%
* € Share class was cancelled on 23 April 2012.
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Ashmore Global Opportunities Limited
Chairman’s Statement
The Chairman submits this statement and the audited financial statements of Ashmore Global Opportunities Limited for the year ended 31 December 2012. As at 31 December 2012, the NAVs of the US dollar and Sterling classes stood at US$7.92 and £7.77, decreases of 8.01% and 8.37% respectively over the year. The US dollar and Sterling share prices stood at US$5.25 and £5.43 respectively as at 31 December 2012, a fall of 18.60% and 15.81% respectively against the levels as at 30 December 2011.
Managed wind-down of the Company The share price of the Company has traded at a significant discount to its Net Asset Value over a long period of time and in the second half of 2012 this discount widened considerably. The Board of Directors (the “Board”) received feedback from both the Shareholders and the Company’s advisors that the structure of a closed-end investment company was no longer appropriate for investment in Special Situations.
The historic discount of the Company’s share price to its NAV is set out below:
GBP Class
USD Class
10.0%
0%
-10.0%
-20.0%
-30.0%
- 40.0%
- 50.0% Dec 2007
Dec 2008
Dec 2009
Source: Northern Trust, Thomson Datastream as at 31 December 2012
2
Dec 2010
Dec 2011
Dec 2012
Ashmore Global Opportunities Limited
Chairman’s Statement continued
On 20 February 2013, the Board proposed a managed winding down of the Company following consultation with the Investment Manager and the main Shareholders. The proposal was accepted during the Extraordinary General Meeting of Shareholders on 13 March 2013 in which the Shareholders of the Company approved: (i) to change the investment objective and to cease the current investment restrictions of the Company in order to realise the Company’s assets in an orderly manner to return cash to Shareholders; (ii) to amend the Articles of Incorporation of the Company to facilitate a regular, quarterly return of cash to Shareholders; (iii) to amend the Articles of Incorporation of the Company to remove the continuation vote of Shareholders; (iv) to amend the Articles of Incorporation to reduce the minimum number of Directors from five to one; and (v) to amend the terms of the Investment Management Agreement (“IMA”) between the Company and Ashmore Investment Management Limited (“Investment Manager”). The Board intends to distribute the cash currently available for distribution by the Company to Shareholders by way of a pro rata compulsory redemption of Shares at NAV per Share. The Board will then make subsequent quarterly distributions to Shareholders once investments are realised and the proceeds of such realisations are received by the Company, provided that the Company holds liquid funds of at least $10 million at each quarter end. The initial distribution relating to the quarter ended 31 March 2013 will be US$88.8 million with payment expected to take place on or around 3 May 2013. The Board expects that approximately a further US$40 million will be realised during the following six months and that, including the above
mentioned distributions, in total approximately 50% of the 31 December 2012 NAV will have become available for distribution by 31 December 2014. The financial statements are prepared on the going concern basis, despite the managed wind-down of the Company. The factors surrounding this are detailed in the Directors’ Report and in note 17. The Board has concluded that currently this managed wind-down will have no significant impact on the valuation of the Company’s investments as these investments will be realised in an orderly manner.
Investment Portfolio and Divestments On a look through basis, the allocation to Special Situations of the total net assets was 65.63% at the end of 31 December 2012. This compares with 85.14% of NAV invested in Special Situations as at 30 December 2011. The lower than usual allocation to the theme reflects significant cash distributions made by some of the Company’s underlying Special Situations Funds in the last week of December 2012. The Company’s focus on Special Situations was maintained with over 80% of the NAV invested in these assets for the majority of the period. The Company’s most significant exposure to Special Situations is through Ashmore’s Global Special Situations Fund 4 which accounted for 29.71% of the NAV as at 31 December 2012. Looking through the various funds at the top underlying holdings, since the interim report, significant events have occurred in AEI, Bangkok Land, and Jasper Investments. A number of divestments were made from the underlying Special Situation Funds including Digicable in India, Star Energy in Indonesia and China Rightway in China. These are described in more detail in the Investment Manager’s report together with information on the top ten holdings on a look through basis. The Company received further distributions from Ashmore Global Special Situations Funds 3, 4, and 5, and from its direct investment in AEI.
3
Ashmore Global Opportunities Limited
Chairman’s Statement continued
Discount Control measures In the Company’s interim report the Board announced that it had committed up to US$20 million to buy back shares in the market. The Company then repurchased 350,887 US dollar shares and 337,042 Sterling shares for a total consideration of approx. US$4.6 million. These shares are currently being held in treasury. On 16 November 2012, the Board announced a suspension of its share buyback programme as it considered options to address the structural discount at which the Company’s shares were traded. This resulted in the proposals for a managed wind-down of the Company as described above.
drive equity markets in these countries, and, either directly, or indirectly through the valuations of comparable companies, drive the valuations of the Company’s underlying holdings. In addition to these expected positive market developments, the embedded value of the current portfolio of investments has begun to be realised in the Company’s NAV, most recently through the sales of Star Energy and China Rightway. Given the maturity of many of the Company’s underlying holdings and the managed wind-down approved by the EGM held on 13 March 2013, the Board and the Investment Manager expect a continued high level of divestment in the next few years.
Outlook for the Company The recent acceleration of economic growth in the Emerging Markets is expected to continue into 2013. This improving fundamental backdrop should
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Jonathan Agnew 18 April 2013
Ashmore Global Opportunities Limited
Investment Manager’s Report
OVERVIEW Markets generally rose amidst volatility in 2012. While growth accelerated in the US, underlying fiscal problems were not addressed. Europe continued to lag, partly due to lack of bank recapitalisation whereas EM countries showed healthy growth in spite of a stagnant external environment. Central Banks in the developed world have played their part to avert a depression; pumping money into the financial system by way of Quantitative Easing (“QE”) as well as by providing various sources of liquidity to European financial institutions. The first such liquidity provision in the period was an extension of the LTRO (Long Term Refinancing Operation) initially enacted in late 2011. This enabled European banks to borrow money from the European Central Bank (ECB) at discounted rates, thus helping remove some of the tail risk of an outright European bank failure. This in turn helped alleviate some of the tensions in the Eurozone. Despite the LTRO, the market soon became concerned about the state of the Spanish banking sector and uncertainty surrounding the Greek elections helped to fuel the fire. Consequently, in July, Mario Draghi, President of the European Central Bank, pledged to do “whatever it takes” to protect the Eurozone from collapse – including fighting unreasonably high government borrowing costs. In our view this was a game changer as it effectively highlighted that the ECB would act as lender of last resort. This was soon followed by an announcement that the ECB would engage in Outright Monetary Transactions (“OMT”) to address “severe distortion” in government bond markets. These two events helped set the tone for a positive end to the year. At the same time, data from the US showed a slow move towards growth, starting with a recovery in the housing sector, while payroll and manufacturing indices also began to show an improvement. Following Draghi’s announcement, European governments and the IMF agreed on a major restructuring of the Greek debt and arranged to disburse a substantial amount of money ahead of the impending Greek debt payment obligations. Progress was also made on the regulatory side
as European leaders agreed that legislation establishing a Single Supervisory Mechanism (SSM) with the ECB at its centre would be enacted in March 2013. Central Banks in the developed world kept the printing presses running after the US Federal Reserve announced a massive “unlimited” QE program in December. Around the same time, the Bank of England and the Bank of Japan followed suit, announcing QE programs of their own. US elections resulted in a second term for President Obama, and again in a divided Congress. As the election passed, markets became nervous over the impeding fiscal cliff. As recent events have proved, solutions to these budgetary issues are not easy to come by. Indeed, a compromise was struck after the official fiscal cliff deadline, but the subject of spending cuts will have to be re-visited when the Republicans and the Democrats debate the US debt ceiling in the coming months. Emerging Markets policy makers in a number of countries responded to slower growth by cutting interest rates as well as implementing other fiscal and monetary measures. Now that the developed world is entrenched, EM export based economies face the challenge of rebalancing their economic model towards domestic demand, as well as the need to push through economic reforms. India is a good example: Bold supply-side structural economic reforms announced by the new finance minister, including the liberalisation of certain business sectors (such as food retailing) and the withdrawal of unaffordable subsidies (kerosene) were unpopular with some members of the public but we believe that they will leave India in better shape in the long term. Despite a slowdown in the G7 economies and falling commodity prices, average EM GDP growth in 2012 was around 5%, highlighting that domestic demand and south-south trade is driving EM growth. The opportunity is also ripe for investment in key sectors and infrastructure spending. Brazil announced a big infrastructure spending programme while Indonesia and the Philippines have also made good progress in this area. Peru and Colombia have invested in developing their mining sectors.
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Ashmore Global Opportunities Limited
Investment Manager’s Report continued
PERFORMANCE The annualised performance figures for the year to 31 December 2012 were (8.37)% and (8.01)% for the GBP and USD share classes respectively. Since inception, on an annualised basis, performance was (4.17)% for the GBP share class and (3.80)% for the USD share class. The NAVs per share for the GBP and USD share classes stood at £7.77 and $7.92 respectively as at 31 December 2012. Performance over the period can mainly be attributed to ETH, ECI and Digicable the details of which are described later in this report. The chart below shows the past performance of AGOL’s NAV since inception (USD).
Price and NAV performance against peer indices (rebased), 12 Months AGOL Share Price
AGOL NAV
LPX PE
MSCI EM
120.0
100.0
80.0
60.0
40.0
20.0
Data sourced from Northern Trust and Bloomberg
6
01 2 c2 De
2 Ju n2 01
01 1 c2 De
01 1 n2 Ju
01 0 De c2
0 Ju n2 01
9 00 c2 De
9 Ju n2 00
00 8 c2 De
8 00 n2 Ju
De
c2
00 7
0.0
Ashmore Global Opportunities Limited
Investment Manager’s Report continued
Portfolio On a look through basis, the allocation to Special Situations of the total portfolio was 65.63% at the end of 31 December 2012. As mentioned in the Chairman’s Statement, this unusually low allocation to the theme resulted from cash distributions received from some of the underlying Special Situations Funds in the last week of December 2012. This can be seen in the above average allocation to cash and equivalents at year end. The table below shows the top 10 underlying investments. Changes to the table since the interim report included the full realisation of Star Energy in December and the partial realisation of Bangkok Land following an agreement in October. These changes have resulted in the inclusion of GEMS/UTILECO and TAAS. There have also been some changes in size/ranking by NAV. Investment Name Holding
Country
Business Description
ETH Bioenergia 12.26% Brazil
Renewable energy equipment company for production of ethanol & electricity from sugar cane.
AEI 7.32% Cayman
Owns and operates essential energy infrastructure businesses in Emerging Markets.
Multi Commodity 6.64% India Exchange of India (MCX)
Nationwide electronic commodity futures exchange trading in over 40 commodities.
EMTEK 6.22% Indonesia
Listed Indonesian telecom, information technology & multimedia company.
Alphaland 5.14% Philippines
Real estate development company focussing on underdeveloped sites.
Pacnet Int’l Ltd. 4.49% Singapore
Asia’s leading independent telecommunications infrastructure and service provider.
Jasper Investments 4.21% Singapore
Listed company investing in Asian growth enterprises, but primarily oil services.
GEMS/UTILECO 3.13% Saudi Arabia
Saudi Arabian integrated industrial services and waste management platform
TAAS
Oil and Gas exploration
3.00%
Russia
ECI Telecom 2.21% Israel
ECI Telecom is a leading supplier of broadband networking infrastructure equipment.
Core country allocations for the Special Situations theme were India, Brazil and Singapore, with the largest single position in the fund being ETH Bioenergia, the Brazilian ethanol producer. By industry, the largest weighting continues to be Real Estate. The tables below show the top ten country and industry allocations at the end of December 2012: Country
(% of NAV) Industry
(% of NAV)
India
14.52%
Real Estate
12.89%
Brazil
14.03%
Energy-Alternate Sources
12.26%
Singapore
10.09%
Diversified Financial Services
11.28%
China
8.64%
Electric
8.61%
Indonesia
8.13%
Telecommunications
7.87%
Cayman Islands
7.32%
Media
6.41%
Philippines
6.40%
Oil & Gas Services
5.53%
Russia
5.45%
Oil & Gas
4.24%
Saudi-Arabia
3.28%
Sovereign
3.34%
Israel
2.23%
Environmental Control
3.13%
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Ashmore Global Opportunities Limited
Investment Manager’s Report continued
Operating performance in the underlying investee companies has been satisfactory on the whole, albeit with a few notable exceptions: Firstly ETH, which was hampered by poor sugar cane harvests, and hence below budget levels of ethanol production. The weather has since reverted to normal patterns and consequently, sugar cane production is back on track for significant growth. Secondly, ECI Telecom struggled in the face of Chinese competition from Huawei and ZTE. ECI’s new CEO has embarked on a cost cutting plan to focus on the most profitable business lines. Early results were seen in Q4 2012 and look set to continue in to 2013. Finally, Digicable was also a poor performer. As communicated in previous reports, the intended merger between Digicable and Reliance Communications failed to materialise for regulatory reasons. In 2011, the Indian government mandated the digitisation of Indian cable TV in several phases over a three year period. This left Digicable in a difficult position: It had 8 million subscribers, but in order to achieve the mandated timetable for digitisation, it will incur massive up-front capital costs to subsidise digital set-top boxes for these customers. As per the Reliance plans, we had been working on consolidation in this fragmented industry, and in order to avoid on going financing costs in the years to come, the asset was realised below its marked price and sold to Sahara, an Indian business group. Of the positives, EMTEK’s integration of the purchased IDKM television channel into SCTV has proceeded well. Efficiency will be improved by combining production facilities while the launch of desktop television services will allow it to break in to new markets. Jasper Investments commissioned the production of two jack-up rigs in 2011 and both of these rigs were sold to a Mexican oil field
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services company in 2012. Jasper also announced the appointment of a new CEO with a long history of working in the FPSO sector. At the time of writing, Jasper has secured a six month contract for the deepwater drillship Explorer which will help improve the cashflow of the business. AEI continues to dispose of its non-core assets according to plan. The sales of two of the three largest non-core assets, Huatong and GTB/TBG, closed in Q3 2012. Trakya, the third largest asset sale, which was signed in Q2 2012 is pending regulatory approval and is expected to close shortly. The greenfield development projects have continued to progress and following the disposal of the AEI assets, AGOL received a cash distribution from this investment. MCX continues to perform well, retaining its very high market share. Historically, the Ashmore Funds held positions in both Bangkok Land and its main operating asset IMPACT (a convention centre). In October, the Ashmore Funds agreed to sell their position in IMPACT to Bangkok Land for an initial THB 600 million, total consideration will be in the range of THB 2.7 billion to THB 3 billion. The Ashmore Funds continue to hold their position in Bangkok Land. Star Energy, the Indonesian geothermal energy producer was fully realised in November 2012. In March 2012, MCX, the India Multi Commodity Exchange was listed on the BSE in an offer which was 54 times oversubscribed. Other smaller realisations have also occurred through the year, namely Care Hospitals and China Rightway. At the end of this Investment Manager’s report we show detailed descriptions of the top ten underlying holdings of the Company and an update on their operations.
Ashmore Global Opportunities Limited
Investment Manager’s Report continued
OPERATING AND VALUATION METRICS Portfolio split by Sales growth
Portfolio split by Debt to EBITDA ratio
% NAV
No. of deals
50.0%
47.3%
% NAV
No. of deals
30.0% 26.1%
45.0%
25.0%
40.0% 35.0%
22.1%
20.0%
30.0% 15.0%
25.0% 20.0%
10.0%
15.0% 10.0% 5.0% 0.0%
7.3%
4.1%
5.0%
6.5%
0.0% –
1
5
18
10%
0.0%
7 4
Debt to EBITDA ratio
Portfolio split by Profit growth
Portfolio split by EV/EBITDA multiple % NAV
% NAV
No. of deals
No. of deals
25.0%
35.0%
21.4%
29.3%
30.0%
20.7%
20.0%
25.0% 15.0%
20.0% 15.0% 10.0%
13.5%
10.0% 9.2%
5.0%
5.0%
5.1%
0.0% 4
–
3
14
10%
0.0%
0.0%
0.0% –
14
4
5
0 to 5x
5.1x to 10x
10.1x to 15x
>15x
EV/EBITDA multiple
Profit growth
Portfolio split by Valuation basis
Portfolio split by Gearing ratio % NAV
No. of deals
% NAV
No. of deals
25.0%
25.0%
21.6%
21.9%
19.8%
20.0% 14.1%
15.0%
20.0% 15.0%
17.7% 15.2% 13.0%
10.0%
10.0% 6.4% 4.4%
0.0%
6
9
0
0 to 0.5
5
1.4% 1
1
0.6 to 1 1.1 to 1.5 1.6 to 2 Gearing (D:E)
5.0% 7 >2
0.0%
2
0.0% –
16
0.5% 1
0.0% –
7
3
Tra DC ns ac F tio nm Ind ult ipl us es try Co mp ara ble s Hi sto ric co st Ex ter na lB rok er Lis ted Pr ice D Co CF/ I mp nd ara ust ble ry s
5.0%
Valuation basis
The above analysis of the last twelve months’ operating performance and valuation metrics of AGOL’s underlying Special Situations holdings as at 31 December 2012 has been done on a best effort basis. The totals may not add up to 100% due to holdings in other investment themes, or Special Situations themed investments for which the selected measures are inappropriate (for example distressed debt or project development). AGOL and Ashmore Investment Management Limited accept no liability for these figures. 9
Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS ETH Bioenergia Company: ETH Bioenergia (Renovavel Investment BV New PIK/PPN) Industry: Ethanol and Power Country: Brazil Website: www.eth.com Company Status: Private
Business Description r E TH Bioenergia (ETHB) is a fully integrated, renewable fuels company which we anticipate may become one of Brazil’s largest ethanol production platforms involving the planning, development and harvesting of sugarcane and the large scale industrial production and distribution of ethanol fuel r E THB currently operates 7 large-scale ethanol plants and is in the process of constructing 2 additional plants
Deal Type: Private Equity
r A t full capacity (which is expected to occur in 2014) ETHB should crush over 40 million tons of sugarcane and produce 3 billion litres of ethanol
Investment Risk: Underlying Equity
Investment Rationale – Why Did Ashmore Invest? r F avourable ethanol production environment in Brazil - with an experienced labour force; a large amount of inexpensive, fertile and arable land; and proven technology r E THB’s competitive advantage is based on its cost-advantaged raw material supply, integrated production and strong execution r T he Company is one of the few global-scale, technologically advanced producers with significant ethanol and cogeneration capacity and a strong balance sheet
Value Creation – What Has Ashmore Done? r A fter an initial minority investment in Brenco, Ashmore gradually increased its participation in the Company, ultimately co-controlling Brenco with Brazil’s development bank, BNDES r In 2010, Ashmore led the merger of Brenco with Odebrecht-controlled ETH, resulting in ETHB r T he creation of ETHB fast-tracked Brenco’s development plan and is poised to benefit from Brazilian ethanol’s supportive industry dynamics
Recent Events r A fter two consecutive harvest seasons with industry-wide, weather-related sugarcane production shortfalls, production began to return to trend in mid-June 2012 and remained normal for the remainder of the harvest season. Total Brazilian sugarcane crushing is expected to increase by 4% this season compared to the previous one. ETH’s production ramped up significantly from the second half of June, and is expected to close the current harvest year at approximately 19 million tons of crushing (vs. 13m last season). r D espite a benign domestic supply/demand dynamic, Brazil’s ethanol prices have remained stagnant for the past 18 months, capped by regulated gasoline prices which are widely anticipated to be raised early in 2013. As a result of production and price shortfalls, ETH continued to increase its debt load during the year, which stood at over US$4.5 billion as at 30 November 2012. This has impacted equity valuations but as interest rates in Brazil fell during the year, the cost of ETH’s debt load did not however increase commensurately. BNDES, Brazil’s state-owned development bank has continued to support ETHB as a key player in Brazil’s strategic ethanol industry.
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Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS continued AEI Company: Ashmore Energy International (AEI) Industry: Power Generation Country: Regional Latin America Website: www.aeienergy.com Company Status: Private Deal Type: Private Equity Investment Risk: Equity
Business Description r H eadquartered in Houston, Texas (domiciled in the Cayman Islands), AEI owns and operates interests in multiple power generation assets as well as natural gas transportation and distribution businesses in Emerging Markets in Asia, Central America and the Caribbean and South America
Investment Rationale – Why Did Ashmore Invest? r A EI was formed by Ashmore to create a diversified portfolio of Emerging Markets energy assets r A EI is reorganising around its core power generation assets and will continue its power plant development projects in Latin America. In addition, the business will pursue compelling growth opportunities
Value Creation – What Has Ashmore Done? r A shmore funds acquired Argentine power assets, and later a controlling interest in Elektra Noreste, which were consolidated along with the energy assets of Prisma Energy International (acquired from the Enron bankruptcy estate) to create AEI, an energy platform for oil, gas & power transportation and distribution businesses r A EI acquired further energy assets in China, Chile and El Salvador amongst other countries to expand its energy platform r In January 2011, AEI agreed to sell its interests in 10 operating companies to an Iberdrola led consortium, representing approximately 80% of AEI’s total assets, for US$4.7 billion. It retained 2.2GW of power generation capacity as a platform for future development r In Q2 2012, Ashmore led the divestiture of virtually all of AEI’s non-core assets for gross proceeds of over US$500 million, and will be focussing on developing its greenfield projects which should fuel the growth of its core Latin American generation platform
Recent Events r G reenfield development projects continued to progress: Fenix, AEI’s 531MW gas-fired power plant in Peru, continued construction apace for start-up in Q3 2013. AEI is studying a number of financing alternatives for Fenix that would take advantage of the project’s advanced stage and lower risk to optimise its capital structure. Jaguar, AEI’s 300 MW coal-fired plant in Guatemala, continues to deal with delays resulting from the EPC contractor encountering difficulties in getting visas for its workers to enter Guatemala, and is now no longer expected to begin operation in 2013. Arrayan, AEI’s 115MW wind plant in Chile, is continuing to progress on engineering and procurement, but site works have not yet started due to delays in environmental permit approvals. r O perating assets performed in line with budget, with the exception of San Felipe, which is behind due to lower fuel margins and reduced availability due to a two-month extension of planned maintenance downtime in the first and second quarter.
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Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS continued MCX Company: MCX (Aginyx Ordinary Shares) Industry: Banking and Finance Country: India Website: www.mcxindia.com
Business Description r M CX is India’s leading commodity exchange with over 85% of the market share r G lobally, MCX is the third largest commodities futures exchange in terms of volume. In terms of future contracts traded, it ranks first in silver and gold, second in natural gas, third in crude oil
Company Status: Private
r It has 40 commodities trading across segments including bullion, base metals, energy and agricultural commodities
Deal Type: Private Equity
Investment Rationale – Why Did Ashmore Invest?
Investment Risk: Underlying Equity
r MCX is India’s leading commodity exchange with a first mover advantage r T he Company is expected to benefit from the rapid growth in the commodity trading business on the back of India’s economic growth r S tructural changes in business and better infrastructure will enhance value. India’s proportion of commodity derivatives to physical contracts is at 3x compared to 30-40x for global benchmarks r A shmore acquired its stake at a discount to the entry price as the seller wished to divest non-core assets
Value Creation – What Has Ashmore Done? r A shmore has a minority stake, and is invested alongside State Bank of India (SBI), National Bank for Agriculture and Rural Development (NABARD), National Stock Exchange of India Ltd (NSE), Bank of India (BOI), Bank of Baroda (BOB), Union Bank of India, Corporation Bank, Canara Bank, HDFC Bank, Fidelity International, Merrill Lynch, Euronext N.V. and others r In March 2012, MCX became the first Indian bourse to be listed on the Indian stock exchanges r T he IPO was done through a book building process that was oversubscribed 54 times, generating bids worth US$7.2 billion against an offer size of US$132 million on the back of strong investor demand with a listing at a 34% premium to the issue price. MCX has a current market capitalisation of over US$1 billion
Recent Events r M CX reported strong growth and performance in the first quarter of FY2013: revenue and EBITDA increased by 6% and net profit by 4% for the corresponding quarter of FY2012. The Q1 FY2013 EBITDA margin was at 68% and net profit margin at 44%. The Company launched two new futures contracts that witnessed an increase in volumes. r T he total number of commodity futures contracts traded in Q1 FY2013 increased by 40% to 98.28 million from 70.27 million in the corresponding quarter of FY2012 with MCX increasing its market-share of contracts traded to 87.2% compared with 86% in FY2012.
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Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS continued EMTEK Company: EMTEK Industry: Television Country: Indonesia Website: www.emtek.co.id Company Status: Private Deal Type: Private Equity Investment Risk: Equity
Business Description r E mtek is a holding company with interests in Free-to-Air TV, communications networks and related retail and IT services. The vast majority of Emtek’s value comes from its interest in SCTV, Indonesia’s No2 FTA channel r S CTV acquired an 84.7% interest in Indosiar, its main FTA competitor. The combined platform has a 25% market share in Indonesia
Investment Rationale – Why Did Ashmore Invest? r E mtek/SCTV provided a clear exposure to rising Indonesian incomes and expenditure r A shmore believes that the FTA media business in Indonesia will merge over time and that Emtek provides the best platform to benefit from that
Value Creation – What Has Ashmore Done? r S taffing: the Company’s COO came from Ashmore’s stable of operating contacts and, once in place, initiated very stringent cost and capital budgeting – this has been key to SCTV’s continued top line growth along with cost and working capital savings r P rovided management with the patient capital needed to develop its own economic position and enabling it to be a consolidator of the local industry r P rovided Ashmore staff to help management and our partner review M&A opportunities as they come up r T he Indonesian market has excess capacity and is inefficient. Applying SCTV’s benchmarks to other operators should result in material savings and increased revenues r W e believe that a successful integration with IDKM will provide a more attractive platform going forward
Recent Events r N o major events in H2 2012. Both SCTV and Indosiar, EMTEK’s main operating subsidiaries, did small block trades and stock splits to improve liquidity.
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Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS continued Alphaland Company: Alphaland Industry: Real Estate Development Country: The Philippines Website: www.alphaland.com.ph Company Status: Public Deal Type: Private Equity Investment Risk: Underlying Equity
Business Description r A lphaland is a developer of Class A office and retail space and high and mid-tier residential real estate in Metro Manila. In addition, the Company is a development partner in two high-end resorts and second home developments on holiday islands near to Manila r T he Company’s assets are a Metro Manila land bank, a tenanted mixeduse office building, under construction sites in Makati Manila and two residential developments in the island belt around Manila
Investment Rationale – Why Did Ashmore Invest? r T he macro driver for Ashmore’s Initial Investment was the relative lack of Class A office buildings in Metro Manila compared to potential demand:
– Supply did not meet the needs of the outsourcing, offshoring and services industries
– Continued strong remittance payments were seeking quality, new build, affordable city housing. This has not been a traditional market for Metro Manila developers
r In addition, our partners in Alphaland were able to provide i) an experienced local management team able to source land and build and ii) compelling acquisition prices from distressed sellers
Value Creation – What Has Ashmore Done? r W orked with local partners to source, underwrite and review site acquisitions r Introduced management to Ashmore relationship banks in order to provide the Company with additional sources of land and construction financing r A lphaland was listed on the PSE in 2010 via the reverse takeover of a shell company. Although illiquid, this listing could make a future public equity capital raising swifter and easier for the company r A shmore staff have worked consistently with the management team over the last year on refining their marketing projections and matching resources/best practice with those projections r T he Company, with Ashmore monitoring, is now on target to complete its Balesin Island Resort 12 months ahead of schedule – this should bring membership sales and cashflow forward by a similar amount r S imilarly the Alphaland Tower project has now come in on time and Ashmore is working with management on the leasing strategy
Recent Events r A ll the main construction projects (Balescin Resort, Makati Place Residential and City Club and the Alphaland Tower) continue to progress well. Alphaland Tower has been topped out and an active leasing programme has been started resulting in a number of conversations with tenants looking to take large areas of the building. Balescin and Makati Place sales have strengthened with international sales in particular showing a strong tick up.
14
Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS continued Pacnet Company: Pacnet Industry: Telecommunications Country: Hong Kong and Singapore Website: www.pacnet.com Company Status: Private Deal Type: Private Equity Investment Risk: Underlying Equity
Business Description r P acnet was formed in 2008 with the merger of three leading Asian IP telecommunication companies, creating Asia’s longest and highest capacity privately-owned submarine cable network r Total network construction costs were US$4.1 billion r O ver 240 carrier customers, 800 enterprise customers and more than 43,000 SME customers worldwide r O ver 1,200 employees and the largest regional telecom sales force in Asia r M ission is to become Asia’s leading next generation data service provider for all enterprises in the Asia Pacific region
Investment Rationale – Why Did Ashmore Invest? r Network acquisitions were done at a fraction of construction costs r P lan to become the largest owner of sub-sea capacity in Asia to command pricing power and lead consolidation while building a complex telecom services company r V alue drivers included exponential Asian broadband usage growth and pricing recovery from massive over-capacity
Value Creation – What Has Ashmore Done? r L ed the restructuring of the C2C asset with the conversion of debt into equity, further acquisition and integration into Asia Netcom in 2006 r T ransformed Asia Netcom and C2C from money-losing sub-sea networks 5 years ago into a profitable full service telco and successfully integrated Pacific Internet in 2008 r A ppointed a new CEO and strengthened senior management team to support the Company’s focus on higher margin business and the enhanced offerings of Managed Services r D irected a new Management team to undertake a review of the operational efficiency of the business, which has led to approx US$30 million pa in cost savings, and projected 2013 EBITDA growth of approximately 25% r R e-positioned the Company as a provider of bundled Network and Managed Services to Carriers and Enterprise Customers. In 2013 Pacnet will add new owned Data Centre locations in Australia and Singapore, as well as managed locations in China
Recent Events r A new CEO was appointed in July and senior hires were also made in both Sales and Managed Services, further strengthening the management team. Management was tasked with a review of the cost structure and the profitability of its Network and Connectivity products. In response to this, the decision has been taken to exit the low margin Voice Data business and the product offerings to retail customers. Management is targeting US$30 million pa in cost savings from these initiatives, mainly driven by reduced headcount. If these savings are achieved, EBITDA should grow by approximately 20% in 2013. r T he business is now being positioned to focus on providing Network and Managed Services to Carrier and Enterprise customers, whilst also looking to fully exploit the Company’s business and licences in China. 15
Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS continued Jasper Investments Company: Jasper Investments Industry: Oilfield Services Country: Singapore Website: www.jasperinvestments.com Company Status: Public Deal Type: Private Equity Investment Risk: Underlying Equity & Debt
Business Description r J asper Investments Limited (“Jasper”) is a holding company listed on the SGX since 1993 which principally invests in the offshore oil and gas drilling and services sector r J asper’s principal subsidiary, Jasper Offshore, owns and operates oil rigs for deep sea drilling which are contracted out to oil and gas exploration and production companies
Investment Rationale – Why Did Ashmore Invest? r A shmore acquired its majority interest in Jasper as a Singapore listed holding vehicle r A shmore first had the opportunity to acquire Neptune, the oilfield services genesis of Jasper, when the previous management/promoter team got into financial difficulties r A conversion programme was expected to be a cheaper and more efficient way to get access to increasing E&P capex spending
Value Creation – What Has Ashmore Done? r A shmore staff have worked with the Company to extend the tenor of its debt allowing management to focus on near term operations r F ound new senior management with extensive drilling and company development experience r S trong focus on supervision of management by the board/Shareholders with a focus on i) the operating status of the Explorer and ii) marketing of the Explorer drillship and the jack-up rigs r F ound buyers through Ashmore’s network for Jasper’s jack-up rigs at higher prices than recent comparable sales r A shmore staff have been deeply involved in project reviews for all capex and in setting up project management best practice r A shmore has appointed a new Chairman to the company to provide additional support to management r A shmore staff carried out a complete review of processes, benchmarks and reporting within the company r A new CEO was appointed after a thorough search initiated and managed by Ashmore
Recent Events r T he Adventurer jack-up was sold for US$216 million compared with a US$180 million construction price. An option on the second jack-up was also sold which was exercised in November 2012. The Explorer refurbishment is continuing and management is actively pursuing contract discussions with two parties. The vessel is expected to be on contract as soon as the dry dock work is complete.
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Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS continued GEMS/Utileco Company: GEMS/Utileco Industry: Waste Management Country: Saudi Arabia Website: www.gems-ksa.com Company Status: Private Deal Type: Private Equity Investment Risk: Underlying Equity
Business Description r G EMS/Utileco is an integrated industrial services and waste management platform. The main business activities are the collection, handling and disposal of petroleum and chemical wastes r T he company is also involved in wastewater treatment, bio remediation, resource recovery and environmental cleanups, as well as the recovery and resale of oils such as waste lube oil r G EMS runs 14 waste oil collection and treatment sites across the Kingdom of Saudi Arabia
Investment Rationale – Why Did Ashmore Invest? r T he rationale is to leverage GEMS’s existing infrastructure, facilities, partnerships, licenses and contracts, combined with Ultileco’s IP and management team, to create the leading integrated regional waste management company in both the Kingdom of Saudi Arabia, and the region r A shmore Funds first invested in GEMS /Utileco in Q4 2008, and Q1 2009. There have been several subsequent investment rounds to fund capacity increases and the consolidation of shareholdings r F urther value generation is available through continued capacity expansion in addition to investment in Integrated Waste Management plants and waste lube oil re-refineries that will not only increase collection capacity but also the amount of resources recovered such as waste and base oils which can be resold in the local market as well as regionally
Value Creation – What Has Ashmore Done? r T he continued increase in waste production, particularly in the Oil & Gas and petrochemicals sectors in the region combined with stricter environmental laws is creating a large underserved market that GEMS/ Utileco is benefiting from. Ashmore identified this opportunity, recruited the management team, coordinated the strategy and has been working closely with management on operations to drive the value of the business
Recent Events r E BITDA year to date has increased 43% vs. the same period last year which is below budget. This is mainly due to a delay in the approvals required to allow collections from the Royal Commission zones and delays in contracts due to the prolonged crossover of summer and religious holidays. Approvals have now been granted and contracts have resumed. Management expect to close the year very close to the initial targets. r Investment in equipment and capacity expansion in the existing waste management centres throughout the Kingdom continues on schedule with land granted in the Royal Commission of Yanbu and expansion of the Al Joffa site. Shareholders have initiated discussions regarding several possible corporate events (merger, sale, third party funding).
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Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS continued TAAS Company: TAAS Industry: Oil exploration/production Country: Russia Company Status: Private Deal Type: Private Equity Investment Risk: Equity
Business Description r T AAS holds the licence for the development and commercial exploitation of the Srednebotuobinskoe oil-gas-condensate field located in Eastern Siberia in the Republic of Sakha (Yakutia), Russia r T he field is one of the five largest discovered in Eastern Siberia with 2P oil reserves of 885.8 mm bbl as per an independent report produced by DeGoyler and MacNaughton at 31 March 12 r It is located close (168 km) to the East Siberia Pacific Ocean (ESPO) pipeline, connected to an oil terminal in Kozmino Bay on the Pacific shore, which is the main oil export route from Russia to the Far East
Investment Rationale – Why Did Ashmore Invest? r T he investment offered an opportunity to gain access to a large, high quality oil field in the developing Eastern Siberia region r V alue creation was expected to be delivered through the development of the field, connection to the Far East markets via the ESPO and the strategic interest in the acquisition of Russian oil reserves well positioned to target markets in the Far East, including Chinese crude oil markets r G overnment attempts to attract investment into the region included certain tax breaks that were awarded to TAAS significantly improving the economics
Value Creation – What Has Ashmore Done? r Field development is now underway r T he tie-in to the ESPO pipeline has been completed and is undergoing testing r Production start-up is expected H1 2013 r S hareholder restructurings in 2008 and 2011 resulted in the inclusion of Rosneft as a significant but not controlling shareholder. Ashmore not only protected its own position during this process but was also instrumental in negotiations to close the deal r In early 2011, the license on the field was extended from 2016 to 2041 r Taas is reviewing several funding proposals from off-takers and banks
Recent Events r T he government has publicly announced an extension in a tax (MET) exemption for oil companies operating in Eastern Siberia. This will result in an MET holiday extension for the Central block of the field until at least 2019 and until 2022 for the Southern block, providing a significant NPV uplift.
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Ashmore Global Opportunities Limited
Investment Manager’s Report continued
DETAILS ON TOP 10 UNDERLYING HOLDINGS continued ECI Company: ECI
Business Description
Industry: Telecoms Hardware
r E CI designs Telecoms hardware and sells to major telcos worldwide, although historically around two thirds of sales are to Emerging Markets
Country: Israel
Investment Rationale – Why Did Ashmore Invest?
Website: www.ecitele.com
r M anufacturing could potentially be outsourced, with a projected saving of US$16 million
Company Status: Private Deal Type: Public to Private Investment Risk: Debt & Underlying Equity
r U S$124 million excess real estate, investments and working capital were identified r ECI traded on NASDAQ at 10x EBITDA, but 5.4x proforma EBITDA r A bility to secure recurring revenues from Telcos in Emerging and Developed Markets with capex spending on broadband access, transport and Backhaul solutions, complemented by providing turnkey projects and service-based solutions
Value Creation – What Has Ashmore Done? r Manufacturing has been outsourced to Flextronics r 3 8% of the high cost Israeli R&D headcount has been deployed to low cost geographies r R &D has been used to expand the product range, and the addressable market has quadrupled as a result. US$500 million spent on R&D since the acquisition r ECI won a major 5 year BT Open Reach contract r A full restructuring of the Company is being concluded after revenue shortfalls in 2011, with leadership changes including the CEO, the head of sales and the head of products. There has been a US$150 million (30%+) reduction in annualised costs in the last 15 months r P ost-restructuring, the company is now focussed on driving future growth from its core transport technologies
Recent Events r T he macro-economic environment, exacerbated by Chinese competition from Huawei/ZTE and regulatory uncertainty created by the cancellation of 2G licenses in India, has led to depressed capex spend and increased price sensitivity by network operators in ECI’s key markets. These factors resulted in depressed sales across 2012. The participation of Huawei and ZTE is currently under investigation in several markets, including the US, the UK and the Netherlands. r T he new CEO started on 1 August 2012 and was charged with achieving cash-flow break-even and helping to position ECI for a future exit. An initial round of cuts is estimated to have reduced the 2012 cost base by US$48 million. A programme of further cuts was implemented in October. The first shipment of ECI’s new Apollo product line (combined IP/optical Transport platform for metro deployment) was made to Germany in Q3 2012.
Ashmore Investment Management Limited Investment Manager 18 April 2013 19
Ashmore Global Opportunities Limited
Schedule of Investments As at 31 December 2012
Valuation in US$
% of NAV
Ashmore Global Special Situations Fund 4 LP
142,633,634 29.71
Ashmore Asian Recovery Fund
110,194,018 22.95
Ashmore Global Special Situations Fund 5 LP 42,075,258 8.77 Renovavel Investments BV New PIK/PPN
31,379,479 6.54
AEI Inc – Equity
20,970,584 4.37
Aginyx Ordinary Shares
18,182,432 3.79
Ashmore SICAV Emerging Markets Total Return Fund
15,781,659 3.29
Ashmore Global Special Situations Fund 3 LP
15,531,325 3.23
AA Development Capital India Fund LP
14,117,769 2.94
Ashmore SICAV EM Equity Select Fund
13,306,503 2.77
Everbright Ashmore China Real Estate Fund LP
9,313,072 1.94
Ashmore Asian Special Opportunities Fund Limited
8,986,474 1.87
Ashmore Greater China Equity Fund Limited
5,130,256 1.07
VTBC Ashmore Real Estate Partners 1 LP
3,329,247 0.69
Ashmore Private Equity Turkey Fund LP
2,684,127 0.56
Ashmore Global Special Situations Fund 2 Limited
1,608,792 0.34
Total investments at fair value Net other current assets
455,224,629
94.83
24,809,640 5.17
Total net assets
480,034,269
100.00
Valuation in US$
% of NAV
Special Situations*
315,015,443 65.63
Cash and equivalents
50,074,709 10.43
Corporate Debt
36,873,195 7.68
Equity
16,388,087 3.41
External Debt
15,022,413 3.13
Real Estate
12,291,065 2.56
Local Currency
9,559,717 1.99 455,224,629 94.83
*As defined in the registration document of the Company (the “Prospectus”).
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Ashmore Global Opportunities Limited
Board Members
As at 31 December 2012 the Board consisted of five 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 AIC Code on Corporate Governance (the “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. Jonathan Agnew, Independent Chairman (UK resident) appointed 16 October 2007 Jonathan Agnew is Chairman of AGOL, having been appointed to the Board in 2007. He is also Chairman of The Cayenne Trust plc and Senior Independent Director of Rightmove plc. Mr Agnew was formerly a managing director of Morgan Stanley and subsequently Chief Executive of Kleinwort Benson Group and has been Chairman of Limit plc, Gerrard Group plc, Henderson Geared Income & Growth Trust plc, Beazley plc, LMS Capital plc and Nationwide Building Society. Graeme Dell, Non-Independent Director (Employee of the Investment Manager), (UK resident) appointed 5 March 2008 Graeme Dell joined Ashmore Group plc and was appointed to the Board as Group Finance Director in December 2007. Prior to joining Ashmore, Graeme was Group Finance Director at Evolution Group Plc from 2001 to 2007, where he had group-wide responsibility for finance, operations, technology, compliance, risk and HR which included playing a significant role in the foundation and development of Evolution’s Chinese securities business. Graeme previously worked for Deutsche Bank and Goldman Sachs in a range of business management, finance and operations roles both in Europe and in Asia Pacific. Graeme qualified as a Chartered Accountant with Coopers & Lybrand and is a graduate of Hertford College, Oxford University.
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 including at BH Macro Limited where he chairs the Audit Committee. Richard Hotchkis, Independent Director (Guernsey resident) appointed 18 April 2011 Richard Hotchkis has 36 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 FRM Credit Alpha Limited, Alternative Investment Strategies Limited and Advance Frontier Markets Fund Limited.
21
Ashmore Global Opportunities Limited
Directors’ Report
The Directors submit their Report together with the Company’s Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows, and related notes for the year ended 31 December 2012, which have been prepared properly, in accordance with International Financial Reporting Standards (“IFRS”) 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.
Going Concern In view of the significant discount to net asset value at which the Company’s shares trade, on 16 November 2012 the Board deemed it appropriate to suspend the share buyback programme, while they consider options available to address this structural issue. The Board of Directors called an Extraordinary General Meeting (“EGM”) 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 has, 1. changed the investment objective of the Company to realise the Company’s assets in an orderly manner to return cash to Shareholders; 2. amended the Articles of Incorporation to facilitate a regular, quarterly return of cash to Shareholders;
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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 Management Limited (“Investment Manager”). The Directors have examined significant areas of possible financial going concern risk and are satisfied that no material exposures exist. The Directors therefore consider that the Company has adequate resources to continue in operational existence for the foreseeable future and after due consideration 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.
Corporate Governance Introduction As an authorised, closed-ended investment company, registered in Guernsey, the Company has adopted the Association of Investment Companies (“AIC”) Code on Corporate Governance (the “Code”). The Board of the Company has considered the principles and recommendations of the Code by reference to the AIC Corporate Governance Guide for Investment Companies (“AIC Guide”). The 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 (e.g. specific corporate governance requirements contained in the UK Listing Rules which are relevant to investment companies). The Board has put in place a framework for corporate governance which it believes is suitable for an investment company and which enables the Company to comply with the requirements of the Code, which sets out principles of good governance and a code of best practice. On 30 September 2011 the Guernsey Financial Services Commission (“GFSC”) issued a new Code of Corporate Governance (the “GFSC Code”) which came into effect on 1 January 2012.
Ashmore Global Opportunities Limited
Directors’ Report continued
The GFSC Code replaces the existing GFSC guidance, “Guidance on Corporate Governance in the Finance Sector”. The GFSC Code provides a framework that applies to all entities licensed by the GFSC or which are registered or authorised as a collective investment scheme. Companies reporting against the UK Corporate Governance Code or the AIC Code of Corporate Governance are deemed to comply with the GFSC Code. The following statements describe how the principles of governance are applied to the Company. The Board Details and biographies for all the Directors can be found on page 21 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 Jonathan Agnew is an Independent Director. As the Chairman is an Independent Director, no appointment of a Senior Independent Director has been made. The Company has no employees and is not self-managed therefore there is no requirement for a chief executive. The Articles of Incorporation provide that unless otherwise determined by ordinary resolution, the number of the Directors shall not be less than five and the aggregate remuneration of all Directors in any twelve month period, or pro rata for any lesser period shall not exceed £300,000 or such higher amount as may be approved by ordinary resolution. 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 9 years on the Board, will thereafter be put forward for re-election on an annual basis. The Board of Directors is charged with setting the Company’s investment strategy. They have delegated the day to day implementation of this strategy to its Investment Manager but retain responsibility to ensure that adequate resources of the Company are directed in accordance with their decisions.
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 Board, Audit Committee and Management Engagement Committee undertake an evaluation of their own performance and that of 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. 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. As soon as practicable after the Board is satisfied with the progress of the managed wind-down, the Board intends to reduce its size and thus reduce further its costs. With the appointment to the Board of any new Director, consideration will be given as to whether an induction process is appropriate.
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Ashmore Global Opportunities Limited
Directors’ Report continued
The table below sets out the number of Board meetings and Audit Committee meetings during the year ended 31 December 2012: Management Audit Engagement Board Committee Committee meetings meetings meeting attended attended attended
Jonathan Agnew 8 N/A 2 Graeme Dell 7 N/A N/A Nigel de la Rue 9 3 2 Christopher Legge 9 3 2 Richard Hotchkis 8 2 2 No. of meetings during the year
9
3
2
In addition to the Board and Audit Committee meetings, 10 other committee meetings were held. Any Directors who are not members of Board Committees are also invited to attend meetings of such committees as necessary.
Audit Committee An Audit Committee has been established and holds meetings at least twice a year. The Audit Committee consists of Nigel de la Rue, Richard Hotchkis and Chairman Christopher Legge. The principal duties of the Audit Committee are, amongst other things, reviewing the interim and annual reports, considering the appointment and independence of external auditors, discussing with the external auditors the scope of the audit and ensuring all duties are performed within the requirements of the Code, where relevant. The Board of Directors is satisfied that for the year under review and thereafter the committee has sufficient recent and relevant commercial and financial knowledge to satisfy the provisions of the Code. 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.
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The table below summarises the remuneration paid to KPMG Channel Islands Limited and to other KPMG affiliates for audit and non-audit services during the years ended 31 December 2012, and 31 December 2011:
Year ended Year ended 31 December 31 December 2012 2011 US$ US$
Audit and audit related services – Annual audit 97,444 101,913 – Interim review 39,980 42,763 Non-audit services – Services related to Premium Listing – 67,434 The Audit Committee is satisfied that the external auditors remain independent and confirms that the Audit Committee also met with the external auditors 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 auditors to raise any matters of concern in confidence. The Audit Committee has reviewed the need for an internal audit function. 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. The Audit Committee has requested and received ISAE 3402 or equivalent reports from the Investment Manager and the Company’s administrator to enable it to fulfil its duties under the Audit Committee’s terms of reference. Representatives of the auditors, Investment Manager and the Administrator attend each Audit Committee meeting as a matter of practice and presentations are made by those attendees as and when required.
Ashmore Global Opportunities Limited
Directors’ Report continued
Nomination Committee
Management Engagement 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. Neither external search consultancy nor open advertising have been used when appointing a chairman or a non-executive director because of the specialist nature of the appointments and the knowledge amongst existing Directors and Ashmore Investment Management Limited.
The function of the Management Engagement Committee, comprised of four independent Directors (Jonathan Agnew, 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 auditors). The Committee also reviews the performance of the Investment Manager and the other third party service providers on a periodic basis.
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 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 7 in the notes to the financial statements. Conversions approved by the Directors subsequent to the year end are detailed in note 17 in the notes 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.
The Company has entered into an agreement with the Investment Manager, Ashmore Investment Management 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. At the Extraordinary General Meeting held 13 March 2013, the Investment Manager has agreed to revise terms of the Investment Management Agreement, which are aligned with the Company’s restated investment objective and policy. Despite the performance of the Company since incorporation, at its October 2012 and January 2013 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 under the terms agreed, which were subsequently amended in the revised Investment Management Agreement dated 1 February 2013. The Board at the date of this report continues to expect that Ashmore will remain the Investment Manager for the remaining life of the Company, The terms of references of all the existing committees are made available by the Company to Shareholders upon request.
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Ashmore Global Opportunities Limited
Directors’ Report continued
Independent Auditor KPMG Channel Islands Limited have expressed their willingness to continue in office as auditors and a resolution proposing their re-appointment will be submitted at the Annual General Meeting.
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. A monthly report on investment performance is published on the Company’s website (www.agol. com). 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.
Directors’ Remuneration 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 on page 30 of this annual report.
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 Financial 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.
26
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.
Compliance Statement During the year, the Company has complied with the provisions of the Code, subject to any exceptions disclosed above. The revised UK Corporate Governance Code released in September 2012 is not applicable for the Company for the year ended 31 December 2012 and the Company will not be early adopting. It will be applicable for the year ended 31 December 2013 and the Board will discuss this through the year to determine what impact and additional disclosure might be needed.
Investment Policy As at 31 December 2012, 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 the Company’s assets across Ashmore’s investment themes with a principal focus on Special Situations and seeks to create value for Shareholders and target total return through active portfolio management. The Investment Manager employed a predominantly top-down and valuedriven investment approach coupled with a
Ashmore Global Opportunities Limited
Directors’ Report continued
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 was seeking 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, 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 trade, which included proposals to Shareholders to amend the investment strategy to make no new special situations investments (any new investments to be shorter term in nature), to realise the company’s assets for cash over the next few years and over time to return all cash realised from the investment portfolio to Shareholders (the “Managed Wind-Down”). Shareholders approved the Board’s proposals above at the Extraordinary General Meeting of Shareholders on 13 March 2013. The Board believes the revised investment strategy is the best way of realising the value of the Company.
Results and Dividends The results for the year are set out on page 33 of this annual report.
Association of Investment Companies (AIC) The Company is a member of the AIC.
Continuation Vote As a result of the discount persisting at an average level in excess of 10%, the Board called Extraordinary General Meetings (“EGM”) on 18 April 2011 and 7 June 2012 for investors to consider the continuation of the Company. At each EGM, the shareholders voted overwhelmingly against the resolution to wind-up the Company in line with the Board’s unanimous recommendation.
At the Extraordinary General Meeting (“EGM”) held on 13 March 2013, Shareholders approved the Board’s proposals for a managed wind-down of the Company`s portfolio, including amending the Articles to facilitate a regular, quarterly return of cash to Shareholders and to remove the continuation vote.
Derivatives and Hedging The shares of the Company are denominated in US Dollars and Pounds Sterling. The base currency of the Company is the US Dollar, and as such, non-US Dollar subscription monies for shares are converted to US Dollars for operational purposes. Both the costs and any benefit of hedging the foreign currency exposure of the assets attributable to shares denominated in Sterling from the US Dollar will be allocated solely to the relevant class of shares. This may result in variations in the Net Asset Value of the two classes of shares.
Share Capital The number of shares in issue at the year end is disclosed in note 7 to the financial statements.
Directors’ Interests As at 31 December 2012, three Directors: Nigel de la Rue, Christopher Legge and Richard Hotchkis had beneficial interests in 4,000, 2,500 and 1,500 Sterling shares respectively and Jonathan Agnew had a beneficial interest of 15,000 US$ shares. Since 31 December 2011 Jonathan Agnew sold 10,000 Sterling shares and acquired 15,000 US$ shares and Christopher Legge acquired 2,500 Sterling shares. Graeme Dell is Group Finance Director of Ashmore Group plc. He also sits on the Board of Ashmore Investment Management Limited and has a beneficial interest in Ashmore Global Special Situations Fund 5 Limited Partnership and Ashmore Asian Special Opportunities Fund Limited.
27
Ashmore Global Opportunities Limited
Directors’ Report continued
Statement of Directors’ Responsibilities
Disclosure of information to auditors
The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations.
The Directors who held office at the date of approval of the financial statements confirm that, so far as they are each aware:
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 and applicable law.
• There is no relevant audit information of which the Company’s auditor is unaware; and
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.
• 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 and Transparency Rules 4.1.12
In preparing these financial statements, the Directors are required to:
We confirm that to the best of our knowledge and belief:
• select suitable accounting policies and then apply them consistently;
• the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
• 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.
28
• the Chairman’s Statement, the Investment Manager’s Report and the Directors’ Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces. Signed on behalf of the Board of Directors on 18 April 2013
Jonathan Agnew
Christopher Legge
Chairman
Chairman of the Audit Committee
Ashmore Global Opportunities Limited
Directors’ Remuneration Report
Introduction An ordinary resolution for the approval of the annual remuneration report will be put to the Shareholders at the Annual General Meeting to be held in 2013.
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 directors of comparable companies. There are no long term incentive schemes provided by the Company and no performance fees are paid to Directors. The Articles of Incorporation provide that unless otherwise determined by ordinary resolution, the number of the Directors shall not be less than five and the aggregate remuneration of all Directors in any twelve month period, or pro rata for any lesser period shall not exceed £300,000 or such higher amount as may be approved by ordinary resolution.
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 9 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 notice in writing to the Board at any time. As Graeme Dell is an employee of the Investment Manager and therefore deemed not to be an independent Director, he shall be put forward for re-election on an annual basis. As a result of the Company being placed into a managed wind-down, it was considered appropriate for there to be a reduction in Directors’ fees.
Directors’ fees Directors are remunerated in the form of fees, payable monthly in arrears, to the Director personally, except Mr. Dell’s which is paid to Ashmore Group plc. No other remuneration or compensation was paid or payable by the Company during the period to any of the Directors apart from the reimbursement of allowable expenses. Directors’ remuneration for the year ended 31 December 2012 was as follows; the Chairman: £75,000 per annum, the Chairman of the Audit Committee: £35,000 per annum and Directors: £33,000 per annum.
29
Ashmore Global Opportunities Limited
Directors’ Remuneration Report continued
The fees payable by the Company in respect of each of the Directors who served during the years ended 31 December 2012 and 2011, were as follows: Year ended Year ended
31 December 31 December 2012 2011 £ £
Jonathan Agnew 75,000 75,000 Christopher Legge 35,000 35,000 Graeme Dell 33,000 33,000 Nigel de la Rue 33,000 33,000 Richard Hotchkis (appointed 18 April 2011) 33,000 23,100 John Roper (retired 18 April 2011) – 9,900 Total 209,000 209,000
30
Effective 1 January 2013, Mr. Dell waived his Director’s fee. Following the EGM held on 13 March 2013, effective 1 April 2013 the fees of the Chairman reduced by 20% with the other directors fees being reduced by 10%. Signed on behalf of the Board of Directors on 18 April 2013
Jonathan Agnew
Christopher Legge
Chairman
Chairman of the Audit Committee
Ashmore Global Opportunities Limited
Independent Auditor’s Report to the Members of Ashmore Global Opportunities Limited
We have audited the financial statements (the “financial statements”) of Ashmore Global Opportunities Limited (the “Company”) for the year ended 31 December 2012 which comprise 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. This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor As explained more fully in the Statement of Directors’ Responsibilities set out on page 28, 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 International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements 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. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements In our opinion the financial statements: • give a true and fair view of the state of the Company’s affairs as at 31 December 2012 and of its loss for the year then ended; • are in accordance with International Financial Reporting Standards as issued by the IASB; and • comply with the Companies (Guernsey) Law, 2008.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion: • the Company has not kept proper accounting records; or • the financial statements are not in agreement with the accounting records; or • we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit. Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review.
Neale D. Jehan For and on behalf of KPMG Channel Islands Limited Chartered Accountants and Recognised Auditors 19 April 2013 31
Ashmore Global Opportunities Limited
Statement of Financial Position As at 31 December 2012
31 December 2012 31 December 2011 Notes US$ US$
Assets 28,141,250 5,142,245
Cash and cash equivalents Other financial assets
6
3,773 –
Financial assets at fair value through profit or loss
4
458,867,159 515,006,150
Total assets
487,012,182
520,148,395
Equity Capital and reserves attributable to equity holders of the Company 7
Special reserve
Retained earnings Total equity
705,125,322
709,686,456
(225,091,053)
(196,866,875)
480,034,269
512,819,581
Liabilities
Current liabilities Other financial liabilities
6
Financial liabilities at fair value through profit or loss
5
Total liabilities
6,658,436
5,570,174
319,477
1,758,640
6,977,913
7,328,814
Total equity and liabilities 487,012,182 520,148,395
Net asset values Net assets per $ share
8
Net assets per € share
8
Net assets per £ share
8
US$7.92 US$8.61 –
€8.24
£7.77 £8.48
The financial statements on pages 32 to 59 were approved by the Board of Directors on 18 April 2013, and were signed on its behalf by:
Jonathan Agnew
Christopher Legge
Chairman
Chairman of the Audit Committee
The notes on pages 36 to 59 form an integral part of these financial statements.
32
Ashmore Global Opportunities Limited
Statement of Comprehensive Income For the year ended 31 December 2012
Year ended Year ended 31 December 2012 31 December 2011 Notes US$ US$
Interest income
9
692 –
Dividend income
9
28,869,984 75,013,721
Net foreign currency gain
875 266,205
Other net changes in fair value on financial assets and liabilities at fair value through profit or loss
(52,163,017) (124,838,569)
4,5
Total net (loss)
(23,291,466) (49,558,643)
Expenses 10a
(2,676,787) (3,928,856)
Incentive fee
10a
(845,334) (4,838,585)
Directors’ remuneration
10b
(306,178) (341,834)
Fund administration fee
10c
(202,591) (209,973)
Custodian fees
10d
(99,403) (113,202)
Net investment management fee
– (1,038)
Interest charges Other operating expenses
11
Total operating expenses
(802,419) (1,259,222) (4,932,712)
(10,692,710)
Operating (loss) for the year
(28,224,178)
(60,251,353)
Other comprehensive income Total comprehensive (loss) for the year
– – (28,224,178)
(60,251,353)
Earnings per share Basic and diluted (loss) per US$ share
12
US$(0.64) US$(0.84)
Basic and diluted earnings/(loss) per € share*
12
US$1.19 US$(0.89)
Basic and diluted (loss) per £ share
12
US$(0.62) US$(1.75)
*For the period ended 23 April 2012 as the Euro share class was cancelled on that date (see note 7 for details). All items derive from continuing activities.
The notes on pages 36 to 59 form an integral part of these financial statements.
33
Ashmore Global Opportunities Limited
Statement of Changes in Equity For the year ended 31 December 2012
Special Retained reserve earnings Total Notes US$ US$ US$
As at 1 January 2012
709,686,456
(196,866,875)
512,819,581
–
(28,224,178)
(28,224,178)
Total comprehensive loss for the year Repurchase of own shares
7
As at 31 December 2012
(4,561,134) 705,125,322
– (225,091,053)
(4,561,134) 480,034,269
As at 1 January 2011
717,638,160
(124,424,650)
593,213,510
Total comprehensive loss for the year
–
(60,251,353)
(60,251,353)
–
(12,190,872)
(12,190,872)
Dividend paid to shareholders
7
Repurchase of own shares
7 (7,951,704)
As at 31 December 2011
709,686,456
– (7,951,704)
(196,866,875)
512,819,581
The notes on pages 36 to 59 form an integral part of these financial statements.
34
Ashmore Global Opportunities Limited
Statement of Cash Flows For the year ended 31 December 2012
Year ended Year ended 31 December 2012 31 December 2011 US$ US$
Cash flows from operating activities (28,224,178) (60,251,353)
Operating (loss) for the year
Adjustments for: (692) –
– Interest income – Dividend income
(28,869,984) (75,013,721)
Total
(57,094,854)
(135,265,074)
Net increase/(decrease) in other receivables and payables
1,084,489 (1,077,494)
Net decrease in financial assets at fair value through profit and loss, excluding derivatives (see note below)
59,651,023 78,015,202
Net (increase)/decrease in derivative financial instruments
(4,951,195) 3,638,918
Cash (used in)/generated from operations
(1,310,537)
(54,688,448)
692 –
Interest received Dividend received
28,869,984 74,455,591
Net cash (used in)/from operating activities
27,560,139
19,767,143
Cash flows from financing activities Repurchase of own shares
(4,561,134) (7,951,704)
Dividends paid
– (12,190,872)
Net cash used in financing activities
(4,561,134)
(20,142,576)
Net increase/(decrease) in cash and cash equivalents
22,999,005
(375,433)
Cash and cash equivalents at beginning of the year 5,142,245 5,517,678 Cash and cash equivalents at the end of the year
28,141,250
5,142,245
Note: Cash flows from the purchase of financial assets during the year amounted to US$65,987,228 (2011: US$210,740,210) and proceeds from the sale of financial assets during the year, which included the returns of capital received from AEI and GSSF 2, amounted to US$60,969,503 (2011: US$164,805,583).
The notes on pages 36 to 59 form an integral part of these financial statements.
35
Ashmore Global Opportunities Limited
Notes to the Financial Statements
1. General information
Ashmore Global Opportunities Limited (the “Company”, “AGOL”) is an authorised closed ended investment company incorporated in Guernsey on 21 June 2007 with an indefinite life and listed on the London Stock Exchange. As an existing closed ended Company, AGOL is deemed to have been granted an authorisation declaration 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) Ordinance 1959 to 1989. AGOL’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, including external debt, local currency, special situations (incorporating distressed debt and private equity) corporate high yield and equities with a principal focus on special situations.
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 winding down of the Company following consultation with the Investment Manager and the main shareholders. The proposal was accepted during the Extraordinary General Meeting of Shareholders on 13 March 2013.
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 The 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 International Financial Reporting Standards Committee and the Listing Rules of the UK Listing Authority. They comply with the Companies (Guernsey) Law, 2008 (the “Law”).
b) Basis of preparation The 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.
The financial statements are prepared on the going concern basis, despite the managed wind-down of the Company which has been approved by the Shareholders during the Extraordinary Meeting of 13 March 2013. The factors surrounding this are detailed in the Directors’ Report on page 22 and in note 17. The Board has concluded that currently this managed wind-down has no significant impact on the valuation of the Company’s investments.
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities and income and expenses.
The 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 judgments 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.
Judgments made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment relate to unquoted financial instruments as described in note 2d and 14.
36
Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
c) Foreign currency transactions i) Functional and presentation currency The 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 as the currency that most faithfully represents the economic effect 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 European 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 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 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 financial liabilities at fair value through profit or loss’.
d) Financial assets and financial liabilities i) Classification The Company has classified financial assets and financial liabilities into the following categories:
– Financial assets and financial liabilities at fair value through profit or loss:
Financial assets and liabilities held for trading: Financial assets or financial liabilities classified as held for trading are those acquired or incurred principally for the purpose of selling or repurchasing in the short term. Derivatives, including forward foreign currency contracts are categorised as financial assets or financial liabilities held for trading.
Financial assets and liabilities designated at fair value through profit or loss at inception: Financial assets and financial liabilities designated at fair value through profit or loss at inception are financial instruments that are not classified as held for trading but are managed, and whose performance is evaluated on a fair value basis in accordance with the Company’s documented investment strategy. These financial instruments include direct debt or equity investments and investments in quoted and unquoted Funds.
– Financial assets and financial liabilities at amortised cost:
Loans and receivables This includes cash and cash equivalents, balances due from brokers, and other receivables.
Other financial liabilities This includes balances due to brokers and 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 transactions costs recognised 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.
37
Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
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 amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the measurement date.
Gains and losses arising from changes in the fair value of the financial assets or financial liabilities at fair value through profit or loss category are presented in the statement of comprehensive income within other net changes in 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 period 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 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 which represents the fair value, quoted 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 special purpose vehicles (“SPVs”). The valuation of such positions is performed on a look through basis. The fair value of direct investments in debt or equity securities is based on their quoted market price 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 nonexchange traded financial instruments, the fair value is estimated using valuation techniques, including the use of recent arm’s length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow techniques, or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions.
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 at that point. 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.
Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest rate method for any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
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 2012 and 2011, 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, 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.
38
Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
iv) Impairment of financial assets classified as loans and receivables continued Impairment losses on loans and receivables are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses are recognised in profit or loss and reflected in 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 investments have expired or the Company has transferred substantially all risks and rewards of ownership. On the other hand, 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.
Income and expenses are presented on a net basis only when permitted under IFRSs.
The Company is not required to consolidate any of the investments listed on page 20 or the underlying investments of the Funds held as it does not control them.
e) Amounts due from and due to brokers Amounts due from and 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.
Accounting policy for the recognition of amounts due from and 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 shown in equity as a deduction from the proceeds, net of tax. Incremental costs directly attributable to the issue of new ordinary shares or options are included in the cost of acquisition as part of the purchase consideration.
Where the Company re-purchases its own ordinary shares (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company’s equity holders until the ordinary shares are cancelled, re-issued or disposed of. Where such shares are subsequently sold or reissued, the amount received, net of any directly attributable incremental transaction costs and the related income tax effects, is recognised as an increase in equity. Where such shares are subsequently cancelled, no further adjustments to Shareholders equity or reserves are necessary.
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 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.
39
Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
i) Expenses All expenses are recognised in the statement of comprehensive income on an accruals basis.
j) 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.
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 Board of Directors is charged with setting the Company’s investment strategy in accordance with the Articles of Incorporation. They have delegated the day to day implementation of this strategy to its Investment Manager but retain responsibility to ensure that adequate resources of the Company are directed in accordance with their decisions. The investment decisions of the Investment Manager are reviewed on a regular basis to ensure compliance with the policies and legal responsibilities of the Board. The Investment Manager has been given full authority to act on behalf of the Company, including the authority to purchase and sell securities and other investments on behalf of the Company and to carry out other actions as appropriate to give effect thereto. Whilst the Investment Manager may make the investment decisions on a day to day basis regarding the allocation of funds to different investments, any changes to the investment strategy or major allocation decisions have to be approved by the Board, even though they may be proposed by the Investment Manager. The Board therefore retains full responsibility as to the major allocation decisions made on an ongoing basis. The Investment Manager will always act under the terms of the Investment Management Agreement which cannot be radically changed without the approval of the Board of Directors.
As at 31 December 2012 and 2011, the Company has no assets classified as non-current assets.
As at 31 December 2012 and 2011 the investment restrictions were as follows:
• No more than 50 per cent of the Company’s Net Asset Value may be invested in any one investment theme (with the exception of Special Situations in respect of which there is no investment restriction).
• N o more than 25 per cent of the Company’s Net Asset Value may be invested in any one Ashmore Fund, except for Ashmore Funds, which have investment restrictions restricting them from investing more than 25 per cent of their Net Asset Value in any one investment.
• No more than 25 per cent of the Company’s Net Asset Value may be invested in any one direct investment.
• No investment in any single Fund may comprise more than 50 per cent of the capital of such Fund.
• Not more than 15 per cent of the Company’s Net Asset Value may be invested in third party Funds.
• The Company can borrow in aggregate up to 20 per cent of its Net Asset Value for the purpose of financing Share buybacks and subsequent repurchases of Shares or satisfying working capital requirements. A majority of the Shareholders can approve borrowing outside this limit.
Following the EGM held 13 March 2013, investment restrictions set out above ceased to apply for the Company to realise its assets in an orderly manner to return cash to Shareholders.
The Company is domiciled in Guernsey, Channel Islands. Most of the Company’s income is from investment entities incorporated in Guernsey. The investments of the Company are appropriately diversified in accordance with the investment restrictions described in the Prospectus.
The Company has a diversified shareholder population as at 31 December 2012 and 2011, there was no shareholder who held more than 10% of the Company’s net asset value.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
l) 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 2012, and have not been applied in preparing these financial statements as none of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company.
Standards issued but not yet effective at the date of the issuance of the Company’s financial statements which may have an impact on the Company’s financial statements are listed below.
• IFRS 9 Financial Instruments issued in November 2009. This standard will change the classification of financial assets. The standard is not expected to have an impact on the measurement basis of the financial assets since the majority of the Company’s financial assets are measured at fair value through profit or loss.
IFRS 9 deals with classification and measurement of financial assets and its requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The standard contains two primary measurement categories for financial assets: at amortised cost and fair value. A financial asset would be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the asset’s contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of held to maturity, available for sale and loans and receivables. For an investment in an equity instrument that is not held for trading, the standard permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognised in other comprehensive income would ever be reclassified to profit or loss. However, dividends on such investments are recognised in profit or loss, rather than other comprehensive income unless they clearly represent a partial recovery of the cost of the investment. Investments in equity instruments in respect of which an entity does not elect to present fair value changes in other comprehensive income would be measured at fair value with changes in fair value recognised in profit or loss. The standard requires that derivatives embedded in contracts with a host that is a financial asset within the scope of the standard are not separated; instead the hybrid financial instrument is assessed in its entirety as to whether it should be measured at amortised cost or fair value. The standard is effective for annual periods beginning on or after 1 January 2015. Earlier application is permitted. The Company does not plan to adopt this standard early.
• In May 2011, the International Accounting Standards Board (IASB) issued IFRS 10 Consolidated Financial Statements which is effective for annual periods beginning on or after 1 January 2013. The standard establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 replaces the consolidation requirements in SIC-12 Consolidation – Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. The Company is currently assessing the impact of this standard and does not plan to adopt it early.
• In May 2011, the IASB issued IFRS 11, Joint Arrangements which is effective for annual periods beginning on or after 1 January 2013. The standard establishes principles for financial reporting by parties to a joint arrangement. The Company is currently assessing the impact of this standard and does not plan to adopt it early.
• In May 2011, the IASB issued IFRS 12, Disclosure of Interests in Other Entities which is effective for annual periods beginning on or after 1 January 2013. The standard requires entities to disclose the nature, risk, and financial effects of its interests in other entities. The Company is currently assessing the impact of this standard and does not plan to adopt it early.
• In May 2011, the IASB issued IFRS 13, Fair Value Measurement which is effective for annual periods beginning on or after 1 January 2013. The standard defines fair value as 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 (i.e. an exit price). The Company is currently assessing the impact of this standard and does not plan to adopt it early.
• The amendments to IAS 32, “Financial instruments: Presentation” clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. They are effective for annual periods beginning on or after 1 January 2014. The Company is currently assessing the impact of these amendments and does not plan to adopt them early.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
l) New standards and interpretations not yet adopted continued • The amendments to IFRS 10, IFRS 12 and IAS 27 on Investment Entities are effective for annual periods beginning on or after 1 January 2014 and define an investment entity and introduce an exception to consolidating particular subsidiaries for investment entities. These amendments require an investment entity to measure those subsidiaries at fair value through profit or loss in its consolidated and separate financial statements. The amendments also introduce new disclosure requirements for investment entities in IFRS 12 and IAS 27. The Company is currently assessing the impact of these amendments and does not plan to adopt them early.
• T he amendments to IFRS 7 contain new disclosure requirements for financial assets and liabilities that are offset in the statement of financial position and that are subject to enforceable master netting arrangements and similar agreements. These amendments are effective for annual periods beginning on or after 1 January 2013. The Company is currently assessing the impact of these amendments and does not plan to adopt them early.
• The amendments to IFRS 10, IFRS 11 and IFRS 12 on Transition Guidance provide additional transition relief by limiting the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before IFRS 12 is first applied. These amendments are effective for annual periods beginning on or after 1 January 2013. The Company is currently assessing the impact of these amendments and does not plan to adopt them early.
3. Taxation
The Director of Income Tax in Guernsey has confirmed that for the year ended 31 December 2012, 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 £600, payable to States of Guernsey Income Tax. The Company is exposed to other taxes in the countries of investment.
4. Financial assets at fair value through profit or loss
31 December 31 December 2012 2011 US$ US$
Financial assets held for trading: – Derivative financial assets 3,642,530 130,498 Total financial assets held for trading 3,642,530 130,498 Designated at fair value through profit or loss at inception: – Equity investments 423,845,150 468,991,514 – Debt investments 31,379,479 45,884,138 Total designated at fair value through profit or loss at inception 455,224,629 514,875,652 Total financial assets at fair value through profit or loss 458,867,159 515,006,150 During 2012, the Company disposed of its investment in Ashmore SICAV Emerging Markets Local Currency Corporate Debt Fund and acquired shares of Ashmore SICAV EM Equity Select Fund and Ashmore SICAV Emerging Markets Total Return Fund.
During 2012, the Board of AEI approved a plan of liquidation with the agreement of its shareholders whereby the company will, inter alia, dispose of its assets in an orderly manner and distribute the proceeds to shareholders. All distributions will be henceforth treated as liquidating dividends representing return of capital to shareholders. In 2012, the Company received an amount of US$5,176,742 which has been treated accordingly.
The change in unrealised loss on financial assets and liabilities at fair value through profit or loss which amounted to US$127,445,428 in 2011 included US$40,072,275 pertaining to AEI which resulted from the fair value diminution following the distribution in 2011 as indicated in note 9.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
4. Financial assets at fair value through profit or loss continued
There were no other significant changes to the Company’s direct equity and debt investments other than the valuation movements.
31 December 31 December 2012 2011 US$ US$
Other net changes in fair value through profit or loss: – Realised 30,994,050 36,729,035 – Change in unrealised (59,311,476) (127,445,428) Total (losses) (28,317,426) (90,716,393) Other net changes in fair value on assets held for trading 36,351,321 32,675,305 Other net changes in fair value on assets designated at fair value through profit or loss (64,668,747) (123,391,698) Total net (losses) (28,317,426) (90,716,393) As at 31 December 2012, derivative financial assets were comprised of forward foreign currency contracts as follows:
Currency Bought
Amount Bought
GBP 188,497,429 US$ 10,316,757 US$ 4,943,125 Derivative financial asset
Currency Sold
US$ BRL GBP
Amount Sold
Maturity Date
302,763,460 18/01/2013 21,188,556 04/02/2013 3,039,170 18/01/2013
Unrealised gain
3,626,326 13,044 3,160 3,642,530
As at 31 December 2011, derivative financial assets were comprised of forward foreign currency contracts as follows:
Currency Bought
Amount Bought
GBP 3,100 GBP 14,145 US$ 1,900,223 US$ 1,900,676 US$ 21,261,128 Derivative financial assets
Currency Sold
US$ US$ EUR EUR BRL
Amount Sold
Maturity Date
4,814 10/01/2012 21,904 03/01/2012 1,461,794 23/01/2012 1,461,794 23/01/2012 40,179,280 03/04/2012
Unrealised gain
3 79 2,350 2,803 125,263 130,498
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
5. Financial liabilities at fair value through profit or loss
31 December 31 December 2012 2011 US$ US$
Financial liabilities held for trading: – Derivative financial liabilities (319,477) (1,758,640) Total financial liabilities held for trading (319,477) (1,758,640) Other net changes in fair value through profit or loss: – Realised (25,284,754) (32,363,536) – Change in unrealised 1,439,163 (1,758,640) Total (losses) (23,845,591) (34,122,176) (23,845,591) (34,122,176) (23,845,591) (34,122,176)
Other net changes in fair value on liabilities held for trading Total net (losses)
As at 31 December 2012, derivative financial liabilities comprised forward foreign currency contracts as follows: Currency Bought
Amount Bought
Currency Sold
US$ 7,600,000 US$ 3,814,025 US$ 5,670,371 Derivative financial liabilities
BRL EUR GBP
Amount Sold
Maturity Date
15,937,960 04/02/2013 2,923,588 14/01/2013 3,567,429 18/01/2013
Unrealised loss
(150,418) (40,816) (128,243) (319,477)
As at 31 December 2011, derivative financial liabilities comprised forward foreign currency contracts as follows: Currency Bought
Amount Bought
Currency Sold
GBP 201,164,428 EUR 28,499,862 BRL 40,179,280 US$ 21,441,528 Derivative financial liabilities
US$ US$ US$ BRL
Amount Sold
Maturity Date
313,525,423 20/01/2012 37,619,248 20/01/2012 21,636,661 04/01/2012 40,179,280 04/01/2012
Unrealised loss
(945,417) (618,090) (101,059) (94,074) (1,758,640)
6. Other financial assets and liabilities
Other financial assets relate prepaid expenses and were comprised of the following
31 December 31 December 2012 2011 US$ US$
– Prepaid regulatory fees 3,773 – 3,773 –
Other financial liabilities relate to accounts payable and accrued expenses, and were comprised of the following:
31 December 31 December 2012 2011 US$ US$
Management fee payable (net) 446,531 184,995 Incentive fee payable 5,886,923 5,041,589 Other accruals 324,982 343,590 6,658,436 5,570,174
Net management fee payable includes a rebate of US$1,173,727 (2011: US$678,415) due from the Investment Manager in accordance with the Investment Management Agreement as described in note 10a.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
7. Capital and reserves
The Company’s capital is represented by two classes of ordinary shares outstanding, namely the US$ share class and GBP share class. The holders of ordinary shares are entitled to dividends as declared from time to time and have no redemption rights.
The total comprehensive gain or loss during the year is allocated proportionately to each share class except for the results of the hedging the foreign currency exposure of the assets attributable to the shares denominated in Sterling from the US Dollar which are allocated solely to the Sterling class of shares.
The Company is authorised to issue an unlimited number of US$ and £ shares at no par value.
Ordinary shares The following table presents the summary of changes in the number of shares issued and fully paid during the year ended 31 December 2012:
31 December 2011 Share conversions Share repurchases 31 December 2012
US$ Shares
19,896,356 4,288,750 (350,887) 23,834,219
€ Shares
3,370,942 (3,370,942) – –
£ Shares
23,184,008 205,044 (337,042) 23,052,010
Voting rights The number of votes each share shall be entitled to on a poll at any general meeting of the Company (applying the Weighted Voting Calculation as described in the registration document published by the Company on 6 November 2007 (the “Prospectus”)) is as follows:
US Dollar Shares: 1.0000
Sterling Shares:
The above figures may be used by Shareholders as the denominator for the calculations, by which they will determine if they are required to notify their interest in, or a change to their interest in the Company under the Financial Services Authority (“FSA”)’s Disclosure and Transparency Rules.
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 or classes of shares (the “New Class”) by giving at least 5 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 are able to convert their shares on a monthly basis.
An announcement was made by the Directors of the Company on 22 March 2013, that the monthly share conversion opportunities for the months ended March, June, September and December 2013, will not take place. This decision has been taken due to the anticipated return of capital expected to take place using the NAV’s on these month end dates, as part of the orderly winding up of the Company.
As the Euro share class of the Company no longer met the public hands requirement (minimum 25 per cent of shares must be held by the public), in February 2012 the Directors of the Company resolved, in accordance with the Articles, to convert all the Euro class shares in issue into US Dollar class shares and any Euro class shares which were held in treasury into US Dollar class shares. The share conversion ratio was determined in accordance with the Articles, at the rate prevailing on the date when the public hands requirement ceased to be met, i.e. at 1.37487970 US Dollar shares for each Euro share. The following forced conversion took place on 23 April 2012:
2.0288
Transfers from Transfers to
€ shares € treasury shares
US$ shares US$ treasury shares
Number of shares to switch out
3,086,606 309,460
Number of shares to switch in
4,243,712 425,470
The forced conversion ratio, being calculated using a historic rate as at a specific date as required by the Articles, created a gain amounting to approximately US$3.6 million for the Shareholders of the Euro class shares, offset by a loss of the same amount for the remaining Shareholders, which was allocated to the US$ and £ share classes on a pro rata Basis.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
7. Capital and reserves continued
Following an average daily net asset value price discount of greater than 10% over a rolling 365 day period to 16 February 2012, an Extraordinary General Meeting of Shareholders was held on 7 June 2012 to consider a resolution for the voluntary wind-up of the Company. The majority of the votes cast were against the winding up of the Company.
Special reserve On 5 November 2007, the Company passed a special resolution that, conditional on admission of the shares to the London Stock Exchange becoming unconditional and with the approval of the Royal Court (the “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 the purchase of the Company’s own shares and payment of dividends.
Repurchase of own shares (treasury shares) The Board has Shareholder authority, up to the Company’s next annual general meeting, to purchase (without making a tender offer) in the market up to 14.99% of the shares of each class in issue.
At no time may shares of any class representing in excess of 10% of the issued shares of such class be held in treasury.
In 2009, the Board adopted a policy to consider distributing up to 50% of the growth in NAV to Shareholders of the Company, by way of share buybacks and/or dividends. However, in 2012, even though there was no growth in NAV over 2011, the Board recognised that the widened discount of the share prices to their NAVs represented an opportunity to increase the NAV per share by way of an additional share buyback programme. Accordingly, the Board committed up to USD 20 million to buy back shares in the market. This programme was subsequently suspended by the Board on the 16 November 2012.
For the year ended 31 December 2012, the following share repurchases were made:
Number of ordinary shares repurchased
Consideration in US$
US$ share class 350,887 1,825,253 £ share class 337,042 2,735,881 4,561,134
For the year ended 31 December 2011, the following share repurchases were made:
Number of ordinary shares repurchased
Consideration in US$
US$ share class 458,930 3,710,064 £ share class 324,815 4,241,640 7,951,704
Number of Shares held in treasury as at 31 December 2012
Number of Shares held in treasury as at 31 December 2011
2,385,107* 1,608,750* – 309,460* 1,063,503 726,461 3,448,610 2,644,671
US$ share class € share class £ share class
* The € treasury shares as at 23 April 2012 were transferred to the $ treasury shares using an effective rate of 1.3748 which resulted in a conversion of 425,470 US$ shares.
No own shares were acquired from related parties during the year.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
7. Capital and reserves continued
Capital management The Company is not subject to externally imposed capital requirements. The Company’s objective in managing capital is to ensure a stable capital base to maximise returns to all investors. During the period under review the Company did manage its capital through the discount control mechanism discussed below. Additionally, the Company has put in place hedging mechanisms to hedge the currency risk arising on the non-USD share classes (note 13).
Discount control mechanism The Board may, at their absolute discretion, utilise the share repurchase authority described above to address any imbalance between the supply of and demand for shares, and may do so actively if the closing price of any class of shares is 5 per cent or more below the most recently published Net Asset Value of the shares of that class. As set out above however, there can be no assurance that any such purchases will be made.
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. The Board may declare and pay interim dividends if, in the opinion of the Board, they are justified by the profits of the Company.
No dividends were declared during the year ended 31 December 2012.
Following the positive outcome of the EGM held on 18 April 2011, the payment of a special dividend was declared of approximately US$12 million as well as a commitment to buy back shares worth up to US$8 million in the market where discounts to NAV were greater than 10%. In the Board’s view this approach provided an optimal blend of cost efficiency, NAV accretion and flexibility.
Dividends declared during 2011
US$ Shares
€ Shares
£ Shares
Total dividend paid on 20 May 2011 (ex-date – 4 May 2011, record date – 6 May 2011 Dividend per share
As per amended Articles of Incorporation of the Company dated 18 April 2011, dividends and distributions (including returns of capital) may be declared by the Directors in their sole discretion from time to time and such payments will not be subject to the approval of the Shareholders. The Company has also introduced a solvency test which replaces the capital maintenance model in relation to the declaration of dividends and distributions.
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 a pro rata compulsory redemption of Shares at NAV per share.
US$4,171,915 US$1,362,675 US$6,656,282 US$0.193 €0.187 £0.19
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
8. Net Asset Value
The Net Asset Value of each US$, € and £ share is determined by dividing the total net assets of the Company attributed to the US$, € and £ share classes by the number of US$, €, and £ shares in issue at the period end as follows:
Net assets attributable to each As at 31 December 2012 share class in US$
Net assets per share in US$
Net assets per share in local currency
188,793,224 23,834,219 7.92 7.92 291,241,045 23,052,010 12.63 7.77 480,034,269
US$ Share £ Share
As at 31 December 2011
Shares in issue (net of treasury shares)
Net assets attributable to each share class in US$
Shares in issue (net of treasury shares)
Net assets per share in US$
Net assets per share in local currency
US$ Share 171,285,720 19,896,356 8.61 8.61 € Share 36,060,821 3,370,942 10.70 8.24 £ Share 305,473,040 23,184,008 13.18 8.48 512,819,581 The allocation of the Company’s Net Asset Value between share classes is further described in the Company’s Prospectus.
9. Dividend and interest income
Interest income Cash and cash equivalents Total interest income
Year ended Year ended 31 December 31 December 2012 2011 US$ US$
692 – 692 –
Year ended Year ended 31 December 31 December 2012 2011 US$ US$
Dividend income Equity investments designated at fair value through profit or loss Total dividend income
28,869,984 75,013,721* 28,869,984 75,013,721
* During the year ended 31 December 2011 and prior to the adoption of the plan of liquidation, AEI made a distribution of US$12 per share amounting to US$74,844,468, of which US$70,269,218 was accounted as dividend income with the remainder being accounted for as a return of capital.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
10. Significant agreements
a) Investment Manager Ashmore Investment Management Limited (the “Investment Manager”) is remunerated at a monthly rate of one twelfth of 2% of the Net Asset Value (calculated before the deduction of investment management fees for that month and before the deduction of any accrued incentive fee) payable monthly in arrears. There is an arrangement to offset the investment management fees payable by the Company against management fees charged at the Sub-Fund level so that the effective monthly investment management fee payable at Company level equates to one twelfth of 2% of the Net Asset Value.
The Company invests in other Ashmore Funds which are advised by the same Investment Manager. The Company is credited with a rebate of management fees from the Ashmore Funds it invests in to avoid double charging management fees.
The Investment Manager may terminate the Investment Management Agreement at any time after Admission by giving the Company not less than 6 months written notice provided that such termination does not take effect before the date which is 12 months from Admission.
The Investment Management Agreement, which is governed by English law, had a fixed term of three years which commenced on Admission. Following this initial term, the agreement continues unless: (i) it is terminated by the Company, giving the Investment Manager not less than two years written notice, provided that any such notice may only be given following the expiry of the fixed initial term of three years; or (ii) it is terminated by the Company, giving the Investment Manager 60 calendar days written notice (a “Company 60 Day Notice”) to expire no earlier than the fixed three year initial term of the agreement, provided that the Company provides the Investment Manager with certain compensation. In the event that the agreement is terminated in accordance with (i) above and such termination takes effect on or prior to the seventh anniversary of Admission (12 December 2014), the Company will reimburse the Investment Manager for the costs of the initial public offering and of establishing the Company (the “Initial Costs”) of approximately £14.6 million. As at 31 December 2012, based on the revisions to the Investment Management Agreement the probability of the reimbursement of the Initial Costs being triggered is remote.
Net investment management fees during the year were as follows:
Year ended Year ended 31 December 31 December 2012 2011 US$ US$
Investment management fee expense Investment management fee rebate
(10,139,308) (12,562,421) 7,462,521 8,633,565 (2,676,787) (3,928,856)
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 over the period in excess of 6% per annum. The incentive fee is computed at 20% of the performance above the cost. Incentive fees are payable only upon the realisation of the investments. During the year, incentive fees of US$420,013 were paid and US$845,334 were charged (2011: US$5,510,105 and US$4,838,585 respectively).
It was approved at the EGM held on 13 March 2013, that with effect from 13 December 2014 the Company will pay to the Investment Manager the monthly management fee at the reduced level of one twelfth of 1% of the NAV of investments made other than in Funds (calculated before deduction of the investment management fee for that month and before the deduction of any accrued incentive fee).Under the Investment Management Agreement, the Investment Manager is also entitled to 4% of the reduction in Net Asset Value by repurchase of shares pursuant to the Company’s buy-back policy, or distribution made in relation to Shares, or return of capital made in relation to the Shares, and such reduction occurs on or before 30 June 2014. Such payment should not exceed the Initial Costs. The investment management fee expense amounts include buyback fees.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
10. Significant agreements continued
b) Directors’ remuneration Directors’ remuneration for the year ended 31 December 2012 was as follows; Directors: £33,000 per annum, the Chairman: £75,000 per annum and the Chairman of the Audit Committee: £35,000 per annum.
c) Administrator The Administrator, Northern Trust International Fund Administration Services (Guernsey) Limited, performs administrative duties for which it was remunerated with a fee calculated as follows:
Company’s Total Net Assets Up to $500 million 0.04%
$500 million to $1 billion
Over $1 billion
d) Custodian Northern Trust (Guernsey) Limited (the “Custodian”), was remunerated at an annual rate of 0.02 per cent of the Total Net Assets of the Company. Sub-custodian fees are borne by the Company.
0.025% 0.01%
11. Other expenses
Year ended Year ended 31 December 31 December 2012 2011 US$ US$
164,526 – 137,424 500,469 802,419
Promotional fees Premium listing fees Audit fees Miscellaneous fees
Promotional fees are fees reimbursed to Investment Manager for promotional and administrational costs they incurred in relation to the Company.
50
309,734 403,091 144,677 401,720 1,259,222
Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
12. 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.
Earnings/(loss) attributable to each share class for the year ended 31 December 2012:
US$ Share
€ Share*
£ Share
(Loss)/gain per share class (US$) (14,727,815) 835,947 (14,332,310) Weighted average number of shares 22,853,919 702,119 23,299,275 EPS per share class (0.64) 1.19 (0.62) Issued shares at the beginning of period 19,896,356 3,370,942 23,184,008 Effect on the weighted average number of shares: Conversion of shares 3,083,273 (2,668,823) 243,969 Repurchase of own shares (125,710) – (128,702) Weighted average number of shares 22,853,919 702,119 23,299,275
* For the period ended 23 April 2012 as the Euro share class was cancelled on that date.
There were no dilutive instruments in issue during the year.
Loss attributable to each share class for the year ended 31 December 2011:
US$ Share
€ Share
(Loss) per share class (US$) (17,356,421) (3,648,750) Weighted average number of shares 20,718,578 4,091,223 EPS per share class (0.84) (0.89) Issued shares at the beginning of period 21,791,041 6,050,757 Effect on the weighted average number of shares: Conversion of shares (841,931) (1,959,534) Repurchase of own shares (230,532) – Weighted average number of shares 20,718,578 4,091,223
£ Share
(39,246,182) 22,380,197 (1.75) 20,372,123
2,156,196 (148,122) 22,380,197
There were no dilutive instruments in issue during the year.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
13. Financial risks management
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk.
The Company puts policies and processes in place to measure and manage the various types of risk to which it is exposed; these are explained below.
Market risk The majority of the Company’s financial instruments are recognised at fair value, and changes in market conditions directly affect net investment income.
i) Currency risk Although the majority of the Company’s investments are denominated in US$, the Company may invest in financial instruments denominated in currencies other than its functional currency. Consequently, the Company is exposed to risks that the exchange rate of its currency, relative to other foreign currencies, may change in a manner that has an adverse effect on the value of that portion of the Company’s assets or liabilities denominated in currencies other than the US$.
When appropriate, currency exposures may be hedged by the Investment Manager by reference to the most recent Net Asset Value of the underlying investment Funds via the use of forward foreign currency contracts or similar instruments.
As at the statement of financial position date, the Company is not exposed to any significant currency risk arising on its financial assets and liabilities, as all investments of the Company are denominated in US$. However, the Company has put in place hedging mechanisms to hedge the currency risk arising on the £ share class.
The 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 will typically be converted to US Dollars for operational purposes. The costs and any benefit of hedging the foreign currency exposure of the assets attributable to the shares denominated in Sterling from the US Dollar will be allocated solely to the Sterling class of shares. This may result in variations in the Net Asset Value of the two classes of shares as expressed in US Dollars.
As at 31 December 2012 the net foreign currency exposure on the £ share class was as follows (in US$):
£ Share
Currency exposure of non-US$ share class 291,241,045 Nominal value of currency hedges (292,149,964) Net foreign currency exposure (908,919)
As at 31 December 2011 the net foreign currency exposure on the € share class and £ share class was as follows (in US$):
€ Share
Currency exposure of non-US$ share class Nominal value of currency hedges Net foreign currency exposure
As at 31 December 2012, had the US Dollar strengthened by 1% in relation to Euro, Brazil Lira and Pound Sterling, with all other variables held constant, net assets attributable to equity holders would have increased by US$33,231 (2011: increased by US$16,281).
A 1% weakening of the US Dollar against the above currencies would have resulted in an equal but opposite effect on the net assets attributable to Shareholders, on the basis that all other variables remain constant. The currency risk sensitivity analysis provided is a relative estimate of risk rather than a precise and accurate number.
52
36,060,821 (33,818,349) 2,242,472
£ Share
305,473,040 (313,552,141) (8,079,101)
Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
13. Financial risks management continued
ii) Interest rate risk The majority of the Company’s financial assets and liabilities are non-interest bearing (2012: 94.17%, 2011: 99.00%). As at 31 December 2012, interest-bearing financial assets comprise of cash and cash equivalents of US$28,141,250. The Company’s investment portfolio is composed entirely of non-interest bearing assets as at the same date (2012: 100%, 2011: 100%). As a result, the Company is subject to limited exposure to interest rate risk due to 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 driven by the Company’s investment objective. The Company invests primarily in Funds managed by the Investment Manager (“Ashmore Funds”) with a principal focus on Special Situations. The Company may also invest (or co-invest alongside Ashmore Funds and/or others when appropriate) in direct investments and, on a limited basis, third party Funds. Accordingly, in order to achieve a principal focus on Special Situations over time, a significant proportion of the net proceeds may be invested in Ashmore Global Special Situations Funds.
The Company is managed in accordance with the investment restrictions described in note 2k. These restrictions are intended to ensure that the investments of the Company are appropriately diversified.
Details of the Company’s investment portfolio at the statement of financial position date are disclosed in the Schedule of 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 increases by 5% (2011: 5%), with all other variables held constant.
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. 31 December 2012 31 December 2011 US$ US$
Equity investments 21,192,258 23,449,576 Debt investments 1,568,974 2,294,207 22,761,232 25,743,783
Credit risk Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. Credit risk is generally higher when a non exchange-traded financial instrument is involved, because the counterparty is not backed by an exchange clearing house.
As at the statement of financial position date, the maximum exposure to credit risk before any credit enhancements is the carrying amount of the financial assets as set out below: 31 December 2012 31 December 2011 US$ US$
Cash and cash equivalents 28,141,250 5,142,245 Forward currency contracts 3,642,530 130,498 31,783,780 5,272,743
None of these assets are impaired nor past due but not impaired.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
13. Financial risks management continued
Credit risk continued Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered small due to the short settlement period involved. In addition, the Company monitors the credit rating and the financial positions of the brokers used to further mitigate this risk.
Substantially all of the assets of the Company, including cash, are held by Northern Trust (Guernsey) Limited. Bankruptcy or insolvency of the Custodian may cause the Company’s rights with respect to assets held by the Custodian to be delayed or limited. The Company monitors its risk by monitoring the credit quality and financial positions of the Custodian that the Company uses.
The Company is not considered to have exposure to credit risk on the PIK/PPN debt instruments, as the underlying investment is an equity (PIK and PPN agreements are made with an SPV which is used to acquire the direct investment).
The Company is considered to have exposure to concentration risk in AEI Inc – Equity and Renovavel Investments BV New PIK/PPN which are also held in the GSSF Funds. As at 31 December 2012 the value of these instruments (held directly and indirectly) amounted to US$34,869,677 and US$58,465,692 respectively, and was classified in the caption ‘Financial assets at fair value through profit and loss’ in the statement of financial position.
Liquidity risk The Company is not exposed to any significant liquidity risk arising from redemptions at the Shareholders’ discretion as the shares issued have no defined redeemable date.
In accordance with the investment objective, a significant proportion of the Company’s investments are focused on special situations via investments in unlisted Funds and other financial instruments. As a result, in certain circumstances, the Company may not be able to quickly liquidate its investments in these instruments.
All residual maturities of the financial liabilities of the Company in US$ as at 31 December 2012 and 2011 are less than 3 months, except for incentive fees payable to the Investment Manager on realisation of investment.
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. As at 31 December 2011 and 2012, the Company had enough cash and liquid assets to meet its obligation on these outstanding commitments.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
14. Fair value disclosures
The Company classifies fair value measurements (note 2d) using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
• Level 1: Quoted price (unadjusted) in an active market for an identical instrument.
• Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted prices in active markets for similar instruments: quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques for which all significant inputs are directly or indirectly observable from market data.
• Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
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 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 at 31 December 2012:
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 – 3,642,530 – 3,642,530 Financial assets designated at fair value through profit or loss at inception: – Equity investments 29,088,162 128,376,450 266,380,538 423,845,150 – Debt investments – – 31,379,479 31,379,479 Total 29,088,162 132,018,980 297,760,017 458,867,159
Financial liabilities at fair value through profit and loss Financial liabilities held for trading: – Derivative financial liabilities – 319,477 – Total – 319,477 –
319,477 319,477
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
14. Fair value disclosures continued
The following table analyses within the fair value hierarchy the Company’s financial assets at fair value through profit and loss (by class) measured at fair value at 31 December 2011:
Level 1
Level 2
Level 3
Financial assets at fair value through profit and loss Financial assets held for trading: – Derivative financial assets – 130,498 – Financial assets designated at fair value through profit or loss at inception: – Equity investments 24,914,630 110,126,900 333,949,984 – Debt investments – – 45,884,138 Total 24,914,630 110,257,398 379,834,122
Total balance
130,498
468,991,514 45,884,138 515,006,150
Financial liabilities at fair value through profit and loss Financial liabilities held for trading: – Derivative financial liabilities – 1,758,640 – Total – 1,758,640 –
Level 1 assets include all quoted and listed Funds with regular and unadjusted quotes in active markets.
Level 2 assets include; Ashmore SICAV 2 Global Liquidity US$ Fund, which is a money market Fund with daily NAV of US$1; and an unrealised gain on forward currency contracts that is calculated internally using observable data; and the listed Fund, Ashmore Asian Recovery Fund (“ARF”). Following the listing of MCX, Aginyx Ordinary Shares were transferred out of level 3 into level 2 fair value measurements, as its fair value as at the statement of financial position date was obtained using valuation techniques based on observable market inputs.
ARF shares were subsequently suspended from their official listing on the Channel Islands Stock Exchange with effect from 29 January 2013 and they will be transferred into level 3 in the next set of financial statements.
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, quoted by the administrator of the unquoted Fund as at the close of business on the relevant valuation day.
There were no transfers between levels 1 and 2 for the year ended 31 December 2012 and 31 December 2011.
The following tables present the movement in level 3 instruments for the years ended 31 December 2012 and 2011 by class of financial instrument.
Equity securities
Debt securities
1,758,640 1,758,640
Total
Opening balance 1 January 2012 Purchases Sales and return of capital Transfer out of level 3 Gains and losses recognised in profit and loss * Closing balance 31 December 2012
333,949,984 45,884,138 379,834,122 21,918,052 – 21,918,052 (22,832,937) – (22,832,937) (11,501,887) – (11,501,887) (55,152,674) (14,504,659) (69,657,333) 266,380,538 31,379,479 297,760,017
Equity securities
Opening balance 1 January 2011 Purchases Sales and return of capital Gains and losses recognised in profit and loss * Closing balance 31 December 2011
359,591,275 86,806,289 (14,570,177) (97,877,403) 333,949,984
56
Debt securities
47,772,566 – – (1,888,428) 45,884,138
Total
407,363,841 86,806,289 (14,570,177) (99,765,831) 379,834,122
* Gains and losses recognised in profit and loss includes unrealised results on existing assets as at 31 December 2012 of US$(186,892,888) (2011: US$(116,626,382)).
Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
14. Fair value disclosures continued
Total gains and losses included in the statement of comprehensive income are presented in ‘Other net changes in fair value of financial assets and financial liabilities at fair value through profit and loss’.
As at 31 December 2012 and 2011 the carrying values of other financial assets and liabilities approximate their fair values.
The Pricing Methodology and Valuation Committee (PMVC) which has been authorised as an Approved Person to provide valuations to the Administrator, operates and meets to consider the methods for pricing hard to value investments where a reliable pricing source is not available, if an asset does not trade regularly, or in the case of a significant event (such as a major event and market volatility outside of local market hours). These assets, which are classified within level 3, include all asset types but are frequently ‘Special Situations’ style investments, typically incorporating distressed, illiquid or private equity assets.
For these hard to value investments, the methodology and models used to determine fair value were created in accordance with the International Private Equity and Venture Capital Valuation (IPEV) guidelines by experienced personnel at an independent third party valuation specialist. The valuation is then subject to review, amendment if necessary, then approval, firstly by the PMVC, and then by the Board of Directors of the Company.
Valuation techniques used by the third party valuation specialists include the market approach, the income approach or the cost approach for which sufficient and reliable data is available. Within level 3, the use of the market approach generally consists of using comparable market transactions, while the use of the income approach generally consists of the net present value of estimated future cash flows, adjusted as deemed appropriate for liquidity, credit, market and/or other risk factors.
The main inputs used by the third party valuation specialist in estimating the value of level 3 investments 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 changes in financial ratios or cash flows. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability.
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 equity investments in Level 3, changing one or more of the assumptions used to alternative assumptions would result in an increase/(decrease) in net assets attributable to equity holders. 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.
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. 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 Ashmore Investment Management Limited.
The Company and the Investment Manager entered into an Investment Management Agreement amended 26 April 2011 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.
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Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
16. Related party transactions continued
During the year ended 31 December 2012, the Company engaged in the following related party transactions:
Income/ Receivable/ (Expense) (Payable) Related Party Nature US$ US$
Ashmore Investment Management Limited Ashmore Investment Management Limited Ashmore Investment Management Limited Board of Directors
Management fees (net) Incentive fees Promotional fees Directors’ fees
(2,676,787) (446,531) (845,334) (5,886,923) (164,526) (40,831) (306,178) –
Investment Activity US$
Related Funds Related Funds Related Funds
During the year ended 31 December 2011, the Company engaged in the following related party transactions:
Purchases Sales Dividends
(52,711,757) 55,013,508 28,869,984
Income/ Receivable/ (Expense) (Payable) Related Party Nature US$ US$
Ashmore Investment Management Limited Ashmore Investment Management Limited Ashmore Investment Management Limited Board of Directors
Management fees (net) Incentive fees Promotional fees Directors’ fees
(3,928,856) (4,838,585) (309,734) (341,834)
(184,995) (5,041,589) (79,099) (27,000)
Investment Activity US$
Related Funds Related Funds Related Funds Ashmore SICAV 2 Global Liquidity US$ Fund Ashmore SICAV 2 Global Liquidity US$ Fund Ashmore SICAV 2 Global Liquidity US$ Fund
Related Funds are other Funds managed by Ashmore Investment Management Limited.
As at 31 December 2012, three Directors: Nigel de la Rue, Christopher Legge and Richard Hotchkis had a beneficial interest in 4,000, 2,500 and 1,500 Sterling shares respectively and Jonathan Agnew held 15,000 US$ shares.
As at 31 December 2011, three Directors, Jonathan Agnew, Nigel de la Rue and Richard Hotchkis had a beneficial interest in 10,000, 4,000 and 1,500 Sterling shares respectively.
Purchases and Sales of the Ashmore SICAV 2 Global Liquidity Fund (“Global Liquidity Fund”) are solely related to the cash management of USD 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.
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Purchases Sales Dividends Purchases Sales Dividends
(205,614,547) 155,212,520 8,853,826 (17,000,000) 17,001,452 1,581
Ashmore Global Opportunities Limited
Notes to the Financial Statements continued
17. Subsequent events
a) Share conversion The following conversions occurred subsequent to year ended 31 December 2012:
Transfers from
Transfers to
US$ shares
£ shares
Number of shares to switch out
Number of shares to switch in
662,196
425,743
The Directors of the Company announced on 22 March 2013, that the monthly share conversion opportunities for the months ended March, June, September and December 2013, will not take place. This decision has been taken due to the anticipated return of capital expected to take place using the NAV’s on these month end dates, as part of the orderly winding up of the Company.
b) Extraordinary General Meeting (EGM) At the Extraordinary General Meeting of Shareholders held on 13 March 2013, the Shareholders of the Company approved:
1. to change the investment objective and to cease the current investment restrictions of the Company in order to realise the Company’s assets in an orderly manner to return cash to Shareholders;
2. to amend the Articles of Incorporation of the Company to facilitate a regular, quarterly return of cash to Shareholders;
3. to amend the Articles of Incorporation of the Company to remove the continuation vote of Shareholders;
4. to amend the Articles of Incorporation of the Company to reduce the minimum number of Directors from five to one; and
5. to amend the terms of the Investment Management Agreement (“IMA”) between the Company and Ashmore Investment Management Limited (“Investment Manager”) to reflect the changes in the investment objective of the Company and to reduce the applicable fee payable to the Investment Manager with effect from 13 December 2014.
Following the EGM, the changes to the Articles of Incorporation and to the IMA have been effected to reflect the above resolutions.
c) Capital return A substantial return of capital is expected to be paid to all Shareholders by way of a pro rata compulsory redemption of ordinary shares, based on the 31 March 2013 NAV. Details of this capital return will be announced on 18 April 2013 with payment expected to take place on or around 3 May 2013.
d) Amendments to Administrator and Custodian’s remuneration Effective 1 January 2013, the annual rates applied to calculate the Administrator’s and Custodian’s fees have been reduced to 0.02% and 0.01% respectively.
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 2012 the outstanding commitment was US$1,357,419 (2011: US$4,987,728).
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 2012 the outstanding commitment was €7,833,696 (2011: €7,833,696).
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$23,581,027. As at 31 December 2012 the outstanding commitment was US$5,991,322 (2011: US$1,559,197).
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Ashmore Global Opportunities Limited
Corporate Information
Directors Jonathan Agnew – Chairman Graeme Dell Nigel de la Rue Christopher Legge Richard Hotchkis Registered Office PO Box 255 Trafalgar Court Les Banques St Peter Port Guernsey GY1 3QL 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 Investment Manager Ashmore Investment Management Limited 61 Aldwych London WC2B 4AE United Kingdom
Custodian Northern Trust (Guernsey) Limited PO Box 71 Trafalgar Court Les Banques St Peter Port Guernsey GY1 3DA Channel Islands Auditor KPMG Channel Islands Limited 20 New Street St Peter Port Guernsey GY1 4AN Channel Islands Advocates to the Company Carey Olsen Carey House Les Banques St Peter Port Guernsey GY1 4BZ Channel Islands UK Solicitors to the Company Slaughter and May One Bunhill Row London EC1Y 8YY United Kingdom
Broker J.P. Morgan Cazenove 20 Moorgate London EC2R 6DA United Kingdom
UK Transfer Agent Computershare Investor Services PLC The Pavilions Bridgewater Road Bristol BS13 8AE United Kingdom
Broker Jefferies International Limited Vintners Place 68 Upper Thames Street London EC4V 3BJ United Kingdom
Website Performance and portfolio information for Shareholders can be found at: www.agol.com
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Investment Management Limited 61 Aldwych, London WC2B 4AE. United Kingdom Authorised and regulated by the Financial Services Authority Designed and produced by Weber Shandwick Financial Design
