The Middle East and Africa are important sources of institutional funds and we have a strong client base which we service from London. Around 8% of our AuM is managed for institutional and sovereign wealth entities in those regions.
Other fund manager groups have come unstuck before through hopeful product diversification. By focusing on performance and process, and aligning our marketing efforts, we believe that we can win over buyers to our products such as EMD with which they have not historically associated us.
We sell products in pooled funds and segregated mandates. Over recent years, we have seen strong growth in our wholesale channel where flows are into pooled products. We expect this trend to continue.
– Targeted approach to growth; concentrate on the capabilities where we have a strong track record in the markets where there is a demand for these products.
We develop our brand and differentiation through a co-ordinated series of local and regional name awareness initiatives and sponsorship opportunities.
Nordic direct 39% UK direct 24% Continental Europe direct 17% Global direct 10% Continental Europe multi manager 6% Asia multi manager 3% UK multi manager 1%
Key strengths • Active management of diversified multi asset portfolios, multi manager funds, fund of hedge funds and fund of private equity funds
Equality and diversity As a global organisation with customers spanning a multitude of countries, cultures and professions, we view diversity as a valuable business asset.
Our investment performance is strong not only in GEM, Asia and global, but also in European, Japanese and regional emerging market products, including Latin America. We look for solid stock selection and believe that there remain good companies with balance sheet strength, good cash generation and excellent management teams that respect good long-term investments, even with the uncertain economic backdrop.
We have strengthened our global property platform with expanded multi manager teams in Asia and the US, and have added specialist distribution capabilities in both regions.
Taiwan was our stand-out retail market. We raised around £150 million in new assets. In March, we won eight Morningstar / Smart awards for performance, a record for any fund house. With an expanded sales team and a new office pending in Kaoshiung, the island’s second largest city, we are gaining vital purchase with key distributors too.
Sales to private banks, which follow a Singapore-Hong Kong axis, also improved thanks to more engagement with the leading banks. They have a wider appetite than for just Asian/ GEM equities and are a valuable test-case for cross-selling other capabilities, including but not limited to, multi asset and solutions-based products.
An interim dividend of 4.4p per share was paid to ordinary shareholders in June 2012 and the Board is recommending payment of a final dividend of 7.1p per share, resulting in a total payment for 2012 of 11.5p, a 28% increase on 2011. This dividend is covered approximately 2.0 times by diluted underlying earnings per share and is covered 1.5 times by diluted earnings per share, reported on a statutory basis.
We have a centralised product development team which oversees the assessment and launch of all new products across the Group. There is a groupwide approach covering all asset classes as well as product and competitor reviews.
We face credit risk as a result of counterparty exposure. The principal risks are in respect of deposits placed with banks.
The Board is accountable to shareholders for the Group’s activities and is responsible for the effectiveness of corporate governance practices within the Group. The responsibilities of the Board include setting the Group's strategic aims, providing the leadership to put them into effect, supervising management of the business and reporting to shareholders.
The Board and its committees will actively engage with the executive in what it sees as emerging risks. The Board believes that a mindset that questions ‘low likelihood, high impact risks’ is critical.
Corporate responsibility We have included an update on corporate responsibility and our annual corporate responsibility report is available on our website.
• Determine the remuneration strategy for the Group to ensure staff retention and incentivisation, to meet with current best practice and to align the interests of all stakeholders, in particular shareholders and employees.
Other appointments • FirstGroup PLC (chairman) • British Sky Broadcasting Group PLC (non-executive director)
Background and experience Rod is responsible for UK and global risk including regulatory compliance, legal services, business and investment risk. Rod joined Aberdeen in 2003, following the acquisition of Edinburgh Fund Managers.
Background and experience Simon was a partner at Cazenove and Company Limited before moving to Fauchier Partners in 2003 where he became chief operating officer. He qualified as a chartered surveyor having read Land Economy at Cambridge University.
Environment Since the development of our Environmental Management System (EMS), we have worked to reduce our carbon footprint and minimise waste and resource use. Given the nature of the business, carbon emissions from our offices, emissions from business travel and waste generation are our most significant direct environmental impact.
• The period of deferral has been extended. The 75% deferred element will vest over four years rather than three.
vesting of awards is dependent on the extent to which growth in the Group’s adjusted earnings per share exceeds growth in the composite index, which measures the weighted average performance of the stock markets in which the Group’s AuM are invested, as set out in the following table.
The composite index is derived from movements in the following indices, which are considered as being representative of the assets managed by the Group and includes the following: FTSE All-Share MSCI Emerging Markets
Growth in stock market composite index Excess growth Proportion of awards vesting 1 To the extent the committee deems appropriate, EPS is subject to adjustments to exclude the effects of (i) amortisation and impairment of intangible assets; (ii) impairment of goodwill; (iii) charges arising from share options and LTIP awards; and (iv) exceptional items.
Total shareholder return (dividends reinvested) Cumulative : 5 years ending 30 September 2012
Service contracts The executive directors have service contracts which may be terminated on twelve months' notice from the Company or six months' notice from the director. If the Company decides to terminate the director's appointment without giving the required period of notice then the director is entitled to receive one year's remuneration, which will include the value of all benefits including any bonus to which the director would otherwise have been entitled. The directors' contracts also provide for termination on three months' notice if, in the opinion of the Board and having given the director adequate opportunity to improve, the director has failed to perform at a satisfactory standard; in such circumstances no liquidated damages would be paid.
Going concern The business review discusses the Group's business activities, together with the factors likely to affect its future development, performance and position and sets out the financial position of the Group, its cash flows and liquidity. Note 30 of the financial statements sets out the Group's objectives, policies and processes for managing capital and its financial risk management objectives, together with details of financial instruments and exposure to credit risk and liquidity risk. The Group has considerable financial resources and a strong cash position. The Board has prepared forecasts, including rigorous sensitivity analysis, which demonstrate that the Group will continue to operate within its available resources. After making these enquiries, the Board considers that the Group has adequate resources to meet its business needs and it is therefore appropriate to adopt the going concern basis in preparing these financial statements.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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.
Standards not affecting the reported results nor the financial position The following new and revised Standards and Interpretations have been adopted in the current year. Their adoption has not had any significant impact on amounts reported in these financial statements.
• where the deferred tax asset or liability arises from the initial recognition of goodwill.
– at the time of the transaction, affects neither accounting profit nor loss.
Where there is objective evidence that an available for sale financial asset is impaired, the cumulative impairment loss is reclassified from equity to profit and loss with subsequent movements recognised in profit and loss.
The following assets are designated as available for sale: • Non-current assets – Other investments
Total non-current liabilities 70.6 160.4 1.9 86.5 Current liabilities Investment contract liabilities 18 2,311.9 1,128.1 – – Interest bearing loans and borrowings 25 81.5 – 451.9 280.0
Details of Directors’ remuneration are given in the Remuneration report on pages 50 to 62.
Add: interest on 2014 convertible bonds, net of attributable taxation 4.3 4.0 4.3 4.0
Dilutive effect of exercisable share options and deferred shares 57.5 53.8 57.5 53.8
The categories of management contracts and distribution agreements, their carrying amounts at the year end, remaining amortisation periods and estimated useful lives are as follows: Net book values £m
The awards outstanding at 30 September 2012 had a weighted average remaining contractual life of 8 years.
Capital redemption reserve The capital redemption reserve is created on the cancellation of share capital and the balance reflects the value of preference share capital redeemed by the Company. This reserve is not distributable.
Investments of life and pensions subsidiary 6.6 23.1 6.6 23.1 – – – –
Singapore dollar 169.5 50.6 vi) Interest rate risk The Group is exposed to interest rate risk through borrowing at both fixed and floating rates. The risk is managed by maintaining an appropriate mix. The Group’s debt consists of convertible debt and the revolving credit facilities, which were undrawn at 30 September 2012. The convertible bonds, which were issued in December 2009, bear interest at a fixed rate throughout their five year life. Interest on the revolving credit facilities, which have been undrawn throughout the year, is at LIBOR plus a margin.
30 Financial risk management (continued) The interest rate profiles of the Group's and Company's financial assets excluding the assets backing the liabilities relating to the life assurance subsidiary at 30 September were as follows: Group
www.aberdeen-asset.com 115 vii) Sensitivity analysis The following analysis provides an indication of the impact of changes in the significant market risk variables on the fair value and cash flows of the Group's financial instruments.
• Market prices are assumed to increase or decrease by 10% at each reporting date
Regulatory capital requirements In accordance with the Capital Requirements Directive (CRD), as implemented in the UK by the Financial Services Authority (FSA), the
Deferred elements of employee benefits outstanding at the year end: Amounts owed to related parties (including amounts deferred from previous years) 34.6 32.2
The increased contribution to the CGA Staff Pension Fund was to enable the trustees of the scheme to buy out the liabilities with an insurer and commence wind-up of the scheme. No further contribution will be payable.
Fair value of plan assets at 30 September 154.0 129.8 119.8 105.2 94.2 Net pension deficit (15.4) (24.3) (35.0) (33.4) (11.9) Difference between expected and actual return on plan assets Amount 11.3 2.4 8.6 (1.6) (14.4)
Amortisation, impairment and exceptional operating items (78.1) (77.8) (66.2) (30.1) (13.8)
Stockbrokers J.P.Morgan Cazenove 25 Bank Street Canary Wharf London E14 5JP