Ashmore Group PLC Final Results (6763Y)

TIDMASHM

RNS Number : 6763Y

Ashmore Group PLC

11 September 2020

Ashmore Group plc

11 September 2020

RESULTS FOR THE YEARING 30 JUNE 2020

Ashmore Group plc (Ashmore, the Group), the specialist Emerging Markets asset manager, today announces its audited results for the year ending 30 June 2020.

- Solid operating and financial performance

- Adjusted net revenue increased by 5% YoY, driven by 7% growth in net management fees

- Lower operating costs delivered 10% YoY growth in adjusted EBITDA to GBP222.5 million and higher margin of 68%

- Profit before tax of GBP221.5 million increased 1% YoY and diluted EPS increased 3% YoY to 25.7 pence

- Recommended final DPS of 12.10 pence to give a 2% YoY increase in total dividends to 16.90 pence

- Balance sheet strength maintained with financial resources of more than GBP700 million

- Assets under management (AuM) declined by 9% to US$83.6 billion

- Negative market performance of US$8.1 billion reflecting the Q3 impact of COVID-19 pandemic

- Flat net inflows over the year with continued allocations by existing and new institutional clients offset by mutual fund redemptions relating to impact of Q3 market conditions

- Net inflows to equity products in every quarter

- Performance impacted by fall in markets in Q3, Ashmore processes generating significant alpha as markets recover

- 17% of AuM outperforming benchmarks over three years and 74% over five years

- Equities strategies delivering strong relative performance

- Consistent implementation of active management processes generating significant alpha as markets recover

- Strategic progress

- Diversification through increased momentum in equities and continued seed capital investment

- Ashmore Indonesia listed on Jakarta Stock Exchange in January 2020

- Strength of Ashmore's business model demonstrated in adverse conditions

- Resilient business model underpinned by strong team-based culture, a single global operating platform, balance sheet strength and cost flexibility

- Swift, effective transition to remote working for all offices in March

- Ashmore's team-based culture means office working is optimal; employees' welfare is a priority in determining how and when to return to offices

Commenting on the Group's results, Mark Coombs, Chief Executive Officer, Ashmore Group said:

"Ashmore has delivered a solid operational and financial performance over the past year, against a backdrop of significant market dislocation in the third quarter as a result of the worldwide COVID-19 pandemic. The Group's business model, based on a consistent global operating platform, has proven its resilience in this challenging period and, after the initial negative impact in Q3, the investment processes are delivering outperformance as markets recover and client flows have continued to stabilise.

"The economic and social effects of the virus will continue for some time and the medium to long term impact remains uncertain. However, the huge diversity of Emerging Markets means that countries will be affected and will respond differently, thereby providing a wide range of potential return scenarios for active managers. Importantly, many emerging nations have the policy flexibility to cope with the challenges, and they provide superior growth and yield prospects compared with many Developed Markets, where high equity valuations and persistently low or negative rates combine with low growth and high levels of debt. This provides clear incentives for investors to increase allocations to both equity and fixed income markets in the emerging world and therefore supports the medium-term growth opportunity for Ashmore's specialist approach."

Analysts briefing

There will be an online presentation for analysts at 9.30am on 11 September 2020. A copy of the presentation will be made available on the Group's website at www.ashmoregroup.com.

Contacts

For further information please contact:

Ashmore Group plc

 
Tom Shippey, Group Finance 
 Director                    [phone] 
Paul Measday, Investor 
 Relations                   [phone] 
 

FTI Consulting

 
Neil Doyle    [phone] 
Laura Ewart   [phone] 
 

Chief Executive's review

Ashmore delivered a solid financial performance this year, with net revenue growth of 5%, an increase in adjusted EBITDA of 10% and 3% higher diluted EPS. The social and economic impact of the COVID-19 pandemic inevitably impacts any assessment of the past 12 months, but reassuringly Ashmore implemented its investment philosophy diligently throughout the market volatility, demonstrated the operational resilience of its business model, continued to broaden its client base, and achieved important strategic developments during the period.

Investment performance

The first half of the financial year saw satisfactory returns across the Emerging Markets investment themes, continuing the recovery trend evident since early 2016, albeit with some volatility and therefore opportunities for Ashmore's investment processes to add risk to portfolios to capture longer-term upside. This relatively benign environment then changed dramatically with the worldwide spread of the COVID-19 virus in the third quarter of the financial year. Global capital markets saw rapid and severe declines that resulted in mark-to-market losses across a broad range of asset classes.

As is often experienced in a period of widespread risk aversion, a number of Ashmore's strategies underperformed their benchmarks. Some Emerging Markets countries required a restructuring of their debt, which also contributed to the underperformance. While the market recovery and delivery of outperformance began in Q4, the performance snapshot at the end of June reflects the impact of the Q3 sell-off with 9% of AuM outperforming over one year, 17% over three years and 74% over five years. For a number of Ashmore's broad fixed income composites, this picture is also reflected in performance compared with peer groups, while equity performance is generally strong versus the peer groups.

The combined impact of the COVID-19 virus, an oil price shock and a sharp fall in US equity prices caused investors to move quickly into 'safe haven' assets such as US government bonds and to focus on raising US dollar liquidity. Valuations across asset classes reached extreme levels, in many cases those last seen more than a decade ago in the global financial crisis. For example, the spread over US Treasuries on external debt exceeded 700 basis points, more than four times its historical low and more than twice the recent level of around 300 basis points.

Ashmore's experienced investment teams have managed through multiple market cycles, and while each cycle is different, the principles of investing do not change. With a tolerance for mark-to-market volatility, the investment committees seek to identify mispriced assets and to add risk to portfolios in order to deliver longer-term outperformance. Such opportunities were apparent in most investment themes in February and March, but were particularly notable in high yield external debt given significant spread widening, in investment grade corporate and external debt, and in equities as valuations fell close to book values.

While the economic and social consequences of COVID-19 will continue for some time, markets have started to recover from the levels seen in March. The broad-based rally, combined with the benefit of adding risk at lower market levels, means that Ashmore's strategies are outperforming on a short-term basis. For example, the blended debt composite saw its benchmark fall by 13% in Q3 and the strategy underperformed by 8%; the benchmark rallied 9% in Q4 and the strategy outperformed by 6% over the three months.

Ashmore remains focused on continuing to recover the performance impact of the Q3 market dislocation, and as described in the Market review and outlook comments below, the conditions remain in place for Emerging Markets to outperform developed world assets and for Ashmore's investment processes to continue to deliver performance for clients.

Clients

The Group has an experienced and diversified client base that continued to allocate to Emerging Markets and delivered flat net flows over the year. The broad-based net inflows of US$5.7 billion during the first half of the year were disappointingly then reversed in the second half, as the impact of market volatility resulted in net outflows over the six months of US$5.8 billion. Inevitably, intermediary retail clients were quicker to react to the change in markets and consequently the proportion of AuM from such clients has reduced over the year from 15% to 11%.

The majority of the outflows were experienced during the extremely volatile market conditions of February and March, and concentrated in two specific areas: intermediary retail and institutional investors reacting quickly to the deterioration in markets and consequent underperformance in specific strategies such as Short Duration, and institutional clients sourcing US dollar liquidity from daily-dealing mutual funds invested in local currency bond markets. Some clients also inevitably reduced exposure as prices recovered.

The level of gross subscriptions was higher in the first six months of the year, but there were consistent patterns of client behaviour throughout the 12-month period. For example, there was a good mix of existing institutional clients adding to mandates or funding new mandates, and new client wins, particularly in the equities theme. Notably, the Group attracted new clients in the period after remote working was introduced, demonstrating that the distribution processes continue to be effective even without the ability to travel and meet counterparts in person.

The diversified nature of the Group's client base, whether by domicile, by type of institution and retail intermediary or by investment objectives, means that there is a variety of responses to a given set of market conditions and resultant investment performance. While some clients redeem capital either immediately or shortly after a market dislocation, others will see it as an opportunity to take advantage of attractive valuations and to increase allocations in line with long-term objectives. A third constituency will take longer to take stock of the situation and will therefore inevitably react later.

All these types of behaviour have been experienced in previous cycles and over the past six months, and it is reasonable to expect a continued mix of client behaviours until there is a greater degree of conviction in respect of economic and market developments.

Business model resilience

Ashmore invests in cyclical markets and its business model is explicitly designed to operate successfully through all stages of the cycle. Several characteristics, including the single consistent operating platform, provide resilience and have enabled the Group to protect returns to shareholders in a period when assets under management are lower, as well as enabling a rapid transition to remote working for all the Group's employees in response to the COVID-19 pandemic. The strength of Ashmore's business model meant that it did not furlough or make redundant any staff as a result of COVID-19 and nor did it voluntarily subscribe to any government funding schemes.

Disciplined operating cost control

Non-variable operating costs are managed strictly, with a detailed bottom-up budgeting process ensuring that redundant expenses are identified and removed from the cost base. Additionally, in the second half of the year, the imposition of travel restrictions and remote working in many countries meant that operating costs were slightly lower than anticipated. For the 12 months as a whole, operating costs before variable remuneration were reduced by 5%.

Remuneration philosophy

A principal component of the Group's cost flexibility and ability to respond quickly and appropriately to different revenue conditions is its remuneration philosophy, with a bias towards performance-related variable pay. The aggregate variable remuneration paid to employees each year is determined by the performance of the business, covering both financial and non-financial factors, and is capped at 25% of EBVCIT (operating profit before the variable remuneration charge). This means employee remuneration is aligned with the interests of clients and shareholders, and profitability can be protected in more challenging stages of the cycle. Furthermore, with a significant proportion of an employee's variable remuneration being in the form of equity awards with five-year vesting, this alignment of interests is maintained over the long term.

Although Ashmore's financial performance was solid this year, with higher revenues and profits, the variable remuneration charge was reduced to 19.5% from 22.5% in the prior year, in recognition of the more challenging market environment in the second half of the year and its consequent impact on investment performance and client flows. This demonstrates the benefits to shareholders of a well-designed and flexible remuneration policy in which discretion can be and is used in order to achieve appropriate outcomes. Together with the ongoing control of other operating costs, this resulted in the Group's adjusted EBITDA margin increasing slightly to 68%.

Global operating model

Ashmore has a single, consistent operating model implemented across all offices to provide stability and scalability. The operational infrastructure supports the business in global hubs in New York, Dublin, London and Singapore together with Tokyo and the local asset management platforms.

For example, investment teams use a single front office portfolio management and trading system, the fund accounting platform is uniform across the jurisdictions, and the Group has a single general ledger. This simple architecture is the result of Ashmore's strategy delivering growth primarily through organic means rather than relying on acquisitions with the associated challenges of integrating legacy systems.

This structure provides efficiency and scalability. In the current year, additional benefits were seen as the Group was able to implement its Business Continuity Plan and transition all its employees swiftly, safely and successfully to a secure remote working environment in March. That this was achieved in a period notable for stressed market conditions and elevated transaction volumes is even greater testament to the resilience of the platform and the professionalism and dedication of Ashmore's employees.

Although some employees in Asia have started to return to offices in line with local government guidance, there remains the possibility of a return to greater restrictions as has been seen elsewhere. The Group's operating platform is capable of supporting the remote-working environment for the foreseeable future, however there are other considerations, for example from a culture perspective. Over the longer term, the fundamental characteristics of Ashmore's business model will continue to be based upon teams collaborating effectively in an office-based environment, with a close-knit culture and a common remuneration philosophy that aligns the interests of all stakeholders.

Balance sheet

Ashmore's balance sheet is conservatively structured with substantial financial resources predominantly held in cash and no debt, and this conservative approach has served the Group and its shareholders well through numerous market cycles. Over the year, the strength and liquidity of the balance sheet was maintained while continuing to provide resources to invest in future growth through the active management of the Group's seed capital. For example, total new seed capital investments of more than GBP50 million were made during the period, predominantly into equity funds to support growth in this theme. Over the year, there were successful net realisations of seed capital investments.

As described in the Business review, the ICAAP resulted in an increase in the Group's Pillar II regulatory capital requirements due to the impact of higher market volatility on increased balance sheet positions, but the Group's total financial resources of approximately GBP700 million mean that a substantial excess capital position has been maintained throughout the period.

Strategy update

The asset management industry continues to face various structural challenges, such as the increasing adoption of passive investment strategies, a more complex regulatory environment, and rising demand for ESG factors to be incorporated into investment decisions.

Ashmore's specialist, active investment style, and consistent global operating model assist in addressing these challenges, and its strategy is aligned with the significant growth opportunity across the broad range of Emerging Markets asset classes, with the three phases focused on growing and diversifying Ashmore's business and creating value for clients and shareholders. Progress was made in all three phases this year.

Phase 1: continued allocations

The Emerging Markets investment universe continues to expand, with 12% growth in the value of bonds in issue to US$29.6 trillion and an equity market capitalisation of over US$30 trillion. However, benchmark representation of 13% for fixed income and 19% for equities remains at low levels given the scale and importance of the Emerging Markets investment opportunity.

Global benchmark indices have a typical Emerging Market weighting of between 10% and 20%, and most investors have a target allocation of below 10%. Given the more favourable prospects for emerging countries over the longer term, as they continue along the path of economic convergence with the developed world, then this significant underweight position poses a risk to investors' risk-adjusted returns that should be addressed by higher allocations.

Ashmore's institutional flows over the past 12 months remain biased towards existing clients with approximately 80% of gross flows delivered through a combination of additional capital in existing mandates and new mandates to access different investment opportunities, illustrating that the arguments in favour of higher allocations to Emerging Markets are resonating and being acted upon by investors.

Phase 2: diversifying investment themes and products

An important strategic objective for Ashmore is to develop and grow its equities business, in order to achieve further product diversification and provide clients with access to a full range of Emerging Markets equity products, from global strategies to specialist, regional and single country strategies.

Equities has performed well this year, with strong relative investment performance being maintained over a broad range of products, including through the volatility in Q3, and net inflows delivered in every quarter to give total net flows into equities of GBP1.2 billion for the year.

Encouragingly, the client flows are a mix of existing clients recognising the developing investment track record, and new clients making their first allocation to an Ashmore strategy. The prospects for continued growth are good, with the All Cap strategy performing well as it approaches its three-year track record later in 2020.

In the second half of the year, Ashmore launched and seeded a dedicated equity ESG fund, to sit alongside the blended debt ESG fund established in early 2019.

Phase 3: mobilising Emerging Markets capital

Approximately 26% of the Group's assets under management have been sourced from clients domiciled in the Emerging Markets. This capital is managed both on a global basis and by the local asset management platforms where the client either wishes or is required to invest in domestic assets and capital markets. In total, the Group's local asset management platforms manage AuM of US$5.0 billion, or 6% of the Group's total.

Ashmore's Indonesian business achieved a significant milestone in January 2020 when it undertook an IPO and listed on the Jakarta Stock Exchange. There were no shares sold by existing shareholders, meaning that Ashmore remains a committed majority shareholder and fully aligned with the local management team and its significant minority equity stake. The process diversified the shareholder register, raised the profile of the business domestically and regionally, and provided a potential roadmap for the Group's other local platforms to consider at the appropriate stage in their development.

People and culture

The impact of COVID-19 has resulted in significant responses, both at a macro level in terms of fiscal and monetary stimulus, and for individual economies and businesses, most notably with the requirement for employees to work from home. Ashmore has a distinctive team-based culture that has been sustained through its long history of investing in Emerging Markets, and which has enabled it to adapt successfully to this new environment. While the culture lends itself to teams working collaboratively in offices, the business can support the requirements of remote working for as long as is required in order for colleagues to return safely to the Group's offices around the world.

The commitment of the Group's employees means that the business has operated effectively, including notably throughout the more challenging period in the second half of the financial year. I would therefore like to thank all of my colleagues for their impressive dedication, professionalism and commitment to continue to deliver for Ashmore's clients, shareholders and other stakeholders over the course of the past year.

Outlook

The trends in market performance, delivery of outperformance and a stabilisation of client flows seen towards the end of the financial year have continued over the summer months. However, the recovery in Emerging Markets asset prices still has further to go to return to levels that could be considered fair value. The process is likely to take time and has unknown factors, as COVID-19 will continue to have a wide range of impacts on countries and asset prices across the Emerging and Developed Markets and there is ongoing tension between the US and China, which in part is linked to the US presidential election later this year. However, volatility and uncertainty can provide significant opportunities for investors and, as ever, the critical analysis is to determine what is priced in, and therefore whether expected returns compensate for perceived risk.

In this context, the Emerging Markets offer notable value. Economic growth prospects are superior in Emerging Markets and support the outlook for equity markets, currencies are cheap versus the US dollar, bond yields in both nominal and real terms are significantly higher than developed world equivalents, and structural issues such as high indebtedness and a lack of reforms continue to constrain growth in developed nations.

However, the attractions of growth-driven equity returns and high yields also have to be seen against the uncertainties relating to COVID-19 and the worsening economic fundamentals in the developed world that are likely to keep risk aversion high for a period of time.

Ashmore will continue to focus on delivering investment and financial performance for its clients and shareholders, and on ensuring the safety of its employees while planning to return to offices when local conditions permit.

Mark Coombs

Chief Executive Officer

10 September 2020

COVID-19: Meeting the challenge for all stakeholders

The COVID-19 virus has had a profound effect on societies, economies and markets across the world, and there remains significant uncertainty about its future impact. Ashmore's priorities during this period have been to ensure the health and safety of its employees and to continue to focus on delivering value for its stakeholders. While this crisis is unprecedented in recent memory, and has occurred at the same time as an oil price shock, the Group's business model and culture have meant that it has responded effectively to the challenges and maintained its investment, operational and support activities as close to normal as possible.

Operational impact

Although the nature and impact of the COVID-19 pandemic was not predicted, Ashmore's comprehensive Business Continuity Plan was deployed swiftly and delivered an effective response in the context of the rapid development of government guidance, policies and legislation in each of the countries in which the Group operates. Over a two-week period in mid-March, the firm's approximately 300 employees transitioned successfully from full-time office-based roles to working remotely. This was facilitated efficiently due to Ashmore's single consistent global operating model and robust IT infrastructure, as well as the commitment and dedication of all employees at a time of significant uncertainty. The integrity of Ashmore's remote access environment enables effective management of cyber security risks in the remote working period.

Some working practices were changed early in the crisis, such as no face-to-face meetings and a restriction on travel, and while at the time of writing they remain in place it is expected that they will ultimately prove temporary. Nonetheless, the increased use of 'virtual' communications since the start of 2020 is likely to have a lasting impact on behaviour across the industry.

In line with local government guidelines, certain Ashmore offices have begun to return to office-based operations, with strict social distancing rules in place and team rotations. This approach is coordinated centrally at the Group level so best practice and lessons learned can be shared with other locations as they prepare to make the transition back to office-based working.

Communications

The worldwide impact of the pandemic on working practices means that most elements of the asset management industry have had to employ alternative ways of communicating with stakeholders. In Ashmore's case this has included, for example, a significant increase in the use of video calling systems to enable employees to maintain contact with members of their teams and other colleagues, frequent and regular CEO emails to all employees, ongoing regular contact with the Group's regulators, as well as a letter to stakeholders early in the crisis to provide a comprehensive update and reassurance on the Group's response to the developing situation.

Governance

Ashmore's governance structures have continued to operate effectively, with all Board, committee and other management meetings taking place as planned. The Group's Operating Committee met frequently and regularly to manage the developing impact of COVID-19.

Investment processes

The fall in global markets in Q3 resulted in negative investment performance for the year, as described in the Business review. Ashmore's investment processes manage client portfolios through investment committees, all of which have continued to operate effectively notwithstanding some constraints imposed by working remotely. Local offices already participated by telephone in IC meetings and so this has naturally extended to all investment professionals. From a research perspective, interaction with issuers and other counterparties has also transitioned effectively to the new environment through the use of 'virtual' roadshows, video calls and webcasts in the place of travel.

Client interaction

The distribution team faced the challenge of communicating with existing and potential clients as markets experienced a substantial dislocation in February and March, while becoming increasingly restricted in terms of the ability to conduct face-to-face meetings. However, the levels of engagement were high and assisted by an increase in the use of video technology alongside the more traditional methods of communication. While client redemptions increased, Ashmore's focus on liquidity management ensured that they were facilitated even in the more stressed market conditions.

Inevitably some client-related processes have become more protracted in the absence of physical meetings, but as with the investment processes, the transition to a remote working environment has been accomplished without any major issues.

Society

Ashmore encouraged employees, where possible, to support local charitable efforts to meet the serious and pervasive challenges presented by the COVID-19 crisis in the countries in which it operates. The Group made a GBP250,000 donation to NHS Charities Together in the UK to support the critical efforts of healthcare workers in dealing with the immediate impact of the virus as well as preparing to tackle the longer-term consequences in areas such as resource requirements and staff wellbeing.

Many of the Group's employees made voluntary donations to the Ashmore Foundation, NHS Charities Together and other charities fighting the effects of COVID-19, and Ashmore matched these generous contributions, resulting in further total charitable donations of more than GBP45,000.

The Group has not furloughed or made redundant any employees as a result of COVID-19 and nor has it voluntarily taken advantage of any government or other support schemes in any of the countries in which it operates.

As the full impact of the virus becomes clearer, the Group will continue to examine ways in which it can contribute to broader recovery efforts in society, including by continuing to support grant organisations in the Emerging Markets through the work of the Ashmore Foundation.

Conclusion

The longer-term impact of COVID-19 remains uncertain with many unknowns, but the principles of investing, the long-term growth opportunity available in Emerging Markets, and the resilience of Ashmore's business model, ensure that the Group is well-positioned to meet the challenges and opportunities resulting from the crisis.

Ashmore's infrastructure continues to support effective remote working, but the Group's culture is centred on teams operating in offices. It is therefore recognised that a transition back to this way of working is desirable, but the health of employees is paramount and so a decision to return to offices will be taken only when it is safe and appropriate to do so, and always in accordance with local government advice.

Market review

Emerging Markets performed well in the first half of the financial year, then the spread of the COVID-19 virus around the world and an oil price shock caused markets to fall in the third quarter. Markets began to recover in Q4 and were more stable towards the end of the year.

There was significant volatility in Emerging Markets returns over the year, with +3% to +7% delivered in the first half, before the market environment deteriorated in Q3 leading to 10% to 15% declines in fixed income markets and 24% in equities over the quarter. With the start of a recovery in asset prices in the fourth quarter the financial year overall saw modest returns in hard currency fixed income indices, of between +1% and +4%, and negative returns in local currency fixed income and equity indices of -3%.

Emerging Markets and policy flexibility

The economic and social impact of the COVID-19 virus has been severe, with a global recession expected in 2020. However, while there are significant uncertainties as to the development of the pandemic, there is a broad consensus of market opinion that expects a gradual economic recovery in 2021, with GDP levels tracing a 'tick' profile over the two years. Importantly, in aggregate the emerging nations are expected to experience a shallower recession and deliver a stronger recovery than the developed world. For example, the IMF's forecasts are for Emerging Markets GDP to fall by 3% in aggregate this year and then rise by 6% next year, compared with an 8% decline in developed world GDP this year and a 5% recovery in 2021.

Of course, there are significant variances between the 155 emerging nations in their economic, political and social structures, and a clear distinction can be made between two broad sets of countries and their ability to deal with the worldwide growth shock and, as necessary, a domestic COVID-19 challenge.

- The greatest policy flexibility is apparent in the larger, typically more diversified economies, that fund themselves predominantly or only in their own currency. Real interest rates are high, inflation is low, currencies are competitive, and so central banks have the ability to cut policy rates and employ quantitative easing (QE) tools, such as asset purchases, as appropriate. These countries also have room for fiscal expansion. While the growth challenge caused by the virus may be significant, this group has policy tools available to be able to meet these challenges. This group is broadly represented across Latin America, Europe, Africa and Asia.

- The other group of nations has a reduced set of policy options, as a consequence of having smaller and narrower economies, and being funded by external creditors in hard currency. These countries need to maintain access to international capital markets and must therefore keep monetary policy relatively tight. Such countries usually rely on external creditors for funding, whether supranational organisations such as the IMF and World Bank or private sector creditors, and will require even greater support from these counterparties. Countries in this group are particularly present in Africa and Latin America.

Ultimately, the structure of an economy, the strength of its institutions, together with the flexibility and quality of policy making, will determine how successfully a country is able to deal with the challenges of the virus pandemic and the worldwide recession.

Developed Markets and policy consequences

For the most part, developed world governments have not addressed the huge increase in public sector debt that resulted from the global financial crisis more than a decade ago, and have lacked any meaningful reform agenda. This has delivered only lacklustre economic growth and persistently low interest rates, but a strong bull market in assets, such as US equities and government bonds, that were supported, directly or indirectly, by central banks' QE policies.

The policy responses by developed world institutions to the COVID-19 pandemic have largely been swift and substantial, encompassing both monetary stimulus including a return to QE and fiscal stimulus in the form of direct support to the employment market, as well as business loan and guarantee schemes. While these actions undoubtedly helped to mitigate the economic impact of the pandemic, they will have consequences that will exacerbate the indebtedness of developed nations, thereby constraining economic growth further, and requiring policy rates to remain extremely low for a prolonged period of time. In this context, and as explained below, Emerging Markets present a favourable medium-term growth outlook, underpinned by ongoing structural reforms, and accompanied by attractive yields.

Implications of a US recession for Emerging Markets

The prospects for the US economy are directly and indirectly relevant to many other countries and can influence investors' portfolio allocations with implications for Emerging Markets. The initial phase of a recession causes a short period of risk aversion, during which capital flows out of perceived riskier asset classes, including the Emerging Markets, and into 'safe havens' such as the US Treasury market, almost irrespective of valuations and return prospects.

The next, usually more prolonged, period involves capital reallocating away from equities and corporate credit as profits fall and defaults rise, and into US Treasuries to take advantage of rate cuts. However, with nominal and real rates in the US at low or even negative levels, it is arguable that capital will seek higher returns elsewhere in the world, resulting in downward pressure on the US dollar and the potential for flows into the faster growing, higher return Emerging Markets. These flows will stimulate domestic demand in financially-constrained economies, underpinning GDP growth further.

Attractive valuations

The fall in global markets in February and March drove valuations across Emerging Markets to extreme levels. For example, the external debt (EMBI GD) index spread widened to over 700 basis points and equities traded at close to book value, neither of which have been experienced in the 12 years since the global financial crisis. Markets began to recover strongly at the end of March, but valuations still look highly attractive, whether in absolute terms, compared with history, or compared with equivalent assets in Developed Markets.

External debt trades at 475 basis points over US Treasuries, nearly three times the historical low (160 basis points) and well above a reasonable estimate of normalised value (300 basis points). Indeed, the index has traded at or wider than this level for only 3% of the trading days over the past decade. The majority of bonds in the index are investment grade, and this sub-component also offers good value with a yield of more than 3% and a spread over US Treasuries of more than 200 basis points.

Local currency bonds yield 4.5%, but with inflation across Emerging Markets well-controlled and near record lows, the real yield is highly attractive at around 2% and especially when compared with negative real yields for equivalent duration government bonds issued by developed countries. Significantly, China has joined the benchmark GBI-EM GD index, effectively providing the first 'safe haven' destination within the asset class. As discussed above, with the potential for medium-term weakness in the US dollar, there is an opportunity for investors to enhance returns from these markets with foreign exchange gains.

Corporate debt has many attractive characteristics when compared with the US high yield (HY) market, for example the Emerging Markets index is highly diversified with 57 countries represented, has a higher average credit rating, and a lower historical default rate. However, as is the case for external debt, the majority of bonds in the index are investment grade (IG). Both the HY and IG components have attractive valuations, with yields in excess of 7% and 3%, respectively.

Equity market performance is typically correlated with the relative growth rates expected between Emerging and Developed Markets. Therefore, as discussed above, the premium growth forecast for emerging countries should underpin outperformance by Emerging Markets equities. This view is further reinforced by the MSCI EM index trading at attractive levels and an expectation that undervalued equity markets will perform strongly as economies start to recover from the impact of the virus pandemic. Indeed there are already tentative signs of a 'first-in, first-out' economic and market recovery in parts of Asia.

Continued development of the Emerging Markets asset classes

Notwithstanding short-term cyclical market movements, there continue to be significant structural characteristics and developments of the fixed income and equity markets that support longer-term outperformance compared with Developed Markets, and therefore also underpin the case for higher investor allocations.

Benchmark indices remain a poor representation of the investment opportunities

The Emerging Markets investment universe is large and diversified, but one of the most striking inefficiencies is the very low level of index representation: only 13% of bonds and 19% of equity market capitalisation are included in benchmark indices. This has a number of important implications:

- the competitive threat of passive substitutes is limited, given the small proportion of the universe that can be replicated passively;

- active management can deliver alpha, whether through active risk against benchmark securities or by investing in non-benchmark assets; and

- liquidity in local currency instruments is increasingly found in the domestic capital markets, as the bonds and shares are owned and traded by domestic institutions. An established network of local market counterparties is therefore a prerequisite to accessing this liquidity on a consistent basis.

While these inefficiencies can be successfully exploited by active management, over time it is desirable to have higher index representation in order to drive higher investor allocations to the asset classes.

In this respect, there have been notable developments in 2020. Over the course of the year, JP Morgan is including Chinese local currency bonds in its GBI-EM GD benchmark index with an eventual weight of 10%. Also, India has taken some tentative steps to increase foreign investor access to its domestic markets, which could enable it to follow the path taken by China in due course.

Structure of fixed income markets

There are approximately 155 developing countries of which fewer than half have issued debt in public markets, the remainder typically relying on organisations such as the IMF for funding. When a country issues public market bonds for the first time, it typically does so in the external (hard currency) markets, since domestic institutional investors and yield curves are not necessarily sufficiently developed to allow significant local currency issuance. Over time, as the country and its institutions and capital markets develop, it will increasingly issue domestic bonds in its own currency. Consequently, in Emerging Markets, the largest and fastest growing fixed income markets are the local currency-denominated sovereign and corporate bond markets, which together represent 82% of all bonds issued by Emerging Markets countries and companies.

This market structure has important implications for the resilience of countries in the face of domestic and external shocks, with a dependence on foreign creditors typically leading to a narrower set of policy options when compared with those countries that are predominantly funded by domestic investors. The effect of this has been seen most recently as many local currency funded nations have been able to deploy fiscal and monetary stimulus in order to manage the economic impact of the worldwide virus pandemic.

Allocations

Developed world investors hold significantly underweight positions in Emerging Markets fixed income and equities, which is at odds with the increasing influence of these countries in the world's economic, political and social affairs. Higher allocations to Emerging Markets will provide investors with access to superior growth and potential returns.

The increasing significance of Emerging Markets is illustrated by the following characteristics:

- 84% of the world's population lives in an Emerging Market country, with typically much more favourable demographics than developed nations;

- Emerging Markets account for 60% of world GDP and 75% of the world's economic growth forecast by the IMF over the five years to 2021;

- GDP per capita of US$13,000 in Emerging Markets is less than a third of the developed world level of US$45,000. The inherent growth potential in the emerging world is illustrated by the fact that the developed world was at the same level of wealth in 1983;

- emerging nations control foreign exchange reserves of nearly US$9 trillion, accounting for more than 75% of total world foreign exchange reserves;

- Emerging Markets represent only 25% of worldwide bond issuance and 33% of world equity market capitalisation, providing significant growth opportunities; and

- the weights of Emerging Markets in global equity and bond indices are relatively low, at between 10% and 20% respectively, but increasing over time as markets grow and reforms allow better access.

In this context, the typical investor has a target weighting of below 10%, which over the longer term will result in below par returns compared with a portfolio that has at least a neutral weighting to Emerging Markets through the cycle.

Market outlook

There is a broad consensus of opinion that the world economy will recover from the current recessionary conditions over the course of 2021, although there will be significant variations in the experiences of individual countries and there is uncertainty with respect to the development and impact of the COVID-19 pandemic. The US presidential election in November 2020 is an additional source of potential market volatility.

While this backdrop is potentially challenging, periods of market volatility such as that experienced in early 2020 typically provide significant investment return opportunities as short periods of extreme risk aversion lead to mispriced assets. Although there has been something of a market recovery since the lows seen in March, there remains substantial value available across a wide range of equity and fixed income markets in the emerging world. Furthermore, the relative attractions of Emerging Markets have arguably been enhanced by the return to aggressively looser monetary policy, including QE, and debt-funded fiscal stimulus by developed countries.

Notwithstanding the present uncertainty, investors are increasingly recognising the superior long-term economic growth prospects of Emerging Markets compared with the developed world, and when set against the notable value available in those markets and investors' underweight positions, this should result in a continued trend of higher allocations over time. Ashmore's experience, specialism and active management approach mean it is well placed to benefit from this growth opportunity.

Investment themes

Ashmore's investment teams have been focused on Emerging Markets investing for more than 25 years. Ashmore has established a diversified range of eight headline investment themes with focused strategies under each theme delivering Emerging Markets exposures in, for example, global or specific regional or country funds, as well as dedicated investment grade and high yield products.

The Group's products are available in a wide range of fund structures, covering the full liquidity spectrum from daily-dealing pooled funds through to multi-year locked-up structures. Ashmore provides investors with access to new investment strategies as Emerging Markets continue to develop.

External debt

The external debt benchmark index (EMBI GD) delivered a modest positive return of +0.5% over the 12 months, but with significant variations by quarter, and a marked difference between investment grade (+8.3%) and high yield bonds (-8.2%). Over the past three years, Ashmore's external debt composite has returned +0.7% on a gross annualised basis, compared with +3.6% for the benchmark.

Countries that have predominantly funded themselves in external debt markets will struggle to manage the twin challenges of the global virus pandemic and the consequent growth shock. The support of creditors, be they supranational organisations or private sector lenders, will be crucial to a country's ability to maintain long-term access to funding, but also requires governments to exhibit a clear willingness to reform where necessary.

Valuations reached exceptional levels in the market lows of March 2020, with the index spread over US Treasuries exceeding 700 basis points. In an index of 74 countries, and with the majority rated investment grade, this clearly reflected the impact of short-term risk aversion and a desire for US dollar liquidity rather than being an accurate reflection of the underlying economic and political fundamentals of all the constituent countries. Although markets have begun to recover, there remains notable value in the asset class, with the spread still at an elevated level of 475 basis points at the year end, nearly three times the historical low of 160 basis points and in excess of its recent level of 300 basis points.

Local currency

The GBI-EM GD index fell -2.8% over the year, with a positive return from rates offset by US dollar strength. As with the external debt markets, there was significant volatility on a quarter-by-quarter basis, especially in the second half of the year. Over the past three years, Ashmore's local currency composite has returned +0.9% on a gross annualised basis, compared with +1.1% for the benchmark.

Local currency markets are increasingly resilient as a result of the increasing adoption of monetary policy frameworks that successfully target inflation, and domestic ownership that mitigates the impact of foreign capital flows. Capital market reforms are important and providing greater access to foreign investors over time will result in more representative indices, as is illustrated by China's inclusion in the GBI-EM GD index in 2020.

The attractiveness of local currency bonds is derived from both rates and foreign exchange. Inflation continues to be well-controlled and is close to record lows, enabling central banks across a large number of emerging countries to continue to be accommodating with monetary policies. The resultant real yield for the index of around 2% is attractive in its own right but even more so when set against the negative real yields prevailing in most major developed world bond markets of similar duration. Looking at FX, the consequences of debt-funded fiscal stimulus and a recession in the US should be to create inflation but also to restrict the Fed's ability to raise rates significantly for the foreseeable future and to undermine productivity, hence the US dollar is likely to enter a period of weakness against other global currencies including those in Emerging Markets. Local currency bonds therefore offer potentially the highest medium-term returns of the main fixed income asset classes through a combination of attractive yields and potential capital gains from currencies.

Corporate debt

Corporate debt performed well over the 12 months with the CEMBI BD index returning +3.7%, although as seen in the sovereign market, there was a notable difference between investment grade performance of +5.7% and high yield returns of +1.0%. Over the past three years, Ashmore's corporate debt composite has returned +3.8% on a gross annualised basis, compared with +4.5% for the benchmark. The short duration strategy has underperformed, with three-year gross annualised returns of -4.6% compared with +3.5% for its benchmark, and consequently it experienced net outflows for the 12-month period.

The corporate bond index is highly diversified with nearly 700 issuers across 57 countries, and with the majority of bonds being investment grade rated. With a yield of 4.9%, and 7.3% for high yield bonds, this is an attractive asset class when compared with the US HY market, which offers a similar yield (7.7%) but is less diversified and with companies that have higher leverage and often as a result of financial engineering rather than for operational purposes. Furthermore, the Emerging Markets asset class includes quasi sovereign issuers, which means that implicit or explicit support by the sovereign can be a factor in assessing credit risk. These factors are reflected in the long-run default rates for the two markets, with the US market experiencing a 30% higher default rate over the past three decades of 4.3% compared with 3.3% for Emerging Markets.

Blended debt

The standard blended debt benchmark (50% external debt, 25% local currency bonds and 25% EMFX) fell by -1.3% over the year, with positive returns in hard currency markets offset by weaker local currency returns, as described for each of the asset classes above. Over the past three years, Ashmore's blended debt composite has returned +0.5% on a gross annualised basis, compared with +2.2% for the standard benchmark.

The blended debt strategy provides access to a broad and actively-managed portfolio of Emerging Markets fixed income securities, which is a popular approach for institutional or intermediary retail clients that are making their first investment in Emerging Markets. As an investor's experience of Emerging Markets grows, incremental allocations can be made into dedicated products in the underlying fixed income asset classes. Additionally, the blended debt theme allows institutional investors to define a bespoke performance benchmark, through which a preference for one or more asset classes can be expressed.

Equities

The MSCI EM index fell by -3.4% over the 12 months, with particular volatility in the second half of the year as markets rapidly discounted a global recession as a consequence of the COVID-19 virus and then began to reflect expectations of a recovery supported by extraordinary fiscal and monetary stimulus. Ashmore's Active Equity composite has returned +4.4% on a gross annualised basis over the past three years, compared with +1.9% for the benchmark, and the Small Cap composite has returned +0.6% annualised over the past three years compared with -3.0% for its benchmark.

The performance of equity markets tends to be correlated over the longer term with economic growth, although the highly diverse nature of the Emerging Markets equity universe, in terms of industries as well as geographically, requires active management and a combination of bottom-up company analysis and top-down macro economic insights to deliver optimal returns.

Emerging Markets will continue to enjoy a growth premium over the developed world, and many countries are well-equipped from a policy perspective to deal with the challenges presented by the COVID-19 pandemic. Indeed, there is a possibility that parts of Asia, having been the first to deal with the issue, could also be the first to deliver a sustained economic and market recovery. The outlook for equity markets is also underpinned by the attractive valuations available, compared with history but also the Developed Markets, where valuations continue to be influenced by central bank policies such as QE.

Business review

Ashmore's financial performance over the year reflected a strong first half, the impact of the weak global markets environment in Q3 and the start of a recovery in the final quarter. Over the 12-month period, AuM declined by 9% but with higher average AuM levels, net revenue increased by 5% and adjusted EBITDA was 10% higher. Diluted EPS increased by 3% and the Group's balance sheet remains liquid and well-capitalised with capital resources of GBP702.5 million and excess regulatory capital of GBP555.2 million.

Summary non-GAAP financial performance

The table below reclassifies items relating to seed capital and the translation of non-Sterling balance sheet positions. This aids clarity and comprehension of the Group's operating performance, by excluding the mark-to-market volatility of these items, and provides a more meaningful comparison with the prior year. For the purposes of presenting 'Adjusted' profits, personnel expenses have been adjusted for the variable compensation on foreign exchange translation gains and losses. Non-GAAP alternative performance measures (APMs) are defined and explained below.

 
                                                        Reclassification 
                                                                of 
                                                   --------------------------- 
                                                   Seed capital-       Foreign 
                                        FY2019/20        related      exchange  FY2019/20  FY2018/19 
GBPm                                     Reported          items   translation   Adjusted   Adjusted 
--------------------------------------  ---------  -------------  ------------  ---------  --------- 
Management fees net of distribution 
 costs                                      315.5              -             -      315.5      294.3 
Performance fees                              3.9              -             -        3.9        2.8 
Other revenue                                 4.1              -             -        4.1        5.9 
Foreign exchange                              7.0              -         (5.5)        1.5        5.1 
--------------------------------------  ---------  -------------  ------------  ---------  --------- 
Net revenue                                 330.5              -         (5.5)      325.0      308.1 
Investment securities                      (19.1)           19.1             -          -          - 
Third-party interests                         7.5          (7.5)             -          -          - 
Personnel expenses                         (82.6)              -           1.1     (81.5)     (82.8) 
Other expenses excluding depreciation 
 & amortisation                            (23.2)            2.2             -     (21.0)     (23.5) 
--------------------------------------  ---------  -------------  ------------  ---------  --------- 
EBITDA                                      213.1           13.8         (4.4)      222.5      201.8 
EBITDA margin                                 64%              -             -        68%        66% 
Depreciation & amortisation                 (3.4)              -             -      (3.4)      (4.8) 
--------------------------------------  ---------  -------------  ------------  ---------  --------- 
Operating profit                            209.7           13.8         (4.4)      219.1      197.0 
Net finance income/expense                   12.0          (6.2)             -        5.8        7.7 
Associates & joint ventures                 (0.2)              -             -      (0.2)      (0.3) 
--------------------------------------  ---------  -------------  ------------  ---------  --------- 
Adjusted profit before tax                  221.5            7.6         (4.4)      224.7      204.4 
Foreign exchange translation                    -              -           4.4        4.4        4.8 
Seed capital-related items                      -          (7.6)             -      (7.6)       10.7 
--------------------------------------  ---------  -------------  ------------  ---------  --------- 
Profit before tax                           221.5              -             -      221.5      219.9 
--------------------------------------  ---------  -------------  ------------  ---------  --------- 
 

Assets under management

AuM fell by 9% to US$83.6 billion as a result of negative market performance of US$8.1 billion, which, as described in the Chief Executive's review and Market review, was the result of the market conditions experienced in Q3 and related to the COVID-19 pandemic, a fall in the oil price and tighter liquidity conditions across global markets. Over the 12-month period, the Group had a net outflow of US$0.1 billion. Average assets under management increased by 11% to US$89.6 billion (FY2018/19: US$80.5 billion).

Gross subscriptions of US$24.3 billion were slightly higher than in the prior year and represent 26% of opening AuM (FY2018/19: US$23.7 billion, 32%). Gross redemptions increased to US$24.4 billion, or 27% of opening AuM (FY2018/19: US$13.0 billion, 18%).

There was good demand over the period across the broad range of investment themes, but with particular strength in the local currency, corporate debt, blended debt and equities themes. Approximately 70% of institutional mandate subscriptions were from existing clients increasing their allocations, with a further 10% the result of clients broadening their exposure to Emerging Markets investment opportunities through additional mandates. New institutional client mandates therefore represented 20% of subscriptions and were mainly invested in the equities and external debt themes.

The increase in redemptions compared with the prior year was primarily in the corporate debt and local currency themes and biased towards the second half of the year when market conditions were significantly more volatile. In particular, intermediary retail and institutional clients reacted to weaker performance in the Short Duration strategy, and institutional clients sought US dollar liquidity and reduced risk in local currency funds.

For the year as a whole, net flows were essentially flat at -US$0.1 billion, with institutional clients delivering net inflows of US$1.9 billion, largely offsetting the net outflow from intermediary retail clients of US$2.0 billion.

Investor profile

The Group's client base remains well diversified and biased towards institutions, with no significant changes in composition by client domicile or client type, other than a reduction in the proportion of AuM sourced from intermediary retail clients, from 15% to 11%, and an increase in AuM from corporates and financial institutions, particularly those focused on investment grade mandates, from 18% to 22%. In total, 26% of the Group's AuM has been sourced from clients domiciled in Emerging Markets (30 June 2019: 30%).

AuM by investor type

 
                                    2020  2019 
                                       %     % 
----------------------------------  ----  ---- 
Central banks                         11    12 
Sovereign wealth funds                 7     7 
Governments                           16    16 
Pension plans                         29    29 
Corporates/financial institutions     22    18 
Funds/sub-advisers                     3     2 
Third-party intermediaries            11    15 
Foundations/endowments                 1     1 
----------------------------------  ----  ---- 
 

AuM by investor geography

 
                         2020  2019 
                            %     % 
-----------------------  ----  ---- 
Americas                   23    26 
Europe ex UK               28    25 
UK                          9     9 
Middle East and Africa     17    17 
Asia Pacific               23    23 
-----------------------  ----  ---- 
 

Segregated accounts including white-labelled funds represent 75% of AuM (30 June 2019: 66%), the higher proportion being a consequence of significant new segregated mandate wins and additional allocations, as well as the net redemptions from mutual funds in the year.

Ashmore's main mutual fund platforms are in Europe and the US. The European SICAV range comprises 30 funds with AuM of US$12.1 billion (30 June 2019: 30 funds, US$19.6 billion) and the US 40-Act platform manages US$2.4 billion in 10 funds (30 June 2019: eight funds, US$3.7 billion). The lower level of mutual fund AuM is the result of negative market performance across a broad range of asset classes, particularly in the third quarter of the financial year, and redemptions that were concentrated in short duration and local currency bond funds.

AuM movements by investment theme

The AuM by theme as classified by mandate is shown in the table below. Reclassifications typically occur when a fund's investment objectives, investment guidelines or performance benchmark change such that its characteristics cause it to be included in a different theme.

 
                         AuM                                                                                      AuM 
                     30 June                        Gross         Gross                                       30 June 
                        2019  Performance   subscriptions   redemptions  Net flows  Reclassifications/other      2020 
Theme                  US$bn        US$bn           US$bn         US$bn      US$bn                    US$bn     US$bn 
------------------  --------  -----------  --------------  ------------  ---------  -----------------------  -------- 
External debt           19.1        (1.1)             2.3         (3.2)      (0.9)                        -      17.1 
Local currency          19.7        (1.7)             5.8         (5.1)        0.7                        -      18.7 
Corporate debt          15.5        (1.9)             6.7         (9.2)      (2.5)                    (0.5)      10.6 
Blended debt            24.3        (2.2)             4.5         (3.8)        0.7                      0.5      23.3 
Equities                 4.4        (1.0)             2.2         (1.0)        1.2                        -       4.6 
Alternatives             1.6        (0.2)             0.1         (0.1)          -                        -       1.4 
Multi-asset              0.5        (0.1)               -         (0.1)      (0.1)                        -       0.3 
Overlay/liquidity        6.7          0.1             2.7         (1.9)        0.8                        -       7.6 
------------------  --------  -----------  --------------  ------------  ---------  -----------------------  -------- 
Total                   91.8        (8.1)            24.3        (24.4)      (0.1)                        -      83.6 
------------------  --------  -----------  --------------  ------------  ---------  -----------------------  -------- 
 

AuM as invested

The table below shows AuM 'as invested' by underlying investment theme, which adjusts from the 'by mandate' presentation to take account of the allocation into the underlying asset classes of the multi-asset and blended debt themes, and of crossover investment from within certain external debt funds.

AuM as invested

 
                    2020  2019 
                       %     % 
------------------  ----  ---- 
External debt         38    39 
Local currency        28    29 
Corporate debt        17    17 
Equities               6     5 
Alternatives           2     2 
Overlay/liquidity      9     8 
------------------  ----  ---- 
 

The Group's AuM by geography of investment remains diversified with 40% invested in Latin America, 24% in Asia Pacific, 15% in the Middle East and Africa, and 21% in Eastern Europe.

Revenues

Net revenue increased 5% to GBP330.5 million as a result of growth in recurring net management fee income. On an adjusted basis, excluding foreign-exchange translation effects, net revenue increased 5% to GBP325.0 million.

Net revenue

 
                                FY2019/20  FY2018/19 
                                     GBPm       GBPm 
------------------------------  ---------  --------- 
Net management fees                 315.5      294.3 
Performance fees                      3.9        2.8 
Other revenue                         4.1        5.9 
FX: hedges                            1.5        5.1 
------------------------------  ---------  --------- 
Adjusted net revenue                325.0      308.1 
FX: balance sheet translation         5.5        6.2 
------------------------------  ---------  --------- 
Net revenue                         330.5      314.3 
------------------------------  ---------  --------- 
 

The Group's management fee income, net of distribution costs, increased 7% to GBP315.5 million, driven by an 11% rise in average AuM to US$89.6 billion (FY2018/19: US$80.5 billion). Fee income benefited from the weaker average GBP:USD rate of 1.2637 (FY2018/19: 1.2958) and also reflects a decline in the average net management fee margin from 48bps to 45bps. At constant FY2018/19 average exchange rates, net management fees increased by 5%.

The three basis points decline in the net management fee margin compared with the prior year is the result of net flows into existing and new large mandates (1.5 basis points), investment theme mix (1 basis point) and mutual fund net redemptions in the corporate debt and local currency themes (0.5 basis point). Other factors such as competition and product mix effects broadly offset each other.

Fee income and net management fee margin by investment theme

The table below summarises net management fee income after distribution costs, performance fee income, and average net management fee margin by investment theme.

 
                    Net management  Net management  Performance  Performance  Net management  Net management 
                              fees            fees         fees         fees      fee margin      fee margin 
                         FY2019/20       FY2018/19    FY2019/20    FY2018/19       FY2019/20       FY2018/19 
Theme                         GBPm            GBPm         GBPm         GBPm             bps             bps 
------------------  --------------  --------------  -----------  -----------  --------------  -------------- 
External debt                 59.4            55.1          2.5          0.5              41              44 
Local currency                60.2            54.2            -          0.8              38              39 
Corporate debt                51.3            51.9          0.4          0.2              50              56 
Blended debt                  94.6            81.2          0.9          1.0              49              49 
Equities                      23.0            25.1            -            -              66              76 
Alternatives                  15.4            15.1          0.1          0.3             139             129 

Multi-asset                    3.0             4.3            -            -             100              77 
Overlay/liquidity              8.6             7.4            -            -              15              16 
------------------  --------------  --------------  -----------  -----------  --------------  -------------- 
Total                        315.5           294.3          3.9          2.8              45              48 
------------------  --------------  --------------  -----------  -----------  --------------  -------------- 
 

Performance fees of GBP3.9 million were generated in the period, a similar level to the prior year. At 30 June 2020, 13% of the Group's AuM was eligible to earn performance fees (30 June 2019: 14%), of which a substantial proportion is subject to rebate agreements. The Group continues to expect net management fee income to generate the substantial majority of its net revenues. No performance fees were realised by funds with an August year end.

Translation of the Group's non-Sterling assets and liabilities, excluding seed capital, resulted in an unrealised foreign exchange gain of GBP5.5 million reflecting a lower GBP:USD dollar rate at the period end and active management of the Group's foreign exchange balances. The net realised and unrealised gain on the Group's foreign exchange hedges was GBP1.5 million. Therefore, the total foreign exchange gain recognised in revenues was GBP7.0 million (FY2018/19: GBP11.3 million gain).

Other revenue fell slightly to GBP4.1 million as this year there were fewer project management and advisory fees related to funds in the alternatives theme.

Operating costs

Total operating costs of GBP109.2 million include GBP2.2 million of expenses incurred by seeded funds that are required to be consolidated, as disclosed in note 20. On an adjusted basis, excluding the impact of seed capital and the variable compensation accrual on foreign exchange translation gains, operating costs were reduced by 5% to GBP105.9 million (FY2018/19: GBP111.1 million). At constant FY2018/19 average exchange rates, adjusted operating costs declined by 5% compared with the prior year period.

Adjusted operating costs before variable compensation were 5% lower at GBP52.0 million (FY2018/19: GBP54.8 million), with an increase in fixed staff costs more than offset by an 11% reduction in other operating costs and a lower depreciation and amortisation expense.

The Group's headcount was stable over the year at 306 employees, of which 291 are involved in investment management-related activities (30 June 2019: 307 and 288, respectively), and the average headcount was 3% higher than in the prior year. The Group's fixed staff costs of GBP27.6 million increased by 4% compared with the prior year period, and increased by 2% at constant exchange rates.

Other operating costs, excluding consolidated fund expenses and depreciation and amortisation, were 11% lower at GBP21.0 million (FY2018/19: GBP23.5 million), primarily due to the adoption of IFRS 16 as described below. Other operating costs were lower in the second half of the year compared with the first half due to reductions in travel and office-related costs as a result of the restrictions associated with the COVID-19 pandemic, and notwithstanding the GBP0.3 million cost of charitable donations.

The accrual for variable compensation was GBP55.0 million, 5% lower than the prior year and representing 19.5% of EBVCIT (FY2018/19: GBP57.7 million, 22.5%). The Group's financial and operating performance this year was solid, but the lower charge recognises the more challenging conditions of the second half of the year and the consequent impact upon Ashmore's investment performance and assets under management.

The combined depreciation and amortisation charges for the period were GBP3.4 million.

The adoption of IFRS 16 had a small negative impact of GBP0.2 million on profit before tax in the current period. It removed the rental expense relating to the Group's properties (GBP2.8 million) and replaced it with depreciation of the right-of-use asset (GBP2.5 million) and a lease finance expense (GBP0.5 million).

Operating costs

 
                                         FY2019/20  FY2018/19 
                                              GBPm       GBPm 
---------------------------------------  ---------  --------- 
Fixed staff costs                           (27.6)     (26.5) 
Other operating costs                       (21.0)     (23.5) 
Depreciation & amortisation                  (3.4)      (4.8) 
---------------------------------------  ---------  --------- 
Operating costs before VC                   (52.0)     (54.8) 
Variable compensation                       (55.0)     (57.7) 
VC accrual on FX gains/losses                  1.1        1.4 
---------------------------------------  ---------  --------- 
Adjusted operating costs                   (105.9)    (111.1) 
Consolidated funds costs                     (2.2)      (3.3) 
Add back VC accrual on FX gains/losses       (1.1)      (1.4) 
---------------------------------------  ---------  --------- 
Total operating costs                      (109.2)    (115.8) 
---------------------------------------  ---------  --------- 
 

Adjusted EBITDA

Adjusted EBITDA increased by 10% from GBP201.8 million to GBP222.5 million, higher than the 5% rise in adjusted net revenue due to the 5% reduction in adjusted operating costs. Consequently, the adjusted EBITDA margin expanded slightly to 68% (FY2018/19: 66%). The impact of IFRS 16 contributed 0.9% to the adjusted EBITDA margin.

Finance income

Net finance income of GBP12.0 million (FY2018/19: GBP17.4 million) includes items relating to seed capital investments, which are described in more detail below. Excluding these items, net interest income for the period was GBP5.8 million (FY2018/19: GBP7.7 million) with the reduction being primarily a consequence of higher cash holdings in US dollars with lower prevailing interest rates.

Profit before tax

Statutory profit before tax of GBP221.5 million was 1% higher than the prior year (FY2018/19: GBP219.9 million) reflecting the positive operating performance offset by mark-to-market losses incurred in the second half of the year on the Group's seed capital investments.

Taxation

The majority of the Group's profit is subject to UK taxation. Of the total current tax charge for the year of GBP38.7 million (FY2018/19: GBP41.8 million), GBP24.7 million relates to UK corporation tax (FY2018/19: GBP36.3 million).

The Group's effective tax rate for the financial year is 16.6% (FY2018/19: 17.5%), which is lower than the prevailing UK corporation tax rate of 19.0%. This reflects the impact of the geographic mix of the Group's profits in the period, non-taxable unrealised seed capital losses and the valuation of deferred tax assets relating to share-based remuneration provided to employees. Note 12 to the financial statements provides a reconciliation of this difference compared with the UK corporation tax rate.

Earnings per share

Basic earnings per share for the period increased by 3% to 27.4 pence (FY2018/19: 26.6 pence) and diluted earnings per share increased by 3% to 25.7 pence (FY2018/19: 25.0 pence).

On an adjusted basis, excluding the effects of seed capital items, foreign exchange translation and relevant tax, diluted earnings per share increased by 12% to 26.1 pence (FY2018/19: 23.4 pence).

Balance sheet

Ashmore's policy is to maintain a strong balance sheet through market cycles in order to meet regulatory capital requirements, to support the commercial demands of current and prospective investors, and to fund strategic development opportunities across the business.

As at 30 June 2020, total equity attributable to shareholders of the parent was GBP856.4 million (30 June 2019: GBP843.2 million). Capital resources available to the Group totalled GBP702.5 million as at 30 June 2020, equivalent to 99 pence per share, and significantly exceeded the Group's regulatory capital requirement of GBP147.3 million, equivalent to 21 pence per share. The Group has no debt.

Cash

Ashmore's business model consistently delivers a high conversion rate of operating profits to cash. Based on operating profit of GBP209.7 million for the period (FY2018/19: GBP202.8 million), the Group generated GBP254.9 million of cash from operations (F2018/19: GBP211.2 million). The operating cash flows after excluding consolidated funds represent 116% of the adjusted EBITDA for the period of GBP222.5 million (FY2018/19: 106%).

Cash and cash equivalents by currency

 
            30 June  30 June 
               2020     2019 
               GBPm     GBPm 
----------  -------  ------- 
Sterling       66.0    157.8 
US dollar     391.1    269.5 
Other          43.8     49.9 
----------  -------  ------- 
Total         500.9    477.2 
----------  -------  ------- 
 

The 10% increase in adjusted EBITDA and continued efficient conversion of profits to cash, after allowing for items such as additional advance payments of corporation tax and the purchase of shares, resulted in an increase in the Group's cash and cash equivalents compared with the prior year end, with active management of the Group's foreign exchange exposures resulting in a higher US dollar balance.

Seed capital investments

The Group's actively managed seed capital programme continues to support growth in third-party AuM with more than US$8.5 billion of AuM in funds that have been seeded, representing 10% of total Group AuM.

During the financial year, the Group made new seed investments of GBP51.4 million and realised GBP84.0 million from previous investments. The consequent net redemption of GBP32.6 million together with unrealised market-to-market losses of GBP6.8 million means the market value of the Group's seed capital investments reduced from GBP277.8 million as at 30 June 2019 to GBP238.4 million as at 30 June 2020. Ashmore has also made seed capital commitments of GBP20.0 million to funds in the alternatives theme that were undrawn at the period end, giving a total committed value for the Group's seed capital programme of approximately GBP260 million.

As at 30 June 2020, the original cost of the Group's current seed capital investments was GBP214.1 million, representing 28% of Group net tangible equity. More than two-thirds of the Group's seed capital is held in funds with better than one-month dealing frequency, such as SICAV or US 40-Act mutual funds.

The majority of the new investments were into corporate debt and equity funds, supporting product diversification and AuM growth within Phase 2 of the Group's strategy. The redemptions were mainly in the equities and local currency themes as a consequence of client flows, and also in the alternatives theme as capital was returned to investors.

Seed capital market value by currency

 
                     30 June 2020  30 June 
                             GBPm     2019 
                                      GBPm 
-------------------  ------------  ------- 
US dollar                   213.7    250.7 
Colombian peso               13.9     14.8 
Other                        10.8     12.3 
-------------------  ------------  ------- 
Total market value          238.4    277.8 
-------------------  ------------  ------- 
 

The table below summarises the principal IFRS line items to assist in the understanding of the financial impact of the Group's seed capital programme. The seed capital investments generated a total loss of GBP7.6 million in the period (FY2018/19: GBP10.7 million gain) including a realised gain of GBP4.0 million. This comprises a GBP9.0 million mark-to-market loss in respect of consolidated funds, including GBP4.8 million of finance income, and a GBP1.4 million gain in respect of unconsolidated funds that is reported in finance income.

Financial impact of seed capital investments

 
                                   FY2019/20  FY2018/19 
                                        GBPm       GBPm 
---------------------------------  ---------  --------- 
Consolidated funds (note 
 20): 
Gains/(losses) on investment 
 securities                           (19.1)        0.5 
Change in third-party interests 
 in 
 consolidated funds                      7.5        3.8 
Operating costs                        (2.2)      (3.3) 
Finance income                           4.8        5.5 
---------------------------------  ---------  --------- 
Sub-total: consolidated 
 funds                                 (9.0)        6.5 
 
Unconsolidated funds (note 
 8): 
Market return                            1.6        3.3 
Foreign exchange                       (0.2)        0.9 
---------------------------------  ---------  --------- 
Sub-total: unconsolidated 
 funds                                   1.4        4.2 
---------------------------------  ---------  --------- 
 
Total seed capital profit/(loss)       (7.6)       10.7 
---------------------------------  ---------  --------- 
 
  *    realised                          4.0        2.4 
 
  *    unrealised                     (11.6)        8.3 
---------------------------------  ---------  --------- 
 

Foreign exchange

The majority of the Group's fee income is received in US dollars and it is the Group's policy to hedge up to two-thirds of the notional value of budgeted foreign currency-denominated net management fees, using either forward or option foreign exchange contracts. Ashmore's Foreign Exchange Management Committee determines the proportion of budgeted fee income to hedge or sell by regular reference to expected non-US dollar, and principally Sterling, cash requirements. Foreign currency assets and liabilities, including cash, are marked to market at the period end exchange rate with movements reported in either revenues or other comprehensive income.

Goodwill and intangible assets

At 30 June 2020, goodwill and intangible assets on the Group's balance sheet totalled GBP89.7 million (30 June 2019: GBP87.3 million). The movement in the period is the result of an amortisation charge of GBP0.2 million (FY2018/19: GBP4.1 million) and a foreign exchange revaluation gain in reserves of GBP2.6 million (FY2018/19: GBP3.4 million gain).

Shares held by Employee Benefit Trust (EBT)

The Group's EBT purchases and holds shares in anticipation of the vesting of share awards. During the second half of the year, the EBT actively acquired shares to satisfy future employee share awards. At 30 June 2020, the EBT owned 56,477,466 ordinary shares (30 June 2019: 40,355,103 ordinary shares), representing 7.9% of the Group's issued share capital (30 June 2019: 5.7%).

Regulatory capital

Ashmore is subject to consolidated regulatory capital requirements, whereby the Board is required to assess the degree of risk across the Group's business, and the Group is required to hold sufficient capital against these risks.

Through the Internal Capital Adequacy Assessment Process (ICAAP) the Board has determined the amount of Pillar II capital required to be GBP147.3 million (30 June 2019: GBP121.0 million). The increase is primarily the result of higher levels of foreign currency and seed capital positions and increased market volatility during the second half of the financial year leading to a higher market risk requirement.

The Group has total capital resources of GBP702.5 million as at 30 June 2020, equivalent to 99 pence per share, giving a solvency ratio of 377% and excess regulatory capital of GBP555.2 million. Therefore, the Board is satisfied that the Group is adequately capitalised.

Dividend

The Board intends to pay a progressive ordinary dividend over time, taking into consideration factors such as the prospects for the Group's earnings, demands on the Group's financial resources, and the markets in which the Group operates.

Consistent with this approach, the Directors have recommended a final dividend of 12.10 pence per share for the year ending 30 June 2020 (FY2018/19: 12.10 pence), which if approved by shareholders will be paid on 11 December 2020 to all shareholders on the register on 6 November 2020. Total dividends paid and recommended for the year are 16.90 pence (FY2018/19: 16.65 pence), which are covered 1.5x by diluted earnings per share.

Tom Shippey

Group Finance Director

10 September 2020

Alternative performance measures

Ashmore discloses non-GAAP financial alternative performance measures (APMs) in order to assist shareholders' understanding of the operational performance of the Group during the accounting period and to make comparisons with prior periods.

The calculation of APMs is consistent with the financial year ending 30 June 2019 and unless otherwise stated reconciliations to statutory IFRS results are provided in the Business review. Historical reconciliations of APMs to statutory IFRS results can be found in the respective interim financial reports and annual reports and accounts.

Net revenue

As shown on the face of the consolidated statement of comprehensive income, net revenue is total revenue less distribution costs and including foreign exchange. This provides a comprehensive view of the revenues recognised by the Group in the period.

Net management fee margin

The net management fee margin has been included as an APM to increase transparency and aid understanding of the Group's performance in the period. It is defined as the ratio of management fees less distribution costs to average assets under management for the period, and is a commonly-used industry performance measure.

Variable compensation ratio

The charge for employee variable compensation as a proportion of earnings before variable compensation, interest and tax (EBVCIT). The linking of variable annual pay awards to the Group's profitability is one of the principal methods by which the Group controls its operating costs. The charge for variable compensation is a component of personnel expenses.

EBVCIT is defined as operating profit excluding the charge for variable compensation and seed capital-related items. The latter comprises gains/losses on investment securities; change in third-party interests in consolidated funds; and other expenses in respect of consolidated funds.

EBITDA

The standard definition of earnings before interest, tax, depreciation and amortisation is operating profit before depreciation and amortisation. It provides a view of the operating performance of the business before certain non-cash items, financing income and charges, and taxation.

Adjusted net revenue, adjusted operating costs and adjusted EBITDA

Adjusted figures exclude items relating to foreign exchange translation and seed capital. This provides a better understanding of the Group's operational performance excluding the mark-to-market volatility of foreign exchange translation and seed capital investments. These adjustments are merely reclassified within the adjusted profit and loss account, leaving statutory profit before tax unchanged.

Adjusted EBITDA margin

The ratio of adjusted EBITDA to adjusted net revenue, both of which are defined above. This is an appropriate measure of the Group's operational efficiency and its ability to generate returns for shareholders.

Conversion of operating profits to cash

This compares adjusted EBITDA to cash generated from operations excluding consolidated funds, and is a measure of the effectiveness of the Group's operations at converting profits to cash.

Risk Management

In accordance with provision 29 of the 2018 version of the UK Corporate Governance Code, the Board is ultimately responsible for the Group's risk management and internal control systems and for reviewing their effectiveness. Such systems and their review are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

Ashmore considers a number of risks and has described in the table below those that is has assessed as being most significant in this period, together with examples of associated controls and mitigants. Reputational and conduct risks are common to most aspects of the strategy and business model.

The Group considers the assessment and management of emerging risks within its internal control framework, examples of which are:

- the impact of passive funds on the asset management industry;

- market and/or commercial impact of terrorism;

- global political uncertainty;

- high level of new regulatory obligations for the industry;

- impact of a low oil price; and

- the impact of the COVID-19 pandemic, with specific effects also considered under relevant principal risks and their associated controls and mitigants.

Principal risks and associated controls and mitigants

 
Description of principal risks                                Examples of associated controls and 
                                                               mitigants 
----------------------------------------------------------    ------------------------------------------------------------ 
Strategic and business risks (Responsibility: Ashmore Group plc 
 Board) 
-------------------------------------------------------------------------------------------------------------------------- 
 
  *    Long-term downturn in Emerging Markets                   *    Group strategy is reviewed and approved by a Board 
       fundamentals/technicals/sentiment, and impact of              with relevant industry experience 
       broader industry changes including ESG and climate 
       change risks 
                                                                *    Diversification of investment capabilities and 
                                                                     products 
 
 
                                                                *    Ashmore has a strong balance sheet with no debt 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Market capacity issues and increased competition        *    Experienced Emerging Markets investment professionals, 
       constrain growth                                             with deep market knowledge, participate in investment 
                                                                    committees 
 
 
                                                               *    Periodic investment theme capacity reviews 
 
 
                                                               *    Barriers to entry remain high, e.g. demonstration of 
                                                                    long-term investment track record 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Failure to understand and plan for the potential         *    Oversight by ESG Committee, which has overall 
       impact of investor sentiment and regulatory changes           responsibility for Ashmore's sustainability and 
       relating to sustainability and climate change                 responsible investing framework across its corporate 
                                                                     and investment activities 
 
 
                                                                *    Head of Sustainability provides updates to the Board 
 
 
                                                                *    Dedicated ESG funds 
----------------------------------------------------------    ------------------------------------------------------------ 
Client risks (Responsibility: Product Committee and Group Risk and 
 Compliance Committee) 
-------------------------------------------------------------------------------------------------------------------------- 
 
  *    Inappropriate marketing strategy and/or ineffective      *    Frequent and regular Product Committee meetings 
       management of existing and potential fund investors           review product suitability and appropriateness 
       and distributors, including impact of net outflows 
       and fee margin pressure 
                                                                *    Experienced distribution team with appropriate 
                                                                     geographic coverage 
 
 
                                                                *    Investor education to ensure understanding of Ashmore 
                                                                     investment themes and products 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Inadequate client oversight including alignment of       *    Monitoring of client-related issues including a 
       interests                                                     formal complaints handling process 
 
 
                                                                *    Compliance and legal oversight to ensure clear and 
                                                                     fair terms of business and disclosures, and 
                                                                     appropriate client communications and financial 
                                                                     promotions 
 
 
                                                                *    Global distribution team appropriately structured for 
                                                                     institutional and intermediary retail clients 
----------------------------------------------------------    ------------------------------------------------------------ 
Treasury risks (Responsibility: Chief Executive Officer and Group 
 Finance Director) 
-------------------------------------------------------------------------------------------------------------------------- 
 
  *    Inaccurate financial projections and hedging of          *    Defined risk appetite, and risk appetite measures 
       future cash flows and balance sheet                           updated quarterly 
 
 
                                                                *    Group foreign exchange (FX) hedging policy and FX and 
                                                                     Liquidity Management Committee 
----------------------------------------------------------    ------------------------------------------------------------ 
Investment risks (Responsibility: Group Investment Committees) 
-------------------------------------------------------------------------------------------------------------------------- 
 
  *    Downturn in long-term performance                        *    Consistent investment philosophy over more than 27 
                                                                     years and numerous market cycles, with dedicated 
                                                                     Emerging Markets focus including country visits and 
                                                                     network of local offices 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Manager non-performance including i) ineffective        *    Funds in the same investment theme are managed by 
       leverage, cash and liquidity management and similar          consistent investment management teams, and 
       portfolios being managed inconsistently; and ii)             allocations approved by investment committees 
       neglect of duty, market abuse 
 
                                                               *    Comprehensive policies in place to cover, for example, 
                                                                    conflicts, best execution, market abuse and client 
                                                                    order handling 
 
 
                                                               *    Tools to manage liquidity issues as a result of 
                                                                    redemptions including restrictions on illiquid 
                                                                    exposures and ability to use in specie redemptions 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Insufficient number of trading counterparties            *    Group Trading counterparty policy and sufficient 
                                                                     counterparties to provide access to liquidity. 
                                                                     Extensive trading relationships developed over the 
                                                                     firm's history of focusing on Emerging Markets 
                                                                     investing 
----------------------------------------------------------    ------------------------------------------------------------ 
Operational risks (Responsibility: Group Risk and Compliance Committee) 
-------------------------------------------------------------------------------------------------------------------------- 
 
  *    Inadequate security of information including cyber       *    Information security and data protection policies, 
       security and data protection                                  subject to annual review including cyber security 

                                                                     review. Cyber security working group meets frequently 
                                                                     and regularly 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Inadequate business continuity planning (BCP)            *    Established BCP process with periodic updates to 
                                                                     Group RCC 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Inaccurate or invalid data including manual              *    Dedicated teams responsible for Transaction 
       processes/reporting                                           Processing, Fund Administration, and Pricing and Data 
                                                                     Management 
 
 
                                                                *    Pricing Oversight and Pricing Methodology and 
                                                                     Valuation Committees, with PMVC valuations subject to 
                                                                     external audit 
 
 
                                                                *    Annual ISAE 3402 process and report 
----------------------------------------------------------    ------------------------------------------------------------ 
 
 *    Failure of IT infrastructure, including inability to      *    Appropriate IT policies with annual review cycle 
      support business growth 
 
                                                                *    IT systems and environmental monitoring 
 
 
                                                                *    Group IT platform incorporates local offices 
----------------------------------------------------------    ------------------------------------------------------------ 
 
 *    Legal action, fraud or breach of contract perpetrate      *    Independent Internal Audit function that considers 
d                                                                    risk of fraud in each audit 
      against the Group, its funds or investments 
 
                                                                *    Financial crime policy covering the Group and its 
                                                                     service providers 
 
 
                                                                *    Whistleblowing policy including independent reporting 
                                                                     line, and Board sponsor (the Senior Independent 
                                                                     Director) 
 
 
                                                                *    Due diligence on all new, and regular reviews of 
                                                                     existing, service providers 
 
 
                                                                *    Insurance policies with appropriate cover to ensure 
                                                                     appropriate client litigation cover 
----------------------------------------------------------    ------------------------------------------------------------ 
 
 *    Insufficient resources, including loss of key staff,      *    Committee-based investment management reduces key man 
      inability to attract staff and health and safety               risk 
      issues, which hampers growth or the Group's ability 
      to execute its strategy 
                                                                *    Appropriate remuneration policy with emphasis on 
                                                                     performance-related pay and long-dated deferral of 
                                                                     equity awards 
 
 
                                                                *    Regular reviews of resource requirements and updates 
                                                                     provided to the Board 
----------------------------------------------------------    ------------------------------------------------------------ 
 
 *    Lack of understanding and compliance with global and     *    Regulatory Development Working Group and compliance 
      local regulatory requirements, as well as conflicts           monitoring programme, which covers financial crime 
      of interest and not treating customers fairly; and            risks such as money laundering and bribery 
      financial crime, which includes money laundering, 
      bribery and corruption, leading to high level 
      publicity or regulatory sanction                         *    Compliance policies covering global and local offices, 
                                                                    for example global conflicts of interest and 
                                                                    inducements policies 
 
 
                                                               *    Conduct risk and organisational culture indicators 
                                                                    are considered on a monthly basis by the Group RCC 
                                                                    and on an annual basis by the Board 
 
 
                                                               *    Internal Capital Adequacy Assessment Process (ICAAP) 
                                                                    with ongoing engagement with the Board 
 
 
                                                               *    Mandatory compliance training for all employees 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Inadequate tax oversight or advice                       *    Dedicated in-house tax specialist and Group Tax 
                                                                     policy covering all Group entities with external 
                                                                     advice sought as appropriate 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Inadequate oversight of Ashmore overseas offices         *    Group Finance Director has oversight responsibility 
                                                                     for overseas offices, and RCC has oversight of the 
                                                                     operating model with annual reviews. Senior staff 
                                                                     take local Board/advisory positions 
 
 
                                                                *    Local RCCs held and Group RCC receives updates 
 
 
                                                                *    Internal Audit reviews, and annual governance reviews 
                                                                     reported to RCC 
----------------------------------------------------------    ------------------------------------------------------------ 
 
  *    Ineffective or mismanaged third-party services           *    Due diligence on all new third parties and periodic 
                                                                     meetings with core service providers 
----------------------------------------------------------    ------------------------------------------------------------ 
 

Consolidated statement of comprehensive income

For the year ended 30 June 2020

 
                                                               2020    2019 
                                                      Notes    GBPm    GBPm 
----------------------------------------------------  -----  ------  ------ 
Management fees                                               330.0   307.6 
Performance fees                                                3.9     2.8 
Other revenue                                                   4.1     5.9 
----------------------------------------------------  -----  ------  ------ 
Total revenue                                                 338.0   316.3 
Distribution costs                                           (14.5)  (13.3) 
Foreign exchange                                          7     7.0    11.3 
----------------------------------------------------  -----  ------  ------ 
Net revenue                                                   330.5   314.3 
 
Gains/(losses) on investment securities                  20  (19.1)     0.5 
Change in third-party interests in consolidated 
 funds                                                   20     7.5     3.8 
Personnel expenses                                        9  (82.6)  (84.2) 
Other expenses                                           11  (26.6)  (31.6) 
----------------------------------------------------  -----  ------  ------ 
Operating profit                                              209.7   202.8 
 
Finance income                                            8    12.0    17.4 
Share of losses from associates and joint ventures       26   (0.2)   (0.3) 
----------------------------------------------------  -----  ------  ------ 
Profit before tax                                             221.5   219.9 
 
Tax expense                                              12  (36.8)  (38.4) 
----------------------------------------------------  -----  ------  ------ 
Profit for the year                                           184.7   181.5 
 
Other comprehensive income, net of related 
 tax effect 
Items that may be reclassified subsequently 
 to profit or loss: 
   Foreign currency translation differences arising 
    on foreign operations                                      12.8    14.7 
   Cash flow hedge intrinsic value losses                     (0.1)       - 

----------------------------------------------------  -----  ------  ------ 
Other comprehensive income, net of tax                         12.7    14.7 
----------------------------------------------------  -----  ------  ------ 
Total comprehensive income for the year                       197.4   196.2 
----------------------------------------------------  -----  ------  ------ 
 
Profit attributable to: 
Equity holders of the parent                                  182.1   178.6 
Non-controlling interests                                       2.6     2.9 
----------------------------------------------------  -----  ------  ------ 
Profit for the year                                           184.7   181.5 
----------------------------------------------------  -----  ------  ------ 
 
Total comprehensive income attributable to: 
Equity holders of the parent                                  194.7   193.2 
Non-controlling interests                                       2.7     3.0 
----------------------------------------------------  -----  ------  ------ 
Total comprehensive income for the year                       197.4   196.2 
----------------------------------------------------  -----  ------  ------ 
 
Earnings per share 
Basic                                                    13  27.35p  26.57p 
Diluted                                                  13  25.68p  25.04p 
----------------------------------------------------  -----  ------  ------ 
 

Consolidated balance sheet

As at 30 June 2020

 
                                                          2020     2019 
                                                Notes     GBPm     GBPm 
----------------------------------------------  -----  -------  ------- 
Assets 
Non-current assets 
Goodwill and intangible assets                     15     89.7     87.3 
Property, plant and equipment                      16     11.7      1.5 
Investment in associates and joint ventures        26      0.6      1.8 
Non-current financial assets measured at fair 
 value                                             20     28.0     31.6 
Deferred acquisition costs                                 0.7      0.8 
Deferred tax assets                                18     30.6     30.2 
----------------------------------------------  -----  -------  ------- 
                                                         161.3    153.2 
----------------------------------------------  -----  -------  ------- 
Current assets 
Investment securities                              20    234.5    278.7 
Financial assets measured at fair value            20     11.6     16.0 
Trade and other receivables                        17     96.2     79.4 
Cash and cash equivalents                                500.9    477.2 
----------------------------------------------  -----  -------  ------- 
                                                         843.2    851.3 
----------------------------------------------  -----  -------  ------- 
 
Non-current assets held for sale                   20     43.1     44.7 
----------------------------------------------  -----  -------  ------- 
Total assets                                           1,047.6  1,049.2 
----------------------------------------------  -----  -------  ------- 
 
Equity and liabilities 
Capital and reserves - attributable to equity 
 holders of the parent 
Issued capital                                     22      0.1      0.1 
Share premium                                             15.6     15.6 
Retained earnings                                        813.2    812.6 
Foreign exchange reserve                                  27.6     14.9 
Cash flow hedging reserve                                (0.1)        - 
----------------------------------------------  -----  -------  ------- 
                                                         856.4    843.2 
Non-controlling interests                          30     22.6     10.9 
----------------------------------------------  -----  -------  ------- 
Total equity                                             879.0    854.1 
----------------------------------------------  -----  -------  ------- 
Liabilities 
Non-current liabilities 
Lease liabilities                                  16      8.2        - 
Deferred tax liabilities                           18      6.9      8.4 
----------------------------------------------  -----  -------  ------- 
                                                          15.1      8.4 
----------------------------------------------  -----  -------  ------- 
Current liabilities 
Lease liabilities                                  16      2.0        - 
Current tax                                                8.5     22.5 
Third-party interests in consolidated funds        20     86.1    107.0 
Derivative financial instruments                   21      1.7      1.1 
Trade and other payables                           24     50.7     56.1 
----------------------------------------------  -----  -------  ------- 
                                                         149.0    186.7 
Non-current liabilities held for sale              20      4.5        - 
----------------------------------------------  -----  -------  ------- 
Total liabilities                                        168.6    195.1 
----------------------------------------------  -----  -------  ------- 
Total equity and liabilities                           1,047.6  1,049.2 
----------------------------------------------  -----  -------  ------- 
 

Approved by the Board on 10 September 2020 and signed on its behalf by:

Mark Coombs Tom Shippey

Chief Executive Officer Group Finance Director

Consolidated statement of changes in equity

For the year ended 30 June 2020

 
                                               Attributable to equity holders 
                                                        of the parent 
-------------------------------  -----------------------------------------------------------  ---------------  ------- 
                                                                               Cash 
                                                                  Foreign      flow 
                                   Issued     Share   Retained   exchange   hedging           Non-controlling    Total 
                                  capital   premium   earnings    reserve   reserve    Total        interests   equity 
                                     GBPm      GBPm       GBPm       GBPm      GBPm     GBPm             GBPm     GBPm 
Balance at 30 June 2018               0.1      15.6      743.2        0.3         -    759.2              1.3    760.5 
 
Profit for the year                     -         -      178.6          -         -    178.6              2.9    181.5 
Other comprehensive 
income/(loss): 
   Foreign currency translation 
    differences 
    arising on foreign 
    operations                          -         -          -       14.6         -     14.6              0.1     14.7 
Total comprehensive 
 income/(loss)                          -         -      178.6       14.6         -    193.2              3.0    196.2 
Transactions with owners: 
   Purchase of own shares               -         -     (23.7)          -         -   (23.7)                -   (23.7) 
   Acquisition of subsidiary 
    with 
    non-controlling interest            -         -        5.2          -         -      5.2              9.0     14.2 
   Share-based payments                 -         -       27.6          -         -     27.6                -     27.6 
   Dividends to equity holders          -         -    (118.3)          -         -  (118.3)                -  (118.3) 
   Dividends to non-controlling 
    interests                           -         -          -          -         -        -            (2.4)    (2.4) 
-------------------------------  --------  --------  ---------  ---------  --------  -------  ---------------  ------- 
Total contributions and 
 distributions                          -         -    (109.2)          -         -  (109.2)              6.6  (102.6) 
-------------------------------  --------  --------  ---------  ---------  --------  -------  ---------------  ------- 
Balance at 30 June 2019               0.1      15.6      812.6       14.9         -    843.2             10.9    854.1 
-------------------------------  --------  --------  ---------  ---------  --------  -------  ---------------  ------- 
Adjustment on adoption of IFRS 
 16 (note 3)                            -         -      (0.2)          -         -    (0.2)                -    (0.2) 
-------------------------------  --------  --------  ---------  ---------  --------  -------  ---------------  ------- 
Adjusted balance at 1 July 2019       0.1      15.6      812.4       14.9         -    843.0             10.9    853.9 
 
Profit for the year                     -         -      182.1          -         -    182.1              2.6    184.7 
Other comprehensive 
income/(loss): 
   Foreign currency translation 
    differences 
    arising on foreign 
    operations                          -         -          -       12.7         -     12.7              0.1     12.8 
   Cash flow hedge intrinsic 
    value 
    losses                              -         -          -          -     (0.1)    (0.1)                -    (0.1) 
-------------------------------  --------  --------  ---------  ---------  --------  -------  ---------------  ------- 
Total comprehensive 
 income/(loss)                          -         -      182.1       12.7     (0.1)    194.7              2.7    197.4 
Transactions with owners: 
   Purchase of own shares               -         -     (89.5)          -         -   (89.5)                -   (89.5) 
   Share-based payments                 -         -       28.6          -         -     28.6                -     28.6 
   Issue of shares to 
    non-controlling 

    interests (note 30)                 -         -      (0.4)          -         -    (0.4)             11.7     11.3 
   Dividends to equity holders          -         -    (120.0)          -         -  (120.0)                -  (120.0) 
   Dividends to non-controlling 
    interests                           -         -          -          -         -        -            (2.7)    (2.7) 
-------------------------------  --------  --------  ---------  ---------  --------  -------  ---------------  ------- 
Total contributions and 
 distributions                          -         -    (181.3)          -         -  (181.3)              9.0  (172.3) 
-------------------------------  --------  --------  ---------  ---------  --------  -------  ---------------  ------- 
Balance at 30 June 2020               0.1      15.6      813.2       27.6     (0.1)    856.4             22.6    879.0 
-------------------------------  --------  --------  ---------  ---------  --------  -------  ---------------  ------- 
 

Consolidated cash flow statement

For the year ended 30 June 2020

 
                                                                  2020      2019 
                                                                  GBPm      GBPm 
-------------------------------------------------------------  -------  -------- 
Operating activities 
Operating profit                                                 209.7     202.8 
Adjustments for non-cash items: 
  Depreciation and amortisation                                    3.4       4.8 
  Accrual for variable compensation                               33.9      27.6 
  Unrealised foreign exchange gains                              (7.0)    (11.3) 
  Other non-cash items                                            10.6     (4.3) 
-------------------------------------------------------------  -------  -------- 
Cash generated from operations before working capital 
 changes                                                         250.6     219.6 
Changes in working capital: 
  Decrease/(increase) in trade and other receivables               9.1     (8.2) 
  Increase in derivative financial instruments                     0.6       1.0 
  Decrease in trade and other payables                           (5.4)     (1.2) 
-------------------------------------------------------------  -------  -------- 
Cash generated from operations                                   254.9     211.2 
Taxes paid                                                      (52.1)    (22.1) 
-------------------------------------------------------------  -------  -------- 
Net cash generated from operating activities                     202.8     189.1 
-------------------------------------------------------------  -------  -------- 
 
Investing activities 
Interest and investment income received                           14.7      15.4 
Proceeds on disposal of associates                                 0.6         - 
Acquisition of subsidiary, net of cash acquired                      -     (4.9) 
Purchase of non-current financial assets measured 
 at fair value                                                   (3.6)     (4.8) 
Purchase of financial assets held for sale                      (43.6)    (64.0) 
Purchase of financial assets measured at fair value                  -     (0.3) 
(Purchase)/sale of investment securities                         (9.1)       4.7 
Sale of non-current financial assets measured at fair 
 value                                                             2.5      24.0 
Sale of financial assets held for sale                             8.4      19.4 
Sale of financial assets measured at fair value                   25.1       4.4 
Net cash on initial consolidation of seed capital 
 investments                                                     (0.4)       3.5 
Purchase of property, plant and equipment                        (1.0)     (0.8) 
-------------------------------------------------------------  -------  -------- 
Net cash used in investing activities                            (6.4)     (3.4) 
-------------------------------------------------------------  -------  -------- 
 
Financing activities 
Dividends paid to equity holders                               (120.0)   (118.3) 
Dividends paid to non-controlling interests                      (2.7)     (2.4) 
Third-party subscriptions into consolidated funds                 50.0       2.7 
Third-party redemptions from consolidated funds                 (29.6)    (10.3) 
Distributions paid by consolidated funds                         (1.9)     (1.5) 
Proceeds on issue of shares to non-controlling interests 
 (note 30)                                                        11.3         - 
Payment of lease liabilities (note 16)                           (2.3)         - 
Interest paid (note 16)                                          (0.5)         - 
Purchase of own shares                                          (89.5)    (23.7) 
-------------------------------------------------------------  -------  -------- 
Net cash used in financing activities                          (185.2)   (153.5) 
-------------------------------------------------------------  -------  -------- 
 
Net increase in cash and cash equivalents                         11.2      32.2 
 
Cash and cash equivalents at beginning of year                   477.2     433.0 
Effect of exchange rate changes on cash and cash equivalents      12.5      12.0 
-------------------------------------------------------------  -------  -------- 
Cash and cash equivalents at end of year                         500.9     477.2 
-------------------------------------------------------------  -------  -------- 
 
Cash and cash equivalents at end of year comprise: 
Cash at bank and in hand                                          68.5      73.9 
Daily dealing liquidity funds                                    368.0     243.3 
Deposits                                                          64.4     160.0 
-------------------------------------------------------------  -------  -------- 
                                                                 500.9     477.2 
-------------------------------------------------------------  -------  -------- 
 

Company balance sheet

As at 30 June 2020

 
                                                      2020   2019 
                                              Notes   GBPm   GBPm 
--------------------------------------------  -----  -----  ----- 
Assets 
Non-current assets 
Goodwill                                         15    4.1    4.1 
Property, plant and equipment                    16    6.8    0.5 
Investment in subsidiaries                       25   19.9   19.9 
Deferred acquisition costs                             0.7    0.8 
Deferred tax assets                              18   20.6   16.6 
--------------------------------------------  -----  -----  ----- 
                                                      52.1   41.9 
--------------------------------------------  -----  -----  ----- 
Current assets 
Trade and other receivables                      17  518.2  495.0 
Cash and cash equivalents                             91.8  150.3 
--------------------------------------------  -----  -----  ----- 
                                                     610.0  645.3 
--------------------------------------------  -----  -----  ----- 
Total assets                                         662.1  687.2 
--------------------------------------------  -----  -----  ----- 
 
Equity and liabilities 
Capital and reserves 
Issued capital                                   22    0.1    0.1 
Share premium                                         15.6   15.6 
Retained earnings                                    583.5  632.6 
Cash flow hedging reserve                            (0.1)      - 
--------------------------------------------  -----  -----  ----- 
Total equity attributable to equity holders 
 of the Company                                      599.1  648.3 
--------------------------------------------  -----  -----  ----- 
 
Liabilities 
Non-current liabilities 
Lease liability                                  16    4.8      - 
 
Current liabilities 
Lease liability                                  16    1.1      - 
Derivative financial instruments                       1.7    0.7 
Trade and other payables                         24   55.4   38.2 
--------------------------------------------  -----  -----  ----- 
                                                      63.0   38.9 
--------------------------------------------  -----  -----  ----- 
Total equity and liabilities                         662.1  687.2 
--------------------------------------------  -----  -----  ----- 
 

Approved by the Board on 10 September 2020 and signed on its behalf by:

Mark Coombs Tom Shippey

Chief Executive Officer Group Finance Director

Company statement of changes in equity

For the year ended 30 June 2020

 
                                                                                           Total 
                                                                                          equity 
                                                                                    attributable 
                                                                                       to equity 
                                                                        Cash flow        holders 
                                           Issued     Share   Retained    hedging         of the 
                                          capital   premium   earnings    reserve         parent 
                                             GBPm      GBPm       GBPm       GBPm           GBPm 
---------------------------------------  --------  --------  ---------  ---------  ------------- 
Balance at 30 June 2018                       0.1      15.6      573.8          -          589.5 
 
Profit for the year                             -         -      178.4          -          178.4 
Purchase of own shares                          -         -     (23.7)          -         (23.7) 
Acquisition of subsidiary                       -         -        5.2          -            5.2 
Share-based payments                            -         -       17.2          -           17.2 
Dividends to equity holders                     -         -    (118.3)          -        (118.3) 
---------------------------------------  --------  --------  ---------  ---------  ------------- 
Balance at 30 June 2019                       0.1      15.6      632.6          -          648.3 
---------------------------------------  --------  --------  ---------  ---------  ------------- 
 
Profit for the year                             -         -      120.7          -          120.7 
Cash flow hedge intrinsic value losses          -         -          -      (0.1)          (0.1) 
Purchase of own shares                          -         -     (89.5)          -         (89.5) 
Share-based payments                            -         -       39.7          -           39.7 
Dividends to equity holders                     -         -    (120.0)          -        (120.0) 
---------------------------------------  --------  --------  ---------  ---------  ------------- 
Balance at 30 June 2020                       0.1      15.6      583.5      (0.1)          599.1 
---------------------------------------  --------  --------  ---------  ---------  ------------- 
 

Company cash flow statement

For the year ended 30 June 2020

 
                                                                  2020     2019 
                                                                  GBPm     GBPm 
-------------------------------------------------------------  -------  ------- 
Operating activities 
Operating profit                                                 116.9    178.4 
Adjustments for: 
   Depreciation and amortisation                                   1.5      0.3 
   Accrual for variable compensation                              21.7     17.2 
   Unrealised foreign exchange gains                            (13.9)   (15.5) 
   Dividends received from subsidiaries                        (122.0)  (174.4) 
-------------------------------------------------------------  -------  ------- 
Cash generated from operations before working capital 
 changes                                                           4.2      6.0 
Changes in working capital: 
   Decrease/(increase) in trade and other receivables             22.4    (9.7) 
   Increase in derivative financial instruments                    1.0      0.7 
   Increase/(decrease) in trade and other payables                17.2   (37.8) 
-------------------------------------------------------------  -------  ------- 
Cash generated from/(used in) operations                          44.8   (40.8) 
Taxes paid                                                      (38.4)   (12.5) 
-------------------------------------------------------------  -------  ------- 
Net cash generated from/(used in) operating activities             6.4   (53.3) 
-------------------------------------------------------------  -------  ------- 
 
Investing activities 
Interest received                                                  1.4      0.7 
Acquisition of subsidiary                                            -    (5.2) 
Loans advanced to subsidiaries                                 (111.8)   (66.8) 
Loans repaid by subsidiaries                                     135.1     80.1 
Dividends received from subsidiaries                             122.0    174.4 
Purchase of property, plant and equipment                        (0.9)    (0.3) 
-------------------------------------------------------------  -------  ------- 
Net cash generated from investing activities                     145.8    182.9 
-------------------------------------------------------------  -------  ------- 
 
Financing activities 
Dividends paid                                                 (120.0)  (118.3) 
Payment of lease liability                                       (1.0)        - 
Interest paid                                                    (0.3)        - 
Purchase of own shares                                          (89.5)   (23.7) 
-------------------------------------------------------------  -------  ------- 
Net cash used in financing activities                          (210.8)  (142.0) 
-------------------------------------------------------------  -------  ------- 
 
Net decrease in cash and cash equivalents                       (58.6)   (12.4) 
 
Cash and cash equivalents at beginning of year                   150.3    159.2 
Effect of exchange rate changes on cash and cash equivalents       0.1      3.5 
-------------------------------------------------------------  -------  ------- 
Cash and cash equivalents at end of year                          91.8    150.3 
-------------------------------------------------------------  -------  ------- 
 
Cash and cash equivalents at end of year comprise: 
Cash at bank and in hand                                          16.9     19.6 
Daily dealing liquidity funds                                     31.9     10.7 
Deposits                                                          43.0    120.0 
-------------------------------------------------------------  -------  ------- 
                                                                  91.8    150.3 
-------------------------------------------------------------  -------  ------- 
 

Notes to the financial statements

   1)    General information 

Ashmore Group plc (the Company) is a public limited company listed on the London Stock Exchange and incorporated and domiciled in the United Kingdom. The consolidated financial statements of the Company and its subsidiaries (together the Group) for the year ended 30 June 2020 were authorised for issue by the Board of Directors on 10 September 2020.

   2)    Basis of preparation 

The Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) effective for the Group's reporting for the year ended 30 June 2020 and applied in accordance with the provisions of the Companies Act 2006.

The financial statements have been prepared on a going concern basis under the historical cost convention, except for the measurement at fair value of derivative financial instruments and financial assets and liabilities that are held at fair value through profit or loss.

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 that allows it not to present its individual statement of comprehensive income and related notes.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and 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 the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Further information about key assumptions and other key sources of estimation and areas of judgement are set out in note 31.

Going concern

The Board of Directors has considered the resilience of the Group, taking into account its current financial position, and the principal and emerging risks facing the business including the impact of COVID-19 on global markets and potential implications for the Group's financial performance. The Board reviewed cash flow forecasts for a period of 12 months from the date of approval of these financial statements which indicate that, taking account of downsides which could reasonably be anticipated, the Group will have sufficient funds to meet its liabilities as they fall due for that period. The Board considered the impact of COVID-19 by applying stressed scenarios, including severe but plausible downside assumptions, and the impact on assets under management, profitability of the Group and known commitments. While there are significant wider market uncertainties that may impact the Group, the stressed scenarios, which assumed a significant reduction in revenue for the entire forecast period, show that the Group and Company would continue to operate profitably and meet their liabilities as they fall due for a period of at least 12 months from the date of approval of the annual financial statements. The financial statements have therefore been prepared on a going concern basis.

   3)    New Standards and Interpretations adopted by the Group 

The Group has applied IFRS 16 Leases (IFRS 16) and IFRIC 23 Uncertainty over Income Tax Treatments from 1 July 2019. The nature and effect of the adoption of these standards are disclosed below.

IFRS 16 Leases

The Group has applied IFRS 16 for the first time for its annual reporting period commencing on 1 July 2019. IFRS 16 replaces IAS 17 Leases and became effective for reporting periods beginning on or after 1 January 2019. On adoption of IFRS 16, the Group has measured the right-of-use (ROU) assets as if the standard had always been applied but based on an incremental borrowing rate at 1 July 2019. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate as at 1 July 2019.

Comparative information has not been restated as the Group has applied IFRS 16 using the modified retrospective approach with the cumulative effect of initially applying the standard recognised as an adjustment to the opening retained earnings at 1 July 2019.

The Group has applied the optional exemption contained within IFRS 16, which permits the cost of short-term (less than 12 months) leases to be expensed on a straight-line basis over the lease term. These lease arrangements are not material to the Group.

At 30 June 2019, the Group had non-cancellable operating lease commitments of GBP13.8 million. As a result of applying IFRS 16, the Group has recognised a lease liability and ROU asset at 1 July 2019 of GBP12.8 million and GBP12.6 million respectively. This reduced the Group's net assets by GBP0.2 million, recognised as a reduction in retained earnings at 1 July 2019. The weighted average lessee's incremental borrowing rate applied to measure the lease liabilities on 1 July 2019 was 4.8%.

The Group's accounting policies in respect of IFRS 16 are set out in note 4 and additional disclosure on the Group's recognised ROU assets and lease liabilities is provided in note 16.

IFRIC 23 Uncertainty over Income Tax Treatments

IFRIC 23 became effective on 1 January 2019 and provides clarification as to how the recognition and measurement requirements of IAS 12 Income Tax should be applied. IFRIC 23 does not have a material impact on the Group.

New Standards and Interpretations not yet adopted

There were no other Standards or Interpretations that were in issue and required to be adopted by the Group as at the date of authorisation of these consolidated financial statements. No other Standards or Interpretations have been issued that are expected to have a material impact on the Group's financial statements.

   4)    Significant accounting policies 

The following principal accounting policies have been applied consistently where applicable to all years presented in dealing with items considered material in relation to the Group and Company financial statements, unless otherwise stated.

Basis of consolidation

The consolidated financial statements of the Group comprise the financial statements of the Company and its subsidiaries, associates and joint ventures. This includes an Employee Benefit Trust (EBT) established for the employee share-based awards and consolidated investment funds.

Interests in subsidiaries

Subsidiaries are entities, including investment funds, over which the Group has control as defined by IFRS 10. The Group has control if it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control ceases. The Group reassesses whether or not it controls an entity if facts and circumstances indicate that there are changes to one or more of the elements of control.

The profit or loss and each component of other comprehensive income are attributed to the equity holders of the Company and to any non-controlling interests. Based on their nature, the interests of third parties in consolidated funds are classified as liabilities and appear as 'Third-party interests in consolidated funds' on the Group's balance sheet. Associates and joint ventures are presented as single-line items in the statement of comprehensive income and balance sheet (refer to note 26). Intercompany transactions and balances are eliminated on consolidation. Consistent accounting policies have been applied across the Group in the preparation of the consolidated financial statements as at 30 June 2020.

A change in the ownership interest of a consolidated entity that does not result in a loss of control by the Group is accounted for as an equity transaction. If the Group loses control over a consolidated entity, it derecognises the related assets, goodwill, liabilities, non-controlling interest and other components of equity, and any gain or loss is recognised in consolidated comprehensive income. Any investment retained is recognised at its fair value at the date of loss of control.

Interests in associates and joint arrangements

Associates are partly owned entities over which the Group has significant influence but no control. Joint ventures are entities through which the Group and other parties undertake an economic activity which is subject to joint control.

Investments in associates and interests in joint ventures are measured using the equity method of accounting. Under this method, the investments are initially recognised at cost, including attributable goodwill, and are adjusted thereafter for the post-acquisition changes in the Group's share of net assets. The Group's share of post-acquisition profit or loss is recognised in the statement of comprehensive income.

Where the Group's financial year is not coterminous with those of its associates or joint ventures, unaudited interim financial information is used after appropriate adjustments have been made.

Interests in consolidated structured entities

The Group acts as fund manager to investment funds that are considered to be structured entities. Structured entities are entities that have been designed so that voting or similar rights are not the dominant factor in deciding which party has control: for example, when any voting rights relate to administrative tasks only and the relevant activities of the entity are directed by means of contractual arrangements. The Group's assets under management are managed within structured entities. These structured entities typically consist of unitised vehicles such as Société d'Investissement à Capital Variable (SICAVs), limited partnerships, unit trusts and open-ended and closed-ended vehicles which entitle third-party investors to a percentage of the vehicle's net asset value.

The Group has interests in structured entities as a result of the management of assets on behalf of its clients. Where the Group holds a direct interest in a closed-ended fund, private equity fund or open-ended pooled fund such as a SICAV, the interest is accounted for either as a consolidated structured entity or as a financial asset, depending on whether the Group has control over the fund or not. Control is determined in accordance with IFRS 10, based on an assessment of the level of power and aggregate economic interest that the Group has over the fund, relative to third-party investors. Power is normally conveyed to the Group through the existence of an investment management agreement and/or other contractual arrangements. Aggregate economic interest is a measure of the Group's exposure to variable returns in the fund through a combination of direct interest, expected share of performance fees, expected management fees, fair value gains or losses, and distributions receivable from the fund.

The Group concludes that it acts as a principal when the power it has over the fund is deemed to be exercised for self-benefit, considering the level of aggregate economic exposure in the fund and the assessed strength of third-party investors' kick-out rights. The Group concludes that it acts as an agent when the power it has over the fund is deemed to be exercised for the benefit of third-party investors.

The Group concludes that it has control and, therefore, will consolidate a fund as if it were a subsidiary where the Group acts as a principal. If the Group concludes that it does not have control over the fund, the Group accounts for its interest in the fund as a financial asset.

Interests in unconsolidated structured entities

The Group classifies the following investment funds as unconsolidated structured entities:

- Segregated mandates and pooled funds managed where the Group does not hold any direct interest. In this case, the Group considers that its aggregate economic exposure is insignificant and, in relation to segregated mandates, the third-party investor has the practical ability to remove the Group from acting as fund manager, without cause. As a result, the Group concludes that it acts as an agent for third-party investors.

- Pooled funds managed by the Group where the Group holds a direct interest, for example seed capital investments, and the Group's aggregate economic exposure in the fund relative to third-party investors is less than 20% (i.e. the threshold established by the Group for determining agent versus principal classification). As a result, the Group concludes that it is an agent for third-party investors and, therefore, will account for its beneficial interest in the fund as a financial asset.

The disclosure of the AuM in respect of consolidated and unconsolidated structured entities is provided in note 27.

Foreign currency

The Group's financial statements are presented in Pounds Sterling (Sterling), which is also the Company's functional and presentation currency. Items included in the financial statements of each of the Group's entities are measured using the functional currency, which is the currency that prevails in the primary economic environment in which the entity operates.

Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of the Group entities at the spot exchange rates at the date of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into the functional currency at the spot exchange rate at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on translation are generally recognised in comprehensive income, except for qualifying cash flow hedges to the extent that the hedge is effective, in which case foreign currency differences arising are recognised in other comprehensive income.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into Sterling at the spot exchange rates at the balance sheet date. The revenues and expenses of foreign operations are translated into Sterling at rates approximating to the foreign exchange rates ruling at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income, and accumulated in the foreign currency translation reserve, except to the extent that the translation difference is allocated to non-controlling interests.

When a foreign operation is disposed of such that control is lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is reclassified to comprehensive income as part of the gain or loss on disposal. If the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests.

If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency differences arising on the item form part of the net investment in the foreign operation and are recognised in other comprehensive income, and accumulated in the foreign currency translation reserve within equity.

Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.

The consideration transferred for the acquisition is generally measured at the acquisition date fair value, as are the identifiable net assets acquired, liabilities incurred (including any asset or liability resulting from a contingent consideration arrangement) and equity instruments issued by the Group in exchange for control of the acquiree.

Acquisition-related costs are expensed as incurred, except if they are related to the issue of debt or equity securities.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. If the contingent consideration is classified as equity, it will not be remeasured and settlement is accounted for within equity.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.

Goodwill

The cost of a business combination in excess of the fair value of net identifiable assets or liabilities acquired, including intangible assets identified, is recognised as goodwill and stated at cost less any accumulated impairment losses. Goodwill has an indefinite useful life, is not subject to amortisation and is tested annually for impairment or when there is an indication of impairment.

Intangible assets

The cost of intangible assets, such as management contracts and brand names, acquired as part of a business combination

is their fair value as at the date of acquisition. The fair value at the date of acquisition is calculated using the discounted cash flow methodology and represents the valuation of the profits expected to be earned from the management contracts and brand name in place at the date of acquisition.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and impairment losses. Intangible assets with finite life are amortised on a systematic basis over their useful lives. The useful life of an intangible asset which has arisen from contractual or other legal rights does not exceed the period of the contractual or other legal rights.

Non-controlling interests (NCI)

The Group recognises NCI in an acquired entity either at fair value or at the NCI's proportionate share of the acquired entity's net identifiable assets. This decision is made on an acquisition-by-acquisition basis. Changes to the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost is determined on the basis of the direct and indirect costs that are directly attributable. Property, plant and equipment are depreciated using the straight-line method over the estimated useful lives, assessed to be five years for office equipment and four years for IT equipment. The residual values and useful lives of assets are reviewed at least annually.

Deferred acquisition costs

Costs that are directly attributable to securing an investment management contract are deferred if they can be identified separately and measured reliably and it is probable that they will be recovered. Deferred acquisition costs represent the incremental costs incurred by the Group to acquire an investment management contract, typically on a closed-ended fund. The Group amortises the deferred acquisition asset recognised on a systematic basis, in line with the revenue generated from providing the investment management services over the life of the fund.

Financial instruments

Recognition and initial measurement

Financial instruments are recognised when the Group becomes party to the contractual provisions of an instrument, initially at fair value plus transaction costs except for financial assets classified at fair value through profit or loss. Purchases or sales of financial assets are recognised on the trade date, being the date that the Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or been transferred or when the Group has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when the obligation under the liability has been discharged, cancelled or expires.

Subsequent measurement

The subsequent measurement of financial instruments depends on their classification in accordance with IFRS 9 Financial Instruments and IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Under IFRS 9, the Group classifies its financial assets into two measurement categories: amortised cost and FVTPL. The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All financial assets not classified as measured at amortised cost are measured at FVTPL. The Group classifies its financial liabilities at amortised cost or derivative liabilities measured at FVTPL.

Amortised cost is the amount determined based on moving the initial amount recognised for the financial instrument to the maturity value on a systematic basis using a fixed interest rate (effective interest rate), taking account of repayment dates and initial premiums or discounts.

Financial assets

The Group classifies its financial assets into the following categories: investment securities at FVTPL, non-current financial assets held for sale, financial assets at FVTPL and financial assets measured at amortised cost.

The Group may, from time to time, invest seed capital in funds where a subsidiary is the investment manager or an adviser. Where the holding in such investments is deemed to represent a controlling stake and is acquired exclusively with a view to subsequent disposal through sale or dilution, these seed capital investments are recognised as non-current financial assets held for sale in accordance with IFRS 5. The Group recognises 100% of the investment in the fund as a 'held for sale' asset and the interest held by other parties as a 'liability held for sale'. Where control is not deemed to exist, and the assets are readily realisable, they are recognised as financial assets measured at FVTPL in accordance with IFRS 9. Where the assets are not readily realisable, they are recognised as non-current financial assets measured at FVTPL. If a seed capital investment remains under the control of the Group for more than one year from the original investment date, the underlying fund is consolidated line by line.

Investment securities at FVTPL

Investment securities represent securities, other than derivatives, held by consolidated funds. These securities are measured at fair value with gains and losses recognised through the consolidated statement of comprehensive income.

Non-current financial assets held for sale (HFS)

Non-current financial assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell except where measurement and remeasurement is outside the scope of IFRS 5. Where investments that have initially been recognised as non-current financial assets held for sale, because the Group has been deemed to hold a controlling stake, are subsequently disposed of or diluted such that the Group's holding is no longer deemed a controlling stake, the investment will subsequently be classified as financial assets measured at FVTPL in accordance with IFRS 9. Subsequent movements will be recognised in accordance with the Group's accounting policy for the newly adopted classification.

Financial assets at FVTPL

Financial assets at FVTPL include certain readily realisable interests in seeded funds, non-current financial assets measured at fair value and derivatives. From the date the financial asset is recognised, all subsequent changes in fair value, foreign exchange differences, interest and dividends are reflected in the consolidated statement of comprehensive income and presented in finance income or expense.

   (i)      Non-current financial assets measured at fair value 

Non-current financial assets include closed-end funds that are measured at FVTPL. They are held at fair value with changes in fair value being recognised through the consolidated statement of comprehensive income.

   (ii)     Financial assets measured at fair value 

The Group classifies readily realisable interests in newly seeded funds as financial assets measured at FVTPL with fair value changes being directly recognised through the consolidated statement of comprehensive income. Fair value is measured based on the proportionate net asset value in the fund.

    (iii)   Derivatives 

Derivatives include foreign exchange forward contracts and options used by the Group to manage its foreign currency exposures and those held in consolidated funds. Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and subsequently remeasured at fair value. Transaction costs are recognised immediately in the statement of comprehensive income. All derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives are taken directly in comprehensive income, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income.

Financial assets measured at amortised cost

   (i)       Trade and other receivables 

Trade and other receivables are initially recorded at fair value plus transaction costs. The fair value on acquisition is normally the cost. Impairment losses with respect to the estimated irrecoverable amount are recognised through the statement of comprehensive income when there is appropriate evidence that trade and other receivables are impaired. Subsequent to initial recognition these assets are measured at amortised cost less any impairment losses.

   (ii)     Cash and cash equivalents 

Cash represents cash at bank and in hand, and cash equivalents comprise short-term deposits and investments in money market instruments that are redeemable on demand or with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value.

Financial liabilities

The Group classifies its financial liabilities into the following categories: non-current financial liabilities held for sale, financial liabilities at FVTPL and financial liabilities at amortised cost.

Non-current financial liabilities held for sale

Non-current financial liabilities represent interests held by other parties in funds in which the Group recognises 100% of the investment in the fund as a held for sale financial asset. These liabilities are carried at fair value with gains or losses recognised in the statement of comprehensive income within finance income or expense.

Financial liabilities at FVTPL

Financial liabilities at FVTPL include derivative financial instruments and third-party interests in consolidated funds. They are carried at fair value with gains or losses recognised in the consolidated statement of comprehensive income within finance income or expense.

Financial liabilities at amortised cost

Other financial liabilities including trade and other payables are subsequently measured at amortised cost using the effective interest rate method. Interest expense is recognised as it is incurred using the effective interest method, which allocates interest at a constant rate of return over the expected life of the financial instrument based on the estimated future cash flows.

Fair value of financial instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the 'exit price') in an orderly transaction between market participants at the measurement date. In determining fair value, the Group uses various valuation approaches and establishes a hierarchy for inputs used in measuring fair value that maximises the use of relevant observable inputs and minimises the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Group.

Unobservable inputs are inputs that reflect the Group's judgements about the assumptions other market participants would use in pricing the asset or liability, developed based on the best information available in the circumstances.

Securities listed on a recognised stock exchange, or dealt on any other regulated market that operates regularly, is recognised and open to the public, are valued at the last known available closing bid price. If a security is traded on several actively traded and organised financial markets, the valuation is made on the basis of the last known bid price on the main market on which the securities are traded. In the case of securities for which trading on an actively traded and organised financial market is not significant, but which are bought and sold on a secondary market with regulated trading among security dealers (with the effect that the price is set on a market basis), the valuation may be based on this secondary market.

Where instruments are not listed on any stock exchange or not traded on any regulated markets, valuation techniques are used by valuation specialists. These techniques include the market approach, the income approach or the cost approach. The use of the market approach generally consists of using comparable market transactions or using techniques based on market observable inputs, 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.

Investments in funds are valued on the basis of the last available net asset value of the units or shares of such funds.

The fair value of the derivatives is their quoted market price at the balance sheet date.

Hedge accounting

The Group applies the general hedge accounting model in IFRS 9. This requires the Group to ensure that hedge accounting relationships are aligned with its risk management objectives and strategy and to apply a more qualitative and forward-looking approach to assessing hedge effectiveness.

The Group uses forward and option contracts to hedge the variability in cash flows arising from changes in foreign exchange rates relating to management fee revenues. The Group designates only the change in fair value of the spot element of the forward and option contracts in cash flow hedging relationships. The effective portion of changes in fair value of hedging instruments is accumulated in a cash flow hedge reserve as a separate component of equity.

The Group applies cash flow hedge accounting when the transaction meets the specified hedge accounting criteria. To qualify, the following conditions must be met:

- formal documentation of the relationship between the hedging instrument(s) and hedged item(s) must exist at inception;

- the hedged cash flows must be highly probable and must present an exposure to variations in cash flows that could ultimately affect comprehensive income;

   -   the effectiveness of the hedge can be reliably measured; and 
   -   the hedge must be highly effective, with effectiveness assessed on an ongoing basis. 

For qualifying cash flow hedges, the change in fair value of the effective hedging instrument is initially recognised in other comprehensive income and is released to comprehensive income in the same period during which the relevant financial asset or liability affects the Group's results.

Where the hedge is highly effective overall, any ineffective portion of the hedge is immediately recognised in comprehensive income. Where the instrument ceases to be highly effective as a hedge, or is sold, terminated or exercised, hedge accounting is discontinued.

Derecognition of financial assets and liabilities

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risk and rewards of ownership of the asset. The Group derecognises a financial liability when the Group's obligations are discharged, cancelled or they expire.

Impairment of financial assets

Under IFRS 9, impairment losses on the Group's financial assets at amortised cost are measured using an expected credit loss (ECL) model. Under this model, the Group is required to account for expected credit losses, and changes in those expected credit losses over the life of the instrument. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition and, consequently, more timely information is provided about expected credit losses. A three stage model is used for calculating expected credit losses, which requires financial assets to be assessed as:

- Performing (stage 1) financial assets where there has been no significant increase in credit risk since original recognition; or

- Under-performing (stage 2) financial assets where there has been a significant increase in credit risk since initial recognition, but no default event; or

   -   Non-performing (stage 3) financial assets that are in default. 

Expected credit losses for stage 1 financial assets are calculated based on possible default events within the 12 months after the reporting date. Expected credit losses for stage 2 and 3 financial assets are calculated based on lifetime expected credit losses that result from all possible default events over the expected life of a financial instrument. The Group applies the simplified approach to calculate expected credit losses for financial assets measured at amortised cost. Under this approach, financial assets are not categorised into three stages and expected credit losses are calculated based on the life of the instrument.

Assets measured at amortised cost

The Group measures loss allowances at an amount equal to lifetime expected credit losses. Expected credit loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. The Group's financial assets subject to impairment assessment under the ECL model comprise cash deposits held with banks and trade receivables. In assessing the impairment of financial assets under the ECL model, the Group assesses whether the risk of default has increased significantly since initial recognition, by considering both quantitative and qualitative information, and the analysis is based on the Group's historical experience of credit default, including forward-looking information.

The Group's trade receivables comprise balances due from management fees, performance fees, expense recoveries from funds managed, and are generally short term and do not contain financing components. Factors considered in determining whether a default has taken place include how many days past the due date a payment is, deterioration in the credit quality of a counterparty, and knowledge of specific events that could influence a counterparty's ability to pay. The Group assesses lifetime expected credit losses based on historical observed default rates, adjusted by forward-looking estimates regarding the economic conditions within the next year. Externally derived credit ratings have been identified as representing the best available determinant of counterparty credit risk for cash balances and credit risk is deemed to have increased significantly if the credit rating has significantly deteriorated at the reporting date relative to the credit rating at the date of initial recognition.

Impairment of non-financial assets

For all other assets other than goodwill, an impairment test is performed annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets, other than goodwill, that have suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Goodwill

Goodwill is tested for impairment annually or whenever there is an indication that the carrying amount may not be recoverable based on management's judgements regarding the future prospects of the business, estimates of future cash flows and discount rates. When assessing the appropriateness of the carrying value of goodwill at year end, the recoverable amount is considered to be the greater of fair value less costs to sell or value in use. The pre-tax discount rate applied is based on the Group's weighted average cost of capital after making allowances for any specific risks.

The business of the Group is managed as a single unit, with asset allocations, research and other such operational practices reflecting the commonality of approach across all fund themes. Therefore, for the purpose of testing goodwill for impairment, the Group is considered to have one cash-generating unit to which all goodwill is allocated and, as a result, no further split of goodwill into smaller cash-generating units is possible and the impairment review is conducted for the Group as a whole.

An impairment loss in respect of goodwill cannot be reversed.

Net revenue

Net revenue is total revenue less distribution costs and including foreign exchange. The Group's total revenue includes management fees, performance fees and other revenue. The primary revenue source for the Group is fee income received or receivable for the provision of investment management services.

The Group recognises revenue in accordance with the principles of IFRS 15 Revenue from Contracts with Customers.

The core principle of IFRS 15 is that revenue is recognised to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Group applies the IFRS 15 five-step model for recognising revenue, which consists of identifying the contract with the customer; identifying the relevant performance obligations; determining the amount of consideration to be received under the contract; allocating the consideration to each performance obligation; and earning the revenue as the performance obligations are satisfied.

The Group's principal revenue recognition policies are summarised below:

Management fees

Management fees are presented net of rebates, and are calculated as a percentage of net fund assets managed in accordance with individual management agreements. Management fees are calculated and recognised on a monthly basis in accordance with the terms of the management fee agreements. Management fees are typically collected on monthly or quarterly basis.

Performance fees

Performance fees are presented net of rebates, and are calculated as a percentage of the appreciation in the net asset value of a fund above a defined hurdle. Performance fees are earned from some arrangements when contractually agreed performance levels are exceeded within specified performance measurement periods, typically over one year. The fees are recognised when they can be reliably estimated and/or crystallised, and there is deemed to be a low probability of a significant reversal in future periods. This is usually at the end of the performance period or upon early redemption by a fund investor. Once crystallised, performance fees typically cannot be clawed-back.

Rebates

Rebates relate to repayments of management and performance fees charged subject to a rebate agreement, typically with institutional investors, and are calculated based on an agreed percentage of net fund assets managed and recognised as the service is received. Where rebate agreements exist, management and performance fees are presented on a net basis in the consolidated statement of comprehensive income.

Other revenue

Other revenue principally comprises fees for other services, which are typically driven by the volume of transactions, along with revenues that vary in accordance with the volume of fund project development activities. Other revenue includes transaction, structuring and administration fees, project management fees, and reimbursement by funds of costs incurred by the Group. This revenue is recognised as the relevant service is provided and it is probable that the fee will be collected.

Distribution costs

Distribution costs are costs of sales payable to external intermediaries for marketing and investor servicing. Distribution costs vary based on fund assets managed and the associated management fee revenue, and are expensed over the period in which the service is provided.

Employee benefits

Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of comprehensive income when payable in accordance with the scheme particulars.

Share-based payments

The Group issues share awards to its employees under share-based compensation plans.

For equity-settled awards, the fair value of the amounts payable to employees is recognised as an expense with a corresponding increase in equity over the vesting period after adjusting for the estimated number of shares that are expected to vest. The fair value is measured at the grant date using an appropriate valuation model, taking into account the terms and conditions upon which the instruments were granted. At each balance sheet date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management's best estimate of the awards that are ultimately expected to vest is calculated. The movement in cumulative expense is recognised in the statement of comprehensive income with a corresponding entry within equity.

For cash-settled awards, the fair value of the amounts payable to employees is recognised as an expense with a corresponding liability on the Group's balance sheet. The fair value is measured using an appropriate valuation model, taking into account the estimated number of awards that are expected to vest and the terms and conditions upon which the instruments were granted. During the vesting period, the liability recognised represents the portion of the vesting period that has expired at the balance sheet date multiplied by the fair value of the awards at that date. Movements in the liability are recognised in the statement of comprehensive income.

Leases

The Group's lease arrangements primarily consist of operating leases relating to office space.

IFRS 16 replaced IAS 17 Leases on 1 January 2019. Until 30 June 2019, in accordance with IAS 17, obligations under lease agreements were not recorded on the Group's consolidated statement of financial position but were disclosed as lease commitments. The Group has not restated comparative information.

The Group initially records a lease liability reflecting the present value of the future contractual cash flows to be made over the lease term, discounted using the rate implicit in the lease, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the ROU asset in a similar economic environment with similar terms, security and conditions. Where this rate is not readily available, the Group applies the incremental borrowing rate applicable for each lease arrangement. A ROU asset is also recorded at the value of the lease liability plus any directly related costs and estimated dilapidation expenses and is presented within property, plant and equipment (see note 16). Interest is accrued on the lease liability using the effective interest rate method to give a constant rate of return over the life of the lease whilst the balance is reduced as lease payments are made. The ROU asset is depreciated over the life of the lease as the benefit of the lease is consumed.

After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects the likelihood that it will exercise (or not exercise) a term extension option.

The cost of short-term (less than 12 months) leases is expensed on a straight-line basis over the lease term.

Finance income and expense

Finance income includes interest receivable on the Group's cash and cash equivalents, and both realised and unrealised gains on financial assets at FVTPL.

Finance expense includes both realised and unrealised losses on financial assets at FVTPL. Interest expense on lease liabilities is presented within finance expense.

Taxation

Tax expense for the year comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year, and any adjustment to the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the balance sheet date in the countries where the Group operates. Current tax also includes withholding tax arising from dividends.

Deferred tax

Deferred tax is recognised using the balance sheet liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following differences are not provided for:

   -   goodwill not deductible for tax purposes and 

- differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the balance sheet date.

Dividends

Dividends are recognised when shareholders' rights to receive payments have been established.

Equity shares

The Company's ordinary shares of 0.01 pence each are classified as equity instruments. Ordinary shares issued by the Company are recorded at the fair value of the consideration received or the market price at the day of issue. Direct issue costs, net of tax, are deducted from equity through share premium. When share capital is repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity.

Own shares

Own shares are held by the Employee Benefit Trust (EBT). The holding of the EBT comprises own shares that have not vested unconditionally to employees of the Group. In both the Group and Company, own shares are recorded at cost and are deducted from retained earnings.

Segmental information

Key management information, including revenues, margins, investment performance, distribution costs and AuM flows, which is relevant to the operation of the Group, is reported to and reviewed by the Board on the basis of the investment management business as a whole. Hence the Group's management considers that the Group's services and its operations are not run on a discrete geographic basis and comprise one business segment (being provision of investment management services).

Company-only accounting policies

In addition to the above accounting policies, the following specifically relates to the Company:

Investment in subsidiaries

Investments by the Company in subsidiaries are stated at cost less, where appropriate, provisions for impairment.

   5)    Segmental information 

The Group's operations are reported to and reviewed by the Board on the basis of the investment management business as a whole, hence the Group is treated as a single segment. The key management information considered is adjusted EBITDA which is GBP222.5 million for the year as reconciled in the Business review (FY2018/19: adjusted EBITDA of GBP201.8 million was derived by adjusting operating profit by GBP4.8 million of depreciation and amortisation expense, GBP1.0 million of income related to seed capital and GBP4.8 million of foreign exchange gains). The disclosures below are supplementary, and provide the location of the Group's non-current assets at year end other than financial assets and deferred tax assets. Disclosures relating to revenue by location are in note 6.

Analysis of non-current assets by geography

 
                              2020    2019 
                              GBPm    GBPm 
---------------------------  -----  ------ 
United Kingdom and Ireland    26.4    20.6 
United States                 72.4    69.3 
Other                          3.9     1.5 
---------------------------  -----  ------ 
Total non-current assets     102.7    91.4 
---------------------------  -----  ------ 
 
   6)    Revenue 

Management fees are accrued throughout the year in line with prevailing levels of assets under management and performance fees are recognised when they can be estimated reliably and it is probable that they will crystallise. The Group is not considered to be reliant on any single source of revenue. During the year, none of the Group's funds (FY2018/19: none) provided more than 10% of total revenue in the year respectively when considering management fees and performance fees on a combined basis.

Analysis of revenue by geography

 
                              2020    2019 
                              GBPm    GBPm 
---------------------------  -----  ------ 
United Kingdom and Ireland   287.0   265.1 
United States                 24.3    24.1 
Other                         26.7    27.1 
---------------------------  -----  ------ 
Total revenue                338.0   316.3 
---------------------------  -----  ------ 
 
   7)    Foreign exchange 

The foreign exchange rates which had a material impact on the Group's results are the US dollar, the Euro, the Indonesian rupiah and the Colombian peso.

 
                                 Closing     Average     Average 
                       Closing      rate   rate year   rate year 
                       rate as     as at       ended       ended 
                         at 30   30 June     30 June     30 June 
GBP1                 June 2020      2019        2020        2019 
------------------  ----------  --------  ----------  ---------- 
US dollar               1.2356    1.2727      1.2637      1.2958 
Euro                    1.1001    1.1176      1.1331      1.1345 
Indonesian rupiah       17,651    17,980      18,134      18,660 
Colombian peso           4,620     4,082       4,468       4,058 
------------------  ----------  --------  ----------  ---------- 
 

Foreign exchange gains and losses are shown below.

 
                                                          2020    2019 
                                                          GBPm    GBPm 
-------------------------------------------------------  -----  ------ 
Net realised and unrealised hedging gains                  1.5     5.1 
Translation gains on non-Sterling denominated monetary 
 assets and liabilities                                    5.5     6.2 
-------------------------------------------------------  -----  ------ 
Total foreign exchange gains                               7.0    11.3 
-------------------------------------------------------  -----  ------ 
 
   8)    Finance income 
 
                                                                2020    2019 
                                                                GBPm    GBPm 
-------------------------------------------------------------  -----  ------ 
Finance income 
   Interest and investment income                               11.1    13.2 
   Net realised gains on seed capital investments measured 
    at fair value                                                4.0     2.4 
   Net unrealised gains/(losses) on seed capital investments 
    measured at fair value                                     (2.6)     1.8 
   Interest expense on lease liabilities (note 16)             (0.5)       - 
-------------------------------------------------------------  -----  ------ 
Total finance income                                            12.0    17.4 
-------------------------------------------------------------  -----  ------ 
 

Included within interest and investment income are gains of GBP4.8 million (FY 2018/19: GBP5.5 million gains) from investment securities on consolidated funds (note 20d).

Included within net realised and unrealised gains on seed capital investments measured at fair value are GBP2.8 million gains (FY2018/19: GBP3.2 million gains) in relation to held for sale investments (note 20a), GBP0.8 million losses (FY2018/19: GBP0.3 million gains) on financial assets measured at FVTPL (note 20b) and GBP4.5 million losses (FY2018/19: GBP0.7 million gains) on non-current financial assets measured at fair value (note 20c).

   9)    Personnel expenses 

Personnel expenses during the year comprised the following:

 
                                    2020    2019 
                                    GBPm    GBPm 
---------------------------------  -----  ------ 
Wages and salaries                  22.2    21.2 
Performance-related cash bonuses    21.1    26.4 
Share-based payments                33.9    31.3 
Social security costs                1.9     1.9 
Pension costs                        1.9     1.6 
Other costs                          1.6     1.8 
---------------------------------  -----  ------ 
Total personnel expenses            82.6    84.2 
---------------------------------  -----  ------ 
 

Number of employees

At 30 June 2020, the number of investment management employees of the Group (including Executive Directors) during the year was as follows:

 
                                                      Average 
                                            Average   for the 
                                            for the      year 
                                         year ended     ended        At        At 
                                            30 June   30 June   30 June   30 June 
                                               2020      2019      2020      2019 
                                             Number    Number    Number    Number 
--------------------------------------  -----------  --------  --------  -------- 
Total investment management employees           292       281       291       288 
--------------------------------------  -----------  --------  --------  -------- 
 

Directors' remuneration

There are retirement benefits accruing to two Executive Directors under a defined contribution scheme (FY2018/19: two).

10) Share-based payments

The cost related to share-based payments recognised by the Group in the statement of comprehensive income is shown below:

 
                                      2020    2019 
Group                                 GBPm    GBPm 
-----------------------------------  -----  ------ 
Omnibus Plan                          33.5    31.3 
Phantom Bonus Plan                     0.4       - 
-----------------------------------  -----  ------ 
Total share-based payments expense    33.9    31.3 
-----------------------------------  -----  ------ 
 

The total expense recognised for the year in respect of equity-settled share-based payment awards was GBP28.9 million (FY2018/19: GBP27.3 million), of which GBP2.0 million (FY2018/19: GBP1.9 million) relates to share awards granted to key management personnel.

The Executive Omnibus Incentive Plan (Omnibus Plan)

The Omnibus Plan was introduced prior to the Company listing in October 2006 and provides for the grant of share awards, market value options, premium cost options, discounted options, linked options, phantoms and/or nil-cost options to employees. The Omnibus Plan will also allow bonuses to be deferred in the form of share awards with or without matching shares. Awards granted under the Omnibus Plan typically vest after five years from date of grant, with the exception of bonus awards which vest after the shorter of five years from date of grant or on the date of termination of employment. Awards under the Omnibus Plan are accounted for as equity-settled, with the exception of phantoms which are classified as cash-settled.

The combined cash and equity-settled payments below represent the share-based payments relating to the Omnibus Plan.

Total expense by year awards were granted (excluding national insurance)

 
Group and Company                                      2020   2019 
 Year of grant                                         GBPm   GBPm 
----------------------------------------------------  -----  ----- 
2014                                                      -    2.0 
2015                                                    3.3    3.4 
2016                                                    2.7    2.7 
2017                                                    3.7    3.8 
2018                                                    3.8    3.8 
2019                                                    4.8   11.6 
2020                                                   10.9      - 
----------------------------------------------------  -----  ----- 
Total Omnibus share-based payments expense reported 
 in comprehensive income                               29.2   27.3 
----------------------------------------------------  -----  ----- 
 

Awards outstanding under the Omnibus Plan were as follows:

   i)    Equity-settled awards 
 
                                        2020       2020         2019       2019 
                                      Number   Weighted       Number   Weighted 
                                   of shares    average    of shares    average 
                                     subject      share      subject      share 
Group and Company                  to awards      price    to awards      price 
-------------------------------  -----------  ---------  -----------  --------- 
Restricted share awards 
-------------------------------  -----------  ---------  -----------  --------- 
At the beginning of the year      21,233,773    GBP3.04   22,155,889    GBP3.14 
Granted                            4,026,981    GBP4.39    4,606,773    GBP3.33 
Vested                           (3,063,448)    GBP3.16  (4,828,408)    GBP3.69 
Forfeited                          (123,968)    GBP3.04    (700,481)    GBP3.44 
-------------------------------  -----------  ---------  -----------  --------- 
Awards outstanding at year end    22,073,338    GBP3.27   21,233,773    GBP3.04 
-------------------------------  -----------  ---------  -----------  --------- 
 
Bonus share awards 
-------------------------------  -----------  ---------  -----------  --------- 
At the beginning of the year       9,705,156    GBP3.07    9,151,992    GBP3.12 
Granted                            2,060,811    GBP4.38    2,435,432    GBP3.33 
Vested                           (1,072,680)    GBP3.09  (1,882,268)    GBP3.76 
Forfeited                                  -          -            -          - 
-------------------------------  -----------  ---------  -----------  --------- 
Awards outstanding at year end    10,693,287    GBP3.32    9,705,156    GBP3.07 
-------------------------------  -----------  ---------  -----------  --------- 
 
Matching share awards 
-------------------------------  -----------  ---------  -----------  --------- 
At the beginning of the year       9,730,005    GBP3.08    9,162,119    GBP3.15 
Granted                            2,092,986    GBP4.38    2,450,926    GBP3.33 
Vested                           (1,072,680)    GBP3.09  (1,598,210)    GBP3.78 
Forfeited                                  -          -    (284,830)    GBP3.60 
-------------------------------  -----------  ---------  -----------  --------- 
Awards outstanding at year end    10,750,311    GBP3.33    9,730,005    GBP3.08 
-------------------------------  -----------  ---------  -----------  --------- 
Total                             43,516,936    GBP3.30   40,668,934    GBP3.06 
-------------------------------  -----------  ---------  -----------  --------- 
 
   ii)   Cash-settled awards 
 
                                       2020       2020        2019       2019 
                                     Number   Weighted      Number   Weighted 
                                  of shares    average   of shares    average 
                                    subject      share     subject      share 
Group and Company                 to awards      price   to awards      price 
-------------------------------  ----------  ---------  ----------  --------- 
Restricted share awards 
-------------------------------  ----------  ---------  ----------  --------- 

At the beginning of the year        119,514    GBP3.18     143,542    GBP3.37 
Granted                              31,345    GBP4.38      22,920    GBP3.33 
Vested                              (9,062)    GBP3.09    (14,192)    GBP3.83 
Forfeited                             (500)    GBP4.38    (32,756)    GBP3.83 
-------------------------------  ----------  ---------  ----------  --------- 
Awards outstanding at year end      141,297    GBP3.45     119,514    GBP3.18 
-------------------------------  ----------  ---------  ----------  --------- 
 
Bonus share awards 
-------------------------------  ----------  ---------  ----------  --------- 
At the beginning of the year         68,054    GBP3.21      86,673    GBP3.44 
Granted                              18,890    GBP4.38      16,592    GBP3.33 
Vested                                    -          -    (35,211)    GBP3.83 
Forfeited                                 -          -           -          - 
-------------------------------  ----------  ---------  ----------  --------- 
Awards outstanding at year end       86,944    GBP3.47      68,054    GBP3.21 
-------------------------------  ----------  ---------  ----------  --------- 
 
Matching share awards 
-------------------------------  ----------  ---------  ----------  --------- 
At the beginning of the year         68,054    GBP3.21      86,673    GBP3.44 
Granted                              18,890    GBP4.38      16,592    GBP3.33 
Vested                                    -          -    (10,644)    GBP3.83 
Forfeited                                 -          -    (24,567)    GBP3.83 
-------------------------------  ----------  ---------  ----------  --------- 
Awards outstanding at year end       86,944    GBP3.47      68,054    GBP3.21 
-------------------------------  ----------  ---------  ----------  --------- 
Total                               315,185    GBP3.46     255,622    GBP3.20 
-------------------------------  ----------  ---------  ----------  --------- 
 
   iii)   Total awards 
 
                                        2020       2020         2019       2019 
                                      Number   Weighted       Number   Weighted 
                                   of shares    average    of shares    average 
                                     subject      share      subject      share 
Group and Company                  to awards      price    to awards      price 
-------------------------------  -----------  ---------  -----------  --------- 
Restricted share awards 
-------------------------------  -----------  ---------  -----------  --------- 
At the beginning of the year      21,353,287    GBP3.04   22,299,431    GBP3.14 
Granted                            4,058,326    GBP4.39    4,629,693    GBP3.33 
Vested                           (3,072,510)    GBP3.16  (4,842,600)    GBP3.69 
Forfeited                          (124,468)    GBP3.05    (733,237)    GBP3.46 
-------------------------------  -----------  ---------  -----------  --------- 
Awards outstanding at year end    22,214,635    GBP3.27   21,353,287    GBP3.04 
-------------------------------  -----------  ---------  -----------  --------- 
 
Bonus share awards 
-------------------------------  -----------  ---------  -----------  --------- 
At the beginning of the year       9,773,210    GBP3.07    9,238,665    GBP3.12 
Granted                            2,079,701    GBP4.38    2,452,024    GBP3.33 
Vested                           (1,072,680)    GBP3.09  (1,917,479)    GBP3.76 
Forfeited                                  -          -            -          - 
-------------------------------  -----------  ---------  -----------  --------- 
Awards outstanding at year end    10,780,231    GBP3.33    9,773,210    GBP3.07 
-------------------------------  -----------  ---------  -----------  --------- 
 
Matching share awards 
-------------------------------  -----------  ---------  -----------  --------- 
At the beginning of the year       9,798,059    GBP3.08    9,248,792    GBP3.15 
Granted                            2,111,876    GBP4.38    2,467,518    GBP3.33 
Vested                           (1,072,680)    GBP3.09  (1,608,854)    GBP3.78 
Forfeited                                  -          -    (309,397)    GBP3.62 
-------------------------------  -----------  ---------  -----------  --------- 
Awards outstanding at year end    10,837,255    GBP3.33    9,798,059    GBP3.08 
-------------------------------  -----------  ---------  -----------  --------- 
Total                             43,832,121    GBP3.30   40,924,556    GBP3.06 
-------------------------------  -----------  ---------  -----------  --------- 
 

The weighted average fair value of awards granted to employees under the Omnibus Plan during the year was GBP4.38 (FY2018/19: GBP3.33), calculated as the average Ashmore Group plc closing share price for the five business days prior to grant. For Executive Directors, the fair value of awards also takes into account the performance conditions set out in the Remuneration report.

Where the grant of restricted and matching share awards is linked to the annual bonus process, the fair value of the awards is spread over a period including the current financial year and the subsequent five years to their vesting date when the grantee becomes unconditionally entitled to the underlying shares. The fair value of the remaining awards is spread over the period from the date of grant to the vesting date.

The liability arising from cash-settled awards under the Omnibus Plan at the end of the year and reported within trade and other payables on the Group consolidated balance sheet is GBP0.8 million (30 June 2019: GBP0.5 million) of which GBPnil (30 June 2019: GBPnil) relates to vested awards.

The Approved Company Share Option Plan (CSOP)

The CSOP was also introduced prior to the Company listing in October 2006 and is an option scheme providing for the grant of market value options to employees with the aggregate value of outstanding options not exceeding GBP30,000 per employee. The CSOP qualifies as a UK tax approved company share option plan and approval thereto has been obtained from HMRC. To date, there have been no awards made under the CSOP.

11) Other expenses

Other expenses consist of the following:

 
                                                       2020   2019 
                                                       GBPm   GBPm 
----------------------------------------------------  -----  ----- 
Travel                                                  1.7    2.7 
Professional fees                                       4.9    5.6 
Information technology and communications               6.8    6.1 
Amortisation of intangible assets (note 15)             0.2    4.1 
Operating leases                                        0.1    2.7 
Depreciation of property, plant and equipment (note 
 16)                                                    3.2    0.7 
Premises-related costs                                  1.2    1.3 
Insurance                                               0.6    0.6 
Research costs                                          0.5    0.5 
Auditor's remuneration (see below)                      0.6    0.8 
Consolidated funds (note 20d)                           2.2    3.3 
Other expenses                                          4.6    3.2 
----------------------------------------------------  -----  ----- 
                                                       26.6   31.6 
----------------------------------------------------  -----  ----- 
 

Operating leases expense in the current year relates to short-term leases where the Group has applied the optional exemption contained within IFRS 16, which permits the cost of short-term (less than 12 months) leases to be expensed on a straight-line basis over the lease term.

Auditor's remuneration

 
                                                              2020   2019 
                                                              GBPm   GBPm 
-----------------------------------------------------------  -----  ----- 
Fees for statutory audit services: 
 
  *    Fees payable to the Company's auditor for the audit 
       of the Group's accounts                                 0.2    0.2 
 
  *    Fees payable to the Company's auditor and its 
       associates for the audit of the Company's 
       subsidiaries pursuant to legislation                    0.3    0.3 
 
Fees for non-audit services: 
 
  *    Other non-audit services required by regulation         0.1    0.1 
 
  *    Other assurance services                                  -    0.1 
 
  *    Tax services                                              -    0.1 
-----------------------------------------------------------  -----  ----- 
                                                               0.6    0.8 
-----------------------------------------------------------  -----  ----- 
 

12) Taxation

Analysis of tax charge for the year:

 
                                                            2020   2019 
                                                            GBPm   GBPm 
---------------------------------------------------------  -----  ----- 
Current tax 
UK corporation tax on profits for the year                  24.7   36.3 
Overseas corporation tax charge                             16.8    8.2 
Adjustments in respect of prior years                      (2.8)  (2.7) 
---------------------------------------------------------  -----  ----- 
                                                            38.7   41.8 
Deferred tax 
Origination and reversal of temporary differences 
 (see note 18)                                             (1.2)  (3.4) 
Effect on deferred tax balance of changes in corporation 
 tax rates (see note 18)                                   (0.7)      - 
---------------------------------------------------------  -----  ----- 
Tax expense                                                 36.8   38.4 
---------------------------------------------------------  -----  ----- 
 

Factors affecting tax charge for the year

 
                                                           2020   2019 
                                                           GBPm   GBPm 
--------------------------------------------------------  -----  ----- 
Profit before tax                                         221.5  219.9 
--------------------------------------------------------  -----  ----- 
 
Profit on ordinary activities multiplied by the UK 
 tax rate of 19% (FY2018/19: 19%)                          42.1   41.8 
 
Effects of: 
Non-deductible expenses                                     0.5    0.3 
Deduction in respect of vested shares/exercised options 
 (Part 12, Corporation Tax Act 2009)                      (1.2)  (1.1) 
Different rate of taxes on overseas profits               (4.2)    1.5 
Non-taxable income                                        (0.1)  (0.3) 
Derecognition/(recognition) of historical deferred 
 tax assets                                                 2.9  (0.8) 
Other items                                                 0.3  (0.3) 
Adjustments in respect of prior years                     (3.5)  (2.7) 
--------------------------------------------------------  -----  ----- 
Tax expense                                                36.8   38.4 
--------------------------------------------------------  -----  ----- 
 

The tax charge recognised in reserves within other comprehensive income is as follows:

 
                                                 2020   2019 
                                                 GBPm   GBPm 
----------------------------------------------  -----  ----- 
Current tax expense on foreign exchange gains       -    0.4 
----------------------------------------------  -----  ----- 
Tax credit recognised in reserves                   -    0.4 
----------------------------------------------  -----  ----- 
 

The expected reduction in the UK tax rate to 17% from 1 April 2020 enacted by Finance Act 2016 was reversed in Finance Act 2020. The UK statutory tax rate remains 19% and hence, the measurement of the Group's UK deferred tax assets and liabilities has been updated to reflect the statutory tax rate of 19% as at 30 June 2020.

13) Earnings per share

Basic earnings per share at 30 June 2020 of 27.35 pence (30 June 2019: 26.57 pence) is calculated by dividing the profit after tax for the financial year attributable to equity holders of the parent of GBP182.1 million (FY2018/19: GBP178.6 million) by the weighted average number of ordinary shares in issue during the year, excluding own shares.

Diluted earnings per share is calculated based on basic earnings per share adjusted for all dilutive potential ordinary shares. There is no difference between the profit for the year attributable to equity holders of the parent used in the basic and diluted earnings per share calculations.

Reconciliation of the weighted average number of shares used in calculating basic and diluted earnings per share is shown below.

 
                                                               2020          2019 
                                                             Number        Number 
                                                        of ordinary   of ordinary 
                                                             shares        shares 
-----------------------------------------------------  ------------  ------------ 
Weighted average number of ordinary shares used in 
 the calculation of basic earnings per share            666,019,404   672,361,489 
Effect of dilutive potential ordinary shares - share 
 awards                                                  43,241,702    41,007,535 
-----------------------------------------------------  ------------  ------------ 
Weighted average number of ordinary shares used in 
 the calculation of diluted earnings per share          709,261,106   713,369,024 
-----------------------------------------------------  ------------  ------------ 
 

14) Dividends

Dividends paid in the year

 
                                                      2020   2019 
Company                                               GBPm   GBPm 
---------------------------------------------------  -----  ----- 
Final dividend for FY2018/19 - 12.10p (FY2017/18: 
 12.10p)                                              86.0   86.0 
Interim dividend for FY2019/20 - 4.80p (FY2018/19: 
 4. 55 p)                                             34.0   32.3 
---------------------------------------------------  -----  ----- 
                                                     120.0  118.3 
---------------------------------------------------  -----  ----- 
 

In addition, the Group paid GBP2.7 million (FY2018/19: GBP2.4 million) of dividends to non-controlling interests.

Dividends declared/proposed in respect of the year

 
                                      2020    2019 
Company                              pence   pence 
----------------------------------  ------  ------ 
Interim dividend per share paid       4.80    4.55 
Final dividend per share proposed    12.10   12.10 
----------------------------------  ------  ------ 
                                     16.90   16.65 
----------------------------------  ------  ------ 
 

On 10 September 2020, the Board proposed a final dividend of 12.10 pence per share for the year ended 30 June 2020. This has not been recognised as a liability of the Group at the year end as it has not yet been approved by shareholders. Based on the number of shares in issue at the year end that qualify to receive a dividend, the total amount payable would be GBP85.5 million.

15) Goodwill and intangible assets

 
                                                           Fund management 
                                                                intangible 
                                                 Goodwill           assets   Total 
Group                                                GBPm             GBPm    GBPm 
-----------------------------------------------  --------  ---------------  ------ 
Cost (at original exchange rate) 
-----------------------------------------------  --------  ---------------  ------ 
At 30 June 2018                                      57.5             39.5    97.0 
-----------------------------------------------  --------  ---------------  ------ 
Acquisitions                                         12.9              0.9    13.8 
Fully amortised                                         -           (39.5)  (39.5) 
-----------------------------------------------  --------  ---------------  ------ 
At 30 June 2020 and 2019                             70.4              0.9    71.3 
-----------------------------------------------  --------  ---------------  ------ 
 
Accumulated amortisation and impairment 
-----------------------------------------------  --------  ---------------  ------ 
At 30 June 2018                                         -           (39.9)  (39.9) 
Amortisation charge for the year                        -            (4.1)   (4.1) 
Fully amortised                                         -             43.9    43.9 
-----------------------------------------------  --------  ---------------  ------ 
At 30 June 2019                                         -            (0.1)   (0.1) 
Amortisation charge for the year                        -            (0.2)   (0.2) 
-----------------------------------------------  --------  ---------------  ------ 
At 30 June 2020                                         -            (0.3)   (0.3) 
-----------------------------------------------  --------  ---------------  ------ 
 
Net book value 
-----------------------------------------------  --------  ---------------  ------ 
At 30 June 2018                                      70.3              3.9    74.2 
Acquisitions                                         12.9              0.9    13.8 
Accumulated amortisation for the year                   -            (4.1)   (4.1) 
Foreign exchange revaluation through reserves*        3.3              0.1     3.4 
-----------------------------------------------  --------  ---------------  ------ 
At 30 June 2019                                      86.5              0.8    87.3 
Accumulated amortisation for the year                   -            (0.2)   (0.2) 
Foreign exchange revaluation through reserves*        2.6                -     2.6 
-----------------------------------------------  --------  ---------------  ------ 
At 30 June 2020                                      89.1              0.6    89.7 
-----------------------------------------------  --------  ---------------  ------ 
 

* Foreign exchange revaluation through reserves is a result of the retranslation of US dollar-denominated intangibles and goodwill.

 
                                               Goodwill 
Company                                            GBPm 
---------------------------------------------  -------- 
Cost 
At the beginning and end of the year                4.1 
---------------------------------------------  -------- 
Net carrying amount at 30 June 2020 and 2019        4.1 
---------------------------------------------  -------- 
 

Goodwill

The Group's goodwill balance relates to the acquisition of subsidiaries. The Company's goodwill balance relates to the acquisition of the business from ANZ in 1999.

Goodwill acquired in a business combination is allocated to the cash-generating units that are expected to benefit from that business combination. It is the Group's judgement that the lowest level of cash-generating unit used to determine impairment is the investment management segment level. The Group has assessed that it consists of a single cash-generating unit for the purposes of monitoring and assessing goodwill for impairment. This reflects the Group's global operating model, based on a single operating platform, into which acquired businesses are fully integrated and from which acquisition-related synergies are expected to be realised. Based on this model, the Group's investment management activities are considered as a single cash-generating unit, for which key management regularly receive and review internal financial information.

An annual impairment review of goodwill was undertaken for the year ending 30 June 2020, and no factors indicating potential impairment of goodwill were noted. Goodwill is tested for impairment annually or whenever there is an indication that the carrying amount may not be recoverable based on management's judgements regarding the future prospects of the business, market capitalisation, macroeconomic and market considerations. The key assumption used to determine the recoverable amount is based on a fair value calculation using the Company's market share price.

Based on the calculation as at 30 June 2020 using a market share price of GBP4.17, the recoverable amount was in excess of the carrying value of goodwill and no impairment was implied. In addition, the sensitivity of the recoverable amount to a 10% change in the Company's market share price will not lead to any impairment. Therefore, no impairment loss has been recognised in the current or preceding years.

Fund management intangible assets

Intangible assets as at 30 June 2020 comprise fund management contracts and a contractually agreed share of carried interest recognised by the Group on the acquisition of Ashmore Avenida (Real Estate) Investments LLP in July 2018. An annual impairment review was undertaken for the year ending 30 June 2020 and no factors were identified suggesting that fund management contracts intangible assets were impaired. The impairment review compares the carrying value to the recoverable amount of the intangible asset, determined as the greater of fair value less costs to sell and the updated discounted valuation of the remaining net earnings. Any impairment is recognised immediately in the statement of comprehensive income but may be reversed if relevant conditions improve.

The discounted value is calculated from the cumulative pre-tax net earnings anticipated to be generated over the remaining economic life, discounted to present value using relevant pre-tax discount rates between 20% and 33% per annum. Cumulative net earnings associated with the fund management contracts were derived from the annual operating profit contribution that would arise from the managed fund assets. The recoverable amounts of the intangible assets were determined to be higher than the carrying values as at 30 June 2020. Accordingly, no impairment charge was recognised during the year.

The sensitivity of the recoverable amounts of intangible assets to a 5% increase in pre-tax discount rate used in calculating the recoverable amount was immaterial. The remaining amortisation periods for fund management contracts range between one to five years.

16) Property, plant and equipment

The Group's property, plant and equipment include ROU assets recognised on the adoption of IFRS 16 Leases on 1 July 2019 (see note 3).

 
                                                   Group  Company 
                                                    GBPm     GBPm 
-------------------------------------------------  -----  ------- 
Property, plant and equipment owned by the Group     1.8      1.1 
Right-of-use assets                                  9.9      5.7 
-------------------------------------------------  -----  ------- 
Net book value at 30 June 2020                      11.7      6.8 
-------------------------------------------------  -----  ------- 
 

The movement in property, plant and equipment is provided below:

 
                                                               2020            2019 
                                                          Premises,       Fixtures, 
                                                              plant        fittings 
                                                      and equipment   and equipment 
Group                                                          GBPm            GBPm 
---------------------------------------------------  --------------  -------------- 
Cost 
At the beginning of the year                                    7.7             6.5 
ROU assets recognised on adoption of IFRS 16 (note 
 3)                                                            12.6               - 
Additions                                                       1.0             0.9 
Disposals                                                     (0.3)               - 
Foreign exchange revaluation                                  (0.2)             0.3 
---------------------------------------------------  --------------  -------------- 
At the end of the year                                         20.8             7.7 
---------------------------------------------------  --------------  -------------- 
 
Accumulated depreciation 
At the beginning of the year                                    6.2             5.4 
Disposals                                                     (0.3)               - 
Depreciation charge for the year                                3.2             0.7 
Foreign exchange revaluation                                      -             0.1 
---------------------------------------------------  --------------  -------------- 
At the end of the year                                          9.1             6.2 
---------------------------------------------------  --------------  -------------- 
Net book value at 30 June                                      11.7             1.5 
---------------------------------------------------  --------------  -------------- 
 
 
                                                              2020            2019 
                                                         Premises,       Fixtures, 
                                                             plant        fittings 
                                                     and equipment   and equipment 
Company                                                       GBPm            GBPm 
--------------------------------------------------  --------------  -------------- 
Cost 
At the beginning of the year                                   4.2             3.9 
ROU asset recognised on adoption of IFRS 16 (note 
 3)                                                            6.9               - 
Additions                                                      0.9             0.3 
--------------------------------------------------  --------------  -------------- 
At the end of the year                                        12.0             4.2 
--------------------------------------------------  --------------  -------------- 
 
Accumulated depreciation 
At the beginning of the year                                   3.7             3.4 
Depreciation charge for year                                   1.5             0.3 
--------------------------------------------------  --------------  -------------- 
At the end of the year                                         5.2             3.7 
--------------------------------------------------  --------------  -------------- 
Net book value at 30 June                                      6.8             0.5 
--------------------------------------------------  --------------  -------------- 
 

Lease arrangements

The Group leases office space in various countries and enters into operating lease agreements on office premises for lease periods of 12 months to 10 years. Lease terms are negotiated on an individual basis and contain varying terms and conditions depending on location. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. From 1 July 2019, the Group recognises operating leases as ROU assets with corresponding liabilities in accordance with the requirements of IFRS 16 Leases. The Group calculated the lease liabilities using the lessee's incremental borrowing rates that resulted in a weighted average incremental borrowing rate of 4.8%.

The carrying value of ROU assets, lease liabilities and the movement during the year are set out below.

 
                                                          Group                Company 
-------------------------------------  ------------------------  --------------------- 
                                                          Lease                  Lease 
                                       ROU assets   liabilities  ROU asset   liability 
                                             GBPm          GBPm       GBPm        GBPm 
-------------------------------------  ----------  ------------  ---------  ---------- 
At 1 July 2019 (adoption of IFRS 16, 
 note 3)                                     12.6          12.8        6.9         6.9 
Lease payments                                  -         (2.8)          -       (1.3) 
Interest expense (note 8)                       -           0.5          -         0.3 
Depreciation charge                         (2.5)             -      (1.2)           - 
Foreign exchange revaluation through 
 reserves                                   (0.2)         (0.3)          -           - 
-------------------------------------  ----------  ------------  ---------  ---------- 
At 30 June 2020                               9.9          10.2        5.7         5.9 

-------------------------------------  ----------  ------------  ---------  ---------- 
 

The contractual maturities on the minimum lease payments under lease liabilities are provided below:

 
                                                           Group           Company 
----------------------------------------------  ----------------  ---------------- 
                                                30 June  30 June  30 June  30 June 
Maturity analysis - contractual undiscounted       2020     2019     2020     2019 
 cash flows                                        GBPm     GBPm     GBPm     GBPm 
----------------------------------------------  -------  -------  -------  ------- 
Within 1 year                                       2.6      2.5      1.3      1.3 
Between 1 and 5 years                               8.2      8.7      5.2      5.2 
Later than 5 years                                  1.1      2.6        -      1.0 
----------------------------------------------  -------  -------  -------  ------- 
Total undiscounted lease liabilities               11.9     13.8      6.5      7.5 
 
Lease liabilities are presented in the 
 balance sheet as follows: 
----------------------------------------------  -------  -------  -------  ------- 
Current                                             2.0        -      1.1        - 
Non-current                                         8.2        -      4.8        - 
----------------------------------------------  -------  -------  -------  ------- 
Total lease liabilities                            10.2        -      5.9        - 
----------------------------------------------  -------  -------  -------  ------- 
 
Amounts recognised under financing activities 
 in the cash flow statement: 
----------------------------------------------  -------  -------  -------  ------- 
Payment of lease liabilities                        2.3        -      1.0        - 
Interest paid                                       0.5        -      0.3        - 
----------------------------------------------  -------  -------  -------  ------- 
Total cash outflow for leases                       2.8        -      1.3        - 
----------------------------------------------  -------  -------  -------  ------- 
 

17) Trade and other receivables

 
                                           Group        Company 
                                    ------------  ------------- 
                                     2020   2019   2020    2019 
                                     GBPm   GBPm   GBPm    GBPm 
----------------------------------  -----  -----  -----  ------ 
Current 
Trade debtors                        90.5   73.9    1.6     3.7 
Prepayments                           3.9    4.1    1.4     1.3 
Loans due from subsidiaries             -      -  464.8   471.9 
Amounts due from subsidiaries           -      -   50.3    17.7 
Other receivables                     1.8    1.4    0.1     0.4 
----------------------------------  -----  -----  -----  ------ 
Total trade and other receivables    96.2   79.4  518.2   495.0 
----------------------------------  -----  -----  -----  ------ 
 

Group trade debtors include accrued management and performance fees in respect of investment management services provided up to 30 June 2020. Management fees are received in cash when the funds' net asset values are determined, typically every month or every quarter. Performance fees are accrued when crystallised, and amounted to GBP0.1 million as at 30 June 2020 (30 June 2019: GBP4.3 million). The majority of fees are deducted from the net asset values of the respective funds by independent administrators and therefore, the credit risk of fee receivables is minimal. As at 30 June 2020, no balances are past due and the assessed provision under the IFRS 9 expected credit loss model was immaterial (30 June 2019: no balances are past due and immaterial provision assessed under IFRS 9 expected credit loss model).

Loans due from subsidiaries for the Company include intercompany loans related to seed capital investments held by subsidiaries. Amounts due from subsidiaries represent trading balances that are short term in nature and regularly settled during the year. The majority of the intercompany loans are held with subsidiaries that hold seed capital investments and cash invested in daily-traded investment funds. Under the IFRS 9 expected credit loss model, credit risk is assessed by determining the borrower's capacity to meet contractual cash flow obligations, taking into account the available net assets to repay the intercompany loan in future periods. As at 30 June 2020, no balances are past due and the assessed provision for expected credit losses was immaterial (30 June 2019: no balances are past due and immaterial provision assessed under IFRS 9 expected credit loss model).

18) Deferred taxation

Deferred tax assets and liabilities recognised by the Group and Company at year end are attributable to the following:

 
                                                       2020                              2019 
                           --------------------------------  -------------------------------- 
                                  Other                             Other 
                              temporary  Share-based            temporary  Share-based 
                            differences     payments  Total   differences     payments  Total 
Group                              GBPm         GBPm   GBPm          GBPm         GBPm   GBPm 
-------------------------  ------------  -----------  -----  ------------  -----------  ----- 
Deferred tax assets                 7.7         22.9   30.6          12.0         18.2   30.2 
Deferred tax liabilities          (6.9)            -  (6.9)         (8.4)            -  (8.4) 
-------------------------  ------------  -----------  -----  ------------  -----------  ----- 
                                    0.8         22.9   23.7           3.6         18.2   21.8 
-------------------------  ------------  -----------  -----  ------------  -----------  ----- 
 
                                                       2020                              2019 
-------------------------  --------------------------------  -------------------------------- 
                                  Other                             Other 
                              temporary  Share-based            temporary  Share-based 
                            differences     payments  Total   differences     payments  Total 
Company                            GBPm         GBPm   GBPm          GBPm         GBPm   GBPm 
-------------------------  ------------  -----------  -----  ------------  -----------  ----- 
Deferred tax assets                 0.1         20.5   20.6           0.3         16.3   16.6 
-------------------------  ------------  -----------  -----  ------------  -----------  ----- 
 

Movement of deferred tax balances

The movement in the deferred tax balances between the balance sheet dates has been reflected in the statement of comprehensive income as follows:

 
                                                              Other 
                                                          temporary  Share-based 
                                                        differences     payments  Total 
Group                                                          GBPm         GBPm   GBPm 
-----------------------------------------------------  ------------  -----------  ----- 
At 30 June 2018                                                 3.7         14.8   18.5 
Credited/(charged) to the consolidated statement 
 of comprehensive income                                      (0.1)          3.4    3.3 
-----------------------------------------------------  ------------  -----------  ----- 
At 30 June 2019                                                 3.6         18.2   21.8 
-----------------------------------------------------  ------------  -----------  ----- 
Credited/(charged) to the consolidated statement 
 of comprehensive income                                      (2.8)          4.7    1.9 
-----------------------------------------------------  ------------  -----------  ----- 
At 30 June 2020                                                 0.8         22.9   23.7 
-----------------------------------------------------  ------------  -----------  ----- 
 
                                                              Other 
                                                          temporary  Share-based 
                                                        differences     payments  Total 
Company                                                        GBPm         GBPm   GBPm 
-----------------------------------------------------  ------------  -----------  ----- 
At 30 June 2018                                                 0.2         12.8   13.0 
Credited/(charged) to the statement of comprehensive 
 income                                                         0.1          3.5    3.6 
-----------------------------------------------------  ------------  -----------  ----- 
At 30 June 2019                                                 0.3         16.3   16.6 
Credited/(charged) to the statement of comprehensive 
 income                                                       (0.2)          4.2    4.0 
-----------------------------------------------------  ------------  -----------  ----- 
At 30 June 2020                                                 0.1         20.5   20.6 
-----------------------------------------------------  ------------  -----------  ----- 
 

Refer to note 12 for details on changes to the UK corporation tax rate which have been reflected in the Group's deferred tax position.

19) Fair value of financial instruments

The Group has an established control framework with respect to the measurement of fair values. This framework includes committees that have overall responsibility for all significant fair value measurements. Each committee regularly reviews significant inputs and valuation adjustments. If third-party information is used to measure fair value, the committee assesses and documents the evidence obtained from the third parties to support such valuations. There are no material differences between the carrying amounts of financial assets and liabilities and their fair values at the balance sheet date.

Fair value hierarchy

The Group measures fair values using the following fair value levels that reflect the significance of inputs used in making the measurements, based on the degree to which the fair value is observable:

- Level 1: Valuation is based upon a quoted market price in an active market for an identical instrument. This fair value measure relates to the valuation of quoted and exchange traded equity and debt securities.

- Level 2: Valuation techniques are based upon observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This fair value measure relates to the valuation of quoted equity securities in inactive markets or in interests in unlisted funds whose net asset values are referenced to the fair values of the listed or exchange traded securities held by those funds. Valuation techniques may include using a broker quote in an inactive market or an evaluated price based on a compilation of primarily observable market information utilising information readily available via external sources.

- Level 3: Fair value measurements are derived from valuation techniques that include inputs not based on observable market data.

For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of the financial year.

The fair value hierarchy of financial instruments which are carried at fair value at year end is summarised below:

 
                                                    2020                           2019 
                            ----------------------------  ----------------------------- 
                             Level  Level  Level           Level  Level   Level 
                                 1      2      3   Total       1      2       3   Total 
                              GBPm   GBPm   GBPm    GBPm    GBPm   GBPm    GBPm    GBPm 
--------------------------  ------  -----  -----  ------  ------  -----  ------  ------ 
Financial assets 
Investment securities        125.1   60.6   48.8   234.5   170.4   35.8    72.5   278.7 
Non-current assets 
 held for sale                   -   43.1      -    38.6       -   44.7       -    44.7 
Financial assets measured 
 at FVTPL                        -   10.9    0.7    11.6       -   14.4     1.6    16.0 
Non-current financial 
 assets at fair value            -    0.1   27.9    28.0       -      -    31.6    31.6 
--------------------------  ------  -----  -----  ------  ------  -----  ------  ------ 
                             125.1  114.7   77.4   312.7   170.4   94.9   105.7   371.0 
--------------------------  ------  -----  -----  ------  ------  -----  ------  ------ 
Financial liabilities 
Third-party interests 
 in consolidated funds        65.1   10.6   10.4    86.1    70.6   12.6    23.8   107.0 
Non-current liabilities 
 held for sale                   -    4.5      -     4.5       -      -       -       - 
Derivative financial 
 instruments                     -    1.7      -     1.7       -    1.1       -     1.1 
                              65.1   16.8   10.4    92.3    70.6   13.7    23.8   108.1 
--------------------------  ------  -----  -----  ------  ------  -----  ------  ------ 
 

Transfers between levels

The Group recognises transfers into and transfers out of fair value hierarchy levels at each reporting period based on assessments of price inputs used in the valuation of financial assets. There were no transfers between level 1, level 2 and level 3 of the fair value hierarchy during the year.

Fair value measurements using significant unobservable inputs (level 3)

The following table presents the changes in level 3 items for the years ended 30 June 2020 and 2019:

 
                                                    Financial  Non-current       Third-party 
                                                       assets    financial         interests 
                                        Investment   measured    assets at   in consolidated 
                                        securities   at FVTPL   fair value             funds 
                                              GBPm       GBPm         GBPm              GBPm 
-------------------------------------  -----------  ---------  -----------  ---------------- 
At 30 June 2018                               69.7          -         23.9              32.7 
Reclassification on adoption of 
 IFRS 9                                          -        5.6            -                 - 
Additions                                     20.2          -          9.3               5.9 
Disposals                                    (6.6)      (2.2)        (0.8)             (3.9) 
Transfers to level 1                        (16.5)          -            -             (8.3) 
Unrealised gains/(losses) recognised 
 in finance income                             1.3      (1.8)        (0.9)             (2.6) 
Unrealised gains recognised in 
 reserves                                      4.4          -          0.1                 - 
-------------------------------------  -----------  ---------  -----------  ---------------- 
At 30 June 2019                               72.5        1.6         31.6              23.8 
-------------------------------------  -----------  ---------  -----------  ---------------- 
Additions                                     11.7          -          3.7               3.9 
Disposals                                   (26.7)      (0.1)        (2.6)             (9.8) 
Unrealised losses recognised in 
 finance income                              (6.1)      (0.8)        (4.7)             (7.5) 
Unrealised losses recognised in 
 reserves                                    (2.6)          -        (0.1)                 - 
-------------------------------------  -----------  ---------  -----------  ---------------- 
At 30 June 20 20                              48.8        0.7         27.9              10.4 
-------------------------------------  -----------  ---------  -----------  ---------------- 
 

Valuation of level 3 financial assets recognised at fair value on a recurring basis using valuation techniques

Investments valued using valuation techniques include financial investments which, by their nature, do not have an externally quoted price based on regular trades, and financial investments for which markets are no longer active as a result of market conditions e.g. market illiquidity. The valuation techniques used include comparison to recent arm's length transactions, market approach making reference to other instruments that are substantially the same, discounted cash flow analysis, enterprise valuation and net assets approach. These techniques may include a number of assumptions relating to variables such as interest rate and price earnings multiples. Changes in assumptions relating to these variables could positively or negatively impact the reported fair value of these instruments. When determining the inputs into the valuation techniques used, priority is given to publicly available prices from independent sources when available, but overall the source of pricing is chosen with the objective of arriving at a fair value measurement that reflects the price at which an orderly transaction would take place between market participants on the measurement date.

The fair value estimates are made at a specific point in time, based upon available market information and judgements about the financial instruments, including estimates of the timing and amount of expected future cash flows. Such estimates could include a marketability adjustment to reflect illiquidity and/or non-transferability that could result from offering for sale at one time the Group's entire holdings of a particular financial instrument. The estimates of fair value reflect the impact of the COVID-19 pandemic up to the end of the reporting period. Further details on the estimates and judgements applied by the Group are provided in note 31.

The following tables show the valuation techniques and the significant unobservable inputs used to estimate the fair value of level 3 investments as at 30 June 2020 and 2019, and the associated sensitivity to changes in unobservable inputs to a reasonable alternative.

 
                                     2020  Significant                                 Change in 
Asset class and valuation      Fair value   unobservable    Range of    Sensitivity   fair value 
 technique                           GBPm   inputs           estimates   factor             GBPm 
----------------------------  -----------  ---------------  ----------  -----------  ----------- 
Unquoted securities 
Market multiple and 
 discount                            14.0  EBITDA multiple  10x-20x     +/- 1x           +/- 1.4 
                                           Marketability 
                                            adjustment      10%-30%     +/- 5%           -/+ 0.9 
                                           ---------------  ----------  -----------  ----------- 
Market multiple, discounted 
 cash flows and discount             34.6  Market multiple  5x-10x      +/- 1x           +/- 2.4 
                                           Marketability 
                                            adjustment      10%-30%     +/- 5%           -/+ 4.4 

                                           Discount rate    10%-20%     +/- 5%           -/+ 4.0 
                                           ---------------  ----------  -----------  ----------- 
Unquoted funds 
Net assets approach                  28.8  NAV              1x          +/- 5%           +/- 1.4 
----------------------------  -----------  ---------------  ----------  -----------  ----------- 
Total level 3 investments            77.4 
----------------------------  -----------  ---------------  ----------  -----------  ----------- 
 
 
                                       2019  Significant                                 Change in 
Asset class and valuation        Fair value   unobservable    Range of    Sensitivity   fair value 
 technique                             GBPm   inputs           estimates   factor             GBPm 
------------------------------  -----------  ---------------  ----------  -----------  ----------- 
Unquoted securities 
Market multiple and 
 discount, recent transaction          42.6  EBITDA multiple  10x-20x     +/- 1x           +/- 2.1 
                                             Marketability 
                                              adjustment      10%-30%     +/- 5%           -/+ 1.4 
                                             ---------------  ----------  -----------  ----------- 
Market multiple, discounted 
 cash flows and discount               26.2  Market multiple  5x-10x      +/- 1x           +/- 1.8 
                                             Marketability 
                                              adjustment      10%-30%     +/- 5%           -/+ 3.2 
                                             Discount rate    10%-20%     +/- 5%           -/+ 3.6 
                                             ---------------  ----------  -----------  ----------- 
Adjusted value, broker                       Marketability 
 quotes                                 3.1   adjustment      20%-35%     +/- 5%           -/+ 0.2 
------------------------------  -----------  ---------------  ----------  -----------  ----------- 
Unquoted funds 
Net assets approach                    33.8  NAV              1x          +/- 5%           +/- 1.7 
------------------------------  -----------  ---------------  ----------  -----------  ----------- 
Total level 3 investments             105.7 
------------------------------  -----------  ---------------  ----------  -----------  ----------- 
 

The sensitivity demonstrates the effect of a change in one unobservable input while other assumptions remain unchanged. There may be a correlation between the unobservable inputs and other factors that has not been considered. It should also be noted that some of the sensitivities are non-linear, therefore, larger or smaller impacts should not be interpolated or extrapolated from these results.

Financial instruments not measured at fair value

Financial assets and liabilities that are not measured at fair value include cash and cash equivalents, trade and other receivables, and trade and other payables. The carrying value of financial assets and financial liabilities not measured at fair value is considered a reasonable approximation of fair value as at 30 June 2020 and 2019.

20) Seed capital investments

The Group considers itself a sponsor of an investment fund when it facilitates the establishment of a fund in which the Group is the investment manager. The Group ordinarily provides seed capital in order to provide initial scale and facilitate marketing of the funds to third-party investors. Aggregate interests held by the Group include seed capital, management fees and performance fees. The Group generates management and performance fee income from managing the assets on behalf of third-party investors.

The movements of seed capital investments and related items during the year are as follows:

 
                                                                  Investment                              Non-current 
                                                     Financial    securities         Other   Third-party    financial 
                                                        assets     (relating     (relating     interests       assets 
                      Held-for-                       measured           to             to            in     measured 
                           sale  Available-for-sale    at fair  consolidated  consolidated  consolidated      at fair 
                    investments         investments      value       funds)*      funds)**      funds***        value   Total 
Group                      GBPm                GBPm       GBPm          GBPm          GBPm          GBPm         GBPm    GBPm 
------------------  -----------  ------------------  ---------  ------------  ------------  ------------  -----------  ------ 
Carrying amount 
 at 30 June 2018            6.8                 5.6       23.5         219.1           5.5        (76.1)         43.9   228.3 
Reclassification: 
   Adoption of 
    IFRS 
    9                         -               (5.6)        5.6             -             -             -            -       - 
   HFS investments 
    to 
    consolidated 
    funds                (10.9)                   -          -          11.6             -         (0.7)            -       - 
   FVTPL to 
    consolidated 
    funds                     -                   -      (9.8)          35.4             -        (25.6)            -       - 
   Consolidated 
    funds 
    to FVTPL                  -                   -        1.2         (2.0)             -           0.8            -       - 
Net purchases, 
 disposals and 
 fair 
 value changes             48.8                   -      (4.5)          14.6           8.3         (5.4)       (12.3)    49.5 
------------------  -----------  ------------------  ---------  ------------  ------------  ------------  -----------  ------ 
Carrying amount 
 at 30 June 2019           44.7                   -       16.0         278.7          13.8       (107.0)         31.6   277.8 
------------------  -----------  ------------------  ---------  ------------  ------------  ------------  -----------  ------ 
Reclassification: 
   HFS investments 
    to 
    consolidated 
    funds                (35.7)                   -          -          44.2             -         (8.5)            -       - 
   Consolidated 
    funds 
    to FVTPL                  -                   -       41.4        (77.1)             -          35.7            -       - 
Net purchases, 
 disposals and 
 fair 
 value changes             29.6                         (45.8)        (11.3)         (2.0)         (6.3)        (3.6)  (39.4) 
------------------  -----------  ------------------  ---------  ------------  ------------  ------------  -----------  ------ 
Carrying amount 
 at 30 June 2020           38.6                   -       11.6         234.5          11.8        (86.1)         28.0   238.4 
------------------  -----------  ------------------  ---------  ------------  ------------  ------------  -----------  ------ 
 
   *     Investment securities in consolidated funds are measured at FVTPL. 

** Relates to cash and other assets in consolidated funds that are not investment securities, see note 20(d).

*** Included in net purchases, disposals and fair value changes are third-party subscriptions of GBP50.0 million, redemptions and distributions of GBP31.5 million, fair value movements of GBP7.5 million and other non-cash movements in relation to consolidated funds (FY 2018/19: third-party subscriptions of GBP2.7 million, redemptions of GBP10.3 million and fair value movements of GBP3.8 million and other non-cash movements in relation to consolidated funds).

a) Non-current assets and non-current liabilities held for sale

Where Group companies invest seed capital into funds operated and controlled by the Group and the Group is actively seeking to reduce its investment and it is considered highly probable that it will relinquish control within a year, the interests in the funds are treated as held for sale and are recognised as financial assets and liabilities held for sale. During the year, six funds (FY2018/19: four) were seeded in this manner, met the above criteria, and consequently the assets and liabilities of these funds were initially classified as held for sale.

The non-current assets and liabilities held for sale at 30 June 2020 were as follows:

 
                                                    2020   2019 
                                                    GBPm   GBPm 
------------------------------------------------  ------  ----- 
Non-current financial assets held for sale          43.1   44.7 
Non-current financial liabilities held for sale    (4.5)      - 
------------------------------------------------  ------  ----- 
Non-current assets held for sale                    38.6   44.7 
------------------------------------------------  ------  ----- 
 

Investments cease to be classified as held for sale when they are no longer controlled by the Group. A loss of control may happen through sale of the investment and/or dilution of the Group's holding. When investments cease to be classified as held for sale, they are classified as financial assets at FVTPL. No such fund was transferred to the FVTPL category during the year (FY2018/19: none).

If the fund remains under the control of the Group for more than one year from the original investment date, it will cease to be classified as held for sale, and will be consolidated line by line after it is assessed that the Group controls the investment fund in accordance with the requirements of IFRS 10. During the year, three such funds (FY2018/19: two) with an aggregate carrying amount of GBP35.7 million (FY2018/19: GBP10.9 million) were transferred from held for sale to consolidated funds category. There was no impact on net assets or comprehensive income as a result of the transfer.

Included within finance income are gains of GBP2.8 million (FY2018/19: gains of GBP3.2 million) in relation to held for sale investments.

As the Group considers itself to have one segment (refer to note 4), no additional segmental disclosure of held for sale assets or liabilities is applicable.

b) Financial assets measured at fair value through profit or loss

FVTPL investments at 30 June 2020 comprise shares held in debt and equity funds as follows:

 
                                           2020   2019 
                                           GBPm   GBPm 
----------------------------------------  -----  ----- 
Equity funds                                3.2    4.8 
Debt funds                                  8.4   11.2 
----------------------------------------  -----  ----- 
Financial assets measured at fair value    11.6   16.0 
----------------------------------------  -----  ----- 
 

Included within finance income are losses of GBP0.8 million (FY2018/19: gains of GBP0.3 million) on the Group's financial assets measured at FVTPL.

c) Non-current financial assets measured at fair value

Non-current asset investments relate to the Group's holding in closed-end funds and are measured at FVTPL. Fair value is assessed by taking account of the extent to which potential dilution of gains or losses may arise as a result of additional investors subscribing to the fund where the final close of a fund has not occurred.

 
                                                       2020   2019 
                                                       GBPm   GBPm 
----------------------------------------------------  -----  ----- 
Real estate funds                                       3.5    4.9 
Infrastructure funds                                   17.5   17.8 
Other funds                                             7.0    8.9 
----------------------------------------------------  -----  ----- 
Non-current financial assets measured at fair value    28.0   31.6 
----------------------------------------------------  -----  ----- 
 

Included within finance income are losses of GBP4.5 million (FY2018/19: gains of GBP0.7 million) on the Group's non-current asset investments.

d) Consolidated funds

The Group has consolidated 12 investment funds as at 30 June 2020 (30 June 2019: 13 investment funds), over which the Group is deemed to have control (refer to note 25). Consolidated funds represent seed capital investments where the Group has held its position for a period greater than one year and its interest represents a controlling stake in the fund in accordance with IFRS 10. Consolidated fund assets and liabilities are presented line by line after intercompany eliminations. The table below sets out an analysis of the carrying amounts of interests held by the Group in consolidated investment funds.

 
                                                 2020      2019 
                                                 GBPm      GBPm 
--------------------------------------------  -------  -------- 
Investment securities*                          234.5     278.7 
Cash and cash equivalents                        10.8      14.1 
Other**                                           1.0     (0.3) 
Third-party interests in consolidated funds    (86.1)   (107.0) 
--------------------------------------------  -------  -------- 
Consolidated seed capital investments           160.2     185.5 
--------------------------------------------  -------  -------- 
 

* Investment securities represent trading securities held by consolidated investment funds and are measured at FVTPL. Note 25 provides a list of the consolidated funds by asset class, and further detailed information at the security level is available in the individual fund financial statements.

   **   Other includes trade receivables, trade payables and accruals. 

The maximum exposure to loss is the carrying amount of the assets held. The Group has not provided financial support or otherwise agreed to be responsible for supporting any consolidated or unconsolidated funds financially.

Included within the consolidated statement of comprehensive income are net losses of GBP9.0 million (FY2018/19: GBP6.5 million gains) relating to the Group's share of the results of the individual statements of comprehensive income for each of the consolidated funds, as follows:

 
                                                           2020    2019 
                                                           GBPm    GBPm 
------------------------------------------------------  -------  ------ 
Interest and dividend income                                4.8     5.5 
Gains/(losses) on investment securities                  (19.1)     0.5 
Change in third-party interests in consolidated funds       7.5     3.8 
Other expenses                                            (2.2)   (3.3) 
------------------------------------------------------  -------  ------ 
Net gains/(losses) on consolidated funds                  (9.0)     6.5 
------------------------------------------------------  -------  ------ 
 

Included in the Group's cash generated from operations is GBP3.0 million cash utilised in operations (FY2018/19: GBP3.1 million cash utilised in operations) relating to consolidated funds.

As of 30 June 2020, the Group's consolidated funds were domiciled in Guernsey, Indonesia, Luxembourg, Saudi Arabia, and the United States.

21) Financial instrument risk management

Group

The Group is subject to strategic and business, client, investment, treasury and operational risks throughout its business. This note discusses the Group's exposure to and management of the following principal risks which arise from the financial instruments it uses: credit risk, liquidity risk, interest rate risk, foreign exchange risk and price risk. Where the Group holds units in investment funds, classified either as held for sale, FVTPL or non-current financial assets, the related financial instrument risk disclosures in the note below categorise exposures based on the Group's direct interest in those funds without looking through to the nature of underlying securities.

Capital management

It is the Group's policy that all entities within the Group have sufficient capital to meet regulatory and working capital requirements and it conducts regular reviews of its capital requirements relative to its capital resources.

As the Group is regulated by the United Kingdom Financial Conduct Authority (FCA), it is required to maintain appropriate capital and perform regular calculations of capital requirements. This includes development of an Internal Capital Adequacy Assessment Process (ICAAP), based upon the FCA's methodologies under the Capital Requirements Directive. The Group's Pillar III disclosures can be found on the Group's website at www.ashmoregroup.com. These disclosures indicate that the Group had excess capital of GBP555.2 million as at 30 June 2020 (30 June 2019: excess capital of GBP557.6 million) over the level of capital required under a Pillar II assessment. The objective of the assessment is to check that the Group has adequate capital to manage identified risks and the process includes conducting stress tests to identify capital and liquidity requirements under different future scenarios including a potential downturn.

Credit risk

The Group has exposure to credit risk from its normal activities where the risk is that a counterparty will be unable to pay in full amounts when due.

Exposure to credit risk is monitored on an ongoing basis by senior management and the Group's Risk Management and Control function. The Group has a counterparty and cash management policy in place which, in addition to other controls, restricts exposure to any single counterparty by setting exposure limits and requiring approval and diversification of counterparty banks and other financial institutions. The Group's maximum exposure to credit risk is represented by the carrying value of its financial assets. The table below lists financial assets subject to credit risk.

 
                                                     2020   2019 
                                             Notes   GBPm   GBPm 
-------------------------------------------  -----  -----  ----- 
Investment securities                           19  234.5  278.7 
Non-current financial assets held for sale      19   43.1   44.7 
Financial assets measured at fair value         19   11.6   16.0 
Trade and other receivables                     17   96.2   79.4 
Cash and cash equivalents                           500.9  477.2 
-------------------------------------------  -----  -----  ----- 
Total                                               886.3  896.0 
-------------------------------------------  -----  -----  ----- 
 

Ashmore recognises investment securities by virtue of including consolidated funds on its balance sheet on a line-by-line basis. The risk management policies and procedures for the consolidated funds are the responsibility of the governing bodies of the funds. The associated exposures on credit risk, market risk and foreign exchange risk on the investment securities are monitored by the Group's Risk Management and Control function.

In addition, non-current financial assets held for sale and financial assets measured at fair value through profit or loss expose the Group to credit risk from various counterparties, which is monitored and reviewed by the Group.

The Group's cash and cash equivalents, comprising short-term deposits with banks and liquidity funds, are predominantly held with counterparties with credit ratings ranging from A to AAA- as at 30 June 2020 (30 June 2019: A+ to AAA). As at 30 June 2020, the Group held GBP368.0m (2019: GBP243.3m) in the Ashmore Global Liquidity Fund.

All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2019: none). They include fee debtors that arise principally within the Group's investment management business. They are monitored regularly and, historically, default levels have been insignificant, and, unless a client has withdrawn funds, there is an ongoing relationship between the Group and the client. There is no significant concentration of credit risk in respect of fees owing from clients.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or other financial assets.

In order to manage liquidity risk, there is a Group Liquidity Policy to ensure that there is sufficient access to funds to cover all forecast committed requirements for the next 12 months.

The maturity profile of the Group's contractual undiscounted financial liabilities is as follows:

At 30 June 2020

 
                                                                  More 
                                          Within                  than 
                                          1 year  1-5 years    5 years  Total 
                                            GBPm       GBPm       GBPm   GBPm 
---------------------------------------  -------  ---------  ---------  ----- 
Third-party interests in consolidated 
 funds                                      86.1          -          -   86.1 
Derivative financial instruments             1.7          -          -    1.7 
Current trade and other receivables         50.7          -          -   50.7 
Non-current financial liabilities held 
 for sale                                    4.5          -          -    4.5 
---------------------------------------  -------  ---------  ---------  ----- 
                                           143.0          -          -  143.0 
---------------------------------------  -------  ---------  ---------  ----- 
 

At 30 June 2019

 
                                                                 More 
                                         Within                  than 
                                         1 year  1-5 years    5 years  Total 
                                           GBPm       GBPm       GBPm   GBPm 
--------------------------------------  -------  ---------  ---------  ----- 
Third-party interests in consolidated 
 funds                                     83.2       23.8          -  107.0 
Derivative financial instruments            1.1          -          -    1.1 
Current trade and other payables           56.1          -          -   56.1 
--------------------------------------  -------  ---------  ---------  ----- 
                                          140.4       23.8          -  164.2 
--------------------------------------  -------  ---------  ---------  ----- 
 

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates.

The principal interest rate risk is the risk that the Group will sustain a reduction in interest income through adverse movements in interest rates. This relates to deposits with banks and liquidity funds held in the ordinary course of business. The Group has a cash management policy which monitors cash levels and returns within set parameters on a continuing basis.

Bank and similar deposits held at year end are shown on the consolidated balance sheet as cash and cash equivalents. The effective interest earned on bank and similar deposits during the year is given in the table below:

Effective interest rates applicable to bank deposits

 
                                          2020  2019 
                                             %     % 
----------------------------------------  ----  ---- 
Deposits with banks and liquidity funds   1.31  1.69 
----------------------------------------  ----  ---- 
 

Deposits with banks and liquidity funds are repriced at intervals of less than one year.

At 30 June 2020, if interest rates over the year had been 50 basis points higher/lower with all other variables held constant, profit before tax for the year would have been GBP2.4 million higher/lower (FY2018/19: GBP2.3 million higher/lower), mainly as a result of higher/lower interest on cash balances. An assumption that the fair value of assets and liabilities will not be affected by a change in interest rates was used in the model to calculate the effect on profit before tax.

In addition, the Group is indirectly exposed to interest rate risk where the Group holds seed capital investments in funds that invest in debt securities.

Group

Foreign exchange risk

Foreign exchange risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in foreign exchange rates.

The Group's revenue is almost entirely denominated in US dollars, while the majority of the Group's costs are denominated in Sterling. Consequently, the Group has an exposure to movements in the GBP:USD exchange rate. In addition, the Group operates globally, which means that it may enter into contracts and other arrangements denominated in local currencies in various countries. The Group also holds a number of seed capital investments denominated mainly in US dollars, Colombian pesos and Indonesian rupiah.

The Group's policy is to hedge a proportion of the Group's revenue by using a combination of forward foreign exchange contracts and options for a period of up to two years forward. The Group also sells US dollars at spot rates when opportunities arise.

The table below shows the Group's sensitivity to a 1% exchange movement in the US dollar, Colombian peso, Indonesian rupiah and the Euro, net of hedging activities.

 
                                                      2020                    2019 
                                    ----------------------  ---------------------- 
                                        Impact                  Impact 
                                     on profit               on profit 
                                        before      Impact      before      Impact 
                                           tax   on equity         tax   on equity 
Foreign currency sensitivity test         GBPm        GBPm        GBPm        GBPm 
----------------------------------  ----------  ----------  ----------  ---------- 
US dollar +/- 1%                           1.3         5.3         0.8         4.4 
Colombian peso +/- 1%                      0.1         0.1         0.1         0.1 
Indonesian rupiah +/- 1%                     -         0.1           -           - 
Euro +/- 1%                                0.1         0.1         0.1         0.1 
----------------------------------  ----------  ----------  ----------  ---------- 
 

Price risk

Price risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of market changes.

Seed capital

The Group is exposed to the risk of changes in market prices in respect of seed capital investments. Such price risk is borne by the Group directly through interests in financial assets measured at fair value or indirectly either through line-by-line consolidation of underlying financial performance and positions held in certain funds or potential impairments when fair values less costs to sell of seed investments held for sale are less than carrying amounts. Details of seed capital investments held are given in note 20.

The Group has well-defined procedures governing the appraisal, approval and monitoring of seed capital investments.

At 30 June 2020, a 5% movement in the fair value of these investments would have a GBP11.9 million (FY2018/19: GBP13.9 million) impact on net assets and profit before tax.

Management and performance fees

The Group is also indirectly exposed to price risk in connection with the Group's management fees, which are based on a percentage of value of AuM, and fees based on performance. Movements in market prices, exchange and interest rates could cause the AuM to fluctuate, which in turn could affect fees earned. Performance fee revenues could also be reduced depending upon market conditions.

Management and performance fees are diversified across a range of investment themes and are not measurably correlated to any single market index in Emerging Markets. In addition, the policy of having funds with year ends staged throughout the financial year has meant that in periods of steep market decline, some performance fees have still been recorded. The profitability impact is likely to be less than this, as cost mitigation actions would apply, including the reduction of the variable compensation paid to employees.

Using the year end AuM level of US$83.6 billion and applying the year's average net management fee rate of 45bps, a 5% movement in AuM would have a US$18.7 million impact, equivalent to GBP15.2 million using year end exchange rate of 1.2356, on management fee revenues (FY2018/19: using year end AuM level of US$91.8 billion and applying the year's average net management fee rate of 48bps, a 5% movement in AuM would have a US$21.8 million impact, equivalent to GBP17.1 million using year end exchange rate of 1.2727, on management fee revenues).

Hedging activities

The Group uses forward and option contracts to hedge its exposure to foreign currency risk. These hedges, which have been assessed as effective cash flow hedges as at 30 June 2020, protect a proportion of the Group's revenue cash flows from foreign exchange movements. The cumulative fair value of the outstanding foreign exchange hedges liability at 30 June 2020 was GBP1.7 million (30 June 2019: GBP0.7 million foreign exchange hedges asset) and is included within the Group's derivative financial instrument liabilities.

The notional and fair values of foreign exchange hedging instruments were as follows:

 
                                                               2020                      2019 
                                           ------------------------  ------------------------ 
                                                         Fair value                Fair value 
                                           Notional         assets/  Notional         assets/ 
                                             amount   (liabilities)    amount   (liabilities) 
                                               GBPm            GBPm      GBPm            GBPm 
-----------------------------------------  --------  --------------  --------  -------------- 
Cash flow hedges 
Foreign exchange nil-cost option collars      120.0           (1.7)     160.0           (0.7) 
-----------------------------------------  --------  --------------  --------  -------------- 
                                              120.0           (1.7)     160.0           (0.7) 
-----------------------------------------  --------  --------------  --------  -------------- 
 

The maturity profile of the Group's outstanding hedges is shown below.

 
                                               2020   2019 
Notional amount of option collars maturing:    GBPm   GBPm 
--------------------------------------------  -----  ----- 
Within 6 months                                60.0   60.0 
Between 6 and 12 months                        50.0   60.0 
Later than 12 months                           10.0   40.0 
--------------------------------------------  -----  ----- 
                                              120.0  160.0 
--------------------------------------------  -----  ----- 
 

When hedges are assessed as effective, intrinsic value gains and losses are initially recognised in other comprehensive income and later reclassified to comprehensive income as the corresponding hedged cash flows crystallise. Time value in relation to the Group's hedges is excluded from being part of the hedging item and, as a result, the net unrealised loss related to the time value of the hedges is recognised in the consolidated statement of comprehensive income for the year.

An intrinsic loss of GBP0.1 million (FY2018/19: GBPnil) on the Group's hedges has been recognised through other comprehensive

income and GBP0.1 million intrinsic value gain (FY2018/19: GBP0.9 million intrinsic value gain) was reclassified from equity to the statement of comprehensive income in the year.

Included within the net realised and unrealised hedging gain of GBP1.5 million (note 7) recognised at 30 June 2020 (GBP5.1 million gain at 30 June 2019) are:

- a GBP0.9 million loss in respect of foreign exchange hedges covering net management fee income for the financial year ending 30 June 2020 (FY2018/19: GBP0.3 million gain in respect of foreign exchange hedges covering net management fee income for the financial year ended 30 June 2019); and

- a GBP2.4 million gain in respect of crystallised foreign exchange contracts (FY2018/19: GBP4.8 million gain).

Company

The risk management processes of the Company, including those relating to the specific risk exposures covered below, are aligned with those of the Group as a whole unless stated otherwise.

In addition, the risk definitions that apply to the Group are also relevant for the Company.

Credit risk

The Company's maximum exposure to credit risk is represented by the carrying value of its financial assets. The table below lists financial assets subject to credit risk by credit rating:

 
                                2020   2019 
                                GBPm   GBPm 
----------------------------   -----  ----- 
Cash and cash equivalents       91.8  150.3 
Trade and other receivables    518.2  495.0 
-----------------------------  -----  ----- 
Total                          610.0  645.3 
-----------------------------  -----  ----- 
 

The Company's cash and cash equivalents comprise short-term deposits held with banks and liquidity funds which have credit ratings ranging from A to AAA- as at 30 June 2020 (30 June 2019: A+ to AAA).

All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2019: none).

Liquidity risk

The contractual undiscounted cash flows relating to the Company's financial liabilities all fall due within one year.

Details on other commitments are provided in note 29.

Company

Interest rate risk

The principal interest rate risk for the Company is that it could sustain a reduction in interest revenue from bank deposits held in the ordinary course of business through adverse movements in interest rates.

Bank and similar deposits held at year end are shown on the Company's balance sheet as cash and cash equivalents. The effective interest earned on bank and similar deposits during the year is given in the table below:

Effective interest rates applicable to bank deposits

 
                                          2020  2019 
                                             %     % 
----------------------------------------  ----  ---- 
Deposits with banks and liquidity funds   0.66  0.84 
----------------------------------------  ----  ---- 
 

Deposits with banks and liquidity funds are repriced at intervals of less than one year.

At 30 June 2020, if interest rates over the year had been 50 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been GBP0.6 million higher/lower (FY2018/19: GBP0.8 million higher/lower), mainly as a result of higher/lower interest on cash balances. An assumption that the fair value of assets and liabilities will not be affected by a change in interest rates was used in the model to calculate the effect on post-tax profits.

Foreign exchange risk

The Company is exposed primarily to foreign exchange risk in respect of US dollar cash balances and US dollar-denominated intercompany balances. However, such risk is not hedged by the Company.

At 30 June 2020, if the US dollar had strengthened/weakened by 1% against Sterling with all other variables held constant, profit before tax for the year would have increased/decreased by GBP4.8 million (FY2018/19: increased/decreased by GBP4.9 million).

22) Share capital

Authorised share capital

 
                                                 2020                   2019 
                                       2020   Nominal         2019   Nominal 
                                  Number of     value       Number     value 
Group and Company                    shares   GBP'000    of shares   GBP'000 
------------------------------  -----------  --------  -----------  -------- 
Ordinary shares of 0.01p each   900,000,000        90  900,000,000        90 
------------------------------  -----------  --------  -----------  -------- 
 

Issued share capital - allotted and fully paid

 
                                                 2020                   2019 
                                       2020   Nominal         2019   Nominal 
                                  Number of     value       Number     value 
Group and Company                    shares   GBP'000    of shares   GBP'000 
------------------------------  -----------  --------  -----------  -------- 
Ordinary shares of 0.01p each   712,740,804        71  712,740,804        71 
------------------------------  -----------  --------  -----------  -------- 
 

All the above ordinary shares represent equity of the Company and rank pari passu in respect of participation and voting rights.

At 30 June 2020, there were equity-settled share awards issued under the Omnibus Plan totalling 43,516,936 (30 June 2019: 40,668,934) shares that have release dates ranging from September 2020 to September 2024. Further details are provided in note 10.

23) Own shares

The Trustees of The Ashmore 2004 Employee Benefit Trust (EBT) acquire and hold shares in Ashmore Group plc with a view to facilitating the vesting of share awards. As at 30 June 2020, the EBT owned 56,477,466 (30 June 2019: 40,355,103) ordinary shares of 0.01p with a nominal value of GBP5,648 (30 June 2019: GBP4,036) and shareholders' funds are reduced by GBP192.7 million (30 June 2019: GBP119.1 million) in this respect. The EBT is periodically funded by the Company for these purposes.

24) Trade and other payables

 
                                 Group  Group  Company  Company 
                                  2020   2019     2020     2019 
                                  GBPm   GBPm     GBPm     GBPm 
-------------------------------  -----  -----  -------  ------- 
Current 
Trade payables                    20.1   22.1      2.5      1.6 
Accruals and provisions           30.6   34.0     20.4     29.3 
Amounts due to subsidiaries          -      -     32.5      7.3 
-------------------------------  -----  -----  -------  ------- 
Total trade and other payables    50.7   56.1     55.4     38.2 
-------------------------------  -----  -----  -------  ------- 
 

25) Interests in subsidiaries

Operating subsidiaries held by the Company

There were no movements in investments in subsidiaries held by the Company during the year.

 
                            2020   2019 
Company                     GBPm   GBPm 
-------------------------  -----  ----- 
Cost 
-------------------------  -----  ----- 
At 30 June 2020 and 2019    19.9   19.9 
-------------------------  -----  ----- 
 

In the opinion of the Directors, the following subsidiary undertakings principally affected the Group's results or financial position at 30 June 2020. A full list of the Group's subsidiaries and all related undertakings is disclosed in note 33.

 
                                                                     Country 
                                                           of incorporation/ 
                                                                   formation  % of equity 
                                                               and principal       shares 
                                                                       place      held by 
Name                                                            of operation    the Group 
-------------------------------------------------------  -------------------  ----------- 
Ashmore Investments (UK) Limited                                     England       100.00 
Ashmore Investment Management Limited                                England       100.00 
Ashmore Investment Advisors Limited                                  England       100.00 
Ashmore Management Company Colombia SAS                             Colombia        61.38 
Ashmore CAF-AM Management Company SAS                               Colombia        53.66 
Ashmore Avenida (Real Estate) Investments LLP                       Colombia        56.00 
Ashmore Management Company Limited                                  Guernsey       100.00 
PT Ashmore Asset Management Indonesia Tbk                          Indonesia        60.04 
Ashmore Investment Management (Ireland) Limited                      Ireland       100.00 
Ashmore Japan Co. Limited                                              Japan       100.00 
AA Development Capital Investment Managers (Mauritius) 
 LLC                                                               Mauritius        55.00 
Ashmore Investments (Holdings) Limited                             Mauritius       100.00 
                                                                       Saudi 
Ashmore Investments Saudi Arabia                                      Arabia       100.00 
Ashmore Investment Management (Singapore) Pte. Ltd.                Singapore       100.00 
Ashmore Investment Management (US) Corporation                           USA       100.00 
Ashmore Investment Advisors (US) Corporation                             USA       100.00 
-------------------------------------------------------  -------------------  ----------- 
 

Consolidated funds

The Group consolidated the following 12 investment funds as at 30 June 2020 over which the Group is deemed to have control:

 
                                                                                 Country    % of net 
                                                                       of incorporation/      assets 
                                                                               principal       value 
                                                                                place of     held by 
Name                                                   Type of fund            operation   the Group 
--------------------------------------------------  ---------------  -------------------  ---------- 
Ashmore Special Opportunities Fund LP                  Alternatives             Guernsey       50.00 
Ashmore Emerging Markets Debt and Currency 
 Fund Limited                                          Blended debt             Guernsey       89.60 
Ashmore SICAV Emerging Markets China Bond 
 Fund                                                Local currency           Luxembourg      100.00 
Ashmore SICAV Emerging Markets Equity Fund                   Equity           Luxembourg       48.86 
Ashmore SICAV Emerging Markets IG Total 
 Return Fund                                           Blended debt           Luxembourg       80.10 
Ashmore SICAV Emerging Markets Indonesian 
 Equity Fund                                                 Equity           Luxembourg      100.00 
Ashmore SICAV Emerging Markets Multi-Asset 
 Fund                                                   Multi-asset           Luxembourg       54.58 
Ashmore SICAV Emerging Markets Total Return 
 ESG Fund                                              Blended debt           Luxembourg      100.00 
Ashmore SICAV Emerging Markets Global Small-Cap 
 Equity Fund                                                 Equity           Luxembourg       45.47 
Ashmore SICAV Emerging Markets Volatility-Managed 
 Local Currency Bond Fund                            Local currency           Luxembourg      100.00 
Ashmore Saudi Equity Fund                                    Equity         Saudi Arabia      100.00 
Ashmore Emerging Markets Equity Fund                         Equity                  USA       42.20 
--------------------------------------------------  ---------------  -------------------  ---------- 
 

26) Interests in associates and joint ventures

The Group held interests in the following associates as at 30 June 2020 that are unlisted:

 
                                                                                Country of 
                                                                            incorporation/  % of equity 
                                                                                 formation       shares 
                                                                             and principal      held by 
Name                                    Type      Nature of business    place of operation    the Group 
--------------------------------  ----------  ----------------------  --------------------  ----------- 
Ashmore Investment Management 
 India LLP                         Associate   Investment management                 India       30.00% 
Taiping Fund Management Company    Associate   Investment management                 China        8.50% 
--------------------------------  ----------  ----------------------  --------------------  ----------- 
 

During the year, the Group disposed of its associate and joint interests in Everbright Ashmore, VTB-Ashmore Capital Holdings Limited and Mesa Capital Advisors LLC for total proceeds of GBP1.2 million and has recognised a gain on disposal of GBP0.1 million. The movement in the carrying value of investments in associates and joint ventures for the year is provided below:

 
                                 2020   2019 
Associates and joint ventures    GBPm   GBPm 
------------------------------  -----  ----- 
At the beginning of the year      1.8    1.7 
Additions/(disposals)           (1.1)    0.4 
Share of loss                   (0.2)  (0.3) 
Foreign exchange revaluation      0.1      - 
------------------------------  -----  ----- 
At the end of the year            0.6    1.8 
------------------------------  -----  ----- 
 

The summarised aggregate financial information is shown below.

 
                                       2020    2019 
Associates and joint ventures          GBPm    GBPm 
-----------------------------------  ------  ------ 
Total assets                           24.1    23.7 
Total liabilities                    (17.9)   (9.1) 
-----------------------------------  ------  ------ 
Net assets                              6.2    14.6 
Group's share of net assets             0.6     2.1 
-----------------------------------  ------  ------ 
Revenue for the year                    8.9     9.2 
Loss for the year                     (2.3)   (1.3) 
Group's share of loss for the year    (0.2)   (0.3) 
-----------------------------------  ------  ------ 
 

The carrying value of the investments in associates represents the cost of acquisition subsequently adjusted for share of profit or loss and other comprehensive income or loss. No permanent impairment is believed to exist relating to the associates as at 30 June 2020. The Group had no undrawn capital commitments (30 June 2019: GBPnil) to investment funds managed by the associates.

27) Interests in structured entities

The Group has interests in structured entities as a result of the management of assets on behalf of its clients. Where the Group holds a direct interest in a closed-ended fund, private equity fund or open-ended pooled fund such as a SICAV, the interest is accounted for either as a consolidated structured entity or as a financial asset, depending on whether the Group has control over the fund or not.

The Group's interest in structured entities is reflected in the Group's AuM. The Group is exposed to movements in AuM of structured entities through the potential loss of fee income as a result of client withdrawals. Outflows from funds are dependent on market sentiment, asset performance and investor considerations. Further information on these risks can be found in the Business review.

Considering the potential for changes in AuM of structured entities, management has determined that the Group's unconsolidated structured entities include segregated mandates and pooled funds vehicles. Disclosure of the Group's exposure to unconsolidated structured entities has been made on this basis.

The reconciliation of AuM reported by the Group within unconsolidated structured entities is shown below.

 
                                  Less:       AuM within 
                             AuM within   unconsolidated 
                           consolidated       structured 
               Total AuM          funds         entities 
                   US$bn          US$bn            US$bn 
-------------  ---------  -------------  --------------- 
30 June 2019        91.8            0.4             91.4 
-------------  ---------  -------------  --------------- 
30 June 2020        83.6            0.3             83.3 
-------------  ---------  -------------  --------------- 
 

Included in the Group's consolidated management fees of GBP330.0 million (FY2018/19: GBP307.6 million) are management fees amounting to GBP328.3 million (FY2018/19: GBP305.1 million) earned from unconsolidated structured entities.

The table below shows the carrying values of the Group's interests in unconsolidated structured entities, recognised in the Group balance sheet, which are equal to the Group's maximum exposure to loss from those interests.

 
                               2020   2019 
                               GBPm   GBPm 
----------------------------  -----  ----- 
Management fees receivable     55.7   46.4 
Trade and other receivables    26.6    1.7 
Seed capital investments *     78.2   92.3 
----------------------------  -----  ----- 
Total exposure                160.5  140.4 
----------------------------  -----  ----- 
 

* Comprise held for sale investments, financial assets measured at fair value and non-current financial assets measured at fair value (refer to note 20).

The main risk the Group faces from its beneficial interests in unconsolidated structured entities arises from a potential decrease in the fair value of seed capital investments. The Group's beneficial interests in seed capital investments are disclosed in note 20. Note 21 includes further information on the Group's exposure to market risk arising from seed capital investments.

28) Related party transactions

Related parties of the Group include key management personnel, close family members of key management personnel, subsidiaries, associates, joint ventures, Ashmore funds, the EBT and the Ashmore Foundation.

Key management personnel - Group and Company

The compensation paid to or payable to key management personnel is shown below:

 
                                      2020   2019 
                                      GBPm   GBPm 
-----------------------------------  -----  ----- 
Short-term benefits                    0.8    1.7 
Defined contribution pension costs       -      - 
Share-based payment benefits           0.4    1.6 
-----------------------------------  -----  ----- 
                                       1.2    3.3 
-----------------------------------  -----  ----- 
 

Short-term benefits include salary and fees, benefits and cash bonus.

Share-based payment benefits represent the fair value charge to the statement of comprehensive income of current year share awards.

During the year, there were no other transactions entered into with key management personnel (FY2018/19: none). Aggregate key management personnel interests in consolidated funds at 30 June 2020 were GBP33.9 million (30 June 2019: GBP44.6 million).

Transactions with subsidiaries - Company

Details of transactions between the Company and its subsidiaries are shown below:

 
                                2020   2019 
                                GBPm   GBPm 
-----------------------------  -----  ----- 
Transactions during the year 
Management fees                 78.4   77.1 
Net dividends                  122.0  174.4 
Loans repaid by subsidiaries    23.3    8.1 
-----------------------------  -----  ----- 
 

Amounts receivable or payable to subsidiaries are disclosed in notes 17 and 24 respectively.

Transactions with Ashmore funds - Group

During the year, the Group received GBP174.9 million of gross management fees and performance fees (FY2018/19: GBP158.9 million) from the 109 funds (FY2018/19: 109 funds) it manages and which are classified as related parties. As at 30 June 2020, the Group had receivables due from funds of GBP35.0 million (30 June 2019: GBP6.7 million) that are classified as related parties.

Transactions with the EBT - Group and Company

The EBT has been provided with a loan facility to allow it to acquire Ashmore shares in order to satisfy outstanding unvested share awards. The EBT is included within the results of the Group and the Company. As at 30 June 2020, the loan outstanding was GBP167.0 million (30 June 2019: GBP106.3 million).

Transactions with the Ashmore Foundation - Group and Company

The Ashmore Foundation is a related party to the Group. The Foundation was set up to provide financial grants to worthwhile causes within the Emerging Markets countries in which Ashmore invests and/or operates with a view to giving back to the countries and communities. The Group donated GBP0.1 million to the Foundation during the year (FY2018/19: GBP0.1 million).

29) Commitments

The Group has undrawn investment commitments relating to seed capital investments as follows:

 
                                                        2020   2019 
Group                                                   GBPm   GBPm 
-----------------------------------------------------  -----  ----- 
 
Ashmore Andean Fund II, LP                               0.3    0.5 
Ashmore Avenida Colombia Real Estate Fund I (Cayman) 
 LP                                                      0.1    0.3 
Ashmore I - CAF Colombian Infrastructure Senior Debt 
 Fund                                                   11.6   12.7 
Ashmore Special Opportunities Fund LP                    8.0    7.7 
-----------------------------------------------------  -----  ----- 
Total undrawn investment commitments                    20.0   21.2 
-----------------------------------------------------  -----  ----- 
 

Company

The Company has undrawn loan commitments to other Group entities totalling GBP297.8 million (30 June 2019: GBP276.6 million) to support their investment activities but has no investment commitments of its own (30 June 2019: none).

30) Non-controlling interests

In January 2020 the Group listed PT Ashmore Asset Management Indonesia Tbk (Ashmore Indonesia) on the Jakarta Stock Exchange through an initial public offering (IPO) and issued 10% of the subsidiary's shares to the public. No shares were sold by existing shareholders and this diluted the Group's interest by 6.6% to 60%. Total proceeds of GBP11.7m were received on the new issue of shares and transaction costs of GBP0.4m were paid in relation to the issue of the shares. As a result of this transaction, the equity attributable to owners decreased by GBP0.4 million and non-controlling interests increased by GBP11.7 million. The IPO has raised Ashmore Indonesia's profile in the region and diversified its shareholder register.

The Group's material NCI as at 30 June 2020 were held in two subsidiaries, Ashmore Indonesia and Ashmore Avenida (Real Estate) Investments LLP (Ashmore Avenida). Set out below is summarised financial information for the two subsidiaries and the amounts disclosed are before intercompany eliminations.

 
                                           40% NCI interest    44% NCI interest 
                                          Ashmore Indonesia     Ashmore Avenida 
                                        -------------------  ------------------ 
                                             2020      2019      2020      2019 
Summarised balance sheet                     GBPm      GBPm      GBPm      GBPm 
                                        ---------  --------  --------  -------- 
Total assets                                 22.0       7.8       6.6       7.0 
Total liabilities                           (5.0)     (5.3)     (1.2)     (0.5) 
--------------------------------------  ---------  --------  --------  -------- 
Net assets                                   17.0       2.5       5.4       6.5 
--------------------------------------  ---------  --------  --------  -------- 
Accumulated NCI                              13.4       0.4       8.1       9.0 
--------------------------------------  ---------  --------  --------  -------- 
 
Summarised statement of comprehensive 
 income 
--------------------------------------  ---------  --------  --------  -------- 
Net revenue                                   9.7      10.3       3.7       4.5 
Profit for the period                         5.1       4.6       0.1       1.4 
Other comprehensive income                    0.4       0.2       0.1       0.2 
Total comprehensive income                    5.5       4.8       0.2       1.6 
--------------------------------------  ---------  --------  --------  -------- 
Profit allocated to NCI                       1.9       1.5         -       0.5 
--------------------------------------  ---------  --------  --------  -------- 
Dividends paid to NCI                         0.7       1.5       0.9       0.5 
--------------------------------------  ---------  --------  --------  -------- 
 
Summarised cash flows 
--------------------------------------  ---------  --------  --------  -------- 
Cash flows from operating activities          3.8       6.0       0.4       0.7 
Cash flows from investing activities          0.5       0.2       0.9       0.2 
Cash flows from financing activities          8.9     (4.6)     (1.5)     (0.5) 
--------------------------------------  ---------  --------  --------  -------- 
Net increase/(decrease) in cash and 
 cash equivalents                            13.2       1.6     (0.2)       0.4 
--------------------------------------  ---------  --------  --------  -------- 
 

31) Significant accounting estimates and judgements

The preparation of the financial statements in conformity with IFRS requires the use of certain accounting estimates, and management to exercise its judgement in the process of applying the Group's accounting policies. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year relate to the valuation of unquoted investment securities using unobservable inputs.

Valuation of unquoted investments

In determining the fair value of seed capital investments, the Group makes estimates to determine the inputs used in valuation techniques. The degree of estimation involved depends on the individual financial instrument and is reflected in the fair value hierarchy. The fair value hierarchy also reflects the extent of judgements used in the valuation. Judgement may include determining the accounting classification, the appropriate valuation approach to use as well as determining appropriate assumptions. For level 3 investments, the judgement applied by the Group gives rise to an estimate of fair value.

As at 30 June 2020, approximately 7% of the Group's total assets by value are level 3 investments, whose fair value has been estimated using valuation techniques incorporating inputs that are not based on observable market data. The Group's level 3 investments comprise unquoted securities held in consolidated funds and interests in unconsolidated funds. The securities may include all asset types but are frequently special situations investments, typically incorporating distressed, illiquid or private investments. The methodology and models used to determine fair value are created in accordance with International Private Equity and Venture Capital Valuation Guidelines. Due to the high level of judgement involved, the Group has a separate Pricing Methodology and Valuation Committee (PMVC) to review the valuation methodologies, inputs and assumptions used to value individual investments. Smaller investments may be valued directly by the PMVC but material investments are valued by an independent third-party valuation specialist. Such valuations are subject to review and approval by the PMVC.

Valuation techniques used include the market approach, the income approach or the net assets approach depending on the availability of reliable information. The market approach consists of using comparable transactions and applying either EBITDA (earnings before interest, tax, depreciation and amortisation) multiples or market multiples (based on comparable public company information). The use of the income approach consists of using the net present value derived from discounting estimated future cash flows using the weighted average cost of capital, adjusted as deemed appropriate for liquidity, credit, market and other risk factors. The net assets approach is based on the net asset value (NAV) for the level 3 fund investments determined as at year end.

The significant unobservable inputs used in valuation techniques are EBITDA and market multiples for the market approach, discount rate for the income approach and NAV for the net assets approach. A marketability adjustment is applied for certain level 3 investment securities to reflect illiquidity and/or non-transferability that could result from offering for sale at one time the Group's entire holdings of a particular financial instrument. The valuation of these investments is considered a significant source of estimation uncertainty as in aggregate the range of possible outcomes in respect to the unobservable inputs could have a material impact on the valuation. Further details on the valuation methodologies applied by the Group in the valuation of level 3 investments as at 30 June 2020 are provided in note 19, including details of the significant unobservable inputs and the associated sensitivities to changes in unobservable inputs to a reasonable alternative.

32) Post-balance sheet events

There are no post-balance sheet events that require adjustment or disclosure in the Group consolidated financial statements.

33) Subsidiaries and related undertakings

The following is a full list of the Ashmore Group plc subsidiaries and related undertakings as at 30 June 2020, along with the registered address and the percentage of equity owned by the Group. Related undertakings comprise significant holdings in associated undertakings, joint ventures and Ashmore sponsored public funds in which the Group owns greater than 20% interest.

 
                                                             % voting              Registered address and 
Name                                      Classification     interest              place of incorporation 
---------------------------------------  ---------------  -----------  ---------------------------------- 
Ashmore Investments (UK) Limited              Subsidiary       100.00             61 Aldwych, London WC2B 
                                                                                       4AE United Kingdom 
                                                                       ---------------------------------- 
Ashmore Investment Management 
 Limited                                      Subsidiary       100.00 
                                                                       -----  --------------------------- 
Ashmore Investment Advisors Limited           Subsidiary       100.00 
Aldwych Administration Services 
 Limited                                      Subsidiary       100.00 
Ashmore Asset Management Limited              Subsidiary       100.00 
Ashmore Avenida (Real Estate) 
 Investments LLP                              Subsidiary        56.00 
---------------------------------------  ---------------  -----------  -----  --------------------------- 
Ashmore Investment Management                 Subsidiary       100.00               32 Molesworth Street, 
 (Ireland) Limited                                                                     Dublin 2, D02 Y512 
---------------------------------------  ---------------  -----------  ---------------------------------- 
Ashmore Investment Management                 Subsidiary       100.00              475 Fifth Avenue, 15th 
 (US) Corporation                                                                                   Floor 
                                                                                          New York, 10017 
                                                                                                      USA 
                                                                       ---------------------------------- 
Ashmore Investment Advisors (US) 
 Corporation                                  Subsidiary       100.00 
                                                                       -----  --------------------------- 
Ashmore Equities Investment Management 
 (US) LLC (in liquidation)                    Subsidiary       100.00 
Avenida Partners LLC                          Subsidiary       100.00 
Avenida CREF I Manager Cayman 
 LLC                                          Subsidiary       100.00 
Avenida CREF I Manager LLC                    Subsidiary       100.00 
Avenida A2 Partners LLC                       Subsidiary       100.00 
Avenida Colombia Member LLC                   Subsidiary        83.30 
Avenida CREF II Partners LLC                  Subsidiary       100.00 
Avenida CREF II GP LLC                        Subsidiary       100.00 
MCA Partners LLC                              Subsidiary       100.00 
---------------------------------------  ---------------  -----------  -----  --------------------------- 
Avenida REF Holding SA                        Subsidiary       100.00                 Yamandu 1321, 11500 
                                                                                               Montevideo 
                                                                                                  Uruguay 
                                                                       ---------------------------------- 
Avenida CREF II Manager SRL                   Subsidiary        99.00 
                                                                       -----  --------------------------- 
Avenida CREF Partners SRL                     Subsidiary        99.00 
Avenida CREF II GP SRL                        Subsidiary        85.00 
---------------------------------------  ---------------  -----------  -----  --------------------------- 
Ashmore Investment Management                 Subsidiary       100.00            1 George Street, #15-04, 
 (Singapore) Pte. Ltd.                                                                   Singapore 049145 
---------------------------------------  ---------------  -----------  ---------------------------------- 
PT Ashmore Asset Management Indonesia         Subsidiary        60.04              Pacific Century Place, 
 Tbk                                                                             18th Floor, SCBD Lot 10, 
                                                                                   Jl. Jenderal. Sudirman 
                                                                                 Kav.52-53 Jakarta 12190, 
                                                                                                Indonesia 
---------------------------------------  ---------------  -----------  ---------------------------------- 
Ashmore Management Company Colombia           Subsidiary        61.38               Carrera 7 No. 75 -66, 
 SAS                                                                                     Office 701 & 702 
                                                                                    Bogotá, Colombia 
                                                                       ---------------------------------- 
Ashmore-CAF-AM Management Company 
 SAS                                          Subsidiary        53.66 
                                                                       -----  --------------------------- 
Ashmore Holdings Colombia S.A.S.              Subsidiary       100.00 
Ashmore Investment Advisors Colombia 
 S.A. Sociedad Fiduciaria                     Subsidiary       100.00 
Ashmore Management Backup Company 
 S.A.S                                        Subsidiary       100.00 
Avenida Colombia Management Company 
 SAS                                          Subsidiary       100.00 

---------------------------------------  ---------------  -----------  -----  --------------------------- 
Ashmore Peru SAC                              Subsidiary        99.00              Av. de la Floresta No. 
                                                                                    497, Quinto Piso, San 
                                                                                   Borja, Lima, Perú 
---------------------------------------  ---------------  -----------  ---------------------------------- 
Ashmore Japan Co. Limited                     Subsidiary       100.00       11F, Shin Marunouchi Building 
                                                                              1-5-1 Marunouchi Chiyoda-ku 
                                                                                     Tokyo Japan 100-6511 
---------------------------------------  ---------------  -----------  ---------------------------------- 
Ashmore Investments (Colombia)                Subsidiary       100.00              c/ Hermosilla 11, 4 A, 
 SL                                                                                   28001 Madrid, Spain 
---------------------------------------  ---------------  -----------  ---------------------------------- 
Ashmore Management (DIFC ) Limited            Subsidiary       100.00            Office 105, Gate Village 
                                                                          03, Level 1 Dubai International 
                                                                                  Financial Centre Dubai, 
                                                                                                      UAE 
---------------------------------------  ---------------  -----------  ---------------------------------- 
Ashmore Investment Advisors (India)           Subsidiary        99.82             507A Kakad Chambers, Dr 
 Private Limited (in liquidation)                                                Annie Besant Road, Worli 
                                                                                    Mumbai 400 018, India 
---------------------------------------  ---------------  -----------  ---------------------------------- 
Ashmore Investment Saudi Arabia                       Subsidiary      100.00             3rd Floor Tower B, 
                                                                                               Olaya Towers 
                                                                                          Olaya Main Street 
                                                                                       Riyadh, Saudi Arabia 
                                                                              ----------------------------- 
                                                    Consolidated 
Ashmore Saudi Equity Fund                                   fund      100.00 
---------------------------------------  -----------------------  ----------  --------------------------- 
Ashmore AISA Cayman Limited                           Subsidiary      100.00            Ugland House, Grand 
                                                                                                    Cayman, 
                                                                                   KY1-1104, Cayman Islands 
---------------------------------------  -----------------------  ----------  ----------------------------- 
AA Development Capital Investment                     Subsidiary       55.00          Les Cascades Building 
 Managers (Mauritius) LLC                                                           33 Edith Cavell Street, 
                                                                                                 Port Louis 
                                                                                                  Mauritius 
                                                                              ----------------------------- 
Ashmore Investments (Holdings) 
 Limited                                              Subsidiary      100.00 
---------------------------------------  -----------------------  ----------  --------------------------- 
Ashmore EM Special Situation                          Subsidiary      100.00                Trafalgar Court 
 Opportunities Fund (GP) Limited                                                                Les Banques 
                                                                                              St Peter Port 
                                                                                                    GY1 3QL 
                                                                                                   Guernsey 
                                                                              ----------------------------- 
Ashmore Management Company Limited                    Subsidiary      100.00 
                                                                              --------------------------- 
Ashmore Global Special Situations 
 Fund 3 (GP) Limited                                  Subsidiary      100.00 
Ashmore Global Special Situations 
 Fund 4 (GP) Limited                                  Subsidiary      100.00 
Ashmore Global Special Situations 
 Fund 5 (GP) Limited                                  Subsidiary      100.00 
Ashmore Special Opportunities 
 (GP) Limited                                         Subsidiary      100.00 
Ashmore Special Opportunities                       Consolidated 
 Fund LP                                                    fund       50.00 
Ashmore Emerging Markets Debt                       Consolidated 
 and Currency Fund Limited                                  fund       89.60 
---------------------------------------  -----------------------  ----------  --------------------------- 
Ashmore SICAV Emerging Markets                    HFS investment      100.00             10, rue du Chateau 
 Equity ESG Fund                                                                                      d'Eau 
                                                                                          L-3364 Leudelange 
                                                                                  Grand-Duchy of Luxembourg 
                                                                              ----------------------------- 
Ashmore SICAV Emerging Markets 
 IG Short Duration Fund                           HFS investment       65.46 
                                                                              --------------------------- 
Ashmore SICAV Emerging Markets                      Consolidated 
 China Bond Fund                                            fund      100.00 
Ashmore SICAV Emerging Markets                      Consolidated 
 Equity Fund                                                fund       48.86 
Ashmore SICAV Emerging Markets                      Consolidated 
 Global Small-Cap Equity Fund                               fund       45.47 
Ashmore SICAV Emerging Markets                      Consolidated 
 IG Total Return Fund                                       fund       80.10 
Ashmore SICAV Emerging Markets                      Consolidated 
 Total Return ESG Fund                                      fund      100.00 
Ashmore SICAV Emerging Markets                      Consolidated 
 Indonesian Equity Fund                                     fund      100.00 
Ashmore SICAV Emerging Markets                      Consolidated 
 Multi-Asset Fund                                           fund       54.58 
Ashmore SICAV Emerging Markets                      Consolidated 
 Volatility-Managed LCBF                                    fund      100.00 
Ashmore SICAV Emerging Markets                       Significant 
 Absolute Return Debt Fund                               holding       30.44 
---------------------------------------  -----------------------  ----------  --------------------------- 
Ashmore Emerging Markets Active                   HFS investment      100.00        50 South LaSalle Street 
 Equity Feeder Fund                                                                       Chicago, Illinois 
                                                                                                      60603 
                                                                              ----------------------------- 
Ashmore Emerging Markets Equity 
 ESG Fund                                         HFS investment      100.00 
                                                                              --------------------------- 
Ashmore Emerging Markets Short 
 Duration Select Fund                             HFS investment      100.00 
Ashmore Emerging Markets Equity                     Consolidated 
 Fund                                                       fund       42.20 
---------------------------------------  -----------------------  ----------  --------------------------- 
Ashmore Investment Management                          Associate       30.00           507A Kakad Chambers, 
 India LLP                                                                             Dr Annie Besant Road 
                                                                                                     Worli, 
                                                                                      Mumbai 400 018, India 
---------------------------------------  -----------------------  ----------  ----------------------------- 
Taiping Fund Management Company                        Associate        8.50             Unit 101, Building 
                                                                                     No.5, 135 Handan Road, 
                                                                                            Shanghai, China 
---------------------------------------  -----------------------  ----------  ----------------------------- 
 
 

Cautionary statement regarding forward-looking statements

It is possible that this document could or may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning.

Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are several factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. The Group undertakes no obligation to revise or update any forward-looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.

Statutory accounts

The financial information set out above does not constitute the Group's statutory accounts for the years ending 30 June 2020 or 30 June 2019. Statutory accounts for 2019 have been delivered to the registrar of companies, and those for 2020 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2019 or 2020.

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(END) Dow Jones Newswires

September 11, 2020 02:00 ET (06:00 GMT)