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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ashmore Global Opportunities Limited | LSE:AGOL | London | Ordinary Share | GG00BJJMSL63 | ORD NPV (GBP) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.52 | 1.42 | 1.62 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMAGOU TIDMAGOL
NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES,
CANADA,
AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION
Ashmore Global Opportunities Limited ("AGOL", or the "Company")
a Guernsey incorporated and registered limited liability closed-ended
investment company with a Premium
Listing of its US Dollar and Sterling share classes on the Official List.
LEI 549300D6OJOCNPBJ0R33
Annual Results
For the year ended 31 December 2019
(Classified Regulated Information, under DTR 6 Annex 1 section 1.1)
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the year ended 31 December 2019. All figures
are based on the audited financial statements for the year ended 31 December
2019.
The financial information for the year ended 31 December 2019 is derived from
the financial statements delivered to the UK Listing Authority. The Auditors
reported on those accounts, their report was unqualified and did not contain a
statement under Section 263(2) and 263(3) of The Companies (Guernsey) Law,
2008.
The announcement is prepared on the same basis as will be set out in the annual
accounts.
The Annual Report and Audited Financial Statements will be available on the
Company website: www.agol.com
Financial Highlights
31 December 2019 31 December 2018
Total Net Assets US$14,170,771 US$30,518,440
Net Asset Value per Share
US$ shares US$2.89 US$5.05
GBP shares GBP2.63 GBP4.73
Closing-Trade Share Price*
US$ shares US$2.54 US$4.15
GBP shares GBP1.52 GBP3.58
Discount to Net Asset Value*
US$ shares (12.11)% (17.82)%
GBP shares (42.21)% (24.31)%
* For further information, please refer to Supplementary Information
(Unaudited) - Alternative Performance Measures ("APMs").
Chairman's Statement
As at 31 December 2019, the Net Asset Value ("NAV") of Ashmore Global
Opportunities Limited (the "Company" or "AGOL") was US$14.2m compared to
US$30.5m as at 31 December 2018. The Company realised investments in 2019,
which allowed it to make distributions to Shareholders of US$4.7m. The NAVs per
share were US$2.89 and GBP2.63 as at 31 December 2019, down from US$5.05 and GBP
4.73 respectively at the end of 2018. The share prices stood at US$2.54 and GBP
1.52 as at 31 December 2019. On 31 March 2020 all remaining GBP shares
outstanding were converted to $ shares. Due to the closure of the GBP share
class, there will not be any conversions going forward.
The main detractor from performance was the mark-down by the independent
valuation agent in the value of Microvast in May and November. Further details
on this and the other underlying exposures of the Company are given in the
Investment Manager's Report.
The US$4.7m distributions to Shareholders during the year were primarily the
proceeds of the realisation of the investment in Kulon, and dividends from AEI.
The Investment Manager is working towards the sale of the remaining assets,
with a focus on the largest exposure of the Company, AEI, as well as the other
remaining holdings. Further details on these are given in the Investment
Manager's Report. There may be one or two small sales in 2020 but it is
unlikely that AEI will be sold until the 1st quarter of 2021 at the earliest.
Below is an overview of the distributions made since February 2013 when
Shareholders voted to wind up the Company in an orderly fashion.
Quarterly Distributions
Quarter End Date % of 31 December 2012 % of 31 December 2012
Distributions
(US$) NAV Market Capitalisation
31 March 2013 92,500,000 19% 28%
30 June 2013 13,000,000 3% 4%
30 September 2013 26,000,000 5% 8%
31 December 2013 36,900,000 8% 11%
30 June 2014 7,250,000 2% 2%
30 September 2014 21,500,000 5% 7%
31 December 2014 40,500,000 8% 12%
31 March 2015 19,500,000 4% 6%
30 June 2015 27,250,000 6% 8%
31 December 2015 16,200,000 3% 5%
31 March 2016 2,500,000 0% 1%
30 September 2017 3,000,000 1% 1%
30 June 2018 25,500,000 5% 8%
31 December 2018 0% 0%
1,500,000
*
30 June 2019 4,725,000 1% 1%
Total 337,825,000 70% 102%
* was declared in January 2019 and distributed to Shareholders in Q2 2019.
The Board has taken the decision to close the hedging programme and convert all
the GBP shares into $ shares. Whilst the hedging was designed to eliminate
exchange rate risk between the two share classes, it could generate cash losses
to the fund if GBP fell against the $. To protect itself against that, AGOL
always retained a cash reserve. Now that there are very few assets left, there
seemed little point in maintaining the hedging programme, and that the cash
reserve could be used to cover other expenses or returned to shareholders.
With all the uncertainties surrounding COVID-19 and the economic outlook, the
Board feels that it is prudent to reduce costs as much as possible. As a
result, the Board is reviewing the listing of AGOL as significant costs savings
could be made if AGOL were to be delisted.
I would like to thank everyone involved with AGOL for their hard work.
Richard Hotchkis
24 April 2020
Investment Manager's Report
Performance
As at 31 December 2019, the NAV of the Company was US$14.2m, compared to
US$30.5m at the end of December 2018. During 2019, US$6.2m was distributed to
Shareholders of which US$1.5m related to realisations completed in 2018 and the
balance from realisations achieved and dividends received in 2019.
Consequently, the performance to Shareholders was -38.03%. As at 31 December
2019, the NAVs per share of the US$ and GBP classes stood at US$2.89 and GBP2.63
respectively.
Portfolio Review
AEI, which remaining asset is a coal-fired power plant in Guatemala, continues
to operate satisfactorily. Various efforts to dispose of the asset have not yet
been successful. The final appeal by the original Chinese contractor was heard
in November 2019 and in March 2020 we received a ruling in our favour on all
points. That has cleared the path for a realisation of the asset in the medium
term, subject to market conditions.
The operating performance by Microvast worsened in 2019. First, the macro/
industry situation in China continues to deteriorate in the EV battery sector
with the further decrease of government subsidies. Second, anticipating the
above, Microvast embarked some years ago on a strategy of foreign expansion.
While this has brought successes in places such as the UK, Germany and the
Netherlands, among others, this expansion has not been rapid enough to offset
lower profitability in China, added to which anticipated orders from large
European car and truck manufacturers have not yet materialised. These two
issues combined leave the company's balance sheet significantly weakened, and
new funding will be required. The independent valuation agent took the view
that unless new orders materialise quickly, such new funding may be hard to
obtain, and that in turn may make the current enterprise unviable as a going
concern. In two stages in May and November, the independent valuation agent
wrote down the equity valuation to zero. Microvast's management continues to
focus on raising additional capital and winning further orders in Europe and
China.
There was a full realisation of the Company's investment in Kulon in Russia,
the proceeds of which were distributed to Shareholders in Q2 2019.
Further details on the smaller holdings in the Company are given later in this
Investment Manager's report.
Outlook
As described above, the focus remains on realising AGOL's remaining investments
in an orderly manner, and we expect to start to make progress on this later
this year. Nevertheless, realisations are very much influenced by the
attraction and circumstances of each individual asset.
Since the year end we have seen the development of the coronavirus covid-19
outbreak initially in China and now reaching most continents. At present, it is
not possible to assess the detailed impact of the emerging risk, on the
investments in the Company but there is growing concern about the impact on the
world economy. There has been a significant change in the financial markets in
the last few weeks. The Board and the Investment Manager continue to watch the
efforts of governments to contain the spread of the virus and monitor the
economic impact, if any, on the investments in the Company.
The Investment Manager, Custodian, Administrator and Secretary are monitoring
developments relating to coronavirus covid-19 and are coordinating their
operational response based on existing business continuity plans and on
guidance from global health organisations, relevant governments, and general
pandemic response best practices.
Details on the Top 4 Underlying Holdings (on a look through basis)
The table below shows the top 4 underlying investments as at 31 December 2019
excluding the cash balance (cash was (0.39)% as at 31 December 2019).
Investment Name % of NAV Country Business Description
AEI 80.62% Guatemala Power generation in Latin America
ZIM Laboratories 8.51% India Pharmaceutical research and
Ltd manufacturing
GZ Industries Ltd 6.17% Nigeria Aluminium can manufacturing
Numero Uno 6.06% India Branded apparel manufacturers and
retailers
The tables below show the country and industry allocations of underlying
investments over 1% at the end of December 2019:
Country % of NAV Industry % of NAV
Guatemala 80.62% Electrical 80.62%
India 13.59% Pharmaceuticals 8.51%
Nigeria 6.17% Miscellaneous manufacturing 6.17%
Retail 5.08%
These tables form an integral part of the financial statements.
Details on a Selection of the Underlying Holdings
Microvast
Industry: Technology/clean-tech
Country: China
Website: www.microvast.com
Company Status: Private
Investment Risk: Equity
Operational update
* Microvast continues to supply batteries for pure e-bus and plug-in hybrid
electric vehicles (PHEV) to almost all major Chinese original bus manufacturers
(OEMs), with these being deployed in over 30 cities in China. Follow-on orders
continue to be received for the European bus market, where increasingly
stringent emission rules support the market.
* Microvast's gross margins have fallen due to lower prices under the new
China e-bus subsidy policy. 2019 revenues were down YoY.
* The balance sheet is stretched with net debt exceeding current Enterprise
Value, leading the independent valuation agent to mark down the equity value to
zero during 2019.
2020 operational strategy/priorities
* Securing new long term contracts for commercial vehicle and auto
customers.
* Securing new financing and extending existing financing facilities both
for existing operations and for capex and R&D.
* Hire and retain high quality staff.
Key risks
* Not securing large long-term contracts, making financing difficult to
obtain.
* Overcapacity in both Chinese and global battery companies.
* Warranty claims arising from defective cells or modules.
* Unfavourable changes to the Chinese government's New Energy Vehicle
policy.
Exit strategy
* Block sale pre- or post-IPO.
AEI
Industry: Power generation
Country: Guatemala
Company Status: Private
Investment Risk: Equity
Operational update
* The only operating entity remaining in AEI is Jaguar, in Guatemala.
* The final appeal by the original Chinese conractor was heard in November
2019 and in March 2020 we received a ruling in our favour on all points. That
has cleared the path for a realisation of the asset in the medium term, subject
to market conditions.
Key risks
* Final exit process.
Exit strategy
* Trade sale of the asset.
* Wind up of AEI post the Jaguar exit.
ZIM Laboratories
Industry: Pharmaceuticals
Country: India
Website: zimlab.in
Company Status: Public
Investment Risk: Equity
Operational update and priorities
* The company results are satisfactory albeit below ambitious targets.
* The focus is new delivery solutions for generic products as well as
direct marketing in India and marketing partnerships in the rest of the world.
* Add manufacturing flexibility to deal with high value added, lower volume
orders.
Exit strategy and timing
* The share price performed poorly in 2019 on very low trading volumes. A
block sale at a fair valuation is being sought.
Numero Uno
Industry: Retail
Country: India
Website: www.numerounojeanswear.com
Company Status: Private
Investment Risk: Equity
Operational update and priorities
* Recent results have been on budget and the company remains profitable.
Alternative distribution channels are being pursued.
* Management is focussed on efficiency in operations.
Key risks
* Cash payments remain important to the company and any new tightening of
liquidity conditions could impact revenues.
Exit strategy and timing
* Discussions with the promotor of the company about possible avenues of
realising our investment.
GZI
Industry: Aluminium can manufacturing
Country: Nigeria
Website: www.gzican.com
Company Status: Private
Investment Risk: Equity
Operational update
* In Nigeria, a stable macro environment helped the business continue its
strong performance in H1 2019, however in H2 2019 the business was affected by
unseasonable weather and land border closings falling 10% short of its budget.
* In South Africa, GZI launched its two-line, 1.2bn capacity plant on
schedule and budget. 70% of capacity has been contracted and production is
ramping up and reached peak production by February 2020.
* Going forward we expect pricing pressure in Nigeria but that should be
offset by larger volumes and growth in South Africa driving value in 2020.
2020 operational strategy/priorities
* Sell land in Kenya.
* Leverage larger presence for global contracts with beverage contracts up
for renewal.
* Manage foreign exchange exposures/requirements.
Key risks
* Slowdown in the African beverages markets.
* Clients opting for cheaper competitors or alternatives.
* Access to US$ / local currency depreciation.
* Recruitment / talent sourcing.
Exit strategy and timing
* 2020 exit through IPO or strategic sale.
Ashmore Investment Advisors Limited
Investment Manager
24 April 2020
Board Members
As at 31 December 2019, the Board consisted of four non-executive Directors.
The Directors are responsible for the determination of the Company's investment
policy and have overall responsibility for its activities. As required by the
Association of Investment Companies Code on Corporate Governance (the "AIC
Code"), the majority of the Board of Directors are independent of the
Investment Manager. In preparing this annual report, the independence of each
Director has been considered.
Richard Hotchkis, Independent Chairman, (UK resident) appointed 18 April 2011
Richard Hotchkis has over 40 years of investment experience. Until 2006, he was
an investment manager at the Co-operative Insurance Society, where he started
his career in 1976. He has a breadth of investment experience in both UK and
overseas equities, including in emerging markets, and in particular, investment
companies and other closed-ended funds, offshore funds, hedge funds and private
equity funds.
Steve Hicks, Non-Independent Director (connected to the Investment Manager),
(UK resident) appointed
16 January 2014
Steve Hicks, who is a qualified UK lawyer, has held a number of legal and
compliance roles over a period of more than 25 years. From June 2010 until
January 2014, he was the Ashmore Group Head of Compliance. Prior thereto he was
Director, Group Compliance at the London listed private equity company 3i Group
plc.
Nigel de la Rue, Independent Director, (Guernsey resident) appointed 16 October
2007
Nigel de la Rue graduated in 1978 from Pembroke College, Cambridge with a
degree in Social and Political Sciences. He is qualified as an Associate of the
Chartered Institute of Bankers, as a Member of the Society of Trust and Estate
Practitioners ("STEP") and as a Member of the Institute of Directors. He was
employed for 23 years by Baring Asset Management's Financial Services Division,
where he was responsible for the group's Fiduciary Division and sat on the
Executive Committee. He left Baring in December 2005, one year after that
Division was acquired by Northern Trust. He has served on the Guernsey
Committees of the Chartered Institute of Bankers and STEP, and on the Guernsey
Association of Trustees, and currently holds a number of directorships in the
financial services sector.
Christopher Legge, Independent Director, (Guernsey resident) appointed 27
August 2010
Christopher Legge has over 25 years' experience in financial services. He
qualified as a Chartered Accountant in London in 1980 and spent the majority of
his career based in Guernsey with Ernst & Young, including being the Senior
Partner of Ernst & Young in the Channel Islands. Christopher retired from Ernst
& Young in 2003 and currently holds a number of directorships in the financial
sector. He was appointed to the Board of Sherborne Investors (Guernsey) C
Limited on 25 May 2017. He was also appointed as a non-executive director of NB
Distressed Debt Investment Fund Limited with effect from 12 April 2018.
Disclosure of Directorships in Public Companies Listed on Recognised Stock
Exchanges
The following summarises the Directors' directorships in other public
companies:
Company Name
Exchange
Richard
Hotchkis
Nil
Steve Hicks
Nil
Nigel de la Rue
Nil
Christopher Legge
NB Distressed Debt Investment Fund
Limited London
Sherborne Investors (Guernsey) B Limited
London
Sherborne Investors (Guernsey) C Limited
London
Third Point Offshore Investors Limited
London
TwentyFour Select Monthly Income Fund Limited
London
Strategic Report
The Directors submit their Strategic Report together with the Company's audited
financial statements for the year ended 31 December 2019.
The Strategic Report provides a review of the business for the financial year
and describes how risks are managed. In addition, the report outlines the
financial performance of the Company during the financial year and the position
at the end of the year, and discusses the main factors that could affect the
future performance, and financial position of the Company.
Business Model and Strategy
Investment Strategy
Prior to the Extraordinary General Meeting ("EGM") of shareholders on 13 March
2013, the Company's investment objective was to deploy capital in a diversified
portfolio of global emerging market strategies and actively manage these with a
view to maximising total returns. This was implemented by investing across
various investment themes (Alternatives including Special Situations and Real
Estate, External Debt, Local Currency, Equities, Corporate Debt and
Multi-Strategy), with a principal focus on Special Situations.
On 12 December 2012, the Board announced, following its review and in
conjunction with its independent financial and legal advisers, options to
address the structural issue of the discount to NAV at which the shares were
trading, which included proposals to shareholders: to amend the investment
strategy to make no new Special Situations investments (with any new
investments to be shorter term in nature); to realise the Company's assets for
cash over the next few years; and to return cash realised from the investment
portfolio to shareholders (the "Managed Wind-Down"). Shareholders approved
these proposals at an EGM held on 13 March 2013. The Board believes that the
revised investment strategy is the best way of realising the value of the
Company.
Going Concern
The Board of Directors called an EGM, which was held on 13 March 2013, to
approve proposals for a managed wind-down of the Company`s portfolio. All
proposals were duly passed at the EGM and accordingly the Board:
1. changed the investment objective of the Company to the realisation of the
Company's assets in an orderly manner in order to return cash to shareholders;
2. amended the Articles of Incorporation to facilitate a regular, quarterly
return of cash to shareholders;
3. amended the Articles of Incorporation in relation to the removal of the
continuation vote;
4. amended the Articles of Incorporation to reduce the minimum number of
Directors from five to one; and
5. amended the terms of the Investment Management Agreement ("IMA") between the
Company and Ashmore Investment Advisors Limited (the "Investment Manager").
The Company continues to realise its portfolio in an orderly manner which is
taking longer than originally envisaged. The Board has reviewed the Company's
annual operating costs with a view to reducing costs where possible and
currently estimate such costs to be in the region of US$280,000. The Company
currently has sufficient cash to meet those expenses for at least two years.
The Directors have examined significant areas of possible going concern risk
and are satisfied that no material exposures exist. The Directors consider that
the Company has adequate resources to continue in operational existence for the
foreseeable future and believe it is appropriate to adopt the going concern
basis in preparing the financial statements, despite the managed wind-down of
the Company over the next few years.
Long Term Viability Statement
In accordance with the AIC Code the Directors have assessed the future
prospects of the Company over the next two years. The Directors believe this to
be a reasonable timeframe in which to realise the remaining portfolio of
investments. As stated in the Going Concern section above the Company currently
has sufficient cash resources to meet its operating expenses for that period.
The principal risk affecting the Company is market price risk, although the
Covid-19 pandemic may also affect the timing of disposals, as it seeks to
realise its remaining portfolio. Once the majority of the investments have been
sold the Board will propose that the Company enters into voluntary liquidation.
The Directors consider that the Company has sufficient cash and liquid
resources to complete its wind down and liquidation in an orderly manner
including paying all associated costs.
Business Environment
Internal Controls
The Board is ultimately responsible for the Company's system of internal
control and for reviewing its effectiveness. The Board confirms that there is
an ongoing process for identifying, evaluating and managing the significant
risks faced by the Company. This process has been in place for the year under
review and up to the date of approval of this annual report and accords with
the Turnbull guidance. The Code requires Directors to conduct, at least
annually, a review of the Company's system of internal control, covering all
controls, including: financial, operational, compliance and risk management.
The risk matrix is subject to an annual review by the Board. The Board has
reviewed the effectiveness of the systems of internal control. In particular,
it has reviewed and updated the process for identifying and evaluating the
significant risks affecting the Company and the policies by which these risks
are managed. The internal control systems are designed to meet the Company's
particular needs and the risks to which it is exposed. Accordingly, the
internal control systems are designed to manage rather than eliminate the risk
of failure to achieve business objectives and by their nature can only provide
reasonable and not absolute assurance against misstatement and loss.
Risks and Uncertainties
The principal risks and uncertainties faced by the Company include market risk
(comprising currency risk, interest rate risk and other price risk), credit
risk, concentration risk, liquidity risk, operational risk and capital
management. These could have a material adverse effect separately or in
combination on the Company's earnings and financial condition. Further
information on these risks and uncertainties and how they are mitigated is set
out in note 14 to the financial statements.
The other risks and uncertainties which have been identified and the steps
which are taken by the Board to mitigate them are as follows:
- Cyber risks: the Board is reliant on its key service providers in that
regard who have confirmed to the Board that they have detailed cyber risk
mitigation programmes and report any relevant issues to the Board on a timely
basis. Similarly the Company must comply with the provisions of the Law and
Listing Rules and the Board relies on its service providers and in particular
the Company Secretary in that regard. The key service providers are contracted
to provide investment, company secretarial, administration and accounting
services and report to the Board on a quarterly basis.
- Emerging risks: in order to recognise any new risks that may impact the
Company and to ensure that appropriate controls are in place to manage those
risks, the Audit Committee undertakes regular reviews of the Company's risk
matrix. This review took place on three occasions during the year during Audit
Committee Meetings.
Since the year end we have seen the development of the coronavirus covid-19
outbreak initially in China and now reaching most continents. At present, it is
not possible to assess the detailed impact of the emerging risk, on the
investments in the Company but there is growing concern about the impact on the
world economy. There has been a significant change in the financial markets in
the last few weeks. The Board and the Investment Manager continue to watch the
efforts of governments to contain the spread of the virus and monitor the
economic impact, if any, on the investments in the Company.
The Directors do not believe that any adjustments to the financial statements
as at 31 December 2019 are required as a result of this subsequent event.
The Investment Manager, Custodian, Administrator and Secretary are monitoring
developments relating to coronavirus covid-19 and are coordinating their
operational response based on existing business continuity plans and on
guidance from global health organisations, relevant governments, and general
pandemic response best practices.
Board Diversity
The Board considers that its members have a balance of skills and experience
which are relevant to the Company. The Board has no plans to refresh the Board
at the current time due the Company being in managed wind-down. If it becomes
necessary to appoint new Directors and review the Board composition, the Board
will consider, amongst other factors, diversity, balance of skills, knowledge,
gender, ethnicity and experience. The Board does not consider it appropriate to
establish targets or quotas in this regard.
Social, Community and Human Rights
The Company does not have any specific policies on social, community or human
rights issues as it is an investment company which does not have any physical
assets, property, employees or operations on its own. Please refer to the
Chairman's Statement and Investment Manager's Report for more details on the
Company's investments.
Position and Performance
Key Performance Indicators ("KPIs")
Net Asset Value
The NAV of the Company has decreased from US$30.5m as at 31 December 2018 to
US$14.2m as at 31 December 2019.
Net Asset Value per Share
The NAVs per share of the US$ and GBP classes stood at US$2.89 and GBP2.63
respectively as at 31 December 2019, compared to US5.05 and GBP4.73 respectively
as at 31 December 2018.
Closing-Trade Share Price
The closing-trade share price of the US$ and GBP classes stood at US$2.54 and GBP
1.52 respectively as at 31 December 2019, compared to US$4.15 and GBP3.58
respectively as at 31 December 2018.
Discount to Net Asset Value
The discount to the NAV of the US$ and GBP classes was (12.11)% and (42.21)%
respectively as at 31 December 2019, compared to (17.82)% and (24.31)%
respectively as at 31 December 2018.
Ongoing Charges
The Company's ongoing charges ratio has increased from 0.75% as at 31 December
2018 to 1.34% as at 31 December 2019. The increase in the ongoing charges
percentage between 2018 and 2019 is due to the drop in the average NAV for 2019
compared to 2018 while the expenses remained relatively similar year-on-year.
Earnings per Share
The Earnings per Share of the US$ and GBP classes were US$(1.90) and US$(2.19)
respectively for the year ended 31 December 2019, compared to US$
(0.68) and US$(1.33) respectively for the year ended 31 December 2018.
Dividends
During 2019, US$6.2m was distributed to Shareholders of which US$1.5m related
to realisations completed in 2018 and the balance from realisations achieved
and dividends received in 2019.
Performance
The performance to Shareholders was -38.03% for the year ended 31 December
2019, compared to -10.40% for the year ended 31 December 2018.
Key Service Providers
The Company does not have any employees and as such the Board delegates
responsibility for its day to day operations to a number of key service
providers. The activities of each service provider are closely monitored by the
Board and they are required to report to the Board at the quarterly Board
meetings or more frequently if required.
In addition, a formal review of the performance of each service provider is
carried out once a year by the Management Engagement Committee.
Investment Manager
Ashmore Investment Advisors Limited is the Investment Manager. In exchange for
its services a fee is payable as detailed in note 11 to the financial
statements.
Brokers
J.P. Morgan Cazenove is the Broker.
Administrator and Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited is
the Administrator and Secretary. Further details on fee structure are included
in note 11 to the financial statements.
Custodian
Northern Trust (Guernsey) Limited is the Custodian. Further details on fee
structure are included in note 11 to the financial statements.
UK Registrar and Transfer Agent
Computershare Investor Services PLC is the UK Registrar and Transfer Agent.
Advocates
Carey Olsen (Guernsey) LLP are the Advocates to the Company.
UK Solicitor
Slaughter and May are the Solicitor to the Company.
Signed on behalf of the Board of Directors on 24 April 2020
Richard Hotchkis Christopher Legge
Chairman Chairman of the Audit Committee
Directors' Report
The Directors submit their Report together with the Company's audited financial
statements for the year ended 31 December 2019, which have been prepared in
accordance with International Financial Reporting Standards ("IFRS") as issued
by the International Accounting Standards Board (the "IASB") and are in
agreement with the accounting records, which have been properly kept in
compliance with section 238 of the Companies (Guernsey) Law, 2008.
The Company
The Company was incorporated with limited liability in Guernsey, Channel
Islands as an authorised closed-ended investment company on 21 June 2007. The
Company was launched on 7 December 2007 and the Company's shares were admitted
to the Official Listing of the London Stock Exchange on 12 December 2007,
pursuant to Chapter 14 of the Listing Rules. Following changes to the Listing
Rules on 6 April 2010, the listing became a Standard Listing. On 27 April 2011,
the UK Listing Authority confirmed the transfer of the Company from a Standard
Listing to a Premium Listing under Chapter 15 of the Listing Rules.
Results and Dividends
The results for the year are discussed in more detail in the Chairman's
Statement and the Investment Manager's Report. The Company is returning cash to
investors via regular compulsory partial redemptions and is therefore not
paying dividends.
Compulsory Partial Redemptions
Following the approval by the Company's shareholders of the wind-down proposal
as described in the circular published on 20 February 2013, during the year
ended 31 December 2019, management announced returns of capital to shareholders
by way of compulsory partial redemption of shares, with the following
redemption date:
* 7 March 2019, US$1.5m using the 31 January 2019 NAV; and
* 6 June 2019, US$4.7m using the 30 April 2019 NAV.
Between the end of the reporting year and the date when the financial
statements were authorised for issue, there were no returns of capital to
shareholders by way of compulsory partial redemptions of shares.
The amounts applied to the partial redemptions of shares comprised monies from
dividends received and from the realisation of the Company's investments up to
31 December 2019 pursuant to the wind-down of the Company.
Share Capital
The number of shares in issue at the year end is disclosed in note 8 to the
financial statements.
The Board
The Board of Directors has overall responsibility for safeguarding the
Company's assets, for the determination of the investment policy of the
Company, for reviewing the performance of the service providers and for the
Company's activities. The Directors, all of whom are non-executive, are listed
in the Board Members section.
The Board has adopted a policy on tenure that is considered appropriate for an
investment company. In accordance with the AIC Code all current Directors offer
themselves for re-election at the 2020 AGM of the Company. Mr de la Rue and Mr
Legge have both served as Directors for more than nine years. The Board does
not believe that length of service, by itself, leads to a closer relationship
with the Investment Manager or necessarily affects a Director's independence.
The Board believes that it is not in the best interests of shareholders to
refresh the Board at the current time when the Company is in managed wind-down.
The Board holds Board meetings at least four times a year. At Board meetings,
the Directors review the management of the Company's assets and all other
significant matters so as to ensure that the Directors maintain overall control
and supervision of the Company's affairs. The Board is responsible for the
appointment and monitoring of all service providers to the Company, following
updates and recommendations from the Management Engagement Committee. Between
these formal meetings there is regular contact with the Investment Manager. The
Directors are kept fully informed of investment and financial controls and
other matters that are relevant to the business of the Company and should be
brought to the attention of the Directors. The Directors also have access to
the Secretary and, where necessary in the furtherance of their duties, to
independent professional advice at the expense of the Company.
The table below sets out the number of Board, Audit and Management Engagement
Committee meetings during the year ended 31 December 2019:
Board meetings Audit Committee Management Engagement
attended meetings Committee meeting
attended attended
Richard Hotchkis 6 3 1
Steve Hicks 4 3 -
Nigel de la Rue 7 3 1
Christopher Legge 7 3 1
No. of meetings during the 7 3 1
year
In addition to the meetings above, four other committee meetings were held
during the year. Any Directors who are not members of Board Committees are
invited to attend meetings of such committees as necessary.
Directors' Interests
As at 31 December 2019, three Directors, Nigel de la Rue, Christopher Legge and
Richard Hotchkis, had beneficial interests in the Company representing 373, 232
and 139 GBP shares respectively.
The Company has adopted a code of Directors' dealings in shares, which is based
on the Model Code for directors' dealings contained in the LSE's Listing Rules.
Directors' Indemnity
Directors' and officers' liability insurance cover is in place in favour of the
Directors. The Directors entered into indemnity agreements with the Company
which provide for, subject to the provisions of the Companies (Guernsey) Law,
2008, an indemnity for Directors in respect of costs which they may incur
relating to the defence of proceedings brought against them arising out of
their positions as Directors, in which they are acquitted or judgement is given
in their favour by the Court. The agreement does not provide for any
indemnification for liability which attaches to the Directors in connection
with any negligence, unfavourable judgements, or breach of duty or trust in
relation to the Company.
Corporate Governance
To comply with the UK Listing Regime, the Company must comply with the
requirements of the UK Corporate Governance Code. The Company is also required
to comply with the Code of Corporate Governance issued by the Guernsey
Financial Services Commission.
The Company is a member of the Association of Investment Companies ("AIC") and,
by complying with the AIC Code, it is deemed to comply with both the UK
Corporate Governance Code and Guernsey Code of Corporate Governance.
The Guernsey Financial Services Commission's Code of Corporate Governance (the
"GFSC Code") provides a framework that applies to all entities licensed by the
Guernsey Financial Services Commission or which are registered or authorised as
a collective investment scheme in Guernsey. Companies reporting against the UK
Corporate Governance Code or the AIC Code are deemed to comply with the GFSC
Code.
The UK Corporate Government Code was revised in July 2018 and the updated AIC
Code was issued in February 2019, applicable to financial years beginning on or
after 1 January 2019. The Company reports against the revised UK Corporate
Government Code and updated AIC Code in this annual report.
By complying with the AIC Code and the UK Corporate Governance, the Board is
confident that information provided to shareholders is of a high standard. To
ensure ongoing compliance with the principles and recommendations of the AIC
Code, the Board receives and reviews a report from the Secretary, at each
quarterly meeting, identifying whether the Company is in compliance and
recommending any changes that are necessary.
The Company has complied with the recommendations of the AIC Code and the
relevant provisions of the UK Corporate Governance Code, except as set out
below.
The UK Corporate Governance Code includes provisions relating to:
* the role of the chief executive;
* executive Directors' remuneration;
* the need for an internal audit function;
* whistle-blowing policies;
* nomination committees;
* remuneration committees;
* Auditor's tenure and re-appointment.
For the reasons explained in the UK Corporate Governance Code, the Board
considers that these provisions are not relevant to the position of the Company
as an investment company. The Company has therefore not reported further in
respect of these provisions. The Directors are non-executive and the Company
does not have employees, hence no whistle-blowing policy is required. The
Directors have satisfied themselves that the Company's key service providers
have appropriate whistle-blowing policies and procedures and seek regular
confirmation from the service providers that nothing has arisen under those
policies and procedures which should be brought to the attention of the Board.
Details of compliance with the AIC Code are noted in the succeeding pages. The
Company has not followed the provisions in relation to auditor's tenure and
re-appointment due to the fact that the Company is in managed wind-down. There
have been no instances of non-compliance, other than those noted above.
Details and biographies for all the Directors can be found in the Board Members
section of this annual report, and on the Company's website (www.agol.com). In
considering the independence of the Chairman, the Board has taken note of the
provisions of the Code relating to independence and has determined that Richard
Hotchkis is an Independent Director. As the Chairman is an Independent
Director, no appointment of a Senior Independent Director has been made.
The Board has a breadth of experience relevant to the Company and the Directors
believe that any changes to the Board's composition can be managed without
undue disruption.
The Board, Audit Committee and Management Engagement Committee undertake an
evaluation of their own performance and that of the individual Directors on an
annual basis. In order to review their effectiveness, the Board, Audit
Committee and Management Engagement Committee carry out a process of formal
self-appraisal in order to consider how they function as a whole and also to
review the individual performance of their members. This process is conducted
by the respective Chairman reviewing the Directors' performance, contribution
and commitment to the Company. Given that the Company is in a managed
wind-down, the Board considers that it would not be justified in incurring the
expense of an independent evaluation of the Board's performance.
With the appointment to the Board of any new Director, consideration will be
given as to whether an induction process is appropriate. The Chairman regularly
reviews and agrees with each Director their training and development needs.
Ongoing Charges
Ongoing charges for the year ended 31 December 2019 have been prepared in
accordance with the AIC's recommended methodology and amounted to 1.34% of the
average NAV (31 December 2018: 0.75%). The increase in the ongoing charges
percentage between 2018 and 2019 is due to the drop in the average NAV for 2019
compared to 2018 while the expenses remained relatively similar year-on-year.
For further information, please refer to Supplementary Information (Unaudited)
- Alternative Performance Measures ("APMs").
Audit Committee
An Audit Committee has been established and holds meetings at least twice a
year for the purpose, amongst others, of considering the appointment,
independence, effectiveness and remuneration of the auditor and to review and
recommend the statutory annual report and interim report to the Board of
Directors. Full details of its functions and activities are set out in the
Report of the Audit Committee.
Nomination Committee
The Board as a whole fulfils the function of a nomination committee. The Board
considers that, given the size of the Board and that the Company has no
executives, it would not be appropriate to establish a separate nomination
committee as anticipated by the AIC Code. Neither external search consultancy
nor open advertising have been used when appointing the Chairman or the
non-executive Directors because of the specialist nature of the appointments
and the knowledge amongst existing Directors and the Investment Manager.
Conversion Committee
The Company has established a Conversion Committee, which consists of Nigel de
la Rue, Christopher Legge and Richard Hotchkis. The Conversion Committee holds
meetings in order to determine the terms of monthly/quarterly share
conversions, based on shareholders' requests received by the Company. The date
on which conversion of the shares takes place (the "Conversion Date") is
determined by the Conversion Committee, being not more than 20 business days
after the relevant Conversion Calculation Date.
The Directors approved share conversions during the year, the details of which
can be found in note 8 to the financial statements. Conversions approved by the
Directors subsequent to the year end are detailed in note 20 to the financial
statements.
Disclosure Committee
The Company has established a Disclosure Committee with formally delegated
duties and functions. The Disclosure Committee meets when required to consider
any potential disclosures to be made by the Company through a Regulatory
Information Service provider, in compliance with the Company's obligations
under the Disclosure and Transparency Rules. The Disclosure Committee is
comprised of Richard Hotchkis, Christopher Legge and Chairman, Nigel de la Rue.
The principal duty of the Disclosure Committee is to consider and approve
announcements and disclosures to be made on behalf of the Company in accordance
with the Company's ongoing compliance with applicable law.
Management Engagement Committee
The function of the Management Engagement Committee, comprised of three
independent Directors (Christopher Legge, Richard Hotchkis and Nigel de la
Rue), is to ensure that the Company's Investment Management Agreement is
competitive and reasonable for the shareholders, along with the Company's
agreements with all other third-party service providers (other than the
external auditor). The Committee also reviews the performance of the Investment
Manager and the other third-party service providers on a periodic basis.
The Company has entered into an agreement with the Investment Manager, Ashmore
Investment Advisors Limited. This sets out the Investment Manager's key
responsibilities, which include proposing an investment strategy to the Board
and, within certain authority limits, selecting investments for acquisition and
disposal and arranging appropriate lending facilities. The Investment Manager
is also responsible for all issues pertaining to asset management. The
Management Engagement Committee reviews the performance, fees and terms of the
Investment Management Agreement on an annual basis.
Despite the performance of the Company since incorporation, at its October 2018
and October 2019 meetings it was the view of the Management Engagement
Committee that it is in the best interests of the shareholders to continue with
the current appointment of the Investment Manager. At the date of this report,
the Board continues to expect that Ashmore Investment Advisors Limited will
remain the Investment Manager for the remaining life of the Company.
As all the Directors are non-executive, the Board has resolved that it is not
appropriate to form a Remuneration Committee and remuneration is reviewed and
discussed by the Board as a whole (with each Director abstaining when approving
any changes to their own fee), with independent advice from the Administrator
and the Broker. Details on Directors' remuneration can be found in the
Directors' Remuneration Report of this annual report.
The terms of reference of all the existing committees are made available by the
Company to shareholders upon request.
Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive ("AIFMD") establishes an
EU-wide harmonised framework for monitoring and supervising risks relating to
collective investment undertakings that are not subject to the Undertaking for
Collective Investment in Transferable Securities ("UCITS") regime. AGOL meets
the definition of an Alternative Investment Fund ("AIF") under this legislation
and is subject to the AIFMD framework.
Ashmore Investment Advisors Limited ("AIAL") was authorised as an Alternative
Investment Fund Manager ("AIFM") by the Financial Conduct Authority ("FCA") on
18 July 2014. Effective 18 July 2014, the Board appointed AIAL as the Company's
AIFM and AIAL assumed the role of Investment Manager to the Company from
Ashmore Investment Management Limited ("AIML"), pursuant to a Novation of the 5
November 2007 Investment Management Agreement. Prior to 18 July 2014, AIML
served as Investment Manager to the Company. The investment advisory services
provided to the Company were novated to AIAL to comply with the new AIFMD
legislation.
AIAL and AIML are both wholly-owned subsidiaries of Ashmore Investments (UK)
Limited, which is a wholly-owned subsidiary of the Ashmore Group plc ("Ashmore
Group"). The novation of the Investment Management Agreement with the Company
did not result in any change in: (i) the manner in which investment management
services are provided (including the manner in which the Company is managed or
operated) as contemplated by the Investment Management Agreement; (ii) the
personnel who are responsible for providing or supervising the provision of
investment management services (including those responsible for the management,
portfolio management and operation of the Company); or (iii) the personnel
ultimately responsible for overseeing such provision of services.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act ("FATCA") is aimed at determining the
ownership of US assets in foreign accounts and improving US tax compliance with
respect to those assets. The legislation is wide-encompassing and affects all
non-US funds, albeit some more than others. On 13 December 2013, the States of
Guernsey entered into an Inter-Governmental Agreement ("IGA") with the US
Treasury in order to facilitate the requirements of FATCA through local
legislation. The IGA and the associated guidance notes set out the requirements
and obligations of the Company under the rules. For the purposes of this
agreement, the Company registered with the US Internal Revenue Services ("IRS")
as a Guernsey reporting Foreign Financial Institution ("FFI"), received a
Global Intermediary Identification Number (28C9PC.99999.SL.831), and can be
found on the IRS FFI list.
UK Guernsey Intergovernmental Agreement
The Organisation for Economic Co-operation and Development ("OECD") introduced
the Common Reporting Standard ("CRS") which acts as the single global standard
governing the automatic exchange of financial account information between tax
authorities of tax jurisdictions that have signed up to the standard. The CRS
has been adopted by Guernsey and came into effect on 1 January 2016. It
replaced the intergovernmental agreement between the UK and Guernsey to improve
international tax compliance that had previously applied in respect of 2014 and
2015. The first report for CRS was made to the Director of Income Tax by 30
June 2017.
The Board takes the necessary actions to ensure that the Company is compliant
with Guernsey regulations and guidance in this regard.
Criminal Finances Act
In respect of the Criminal Finances Act 2017 which has introduced a new
corporate criminal offence ("CCO") of 'failing to take reasonable steps to
prevent the facilitation of tax evasion', the Board confirms that they are
committed to zero tolerance towards the criminal facilitation of tax evasion.
Relations with Shareholders
The Investment Manager maintains a regular dialogue with institutional
shareholders, the feedback from which is reported to the Board. In addition,
Board members are available to respond to shareholders' questions at the Annual
General Meeting.
There were no significant votes (being greater than 20%) cast against the
resolutions proposed at the 2019 AGM.
The Company announces its NAV on a monthly basis to the London Stock Exchange.
Shareholders who wish to communicate with the Board should contact the
Administrator in the first instance, whose contact details can be found on the
Company's website.
As at 31 December 2019, the following entities had significant shareholdings in
the Company:
Significant Shareholder US$ shares GBP shares % holding in
held held Company
The Bank of New York Nominees Limited 1,590,800 7,107 32.66%
Goldman Sachs Securities Nominees Limited 696,701 37,626 15.15%
Chase Nominees Limited 2 615,693 15.11%
Nortrust Nominees Limited 416,331 3,937 8.60%
Nordea Bank Danmark A/S 250,284 - 5.11%
Lynchwood Nominees Limited 54,412 151,080 4.82%
Aurora Nominees Limited 174,590 6,362 3.72%
Vidacos Nominees Limited 178,586 1,014 3.67%
HSBC Global Custody Nominees UK Limited 104,392 24,970 2.74%
Signed on behalf of the Board of Directors on 24 April 2020
Richard Hotchkis Christopher Legge
Chairman Chairman of the Audit
Committee
Report of the Audit Committee
On the following pages, we present the Audit Committee (the "Committee") Report
for 2019, setting out the Committee's structure and composition, principal
duties and key activities during the year. As in previous years, the Committee
has reviewed the Company's financial reporting, the independence and
effectiveness of the independent auditor and the internal control and risk
management systems of the Company's service providers.
Structure and Composition
The Committee consists of Nigel de la Rue, Richard Hotchkis and Chairman
Christopher Legge. Appointment to the Committee is for a period of up to three
years, which may be extended for two further three-year periods provided that
the majority of the Committee remains independent of the Investment Manager.
Despite Nigel de la Rue's tenure being extended on three occasions, it was
deemed appropriate to extend his membership in the Committee due to the Company
being in wind-down. Nigel de la Rue, Christopher Legge and Richard Hotchkis are
currently serving their fifth, fourth and third, three-year terms respectively.
Nigel de la Rue served more than nine years and was re-elected as a Director of
the Company at the Annual General Meeting held on 23 August 2019. Nigel de la
Rue and Christopher Legge also both served as directors for more than nine
years but remain on the Board for the reasons stated as in the Directors'
Report.
An induction programme is provided for new Committee members and ongoing
training is available for all members as required.
The Board consider Mr Hotchkis to be independent and in view of the small size
of the Board consider him to a valuable member of the Audit Committee.
The Committee conducts formal meetings at least twice a year. The first table
of the Directors' Report sets out the number of Committee meetings held during
the year ended 31 December 2019 and the number of such meetings attended by
each Committee member. The independent auditor is invited to attend meetings at
which the annual reports are presented to the Committee as well as the annual
audit planning meeting.
Principal Duties
The role of the Committee includes:
· to monitor the integrity of the financial statements of the Company and any
formal announcements relating to the Company's financial performance, reviewing
significant financial reporting judgements contained therein;
· to review the Company's internal financial controls and, unless expressly
addressed by the Board itself, to review the Company's internal control and
risk management systems;
· to make recommendations to the Board, and for them to be subsequently put
to shareholders for their approval at the Annual General Meeting, in relation
to the appointment, re-appointment or removal of the external auditor and to
approve the remuneration and terms of engagement of the external auditor;
· to review and monitor the external auditor's independence and objectivity
and the effectiveness of the audit process, taking into consideration relevant
UK professional and regulatory requirements;
· to develop and implement policy on the engagement of the external auditor
to supply non-audit services, taking into account relevant ethical guidance
regarding the provision of non-audit services by the external audit firm; and
to report to the Board, identifying any matters in respect of which it
considers that action or improvement is needed, making recommendations as to
the steps to be taken; and
· to report to the Board on how it has discharged its responsibilities.
The complete details of the Committee's formal duties and responsibilities are
set out in the Committee's terms of reference, which can be obtained from the
Administrator.
Independent Auditor (Independence and Effectiveness)
KPMG Channel Islands Limited ("KPMG") have expressed their willingness to
continue in office as auditor and a resolution proposing their re-appointment
will be submitted at the Annual General Meeting. According to the AIC Code, the
Committee is responsible for conducting a tender process and for making
recommendations to the Board about the appointment, re-appointment and removal
of the external auditor. However, this is not appropriate due to the Company
being in wind-down. The audit engagement director rotates every five years.
The independence and objectivity of the independent auditor is reviewed by the
Committee, which also reviews the terms under which the independent auditor is
appointed to perform non-audit services. The Committee has also established
pre-approval policies and procedures for the engagement of KPMG to provide
audit, assurance and tax services.
The audit and non-audit fees proposed by the auditor each year are reviewed by
the Committee taking into account the Company's structure, operations and other
requirements during the year, and the Committee makes recommendations to the
Board.
Committee Evaluations during the Year
The following sections discuss the assessments made by the Committee during the
year.
Effectiveness of the Audit
The Committee had formal meetings with KPMG during the course of the year: 1)
before the start of the audit to discuss formal planning, to discuss any
potential significant issues and to agree the scope of the audit, and 2) after
the audit work was concluded to discuss any significant issues encountered.
The Board reviewed the effectiveness and independence of KPMG by using a number
of qualitative measures, including but not limited to:
· the audit plan presented before the start of the audit;
· the post audit report and presentation, including deviations from the
original plan;
· any changes to audit personnel;
· the auditor's own internal procedures to identify threats to independence;
· feedback from both the Investment Manager and the Administrator.
Further to the above, on the conclusion of the 2019 audit, the Committee
performed a specific evaluation of the performance of the independent auditor.
This covered qualitative areas such as the quality of the audit team, business
understanding, audit approach and management.
There were no significant adverse findings from this evaluation.
Significant Financial Statement Issues
The Committee's review of the interim and annual financial statements focused
on the following areas:
The financial statements have been prepared on the going concern basis, despite
the managed wind-down of the Company which was approved by the shareholders
during the EGM of 13 March 2013. The Directors discussed the rationale for this
accounting basis and they noted that they had examined significant areas of
going concern risk, and were satisfied that no material exposures existed.
The valuation of the Company's investment portfolio, given it represents the
majority of the total assets of the Company requires the use of significant
judgement for unlisted investments. The Directors are satisfied with the
Investment Manager's Pricing Methodology and Valuation Committee ("PMVC")'s
controls, and the appropriateness of the valuation techniques, inputs and
assumptions used in relation to valuation of unlisted investments. The
foregoing matters were discussed during the planning and testing stages of the
audit and there were no significant disagreements noted between management and
the independent auditor.
The Committee is satisfied that the significant assumptions used for
determining the value of assets and liabilities have been appropriately
scrutinised and challenged and are sufficiently robust. The Committee further
concludes that the financial statements, taken as a whole, are fair, balanced
and understandable and provide the information necessary for shareholders to
assess the Company's performance, business model and strategy.
The Independent Auditor reported to the Committee that no material unadjusted
misstatements were found in the course of its work. Furthermore, both the
Investment Manager and the Administrator confirmed to the Committee that they
were not aware of any material unadjusted misstatements, including matters
relating to presentation. The Committee confirms that it is satisfied that the
Independent Auditor has fulfilled its responsibilities with regard to diligence
and professional scepticism.
Audit Fees and Safeguards for Non-Audit Services
Where non-audit services are to be provided to the Company by its auditor, full
consideration of the financial and other implications for the independence of
the auditor arising from any such engagement are considered prior to
proceeding.
The table below summarises the remuneration of KPMG and of other KPMG
affiliates for audit and non-audit services provided to the Company for the
years ended 31 December 2019 and 31 December 2018:
Year ended Year ended
31 December 2019 31 December 2018
US$ US$
Audit and audit related
services
- Annual audit 55,352 48,664
Internal Control
The Committee has reviewed the need for an internal audit function. Based on
reviews of control reports, the Committee has concluded that the systems and
procedures employed by the Administrator and the Investment Manager, including
their internal audit functions, provide sufficient assurance that a sound
system of internal control which safeguards the Company's assets is maintained.
An internal audit function specific to the Company is therefore considered
unnecessary.
Conclusions and Recommendations
The Committee is satisfied that the external auditor remains independent and
confirms that the Committee also met with the external auditor without the
Investment Manager or Administrator (Northern Trust International Fund
Administration Services (Guernsey) Limited) being present, so as to provide a
forum for the external auditor to raise any matters of concern in confidence.
Consequent to the review process on the effectiveness of the independent audit
and the review of the audit and non-audit services that the Independent Auditor
delivers, the Committee has recommended that KPMG be reappointed for the coming
financial year.
For any questions on the activities of the Committee not addressed in the
foregoing, a member of the Committee remains available to attend each Annual
General Meeting to respond to such questions.
Christopher Legge
Chairman of the Audit Committee
24 April 2020
Statement of Directors' Responsibility in respect of the Annual Report and
Audited Financial Statements
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with International Financial Reporting Standards as
issued by the IASB and applicable law.
The financial statements are required by law to give a true and fair view of
the state of affairs of the Company and of the profit or loss of the Company
for that period. In preparing these financial statements, the Directors are
required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable and prudent;
· state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
· assess the Company's ability to continue as going concern, disclosing, as
applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with
the Companies (Guernsey) Law, 2008. They are responsible for such internal
control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error, and have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website and for
the preparation and dissemination of financial statements. Legislation in
Guernsey governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions. The Directors have carried
out a robust assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance, solvency or
liquidity.
Disclosure of Information to the Auditor
The Directors who held office at the date of approval of the financial
statements confirm that, so far as they are each aware:
· there is no relevant audit information of which the Company's auditor is
unaware; and
· each Director has taken all the steps that they ought to have taken as a
Director to make themselves aware of any relevant audit information and to
establish that the Company's auditor is aware of that information.
Statement under the Disclosure Guidance and Transparency Rules 4.1.12
We confirm that to the best of our knowledge and belief:
· the financial statements, prepared in accordance with International
Financial Reporting Standards as issued by the IASB, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company;
· the Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for the
shareholders to assess the Company's performance, business model and strategy;
and
· the Chairman's Statement, the Investment Manager's Report and the
Directors' Report include a fair review of the development and performance of
the business and the position of the Company. A description of the principal
risks and uncertainties that the Company faces is provided in note 14 of the
financial statements.
Signed on behalf of the Board of Directors on 24 April 2020
Richard Hotchkis Christopher Legge
Chairman Chairman of the Audit
Committee
Directors' Remuneration Report
Introduction
An ordinary resolution for the approval of the annual remuneration report will
be put to shareholders at the Annual General Meeting.
Remuneration Policy
As all the Directors are non-executive, the Board has resolved that it is not
appropriate to form a Remuneration Committee and remuneration is reviewed and
discussed by the Board as a whole. Directors' remuneration is considered on a
periodic basis.
The Company's policy is that the fees payable to the Directors should reflect
the time spent by the Directors on the Company's affairs in addition to the
responsibilities borne by the Directors, and should be sufficient to attract,
retain and motivate Directors of the quality required to run the Company
successfully. The Chairman of the Board is paid a higher fee in recognition of
his additional responsibilities, as is the Chairman of the Audit Committee. The
policy is to review fee rates periodically, although such a review will not
necessarily result in any changes to the rates, and account is taken of fees
paid to the Directors of comparable companies.
There are no long-term incentive schemes provided by the Company and no
performance fees are paid to Directors.
In accordance with Article 18.3 of the Company's Articles of Incorporation, at
each Annual General Meeting one-third of the Directors retire from office via
rotation and are put forward for re-election based on continued satisfactory
performance. Any Director who serves nine years on the Board will thereafter be
put forward for re-election on an annual basis. Directors' appointments can
also be terminated in accordance with the Articles. Should shareholders vote
against a Director standing for re-election, the Director affected will not be
entitled to any compensation. There are no set notice periods and a Director
may resign by giving notice in writing to the Board at any time.
As Steve Hicks is connected to the Investment Manager and is therefore deemed
not to be an Independent Director, he shall be put forward for re-election on
an annual basis.
Directors' Fees
Directors are remunerated in the form of fees, payable monthly in arrears, to
the Directors personally. No other remuneration or compensation was paid or
payable by the Company during the year to any of the Directors apart from the
reimbursement of allowable expenses.
The fees payable by the Company in respect of each of the Directors who served
during the years ended 31 December 2019 and 2018, were as follows:
Year ended Year ended
31 December 2019 31 December 2018
GBP GBP
Richard Hotchkis 21,240 28,350
Steve Hicks* - -
Christopher Legge 21,240 28,350
Nigel de la Rue 20,040 26,730
Total 62,520 83,430
* Non-independent Director
The Directors' fees were reduced by 25% with effect from 1 January 2019.
Signed on behalf of the Board of Directors on 24 April 2020
Richard Hotchkis Christopher Legge
Chairman Chairman of the
Audit Committee
Our opinion is unmodified
We have audited the financial statements of Ashmore Global Opportunities
Limited (the "Company"), which comprise the statement of financial position as
at 31 December 2019, the statements of comprehensive income, changes in equity
and cash flows for the year then ended, and notes, comprising significant
accounting policies and other explanatory information including a schedule of
investments.
In our opinion, the accompanying financial statements:
· give a true and fair view of the financial position of the Company as at
31 December 2019, and of the Company's financial performance and the Company's
cash flows for the year then ended;
· are prepared in accordance with International Financial Reporting
Standards (IFRS); and
· comply with the Companies (Guernsey) Law, 2008.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities are described below.
We have fulfilled our ethical responsibilities under, and are independent of
the Company in accordance with, UK ethical requirements including FRC Ethical
Standards as applied to listed entities. We believe that the audit evidence we
have obtained is a sufficient and appropriate basis for our opinion.
Key Audit Matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of
most significance in the audit of the financial statements and include the most
significant assessed risks of material misstatement (whether or not due to
fraud) identified by us, including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. In arriving
at our audit opinion above, the key audit matters were as follows (unchanged
from 2018):
The risk Our response
Valuation of financial assets at fair value through profit or loss
US$ 14.6m; (2018: US$ 31.2m)
Refer to the Report of the Audit Committee, note 2d accounting policy and note
7 disclosures
Basis: Our audit procedures included:
The Company invests in an unlisted Internal Control:
private equity investment and a We evaluated the design and implementation of
portfolio of unquoted investment the Investment Manager's Pricing Methodology and
funds (together the "investment Valuation Committee ("PMVC")'s control in
portfolio"). relation to the valuation of the unlisted
private equity investment.
The investment portfolio represents
the most significant balance on the Challenging managements' assumptions and inputs
statement of financial position and including use of our KPMG Specialist:
is the principal driver of the
Company's net asset value ("NAV") For the investment into the unlisted private
(2019: 103.0%; 2018: 102.2%). equity investment (51.3% of NAV (US$ 7.3m)), we
used our own valuation specialist to evaluate
The Company's investment in an the methodology applied by the PMVC and
unlisted private equity investment challenge the key assumptions used in preparing
is valued with the assistance of the valuation by reference to observable
the Company's third party valuation independent market data, information and
agent based on a valuation model industry expectations. We corroborated material
following the International Private investee company inputs used in the valuation
Equity and Venture Capital model to supporting documentation. We also
Valuation Guidelines (December evaluated the Company's third party valuation
2018) agent in the context of their ability to
appropriately challenge and review the fair
The Company's investments in value of the investment valuation, by assessing
unquoted investment funds are their objectivity, capabilities and competence.
valued on the basis of the latest
NAV provided by the respective For unlisted investments in other funds (10.0%
administrators of those unquoted of NAV (US$ 1.4m)) we obtained net asset value
investment funds. per share confirmations directly from the
underlying funds' administrators. We inspected
Risk: the latest audited financial statements of these
underlying funds in order to assess the
The valuation of the Company's appropriateness of the accounting framework
investment portfolio is considered utilised, any modifications to the audit opinion
a significant area of our audit, and other disclosures which may be relevant to
given that it represents the the valuation of the Company's investments.
majority of the net assets of the
Company and in view of the For investments in other Ashmore special
significance of estimates involved. situation investment funds, which are also
In addition, judgements are audited by KPMG Channel Islands Limited (all
involved in the determination of with coterminous year ends), (41.7% of NAV (US$
fair value of the unlisted private 5.9m)) we undertook discussions on key audit
equity investment. findings with the audit teams of those funds and
examined their coterminous audited financial
statements to assess the appropriateness of the
accounting framework utilized, any modifications
to the audit opinion and other disclosures which
may be relevant to the valuation of the
Company's investments.
Assessing disclosures:
We have also assessed the Company's disclosures
(see note 2d) in relation to the use of
estimates and judgements regarding fair value of
investments and the Company's valuation policies
adopted and fair value disclosures in note 7 for
compliance with IFRS.
Ability to continue as a going concern entity
Refer to note 2b accounting policies
Basis: Our audit procedures included:
At an Extraordinary General Meeting Holding discussions with the Board of Directors
in March 2013, the shareholders and the Investment Manager to understand the
approved proposals for a managed proposed investment portfolio realisation
wind-down of the Company's programme and to assess the implications of the
investment portfolio, changing the managed wind-down on the financial statements.
investment objective of the Company We also challenged the Board of Directors' and
to the realisation of the Company's Investment Manager's assessment of the Company's
assets in an orderly manner in ability to continue as a going concern against
order to return cash to our own audit knowledge and expectations about
shareholders. the Company.
Risk:
There is a risk that the directors Assessing disclosures:
may not be able to achieve the
wind-down in an orderly manner and We also considered the Company's going concern
if this was the case then it would disclosure in note 2b of the financial
impact their ability to continue as statements for compliance with IFRS.
a going concern.
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at US$ 283,000,
determined with reference to a benchmark of net assets of $ 14.2m, of which it
represents approximately 2.0% (2018: 3.0%).
We reported to the Audit Committee any corrected or uncorrected identified
misstatements exceeding US$ 14,000, in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified
above, which has informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those areas as
detailed above.
We have nothing to report on going concern
We identified going concern as a key audit matter on this report. Based on the
work described in our response to that key audit matter above, we are required
to report to you if we have anything material to add or draw attention to in
relation to the directors' statement in note 2b to the financial statements on
the use of the going concern basis of accounting with no material uncertainties
that may cast significant doubt over the Company's use of that basis for a
period of at least twelve months from the date of approval of the financial
statements. We have nothing to report in this respect.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report but does not include
the financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and we do not express
an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is
to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we
have nothing material to add or draw attention to in relation to:
* the directors' confirmation within the long term viability statement that
they have carried out a robust assessment of the principal risks facing the
Company, including those that would threaten its business model, future
performance, solvency or liquidity;
* the disclosures describing these risks and explaining how they are being
managed or mitigated;
* the directors' explanation in the long term viability statement as to how
they have assessed the prospects of the Company, over what period they have
done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Corporate governance disclosures
We are required to report to you if:
* we have identified material inconsistencies between the knowledge we
acquired during our financial statements audit and the directors' statement
that they consider that the annual report and financial statements taken as
a whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy; or
· the section of the annual report describing the work of the Audit
Committee does not appropriately address matters communicated by us to the
Audit Committee.
We are required to report to you if the Corporate Governance Statement does not
properly disclose a departure from the provisions of the UK Corporate
Governance Code specified by the Listing Rules for our review.
We have nothing to report to you in these respects.
We have nothing to report on other matters on which we are required to report
by exception
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:
* the Company has not kept proper accounting records; or
* the financial statements are not in agreement with the accounting records;
or
* we have not received all the information and explanations, which to the
best of our knowledge and belief are necessary for the purpose of our
audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on 24, the directors are
responsible for: the preparation of the financial statements including being
satisfied that they give a true and fair view; such internal control as they
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error; assessing
the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going concern basis
of accounting unless they either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor's report. Reasonable assurance
is a high level of assurance, but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material
if, individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the FRC's website
at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by persons other than
the Company's members as a body
This report is made solely to the Company's members, as a body, in accordance
with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has
been undertaken so that we might state to the Company's members those matters
we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members, as a
body, for our audit work, for this report, or for the opinions we have formed.
Steven Stormonth
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors, Guernsey
24 April 2020
Statement of Financial Position
As at 31 December 2019
31 December 2019 31 December 2018
Note US$ US$
Assets
Cash and cash equivalents 691,726
413,401
Other financial assets 6
- 5,366
Financial assets at fair value through 4 14,713,255
profit or loss ("FVTPL") 31,179,252
Total assets 15,404,981
31,598,019
Equity
Capital and reserves attributable to
equity holders
of the Company
Special reserve 8 375,709,891
381,934,791
Retained earnings (361,539,120)
(351,416,351)
Total equity 14,170,771
30,518,440
Liabilities
Current liabilities
Financial liabilities at FVTPL 4 12,409
70,234
Other financial liabilities 6 1,221,801
1,009,345
Total liabilities 1,234,210
1,079,579
Total equity and liabilities 15,404,981
31,598,019
Net asset values
Net assets per US$ share 9 US$2.89 US$5.05
Net assets per GBP share 9 GBP2.63 GBP4.73
The financial statements were approved by the Board of Directors on 24 April
2020, and were signed on its behalf by:
Richard Hotchkis Christopher Legge
Chairman Chairman of the
Audit Committee
Statement of Comprehensive Income
For the year ended 31 December 2019
Year ended Year ended
31 December 2019 31 December 2018
Note US$ US$
Interest income calculated using the effective 10
interest method 18,073 55,724
Net foreign currency gain
45,098 46,734
Net loss from financial instruments at FVTPL 5
(9,637,810) (6,094,473)
Total net loss
(9,574,639) (5,992,015)
Expenses
Incentive fees 11a
(237,746) (30,175)
Directors' remuneration 11b
(81,670) (113,016)
Investment management fees 11a
(69,273) (60,397)
Fund administration fees 11c
(4,658) (9,683)
Custody fees 11d
(749) (5,606)
Other operating expenses 12
(154,034) (137,937)
Total operating expenses
(548,130) (356,814)
Loss for the year
(10,122,769) (6,348,829)
Total loss and comprehensive income
for the year (10,122,769) (6,348,829)
Earnings per share
Basic and diluted loss per US$ share 13 US$(1.90) US$(0.68)
Basic and diluted loss per GBP share 13 US$(2.19) US$(1.33)
All items derive from continuing activities.
Statement of Changes in Equity
For the year ended 31 December 2019
Special Retained
reserve earnings Total
Note US$ US$ US$
Total equity as at 1 January 2019 381,934,791 (351,416,351)
30,518,440
Total loss and comprehensive income for (10,122,769)
the year - (10,122,769)
Capital distribution 8 (6,224,900)
- (6,224,900)
Total equity as at 31 December 2019 375,709,891 (361,539,120)
14,170,771
Total equity as at 1 January 2018 407,583,513 (345,067,522)
62,515,991
Total loss and comprehensive income for (6,348,829)
the year - (6,348,829)
Capital distribution 8 (25,648,722)
- (25,648,722)
Total equity as at 31 December 2018 381,934,791 (351,416,351)
30,518,440
Statement of Cash Flows
For the year ended 31 December 2019
Year ended Year ended
31 December 2019 31 December 2018
Note US$ US$
Cash flows from operating activities
Net bank interest received
18,073 55,724
Dividends received
1,083,815 21,243,875
Net operating expenses paid
(330,308) (435,184)
Net cash from operating activities
771,580 20,864,415
Cash flows from investment activities
Sales of investments
13,303,096 6,890,914
Purchases of investments * *
(7,499,906) (2,000,000)
Net cash flows on derivative instruments and
foreign exchange (71,545) (366,942)
Net cash from investment activities
5,731,645 4,523,972
Cash flows from financing activities
Capital distributions 8
(6,224,900) (25,648,722)
Net cash used in financing activities
(6,224,900) (25,648,722)
Net increase/(decrease) in cash and cash
equivalents 278,325 (260,335)
Reconciliation of net cash flows to movement in cash and cash
equivalents
Cash and cash equivalents at the beginning of the
year 413,401 673,736
Net increase/(decrease) in cash and cash
equivalents 278,325 (260,335)
Cash and cash equivalents at the end of the
year 691,726 413,401
* This amount represents a purchase of shares in the Ashmore SICAV 2 Global
Liquidity US$ Money Market Fund, which is solely related to the cash
management of US$ on account. This is not the purchase of a new investment.
Notes to the Financial Statements - Schedule of Investments
As at 31 December 2019
Description of investments Fair value % of
US$ net assets
AEI Inc - Equity
7,271,092 51.31
Ashmore Global Special Situations Fund 4 LP
2,803,057 19.78
Ashmore Global Special Situations Fund 5 LP
1,601,550 11.30
AA Development Capital India Fund 1, LLC
1,420,471 10.02
Ashmore Global Special Situations Fund 3 LP
718,268 5.07
Ashmore Global Special Situations Fund 2 Limited
472,037 3.33
VTBC Ashmore Real Estate Partners 1 LP
311,358 2.20
Total investments at fair value
14,597,833 103.01
Net other current liabilities
(427,062) (3.01)
Total net assets
14,170,771 100.00
Notes to the Financial Statements
1. General Information
Ashmore Global Opportunities Limited (the "Company" or "AGOL") is an authorised
closed ended investment company incorporated in Guernsey on 21 June 2007 with
an indefinite life and a listing on the London Stock Exchange. As an existing
closed ended Company, AGOL is deemed to have been granted an authorisation in
accordance with section 8 of the Protection of Investors (Bailiwick of
Guernsey) Law, 1987, as amended, and rule 7.02(2) of the Authorised Closed
Ended Investment Schemes Rules 2008 on the same date as the Company obtained
consent under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959
to 1989. AGOL's investment objective is the realisation of the Company's assets
in an orderly manner in order to return cash to shareholders.
The Company was launched on 7 December 2007 and the Company's shares were
admitted to the Official Listing of the London Stock Exchange on 12 December
2007, pursuant to Chapter 14 of the Listing Rules. Following changes to the
Listing Rules on 6 April 2010, the listing became a Standard Listing. On 27
April 2011, the UK Listing Authority confirmed the transfer of the Company from
a Standard Listing to a Premium Listing under Chapter 15 of the Listing Rules.
On 20 February 2013, the Board of Directors proposed a managed wind-down of the
Company following consultation with the Investment Manager and the main
shareholders. The proposal was accepted during the Extraordinary General
Meeting ("EGM") of shareholders on 13 March 2013.
The Directors have assessed the impact of the Alternative Investment Fund
Managers Directive ("AIFMD") on the financial statements of the Company and
have concluded that the Company is exempt from following Chapter V, Section 1,
Articles 103 - 111 of the European Commission's Level 2 Delegated Regulation on
the basis of the operations of the Company: it being (i) a Non-EEA AIF, and
(ii) not being marketed in the European Union, as defined by the Directive.
Investment Strategy
Prior to the Extraordinary General Meeting ("EGM") of shareholders on 13 March
2013, the Company's investment objective was to deploy capital in a diversified
portfolio of global emerging market strategies and actively manage these with a
view to maximising total returns. This was implemented by investing across
various investment themes (Alternatives including Special Situations and Real
Estate, External Debt, Local Currency, Equities, Corporate Debt and
Multi-Strategy), with a principal focus on Special Situations.
The Company is domiciled in Guernsey, Channel Islands. Most of the Company's
income is from investment entities incorporated in Guernsey.
Significant Shareholders
The Company has a diversified shareholder population. As at 31 December 2019
and 31 December 2018, The Bank of New York Nominees Limited, Goldman Sachs
Securities Nominees Limited and Chase Nominees Limited held more than 10% of
the Company's NAV. Significant shareholders are listed in the Directors'
Report.
2. Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these financial
statements are set out below. These policies have been consistently applied for
the years presented, unless otherwise stated.
a) Statement of Compliance
These audited financial statements, which give a true and fair view, are
prepared in accordance with: International Financial Reporting Standards
("IFRS"); and the Listing Rules of the UK Listing Authority. They comply with
the Companies (Guernsey) Law, 2008 (the "Law").
b) Basis of Preparation
These audited financial statements have been prepared under the historical cost
convention, except for financial assets and financial liabilities at fair value
through profit and loss ("FVTPL").
These audited financial statements have been prepared on the going concern
basis, despite the managed wind-down of the Company approved by the
shareholders on 13 March 2013. The factors surrounding this are detailed in the
Strategic Report. The Board has concluded that the managed wind-down of the
Company has no significant impact on the valuation of the Company's investments
or its ability to meet liabilities as they fall due for the foreseeable future,
including for at least 12 months from the date of this report.
The preparation of financial statements in conformity with IFRS requires
judgements, estimates and assumptions that affect the application of policies
and the reported amounts of assets, liabilities, income and expenses.
These estimates and their associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making judgements
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
The estimates and their underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period, or in the
period of revision and future periods if the revision affects both current and
future periods.
The key estimates and judgements made by management in the application of IFRS
that have a significant effect on the financial statements relate to the
valuation of unquoted financial instruments as described in notes 2d and 7b.
c) Foreign Currency
i) Functional and presentational currency
These audited financial statements have been prepared in US dollars ("US$"),
which is the Company's functional and presentational currency, rounded to the
nearest US$. The Board of Directors considers the US$ to be the currency that
most faithfully represents the economic effect on the Company of the underlying
transactions, events and conditions. The US$ is the currency in which the
Company measures its performance and reports its results.
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the date of the transaction. Foreign currency
monetary assets and liabilities are translated into the functional currency
using the exchange rate prevailing at the Statement of Financial Position date
(the "reporting date").
Foreign exchange gains and losses arising from translation are included in net
foreign currency gain in the Statement of Comprehensive Income.
Foreign exchange gains and losses relating to the financial assets and
liabilities carried at FVTPL are presented in the Statement of Comprehensive
Income within "Net loss from financial instruments at FVTPL".
d) Financial Assets and Financial Liabilities
i) Recognition and initial measurement
The Company recognises financial assets and financial liabilities at FVTPL on
the trade date, which is the date on which the Company becomes a party to the
contractual provisions of the instrument. Other financial assets and financial
liabilities are recognised on the date on which they are originated.
Financial assets and financial liabilities at FVTPL are initially measured at
fair value, with transaction costs recognised as expenses in the Statement of
Comprehensive Income. Financial assets or financial liabilities not at FVTPL
are initially measured at fair value and include transaction costs that are
directly attributable to their acquisition or issue.
ii) Classification of financial assets
On initial recognition, the Company classifies financial assets as measured at
amortised cost or FVTPL.
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 ("SPPI").
On initial recognition of an equity investment that is not held for trading,
the Company may irrevocably elect to present subsequent changes in the
investment's fair value in other comprehensive income. This election is made on
an investment-by-investment basis. All other financial assets of the Company,
not classified as measured at amortised cost or fair value through other
comprehensive income, are measured at FVTPL.
- Business model assessment
In making an assessment of the objective of the business model in which a
financial asset is held, the Company considers all of the relevant information
about how the business is managed, including:
· the documented investment strategy and the execution of this strategy in
practice. This includes whether the investment strategy focuses on earning
contractual interest income, maintaining a particular interest rate profile,
matching the duration of the financial assets to the duration of any related
liabilities or expected cash outflows or realising cash flows through the sale
of the assets;
· how the performance of the portfolio is evaluated and reported to the
Company's management;
· the risks that affect the performance of the business model (and the
financial assets held within that business model) and how those risks are
managed;
· how the investment manager is compensated: e.g. whether compensation is
based on the fair value of the assets managed or the contractual cash flows
collected; and
· the frequency, volume and timing of sales of financial assets in prior
periods, the reasons for such sales and expectations about future sales
activity.
Transfers of financial assets to third parties in transactions that do not
qualify for derecognition are not considered sales for this purpose, consistent
with the Company's continuing recognition of the assets.
The Company has determined that it has two business models.
· Held-to-collect business model: this includes cash and cash equivalents,
balances due from brokers and other assets. These financial assets are held to
collect contractual cash flows.
· Other business model: this includes equity investments, investments in
quoted and unquoted Funds and forward foreign currency contracts. These
financial assets are managed and their performance is evaluated, on a fair
value basis.
- Assessment of whether contractual cash flows are SPPI
For the purposes of this assessment, 'principal' is defined as the fair value
of the financial asset on initial recognition. 'Interest' is defined as
consideration for the time value of money and for the credit risk associated
with the principal amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and administrative
costs) as well as a profit margin.
In assessing whether the contractual cash flows are SPPI, the Company considers
the contractual terms of the instrument. This includes assessing whether the
financial asset contains a contractual term that could change the timing or
amount of contractual cash flows such that it would not meet this condition. In
making this assessment, the Company considers:
· contingent events that would change the amount or timing of cash flows;
· leverage features;
· prepayment and extension features;
· terms that limit the Company's claim to cash flows from specified assets
(e.g. non-recourse features); and
· features that modify consideration of the time value of money (e.g.
periodical reset of interest rates).
- Reclassifications
Financial assets are not reclassified subsequent to their initial recognition
unless the Company were to change its business model for managing financial
assets, in which case all affected financial assets would be reclassified on
the first day of the first reporting period following the change in the
business model.
ii) Subsequent measurement of financial assets
* Fair value measurement
Subsequent to initial recognition, all financial assets at FVTPL are measured
at fair value. Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
Gains and losses arising from changes in the fair value of financial assets at
FVTPL are presented in the Statement of Comprehensive Income within "Net loss
from financial instruments at FVTPL" in the period in which they arise and can
be unrealised or realised.
Unrealised gains and losses comprise changes to the fair value of financial
instruments for the year and the reversal of prior period unrealised gains and
losses for financial instruments which were realised in the reporting period.
Realised gains and losses on the disposal of financial instruments classified
as at FVTPL are calculated using the average cost method.
* Valuation of investments in Funds
Investments in quoted open-ended Funds are valued by reference to the most
recent prices quoted on a recognised investment exchange. Investments in
unquoted Funds are valued on the basis of the latest NAV provided by the
administrator of the unquoted Fund in question, as at the close of business on
the relevant valuation day.
* Valuation of direct investments
Direct investments may be effected via holding vehicles. The valuations of such
positions are based on the valuation of the underlying investments. Where
possible the fair values of direct debt or equity investments are based on
their quoted market prices at the reporting date, without any deduction for
estimated future selling costs. If a quoted market price is not available on a
recognised stock exchange or from a broker/dealer for non-exchange traded
financial instruments, the fair value is estimated using valuation techniques,
as described in note 7.
* Valuation of forward foreign currency contracts
Open forward foreign currency contracts at the reporting date are valued at
forward currency rates prevailing on that date. The change in the fair value of
open forward foreign currency contracts is calculated as the difference between
the contract rate and the forward currency rate as at the reporting date.
The Company does not apply hedge accounting.
* Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective
interest method. Interest income is recognised in "Interest income calculated
using the effective interest method", foreign exchange gains and losses are
recognised in "Net foreign currency gain" and impairment (if any) is recognised
in "Impairment losses on financial instruments" in the Statement of
Comprehensive Income. Any gain or loss on derecognition is also recognised in
profit or loss.
Cash and cash equivalents, balances due from brokers and other financial assets
are included in this category.
iii) Financial liabilities - Classification, subsequent measurement and gains
and losses
Financial liabilities are classified as measured at amortised cost or FVTPL.
A financial liability is classified as at FVTPL if it is classified as
held-for-trading, if it is a derivative or if it is designated as such on
initial recognition. Financial liabilities at FVTPL are measured at fair value
and net gains and losses, including any interest expense, are recognised in
profit or loss.
Other financial liabilities are subsequently measured at amortised cost using
the effective interest method. Interest expense and foreign exchange gains and
losses are recognised in profit or loss. Any gain or loss on derecognition is
also recognised in profit or loss.
Financial liabilities at FVTPL:
· Held-for-trading: derivative financial instruments.
Financial liabilities at amortised cost:
· This includes accounts payable and accrued expenses.
v) Impairment of financial assets
The Company recognises loss allowances for expected credit loss ("ECL") on
financial assets measured at amortised cost.
The Company measures loss allowances at an amount equal to lifetime ECLs,
except for the following, which are measured at 12-month ECLs:
· financial assets that are determined to have low credit risk at the
reporting date; and
· other financial assets for which credit risk (i.e. the risk of default
occurring over the expected life of the asset) has not increased significantly
since initial recognition.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Company
considers reasonable and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on the Company's historical experience and
informed credit assessment and including forward-looking information.
The Company assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due.
The Company considers a financial asset to be in default when:
· the borrower is unlikely to pay its credit obligations to the Company in
full, without recourse by the Company to actions such as realising security (if
any is held); or
· the financial asset is more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over
the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are
possible within the 12 months after the reporting date (or a shorter period if
the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual
period over which the Company is exposed to credit risk.
- Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and
the cash flows that the Company expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
- Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried
at amortised cost are credit-impaired. A financial asset is 'credit-impaired'
when one or more events that have a detrimental impact on the estimated future
cash flows of the financial asset have occurred. As at 31 December 2019 and
2018, the Company's financial assets measured at amortised cost were not
impaired.
Evidence that a financial asset is credit-impaired includes the following
observable data:
· significant financial difficulty of the borrower or issuer;
· a breach of contract such as a default or being more than 90 days past
due; or
· it is probable that the borrower will enter bankruptcy or other financial
reorganisation.
- Presentation of allowance for ECLs in the Statement of Financial Position
Loss allowances for financial assets measured at amortised cost are deducted
from the gross carrying amount of the assets.
- Write-off
The gross carrying amount of a financial asset is written off when the Company
has no reasonable expectations of recovering a financial asset in its entirety
or a portion thereof.
v) Derecognition
Financial assets are derecognised when the contractual rights to receive cash
flows from the assets have expired or the Company has transferred substantially
all the risks and rewards of ownership. Financial liabilities are derecognised
when their contractual obligations are discharged, cancelled or expired.
vi) Offsetting
Financial assets and liabilities are offset and the net amount presented in the
Statement of Financial Position when, and only when, the Company has a legal
right to offset the recognised amounts and it intends either to settle on a net
basis or to realise the asset and settle the liability simultaneously.
The Company has adopted the amendments to IAS 32 on offsetting. These
amendments clarify the offsetting criteria in IAS 32 by explaining when an
entity currently has a legally enforceable right to set-off and when gross
settlement is considered to be equivalent to net settlement.
The Company does not hold any financial assets or financial liabilities that
are subject to master netting agreements or similar agreements and, as such,
has not presented any financial assets or liabilities net on the Statement of
Financial Position. There were no financial assets or financial liabilities
that are offset in the Statement of Financial Position.
Income and expenses are presented on a net basis only when permitted under
IFRS.
e) Amounts due from and due to Brokers
Amounts due from and due to brokers represent receivables for securities sold
and payables for securities purchased that have been contracted for but not yet
settled or delivered on the reporting date respectively. The accounting policy
for the recognition of amounts due from and due to brokers is discussed in note
2d.
f) Cash and Cash Equivalents
Cash and cash equivalents may comprise current deposits with banks, bank
overdrafts and other short-term highly liquid investments that: are readily
convertible to known amounts of cash; are subject to insignificant changes in
value; and are held for the purpose of meeting short-term cash commitments
rather than for investment or other purposes. Cash, deposits with banks and
bank overdrafts are stated at their principal amount.
g) Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are included in equity as a
deduction from issue proceeds, net of tax.
h) Interest Income
Interest income is recognised in the Statement of Comprehensive Income as it
accrues, on a time-proportionate basis using the effective interest rate
method. It includes interest income from cash and cash equivalents and from
debt securities at FVTPL.
i) Dividend Income
Income distributions from quoted Funds are recognised in the Statement of
Comprehensive Income within "Net loss from financial instruments at FVTPL" when
declared. Dividend income from unquoted Funds and private equity investments is
recognised when the right to receive payment is established.
j) Earnings per Share
The Company presents basic and diluted earnings per share ("EPS") data for each
class of its ordinary shares. The basic EPS of each share class is calculated
by dividing the profit or loss attributable to the ordinary shareholders of
each share class by the weighted average number of ordinary shares outstanding
for the respective share class during the period. Where dilutive instruments
are in issue, diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of
ordinary shares outstanding for the effects of the dilutive instruments.
k) Expenses
All expenses are recognised in the Statement of Comprehensive Income on an
accruals basis.
l) Segmental Reporting
Although the Company has two classes of shares and invests in various
investment themes, it is organised and operates as one business and one
geographical segment, as the principal focus is on emerging market strategies,
mainly achieved via investments in funds domiciled in Europe but investing
globally. Accordingly, all significant operating decisions are based upon
analysis of the Company as one segment. The financial results from this segment
are equivalent to the financial statements of the Company as a whole.
Additionally, the Company's performance is evaluated on an overall basis. The
Company's management receives financial information prepared under IFRS and, as
a result, the disclosure of separate segmental information is not required.
m) Consolidation
The Company is not required to consolidate any of the investments listed in the
Schedule of Investments or the underlying investments of the Funds held, as it
does not control them and given that the Company is an investment entity under
IFRS 10 - Investment Entities. All investments including those effected via
holding vehicles are valued at FVTPL.
Disclosure of Interests in Other Entities
As a result of the application of IFRS 12 - Disclosure of Interests in Other
Entities, the Company has made disclosures about its involvement with
unconsolidated structured entities in note 16.
The Company has concluded that unlisted Funds in which it invests, but which it
does not consolidate, meet the definition of structured entities for the
following reasons:
· the voting rights attached to the Funds are not considered to be dominant
rights as the holder is unable to control the Funds. The rights relate only to
influence over administrative tasks;
· each Fund's activities are restricted by its prospectus; and
· the Funds have narrow and well-defined objectives to provide investment
opportunities to investors.
n) Related Parties
IAS 24 - Related Party Disclosures defines a related party as a person or
entity that is related to the entity that is preparing its financial statements
(the "reporting entity"). A person or a close member of that person's family is
related to a reporting entity if that person has control, joint control, or
significant influence over the entity or is a member of its key management
personnel. An entity is related to a reporting entity if, among other
circumstances, it is a parent, subsidiary, fellow subsidiary, associate, or
joint venture of the reporting entity, or it is controlled, jointly controlled,
or significantly influenced or managed by a person who is a related party. For
further information, please refer to Supplementary Information (Unaudited) -
Remuneration Disclosure.
o) New Standards, Amendments and Interpretations
The Company has initially applied IFRIC 23 - Uncertainty over Income Tax
Treatments from 1 January 2019. A number of other new standards are also
effective from 1 January 2019 but they do not have a material effect on the
Company's financial statements.
The Company has consistently applied the accounting policies as set out below
to all periods presented in these financial statements.
IFRIC 23 - Uncertainty over Income Tax Treatments
On 7 June 2017, the IASB issued IFRIC Interpretation 23 - Uncertainty over
Income Tax Treatments (the "Interpretation"). The Interpretation clarifies
application of recognition and measurement requirements in IAS 12 - Income
Taxes when there is uncertainty over income tax treatments. The Interpretation
is effective for annual reporting periods beginning on or after 1 January 2019.
Please refer to note 3 for further details.
p) New Standards and Interpretations not yet Adopted
A number of new standards, amendments to standards and interpretations are
effective for annual periods beginning after 1 January 2019 and early adoption
is permitted; however, the Company has not early adopted the new or amended
standards in preparing these financial statements.
The following amended standards and interpretations are not expected to have a
significant impact on the Company's financial statements:
- Amendments to References to Conceptual Framework in IFRS Standards;
- Definition of a Business (Amendments to IFRS 3);
- Definition of Material (Amendments to IAS 1 and IAS 8);
- IFRS 17 - Insurance Contracts;
- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7).
q) Contingent Assets
Contingent assets are not recognised in the financial statements, but are
disclosed in the notes to the financial statements where an inflow of economic
benefits is probable but not virtually certain. Please see note 19 for details
about contingent assets as at 31 December 2019.
3. Taxation
The Director of Income Tax in Guernsey has confirmed that, for the year ended
31 December 2019, the Company is exempt from Guernsey Income Tax under the
Income Tax (Exempt bodies) (Guernsey) Ordinance 1989, and that any surplus
income of the Company may be distributed without the deduction of Guernsey
Income Tax. Pursuant to the exemption granted under the above-mentioned
ordinance, the Company is subject to an annual fee of GBP1,200 (2018: GBP1,200)
equivalent to US$1,531 (2018: US$1,600), payable to the States of Guernsey
Income Tax.
The Company is exposed to other taxes in its countries of investment. During
the years ended 31 December 2019 and 31 December 2018, no dividend income or
interest income received by the Company was subject to withholding tax imposed
in the countries of investment.
4. Financial Assets and Liabilities at FVTPL
31 December 31 December
2019 2018
US$ US$
Equity investments 14,597,833 31,179,252
Derivative financial assets 115,422 -
Total financial assets at FVTPL 14,713,255 31,179,252
During the years ended 31 December 2019 and 2018, the Company invested in the
Ashmore SICAV 2 Global Liquidity US$ Money Market Fund, formerly known as the
Ashmore SICAV 2 Global liquidity US$ Fund. During the year ended 31 December
2019, the Company sold Ashmore Asian Recovery Fund, Ashmore Asian Special
Opportunities Fund Limited and Ashmore SICAV 2 Global Liquidity US$ Money
Market Fund. There were no other significant changes to the Company's direct
equity investments other than valuation movements.
As at 31 December 2019, derivative financial assets comprised forward foreign
currency contracts as follows:
Currency Amount Currency Amount Maturity Unrealised
Bought Bought Sold Sold Date Gain
GBP 3,876,657 US$ 5,024,360 31/01/2020 115,422
Derivative financial assets 115,422
As at 31 December 2018, there were no derivative financial assets.
31 December 31 December
2019 2018
US$ US$
Derivative financial liabilities (12,409) (70,234)
Total financial liabilities at FVTPL (12,409) (70,234)
As at 31 December 2019, derivative financial liabilities comprised forward
foreign currency contracts as follows:
Currency Amount Currency Amount Maturity Unrealised
Bought Bought Sold Sold Date Loss
US$ 1,144,714 GBP 872,755 31/01/2020
(12,409)
Derivative financial liabilities (12,409)
As at 31 December 2018, derivative financial liabilities comprised forward
foreign currency contracts as follows:
Currency Amount Currency Amount Maturity Unrealised
Bought Bought Sold Sold Date Loss
GBP 8,082,702 US$ 10,378,641 31/01/2019
(70,234)
Derivative financial liabilities (70,234)
5. Net Loss from Financial Instruments at FVTPL
31 December 31 December 2018
2019
US$ US$
Derivative financial instruments (1,005,309)
56,604
Total derivative financial instruments (1,005,309)
56,604
Financial assets mandatorily measured at
FVTPL:
- Equity investments (9,694,414) (5,089,164)
Total financial assets mandatorily measured at FVTPL (5,089,164)
(9,694,414)
Net loss from financial instruments at FVTPL (6,094,473)
(9,637,810)
Net loss from financial instruments at FVTPL:
- Dividend income 21,243,891
1,100,458
- Realised gains on investments 2,412,475
12,145
- Realised losses on investments (910,967) (12,720,885)
- Realised gains on forward foreign currency contracts 1,919,582
1,099,524
- Realised losses on forward foreign currency contracts (2,333,258)
(1,216,167)
- Change in unrealised gains on investments 2,995,306 11,113,449
- Change in unrealised losses on investments (12,891,356) (27,138,094)
- Change in unrealised gains on forward foreign 185,656
currency contracts -
- Change in unrealised losses on forward foreign (12,409) (591,633)
currency contracts
Net loss from financial instruments at FVTPL (9,637,810) (6,094,473)
6. Other Financial Assets and Liabilities
a) Other financial assets:
Other financial assets relate to accounts receivable and prepaid expenses, and
comprise the following:
31 December 31 December
2019 2018
US$ US$
Prepaid expenses - 5,366
- 5,366
b) Other financial liabilities:
Other financial liabilities relate to accounts payable and accrued expenses,
and comprise the following:
31 December 31 December 2018
2019
US$ US$
Incentive fees payable
(1,145,642) (907,896)
Investment management fees payable
(6,059) (5,069)
Other accruals
(70,100) (96,380)
(1,221,801) (1,009,345)
7. Financial Instruments
a) Carrying amounts versus fair values
As at 31 December 2019, the carrying values of financial assets and liabilities
presented in the Statement of Financial Position approximate their fair values.
The table below sets out the classifications of the carrying amounts of the
Company's financial assets and financial liabilities into categories of
financial instruments as at 31 December 2019.
Mandatorily Financial Financial Total
at FVTPL assets at liabilities
amortised at amortised
cost cost
Cash and cash equivalents - 691,726 -
691,726
Non-pledged financial assets at 14,713,255 - -
FVTPL 14,713,255
Total 14,713,255 691,726 -
15,404,981
Financial liabilities at FVTPL (12,409) - - (12,409)
Other payables - - (1,221,801) (1,221,801)
Total (12,409) - (1,221,801) (1,234,210)
The table below sets out the classifications of the carrying amounts of the
Company's financial assets and financial liabilities into categories of
financial instruments as at 31 December 2018.
Mandatorily Financial Financial Total
at FVTPL assets at liabilities
amortised at amortised
cost cost
Cash and cash equivalents - 413,401 -
413,401
Non-pledged financial assets at 31,179,252 - -
FVTPL 31,179,252
Other receivables - 5,366 -
5,366
Total 31,179,252 418,767 -
31,598,019
Financial liabilities at FVTPL (70,234) - - (70,234)
Other payables - - (1,009,345) (1,009,345)
Total (70,234) - (1,009,345) (1,079,579)
b) Financial instruments carried at fair value - fair value hierarchy
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability (i.e. the exit price) in an orderly transaction
between market participants at the measurement date.
For certain of the Company's financial instruments including cash and cash
equivalents, prepaid/accrued expenses and other debtors and creditors, their
carrying amounts approximate fair value due to the immediate or short-term
nature of these financial instruments. The Company's investments and financial
derivative instruments are carried at market value, which approximates fair
value.
The Company classifies financial instruments within a fair value hierarchy that
prioritises the inputs to valuation techniques used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The three levels
of the fair value hierarchy are as follows:
Level 1 inputs are unadjusted quoted prices in active markets for identical
assets or liabilities that the reporting entity has the ability to access at
the measurement date.
Level 2 inputs are observable inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly or
indirectly, including:
- quoted prices for similar assets or liabilities in active markets;
- quoted prices for identical or similar assets or liabilities in markets that
are not active;
- inputs other than quoted prices that are observable for the asset or
liability;
- inputs that are derived principally from or corroborated by an observable
market.
Level 3 inputs are unobservable inputs for the asset or liability.
Inputs are used in applying various valuation techniques and broadly refer to
the assumptions that market participants use to make valuation decisions,
including assumptions about risk. Inputs may include price information,
volatility statistics, specific and broad credit data, liquidity statistics,
and other factors. A financial instrument's level within the fair value
hierarchy is based on the lowest level of any input that is significant to the
fair value measurement. However, the determination of what constitutes
"observable" requires significant judgement. The Company considers observable
data to be that market data which is readily available, regularly distributed
or updated, reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant market.
The categorisation of a financial instrument within the hierarchy is based upon
the pricing transparency of the instrument and does not necessarily correspond
to the Company's perceived risk of that instrument.
Investments: Investments whose values are based on quoted market prices in
active markets, and are therefore classified within Level 1, may include active
listed equities, certain U.S. government and sovereign obligations, and certain
money market securities. The Company does not generally adjust the quoted price
for such instruments, even in situations where it holds a large position and a
sale could reasonably impact the quoted price.
Investments that trade in markets that are not considered to be active, but are
valued based on quoted market prices, dealer quotations or alternative pricing
sources supported by observable inputs are classified within Level 2. These may
include government and sovereign obligations, government agency securities,
corporate bonds, and municipal and provincial obligations.
Investments classified within Level 3 have significant unobservable inputs, as
they trade infrequently or not at all. Level 3 instruments may include private
equity investments, certain loan agreements, less-liquid corporate debt
securities (including distressed debt instruments) and collateralised debt
obligations. Also included in this category are government and sovereign
obligations, government agency securities and corporate bonds for which
independent broker prices are used and information relating to the inputs of
the price models is not observable.
When observable prices are not available; e.g. if an asset does not trade
regularly, the Company may rely on information provided by any person, firm or
entity including any professional person whom the Directors consider to be
suitably qualified to provide information in respect of the valuation of
investments and who is approved by the Custodian (an "Approved Person").
Approved Persons may include certain brokers and the Pricing Methodology and
Valuation Committee ("PMVC") of the Investment Manager.
The PMVC may, upon request, provide assistance to the Administrator in
determining a methodology for valuing assets where the Administrator cannot
determine a price or methodology from another source. It is the Administrator's
responsibility to determine whether to use any such assistance provided by the
PMVC. These assets, which are classified within Level 3, may include all asset
types but are frequently 'Special Situations' type investments, typically
incorporating distressed, illiquid or private investments.
For these hard-to-value investments, the methodology and models used to
determine fair value are created in accordance with the International Private
Equity and Venture Capital Valuation ("IPEV") guidelines. Smaller investments
may be valued directly by the PMVC but material investments are valued by
experienced personnel at an independent third-party valuation specialist. Such
valuations are subject to review, amendment if necessary, then approval by the
PMVC. The valuations are ultimately approved by the Directors and reviewed by
the auditors as they make up part of the NAV in the financial statements.
Valuation techniques used include the market approach, the income approach or
the cost approach depending on the availability of reliable information. The
market approach generally consists of using; comparable transactions, earnings
before interest, tax, depreciation and amortisation ("EBITDA") multiples; or
enterprise value ("EV") multiples (based on comparable public company
information). The use of the income approach generally consists of the net
present value of estimated future cash flows, adjusted as deemed appropriate
for liquidity, credit, market and/or other risk factors.
Inputs used in estimating the value of investments may include the original
transaction price, recent transactions in the same or similar instruments,
completed or pending third-party transactions in the underlying investment or
comparable issuers, subsequent rounds of financing, recapitalisations and other
transactions across the capital structure, offerings in the equity or debt
capital markets and bids received from potential buyers.
For the determination of the NAV, Level 3 investments may be adjusted to
reflect illiquidity and/or non-transferability. However, any such adjustments
are typically reversed in the financial statements where it is required by the
accounting standards.
The Company believes that its estimates of fair value are appropriate, however
estimates and assumptions concerning the future, by definition, seldom equal
the actual results and the estimated value may not be realised in a current
sale or immediate settlement of the asset or liability. The use of different
methodologies, assumptions or inputs would lead to different measurements of
fair value and given the number of different factors affecting the estimate,
specific sensitivity analysis cannot be reliably quantified.
Financial Derivative Instruments: Financial derivative instruments can be
exchange-traded or privately negotiated over-the-counter ("OTC").
Exchange-traded derivatives, such as futures contracts and exchange-traded
option contracts, are typically classified within Level 1 or Level 2 of the
fair value hierarchy depending on whether or not they are deemed to be actively
traded.
OTC derivatives, including forwards, credit default swaps, interest rate swaps
and currency swaps, are valued by the Company using observable inputs, such as
quotations received from the counterparty, dealers or brokers, whenever these
are available and considered reliable. In instances where models are used, the
value of an OTC derivative depends upon the contractual terms of, and specific
risks inherent in, the instrument as well as the availability and reliability
of observable inputs. Such inputs include market prices for reference
securities, yield curves, credit curves, measures of volatility, prepayment
rates and correlations of such inputs. Certain OTC derivatives, such as generic
forwards, swaps and options, have inputs which can generally be corroborated by
market data and are therefore classified within Level 2.
Those OTC derivatives that have less liquidity or for which inputs are
unobservable are classified within Level 3. While the valuations of these less
liquid OTC derivatives may utilise some Level 1 and/or Level 2 inputs, they
also include other unobservable inputs which are considered significant to the
fair value determination. At each measurement date, the Company updates the
Level 1 and Level 2 inputs to reflect observable inputs, though the resulting
gains and losses are reflected within Level 3 due to the significance of the
unobservable inputs.
The Company recognises transfers between Levels 1, 2 and 3 based on the date of
the event or change in circumstances that caused the transfer. This policy on
the timing of recognising transfers is the same for transfers into a level as
for transfers out of a level. There were no transfers between the three levels
during the years ended 31 December 2019 and 31 December 2018.
The following table analyses within the fair value hierarchy the Company's
financial assets and liabilities at FVTPL (by class) measured at fair value as
at 31 December 2019:
Level 1 Level 2 Level 3 Total
Non-pledged financial assets at
FVTPL
Equity investments - - 14,597,833
14,597,833
Derivative financial assets - 115,422 -
115,422
Total - 115,422 14,597,833
14,713,255
Financial liabilities at FVTPL
Derivative financial liabilities - (12,409) - (12,409)
Total - (12,409) - (12,409)
The following table analyses within the fair value hierarchy the Company's
financial assets and liabilities at FVTPL (by class) measured at fair value as
at 31 December 2018:
Level 1 Level 2 Level 3 Total
Non-pledged financial assets at
FVTPL
Equity investments 2,000,954 - 29,178,298 31,179,252
Total 2,000,954 - 29,178,298 31,179,252
Financial liabilities at FVTPL
Derivative financial liabilities - (70,234) - (70,234)
Total - (70,234) - (70,234)
Level 1 assets include the Ashmore SICAV 2 Global Liquidity US$ Money Market
Fund.
Level 2 assets and liabilities include forward foreign currency contracts that
are calculated internally using observable market data.
Level 3 assets include all unquoted Funds, limited partnerships and unquoted
investments. Investments in unquoted Funds and limited partnerships are valued
on the basis of the latest NAV, which represents the fair value, as provided by
the administrator of the unquoted Fund at the close of business on the relevant
valuation day. Unquoted Funds have been classified as Level 3 assets after
consideration of their underlying investments, lock-up periods and liquidity.
The following tables present the movement in Level 3 instruments for the years
ended 31 December 2019 and 31 December 2018:
Equity investments
Opening balance as at 1 January 29,178,298
2019
Sales and returns of capital (3,785,593)
Gains and losses recognised in profit and loss (10,794,872)
*
Closing balance as at 31 December 14,597,833
2019
Equity investments
Opening balance as at 1 January 62,402,266
2018
Sales and returns of capital (6,890,914)
Gains and losses recognised in profit and loss (26,333,054)
*
Closing balance as at 31 December 29,178,298
2018
* The change in unrealised losses for the year ended 31 December 2019
recognised in profit or loss and relating to Level 3 instruments held as at 31
December 2019 amounted to US$10,042,824 (31 December 2018: change in net
unrealised losses of U$21,913,937).
Total gains and losses included in the Statement of Comprehensive Income are
presented in "Net loss from financial instruments at FVTPL".
The following table shows the valuation techniques and the key unobservable
inputs used in the determination of fair value for the Level 3 investments as
at 31 December 2019:
Balance as at Valuation Significant Range of Sensitivity to changes
31 December 2019 technique unobservable estimates in significant
US$ inputs for unobservable inputs
unobservable
inputs
Equity in a 7,271,092 Discounted Cash Liquidity - ** The estimated fair
private Flows discount at value would increase
company adjusted if:
equity level - the liquidity
discount were lower
Market approach Listed - ** - the EV/EBITDA
using company EV/ multiples were higher
comparable EBITDA
traded multiple
multiples
Investments 7,326,741 Unadjusted NAV Inputs to US$0.01 to The estimated fair
in unlisted NAV* US$7.95 value would increase
Funds if the NAV was higher
* The Company has assessed whether there are any discounts in relation to
lock-in periods that are impacting liquidity. There were no discounts in
relation to lock-in periods as at 31 December 2019.
** Information has not been included as these are commercially sensitive.
The following table shows the valuation techniques and the key unobservable
inputs used in the determination of fair value for the Level 3 investments as
at 31 December 2018:
Balance as at Valuation Significant Range of Sensitivity to changes
31 December 2018 technique unobservable estimates in significant
US$ inputs for unobservable inputs
unobservable
inputs
Equity in a 6,082,361 Discounted Cash Liquidity - ** The estimated fair
private Flows discount at value would increase
company adjusted if:
equity level - the liquidity
discount were lower
Market approach Listed - ** - the EV/EBITDA
using company EV/ multiples were higher
comparable EBITDA
traded multiple
multiples
Investments 23,095,937 Unadjusted NAV Inputs to US$0.02 to The estimated fair
in unlisted NAV* US$44.89 value would increase
Funds if the NAV was higher
* The Company has assessed whether there are any discounts in relation to
lock-in periods that are impacting liquidity. There were no discounts in
relation to lock-in periods as at 31 December 2018.
** Information has not been included as these are commercially sensitive.
Unobservable inputs are developed as follows:
· EBITDA and revenue multiples represent amounts that market participants
would use when pricing an investment. These multiples are selected from
comparable publicly listed companies based on geographic location, industry
size, target markets and other factors that are considered to be reasonable.
The traded multiples for the comparable companies are determined by dividing
its respective enterprise value by its EBITDA or revenue.
· The Company used a combination of market multiples and discounted cash
flows methodologies to derive the fair value.
The Company believes that its estimates of fair value are appropriate; however
the use of different methodologies or assumptions could lead to different
measurements of fair value. For fair value investments in Level 3, changing one
or more of the assumptions used to alternative assumptions could result in an
increase or decrease in net assets attributable to investors. Due to the
numerous different factors affecting the assets, the impact cannot be reliably
quantified. It is reasonably possible, on the basis of existing knowledge, that
outcomes within the next financial year that are different from the assumptions
used could require a material adjustment to the carrying amounts of affected
assets.
7. Capital and Reserves
The Company's capital is represented by two classes of ordinary shares, namely
the US$ share class and the GBP share class. The holders of ordinary shares are
entitled to dividends as declared from time to time and have no redemption
rights.
The total comprehensive gain or loss during the year is allocated
proportionately to each share class except for the results of hedging the US$
exposure of the assets attributable to the Pound Sterling-denominated GBP share
class, which are allocated solely to this share class.
The Company is authorised to issue an unlimited number of US$ and GBP shares at
no par value.
Ordinary Shares
The following table presents a summary of changes in the number of shares
issued and fully paid during the year ended 31 December 2019:
US$ shares GBP shares
Shares outstanding as at 1 January
2019 4,449,792 1,334,501
Share (14,866)
conversions 16,410
Compulsory partial redemptions
(849,134) (254,584)
Shares outstanding as at 31 December
2019 3,617,068 1,065,051
The following table presents a summary of changes in the number of shares
issued and fully paid during the year ended 31 December 2018:
US$ shares GBP shares
Shares outstanding as at 1 January
2018 7,357,618 2,258,946
Share
conversions 34,474 (26,859)
Compulsory partial redemptions
(2,942,300) (897,586)
Shares outstanding as at 31 December
2018 4,449,792 1,334,501
Share Conversion
A shareholder has the right, as the Directors may determine for this purpose at
each "Conversion Calculation Date", to elect to convert some or all of the
shares of any class they hold into a different class of shares by giving at
least five business days' notice to the Company before the relevant Conversion
Calculation Date. Prior to the 2011 AGM, shareholders were able to convert
their shares on a quarterly basis at the NAV Calculation Dates in March, June,
September and December. As per the amended Articles of Incorporation dated 18
April 2011, shareholders were able to convert their shares on a monthly basis.
On 30 August 2013, the Directors of the Company announced that share conversion
opportunities would be offered at the end of February, May, August and
November. Share conversion opportunities for all other month ends were no
longer offered and this decision was taken due to the timings and processes
surrounding the anticipated returns of capital as part of the orderly wind-down
of the Company.
The following share conversions took place during the year ended 31 December
2019:
Transfers from Transfers to Number of shares Number of shares
to switch out to switch in
GBP shares US$ shares 14,866 16,410
The following share conversions took place during the year ended 31 December
2018:
Transfers from Transfers to Number of shares Number of shares
to switch out to switch in
GBP shares US$ shares 52,928 66,684
US$ shares GBP shares 32,210 26,069
Compulsory Partial Redemptions
Following the approval by the Company's shareholders of the wind-down proposal
as described in the circular published on 20 February 2013, during the year
ended 31 December 2019, management announced partial returns of capital to
shareholders by way of compulsory partial redemption of shares with the
following redemption dates:
* 7 March 2019, US$1.5m using the 31 January 2019 NAV; and
* 6 June 2019, US$4.7m using the 30 April 2019 NAV.
During the year ended 31 December 2018, management announced partial returns of
capital to shareholders by way of compulsory partial redemptions of shares with
the following redemption date:
* 21 June 2018, US$25.5m using the 31 May 2018 NAV.
The amounts applied to the partial redemptions of shares comprised monies from
dividends received and from the realisation of the Company's investments up to
and including the reference NAV calculation dates pursuant to the wind-down of
the Company.
During the year ended 31 December 2019, the following shares were redeemed by
way of compulsory partial redemptions of shares (consideration in US$ has been
determined using the exchange rates at the redemption date):
Number of ordinary Consideration in US$
shares redeemed
US$ shares 849,134 4,552,860
GBP shares 254,584 1,672,040
6,224,900
During the year ended 31 December 2018, the following shares were redeemed by
way of compulsory partial redemptions of shares (consideration in US$ has been
determined using the exchange rates at the redemption date):
Number of ordinary Consideration in US$
shares redeemed
US$ shares 2,942,300 18,497,624
GBP shares 897,586 7,151,098
25,648,722 *
* The capital distribution differs by US$148,722 to the amount declared,
because during the distribution process, shareholders of the GBP share class were
overpaid by US$148,589 (the US$133 difference is FX). The Company had to
compulsory redeem shares from the GBP shareholders to the value of the amount by
which they were overpaid, and these proceeds were then distributed as cash to
the US$ shareholders who were underpaid.
Voting Rights
The voting rights each share is entitled to in a poll at any general meeting of
the Company (applying the Weighted Voting Calculation as described in the
Prospectus published by the Company on 6 November 2007) are as follows:
US$ shares: 1.0000
GBP shares: 2.0288
The above figures may be used by shareholders as the denominator for
calculations to determine if they are required to notify their interest in, or
a change to their interest in the Company under the FCA's Disclosure Guidance
and Transparency Rules.
Special Reserve
On 5 November 2007, the Company passed a special resolution that, subject to
the admission of the Company's shares to the London Stock Exchange becoming
unconditional and with the approval of the Royal Court, the amount standing to
the credit of the share premium account of the Company following completion of
the offering be cancelled and the amount of the share premium account so
cancelled be credited as a distributable reserve to be established in the books
of account of the Company. This reserve is able to be applied in any manner in
which the Company's profits available for distribution (as determined in
accordance with the Laws) are able to be applied, including in the purchase of
the Company's own shares and in the payment of dividends.
Distribution Policy
Subject to the Laws and the Listing Rules, the Company may by ordinary
resolution from time to time declare dividends. No dividend shall exceed the
amount recommended by the Board.
No dividends were declared during the years ended 31 December 2019 and 2018.
Following the EGM on 13 March 2013, shareholders approved proposals to
distribute surplus cash held by the Company on a quarterly basis by way of pro
rata compulsory partial redemptions of shares.
8. Net Asset Value
The NAV of each US$ and GBP Share is determined by dividing the total net assets
of the Company attributable to the US$ and GBP Share classes by the number of US$
and GBP shares in issue respectively at the year end as follows:
As at 31 December Net assets Shares in issue Net assets Net assets
2019 attributable to per share per share
each in US$ in local
share class in US$ currency
US$ shares 10,466,558 3,617,068 2.89 2.89
GBP shares 3,704,213 1,065,051 3.48 2.63
14,170,771
As at 31 December Net assets Shares in issue Net assets Net assets
2018 attributable to per share per share
each in US$ in local
share class in US$ currency
US$ shares 22,475,297 4,449,792 5.05 5.05
GBP shares 8,043,143 1,334,501 6.03 4.73
30,518,440
The allocation of the Company's NAV between share classes is further described
in the Company's Prospectus.
9. Interest Income Calculated using the Effective Interest Method
Year ended Year ended
31 December 31 December
2019 2018
US$ US$
Interest income calculated using the effective
interest method on financial assets carried at
amortised cost:
- Cash and cash equivalents 18,073 55,724
18,073 55,724
10. Significant Agreements
a) Investment Manager
Effective 18 July 2014, the Board appointed Ashmore Investment Advisors Limited
("AIAL") as the Company's Alternative Investment Fund Manager ("AIFM") and AIAL
assumed the role of Investment Manager to the Company pursuant to a Novation of
the 5 November 2007 Investment Management Agreement.
The Investment Manager is remunerated at a monthly rate of one twelfth of 1% of
the NAV excluding investments made in Funds (calculated before deduction of the
investment management fee for that month and before the deduction of any
accrued incentive fee). In relation to investments made in the Funds, the
Investment Manager is entitled only to management fees at the rate charged by
it to the Funds.
The net investment management fees during the year were as follows:
Year ended Year ended
31 December 31 December
2019 2018
US$ US$
Investment management fees (60,397)
(69,273)
(69,273) (60,397)
The Investment Manager is entitled to incentive fees based on the performance
of investments other than investments in Funds, if those investments achieve a
return in excess of 6% per annum compounded annually. Provided that the 6%
return hurdle is cleared, the residual return is allocated to the Investment
Manager until it has received the incentive fee which is calculated as 20% of
the aggregate of (i) the amount received by the Company in excess of the cost
of investment and (ii) the returns achieved on investments above 6% per annum
compounded annually. Incentive fees are payable only upon the realisation of
investments. During the year ended 31 December 2019, no incentive fees were
paid and US$237,746 were charged (31 December 2018: US$130,477 paid and
US$30,175 charged).
b) Directors' Remuneration
With effect from 1 January 2019, the Directors' remuneration was reduced by
25%.
During the years ended 31 December 2019 and 31 December 2018, Directors'
remuneration was as follows:
Year ended Year ended
31 December 2019 31 December 2018
Chairman: GBP21,240 per annum GBP28,350 per annum
Chairman of the Audit Committee: GBP21,240 per annum GBP28,350 per annum
Independent Directors: GBP20,040 per annum GBP26,730 per annum
Non-Independent Director: waived waived
c) Administrator
The Administrator, Northern Trust International Fund Administration Services
(Guernsey) Limited, performs administrative duties for which it is remunerated
at an annual rate of 0.02% of the Company's Total Net Assets.
d) Custodian
Northern Trust (Guernsey) Limited (the "Custodian") is remunerated at an annual
rate of 0.01% of the Company's Total Net Assets.
12. Other Operating Expenses
Year ended Year ended
31 December 2019 31 December 2018
US$ US$
Audit fees
(55,352) (48,664)
Professional fees
(42,272) (2,011)
Legal fees *
11,997 (9,263)
Miscellaneous fees
(68,407) (77,999)
(154,034) (137,937)
* The credits to legal fees for the year ended 31 December 2019 represents the
reversal of accruals as a result of a reduction in expenses as the Company
continues to wind down.
13. Earnings per Share ("EPS")
The calculation of the earnings per US$ and GBP share is based on the profit/
(loss) for the year attributable to US$ and GBP shareholders and the respective
weighted average number of shares in issue for each share class during the
year.
The loss attributable to each share class for the year ended 31 December 2019
was as follows:
US$ share GBP share
Issued shares at the beginning of the
year 4,449,792 1,334,501
Effect on the weighted average number of shares:
- Conversion of shares
4,103 (3,717)
- Compulsory partial redemption of
shares (486,906) (145,976)
Weighted average number of shares
3,966,989 1,184,808
Loss for the year attributable to each class of
shareholders (US$) (7,524,408) (2,598,361)
EPS (US$)
(1.90) (2.19)
There were no dilutive instruments in issue during the year ended 31 December
2019.
The profit attributable to each share class for the year ended 31 December 2018
was as follows:
US$ share GBP share
Issued shares at the beginning of the
year 7,357,618 2,258,946
Effect on the weighted average number of shares:
- Conversion of shares
20,646 (16,197)
- Compulsory partial redemption of
shares (1,500,573) (457,769)
Weighted average number of shares
5,877,691 1,784,980
Loss for the year attributable to each class of
shareholders (US$) (3,976,174) (2,372,655)
EPS (US$)
(0.68) (1.33)
There were no dilutive instruments in issue during the year ended 31 December
2018.
14. Financial Risk Management
The Company's activities expose it to a variety of financial and operational
risks which include: market risk (including currency risk, interest rate risk
and price risk), credit risk and liquidity risk.
The Company is also exposed to certain risk factors peculiar to investing in
Emerging Markets. These require the consideration of matters not usually
associated with investing in the securities of issuers in the developed capital
markets of North America, Japan or Western Europe. The economic and political
conditions in Emerging Markets differ from those in developed markets, and
offer less social, political and economic stability. The value of investments
in Emerging Markets may be affected by changes in exchange regulations, tax
laws, withholding taxes or economic and monetary policies. The absence, in many
cases until relatively recently, of any move towards capital markets structures
or to a free market economy means investing in Emerging Markets may be
considered more risky than investing in developed markets.
The Company puts policies and processes in place to measure and manage the
various types of risk to which it is exposed; these are explained below.
Market Risk
All of the Company's investments are recognised at fair value, and changes in
market conditions directly affect net investment income.
i) Currency Risk
The Company's principal exposure to currency risk arises from underlying
investments denominated in currencies other than US$ and from the exposure of
its underlying portfolio companies to local currencies in their countries of
operation. The value of such investments may be affected favourably or
unfavourably by fluctuations in exchange rates, notwithstanding any efforts
made to hedge such exposures.
The Investment Manager may hedge currency exposures by reference to the most
recent NAV of the Company's underlying investments via the use of forward
foreign currency contracts or similar instruments.
As at the reporting date, the Company is not exposed to any significant direct
currency risk arising on its financial assets and liabilities, as all direct
investments of the Company are denominated in US$, and a sensitivity analysis
of currency risk is not meaningful at this time. However, the Company has put
in place hedging mechanisms to hedge the currency risk arising on the GBP share
class.
Shares in the Company are denominated in US$ and GBP. The base currency is the
US$, and therefore non-US$ subscription monies for shares are typically
converted into US$ for operational purposes. The costs and any benefit of
hedging the foreign currency exposure of the assets attributable to shares
denominated in Pound Sterling against the US$ is allocated solely to the GBP
share class. This may result in variations in the NAVs of the two classes of
shares as expressed in US$.
As at 31 December 2019, the net foreign currency exposure on the GBP share class
was as follows:
US$ % of net
assets
Currency exposure of GBP share class
3,704,213 26.14
Nominal value of currency hedges
(3,879,646) (27.38)
Net foreign currency exposure
175,433) (1.24)
As at 31 December 2018, the net foreign currency exposure on the GBP share class
was as follows:
US$ % of net assets
Currency exposure of GBP share class
8,043,143 26.36
Nominal value of currency hedges
(10,378,641) (34.01)
Net foreign currency exposure
(2,335,498) (7.65)
ii) Interest Rate Risk
The majority of the Company's financial assets and liabilities are non-interest
bearing (31 December 2019: 95.39%, 31 December 2018: 98.65%). As at 31 December
2019, interest-bearing financial assets comprised cash and cash equivalents of
US$691,726 (31 December 2018: US$413,401). The Company's investment portfolio
is composed entirely of non-interest bearing assets as at 31 December 2019 (31
December 2018: 100%). As a result, the Company is subject to limited direct
exposure to interest rate risk through fluctuations in the prevailing levels of
market interest rates and a sensitivity analysis of interest rate risk is not
meaningful at this time.
iii) Other Price Risk
Other price risk is the risk that the value of financial instruments will
fluctuate as a result of changes in market prices (other than those arising
from interest rate risk or currency risk), whether caused by factors specific
to an individual investment, its issuer or any other relevant factors.
The Company's strategy for the management of price risk is to seek to maximise
the exit prices that it obtains for its direct and indirect investments.
The table below summarises the sensitivity of the Company's net assets
attributable to equity holders to investment price movements as at the
reporting date. The analysis is based on the assumption that the prices of the
investments increase by 5% (2018: 5%), with all other variables held constant.
31 December 31 December
2019 2018
US$ US$
Equity investments 729,892 1,558,963
729,892 1,558,963
A 5% decrease in prices of the investments would result in an equal but
opposite effect on the net assets attributable to equity holders, on the basis
that all other variables remain constant. The price risk sensitivity analysis
provided is a relative estimate of risk rather than a precise and accurate
number.
Credit Risk
The Company is exposed to credit risk, which is the risk that a counterparty to
a financial instrument will fail to discharge an obligation or commitment that
it has entered into with the Company.
The Company's financial instruments include non-exchange traded financial
instruments. Credit risk for non-exchange traded financial instruments is
generally higher because the counterparty for the instrument is not backed by
an exchange clearing house.
The Company's financial instruments include direct and indirect holdings of
securities and other obligations of companies that are experiencing significant
financial or business distress, including companies involved in bankruptcy or
other reorganisation and liquidation proceedings. Although such holdings may
result in significant returns, they involve a substantial degree of risk. The
level of analytical sophistication, both financial and legal, necessary for
successful investment in companies experiencing significant business and
financial distress is unusually high. There is no assurance that the Investment
Manager will correctly evaluate the nature and magnitude of the various factors
that could affect the prospects for a successful reorganisation or similar
action. The completion of debt and/or equity exchange offers, restructurings,
reorganisations, mergers, takeover offers and other transactions can be
prevented or delayed, or the terms changed, by a variety of factors. If a
proposed transaction appears likely not to be completed or in fact is not
completed or is delayed, the market price of the investments held by the
Company may decline sharply and result in losses which could have a material
adverse effect on the performance of the Company and returns to shareholders.
The administrative costs in connection with a bankruptcy or restructuring
proceeding are frequently high and will be paid out of the debtor's assets
prior to any return to creditors (other than out of assets or proceeds thereof,
which may be subject to valid and enforceable liens and other security
interests) and equity holders. In addition, certain claims that have priority
by law over the claims of other creditors (for example, claims for taxes) may
reduce any entitlement of the Company. In any reorganisation or liquidation
proceeding relating to a company or sovereign issuance in which the Company
invests, the Company may lose its entire investment or may be required to
accept cash or securities with a value less than its original investment. Under
such circumstances, the returns generated from such investments may not
compensate investors adequately for the risks assumed, which could have a
material adverse effect on the performance of the Company and returns to
shareholders.
It is frequently difficult to obtain accurate information as to the condition
of distressed entities. Such investments may be adversely affected by laws
relating to, among other things, fraudulent transfers and other voidable
transfers or payments, lender liability and the bankruptcy court's power to
disallow, reduce, subordinate or disenfranchise particular claims. The market
prices of such securities are subject to abrupt and erratic market movements
and above-average price volatility, and the spread between the bid and offer
prices of such securities may be greater than those prevailing in other
securities markets.
Securities issued by distressed companies may have a limited trading market,
resulting in limited liquidity. As a result, the Company may have difficulties
in valuing or liquidating positions, which could have a material adverse effect
on the performance of the Company and returns to shareholders.
As at the reporting date, the maximum exposure to direct credit risk before any
credit enhancements is the carrying amount of the financial assets, as set out
below. This excludes credit risk relating to underlying debt instruments held
by the Funds.
31 December 31 December
2019 2018
US$ US$
Cash and cash equivalents* 691,726 413,401
Forward currency contracts* 115,422 -
807,148 413,401
* Held with Northern Trust (Guernsey) Limited.
None of these assets are impaired nor past due but not impaired.
The Investment Manager monitors the credit ratings of the Company's
counterparties, maintains an approved counterparty list and periodically
reviews all counterparty limits.
The credit risk arising on transactions with brokers relates to transactions
awaiting settlement. The risk relating to unsettled transactions is considered
small due to the short settlement period involved.
Substantially all of the assets of the Company are held with the Custodian;
Northern Trust (Guernsey) Limited, which is an indirect wholly-owned subsidiary
of the Northern Trust Corporation. Bankruptcy or insolvency of the Custodian
may cause the Company's rights with respect to cash and securities held by the
Custodian to be delayed or limited. This risk is managed by monitoring the
credit quality and financial positions of the Custodian. The credit rating
assigned by S&P to the Northern Trust Corporation as at the year-end date was
A+ (2018: A+). Depending on the requirements of the jurisdictions in which the
investments of the Company are issued, the Custodian may use the services of
one or more sub-custodians.
Concentration Risk
Due to the managed wind-down, the Company is in the process of reducing the
number and diversification of assets held and as such is considered to have
exposure to concentration risk. The concentration of underlying assets is set
out in the "Details on Top 4 Underlying Holdings". Country and industry
concentrations are also set out in the "Details on Top 5 Underlying Holdings".
Liquidity Risk
Liquidity risk is the risk that the Company may not be able to generate
sufficient cash resources to settle its obligations in full as they fall due or
can only do so on terms that are materially disadvantageous.
The Company is not exposed to any significant liquidity risk arising from
redemptions because shareholders do not have the right to redeem.
Most of the investments of the Company are traded only on over the counter
markets and there may not be an organised public market for such securities.
The effect of this is to increase the difficulty of valuing the investments and
certain investments may generally be illiquid. There may be no established
secondary market for certain of the investments made by the Company. Reduced
secondary market liquidity may adversely affect the market price of the
investments and the Company's ability to dispose of particular investments. Due
to the lack of adequate secondary market liquidity for certain securities, it
may be more difficult to obtain accurate security valuations for the purposes
of valuing the Company. Valuations may only be available from a limited number
of sources and may not represent firm bids for actual sales. In addition, the
current or future regulatory regime may adversely affect liquidity.
All residual maturities of the financial liabilities of the Company in US$ as
at 31 December 2019 and 31 December 2018 are less than three
months, except for incentive fees payable to the Investment Manager on
realisation of investments.
Liquidity risk is primarily related to outstanding commitments and recallable
distributions from investments in limited partnerships. The outstanding
investment commitments of the Company are disclosed in note 18.
Operational Risk
Operational risk is the risk of direct or indirect loss arising from a wide
variety of causes associated with the Company's processes and infrastructure,
or from external factors other than market, credit, or liquidity issues, such
as those arising from legal or regulatory requirements and generally accepted
standards of corporate behaviour. Operational risks arise from all of the
Company's operations.
Capital Management
The Company is not subject to externally imposed capital requirements. The
shares issued by the Company provide an investor with the right to require
redemption for cash at a value proportionate to the investor's share in the
Company's net assets at redemption date and are classified as equity. See note
8 for a description of the terms of the shares issued by the Company. The
Company's objective is to realise the assets in orderly manner to return cash
to shareholders. The Articles of Incorporation of the Company were amended to
facilitate regular returns of cash to shareholders.
14. Ultimate Controlling Party
In the opinion of the Directors on the basis of shareholdings advised to them,
the Company has no ultimate controlling party.
15. Involvement with Unconsolidated Structured Entities
The table below describes the types of structured entities that the Company
does not consolidate but in which it holds an interest.
Type of structured Nature and purpose Interest held by the Company
entity
Investment Funds To manage assets on behalf Investments in units issued
of third party investors. by the Funds
These vehicles are financed
through the issue of units
to investors.
The table below sets out interests held by the Company in unconsolidated
structured entities as at 31 December 2019.
Investment in unlisted Number of Total net Carrying amount % of net
investment Funds investee assets included in assets of
Funds "Financial assets underlying
at FVTPL" Funds
Special Situations Private 5 63,963,243 7,015,383 10.97
Equity Funds
Real Estate Funds 1 2,557,626 311,358 12.17
The table below sets out interests held by the Company in unconsolidated
structured entities as at 31 December 2018.
Investment in unlisted Number of Total net Carrying amount % of net
investment Funds investee assets included in assets of
Funds "Financial assets underlying
at FVTPL" Funds
Special Situations Private 7 109,261,120 19,855,680 18.17
Equity Funds
Real Estate Funds 1 31,019,749 3,240,257 10.45
The maximum exposure to loss is the carrying amount of the financial assets
held.
During the year, the Company did not provide financial support to these
unconsolidated structured entities and has no intention of providing financial
or any other support, except for the outstanding commitments as disclosed in
note 18 to the financial statements.
16. Related Party Transactions
Parties are considered to be related if one party has the ability to control
the other party or to exercise significant influence over the other party in
making financial or operational decisions.
The Directors are responsible for the determination of the investment policy of
the Company and have overall responsibility for the Company's activities. The
Company's investment portfolio is managed by AIAL.
The Company and the Investment Manager entered into an Investment Management
Agreement under which the Investment Manager has been given responsibility for
the day-to-day discretionary management of the Company's assets (including
uninvested cash) in accordance with the Company's investment objectives and
policies, subject to the overall supervision of the Directors and in accordance
with the investment restrictions in the Investment Management Agreement and the
Articles of Incorporation.
During the year ended 31 December 2019, the Company engaged in the following
related party transactions:
Expense Payable
Related Party Nature US$ US$
AIAL Investment (6,059)
management fees (69,273)
AIAL Incentive fees (237,746) (1,145,642)
Board of Directors Directors'
remuneration (81,670) -
Investment
Activity
Related Party Nature US$
Related Funds Sales 3,785,593
Related Funds Dividends 1,083,815
Ashmore SICAV 2 Global Liquidity US$ Money Purchases
Market Fund (7,499,906)
Ashmore SICAV 2 Global Liquidity US$ Money Sales 9,517,503
Market Fund
Ashmore SICAV 2 Global Liquidity US$ Money Dividends 16,643
Market Fund
During the year ended 31 December 2018, the Company engaged in the following
related party transactions:
Expense Payable
Related Party Nature US$ US$
AIAL Investment (5,069)
management fees (60,397)
AIAL Incentive fees (907,896)
(30,175)
Board of Directors Directors' (113,016)
remuneration -
Investment
Activity
US$
Related Funds Sales 6,890,914
Related Funds Dividends 20,316,058
Ashmore SICAV 2 Global Liquidity US$ Fund Purchases (2,000,000)
Ashmore SICAV 2 Global Liquidity US$ Fund Dividends
16
Related Funds are other Funds managed by Ashmore Investment Advisors Limited or
its associates.
Purchases and sales of the Ashmore SICAV 2 Global Liquidity US$ Money Market
Fund ("Global Liquidity Fund") were solely related to the cash management of
US$ on account. Funds are swept into the S&P AAAm rated Global Liquidity Fund
and returned as and when required for asset purchases or distributions. The
Global Liquidity Fund is managed under the dual objectives of the preservation
of capital and the provision of daily liquidity, investing exclusively in very
highly rated short-term liquid money market securities.
The Directors had the following beneficial interests in the Company:
31 December 2019 31 December 2018
GBP ordinary shares GBP ordinary shares
Nigel de la Rue 373 462
Christopher Legge 232 288
Richard Hotchkis 139 173
17. Commitments
During the year ended 31 December 2011, the Company increased its commitment to
VTBC Ashmore Real Estate Partners 1 LP to a total of EUR11.4 million. As at 31
December 2019, the outstanding commitment was EUR243,474
(31 December 2018: EUR243,474).
During the year ended 31 December 2011, the Company entered into a subscription
agreement with AA Development Capital India Fund LP for an initial commitment
of US$4,327,064, which was subsequently increased to US$23,851,027. AA
Development Capital India Fund LP was dissolved by its General Partner on
28 June 2013 with all outstanding commitments transferred to AA Development
Capital India Fund 1 LLC. As at 31 December 2019, the outstanding commitment
was US$5,959,809 (31 December 2018: US$5,959,809).
18. Contingent Assets
The Company has submitted a claim in connection with the settlement of a
securities class action lawsuit preliminarily approved by the US District Court
for the Southern District of New York captioned In Re Foreign Exchange
Benchmark Rates Antitrust Litigation. The inflow of economic benefits from the
settlement fund is deemed to be probable, but not virtually certain. As the
value of the settlement fund cannot be determined in advance, it is not
possible to estimate the settlement amount of the Company.
19. Subsequent Events
Share Conversions
The following share conversions occurred subsequent to 31 December 2019:
Transfers from Transfers to Number of shares Number of shares
to switch out to switch in
GBP shares US$ shares
1,065,656 1,230,563
US$ shares GBP shares
709 605
As a result, the total number of GBP shares outstanding as at 31 March 2020 was
nil. Due to the closure of the GBP share class, there will not be any conversions
going forward.
Emerging Risks
Since the year end we have seen the development of the coronavirus covid-19
outbreak initially in China and now reaching most continents. At present, it is
not possible to assess the detailed impact of the emerging risk, on the
investments in the Company but there is growing concern about the impact on the
world economy. There has been a significant change in the financial markets in
the last few weeks. The Board and the Investment Manager continue to watch the
efforts of governments to contain the spread of the virus and monitor the
economic impact, if any, on the investments in the Company.
The Directors do not believe that any adjustments to the financial statements
as at 31 December 2019 are required as a result of this subsequent event.
There were no other significant events subsequent to the year-end date that
require adjustment to, or disclosure in, the financial statements.
Supplementary Information (Unaudited)
Remuneration Disclosure
Ashmore Investment Advisors Limited ("AIAL") is a full-scope UK Alternative
Investment Fund Manager ("AIFM") that manages many alternative investment funds
("AIFs"). These AIFs implement a number of investment strategies including;
equity, fixed income and alternatives; and invest in many different regions and
industry sectors. AIAL manages both open-ended and closed-ended AIFs, several
of its AIFs are leveraged and some are listed on regulated markets. Its AuM was
approximately US$7.6 billion at 30 June 2019. AIAL's parent company ("Ashmore")
is listed on a regulated market, counts ten offices worldwide and has a number
of subsidiaries both in the UK and abroad. Taking into account guidance from
the UK Financial Conduct Authority ("FCA"), AIAL has complied with the full
AIFM Remuneration Code.
AIAL does not have any direct employees, and as such the amount of remuneration
paid to staff by AIAL is zero. All AIAL AIFM Remuneration Code Staff are
employed and paid by Ashmore. Ashmore's remuneration principles have remained
unchanged since it was listed, and are designed to align all employees with the
long-term success of the business. These include significant levels of
deferral, a clear link between performance and levels of remuneration and
strong alignment of executive directors and employees with shareholders and
clients through significant employee share ownership. The culture is therefore
a collaborative one, with clients' interests and the creation of shareholder
value, including for employee shareholders, the overarching factors for
success.
Executive directors, members of the investment team, and indeed all other
employees, participate in a single capped incentive pool and are paid under a
similar structure, with an annual cash bonus and share award, meaning that all
employees are long-term shareholders in the business.
The policy includes:
- a capped basic salary to contain the fixed cost base;
- a cap on the total variable compensation including any awards made under
Ashmore's share plan, available for all employees at 25% of profits, which to
date has not been fully utilised; and
- a deferral for five years of a substantial portion of variable
compensation into Ashmore shares (or equivalent), which, in the case of
executive directors in lieu of a separate LTIP, is also partly subject to
additional performance conditions measured over five years.
AIAL's board of directors reviews the general principles of the remuneration
policy and is responsible for its implementation with regard to AIAL's AIFM
Remuneration Code Staff. Ashmore's Remuneration Committee periodically reviews
the ongoing appropriateness and relevance of the remuneration policy, including
in connection with the provision of services to AIAL. Ashmore employs the
services of; McLagan to provide advice on remuneration benchmarking; Deloitte
to provide advice on tax compliance, share plan design and administration; and
the Remuneration Committee's advisors are Aon. The Remuneration Committee's
terms of reference can be found here:
http://www.ashmoregroup.com/investor-relations/corporate-governance.
Performance assessment for AIAL's AIFM Remuneration Code Staff for their work
relating to AIAL is based on a combination of quantitative and qualitative
criteria related to the performance of AIAL, the performance of relevant AIF(s)
or business units and the performance of the individual. Qualitative criteria
include adherence to Ashmore Group plc's risk and compliance policies. This
performance assessment is adjusted for relevant current and future risks
related to the AIFs managed by AIAL.
The compensation of control function staff is based on function specific
objectives and is independent from the performance of AIAL and/or the AIFs
managed by AIAL. The remuneration of the senior officers in AIAL's control
functions is directly overseen by the Remuneration Committee.
Variable remuneration awarded to AIAL's Remuneration Code Staff in respect of
AIFMD work is subject to performance adjustment which allows Ashmore to reduce
the deferred amount, including to nil, in light of the ongoing financial
situation and/or performance of Ashmore, AIAL, the AIFs that AIAL manages and
the individual concerned.
The total contribution of AIAL's AIFM Remuneration Code Staff to the business
of Ashmore is apportioned between work carried out for AIAL and work carried
out for the other businesses and subsidiaries of Ashmore. Their remuneration is
similarly apportioned between AIAL and the other businesses and subsidiaries
where required.
The remuneration attributable to AIAL for its AIFMD identified staff for the
financial year ended 30 June 2019 was as follows:
Number of Variable Fixed Total
beneficiaries remuneration remuneration remuneration
Ashmore Global Opportunities 14 GBP1,976 GBP255 GBP2,231
Limited
Total AIAL 21 GBP2,348,230 GBP202,102 GBP2,550,332
All of the remuneration above was attributable to senior management who have a
material impact on the funds risk profile. The Company's allocation of the AIAL
remuneration has been made on the basis of NAV.
Alternative Performance Measures ("APMs")
An APM is a financial measure of historical or future performance, financial
position, or cash flows, other than a financial measure defined and specified
in the applicable financial reporting framework.
Closing-Trade Share Price
A share price is the amount it would cost to buy one share in the Company. The
closing-trade share price of a share of a share class is derived from the
trading price on the London Stock Exchange.
The closing-trade share prices are disclosed in the Financial Highlights and in
the Strategic Report.
Premium/Discount to Net Asset Value
The premium/discount to NAV is calculated for each share class by using the
following formula:
A - B
B
Where:
· 'A' is the closing market price as at 31 December 2019 of a share of the
share class as derived from the trading price on the London Stock Exchange; and
· 'B' is the final NAV per share of the share class as at 31 December 2019.
If the share price of a share is lower than the NAV per share, the shares are
said to be trading at a discount.
The discount to NAV is disclosed in the Financial Highlights and in the
Strategic Report.
Ongoing Charges
The ongoing charges represent the Company's management fees and all other
operating expenses, excluding incentive fees and transaction costs, expressed
as a percentage of the average monthly NAV during the year. The ongoing charges
are disclosed in the Strategic Report and in the Directors' Report.
Corporate Information
Directors Custodian
Richard Hotchkis Northern Trust (Guernsey) Limited
Nigel de la Rue PO Box 71
Christopher Legge Trafalgar Court
Steve Hicks Les Banques
St Peter Port
Guernsey
GY1 3DA
Channel Islands
Registered Office Independent Auditor
PO Box 255 KPMG Channel Islands Limited
Trafalgar Court Glategny Court
Les Banques Glategny Esplanade
St Peter Port St Peter Port
Guernsey Guernsey
GY1 3QL GY1 1WR
Channel Islands Channel Islands
Administrator and Secretary Advocates to the Company
Northern Trust International Fund Carey Olsen (Guernsey) LLP
Administration Services (Guernsey) Carey House
Limited Les Banques
PO Box 255 St Peter Port
Trafalgar Court Guernsey
Les Banques GY1 4BZ
St Peter Port Channel Islands
Guernsey
GY1 3QL
Channel Islands
Alternative Investment Fund Manager UK Solicitor to the Company
Ashmore Investment Advisors Limited Slaughter and May
61 Aldwych One Bunhill Row
London London
WC2B 4AE EC1Y 8YY
United Kingdom United Kingdom
Brokers UK Registrar and Transfer Agent
J.P. Morgan Cazenove Computershare Investor Services PLC
20 Moorgate The Pavilions
London Bridgewater Road
EC2R 6DA Bristol
United Kingdom BS13 8AE
United Kingdom
Jefferies International Limited
Vintners Place Website
68 Upper Thames Street Performance and portfolio
London information for shareholders can be
EC4V 3BJ found at:
United Kingdom www.agol.com
END
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April 27, 2020 03:51 ET (07:51 GMT)
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