Information  X 
Enter a valid email address

Ashmore Global Op Ld (AGOL)

  Print   

Friday 23 August, 2019

Ashmore Global Op Ld

Half-year Report

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.
 

Interim Results
For the period ended 30 June 2019

(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)

The financial information set out in this announcement does not constitute the Company's statutory accounts for the six months ended 30 June 2019. All figures are based on the unaudited financial statements for the six months ended 30 June 2019.

The financial information for the six months ended 30 June 2019 is derived from the financial statements delivered to the UK Listing Authority.

The announcement is prepared on the same basis as will be set out in the interim accounts.

The Interim Report and Unaudited Condensed Interim Financial Statements for the six months ended 30 June 2019 will be available on the Company website: www.agol.com.

Financial Highlights

30 June 2019 31 December 2018
Total Net Assets US$19,920,134 US$30,518,440
Net Asset Value per Share
US$ shares  US$4.10 US$5.05
£ shares £3.76 £4.73
Closing-Trade Share Price
US$ shares  US$4.04 US$4.15
£ shares £3.12 £3.58
Discount to Net Asset Value
US$ shares  (1.46)% (17.82)%
£ shares (17.02)% (24.31)%

Chairman’s Statement

As at 30 June 2019, the Net Asset Value (“NAV”) of Ashmore Global Opportunities Limited (the “Company” or “AGOL”) was US$19.9m compared to US$30.5m at 31 December 2018. The NAVs per share were US$4.10 and £3.76 as at 30 June 2019, down from US$5.05 and £4.73 respectively at the end of 2018. The share prices stood at US$4.04 and £3.12 as at 30 June 2019.

The main detractor to performance was a mark-down in the value of Microvast. This was off-set somewhat by a mark-up in AEI. Further details on the underlying exposures of the Company are given in the Investment Manager’s Report.

There were further realisations during the reporting period: Kulon in Russia and the final asset in Everbright in China were sold completely, and AEI paid a dividend. The Board approved a distribution to Shareholders of US$4.7m on 13 May 2019, with a payment date of 13 June 2019.

The Investment Manager is working towards the sale of the remaining assets, with a particular focus on the two largest exposures of the Company, namely Microvast and AEI. Your Board receives regular updates on the operating performance and on progress with the sales processes.

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 Distributions % of 31 December 2012 % of 31 December 2012
(US$) NAV Market Capitalisation
31 March 2013 92,500,000 19% 28%
30 June 2013 13,000,000 3% 4%
30 September 2013 26,000,000 5% 8%
31 December 2013 36,900,000 8% 11%
30 June 2014 7,250,000 2% 2%
30 September 2014 21,500,000 5% 7%
31 December 2014 40,500,000 8% 12%
31 March 2015 19,500,000 4% 6%
30 June 2015 27,250,000 6% 8%
31 December 2015 16,200,000 3% 5%
31 March 2016 2,500,000 0% 1%
30 September 2017 3,000,000 1% 1%
30 June 2018 25,500,000 5% 8%
31 December 2018 1,500,000  * 0% 0%
30 June 2019 4,725,000 1% 1%
Total 337,825,000 70% 102%

* was declared in January 2019 and paid in April 2019.

I would like to thank everyone involved with AGOL for their hard work.

Richard Hotchkis
23 August 2019

Investment Manager’s Report

Performance

As at 30 June 2019, the NAVs per share of the US$ and £ classes stood at US$4.10 and £3.76 respectively, representing returns of -18.81% and -20.51% over the last six months.

Portfolio Review

The principal detractor to performance in the first half of 2019 was the mark-down in the value of Microvast by the independent valuation agent. This mark-down was due to a 60-70% reduction in Chinese subsidies for the customers who buy the EV batteries. This change in the subsidy scheme was noted in AGOL’s last annual report but turned out to be even larger than envisaged by the market. This has depressed margins. In addition, there is currently an oversupply of EV batteries in the Chinese market and further exports have to be found.

There were full realisations of the investments in Kulon and Everbright during H1 2019, at prices marginally above book values. AEI paid another dividend from its ongoing operations. The proceeds of these sales and dividend were distributed to shareholders in April 2019.

The two largest investee company exposures, Microvast and AEI, now account for around 80% of AGOL’s NAV as at 30 June 2019.

As noted above, Microvast’s gross margins have fallen due to the lower prices under the new e-bus subsidy policy. The company made small losses in Q1 and Q2 2019 and is working on obtaining further export orders, as well as follow-up orders in China. A full exit of this asset is envisaged in 2020/2021, probably through a pre or post IPO transaction.

Sales discussions are proceeding with Numero Uno in India.

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 make further progress on this. The general sentiment towards Emerging Markets (EM) has been improving, in spite of some recent market volatility, thus providing a more positive backdrop to realisations. Nevertheless, realisations are very much influenced by the attraction and circumstances of each individual asset.

Details on the Top 5 Underlying Holdings (on a look through basis)

The table below shows the top 5 underlying investments as at 30 June 2019 excluding the cash balance (cash was -0.14% as at 30 June 2019).

Investment Name Holding Country Business Description
AEI 57.83% Guatemala Power generation in Latin America
Microvast 22.22% China Electric battery and battery systems supplier
ZIM Laboratories Ltd 9.55% India Pharmaceutical research and manufacturing
Numero Uno 5.37% India Branded apparel manufacturers and retailers
GZ Industries Limited 3.33% Nigeria Aluminium can manufacturing

The tables below show the country and industry allocations of underlying investments over 1% at the end of June 2019:

Country % of NAV Industry % of NAV
Guatemala    57.83% Electrical 57.83%
China   22.22% Electrical components and equipment 22.22%
India 16.20% Pharmaceuticals 9.55%
Nigeria  3.89% Retail 5.37%
Miscellaneous manufacturing 3.89%

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 a large number of Chinese original equipment manufacturers (OEMs), with these being deployed in over 30 cities in China. Follow-on orders continue to be received for the European bus market
  • Microvast’s gross margins have fallen due to lower prices under the new e-bus subsidy policy. It is expected that revenues in H1 2019 will be approximately US$35m at a c. 20% gross margin.  As in prior years, H1 is always seasonally weaker and the Co has a number of large revenue opportunities to be contracted in H2. The company is expected to make an operating loss of c.US$17m over H1 2019 as it continues to invest in R&D to maintain its technological leadership
  • The company is in advanced discussions on new export orders for e-car, e-bus and truck batteries
  • Microvast is working on Lithium-ion battery (Li-B) systems for passenger vehicles with some of the leading Chinese auto OEMs. A leading European car company is also in testing.  The production of such batteries will require additional capex and funding

2019/20 operational strategy/priorities

  • Building large scale production of Li-B systems for passenger vehicles, growing the International business and further innovations on battery safety and energy density
  • Funding the capex programme and IPO/Exit planning
  • Meeting short order timeframes from Chinese bus OEMs and ensuring customers can claim Chinese New Energy Vehicle (NEV) subsidies

Key risks

  • Overcapacity in both Chinese and global battery companies
  • Warranty claims arising from defective cells or modules
  • Unfavourable changes to the Chinese government’s New Energy Vehicle policy

Exit strategy

  • Block sale pre- or post IPO targeted in 2020 or 2021

AEI

Industry: Power generation
Country: Guatemala
Website: www.aeienergy.com
Company Status: Private
Investment Risk: Equity

Operational update

  • The only operating entity remaining in AEI is Jaguar, in Guatemala, which is operating normally
  • The final appeal by China Machine New Energy Corporation (CMNC) against the arbitration award before the Singapore Court of Appeal is scheduled for late 2019

Key risks

  • CMNC arbitration appeal

Exit strategy

  • The Manager will explore further exit opportunities post the completion of the Singapore Arbitration process

ZIM Laboratories

Industry: Pharmaceuticals
Country: India
Website: zimlab.in
Company Status: Private
Investment Risk: Equity

Operational update and priorities

  • The company continues to grow but highly ambitious growth targets have not yet been reached. We are in discussion with management about re-assessing the business plan
  • The share price has improved somewhat but liquidity remains low

Exit strategy and timing

  • The company is now listed on the BSE, but liquidity is low

Numero Uno

Industry: Retail
Country: India
Website: www.numerounojeanswear.com
Company Status: Private
Investment Risk: Equity

Operational update and priorities

  • The company is progressing its foray into e-commerce
  • Margins have started to improve and further improvements are targeted in the next two years

 Key risks

  • Cash payments remain important to the company and any new tightening of liquidity conditions could impact revenues
  • E-commerce strategy and competition will be important to realise the margin improvement

Exit strategy and timing

  • The discussions with the promotor about realising our investment are progressing while alternative exits are also being explored

GZI

Industry: Aluminium can manufacturing
Country: Nigeria
Website: www.gzican.com
Company Status: Private
Investment Risk: Equity

Operational update

  • The business experienced a strong rebound in 2018 and the first half of 2019 as the macro picture in Nigeria has stabilised and improved
  • While pricing has started to decline marginally, can volumes are up 15% in H1 2019
  • The plant in South Africa launched in April 2019 and over 60% of capacity was contracted before launch, which will grow as the business ramps up to full capacity by December 2019

2019 operational strategy/priorities

  • Ramp up plant in South Africa
  • Sign multi country contracts with clients to fill up unutilized capacity in Nigeria
  • Sell land in Kenya
  • Manage foreign exchange exposures/requirements

Key risks

  • Increased competition
  • Clients opting for cheaper 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

23 August 2019

Board Members

As at 30 June 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 interim 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
      John Laing Environmental Assets Group Limited (until 13 June 2019) London
      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

Directors’ Responsibility Statement

The Directors are responsible for preparing the Interim Report and Unaudited Condensed Interim Financial Statements, which have not been audited by an independent auditor, and confirm that to the best of their knowledge:

  • the condensed set of financial statements in the interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting; and
  • the interim financial report includes a fair view of the information required by:

(a)   DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year ending 31 December 2019; and

(b)   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

Signed on behalf of the Board of Directors on 23 August 2019

Richard Hotchkis                                                                Christopher Legge

Chairman                                                                               Chairman of the Audit Committee

Unaudited Condensed Statement of Financial Position

As at 30 June 2019

30 June 2019 31 December 2018
Note US$ US$
Assets
Cash and cash equivalents 695,632 413,401
Other financial assets 5a 7,315 5,366
Financial assets at fair value through profit or loss (“FVTPL”) 3 20,423,737 31,179,252
Total assets 21,126,684 31,598,019
Equity
Capital and reserves attributable to equity holders
of the Company
Special reserve 375,709,891 381,934,791
Retained earnings (355,789,757) (351,416,351)
Total equity 19,920,134 30,518,440
Liabilities
Current liabilities
Other financial liabilities 5b 1,188,582 1,009,345
Financial liabilities at FVTPL 3 17,968 70,234
Total liabilities  1,206,550 1,079,579
Total equity and liabilities  21,126,684 31,598,019
Net asset values
Net assets per US$ share 8 US$4.10 US$5.05
Net assets per £ share 8 £3.76 £4.73

The unaudited condensed interim financial statements were approved by the Board of Directors on 23 August 2019, and were signed on its behalf by:

Richard Hotchkis                                                    Christopher Legge
Chairman                                                                                Chairman of the Audit Committee

Unaudited Condensed Statement of Comprehensive Income
For the six months ended 30 June 2019

Six months ended 30 June 2019 Six months ended 30 June 2018
Note US$ US$
Interest income calculated using the effective interest method 13,139 16,955
Net foreign currency gain 45,111 55,855
Net (loss)/income from financial instruments at FVTPL 4 (4,086,738) 1,659,882  *
Total net (loss)/gain (4,028,488) 1,732,692
Expenses
Incentive fees (179,473) 82,756 **
Investment management fees (33,403) (32,806)
Directors’ remuneration (55,205) (58,939)
Fund administration fees (2,865) (5,887)
Custody fees (1,792) (3,306)
Other operating expenses (72,180) (88,399)
Total operating expenses (344,918) (106,581)
(Loss)/gain for the period (4,373,406) 1,626,111
Total (loss)/profit and comprehensive income
for the period
(4,373,406) 1,626,111
Earnings per share
Basic and diluted (loss)/gain per US$ share 9 US$(0.73) US$0.20
Basic and diluted (loss)/gain per £ share 9 US$(0.92) US$0.06

   

* The prior period comparatives have been amended to include the dividend income in line with the requirements of IFRS 9. The dividend income was previously disclosed as a separate line item.
** Incentive fees were positive for the six months ended 30 June 2018 due to a reversal of the prior year accruals.

All items derive from continuing activities.

Unaudited Condensed Statement of Changes in Equity
For the six months ended 30 June 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 comprehensive loss for the period - (4,373,406) (4,373,406)
Capital distribution 7 (6,224,900) - (6,224,900)
Total equity as at 30 June 2019 375,709,891 (355,789,757) 19,920,134
Total equity as at 1 January 2018 407,583,513 (345,067,522) 62,515,991
Total comprehensive gain for the period - 1,626,111 1,626,111
Capital distribution (25,648,722) * - (25,648,722)
Total equity as at 30 June 2018 381,934,791 (343,441,411) 38,493,380

   

* The distribution payable differed by US$148,722 to the amount declared, because during the distribution process, shareholders of the £ share class were overpaid by US$148,589 (the US$133 difference is FX). The Company had to compulsory redeem shares from the £ shareholders to the value of the amount by which they were overpaid, and these proceeds were then distributed as cash to the US$ shareholders who were underpaid.

Unaudited Condensed Statement of Cash Flows
For the six months ended 30 June 2019

Six months ended 30 June 2019 Six months ended 30 June 2018
US$ US$
Cash flows from operating activities
Net bank interest received 13,139 16,955
Dividends received 1,083,816 19,792,055
Net operating expenses paid (167,631) (167,051)
Net cash from operating activities 929,324 19,641,959
Cash flows from investment activities
Sales of investments 13,133,633 6,137,712
Purchases of investments (7,499,907) * -
Net cash flows on derivative instruments and foreign exchange (55,919) 556,685
Net cash from investment activities 5,577,807 6,694,397
Cash flows from financing activities
Capital distributions (6,224,900) -
Net cash used in financing activities (6,224,900) -
Net increase in cash and cash equivalents 282,231 26,336,356
Reconciliation of net cash flows to movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the period 413,401 673,736
Net increase in cash and cash equivalents 282,231 26,336,356
Cash and cash equivalents at the end of the period 695,632 27,010,092

   

* This amount represents a purchase of shares in the Ashmore SICAV 2 Global Liquidity US$ 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 Unaudited Condensed Interim Financial Statements - Schedule of Investments
As at 30 June 2019

Description of investments Fair value
US$
% of
net assets
AEI Inc - Equity 6,979,727 35.04
Ashmore Global Special Situations Fund 4 LP 6,108,015 30.67
AA Development Capital India Fund 1, LLC 3,410,606 17.12
Ashmore Global Special Situations Fund 5 LP 2,548,737 12.79
Ashmore Global Special Situations Fund 3 LP 689,536 3.46
Ashmore Global Special Situations Fund 2 Limited 457,551 2.30
Ashmore Asian Recovery Fund 120,522 0.61
VTBC Ashmore Real Estate Partners 1 LP 84,524 0.42
Ashmore Asian Special Opportunities Fund Limited 18,720 0.09
Ashmore SICAV 2 Global Liquidity US$ Fund 5,799 0.03
Total investments at fair value 20,423,737 102.53
Net other current liabilities (503,603) (2.53)
Total net assets 19,920,134 100.00

Notes to the Unaudited Condensed Interim Financial Statements

1.     Basis of Preparation

a) Statement of Compliance

These unaudited condensed interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and on a going concern basis, despite the managed wind-down of the Company approved by the shareholders on 13 March 2013. The Directors have examined significant areas of possible financial 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 that it is appropriate to adopt the going concern basis despite the managed wind-down of the Company over the next few years.

These unaudited condensed interim financial statements do not include as much information as the annual financial statements, and should be read in conjunction with the audited financial statements of the Company for the year ended 31 December 2018. Selected explanatory notes are included to explain events and transactions that are relevant to understanding the changes in financial position and performance of the Company since the last annual financial statements. 

These unaudited condensed interim financial statements were authorised for issue by the Board of Directors on
23 August 2019.

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.

b) Judgements and Estimates

Preparing the unaudited condensed interim financial statements requires judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The significant judgements made in applying the Company’s accounting policies, and the key sources of estimation uncertainty, were the same as those that applied to the audited financial statements of the Company for the year ended 31 December 2018.

2.     Summary of Significant Accounting Policies

The Board has concluded that at present the managed wind-down of the Company has no significant impact on the valuation of the Company’s investments.

The accounting policies applied in these unaudited condensed interim financial statements are the same as those applied in the Company’s audited financial statements for the year ended 31 December 2018. As disclosed in those Annual Financial Statements, IFRS 9, ‘Financial Instruments’ was applicable for financial reporting periods starting 1 January 2018. As such, these standards have been adopted by the Company, but have not materially affected the Company. There were no other new standards, interpretations or amendments to standards issued and effective for the period which materially impacted the Company.

3.     Financial Assets and Liabilities at Fair Value through Profit or Loss

30 June 2019 31 December 2018
US$ US$
Equity investments 20,423,737 31,179,252
Total financial assets at FVTPL 20,423,737 31,179,252

There were no significant changes to the Company’s direct equity investments other than valuation movements.

As at 30 June 2019 and 31 December 2018, there were no derivative financial assets.

30 June 2019 31 December 2018
US$ US$
Derivative financial liabilities (17,968) (70,234)
Total financial liabilities at FVTPL (17,968) (70,234)

As at 30 June 2019, derivative financial liabilities comprised forward foreign currency contracts as follows:

Currency
Bought
Amount
Bought
Currency
Sold
Amount
Sold
Maturity
Date
Unrealised
Loss
£ 5,540,907 US$ 7,080,143 31/07/2019                  (17,968)
Derivative financial liabilities (17,968)

As at 31 December 2018, derivative financial liabilities comprised forward foreign currency contracts as follows:

Currency
Bought
Amount
Bought
Currency
Sold
Amount
Sold
Maturity
Date
Unrealised
Loss
£ 8,082,702 US$ 10,378,641 31/01/2019 (70,234)
Derivative financial liabilities (70,234)

4.     Net (Loss)/Income from Financial Instruments at FVTPL

30 June 2019 30 June 2018
US$ US$
Derivative financial instruments (48,765) (560,282) *
Total derivative financial instruments (48,765) (560,282) *
Financial assets mandatorily measured at FVTPL:
- Equity investments (4,037,973) 2,220,164 *
Total financial assets mandatorily measured at FVTPL (4,037,973) 2,220,164 *
Net (loss)/income from financial instruments at FVTPL (4,086,738) 1,659,882 *

   

Net income from financial instruments at FVTPL:
- Dividend income 1,099,409 19,792,062 *
- Realised gains on investments - -
- Realised losses on investments (780,516) (2,564,465)
- Realised gains on forward foreign currency contracts 632,731 1,270,047
- Realised losses on forward foreign currency contracts (733,762) (769,216)
- Change in unrealised gains on investments 2,406,435 5,540,878
- Change in unrealised losses on investments (6,763,301) (20,548,311)
- Change in unrealised gains on forward foreign currency contracts 70,234 -
- Change in unrealised losses on forward foreign currency contracts (17,968) (1,061,113)
Net (loss)/income from financial instruments at FVTPL (4,086,738) 1,659,882 *

   

* The prior period comparatives have been amended to conform with the current period’s presentation, in line with the requirements of IFRS 9.

5.     Other Financial Assets and Liabilities

a)     Other financial assets:

Other financial assets relate to accounts receivable and prepaid expenses, and comprise the following:

30 June 2019 31 December 2018
US$ US$
Prepaid expenses 7,315 5,366
7,315 5,366

b)    Other financial liabilities:

Other financial liabilities relate to accounts payable and accrued expenses, and comprise the following:

30 June 2019 31 December 2018
US$ US$
Incentive fees payable (1,087,369) (907,896)
Investment management fees payable (5,816) (5,069)
Other accruals (95,397) (96,380)
(1,188,582) (1,009,345)

6.     Financial Instruments

a) Financial risk management

The Company’s financial risk management objectives and policies are consistent with those disclosed in the audited financial statements of the Company for the year ended 31 December 2018.

b) Carrying amounts versus fair values

As at 30 June 2019, the carrying values of financial assets and liabilities presented in the Unaudited Condensed 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 30 June 2019.

Mandatorily at FVTPL Financial assets at amortised cost Financial liabilities at amortised cost Total
Cash and cash equivalents - 695,632 - 695,632
Non-pledged financial assets at FVTPL 20,423,737 - - 20,423,737
Other receivables - 7,315 - 7,315
Total 20,423,737 702,947 - 21,126,684
Financial liabilities at FVTPL (17,968) - - (17,968)
Other payables - - (1,188,582) (1,188,582)
Total (17,968) - (1,188,582) (1,206,550)

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 at FVTPL Financial assets at amortised cost Financial liabilities at amortised cost Total
Cash and cash equivalents - 413,401 - 413,401
Non-pledged financial assets at FVTPL 31,179,252 - - 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)

c) Financial instruments carried at fair value - fair value hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the exit price) in an orderly transaction between market participants at the measurement date.

For certain of the Company’s financial instruments including cash and cash equivalents, prepaid/accrued expenses and other creditors, their carrying amounts approximate fair value due to the immediate or short-term nature of these financial instruments. The Company’s investments and financial derivative instruments are carried at market value, which approximates fair value.

The Company classifies financial instruments within a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 inputs are observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including:
- quoted prices for similar assets or liabilities in active markets;
- quoted prices for identical or similar assets or liabilities in markets that are not active;
- inputs other than quoted prices that are observable for the asset or liability;
- inputs that are derived principally from or corroborated by an observable market.

Level 3 inputs are unobservable inputs for the asset or liability.

Inputs are used in applying various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgement. The Company considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The categorisation of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Company’s perceived risk of that instrument.

Investments: Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities, certain U.S. government and sovereign obligations, and certain money market securities. The Company does not generally adjust the quoted price for such instruments, even in situations where it holds a large position and a sale could reasonably impact the quoted price.

Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These may include government and sovereign obligations, government agency securities, corporate bonds, and municipal and provincial obligations.

Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. Level 3 instruments may include private equity investments, certain loan agreements, less-liquid corporate debt securities (including distressed debt instruments) and collateralised debt obligations. Also included in this category are government and sovereign obligations, government agency securities and corporate bonds for which independent broker prices are used and information relating to the inputs of the price models is not observable.

When observable prices are not available; e.g. if an asset does not trade regularly, the Company may rely on information provided by any person, firm or entity including any professional person whom the Directors consider to be suitably qualified to provide information in respect of the valuation of investments and who is approved by the Custodian (an “Approved Person”). Approved Persons may include certain brokers and the Pricing Methodology and Valuation Committee (“PMVC”) of the Investment Manager.

The PMVC may provide assistance to the Administrator in determining the valuation of assets where the Administrator cannot determine a valuation from another source. These assets, which are classified within Level 3, may include all asset types but are frequently ‘Special Situations’ type investments, typically incorporating distressed, illiquid or private investments.

For these hard-to-value investments, the methodology and models used to determine fair value are created in accordance with the International Private Equity and Venture Capital Valuation (“IPEV”) guidelines. Smaller investments may be valued directly by the PMVC but material investments are valued by experienced personnel at an independent third-party valuation specialist. Such valuations are subject to review, amendment if necessary, then approval by the PMVC. The valuations are ultimately approved by the Directors and the auditors to a material extent in so far 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 determined that this is required by the accounting standards.

The Company believes that its estimates of fair value are appropriate, however estimates and assumptions concerning the future, by definition, seldom equal the actual results and the estimated value may not be realised in a current sale or immediate settlement of the asset or liability. The use of different methodologies, assumptions or inputs would lead to different measurements of fair value and given the number of different factors affecting the estimate, specific sensitivity analysis cannot be reliably quantified.

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.

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 period ended 30 June 2019 and the year ended 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 30 June 2019:

Level 1 Level 2 Level 3 Total balance
Non-pledged financial assets at FVTPL
Equity investments 5,799 - 20,417,938 20,423,737
Total 5,799 - 20,417,938 20,423,737
Financial liabilities at FVTPL
Derivative financial liabilities - (17,968) - (17,968)
Total - (17,968) - (17,968)

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 balance
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$ 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 Ashmore Funds (“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 table presents the movement in Level 3 instruments for the period ended 30 June 2019:

Equity investments
Opening balance as at 1 January 2019 29,178,298
Sales and returns of capital (3,622,979)
Gains and losses recognised in profit and loss * (5,137,381)
Closing balance as at 30 June 2019 20,417,938

* The change in unrealised losses for the period recognised in profit or loss relating to Level 3 instruments held as at 30 June 2019 amounted to US$4,356,866.

Total gains and losses included in the Unaudited Condensed Statement of Comprehensive Income are presented in “Net (loss)/income from financial instruments at FVTPL”.

The following tables show the valuation techniques and the key unobservable inputs used in the determination of the fair value of Level 3 direct investments:

Balance as at 30 June 2019
US$
Valuation technique Significant unobservable inputs Range of estimates for unobservable inputs Sensitivity to changes in significant unobservable inputs
Equity in a private company 6,979,727 Discounted Cash Flows Liquidity discount at adjusted equity level - ** The estimated fair value would increase if:
- the liquidity discount were lower
- the EV/EBITDA multiples were higher
Market approach using comparable traded multiples Listed company EV/EBITDA multiple - **
Investments in unlisted Funds 13,438,211 Unadjusted NAV Inputs to NAV* US$0.02 to US$37.57 The estimated fair value would increase if the NAV was higher
Balance as at
31 December 2018
US$
Valuation technique Significant unobservable inputs Range of estimates for unobservable inputs Sensitivity to changes in significant unobservable inputs
Equity in a private company 6,082,361 Discounted Cash Flows Liquidity discount at adjusted equity level - **    The estimated fair value would increase if:
- the liquidity discount were lower
- the EV/EBITDA multiples were higher
Market approach using comparable traded multiples Listed company EV/EBITDA multiple - **   
Investments in unlisted Funds 23,095,937 Unadjusted NAV Inputs to NAV* US$0.02 to US$44.89 The estimated fair value would increase 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 30 June 2019 and 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 management 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 period that are different from the assumptions used could require a material adjustment to the carrying amounts of affected assets.

7.     Capital and Reserves

Ordinary Shares
The following table presents a summary of changes in the number of shares issued and fully paid during the period ended 30 June 2019:

US$ shares £ shares
Shares outstanding as at 1 January 2019 4,449,792 1,334,501
Compulsory partial redemptions (849,134) (254,584)
Shares outstanding as at 30 June 2019 3,600,658 1,079,917

Share Conversion
No share conversions took place during the period ended 30 June 2019.

Compulsory Partial Redemptions
During the period ended 30 June 2019, management announced partial returns of capital to shareholders by way of compulsory partial redemptions 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.

Voting rights
The voting rights each share is entitled to in a poll at any general meeting of the Company (applying the Weighted Voting Calculation as described in the Prospectus published by the Company on 6 November 2007) are as follows:

US$ shares: 1.0000
£ shares: 2.0288

The above figures may be used by shareholders as the denominator for calculations to determine if they are required to notify their interest in, or a change to their interest in the Company under the FCA’s Disclosure and Transparency Rules.

8.     Net Asset Value

The NAV of each US$ and £ share is determined by dividing the total net assets of the Company attributable to the US$ and £ share classes by the number of US$ and £ shares in issue respectively at the period and year ends as follows:

As at 30 June 2019 Net assets
attributable to each
share class in US$
Shares in issue Net assets
per share
in US$
Net assets
per share
in local currency
US$ shares 14,750,491 3,600,658 4.10 4.10
£ shares 5,169,643 1,079,917 4.79 3.76
19,920,134

   

As at 31 December 2018 Net assets
attributable to each
share class in US$
Shares in issue Net assets
per share
in US$
Net assets
per share
in local currency
US$ shares 22,475,297 4,449,792 5.05 5.05
£ 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.     Earnings per Share (“EPS”)

The calculation of the earnings per US$ and £ share is based on the gain/loss for the period attributable to US$ and £ shareholders and the respective weighted average number of shares in issue for each share class during the period.

The loss attributable to each share class for the period ended 30 June 2019 was as follows:

US$ share £ share
Issued shares at the beginning of the period 4,449,792 1,334,501
Effect on the weighted average number of shares:
- Compulsory partial redemption of shares (116,188) (34,823)
Weighted average number of shares 4,333,604 1,299,678
Loss for the period attributable to each class of shareholders (US$) (3,171,946) (1,201,460)
EPS (US$) (0.73) (0.92)

There were no dilutive instruments in issue during the period ended 30 June 2019.

The gain attributable to each share class for the period ended 30 June 2018 was as follows:

US$ share £ share
Issued shares at the beginning of the period 7,357,618 2,258,946
Effect on the weighted average number of shares:
- Conversion of shares 474 546
- Compulsory partial redemption of shares (58,846) (18,893)
Weighted average number of shares 7,299,246 2,240,599
Gain for the period attributable to each class of shareholders (US$) 1,487,467 138,644
EPS (US$) 0.20 0.06

There were no dilutive instruments in issue during the period ended 30 June 2018.

10.  Segmental Reporting

Although the Company has two share classes 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.

11.  Ultimate Controlling Party

In the opinion of the Directors and on the basis of shareholdings advised to them, the Company has no ultimate controlling party.

12.  Involvement with Unconsolidated Structured Entities

The table below describes the types of structured entities that the Company does not consolidate but in which it holds an interest.

Type of structured entity Nature and purpose Interest held by the Company
Investment Funds To manage assets on behalf of third party investors. These vehicles are financed through the issue of units to investors. Investments in units issued by the Funds

The table below sets out interests held by the Company in unconsolidated structured entities as at 30 June 2019.

Investment in unlisted investment Funds Number of
investee Funds
Total net assets Carrying amount included in “Financial assets at fair value through profit or loss” % of net assets of underlying  Funds
Special Situations Private Equity Funds 7 84,585,667 13,353,687 15.79
Real Estate Funds 1 693,200 84,524 12.19

The maximum exposure to loss is the carrying amount of the financial assets held.

During the period, the Company did not provide financial support to these unconsolidated structured entities and the Company has no intention of providing financial or other support, except for the outstanding commitments disclosed in note 14 to the financial statements.

13.  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 period ended 30 June 2019, the Company had the following related party transactions:

Expense Payable
Related Party Nature US$ US$
AIAL Investment management fees (33,403) (5,816)
AIAL Incentive fees (179,473) (1,087,369)
Board of Directors Directors’ remuneration (55,205) -
Investment Activity
Related Party Nature US$
Related Funds Sales 3,622,979
Related Funds Dividends 1,083,816
Ashmore SICAV 2 Global Liquidity US$ Fund Purchases (7,499,907)
Ashmore SICAV 2 Global Liquidity US$ Fund Sales 9,510,654
Ashmore SICAV 2 Global Liquidity US$ Fund Dividends 15,593

During the period ended 30 June 2018, the Company engaged in the following related party transactions:

Expense Payable
Related Party Nature US$ US$
AIAL Investment management fees (32,806) (5,353)
AIAL Incentive fees 82,756 * (925,443)
Board of Directors Directors’ remuneration (58,939) -
Investment
Activity
US$
Related Funds Sales 6,137,713
Related Funds Dividends 19,755,109
Ashmore SICAV 2 Global Liquidity US$ Fund Dividends 7

* Incentive fees were positive due to a reversal of the prior year accruals.

Related Funds are other Funds managed by Ashmore Investment Advisors Limited or its associates.

Purchases and sales of the Ashmore SICAV 2 Global Liquidity US$ Fund (“Global Liquidity Fund”) were solely related to the cash management of US dollars on account. Funds are swept into the S&P AAA 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.

With effect from 1 January 2019, the Directors’ remuneration was reduced by 25%.

During the period ended 30 June 2019, Directors’ remuneration was as follows:

Chairman: £21,240 per annum
Chairman of the Audit Committee: £21,240 per annum
Independent Directors: £20,040 per annum
Non-Independent Director: waived

During the period ended 30 June 2018, Directors’ remuneration was as follows:

Chairman: £28,350 per annum
Chairman of the Audit Committee: £28,350 per annum
Independent Directors: £26,730 per annum
Non-Independent Director: waived

The Directors had the following beneficial interests in the Company:

30 June 2019 31 December 2018
£ ordinary shares £ ordinary shares
Nigel de la Rue 373 462
Christopher Legge 232 288
Richard Hotchkis 139 173

14.  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 €11.4 million. As at 30 June 2019, the outstanding commitment was €243,474 (31 December 2018: €243,474).

During the year ended 31 December 2011, the Company entered into a subscription agreement with AA Development Capital India Fund LP for an initial commitment of US$4,327,064, which was subsequently increased to US$23,581,027. 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 30 June 2019, the outstanding commitment was US$5,959,809 (31 December 2018: US$5,959,809).

15.    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.

16.    Subsequent Events

There were no significant events subsequent to the period-end date that require adjustment to, or disclosure in, the financial statements.

Corporate Information

Directors
Richard Hotchkis
Nigel de la Rue
Christopher Legge
Steve Hicks
Custodian
Northern Trust (Guernsey) Limited
P.O. Box 71
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3DA
Channel Islands
Registered Office
P.O. Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Channel Islands
Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Channel Islands
Administrator, Secretary and Registrar
Northern Trust International Fund
Administration Services (Guernsey) Limited
P.O. Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Channel Islands
Advocates to the Company
Carey Olsen
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
Channel Islands
Alternative Investment Fund Manager
Ashmore Investment Advisors Limited
61 Aldwych
London
WC2B 4AE
United Kingdom
UK Solicitor to the Company
Slaughter and May
One Bunhill Row
London
EC1Y 8YY
United Kingdom
Brokers
J.P. Morgan Cazenove
20 Moorgate
London
EC2R 6DA
United Kingdom

Jefferies International Limited
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
United Kingdom
UK Transfer Agent
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
United Kingdom

Website
Performance and portfolio information for shareholders can be found at:
www.agol.com

   


a d v e r t i s e m e n t