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
shares on the Official List.
LEI 549300D6OJOCNPBJ0R33.
Interim
Results
For the period ended 30 June 2020
(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 2020. All figures are
based on the unaudited financial statements for the six months
ended 30 June 2020.
The financial information for the six months ended 30 June 2020 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
2020 will be available on the Company website:
www.agol.com.
Financial Highlights
|
|
30 June
2020 |
|
31
December 2019 |
|
|
|
|
|
Total Net Assets |
|
US$11,914,971 |
|
US$14,170,771 |
|
|
|
|
|
Net Asset Value per
Share |
|
|
|
|
US$ shares |
|
US$2.73 |
|
US$2.89 |
£ shares* |
|
- |
|
£2.63 |
|
|
|
|
|
Closing-Trade Share
Price |
|
|
|
|
US$ shares |
|
US$1.43 |
|
US$2.54 |
£ shares* |
|
- |
|
£1.52 |
|
|
|
|
|
Discount to Net Asset
Value |
|
|
|
|
US$ shares |
|
(47.62)% |
|
(12.11)% |
£ shares* |
|
- |
|
(42.21)% |
* From 31 March 2020, all
remaining £ share class shares were converted to the US$ share
class.
Chairman’s Statement
As at 30 June 2020, the Net Asset
Value (“NAV”) of Ashmore Global Opportunities Limited (the
“Company” or “AGOL”) was US$11.9m
compared to US$14.2m at 31 December 2019. The NAV per share was
US$2.73 as at 30 June 2020, down from US$2.89 at the end of 2019. The share price
stood at US$1.43 as at 30 June 2020. The GBP share class was closed in
March 2020 because hedging no longer
made sense given the much reduced size of the Company and it
simplified operating procedures.
The main detractor from performance during the period was a
mark-down in the value of ZIM Laboratories. ZIM Laboratories is
listed on the BSE in India and its
falling share price in H2 2019 was only recognised in the
semi-annual valuation as at 31 December 2019 of the AADCI
Fund through which AGOL has exposure to this company. Covid-19 led
to a mark-down in GZI in Nigeria/South
Africa, but otherwise valuations were not significantly
affected.
There were no realisations during the reporting period but AEI
paid another dividend in April. The Board approved a distribution
to Shareholders of US$1.4m on
19 May 2020, with a payment date of
12 June 2020.
The Investment Manager is working towards the sale of the
remaining assets, with a particular focus on the largest exposure
of the Company, namely AEI. Your Board receives regular updates on
the operating performance and on progress with the sales
processes.
Below is an overview of the distributions made since
February 2013 when Shareholders voted
to wind up the Company in an orderly fashion.
Distributions |
|
|
|
|
|
|
|
|
|
Date |
Distributions |
|
% of 31
December 2012 |
% of 31
December 2012 |
|
(US$) |
|
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% |
30 June 2020 |
1,375,000 |
|
0% |
0% |
|
|
|
|
|
Total |
339,200,000 |
|
70% |
102% |
* was declared in January 2019 and
paid in April 2019.
Post reporting date, the Board issued a Circular to Shareholders
to propose the de-listing of the Company from the London Stock
Exchange. The principal motivation for the de-listing proposal is
to reduce operating costs as a percentage of the remaining NAV of
the Company. An AGM to decide on this proposal is scheduled for
22 September 2020. Full details are
given in the Circular.
I would like to thank everyone involved with AGOL for their hard
work.
Richard Hotchkis
21 August 2020
Investment Manager’s Report
Performance
As at 30 June 2020, the NAV per
share stood at US$2.73, representing
a return of -5.54% over the last six months. A distribution of
USD 1.4m was made to Shareholders in
June 2020.
Portfolio Review
The principal detractor from performance in the first half of 2020
was the mark-down in the value of ZIM Laboratories. This was due to
the falling share price in H2 2019, which was only reflected in the
semi-annual NAV as at 31 December
2019 of the AADCI Fund through which AGOL has exposure to
this company. The small exposure to GZI was marked down in Q2 2020
due to lower trading volumes as a result of the effects of the
economic measures in Nigeria and
South Africa to fight Covid-19.
AEI won the final appeal by the original Chinese contractor, and
this meant the end of their litigation process.
AEI paid another dividend from its ongoing operations. The
proceeds of this dividend were distributed to Shareholders in
June 2020.
The largest investee company exposure, AEI, now accounts for
around 88% of AGOL’s NAV as at 30 June
2020.
Further details on the smaller holdings of 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 while Covid-19
interrupted some sale processes, we expect to make further progress
on this in the next 12-18 months. The general sentiment towards
Emerging Markets (EM) has suffered under the strains of Covid-19
and resulting measures to fight the spread of the virus.
Nevertheless, in spite of alarming headlines, most emerging
countries are coping relatively well with lower rates of fatalities
per million people than in many of the developed countries. We
believe that is at least partially due to younger populations and
less urbanisation, making social distancing easier. The IMF
predicts shallower recessions and steeper economic recoveries in
emerging countries compared to developed countries. That said,
realisations of the remaining assets in AGOL are very much
influenced by the attraction and circumstances of each individual
asset.
Details on the Top 4 Underlying
Holdings (on a look through basis)
The table below shows the top 4 underlying investments as at
30 June 2020 excluding the cash
balance (cash was 4.23% as at 30 June
2020).
Investment
Name |
Holding |
|
|
Country |
Business
Description |
AEI |
88.09% |
|
|
Guatemala |
Power generation in
Latin America |
ZIM Laboratories
Ltd |
7.34% |
|
|
India |
Pharmaceutical
research and manufacturing |
Numero Uno |
4.62% |
|
|
India |
Branded apparel
manufacturers and retailers |
GZ Industries
Limited |
4.07% |
|
|
Nigeria |
Aluminium can
manufacturing |
The tables below show the country and industry allocations of
underlying investments over 1% at the end of June 2020:
Country |
% of
NAV |
|
Industry |
% of
NAV |
Guatemala |
87.77% |
|
Electrical |
87.77% |
India |
11.90% |
|
Pharmaceuticals |
7.31% |
Nigeria |
4.05% |
|
Retail |
4.60% |
|
|
|
Miscellaneous
manufacturing |
4.05% |
|
|
|
|
|
These tables form an integral part of the financial
statements.
Details on a Selection of the
Underlying Holdings
AEI
Industry: Power generation
Country: Guatemala
Company Status: Private
Investment Risk: Equity
Operational update
- The only operating entity remaining in AEI is Jaguar, a
coal-fired power plant in Guatemala.
- The final appeal by China Machine New Energy Corporation (CMNC)
against the arbitration award was heard in Singapore in November
2019 - this was unsuccessful and the arbitration award
stands.
- Jaguar has commenced enforcement proceedings in China against CNMC in respect of the award.
CNMC has no further right of appeal.
Key risks
Exit strategy
- Resume realisation of the asset once markets improve.
- Wind up of AEI post the Jaguar exit.
ZIM Laboratories
Industry: Pharmaceuticals
Country: India
Website: zimlab.in
Company Status: Private
Investment Risk: Equity
Operational update and priorities
- ZIM reported lower revenues primarily because of supply chain
issues due to Covid-19 in terms of raw materials coming from
China.
- ZIM was not shut down during the lockdown in India and the company is
"protected".
- In response to Covid-19, ZIM has launched a sanitiser product
and also produces Hydroxy-Chloroquine.
- The share price has improved somewhat from the end of 2019 but
liquidity remains low.
Exit strategy and timing
- The company is now listed on the BSE, but liquidity is
low.
- Any block sale talks have been put on hold, pending clarity on
the impact of Covid-19 in India.
Numero Uno
Industry: Retail
Country: India
Website: www.numerounojeanswear.com
Company Status: Private
Investment Risk: Equity
Operational update and priorities
- Covid-19 and the resulting lockdown in India are having a material detrimental effect
on the company’s operating performance.
- Margins had 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 margin improvement.
Exit strategy and timing
- The discussions with the promotor about realising our
investment have stalled in the current economic environment.
- We will seek to re-start such discussions later in 2020.
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 and growth in the canned beverage market resulted in
the business running 15% ahead of plan in Q1 2020 and attaining
record sales volumes. With the onset of Covid-19, however, and the
ensuing lockdowns and movement restrictions, demand for cans
decreased as hotels and restaurants were closed, and the company is
currently running at approximately 50% utilisation rate.
- In South Africa, GZI ramped up
operations on schedule, reaching peak production in February 2020, with two major contracts securing
50% of capacity. However with lockdowns and movement restrictions
due to Covid-19, sales have not matched production to date and the
business is running at 30% utilisation.
- We expect continued subdued demand and pressure on both
businesses until the pandemic abates.
2020 operational
strategy/priorities
- Ramp up production of the plant in South Africa.
- Sell land in Kenya.
- Leverage larger presence for global contracts with beverage
contracts up for renewal.
- Manage foreign exchange exposures/requirements.
- Conserve cash and liquidity as a buffer for a potential second
round of lockdowns.
Key risks
- Slowdown in the African beverages markets.
- Clients opting for cheaper competitors or alternatives.
- Access to USD / local currency depreciation.
- Lockdowns and movement restrictions.
Exit strategy and timing
- Mandated two banks to initiate the sales process in
February 2020 but the process has
been shelved until the business can run normalised operations for 6
months and markets are more conducive to a sale.
Microvast
Industry: Technology/Clean-tech
Country: China
Website: www.microvast.com
Company Status: Private
Investment Risk: Equity
Operational update
- Revenues continued to fall in H1 2020, after more than halving
in 2019, partially due to Covid-19 and a temporary lock-down of the
plant. As described further in the audited financial statements of
the Company for the year ended 31 December
2019, the independent valuation agent wrote down the equity
valuation of Microvast to zero.
2020/21 operational
strategy/priorities
- Securing further long term contracts for commercial vehicle and
automobile 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
- Financing problems and possible default on outstanding
debts.
- Not winning new orders and gaining new revenues.
- Better capitalised competitors who can grow capacity and
improve battery technology quicker and thus achieve more favourable
economies of scale.
- Warranty claims arising from defective cells or modules.
Ashmore Investment Advisors Limited
Investment Manager
21 August 2020
Board Members
As at 30 June 2020, 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.
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
Sherborne Investors (Guernsey) B Limited
Sherborne Investors (Guernsey) C Limited
Third Point Offshore Investors Limited (retired 30 June 2020)
TwentyFour Select Monthly Income Fund Limited |
London
London
London
London
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 21 August 2020
Richard
Hotchkis
Christopher Legge
Chairman
Chairman of the Audit Committee
Unaudited Condensed Statement of Financial Position
As at 30 June 2020
|
|
30
June 2020 |
|
31
December 2019 |
|
Note |
US$ |
|
US$ |
Assets |
|
|
|
|
Cash and cash
equivalents |
|
548,750 |
|
691,726 |
Other financial
assets |
5a |
15,248 |
|
- |
Financial assets at
fair value through profit or loss (“FVTPL”) |
3 |
12,406,209 |
|
14,713,255 |
Total
assets |
|
12,970,207 |
|
15,404,981 |
|
|
|
|
|
Equity |
|
|
|
|
Capital and
reserves attributable to equity holders
of the Company |
|
|
|
|
Special reserve |
|
374,334,833 |
|
375,709,891 |
Retained earnings |
|
(362,419,862) |
|
(361,539,120) |
Total
equity |
|
11,914,971 |
|
14,170,771 |
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities |
|
|
|
|
Financial liabilities
at FVTPL |
3 |
- |
|
12,409 |
Other financial
liabilities |
5b |
1,055,236 |
|
1,221,801 |
Total
liabilities |
|
1,055,236 |
|
1,234,210 |
Total equity and
liabilities |
|
12,970,207 |
|
15,404,981 |
|
|
|
|
|
Net asset
values |
|
|
|
|
Net assets per US$
share |
8 |
US$2.73 |
|
US$2.89 |
Net assets per £ share
* |
8 |
- |
|
£2.63 |
* From 31 March 2020, all
remaining £ share class shares were converted to the US$ share
class.
The unaudited condensed interim financial statements were
approved by the Board of Directors on 21
August 2020, 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
2020
|
|
Six
months ended
30 June 2020 |
|
Six
months ended
30 June 2019 |
|
Note |
US$ |
|
US$ |
|
|
|
|
|
Interest income
calculated using the effective interest method |
|
1,373 |
|
13,139 |
Net foreign currency
gain |
|
1,203 |
|
45,111 |
Net loss from
financial instruments at FVTPL |
4 |
(743,396) |
|
(4,086,738) |
Total net
loss |
|
(740,820) |
|
(4,028,488) |
|
|
|
|
|
Expenses |
|
|
|
|
Directors’
remuneration |
|
(40,446) |
|
(55,205) |
Investment management
fees |
|
(33,215) |
|
(33,403) |
Fund administration
fees |
|
(1,422) |
|
(2,865) |
Custody fees |
|
(831) |
|
(1,792) |
Incentive fees |
|
1,302 |
* |
(179,473) |
Other operating
expenses |
|
(65,310) |
|
(72,180) |
Total operating
expenses |
|
(139,922) |
|
(344,918) |
|
|
|
|
|
Loss for the
period |
|
(880,742) |
|
(4,373,406) |
|
|
|
|
|
Total loss for the
period |
|
(880,742) |
|
(4,373,406) |
|
|
|
|
|
Earnings per
share |
|
|
|
|
Basic and diluted
loss per US$ share |
9 |
US$(0.16) |
|
US$(0.73) |
Basic and diluted
loss per £ share |
9 |
US$(0.39) |
|
US$(0.92) |
* |
Incentive fees were
positive for the six months ended 30 June 2020 due to a reversal of
the prior year accrual. |
All items derive from continuing activities.
Unaudited Condensed Statement of Changes in Equity
For the six months ended 30 June
2020
|
|
|
Special |
|
Retained |
|
|
|
|
|
reserve |
|
earnings |
|
Total |
|
Note |
|
US$ |
|
US$ |
|
US$ |
|
|
|
|
|
|
|
|
Total equity as at
1 January 2020 |
|
|
375,709,891 |
|
(361,539,120) |
|
14,170,771 |
Total comprehensive
loss for the period |
|
|
- |
|
(880,742) |
|
(880,742) |
Capital
distribution |
7 |
|
(1,375,058) |
|
- |
|
(1,375,058) |
Total equity as at
30 June 2020 |
|
|
374,334,833 |
|
(362,419,862) |
|
11,914,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
(6,224,900) |
|
- |
|
(6,224,900) |
Total equity as at
30 June 2019 |
|
|
375,709,891 |
|
(355,789,757) |
|
19,920,134 |
Unaudited Condensed Statement of Cash Flows
For the six months ended 30 June
2020
|
|
Six
months ended
30 June 2020 |
|
Six
months ended
30 June 2019 |
|
|
Note |
US$ |
|
US$ |
|
Cash flows from
operating activities |
|
|
|
|
|
Net bank interest
received |
|
1,373 |
|
13,139 |
|
Dividends
received |
|
1,389,950 |
|
1,083,816 |
|
Net operating expenses
paid |
|
(321,734) |
|
(167,631) |
|
Net cash from
operating activities |
|
1,069,589 |
|
929,324 |
|
|
|
|
|
|
|
Cash flows from
investment activities |
|
|
|
|
|
Sales of
investments |
|
302,295 |
|
13,133,633 |
|
Purchases of
investments |
|
- |
|
(7,499,907) |
* |
Net cash flows on derivative instruments and foreign
exchange |
(139,802) |
|
(55,919) |
|
Net cash from
investment activities |
|
162,493 |
|
5,577,807 |
|
|
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
|
Capital
distributions |
7 |
(1,375,058) |
|
(6,224,900) |
|
Net cash used in
financing activities |
|
(1,375,058) |
|
(6,224,900) |
|
|
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents |
|
(142,976) |
|
282,231 |
|
|
|
|
|
|
|
Reconciliation of net cash flows to movement in cash and cash
equivalents |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the beginning of the period |
691,726 |
|
413,401 |
|
Net
(decrease)/increase in cash and cash equivalents |
|
(142,976) |
|
282,231 |
|
Cash and cash
equivalents at the end of the period |
|
548,750 |
|
695,632 |
|
* |
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 2020
Description of
investments |
Fair
value
US$ |
|
%
of
net assets |
|
|
|
|
AEI Inc - Equity |
6,329,025 |
|
53.12 |
Ashmore Global Special
Situations Fund 4 LP |
2,482,605 |
|
20.84 |
AA Development Capital
India Fund 1, LLC |
1,420,471 |
|
11.92 |
Ashmore Global Special
Situations Fund 5 LP |
1,123,042 |
|
9.43 |
Ashmore Global Special
Situations Fund 3 LP |
628,499 |
|
5.26 |
Ashmore Global Special
Situations Fund 2 Limited |
422,567 |
|
3.55 |
|
|
|
|
Total investments
at fair value |
12,406,209 |
|
104.12 |
|
|
|
|
Net other current
liabilities |
(491,238) |
|
(4.12) |
|
|
|
|
Total net
assets |
11,914,971 |
|
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. 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.
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 2019. 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
21 August 2020.
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 2019.
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 2019. 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
2020 |
31
December 2019 |
|
|
|
|
|
|
US$ |
US$ |
Equity
investments |
|
12,406,209 |
14,597,833 |
Derivative
financial assets |
|
- |
115,422 |
Total
financial assets at FVTPL |
|
12,406,209 |
14,713,255 |
There were no significant changes to the Company’s direct equity
investments other than valuation movements.
As at 30 June 2020, there were no
derivative financial assets. As at 31
December 2019, derivative financial assets comprised forward
foreign currency contracts as follows:
Currency
Bought |
Amount
Bought |
|
Currency
Sold |
Amount
Sold |
|
Maturity
Date |
Unrealised
Gain |
£ |
3,876,657 |
|
US$ |
5,024,360 |
|
31/01/2020 |
115,422 |
Derivative financial assets |
|
|
115,422 |
|
|
|
|
|
|
30 June
2020 |
31
December 2019 |
|
|
|
|
|
|
|
US$ |
US$ |
|
Derivative
financial liabilities |
|
- |
(12,409) |
|
Total
financial liabilities at FVTPL |
|
- |
(12,409) |
|
As at 30 June 2020, there were no
derivative financial liabilities. As at 31
December 2019, derivative financial liabilities comprised
forward foreign currency contracts as follows:
Currency
Bought |
Amount
Bought |
|
Currency
Sold |
Amount
Sold |
|
Maturity
Date |
Unrealised
Loss |
|
US$ |
1,144,714 |
|
£ |
872,755 |
|
31/01/2020 |
(12,409) |
|
Derivative financial liabilities |
|
|
(12,409) |
|
4. Net (Loss)/Income
from Financial Instruments at FVTPL
|
|
|
|
|
|
30 June
2020 |
30 June
2019 |
|
|
|
|
|
|
|
US$ |
US$ |
|
Derivative
financial instruments |
|
(244,018) |
(48,765) |
|
Total
derivative financial instruments |
|
(244,018) |
(48,765) |
|
Financial
assets mandatorily measured at FVTPL: |
|
|
|
|
|
- Equity
investments |
|
(499,378) |
(4,037,973) |
|
Total
financial assets mandatorily measured at FVTPL |
|
(499,378) |
(4,037,973) |
|
Net
loss from financial instruments at FVTPL |
|
(743,396) |
(4,086,738) |
|
Net loss from
financial instruments at FVTPL: |
|
|
|
|
- Dividend income |
|
1,389,950 |
1,099,409 |
|
- Realised gains on
investments |
|
200,567 |
- |
|
- Realised losses on
investments |
|
- |
(780,516) |
|
- Realised gains on
forward foreign currency contracts |
|
93,028 |
632,731 |
|
- Realised losses on
forward foreign currency contracts |
|
(234,033) |
(733,762) |
|
- Change in unrealised
gains on investments |
|
- |
2,406,435 |
|
- Change in unrealised
losses on investments |
|
(2,089,895) |
(6,763,301) |
|
- Change in unrealised
gains on forward foreign currency contracts |
|
12,409 |
70,234 |
|
- Change in unrealised
losses on forward foreign currency contracts |
|
(115,422) |
(17,968) |
|
Net loss from
financial instruments at FVTPL |
|
(743,396) |
(4,086,738) |
|
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
2020 |
31
December 2019 |
|
|
|
|
|
|
|
US$ |
US$ |
|
Prepaid
Directors’ insurance fees |
|
94 |
- |
|
Prepaid
regulatory fees |
|
2,979 |
- |
|
Prepaid
expenses |
|
12,175 |
- |
|
|
|
|
|
|
|
15,248 |
- |
|
b) Other financial liabilities:
Other financial liabilities relate to accounts payable and
accrued expenses, and comprise the following:
|
|
|
|
|
|
30 June
2020 |
31
December 2019 |
|
|
|
|
|
|
US$ |
US$ |
Incentive
fees payable |
|
(996,932) |
(1,145,642) |
Investment
management fees payable |
|
(10,548) |
(6,059) |
Other
accruals |
|
(47,756) |
(70,100) |
|
|
|
|
|
|
(1,055,236) |
(1,221,801) |
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 2019. However, in light of the
current developing global Coronavirus (Covid-19) outbreak they have
also been included for reference in these unaudited condensed
interim financial statements.
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$, and a sensitivity analysis of currency risk is
not meaningful at this time. However, the Company had previously
put in place hedging mechanisms to hedge the currency risk arising
on the £ share class.
Shares in the Company are denominated in US$. From 31 March 2020, all remaining £ share class shares
were converted to the US$ share class. The base currency is the
US$, and therefore non-US$ subscription monies for shares were
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$ were allocated solely to the £ share class. This may have
resulted in variations in the NAVs of the two classes of shares as
expressed in US$.
As at 30 June 2020, there was no
foreign currency exposure.
As at 30 June 2019, the net
foreign currency exposure on the £ share class was as follows:
|
|
|
US$ |
|
% of net
assets |
Currency exposure of £
share class |
|
|
5,169,643 |
|
25.95 |
Nominal value of
currency hedges |
|
|
(7,080,143) |
|
(35.54) |
Net foreign currency
exposure |
|
|
(1,910,500) |
|
(9.59) |
ii) Interest Rate Risk
The majority of the Company’s financial assets and liabilities are
non-interest bearing (30 June 2020:
95.39%, 30 June 2019: 96.51%). As at
30 June 2020, interest-bearing
financial assets comprised cash and cash equivalents of
US$548,750 (30
June 2019: US$695,632). The
Company’s investment portfolio is composed entirely of non-interest
bearing assets as at 30 June 2020
(30 June 2019: 100%). As a result,
the Company is subject to limited direct exposure to interest rate
risk through fluctuations in the prevailing levels of market
interest rates and a sensitivity analysis of interest rate risk is
not meaningful at this time.
iii) Other Price
Risk
Other price risk is the risk that the value of financial
instruments will fluctuate as a result of changes in market prices
(other than those arising from interest rate risk or currency
risk), whether caused by factors specific to an individual
investment, its issuer or any other relevant factors.
The Company’s strategy for the management of price risk is to
seek to maximise the exit prices that it obtains for its direct and
indirect investments.
The table below summarises the sensitivity of the Company’s net
assets attributable to equity holders to investment price movements
as at the reporting date. The analysis is based on the assumption
that the prices of the investments increase by 5% (30 June 2019: 5%), with all other variables held
constant.
|
|
|
30 June
2020 |
|
30 June
2019 |
|
|
|
US$ |
|
US$ |
Equity
investments |
|
|
620,310 |
|
1,021,187 |
|
|
|
620,310 |
|
1,021,187 |
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.
|
|
|
30 June
2020 |
|
30 June
2019 |
|
|
|
US$ |
|
US$ |
Cash and cash
equivalents* |
|
|
548,750 |
|
695,632 |
|
|
|
548,750 |
|
695,632 |
* 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 period-end date was A+ (30 June
2019: 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 4 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 30 June 2020 and
30 June 2019 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 14.
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 7 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.
b) Carrying amounts versus fair values
As at 30 June 2020, 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 2020.
|
Mandatorily at FVTPL |
Financial assets at amortised cost |
Financial liabilities at amortised cost |
Total |
Cash and cash
equivalents |
- |
548,750 |
- |
548,750 |
Non-pledged financial
assets at FVTPL |
12,406,209 |
- |
- |
12,406,209 |
Other receivables |
- |
15,248 |
- |
15,248 |
Total |
12,406,209 |
563,998 |
- |
12,970,207 |
|
|
|
|
|
Financial liabilities
at FVTPL |
- |
- |
- |
- |
Other payables |
- |
- |
(1,055,236) |
(1,055,236) |
Total |
- |
- |
(1,055,236) |
(1,055,236) |
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 at FVTPL |
Financial assets at amortised cost |
Financial liabilities at amortised cost |
Total |
Cash and cash
equivalents |
- |
691,726 |
- |
691,726 |
Non-pledged financial
assets at FVTPL |
14,713,255 |
- |
- |
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) |
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 2020 and the year ended
31 December 2019.
The following table analyses within the fair value hierarchy the
Company’s financial assets at FVTPL (by class) measured at fair
value as at 30 June 2020:
|
Level
1 |
Level
2 |
Level
3 |
Total |
Non-pledged
financial assets at FVTPL |
|
|
|
|
Equity
investments |
- |
- |
12,406,209 |
12,406,209 |
Total |
- |
- |
12,406,209 |
12,406,209 |
There were no financial liabilities at FVTPL as at 30 June 2020.
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) |
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
2020:
|
|
Equity investments |
Opening balance as at
1 January 2020 |
|
|
|
14,597,833 |
Sales and returns of
capital |
|
|
|
(302,295) |
Gains and
losses recognised in profit and loss * |
|
|
(1,889,329) |
Closing balance as
at 30 June 2020 |
|
|
|
12,406,209 |
* The change in unrealised losses for the period recognised in
profit or loss relating to Level 3 instruments held as at
30 June 2020, amounted to
US$1,880,266.
Total gains and losses included in the Unaudited Condensed
Statement of Comprehensive Income are presented in “Net
(loss)/income from financial instruments at FVTPL”.
The following tables show the valuation techniques and the key
unobservable inputs used in the determination of the fair value of
Level 3 direct investments:
Balance as at
30 June 2020
US$ |
|
Valuation technique |
Significant unobservable inputs |
Range
of estimates for unobservable inputs |
Sensitivity to
changes in significant unobservable inputs |
Equity in a
private company |
6,329,025 |
|
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 |
6,077,184 |
|
Unadjusted NAV |
Inputs
to NAV* |
US$0.01
to US$7.12 |
The estimated fair
value would increase if the NAV was higher |
|
|
|
|
|
|
|
Balance as at
31 December 2019
US$ |
|
Valuation technique |
Significant unobservable inputs |
Range
of estimates for unobservable inputs |
Sensitivity to
changes in significant unobservable inputs |
Equity in a
private company |
7,271,092 |
|
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 |
7,326,741 |
|
Unadjusted NAV |
Inputs
to NAV* |
US$0.01
to US$7.95 |
The estimated fair
value would increase if the NAV was higher |
* The Company has assessed whether there are any discounts in
relation to lock-in periods that are impacting liquidity. There
were no discounts in relation to lock-in periods as at 30 June 2020 or at 31
December 2019.
** Information has not been included as these are commercially
sensitive.
Unobservable inputs are developed as follows:
- EBITDA and revenue multiples represent amounts that market
participants would use when pricing an investment. These multiples
are selected from comparable publicly listed companies based on
geographic location, industry size, target markets and other
factors that are considered to be reasonable. The traded multiples
for the comparable companies are determined by dividing its
respective enterprise value by its EBITDA or revenue.
- The Company used a combination of market multiples and
discounted cash flows methodologies to derive the fair value.
The Company believes that its estimates of fair value are
appropriate; however the use of different methodologies or
assumptions could lead to different measurements of fair value. For
fair value investments in Level 3, changing one or more of the
assumptions used to alternative assumptions could result in an
increase or decrease in net assets attributable to investors. Due
to the numerous different factors affecting the assets, the impact
cannot be reliably quantified. It is reasonably possible on the
basis of existing knowledge, that outcomes within the next
financial period that are different from the assumptions used could
require a material adjustment to the carrying amounts of affected
assets.
7. Capital and
Reserves
Ordinary Shares
The following table presents a summary of changes in the number of
shares issued and fully paid during the period ended 30 June 2020:
|
|
US$
shares |
|
£
shares |
Shares
outstanding as at 1 January 2020 |
3,617,068 |
|
1,065,051 |
Share conversions |
|
1,229,807 |
|
(1,065,051) |
Compulsory
partial redemptions |
(488,311) |
|
- |
Shares
outstanding as at 30 June 2020 |
4,358,564 |
|
- |
Share Conversion
The following share conversions took place during the period ended
30 June 2020:
Transfers from |
Transfers to |
Number
of shares
to switch out |
|
Number
of shares
to switch in |
£ shares |
US$ shares |
1,065,656 |
|
1,230,563 |
US$ shares |
£ shares |
756 |
|
605 |
Compulsory Partial Redemptions
During the period ended 30 June
2020, management announced partial returns of capital to
Shareholders by way of compulsory partial redemptions of shares
with the following redemption dates:
•
19 May 2020, US$1,375,000 using the 30
April 2020 NAV.
Voting rights
The voting rights each share is entitled to in a poll at any
general meeting of the Company (applying the Weighted Voting
Calculation as described in the Prospectus published by the Company
on 6 November 2007) are as
follows:
The above figures may be used by Shareholders as the denominator
for calculations to determine if they are required to notify their
interest in, or a change to their interest in the Company under the
FCA’s Disclosure and Transparency Rules.
8. Net Asset
Value
The NAV of each US$ 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 end as follows:
As at 30 June
2020 |
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 |
11,914,971 |
4,358,564 |
2.73 |
2.73 |
|
11,914,971 |
|
|
|
As at 31 December
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 |
10,466,558 |
3,617,068 |
2.89 |
2.89 |
£ shares |
3,704,213 |
1,065,051 |
3.48 |
2.63 |
|
14,170,771 |
|
|
|
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 2020 was as follows:
|
|
|
US$
share |
|
£
share |
Issued shares at the
beginning of the period |
|
|
3,617,068 |
|
1,065,051 |
Effect on
the weighted average number of shares: |
|
|
|
|
- Conversion of
shares |
|
|
614,670 |
|
(532,326) |
Weighted average
number of shares |
|
|
4,231,738 |
|
532,725 |
Loss
for the period attributable to each class of shareholders
(US$) |
|
(672,274) |
|
(208,468) |
EPS (US$) |
|
|
(0.16) |
|
(0.39) |
There were no dilutive instruments in issue during the period
ended 30 June 2020.
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.
10. Segmental Reporting
Although the Company 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 2020.
Investment in unlisted
investment Funds |
Number
of
investee Funds |
|
Total net
assets |
|
Carrying
amount included in “Financial assets at FVTPL” |
|
% of net
assets of underlying Funds |
Special Situations
Private Equity Funds |
5 |
|
55,164,677 |
|
6,077,184 |
|
11.02 |
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
2020, the Company had the following related party
transactions:
|
|
Expense |
|
Payable |
Related
Party |
Nature |
US$ |
|
US$ |
AIAL |
Investment management
fees |
(33,215) |
|
(10,548) |
AIAL |
Incentive fees |
1,302 |
* |
(996,932) |
Board of
Directors |
Directors’
remuneration |
(40,446) |
|
- |
|
|
|
|
|
|
|
|
Investment Activity |
Related
Party |
Nature |
|
|
US$ |
Related Funds |
Sales |
|
302,295 |
Related Funds |
Dividends |
|
454,394 |
* Incentive fees were positive due to a reversal of the prior
year accrual.
During the period ended 30 June
2019, the Company engaged in 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 |
|
|
|
|
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 |
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.
During the period ended 30 June
2020, 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
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 |
The Directors had the following beneficial interests in the
Company:
|
30 June
2020 |
31
December 2019 |
|
£
ordinary shares |
£
ordinary shares |
Nigel de la Rue |
- |
373 |
Christopher Legge |
- |
232 |
Richard Hotchkis |
- |
139 |
14. Commitments
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 2020, the outstanding
commitment was US$5,959,809
(31 December 2019: 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. As the value of the settlement
fund cannot be determined in advance, it is not possible to
estimate the settlement amount of the Company.
16. Subsequent Events
Since the period end we have seen the continued development of
the Coronavirus (Covid-19) outbreak initially in China and now having reached most continents.
At present, it is not possible to assess the detailed impact of the
current risk on the investments in the Company, but there is a
continuing concern about the impact on the world economy. There has
been a significant change in the financial markets in the last few
months. 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.
In relation to the underlying investments of the Company, given
the inherent uncertainties and relatively early stage in terms of
the COVID-19 impact to companies and the broader economies, it is
not practical to determine the impact of COVID-19 or to provide a
quantitative estimate of the impact at this time. The Investment
Manager continues to adopt a proactive approach in engaging with
the investee companies in managing potential issues.
These include, among other things, cashflow planning, cost
reductions where appropriate, negotiations with various third
parties from government authorities to creditors. The eventual
outcome and timing is also very dependent on how successful
authorities are at containing the outbreak and the potential
impact.
The Directors do not believe that any adjustments to the
unaudited condensed interim financial statements as at 30 June 2020 are required as a result of this
subsequent event.
Post reporting date, the Board issued a Circular to Shareholders
to propose the de-listing of the Company from the London Stock
Exchange. The principal motivation for the de-listing proposal is
to reduce operating costs as a percentage of the remaining NAV of
the Company. An AGM to decide on this proposal is scheduled for
22 September 2020. Full details are
given in the Circular. Should the resolution pass, it is
anticipated that the effective date of delisting will be
21 October 2020.
There were no other 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 |