Ashmore Group PLC Annual Report 2020

Plain-text annual report

Annual Report and Accounts 2020MEETING THE CHALLENGE WITH CONTINUED FOCUSStrategic reportGovernanceFinancial statementsStrategyBusiness modelInvestment processesCOVID-192019: US$91.8bn2019: 66%Culture-9% YoYChief Executive’s reviewKPIsMarket reviewInvestment themesBusiness review2019: £219.9mRisk management+1% YoY2019: 97%Engaging with Ashmore’s stakeholdersSustainabilityBoard of Directors2019: 25.0pChairman’s statement+3% YoY2019: £314.3mCorporate governance+5% YoYAudit and Risk Committee reportNominations Committee reportRemuneration reportStatement of Directors’ responsibilities2019: 16.65pDirectors’ report+2% YoYIndependent auditor’s reportConsolidated financial statementsCompany financial statementsNotes to the financial statementsFive-year summaryInformation for shareholdersFor the online version of the annual report, other announcements and details of upcoming events, please visit the Investor Relations section of the Ashmore Group plc website at www.ashmoregroup.com24610121418202428354246616365707475110111116123127130171172Contents2020 highlightsMore informationNon-GAAP alternative performance measures are defined on page 34. Five-year comparatives for other alternative performance measures are included in the five-year summary on page 171.Assets under Adjusted management (AuM)EBITDA marginAuM outperforming Profit before taxbenchmarks (3years)Diluted EPSNet revenueDividends per shareUS$83.6bn68%£221.5m17%25.7p£330.5m16.90p�MEETING THE CHALLENGE WITH CONTINUED FOCUSAshmore’s purpose, as a specialist Emerging Markets investment manager, is to deliver long-term investment performance for clients and generate value for shareholders through market cycles. In pursuing these objectives, Ashmore aims to ensure that its culture and working practices recognise its broader set of stakeholders.Focuses on Creates value Promotes a Recognises the Manages the complexity delivering long-term for team-based culture impact the Group’s and requirements of performance through market cycles, with a clear ‘tone activities may have multiple for underpinned by a from the top’ and a on broader jurisdictions across the strong alignment of collaborative working and takes this Group’s operations and interests through environment for the responsibility seriouslyinvestments in emerging employee equity Group’s , countriesownershipits most important assetshareholdersregulatoryclientssocietyemployeesENABLING DESIGNED A CONSISTENT A TEAM-BASED FOR ALL GROWTH:TO DELIVER:APPROACH:CULTURE:STAKEHOLDERS:Ashmore’s strategyAshmore’s business Ashmore’s investment Performance Section 172 modelprocessesand rewardstatementPAGE 2PAGE 4PAGE 6PAGE 12PAGE 42How Ashmore’s purpose aligns with and benefits its stakeholdersRead on to learn about how Ashmore delivers value through market cyclesStrategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 1123A consistent strategyAshmore’s strategy is aligned with the significant growth opportunity available across the broad range of Emerging Markets asset classes. The three distinct phases are focused on growing and diversifying Ashmore’s business and creating value for clients and shareholders.Establish Emerging Markets asset classesAshmore is recognised as an established specialist Emerging Markets manager, and is therefore well positioned to capture investors’ rising allocations Diversify investment themes and developed world capital sourcesAshmore is diversifying its revenue mix to provide greater revenue stability through the cycle. There is particular focus on growing intermediary retail, equity and alternatives AuM Mobilise Emerging Markets capitalAshmore’s growth is enhanced through accessing rapidly growing pools of investable capital in Emerging MarketsFOCUS ON THE OPPORTUNITY2 Ashmore Group plc | Annual Report and Accounts 2020Opportunity Progress in 2020Potential sources of risk –Developed world investors hold US$80 trillion of assets and are profoundly underweight Emerging Markets: target allocations are less than 10% compared with global benchmark weights of 10% to 20% –Investable capital in Emerging Markets is growing more than 3x faster than in Developed Markets –This presents a significant growth opportunity in local asset management platforms, as well as cross-border Emerging Markets opportunities over the longer term –The Emerging Markets investment universe continues to grow and diversify, and Ashmore strives to be at the forefront of accessing new market opportunities as they arise –Diversifying revenue streams provides greater stability through the cycle –Ashmore’s clients continue to raise allocations to Emerging Markets. Approximately 80% of institutional net flows were from existing clients increasing allocations within existing mandates or broadening their Emerging Markets investments –Investor risk appetite was impacted by COVID-19 crisis in second half of the financial year –Ashmore Indonesia undertook an IPO and listed on the Jakarta Stock Exchange in January 2020 –Local asset management platforms manage US$5 billion, 6% of the Group’s total AuM –More than a quarter (26%) of Group AuM is sourced from clients in the Emerging Markets –Ashmore’s equities business performed well this year, delivering net flows in every quarter and totalling US$1.2 billion over the year –Launched and seeded Equity ESG fund –Client demand was broad-based across Ashmore’s investment themes –Sentiment towards, and fundamental performance of, Emerging Markets –Long-term investment performance –Managing the development of overseas offices, including local asset management platforms in Emerging Markets –Potential constraints on longer-term growth such as competition SEE PAGES 20-27 FOR ASHMORE’S MARKET AND INVESTMENT THEMES REVIEWSEE PAGES 28-34 FOR ASHMORE’S BUSINESS REVIEWSEE PAGES 35-41 FOR ASHMORE’S PRINCIPAL RISKSStrategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 3MEETING THE CHALLENGETHROUGH STRONG FUNDAMENTALSA distinctive and robust business modelAshmore’s business model supports its growth strategy and is designed The salient characteristics of the to create value for the Group’s In a ‘people business’, the alignment model have been sustained through stakeholders through market cycles.of interests between employees, bull and bear markets. Importantly, clients and shareholders is critical. they provide resilience and protect The model converts the structural This is primarily achieved by the shareholder returns when confronted growth opportunities in Emerging team-based approach to investment with more challenging market Markets to deliver positive outcomes management and a remuneration conditions, such as experienced in for Ashmore’s clients, shareholders philosophy that places an emphasis the second half of the financial year. and employees as well as recognising on performance-related pay with a In particular:Ashmore's responsibilities to significant bias to long-dated equity a broader set of stakeholders – The Group’s balance sheet awards and high levels of employee including society.is well-capitalised and liquid equity ownership. When combined with financial resources of with a low fixed operating cost approximately £700 million, more model and continued cost discipline, than £550 million in excess of the this provides significant flexibility in Group’s Pillar II regulatory capital the Group’s cost base to enable it requirement, and includes around to respond to changes in the £500 million of cash. Ashmore has Ashmore’s established investment revenueenvironment.no debt. This not only provides processes have delivered long-term resilience but also enables investment performance for clients The delivery of investment continued investment, for example over nearly three decades. This drives performance for clients results in the seed capital programme.growth in AuMues and profits , revenin diversified AuM growth, which over the longer term.– The remuneration policy underpins the business model translates a highly flexible cost base that efficiently into financial performance delivers a high operating margin and and long-term value creation protects returns for shareholders forshareholders.through market cycles.SEE PAGES 42 TO 45 FOR ASHMORE'S SECTION 172 STATEMENTSEE PAGES 6 TO 9 FOR ASHMORE'S INVESTMENT PROCESSESSEE PAGES 28 TO 34 FOR ASHMORE'S BUSINESS REVIEWStrong alignment of interests Resilience through market cyclesand significant cost flexibilityActive management delivering long-term investment performanceValue creation for shareholders 4 Ashmore Group p|lc Annual Report and Accounts 2020Structural growth opportunitiesHigh-return, diversified range of Emerging Markets investment themesPowerful political, social and economic convergence trendsInvestor allocations have to increase significantly to match global index weights Strong long-term investment performance for clientsConsistent investment philosophy followed since 1992Significant alpha delivered through market cyclesInterests aligned through employee equity ownershipVariable remuneration biased towards long-dated equity awardsEmployees own more than 40% of AshmoreValue for shareholders68% adjusted EBITDA marginStrong cash generationProgressive dividend policyDistinctive business model characteristicsSpecialist focusActive managementDiversified client baseCost disciplineFlexible remuneration philosophyScalable operating platformStrong, liquid balance sheetActive seed capital programmeDelivering value through the cycleStrategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 5Understanding Ashmore’s investment processesAshmore’s investment philosophy and relationships with a network of has been followed consistently since contacts built up over nearly three Ashmore’s experience shows that the Group launched its first fund in decades of investing. These insights significant long-tealpha can be rm Emerging October 1992. There are defining are shared across asset classes, but delivered through active management Markets characteristics that are applied across importantly there is no ‘house view’ and the expression of highconviction countries asset classes as well as specific that has to be followed by the ideas in portfolios. The poor index represented in principles that recognise the key investment teams when constructing representation of fixed income and portfoliosdifferences between, for example, portfolios. Additionally, Ashmore’s equity markets means that alpha can investing successfully in the fixed local office investment teams be generated both through active risk income and equity markets.in countries such as Colombia, against benchmark weights, and SaudiArabia, India and Indonesia also through investing in off-benchmark collaborate with the global investment securities. The latter does not Local asset At the core of the philosophy committees and can provide valuable necessarily mean instruments are management is a committee-based approach ‘on the ground’ insights as well as less liquid or have significantly platformsto managing client portfolios. benefiting from global macro views different risk characteristics, it simply This provides a highly institutionalised, to assist in their own independent means that they do not conform to team-based framework that seeks investment processes.the strict eligibility criteria of the to reduce as far as possible the benchmark index provider.key man risk inherently present in active investment management, and results in a ‘no star’ culture in which no individual is single-handedly responsible for investment decisions.The Emerging Markets fixed income and equityassetclasses are large and diversified, as described in the Market review, but also highly inefficient. This manifests itself in relatively low index representation and volatility in security prices that can be heavily influenced over short time periods by broad investor sentiment rather than underlying economic, political and company fundamentals. Consequently, Ashmore actively manages portfolios to exploit these inefficiencies and to generate long-term outperformance for clients.Ashmore’s long history of specialising Emerging Markets in Emerging Markets means that investedproprietary research is an important Ashmore presencecomponent of investment idea generation. Portfolio managers generate ideas through many sources, including extensive travel Active managementInvestment committeesInefficient asset classesProprietary research816A CONSISTENT INVESTMENT APPROACH Ashmore's Emerging Markets investments and worldwide network6 Ashmore Group p|lc Annual Report and Accounts 2020A specialist, active approach to Emerging MarketsBottom up:- credit/value- equity/quality growth Proprietary research Macro top-downLiquidity obsessedActive management Focus on liquidityAshmore has a robust risk management culture and this is especially important in the assessment and management of liquidity within portfolios. As such, the understanding of market liquidity has always been and remains central to the investment processes, since the investment teams must decide and record specific securities to trade and seek to execute any portfolio changes expeditiously. In addition to pre and post-trade compliance oversight, the investment committee reviews all trades to ensure that they comply with the agreed decisions.The Group’s global operating hubs in New York, London and Singapore provide round-the-clock trading capabilities and Ashmore has strong, well-established counterparty trading relationships formed over nearly three decades of specialist, focused investing in Emerging Markets.Importantly, given that the majority of Emerging Markets securities are issued, owned and traded locally, these relationships include local brokers as well as global investment banks. Hence, as liquidity increasingly moves to local trading venues within the Emerging Markets, Ashmore’s portfolio managers are well positioned to source liquidity when executing committee decisions.Global and local investment teamsAshmore’s common investment philosophy underpins independent decisions taken by its various investment committees. Fixed income and equity investment committees oversee the management of global client portfolios, and local asset management platforms in certain emerging countries invest in local and regional markets on behalf of domestic and global clients. There is collaboration and sharing of information between the global and local investment teams. There is no 'house view' and each team makes its own independent investment decisions.Consistent delivery of long-term outperformanceAshmore launched its first fund, EMLIP, in October 1992 and has successfully managed the portfolio through periods of market dislocation and volatility in global investor sentiment towards Emerging Markets, in accordance with the investment philosophy and committee-based approach described on these pages.Since its inception, EMLIP has delivered annualised net returns of +12.5%, comfortably exceeding returns from its benchmark index (+9.8%) and, for comparison, the S&P500 equity index (+9.5%).This illustrates not only the superior long-term returns available in Emerging Markets, but also the importance of specialist, active asset management in a set of diversified and inefficient asset classes.98Investment professionals33Global fixed income team31Global equity team34Local asset management and alternatives teamsESG integrationAshmore recognises that non-financial factors can play an important part in ensuring sustainable growth and in building a robust and comprehensive understanding of an issuer, whether corporate or sovereign. Therefore, as a specialist Emerging Markets manager, Ashmore has always considered environmental, social and governance factors in its investment analysis.Similar to its credit and equity analysis, Ashmore uses a variety of proprietary and third-party tools and data sets to assist in its understanding of ESG risks and opportunities, and how these are reflected in market prices and fair values of securities.Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 7A CONSISTENT INVESTMENT APPROACHWhile COVID-19 has imposed many travel restrictions, the breadth and depth of Ashmore's relationships means that the research process continues through virtual methods such as video conferences.This approach combines with desktop analysis to generate investment ideas to present to the investment committee.In all themes, scenario planning plays an important part in assessing what is priced in to a security, and therefore being able to identify cases where market prices have diverged from underlying fundamentals.The committee and its investment theme sub-committees have the flexibility to analyse, discuss and act upon market developments between the formal weekly meetings.Fixed income investment processAshmore’s fixed income investment committee oversees the management of global client portfolios within the external debt, local currency, corporate debt, blended debt and multi-asset investment themes.The committee comprises a Chairman, the Head of Research, the relevant fixed income and multi-asset desk heads, and representatives from trading and risk management. The committee meets weekly and follows an established process, to discuss and analyse the global macro environment, to update individual country and company credit views, and to assess other relevant risk factors including those relating to ESG.Alongside the relevant asset class investment teams, the committee oversees model portfolio construction and changes to portfolio holdings. It also assesses the relative risks/rewards across investment themes in order to determine the appropriate positioning of blended debt and other multi-asset class strategies.Ashmore’s value-driven active management approach employs a combination of macro top-down views and rigorous bottom-up credit analysis with a focus on determining an issuer’s ability and willingness to pay.Portfolio managers have geographic responsibilities and travel extensively to conduct research, including meetings with company management, government officials, central banks, regulators and other contacts within Ashmore’s established network. The combination of inefficient asset classes and a specialist approach to value-based active management means that Ashmore’s investment process is able to deliver significant long-term outperformance for clients, albeit with the potential for shorter-term periods of underperformance typically when markets have become dislocated and the greatest investment opportunities can present themselves.Investment teams(sub ICs)AllocationExternal debtESG integrationLocal currencyCorporate debtBlended debtMulti-assetFixed income ICGlobal macro and asset allocationEquity ICLocal offices and AlternativesCollaborationCollaboration8 Ashmore Group plc | Annual Report and Accounts 2020Equity investment processAshmore’s equity investment process follows the same investment committee-based approach to active portfolio management. The equity team participates in a common macro discussion in the fixed income IC, but operates independently of the fixed income committee structure. Not only does this broaden the range of investment opportunities and therefore diversify the returns profile, it also enables the Group to benefit from the sharing of research insights, collaboration with local offices, and common risk management and governance principles.The equity investment committee meets weekly and has responsibility for investment and governance oversight of the Group’s listed equity strategies. The committee comprises a Chairman, the senior portfolio managers responsible for the equity sub-themes, and representatives from trading and risk management.The individual global equity strategies are managed by sub-committees for All Cap equity, Frontier markets equity and Active equity, in the same way that the fixed income teams operate in investment theme sub-committees.There is a shared research framework among the strategies, ensuring efficient and consistent analysis of investment opportunities. The research is fundamental and primarily proprietary in nature, and includes the explicit integration of ESG factors into the bottom-up company analysis. In common with the fixed income approach, equity portfolio managers have geographic research responsibilities and draw upon a variety of internal and external sources to generate investment ideas for consideration by the investment committees.Additionally, while there is no house view, the equity investment committee and sub-committees contribute to and use the fixed income global macro analysis as an input to their decision making and portfolio construction. Furthermore, the insights of Ashmore’s local investment teams can be important to the global equity investment process.Ashmore’s equity investment philosophy recognises that active management with high conviction idea generation can deliver superior performance over time. Importantly, the investment teams are unconstrained by benchmark indices, which in many cases are unrepresentative of the underlying investment opportunities available to an active manager.The equity process has a focus on companies that can deliver quality growth, together with the consistent application of valuation discipline and a strong appreciation and understanding of market liquidity when constructing and managing portfolios.Equity ICGovernance and risk managementFixed income ICLocal offices and AlternativesCollaborationCollaborationAll CapShared research frameworkESG integrationActiveFrontierInvestment teams(sub ICs)Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 9MEETING THE CHALLENGE FOR ALL STAKEHOLDERSCOVID-19The COVID-19 virus has had a profound effect on societies, In line with local government guidelines, certain Ashmore economies and markets across the world, and there remains offices have begun to return to office-based operations, significant uncertainty about its future impact. Ashmore’s with strict social distancing rules in placeand tea m rotations. priorities during this period have been to ensure the health This approach is coordinated centrallyat the Group level so and safety of its employees and to continue to focus on best practice and lessons learned can be shared with other delivering value for its stakeholders. While this crisis is locations as they prepare to make the transition back to unprecedented in recent memory, and has occurred at the office-based working.same time as an oil price shock, the Group’s business model and culture have meant that it has responded effectively to The worldwide impact of the pandemic on working practices the challenges and maintained its investment, operational means that most elements of the asset management industry and support activities as close to normal as possible.have had to employ alternative ways of communicating with stakeholders. In Ashmore’s case this has included, for Although the nature and impact of the COVID-19 pandemic example, a significant increase in the use of video calling was not predicted, Ashmore’s comprehensive Business systems to enable employees to maintain contact with Continuity Plan wasdeployed swiftlyand delivered an members of their teams and other colleagues, frequent and effective response in the context of the rapid development regular CEOemails to all employees,ongoing regular of government guidance, policies and legislation in each of contact with the Group's regulators, as well as a letter to the countries in which the Group operates. Over a two-week stakeholders early in the crisis to provide a comprehensive period in mid-March, the firm’s approximately 300 employees update and reassurance on the Group’s response to the transitioned successfully from full-time office-based roles to developing situation.working remotely. This was facilitated efficiently due to Ashmore's single consistent global operating model and Ashmore’s governance structures have continued to robust IT infrastructure, as well as the commitment and operate effectively, with all Board, committee and other dedication of all employees at a time of significant management meetings taking place as planned. The Group's uncertainty. The integrity of Ashmore’s remote access OperatingCo mmittee met frequently and regularly to environment enables effective management of cyber managethe developing impact ofCOVID-19. security risks in the remote working period.Some working practices were changed early in the crisis, The fall in global markets in Q3 resulted in negative such as no face-to-face meetings and a restriction on travel, investment performance for the year, as described in and while at the time of writing they remain in place it is the Business review. Ashmore’s investment processes,expected that they will ultimately prove temporary. as described on pages 6 to 9, manage client portfolios Nonetheless, the increased use of ‘virtual’ communications through investment committees, all of which have since the start of 2020 is likely to have a lasting impact on continued to operate effectively notwithstanding behaviour across the industry.some constraints imposed by working remotely. CommunicationsOperationalp imactGovernanceInvestment processesMarchAprilEmployeesShareholdersClientsEmployeesShareholdersClientsBCP plan implemented, Continued participation Increased level Increased frequency Additional Additional, timely all Group employees in investor conferences of interaction, of ‘tone from the disclosure in Q3briefings focused on swiftly and successfully and meetings as including top’ communications AuM statementmarket and transitioned to planned, but virtuallyCEO letterand continuation of investment strategy Emerging Markets workingremotely‘normal’ working developments briefing to provide a practices using timely update on technologymarket conditions 10 Ashmore Group p|lc Annual Report and Accounts 2020Localoffices already participated by telephone in IC meetings Many of the Group’s employees made voluntary donations and so this has naturally extended toall investment to the Ashmore Foundation, NHS Charities Together and professionals. From a research perspective, interaction with other charities fighting the effects of COVID-19, and issuers and other counterparties has also transitioned Ashmore matched these generouscontributions, resulting in effectively to the new environment through the use of ‘virtual’ further total charitable donations of more than £45,000.roadshows, video calls and webcasts in the place of travel. The Group has not furloughed or made redundant any employees as a result of COVID-19 and nor has it voluntarily The distribution team faced the challenge of communicating taken advantage of any government or other support with existing and potential clients as markets experienced a schemes in any of the countries in which it operates.substantial dislocation in February and March, while As the full impact of the virus becomes clearer, the Group becoming increasingly restricted in terms of the ability to will continue to examine ways in which it can contribute to conduct face-to-face meetings. However, the levels of broader recovery efforts in society, including by continuing to engagement were high and assisted by an increase in the support grant organisations in the Emerging Markets use of video technology alongside the more traditional through the work of the Ashmore Foundation.methods of communication. While client redemptions increased, Ashmore's focus on liquidity management ensured that they were facilitated even in the more stressed The longer-term impact of COVID-19 remains uncertain market conditions. with many unknowns, but the principles of investing, the long-term growth opportunity available in Emerging Markets, Inevitably some client-related processes have become more and the resilience of Ashmore’s business model, ensure that protracted in the absence of physical meetings, but as with the Group is well-positioned to meet the challenges and the investment processes, the transition to a remote opportunities resulting from the crisis.working environment has been accomplished without any major issues.Ashmore’s infrastructure continues to support effective remote working, but as explained on page 12, the Group’s culture is centred on teams operating in offices. It is Ashmore encouraged employees, where possible, to therefore recognised that a transition back to this way of support local charitable efforts to meet the serious and working is desirable, but the health of employees is pervasive challenges presented by the COVID-19 crisis in paramount and so a decision to return to offices will be the countries in which it operates. The Group made a taken only when it is safe and appropriate to do so, and £250,000 donation to NHS Charities Together in the UK to always in accordance with local government advice.support the critical efforts of healthcare workers in dealing with the immediate impact of the virus as well as preparing to tackle the longer-term consequences in areas such as resource requirements and staff wellbeing. Client interactionConclusionSocietyMayJuneJulyShareholdersSocietyEmployeesShareholdersContinued to Ashmore Group plc Employees return Replaced planned participate in donation to NHS to some offices in investor roadshows virtual conferencesCharities TogetherAsia on a rotational with telephone and basis, in accordance video callsMatched employee with local guidelinesdonationsStrategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 11UNDERSTANDING ASHMORE’S TEAM-BASED CULTUREAshmore has a distinctive team-based ‘nostar’ fund manager culture, which A significant proportion of an culture that has been preserved over reduces key man risk and instils employee’s variable remuneration the Group’s history,as it has grown will be in the form of equity awards appropriatebehaviours. from being a predominantly with long-dated, five-year vesting. This team-based approach is echoed London-based firm with a relatively This serves to encourage long-term across the firm’s operations including small number of employees 15 years decision making and provides a strong distribution and support functions, ago, to having approximately alignment of interests between which means Ashmore has a 300 employees in 11offices employees, clients, shareholders and collegiate, collaborative, client-worldwide today.other stakeholders. Approximately focused and mutually-supportive 40% of Ashmore’s shares are Ultimately, culture is a reflection of culture across the whole firm. The owned by current employees.common beliefs and behaviours and lack of individual profit centres or at Ashmore these are evident across operational silos, together with a the firm and instilled and supported culture of shared equity ownership, by factors such as the Group’s means that Ashmore’s employees remuneration philosophy, a robust are incentivised to collaborate in compliance and risk management order to achieve appropriate framework, and a clear ‘tone from outcomes for the business as the top’ imparted by the Board of awhole.Directors and senior executives.Ashmore’s culture is appproriate for a specialist asset management firm operating in distinctive markets and Ashmore has a single remuneration with significant long-term growth policy that means the Executive potential. It aligns the interests of Directors are remunerated in employees, clients, shareholders substantially the same way asall and other stakeholders over the other Group employees. This is an longer termimportant factor in preserving a , supports and reinforces the principal features of the common culture across the firm.business model, and underpins The policy places a cap on salaries the achievement of the Group’s and therefore means the emphasis is strategic objectives.on performance-related variable remuneration. Importantly, the annual variable remuneration pool is The Group’s management structure determined by reference to the is efficient with a relatively flat firm’s operating profit and is also hierarchy that minimises bureaucracy capped, therefore individual and supports swift decision making employees’ remuneration is with clear accountability.intrinsically linked to the performance of the business as a whole in Ashmore’s investment committees addition to an assessment of their oversee the management of client performance during the period.portfolios by investment teams, which operate with collective responsibility. This results in a Remuneration philosophy aligns interests and underpins the cultureEfficient, team-based operationsIN ACTIONResponse to COVID-19The Group's consistent and simple global operating model and experienced IT team supported a swift transition to remote working.Within a two-week period in March, initially staff based in Asia moved to home working, swiftly followed by all other offices.Ashmore's remuneration philosophy has led to high levels of staff retention and therefore a wealth of experience of both business processes and market cycles. For example, UK-based employees have an average tenure of over seven years. This experience helped to ensure the move to remote working was well-managed and controlled with employee interaction transitioning effectively to voice and video conferencing, preserving the team-based culture.The move to remote working coincided with elevated volatility and activity levels in markets as infection rates increased across Asia and then Europe, but Ashmore's established team-basedculture ensured that the business was able to continue to operate as close to ‘business as usual’ as possible.Ashmore's operational infrastructure is robust and capable of supporting the business in this mode for the foreseeable future, but Ashmore is most effective as a business when teams are interacting in the office.12 Ashmore Group p|lc Annual Report and Accounts 2020Culture extends across the worldwide networkAshmore has expanded internationally, establishing global operating hubs and distribution offices in New York, Ireland, Singapore and Tokyo, and also developing local asset management platforms in Colombia, Peru, Saudi Arabia, the United Arab Emirates, India and Indonesia.Importantly, while the local asset management businesses operate independently in terms of investment decisions, they share a common team-based culture with the Group’s global operations. The same remuneration philosophy is followed in each office with significant employee ownership of equity in the local businesses.The listing of Ashmore’s Indonesian business in January 2020 was an important milestone providing a public market for the shares, increasing local employee share ownership and illustrating to the other local teams the potential for equity-based value creation with Ashmore as a partner.GovernanceThe Board of Directors is instrumental in reinforcing the Group’s culture, through day-to-day management and oversight by the Executive Directors and through interaction with employees at each Board meeting.Since 2016, every Board meeting has included a presentation by a team or overseas office, followed by an open discussion. This ‘teams meet the Board’ arrangement preceded and is consistent with the recent changes to the UK Corporate Governance Code, and enables a clear and consistent ‘tone from the top’ that outlines the Board’s expectations, standards and importance of individual accountability to all employees. The Board is also able to receive regular direct and in-person feedback from employees across the business.The effective communication between the Board and employees was further strengthened this year with the appointment of Jennifer Bingham to the role of ‘designated Non-executive Director for workforce engagement’. In this role, she will chair the regular team presentations to the Board and will also act as a conduit for employees to raise any other matter with the Board.Regulatory oversightThe Financial Conduct Authority (FCA), Ashmore’s lead regulator, in recent years has required firms to dedicate considerable resources to considering their culture. This means ensuring that the firm's culture delivers appropriate outcomes for clients and also instils and supports proper standards of market conduct across the firm.The Group Head of HR and Group Head of Compliance monitor a series of indicators of good culture and report those on a monthly basis to the Group's Risk and Compliance Committee. This information is aggregated and reported to the Board of Directors semi-annually as a summary dashboard. The Remuneration Committee uses the information as one of the elements of the review undertaken at the financial year end of the Executive Directors' performance, and is again reviewed at the calendar year end to ensure that the various measures remain on track.The implementation of the FCA’s Senior Managers and Certification Regime (SMCR) during the year has further reinforced the Group's existing governance processes and structures. The implementation of the regime required the production of a management responsibilities map that documents the governance arrangements in place and where accountability for the various areas of the business sits, and confirming employee and director job descriptions reflected the new terminology, assigned functions and prescribed and overall responsibilities. In line with the FCA's original timetable, the first annual certification process for all Senior Managers and Certified Staff will be concluded during the first half of the 2020/21 financial year. Remuneration Committee — Guided by clear principlesDiscretion and flexibilityAshmore’s remuneration policy provides significant flexibility to reward performance but also to ensure an alignment of interest with clients and shareholders through market cycles. The use of discretion when determining the size of the overall bonus pool and individual awards for directors and employees is critical to preserving this flexibility.Alignment with stakeholdersA salary cap and the use of long-dated equity awards, which represent a significant proportion of an employee’s variable remuneration, ensure a strong alignment of interests with the Group’s stakeholders.Consistency across the GroupThe principles that underpin the Group’s remuneration philosophy are mirrored in its local asset management platforms, resulting in employees owning significant minority equity interests and each business echoing the distinctive Group culture.Pay for long-term performanceThe Committee considers the performance of Executive Directors and senior managers over the long term, and reinforces this approach with five-year vesting for Group employees’ equity awards.1234Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 13Ashmore delivered a solid financial performance this year, with net revenue growth of 5%e in adjusted , an increasEBITDA of 10% and 3% higher diluted EPS. The social and economic impact of the COVID-19 pandemic inevitably impacts any assessment of the past 12months, but reassuringly Ashmore implemented its investment philosophy diligently throughout the market volatility, demonstrated the operational resilience of its business model, continued to broaden its client base, and achieved important strategic developments during the period. Investment performanceClientslevels, in many cases those last seen more than a decade ago in the global financial crisis. For example, the spread over US Treasuries on external debt exceeded 700 basis points, more than four times its historical low and more than twice the recent level of around 300 basis points.Ashmore’s experienced investment teams have managed through multiple market cycles, and while each cycle is different, the principles of investing do not change. With a tolerance for mark-to-market volatility, the investment committees seek to identify mispriced assets and to add risk to portfolios in order to deliver longer-term outperformance. Such opportunities were apparent in most investment themes in February and March, but were particularly notable in high yield external debt given significant spread widening, in investment grade corporate and external debt, and in equities as valuations fell close to book values.The first half of the financial year saw satisfactory returns across the Emerging Markets investment themes, continuing the recovery trend evident since early 2016, albeit with some volatility and therefore opportunities for Ashmore’s investment processes to add risk to portfolios to capture longer-term upside. This relatively benign environment then changed dramatically with the worldwide spread of the COVID-19 virus in the third quarter of the financial year. Global capital markets saw While the economic and social consequences of rapid and severe declines that resulted in mark-to-market COVID-19 will continue for some time, markets have losses across a broad range of asset classes.started to recover from the levels seen in March. The As is often experienced in a period of widespread risk broad-based rally, combined with the benefit of adding risk aversion, a number of Ashmore’s strategies at lower market levels, means that Ashmore's strategies underperformed their benchmarks. Some Emerging are outperforming on a short-term basis. For example, the Markets countries required a restructuring of their debt, blended debt composite saw its benchmark fall by 13% in which also contributed to the underperformance. While Q3 and the strategy underperformed by 8%; the the market recovery and delivery of outperformance benchmark rallied 9% in Q4 and the strategy began in Q4, the performance snapshot at the end of outperformed by 6% over the three months.June reflects the impact of the Q3 sell-off with 9% of Ashmore remains focused on continuing to recover the AuM outperforming over one year, 17% over three years and 74% over five years. For a number of Ashmore's performance impact of the Q3 market dislocation, and as described in the Market review and outlook comments broad fixed income composites, this picture is also belowreflected in performance compared with peer groups, , the conditions remain in place for Emerging Markets to outperform developed world assets and for while equity performance is generally strong versus the Ashmore’s investment processes to continue to deliver peer groups.performance for clients.The combined impact of the COVID-19 virus, an oil price shock and a sharp fall in US equity prices caused investors The Group has an experienced and diversified client base to move quickly into ‘safe haven’ assets such as US that continued to allocate to Emerging Markets and government bonds and to focus on raising US dollar delivered flat net flows over the year. The broad-based net liquidity. Valuations across asset classes reached extreme FOCUS ON THEOPPORTUNITYChief Executive’s review“The firm’s focus is on delivering investment performance for clients after the severe market dislocation early in the second half of theyear.” 14 Ashmore Group p|lc Annual Report and Accounts 2020inflows of US$5.7 billion during the first half of the year were disappointingly then reversed in the second half, as Non-variable operating costs are managed strictly, with a the impact of market volatility resulted in net outflows detailed bottom-up budgeting process ensuring that Adjusted over the six months of US$5.8 billion. Inevitably, redundant expenses are identified and removed from the EBITDA marginintermediary retail clients were quicker to react to the cost base. Additionally, in the second half of the year, the change in markets and consequently the proportion of imposition of travel restrictions and remote working in AuM from such clients has reduced over the year from many countries meant that operating costs were slightly 15% to 11%.lower than anticipated. For the 12 months as a whole, AuM operating costs before variable remuneration were The majority of the outflows were experienced during outperforming reduced by 5%.the extremely volatile market conditions of February over three and March, and concentrated in two specific areas: yearsintermediary retail and institutional investors reacting A principal component of the Group’s cost flexibility and quickly to the deterioration in markets and consequent ability to respond quickly and appropriately to different underperformance in specific strategies such as Short revenue conditions is its remuneration philosophy, Duration, and institutional clients sourcing US dollar with a bias towards performance-related variable pay. Quarters of net liquidity from daily-dealing mutual funds invested in local The aggregate variable remuneration paid to employees inflows to currency bond markets. Some clients also inevitably each year is determined by the performance of the equity productsreduced exposure as prices recovered.business, covering both financial and non-financial factors, and is capped at 25% of EBVCIT (operating profit before The level of gross subscriptions was higher in the first six the variable remuneration charge). This means employee months of the year, but there were consistent patterns of remuneration is aligned with the interests of clients and client behaviour throughout the 12-month period. For shareholders, and profitability can be protected in more example, there was a good mix of existing institutional challenging stages of the cycle. Furthermore, with a clients adding to mandates or funding new mandates, and significant proportion of an employee’s variable new client wins, particularly in the equities theme. Notably, remuneration being in the form of equity awards with the Group attracted new clients in the period after remote five-year vesting, this alignment of interests is maintained working was introduced, demonstrating that the distribution over the long term.processes continue to be effective even without the ability to travel and meet counterparts inperson.The diversified nature of the Group’s client base, whether by domicile, by type of institution and retail intermediary or by investment objectives, means that there is a variety of responses to a given set of market conditions and resultant investment performance. While some clients redeem capital either immediately or shortly after a market dislocation, others will see it as an opportunity to take advantage of attractive valuations and to increase allocations in line with long-term objectives. A third constituency will take longer to take stock of the situation The equities business has performed well this and will therefore inevitably react later.year. Despite the market weakness in Q3, AuM increased by 5% over the 12-month period and All these types of behaviour have been experienced in there was strong relative performance in Active previous cycles and over the past six months, and it is Equity, All Cap and Small Cap strategies.reasonable to expect a continued mix of client behaviours until there is a greater degree of conviction in respect of Net inflows were delivered in every quarter and economic and market developments.totalled US$1.2 billion over the period, half of which was from new clients. There were also significant additional allocations from existing Ashmore invests in cyclical markets and its business model clients invested in single country funds and the is explicitly designed to operate successfully through all Active Equitystrategy. stages of the cycle. Several characteristics, including the single consistent operating platform, provide resilience and Further growth potential is underpinned by the All have enabled the Group to protect returns to shareholders Cap equity strategy that is generating significant in a period when assets under management are lower, as alpha and will reach its three-year investment well as enabling a rapid transition to remote working for all track record later in 2020.the Group’s employees in response to the COVID-19 pandemic. The strength of Ashmore’s business model meant that it did not furlough or make redundant any staff as a result of COVID-19 and nor did it voluntarily subscribe to any government funding schemes. Business model resilienceDisciplined operating cost controlRemuneration philosophy68%17%4SPOTLIGHT+27%Growth in Equities Equities net inflows as % of opening AuMAshmore Group p|lc Annual Report and Accounts 2020 15Strategic reportGovernanceFinancial statementsAlthough Ashmore’s financial performance was solid this year, with higher revenues and profits, the variable remuneration charge was reduced to 19.5% from 22.5% in the prior year, in recognition of the more challenging market environment in the second half of the year and its consequent impact on investment performance and client flows. This demonstrates the benefits to shareholders of a well-designed and flexible remuneration policy in which discretion can be and is used in order to achieve appropriate outcomes. Together with the ongoing control of other operating costs, this resulted in the Group’s adjusted EBITDA margin increasing slightly to 68%.Global operating modelAshmore has a single, consistent operating model implemented across all offices to provide stability and scalability. The operational infrastructure supports the business in global hubs in New York, Dublin, London and Singapore together with Tokyo and the local asset management platforms.For example, investment teams use a single front office portfolio management and trading system, the fund accounting platform is uniform across the jurisdictions, and the Group has a single general ledger. This simple architecture is the result of Ashmore’s strategy delivering growth primarily through organic means rather than relying on acquisitions with the associated challenges of integrating legacy systems.This structure provides efficiency and scalability. In the current year, additional benefits were seen as the Group was able to implement its Business Continuity Plan and transition all its employees swiftly, safely and successfully to a secure remote working environment in March. That this was achieved in a period notable for stressed market conditions and elevated transaction volumes is even greater testament to the resilience of the platform and the professionalism and dedication of Ashmore’s employees.Although some employees in Asia have started to return to offices in line with local government guidance, there remains the possibility of a return to greater restrictions as has been seen elsewhere. The Group’s operating platform is capable of supporting the remote-working environment for the foreseeable future, however there are other considerations, for example from a culture perspective. Over the longer term, the fundamental characteristics of Ashmore's business model will continue to be based upon teams collaborating effectively in an office-based environment, with a close-knit culture and a common remuneration philosophy that aligns the interests of all stakeholders.Balance sheetAshmore’s balance sheet is conservatively structured with substantial financial resources predominantly held in cash and no debt, and this conservative approach has served the Group and its shareholders well through numerous market cycles. Over the year, the strength and liquidity of the balance sheet was maintained while continuing to provide resources to invest in future growth through the active management of the Group’s seed capital. For example, total new seed capital investments of more than £50 million were made during the period, predominantly into equity funds to support growth in this theme. Over the year, there were successful net realisations of seed capital investments.As described in the Business review, the ICAAP resulted in an increase in the Group’s Pillar II regulatory capital requirements due to the impact of higher market volatility on increased balance sheet positions, but the Group’s total financial resources of approximately £700 million mean that a substantial excess capital position has been maintained throughout the period.Strategy updateThe asset management industry continues to face various structural challenges, such as the increasing adoption of passive investment strategies, a more complex regulatory environment, and rising demand for ESG factors to be incorporated into investment decisions.Ashmore’s specialist, active investment style, and consistent global operating model assist in addressing these challenges, and its strategy is aligned with the significant growth opportunity across the broad range of Emerging Markets asset classes, with the three phases focused on growing and diversifying Ashmore’s business and creating value for clients and shareholders. Progress was made in all three phases this year.Phase 1: continued allocationsThe Emerging Markets investment universe continues to expand, with 12% growth in the value of bonds in issue to US$29.6 trillion and an equity market capitalisation of over US$30 trillion. However, benchmark representation of 13% for fixed income and 19% for equities remains at low levels given the scale and importance of the Emerging Markets investment opportunity.Global benchmark indices have a typical Emerging Market weighting of between 10% and 20%, and most investors have a target allocation of below 10%. Given the more favourable prospects for emerging countries over the longer term, as they continue along the path of economic convergence with the developed world, then this significant underweight position poses a risk to investors’ risk-adjusted returns that should be addressed by higher allocations.Ashmore’s institutional flows over the past 12 months remain biased towards existing clients with approximately 80% of gross flows delivered through a combination of Chief Executive’s review continued“The listing and IPO of Ashmore Indonesia is an important milestone for the business and highlights the ongoing development of the third phase of the Group’s strategy.”16 Ashmore Group plc | Annual Report and Accounts 2020additional capital in existing mandates and new mandates to access different investment opportunities, illustrating that the arguments in favour of higher allocations to Emerging Markets are resonating and being acted upon by investors.Phase 2: diversifying investment themes and productsAn important strategic objective for Ashmore is to develop and grow its equities business, in order to achieve further product diversification and provide clients with access to a full range of Emerging Markets equity products, from global strategies to specialist, regional and single country strategies.Equities has performed well this year, with strong relative investment performance being maintained over a broad range of products, including through the volatility in Q3, and net inflows delivered in every quarter to give total net flows into equities of £1.2 billion for the year.Encouragingly, the client flows are a mix of existing clients recognising the developing investment track record, and new clients making their first allocation to an Ashmore strategy. The prospects for continued growth are good, with the All Cap strategy performing well as it approaches its three-year track record later in 2020.In the second half of the year, Ashmore launched and seeded a dedicated equity ESG fund, to sit alongside the blended debt ESG fund established in early 2019.Phase 3: mobilising Emerging Markets capitalApproximately 26% of the Group’s assets under management have been sourced from clients domiciled in the Emerging Markets. This capital is managed both on a global basis and by the local asset management platforms where the client either wishes or is required to invest in domestic assets and capital markets. In total, the Group’s local asset management platforms manage AuM of US$5.0 billion, or 6% of the Group’s total.Ashmore’s Indonesian business achieved a significant milestone in January 2020 when it undertook an IPO and listed on the Jakarta Stock Exchange. There were no shares sold by existing shareholders, meaning that Ashmore remains a committed majority shareholder and fully aligned with the local management team and its significant minority equity stake. The process diversified the shareholder register, raised the profile of the business domestically and regionally, and provided a potential roadmap for the Group’s other local platforms to consider at the appropriate stage in their development.People and cultureThe impact of COVID-19 has resulted in significant responses, both at a macro level in terms of fiscal and monetary stimulus, and for individual economies and businesses, most notably with the requirement for employees to work from home. Ashmore has a distinctive team-based culture that has been sustained through its long history of investing in Emerging Markets, and which has enabled it to adapt successfully to this new environment. While the culture lends itself to teams working collaboratively in offices, the business can support the requirements of remote working for as long as is required in order for colleagues to return safely to the Group’s offices around the world.The commitment of the Group’s employees means that the business has operated effectively, including notably throughout the more challenging period in the second half of the financial year. I would therefore like to thank all of my colleagues for their impressive dedication, professionalism and commitment to continue to deliver for Ashmore’s clients, shareholders and other stakeholders over the course of the past year.OutlookThe trends in market performance, delivery of outperformance and a stabilisation of client flows seen towards the end of the financial year have continued over the summer months. However, the recovery in Emerging Markets asset prices still has further to go to return to levels that could be considered fair value. The process is likely to take time and has unknown factors, as COVID-19 will continue to have a wide range of impacts on countries and asset prices across the Emerging and Developed Markets and there is ongoing tension between the US and China, which in part is linked to the US presidential election later this year. However, volatility and uncertainty can provide significant opportunities for investors and, as ever, the critical analysis is to determine what is priced in, and therefore whether expected returns compensate for perceived risk.In this context, the Emerging Markets offer notable value. Economic growth prospects are superior in Emerging Markets and support the outlook for equity markets, currencies are cheap versus the US dollar, bond yields in both nominal and real terms are significantly higher than developed world equivalents, and structural issues such as high indebtedness and a lack of reforms continue to constrain growth in developed nations.However, the attractions of growth-driven equity returns and high yields also have to be seen against the uncertainties relating to COVID-19 and the worsening economic fundamentals in the developed world that are likely to keep risk aversion high for a period of time. Ashmore will continue to focus on delivering investment and financial performance for its clients and shareholders, and on ensuring the safety of its employees while planning to return to offices when local conditions permit.Mark CoombsChief Executive Officer10 September 2020Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 17Performance measureRelevance to strategy and remunerationFive-year trend The movement between opening and closing AuM The proportion of relevant Group AuM that is provides an indication of the overall success of the outperforming benchmarks on a gross basis, over business during the period, in terms of subscriptions, one year, three years and five years. The gross basis redemptions and investment performance.reflects the largely institutional nature of the client base, typically with the ability to agree bespoke fee The average AuM level during the period, along with the arrangements. Funds without a performance benchmark average margins achieved, determines the level of are excluded, specifically those in the Alternatives and management feerevenues.Overlay/liquidity themes. The Group’s strategy seeks to capitalise on the growth The Group’s success is dependent on delivering trends across Emerging Markets. This is ultimately investment performance for clients, who typically look at reflected in AuM growth over time.performance over the medium to longterm. 2019: US$91.8bn2019: 97% Assets under managementInvestment performance Assets under managementInvestment performance (outperforming over three years)US$83.6bn17%Key Performance IndicatorsMONITORINGPROGRESS202083.6201991.8201873.9201758.7201652.61 yr.3 years5 years7402021 year903 years975 years971 year733 years945 years891 year913 years865 years871 year693 years635 years73910281027102610291718 Ashmore Group p|lc Annual Report and Accounts 2020Adjusted EBITDA marginDiluted EPSBalance sheet strength The adjusted EBITDA margin measures Profit attributable to equity holders The Group maintains a strong balance operating profit excluding depreciation and of the parent divided by the weighted sheet through the Emerging Markets cycle. amortisation against net revenues. average of alldilutive potential This is measured by the total value of Toprovide a meaningful assessment of ordinaryshares.capital resources available to the Group, theGroup’s operating performance, the defined as capital and reserves attributable measure excludes foreign exchange to equity holders of the parent less: translation andseed capital items.goodwill and intangible assets, material holdings and foreseeable dividends. This is compared with the consolidated regulatory capital requirement (see note 21 to the financial statements), to provide a solvency ratio.Delivering a high profit margin demonstrates The earnings per share reflect the overall A strong balance sheet enables the Group the Group’s efficient and scalable global financial performance of the Group in the to build a diversified client base, provides operating platformbles investment in period, andp reresent an aspect of value opportunities for investment to grow the , enafuture growth opportunities, supports cash creation for shareholders.business including the seeding of funds, generation to sustain a strong balance andsupports the Group’s dividend policy.sheet, and provides for attractive returns toshareholders. 2019: 66%2019: 25.0p 2019: 461% Adjusted EBITDA margin Diluted EPSSolvency ratio68%25.7p377%202068201966201866201765201662202025.7201925.0201821.3201723.7201618.1147xx20207033771214612019679119401201859911140420175591004072016506Capital requirement (£m)Financial resources (£m)Solvency ratio (%)Strategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 19There was significant volatility in Emerging Markets between two broad sets of countries and their ability to returns over the year, with +3% to +7% delivered in the deal with the worldwide growth shock and, as necessary, first half, before the market environment deteriorated in a domestic COVID-19 challenge.Q3 leading to 10% to 15% declines in fixed income – The greatestpolicy flexibility is apparent i n the larger, markets and 24% in equities over the quarter. With the typically more diversified economies, that fund start of a recovery in asset prices in the fourth quarter the themselves predominantly or only in their own financial year overall saw modest returns in hard currency currency. Real interest rates are high, inflation is low, fixed income indices, of between +1% and +4%, and currencies are competitive, and so central banks have negative returns in local currency fixed income and equity the ability to cut policy rates and employ quantitative indices of-3%.easing (QE) tools, such as asset purchases, as appproriate. These countries also have room for fiscal The economic and social impact of the COVID-19 virus expansion. While the growth challenge caused by the has been severe, with a global recession expected in virus may be significant, this group has policytools 2020. However, while there are significant uncertainties available to be able to meet these challenges. This as to the development of the pandemic, there is a broad group is broadly represented across Latin America, consensus of market opinion that expects a gradual Europe, Africa and Asia.economic recovery in 2021, with GDP levels tracing a – The other group of nations has a reduced set of policy ‘tick’ profile over the two years. Importantly, in aggregate options, as a consequence of having smaller and the emerging nations are expected to experience a narrower economies, and being funded by external shallower recession and deliver a stronger recovery than creditors in hard currency. These countries need to the developed world. For example, the IMF’s forecasts maintain access to international capital markets and are for Emerging Markets GDP to fall by 3% in aggregate must therefore keep monetary policy relatively tight. this year and then rise by 6% next year, compared with an Such countries usually rely on external creditors for 8% decline in developed world GDP this year and a 5% funding, whether supranational organisations such as recovery in 2021.the IMF and World Bank or private sector creditors, and will require even greater support from these Of course, there are significant variances between the counterparties. Countries in this group are particularly 155 emerging nations in their economic, political and present in Africa and Latin America.social structures, and a clear distinction can be made Ultimately, the structure of an economy, the strength of its institutions, together with the flexibility and quality of policy making, will determine how successfully a country is able to deal with the challenges of the virus pandemic and the worldwide recession.For the most part, developed world governments have not addressed the huge increase in public sector debt that resulted from the global financial crisis more than a decade ago, and have lacked any meaningful reform agenda. This has delivered only lacklustre economic growth and persistently low interest rates, but a strong bull market in assets, such as US equities and government bonds, that were supported, directly or indirectly, by central banks’ QE policies. Emerging Markets and policy flexibilityDeveloped Markets and policy consequencesSignificant variation in quarterly performance of Emerging Markets indices over the 12 months to 30 June 2020ATTRACTIVEOPPORTUNITIESEmerging Markets performed well in the first half of the financial year,then the spreadof the COVID-19 virus around the world and an oil price shock caused markets to fall in the third quarter. Marketsbegan to recover in Q4 and were more stable towards the end of the year.Market review4Q3Q2Q1Q0.0%Blended debt indexEquity index (MSCI EM)+9.4%+18.1%-12.6%-23.6%+3.1%+11.8%-4.3%20 Ashmore Group p|lc Annual Report and Accounts 2020The policy responses by developed world institutions to the COVID-19 pandemic have largely been swift and The fall in global markets in February and March drove substantial, encompassing both monetary stimulus valuations across Emerging Markets to extreme levels. including a return to QE and fiscal stimulus in the form of For example, the external debt (EMBI GD) index spread direct support to the employment market, as well as widened to over 700 basis points and equities traded at business loan and guarantee schemes. While these close to book value, neither of which have been actions undoubtedly helped to mitigate the economic experienced in the 12 years since the global financial impact of the pandemic, they will have consequences that crisis. Markets began to recover strongly at the end of will exacerbate the indebtedness of developed nations, March, but valuations still look highly attractive, whether in thereby constraining economic growth further, and absolute terms, compared with history, or compared with requiring policy rates to remain extremely low for a equivalent assets in Developed Markets.prolonged period of time. In this context, and as explained trades at 475 basis points over US below, Emerging Markets present a favourable medium-Treasuries, nearly three times the historical low (160 basis term growth outlook, underpinned yb ongoing structural points) and well above a reasonable estimate of reforms, and accompanied by attractive yields.normalised value (300 basis points). Indeed, the index has traded at or wider than this level for only 3% of the trading days over the past decade. The majority of bonds in the The prospects for the US economy are directly and index are investment grade, and this sub-component also indirectly relevant to many other countries and can offers good value with a yield of more than 3% and a influence investors’ portfolio allocations with implications spread over US Treasuries of more than 200 basis points.for Emerging Markets. The initial phase of a recession causes a short period of risk aversion, during which capital flows out of perceived riskier asset classes, including the Emerging Markets, and into ‘safe havens’ such as the US Treasury market, almost irrespective of valuations and return prospects.The next, usually more prolonged, period involves capital reallocating away from equities and corporate credit as profits fall and defaults rise, and into US Treasuries to take The main external debt index (EMBI GD) is highly advantage of rate cuts. However, with nominal and real diversified with 167 issuers across 74 countries rates in the US at low or even negative levels, it is and 55% of the bonds are investment grade-arguable that capital will seek higher returns elsewhere in rated. After briefly exceeding 700bps in March the world, resulting in downward pressure on the US 2020, the spread over US Treasuries is still at an dollar and the potential for flows into the faster growing, attractive level and illustrates the value available higher return Emerging Markets. These flows will as economies and markets recover. stimulate domestic demand in financially-constrained economies, underpinning GDP growth further.Attractive valuationsImplications of a US recession for Emerging MarketsExternal debt spread remains at an exceptional level External debtSPOTLIGHTSignificant value available in external debt markets 1,0008006004002000200520082011201420172020)stnio pissab (trso wo tdaerpSStrategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 21Market review continuedLocal currencyCorporate debt Equity Notwithstanding short-term cyclical market movements, there continue to be significant structural characteristics and developments of the fixed income and equity markets that support longer-term outperformance compared with Developed Markets, and therefore also underpin the case for higher investor allocations.The Emerging Markets investment universe is large and diversified, but one of the most striking inefficiencies is the very low level of index representation: only 13% of bonds and 19% of equity market capitalisation are included in benchmark indices. This has a number of important implications:– thecompetitive threat of passive substitutes is limited, given the small proportion of the universe that can be replicated passively;– active management can deliver alpha, whether through active risk against benchmark securities or by investing in non-benchmark assets; and– liquidity in local currency instruments is increasingly found in the domestic capital markets, as the bonds and shares are owned and traded by domestic institutions. An established network of local market counterparties bonds yield 4.5%, but with inflation across Emerging Markets well-controlled and near record is therefore a prerequisite to accessing this liquidity on a lows, the real yield is highly attractive at around 2% and consistent basis.especially when compared with negative real yields for While these inefficiencies can be successfully exploited equivalent duration government bonds issued by by active management, over time it is desirable to have developed countries. Significantly, China has joined the higher index representation in order to drive higher benchmark GBI-EM GD index, effectively providing the investor allocations to the asset classes.first ‘safe haven’ destination within the asset class. As discussed above, with the potential for medium-term In this respect, there have been notable developments in weakness in the US dollar, there is an opportunity for 2020. Over the course of the year, JP Morgan is including investors to enhance returns from these markets with Chinese local currency bonds in its GBI-EM GD foreign exchange gains.benchmark index with an eventual weight of 10%. Also, India has taken some tentative steps to increase foreign has many attractive characteristics when investor access to its domestic markets, which could compared with the US high yield (HY) market, for example enable it to follow the path taken by China in due course.the Emerging Markets index is highly diversified with 57 countries represented, has a higher average credit rating, and a lower historical default rate. However, as is the case There are approximately 155 developing countries of for external debt, the majority of bonds in the index are which fewer than half have issued debt in public markets, investment grade (IG). Both the HY and IG components the remainder typically relying on organisations such as have attractive valuations, with yields in excess of 7% and the IMF for funding. When a country issues public market 3%, respectively.bonds for the first time, it typically does so in the external (hard currency) markets, since domestic institutional market performance is typically correlated with the investors and yield curves are not necessarily sufficiently relative growth rates expected between Emerging and developed to allow significant local currency issuance. Developed Markets. Therefore, as discussed above, the Over time, as the country and its institutions and capital premium growth forecast for emerging countries should markets develop, it will increasingly issue domestic bonds underpin outperformance by Emerging Markets equities. in its own currency. Consequently, in Emerging Markets, This view is further reinforced by the MSCI EM index trading the largest and fastest growing fixed income markets are at attractive levels and an expectation that undervalued the local currency-denominated sovereign and corporate equity markets will perform strongly as economies start to bond markets, which together represent 82% of all bonds recover from the impact of the virus pandemic. Indeed issued by Emerging Markets countries and companies.there are already tentative signs of a ‘first-in, first-out’ economic and market recovery in parts ofAsia. Continued development of the Emerging Markets asset classesBenchmark indices remain a poor representation of the investment opportunitiesStructure of fixed income marketsBenchmark indices remain a poor representation of theEmerging Markets investment opportunities Index market capNon-index market capUS$30.7trnUS$29.6trn19%13%US$12.5trnUS$11.6trn2%11%US$4.1trn26%US$1.4trn84%External External Local Local Fixed Equitiessovereign corporate sovereign corporate incomedebtdebtdebtdebtSource: Ashmore, BIS, JP Morgan, BAML, ICE22 Ashmore Group p|lc Annual Report and Accounts 2020This market structure has important implications for the resilience of countries in the face of domestic and external There is a broad consensus of opinion that the world shocks, with a dependence on foreign creditors typically economy will recover from the current recessionary of economic leading to a narrower set of policy options when conditions over the course of 2021, although there will be growth forecast compared with those countries that are predominantly significant variations in the experiences of individual is in EMfunded by domestic investors. The effect of this has been countries and there is uncertainty with respect to the seen most recently as many local currency funded nations development and impact of the COVID-19 pandemic. have been able to deploy fiscal and monetary stimulus in TheUS presidential election in November 2020 is an FX reserves order to manage the economic impact of the worldwide additional source of potential market volatility.controlled by virus pandemic.EM nationsWhile this backdrop is potentially challenging, periods of market volatility such as that experienced in early 2020 Developed world investors hold significantly underweight typically provide significant investment return opportunities positions in Emerging Markets fixed income and equities, as short periods of extreme risk aversion lead to mispriced which is at odds with the increasing influence of these assets. Although there has been something of a market of bonds countries in the world’s economic, political and social recovery since the lows seen in March, there remains issuedin local affairs. Higher allocations to Emerging Markets will substantial value available across a wide range of equity currenciesprovide investors with access to superior growth and and fixed income markets in the emerging world. potential returns.Furthermore, the relative attractions of Emerging Markets have arguably been enhanced by the return to The increasing significance of Emerging Markets is aggressively looser monetary policy, including QE, and illustrated by the following characteristics:of bonds debt-funded fiscal stimulus by developed countries.– 84% of the world’s population lives in an Emerging included in Notwithstanding the present uncertainty, investors are Market country, with typically much more favourable benchmark increasingly recognising the superior long-term economic indicesdemographics than developed nations;growth prospects of Emerging Markets compared with – Emerging Markets account for 60% of world GDP and the developed world, and when set against the notable 75% of the world’s economic growth forecast by the value available in those markets and investors’ underweight IMF over the five years to 2021;positions, this should result in a continued trend of higher – GDP per capita of US$13,000 in Emerging Markets is allocations over time. Ashmore’s experience, specialism less than a third of the developed world level of and active management approach mean it is well placed US$45,000. The inherent growth potential in the to benefit from this growth opportunity.emerging world is illustrated by the fact that the developed world was at the same level of wealth in1983;– emerging nations control foreign exchange reserves of nearly US$9 trillion, accounting for more than 75% of total world foreign exchange reserves;– Emerging Markets represent only 25% of worldwide bond issuance and 33% of world equity market capitalisation, providing significant growth opportunities; and– the weights of Emerging Markets in global equity and bond indices are relatively low, at between 10% and 20% respectively, but increasing over time as markets grow and reforms allow better access.In this context, the typical investor has a target weighting of below 10%, which over the longer term will result in below par returns compared with a portfolio that has at least a neutral weighting to Emerging Markets through the cycle.Market outlookAllocations 75%82%13%US$9trnStrategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 23External debtLocal currencyAshmore’s local currency composite has returned +0.9% The external debt benchmark index (EMBI GD) delivered on a gross annualised basis, compared with +1.1% for a modest positive return of +0.5% over the 12 months, thebenchmark.but with significant variations by quarter, and a marked Local currency markets are increasingly resilient as a difference between investment grade (+8.3%) and result of the increasing adoption of monetary policy high yield bonds (-8.2%three years, ). Over the past frameworks that successfully target inflation, and Ashmore’s external debt composite has returned +0.7% domestic ownership that mitigates the impact of foreign on a gross annualised basis, compared with +3.6% for capital flows. Capital market reforms are important and thebenchmark.providing greater access to foreign investors over time will Countries that have predominantly funded themselves in result in more representative indices, as is illustrated by external debt markets will struggle to manage the twin China’s inclusion in the GBI-EM GD index in 2020.challenges of the global virus pandemic and the The attractiveness of local currency bonds is derived from consequent growth shock. The support of creditors, be both rates and foreign exchange. Inflation continues to be they supranational organisations or private sector lenders, well-controlled and is close to record lows, enabling will be crucial to a country’s ability to maintain long-term central banks across a large number of emerging access to funding, but also requires governments to countries to continue to be accommodating with exhibit a clear willingness to reform where necessary.monetary policies. The resultant real yield for the index of Valuations reached exceptional levels in the market lows around 2% is attractive in its own right but even more so of March 2020, with the index spread over US Treasuries when set against the negative real yields prevailing in exceeding 700 basis points. In an index of 74 countries, most major developed world bond markets of similar and with the majority rated investment grade, this clearly duration. Looking at FX, the consequences of debt-funded reflected the impact of short-term risk aversion and a fiscal stimulus and a recession in the US should be to desire for US dollar liquidity rather than being an accurate create inflation but also to restrict the Fed’s ability to raise reflection of the underlying economic and political rates significantly for the foreseeable future and to fundamentals of all the constituent countries. Although undermine productivity, hence the US dollar is likely to markets have begun to recover, there remains notable enter a period of weakness against other global currencies value in the asset class, with the spread still at an elevated including those in Emerging Markets. Local currency level of 475 basis points at the year end, nearly three bonds therefore offer potentially the highest medium-term times the historical low of 160 basis points and in excess returns of the main fixed income asset classes through a of its recent level of 300 basis points.combination of attractive yields and potential capital gains from currencies.The GBI-EM GD index fell -2.8% over the year, with a positive return from rates offset by US dollar strength. Aswith the external debt markets, there was significant volatility on a quarter-by-quarter basis, especially in the second half of the year. Over the past three years, DIVERSIFIEDOPPORTUNITIESInvestment themesAshmore’s investment teams have been focused on Emerging Markets investing for more than 25 years. Ashmore has established a diversified range of eight headline investment themes with focused strategies under each theme delivering Emerging Markets exposures in, for example, global or specific regional or country funds,as well as dedicated investment grade and high yield products. The Group’s products are available in awide range of fund structures, coveringthe full liquidity spectrum from daily-dealing pooled funds through to multi-year locked-up structures. Ashmoreprovides investors with access to new investment strategies as Emerging Markets continueto develop. 24 Ashmore Group p|lc Annual Report and Accounts 2020Corporate debtCorporate debt performed well over the 12 months with the CEMBI BD index returning +3.7%, although as seen in the sovereign market, there was a notable difference between investment grade performance of +5.7% and high yield returns of +1.0%. Over the past three years, Ashmore’s corporate debt composite has returned +3.8% on a gross annualised basis, compared with +4.5% for the benchmark. The short duration strategy has underperformed, with three-year gross annualised returns of -4.6% compared with +3.5% for its benchmark, and consequently it experienced net outflows for the 12-month period.The corporate bond index is highly diversified with nearly 700 issuers across 57 countries, and with the majority of bonds being investment grade rated. With a yield of 4.9%, and 7.3% for high yield bonds, this is an attractive asset class when compared with the US HY market, which offers a similar yield (7.7%) but is less diversified and with companies that have higher leverage and often as a result of financial engineering rather than for operational purposes. Furthermore, the Emerging Markets asset class includes quasi sovereign issuers, which means that implicit or explicit support by the sovereign can be a factor in assessing credit risk. These factors are reflected in the long-run default rates for the two markets, with the US market experiencing a 30% higher default rate over the past three decades of 4.3% compared with 3.3% for Emerging Markets.Blended debtThe standard blended debt benchmark (50% external debt, 25% local currency bonds and 25% EMFX) fell by -1.3% over the year, with positive returns in hard currency markets offset by weaker local currency returns, as described for each of the asset classes above. Over the past three years, Ashmore’s blended debt composite has returned +0.5% on a gross annualised basis, compared with +2.2% for the standard benchmark.The blended debt strategy provides access to a broad and actively-managed portfolio of Emerging Markets fixed income securities, which is a popular approach for institutional or intermediary retail clients that are making their first investment in Emerging Markets. As an investor’s experience of Emerging Markets grows, incremental allocations can be made into dedicated products in the underlying fixed income asset classes. Additionally, the blended debt theme allows institutional investors to define a bespoke performance benchmark, through which a preference for one or more asset classes can be expressed.EquitiesThe MSCI EM index fell by -3.4% over the 12 months, with particular volatility in the second half of the year as markets rapidly discounted a global recession as a consequence of the COVID-19 virus and then began to reflect expectations of a recovery supported by extraordinary fiscal and monetary stimulus. Ashmore’s Active Equity composite has returned +4.4% on a gross annualised basis over the past three years, compared with +1.9% for the benchmark, and the Small Cap composite has returned +0.6% annualised over the past three years compared with -3.0% for its benchmark.The performance of equity markets tends to be correlated over the longer term with economic growth, although the highly diverse nature of the Emerging Markets equity universe, in terms of industries as well as geographically, requires active management and a combination of bottom-up company analysis and top-down macro economic insights to deliver optimal returns.Emerging Markets will continue to enjoy a growth premium over the developed world, and many countries are well-equipped from a policy perspective to deal with the challenges presented by the COVID-19 pandemic. Indeed, there is a possibility that parts of Asia, having been the first to deal with the issue, could also be the first to deliver a sustained economic and market recovery. The outlook for equity markets is also underpinned by the attractive valuations available, compared with history but also the Developed Markets, where valuations continue to be influenced by central bank policies such as QE.“Emerging Markets will continue to enjoy a growth premium over the developed world, and many countries are well-equipped from a policy perspective to deal with the challenges presented by the COVID-19 pandemic.”Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 25 EquitiesInvests in equityandequity- related instruments including global, regional, country, small cap and frontier opportunities.First fund:1997Theme AuM:US$18.7bnSize of universe:US$11.6trnFirst fund:2007Theme AuM:US$10.6bnSize of universe:US$16.6trnFirst fund:1988Theme AuM:US$4.6bnSize of universe:US$30.7trnLocal currencyInvests in local currencies and local currency-denominated instruments issued by sovereigns, quasi-sovereigns and companies.Corporate debtInvests in debt instruments issued by public and private sector companies.Investment themes continuedDIVERSIFIED OPPORTUNITIES26 Ashmore Group p|lc Annual Report and Accounts 2020Blended debtInvests in external debt, local currency and corporate debt assets, measured against tailor-made blended indices.First fund:2003Theme AuM:US$23.3bnSize of universe:US$29.6trnAlternativesInvests in private equity, healthcare, infrastructure, special situations, distressed debt and real estate opportunities.First fund:1998Theme AuM:US$1.4bnMulti-assetSpecialised and efficient access allocation across the full Emerging Markets investment universe.First fund:2000Theme AuM:US$0.3bnSize of universe:US$60.3trnOverlay/liquiditySeparates the currency risk of an underlying asset class in order to manage it effectively and efficiently.First fund:2007Theme AuM:US$7.6bnExternal debtInvests in debt instruments issued by sovereigns and quasi-sovereigns and denominated in foreign currencies.First fund:1992Theme AuM:US$17.1bnSize of universe:US$1.4trnStrategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 27SOLID PERFORMANCEIN CHALLENGING TIMESAshmore’s financial performance over the year reflected a strong first half, the impact of the weak global markets environment in Q3 and the start of a recovery in the final quarter. Over the 12-month period, AuM declined by 9% but with higher average AuM levels, net revenue increased by 5% and adjusted EBITDA was 10% higher. Diluted EPS increased by 3% and the Group’s balance sheet remains liquid and well-capitalised with capital resources of £702.5 million and excess regulatory capital of £555.2 million.Assets under managementAuM fell by 9% to US$83.6 billion as a result of negative market performance of US$8.1 billion, which, as described in the Chief Executive’s review and Market review, was the result of the market conditions experienced in Q3 and related to the COVID-19 pandemic, a fall in the oil price and tighter liquidity conditions across global markets. Over the 12-month period, the Group had a net outflow of US$0.1 billion. Average assets under management increased by 11% to US$89.6 billion (FY2018/19: US$80.5 billion).Gross subscriptions of US$24.3 billion were slightly higher than in the prior year and represent 26% of opening AuM (FY2018/19: US$23.7 billion, 32%). Gross redemptions increased to US$24.4 billion, or 27% of opening AuM (FY2018/19: US$13.0 billion, 18%).There was good demand over the period across the broad range of investment themes, but with particular strength in the local currency, corporate debt, blended debt and equities themes. Approximately 70% of institutional mandate subscriptions were from existing clients increasing their allocations, with a further 10% the result of clients broadening their exposure to Emerging Markets investment opportunities through additional mandates. New institutional client mandates therefore represented 20% of subscriptions and were mainly invested in the equities and external debt themes.The increase in redemptions compared with the prior year was primarily in the corporate debt and local currency themes and biased towards the second half of the year when market conditions were significantly more volatile. In particular, intermediary retail and institutional clients reacted to weaker performance in the Short Duration strategy, and institutional clients sought US dollar liquidity and reduced risk in local currency funds.For the year as a whole, net flows were essentially flat at -US$0.1 billion, with institutional clients delivering net inflows of US$1.9 billion, largely offsetting the net outflow from intermediary retail clients of US$2.0 billion. Summary non-GAAP financial performanceThe table below reclassifies items relating to seed capital and the translation of non-Sterling balance sheet positions. This aids clarity and comprehension of the Group’s operating performance, by excluding the mark-to-market volatility of these items, and provides a more meaningful comparison with the prior year. For the purposes of presenting ‘Adjusted’ profits, personnel expenses have been adjusted for the variable compensation on foreign exchange translation gains and losses. Non-GAAP alternative performance measures (APMs) are defined and explained below. Reclassification of £mFY2019/20 ReportedSeed capital-related itemsForeign exchange translationFY2019/20 AdjustedFY2018/19 AdjustedManagement fees net of distribution costs315.5––315.5294.3Performance fees3.9––3.92.8Other revenue4.1––4.15.9Foreign exchange7.0–(5.5)1.5 5.1 Net revenue330.5–(5.5)325.0 308.1Investment securities(19.1)19.1–––Third-party interests7.5(7.5)–––Personnel expenses(82.6)–1.1(81.5)(82.8)Other expenses excluding depreciation & amortisation(23.2)2.2–(21.0)(23.5)EBITDA213.113.8 (4.4) 222.5201.8EBITDA margin64%––68%66%Depreciation & amortisation(3.4)––(3.4)(4.8)Operating profit209.713.8(4.4) 219.1 197.0Net finance income/expense12.0 (6.2)–5.8 7.7Associates & joint ventures(0.2)––(0.2)(0.3) Adjusted profit before tax 221.5 7.6(4.4)224.7 204.4Foreign exchange translation––4.44.4 4.8Seed capital-related items – (7.6) – (7.6) 10.7 Profit before tax221.5––221.5219.9Business review28 Ashmore Group plc | Annual Report and Accounts 2020Investor profileThe Group’s client base remains well diversified and biased towards institutions, with no significant changes in composition by client domicile or client type, other than a reduction in the proportion of AuM sourced from intermediary retail clients, from 15% to 11%, and an increase in AuM from corporates and financial institutions, particularly those focused on investment grade mandates, from 18% to 22%. In total, 26% of the Group’s AuM has been sourced from clients domiciled in Emerging Markets (30 June 2019: 30%).Segregated accounts including white-labelled funds represent 75% of AuM (30 June 2019: 66%), the higher proportion being a consequence of significant new segregated mandate wins and additional allocations, as well as the net redemptions from mutual funds in the year.Ashmore’s main mutual fund platforms are in Europe and the US. The European SICAV range comprises 30 funds with AuM of US$12.1 billion (30 June 2019: 30 funds, US$19.6 billion) and the US 40-Act platform manages US$2.4 billion in 10 funds (30 June 2019: eight funds, US$3.7 billion). The lower level of mutual fund AuM is the result of negative market performance across a broad range of asset classes, particularly in the third quarter of the financial year, and redemptions that were concentrated in short duration and local currency bond funds.AuM as investedThe charts on page 30 show AuM ‘as invested’ by underlying investment theme, which adjusts from the ‘by mandate’ presentation to take account of the allocation into the underlying asset classes of the multi-asset and blended debt themes, and of crossover investment from within certain external debt funds.The Group’s AuM by geography of investment remains diversified with 40% invested in Latin America, 24% in Asia Pacific, 15% in the Middle East and Africa, and 21% in Eastern Europe.AuM movements by investment themeThe AuM by theme as classified by mandate is shown in the table below. Reclassifications typically occur when a fund’s investment objectives, investment guidelines or performance benchmark change such that its characteristics cause it to be included in a different theme.ThemeAuM30 June 2019US$bnPerformance US$bnGross subscriptions US$bnGross redemptions US$bnNet flows US$bnReclassifications/otherUS$bnAuM30 June 2020US$bnExternal debt19.1(1.1)2.3(3.2)(0.9)–17.1Local currency19.7(1.7) 5.8(5.1)0.7–18.7Corporate debt15.5(1.9)6.7(9.2)(2.5)(0.5)10.6Blended debt24.3(2.2)4.5(3.8)0.70.523.3Equities4.4(1.0)2.2(1.0)1.2–4.6Alternatives1.6(0.2)0.1(0.1)––1.4Multi-asset0.5(0.1)–(0.1)(0.1)–0.3Overlay/liquidity6.70.12.7 (1.9)0.8–7.6Total91.8(8.1) 24.3(24.4)(0.1)–83.6Fee income and net management fee margin by investment themeThe table below summarises net management fee income after distribution costs, performance fee income, and average net management fee margin by investment theme.ThemeNet management feesFY2019/20£mNet management feesFY2018/19£mPerformancefeesFY2019/20£mPerformancefeesFY2018/19£mNet management fee marginFY2019/20bpsNet management fee marginFY2018/19bpsExternal debt59.455.12.5 0.5 41 44 Local currency60.254.2–0.838 39Corporate debt51.351.90.40.250 56Blended debt94.6 81.20.91.049 49Equities23.0 25.1––66 76Alternatives15.4 15.10.10.3139 129Multi-asset3.0 4.3 ––100 77Overlay/liquidity8.6 7.4––15 16Total315.5 294.33.92.84548Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 29AuM as investedAuM by investor geography2020 (%)AuM classified by mandate2019 (%)AuM by investor typeBusiness review continuedExternal debt 21Local currency 21Corporate debt 17Blended debt 26Equities 5Alternatives 2Multi-asset 1Overlay/liquidity 7External debt 39Local currency 29Corporate debt 17Equities 5Alternatives 2Overlay/liquidity 8Central banks 12Sovereign wealth funds 7Governments 16Pension plans 29(cid:37)(cid:81)(cid:84)(cid:82)(cid:81)(cid:84)(cid:67)(cid:86)(cid:71)(cid:85)(cid:17)(cid:386)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:2)(cid:75)(cid:80)(cid:85)(cid:86)(cid:75)(cid:86)(cid:87)(cid:86)(cid:75)(cid:81)(cid:80)(cid:85)(cid:2)(cid:19)(cid:26)Funds/sub-advisers 2Intermediary retail 15Foundations/endowments 1Americas 26Europe ex UK 25UK 9Middle East and Africa 17(cid:35)(cid:85)(cid:75)(cid:67)(cid:2)(cid:50)(cid:67)(cid:69)(cid:75)(cid:386)(cid:69)(cid:2)(cid:20)(cid:21)External debt 20Local currency 23Corporate debt 14Blended debt 27Equities 5Alternatives 2Multi-asset 1Overlay/liquidity 8External debt 38Local currency 28Corporate debt 17Equities 6Alternatives 2Overlay/liquidity 9Central banks 11Sovereign wealth funds 7Governments 16Pension plans 29(cid:37)(cid:81)(cid:84)(cid:82)(cid:81)(cid:84)(cid:67)(cid:86)(cid:71)(cid:85)(cid:17)(cid:386)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:2)(cid:75)(cid:80)(cid:85)(cid:86)(cid:75)(cid:86)(cid:87)(cid:86)(cid:75)(cid:81)(cid:80)(cid:85)(cid:2)(cid:20)(cid:20)Funds/sub-advisers 3Intermediary retail 11Foundations/endowments 1Americas 23Europe ex UK 28UK 9Middle East and Africa 17(cid:35)(cid:85)(cid:75)(cid:67)(cid:2)(cid:50)(cid:67)(cid:69)(cid:75)(cid:386)(cid:69)(cid:2)(cid:20)(cid:21)30 Ashmore Group plc | Annual Report and Accounts 2020RevenuesNet revenue increased 5% to £330.5 million as a result of growth in recurring net management fee income. On an adjusted basis, excluding foreign-exchange translation effects, net revenue increased 5% to £325.0 million.Net revenue FY2019/20 £mFY2018/19 £mNet management fees315.5 294.3 Performance fees3.92.8 Other revenue4.1 5.9 FX: hedges1.55.1 Adjusted net revenue325.0308.1 FX: balance sheet translation5.56.2 Net revenue330.5 314.3 The Group’s management fee income, net of distribution costs, increased 7% to £315.5 million, driven by an 11% rise in average AuM to US$89.6 billion (FY2018/19: US$80.5 billion). Fee income benefited from the weaker average GBP:USD rate of 1.2637 (FY2018/19: 1.2958) and also reflects a decline in the average net management fee margin from 48bps to 45bps. At constant FY2018/19 average exchange rates, net management fees increased by 5%.The three basis points decline in the net management fee margin compared with the prior year is the result of net flows into existing and new large mandates (1.5 basis points), investment theme mix (1 basis point) and mutual fund net redemptions in the corporate debt and local currency themes (0.5 basis point). Other factors such as competition and product mix effects broadly offset each other.Performance fees of £3.9 million were generated in the period, a similar level to the prior year. At 30 June 2020, 13% of the Group’s AuM was eligible to earn performance fees (30 June 2019: 14%), of which a substantial proportion is subject to rebate agreements. The Group continues to expect net management fee income to generate the substantial majority of its net revenues. No performance fees were realised by funds with an August year end.Translation of the Group’s non-Sterling assets and liabilities, excluding seed capital, resulted in an unrealised foreign exchange gain of £5.5 million reflecting a lower GBP:USD dollar rate at the period end and active management of the Group’s foreign exchange balances. The net realised and unrealised gain on the Group’s foreign exchange hedges was £1.5 million. Therefore, the total foreign exchange gain recognised in revenues was £7.0 million (FY2018/19: £11.3 million gain).Other revenue fell slightly to £4.1 million as this year there were fewer project management and advisory fees related to funds in the alternatives theme.Operating costsTotal operating costs of £109.2 million include £2.2 million of expenses incurred by seeded funds that are required to be consolidated, as disclosed in note 20. On an adjusted basis, excluding the impact of seed capital and the variable compensation accrual on foreign exchange translation gains, operating costs were reduced by 5% to £105.9 million (FY2018/19: £111.1 million). At constant FY2018/19 average exchange rates, adjusted operating costs declined by 5% compared with the prior year period.Adjusted operating costs before variable compensation were 5% lower at £52.0 million (FY2018/19: £54.8 million), with an increase in fixed staff costs more than offset by an 11% reduction in other operating costs and a lower depreciation and amortisation expense.The Group’s headcount was stable over the year at 306 employees, of which 291 are involved in investment management-related activities (30 June 2019: 307 and 288, respectively), and the average headcount was 3% higher than in the prior year. The Group’s fixed staff costs of £27.6 million increased by 4% compared with the prior year period, and increased by 2% at constant exchange rates.Other operating costs, excluding consolidated fund expenses and depreciation and amortisation, were 11% lower at £21.0 million (FY2018/19: £23.5 million), primarily due to the adoption of IFRS 16 as described below. Other operating costs were lower in the second half of the year compared with the first half due to reductions in travel and office-related costs as a result of the restrictions associated with the COVID-19 pandemic, and notwithstanding the £0.3 million cost of charitable donations. The accrual for variable compensation was £55.0 million, 5% lower than the prior year and representing 19.5% of EBVCIT (FY2018/19: £57.7 million, 22.5%). The Group’s financial and operating performance this year was solid, but the lower charge recognises the more challenging conditions of the second half of the year and the consequent impact upon Ashmore’s investment performance and assets under management.The combined depreciation and amortisation charges for the period were £3.4 million.The adoption of IFRS 16 had a small negative impact of £0.2 million on profit before tax in the current period. It removed the rental expense relating to the Group’s properties (£2.8 million) and replaced it with depreciation of the right-of-use asset (£2.5 million) and a lease finance expense (£0.5 million).Operating costs FY2019/20 £mFY2018/19 £mFixed staff costs(27.6)(26.5)Other operating costs(21.0)(23.5)Depreciation & amortisation(3.4)(4.8)Operating costs before VC(52.0)(54.8)Variable compensation(55.0)(57.7)VC accrual on FX gains/losses1.1 1.4Adjusted operating costs(105.9)(111.1)Consolidated funds costs(2.2)(3.3)Add back VC accrual on FX gains/losses(1.1)(1.4)Total operating costs(109.2)(115.8)Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 31Earnings per shareBalance sheetCashAdjusted EBITDAFinance incomeProfit before taxTaxationSeed capital investmentsBasic earnings per share for the period increased by 3% to 27.4pence (FY2018/19: 26.6 pence) and diluted earnings per share increased by 3% to 25.7 pence (FY2018/19: 25.0 pence). 2019: 307On an adjusted basis, excluding the effects of seed capital items, foreign exchange translation and relevant tax, diluted earnings per share increased by 12% to 26.1 pence (FY2018/19: 23.4 pence). Ashmore’s policy is to maintain a strong balance sheet through market cycles in order to meet regulatory capital requirements, to support the commercial demands of current and prospective investors, and to fund strategic development opportunities across the business.As at 30 June 2020, total equity attributable to shareholders of the parent was £856.4 million (30 June 2019: £843.2 million). Capital resources available to the Group totalled £702.5 million as at 30 June 2020, equivalent to 99 pence per share, and significantly exceeded the Group’s regulatory capital requirement of £147.3 million, equivalent to 21 pence per share. The Group has no debt.Ashmore’s business model consistently delivers a high conversion rate of operating profits to cash. Based on operating profit of Adjusted EBITDA increased by 10% from £201.8 million to £209.7million for the period (FY2018/19: £202.8 million), the £222.5million, higher than the 5% rise in adjusted net revenue Group generated £254.9 million of cash from operations (F2018/19: due to the 5% reduction in adjusted operating costs. Consequently, £211.2 million). The operating cash flows after excluding consolidated the adjusted EBITDA margin expanded slightly to 68% (FY2018/19: funds represent 116% ofthe adjusted EBITDA for the period of 66%). The impact of IFRS 16 contributed 0.9% to the adjusted £222.5 million (FY2018/19: 106%).EBITDA margin.Net finance income of £12.0 million (FY2018/19: £17.4 million) includes items relating to seed capital investments, which are Sterling157.8described in more detail below. Excluding these items, net interest US dollar269.5income for the period was £5.8 million (FY2018/19: £7.7 million) with Other49.9the reduction being primarily a consequence of higher cash holdings 477.2in US dollars with lower prevailing interest rates.The 10% increase in adjusted EBITDA and continued efficient Statutory profit before tax of £221.5 million was 1% higher than the conversion of profits to cash, after allowing for items such as additional advance payments of corporation tax andthe purchase prior year (FY2018/19: £219.9 million) reflecting the positive operating performance offset by mark-to-market losses incurred in of shares, resulted in an increase in the Group’s cash and cash the second half of the year on the Group’s seed capital investments.equivalents compared with the prior year end, with active management of the Group’s foreign exchange exposures resulting in a higher US dollar balance.The majority of the Group’s profit is subject to UK taxation. Of the total current tax charge for the year of £38.7 million (FY2018/19: The Group’s actively managed seed capital programme continues to £41.8 million), £24.7 million relates to UK corporation tax (FY2018/19: support growth in third-party AuM with more than US$8.5 billion of £36.3 million).AuM in funds that have been seeded, representing 10% of total The Group’s effective tax rate for the financial year is 16.6% Group AuM.(FY2018/19: 17.5%), which is lower than the prevailing UK During the financial year, the Group made new seed investments of corporation tax rate of 19.0%. This reflects the impact of the £51.4 million and realised £84.0 million from previous investments. geographic mix of the Group’s profits in the period, non-taxable The consequent net redemption of £32.6 million together with unrealised seed capital losses and the valuation of deferred tax unrealised market-to-market losses of £6.8 million means the market assets relating to share-based remuneration provided to employees. value of the Group’s seed capital investments reduced from £277.8 Note 12 to the financial statements provides a reconciliation of this million as at 30 June 2019 to £238.4 million as at 30 June 2020. difference compared with the UK corporation tax rate.Ashmore has also made seed capital commitments of £20.0 million to funds in the alternatives theme that were undrawn at the period end, giving a total committed value for the Group’s seed capital programme of approximately £260 million. Business review continuedYear end headcount30602029102810271026102GlobalSupportLocalInvestment professionals1121949820811719095212731808317063189771756420286180Cash and cash equivalents by currency 30 June 2019 £m30 June 2020 £m66.0 391.143.8 Total500.9 32 Ashmore Group p|lc Annual Report and Accounts 2020As at 30 June 2020, the original cost of the Group’s current seed capital investments was £214.1 million, representing 28% of Group net tangible equity. More than two-thirds of the Group’s seed capital is held in funds with better than one-month dealing frequency, such as SICAV or US 40-Act mutual funds.The majority of the new investments were into corporate debt and equity funds, supporting product diversification and AuM growth within Phase 2 of the Group’s strategy. The redemptions were mainly in the equities and local currency themes as a consequence of client flows, and also in the alternatives theme as capital was returned to investors.Seed capital market value by currency 30 June 2020£m30 June 2019 £mUS dollar213.7 250.7Colombian peso13.914.8Other10.8 12.3Total market value238.4 277.8The table below summarises the principal IFRS line items to assist in the understanding of the financial impact of the Group’s seed capital programme. The seed capital investments generated a total loss of £7.6 million in the period (FY2018/19: £10.7 million gain) including a realised gain of £4.0 million. This comprises a £9.0 million mark-to-market loss in respect of consolidated funds, including £4.8 million of finance income, and a £1.4 million gain in respect of unconsolidated funds that is reported in finance income.Financial impact of seed capital investments FY2019/20 £mFY2018/19 £mConsolidated funds (note 20): Gains/(losses) on investment securities(19.1)0.5Change in third-party interests in consolidated funds7.53.8 Operating costs(2.2)(3.3)Finance income4.8 5.5Sub-total: consolidated funds(9.0) 6.5 Unconsolidated funds (note 8): Market return1.6 3.3Foreign exchange(0.2) 0.9Sub-total: unconsolidated funds1.4 4.2 Total seed capital profit/(loss)(7.6)10.7– realised4.0 2.4– unrealised(11.6)8.3Foreign exchangeThe majority of the Group’s fee income is received in US dollars and it is the Group’s policy to hedge up to two-thirds of the notional value of budgeted foreign currency-denominated net management fees, using either forward or option foreign exchange contracts. Ashmore’s Foreign Exchange Management Committee determines the proportion of budgeted fee income to hedge or sell by regular reference to expected non-US dollar, and principally Sterling, cash requirements. Foreign currency assets and liabilities, including cash, are marked to market at the period end exchange rate with movements reported in either revenues or other comprehensive income.Goodwill and intangible assetsAt 30 June 2020, goodwill and intangible assets on the Group’s balance sheet totalled £89.7 million (30 June 2019: £87.3 million). The movement in the period is the result of an amortisation charge of £0.2 million (FY2018/19: £4.1 million) and a foreign exchange revaluation gain in reserves of £2.6 million (FY2018/19: £3.4 million gain).Shares held by Employee Benefit Trust (EBT)The Group’s EBT purchases and holds shares in anticipation of the vesting of share awards. During the second half of the year, the EBT actively acquired shares to satisfy future employee share awards. At 30 June 2020, the EBT owned 56,477,466 ordinary shares (30 June 2019: 40,355,103 ordinary shares), representing 7.9% of the Group’s issued share capital (30 June 2019: 5.7%).Regulatory capitalAshmore is subject to consolidated regulatory capital requirements, whereby the Board is required to assess the degree of risk across the Group’s business, and the Group is required to hold sufficient capital against these risks.Through the Internal Capital Adequacy Assessment Process (ICAAP) the Board has determined the amount of Pillar II capital required to be £147.3 million (30 June 2019: £121.0 million). The increase is primarily the result of higher levels of foreign currency and seed capital positions and increased market volatility during the second half of the financial year leading to a higher market risk requirement.The Group has total capital resources of £702.5 million as at 30 June 2020, equivalent to 99 pence per share, giving a solvency ratio of 377% and excess regulatory capital of £555.2 million. Therefore, the Board is satisfied that the Group is adequately capitalised.DividendThe Board intends to pay a progressive ordinary dividend over time, taking into consideration factors such as the prospects for the Group’s earnings, demands on the Group’s financial resources, and the markets in which the Group operates.Consistent with this approach, the Directors have recommended a final dividend of 12.10 pence per share for the year ending 30 June 2020 (FY2018/19: 12.10 pence), which if approved by shareholders will be paid on 11 December 2020 to all shareholders on the register on 6 November 2020. Total dividends paid and recommended for the year are 16.90 pence (FY2018/19: 16.65 pence), which are covered 1.5x by diluted earnings per share.Tom ShippeyGroup Finance Director10 September 2020Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 33Alternative performance measuresAshmore discloses non-GAAP financial alternative performance measures (APMs) in order to assist shareholders’ understanding of Adjusted figures exclude items relating to foreign exchange the operational performance of the Group during the accounting translation and seed capital. This provides a better understanding of the Group’s operational performance excluding the mark-to-market period and to make comparisons with prior periods. volatility of foreign exchange translation and seed capital investments. The calculation of APMs is consistent with the financial yearending These adjustments are merely reclassified within the adjusted profit 30 June 2019 and unless otherwise stated reconciliations to and loss account, leaving statutory profit before taxunchanged. statutory IFRS results are provided in the Business review. Historical reconciliations of APMs to statutory IFRS results can be found in the respective interim financial reports and annual reports and accounts.The ratio of adjusted EBITDA to adjusted net revenue, both of which are defined above. This is an appropriate measure of the Group’s operational efficiency and its ability to generate returns As shown on the face of the consolidated statement of forshareholders.comprehensive income, net revenue is total revenue less distribution costs and including foreign exchange. This provides a comprehensive view of the revenues recognised by the Group in This compares adjusted EBITDA to cash generated from operations theperiod.excluding consolidated funds, and is a measure of the effectiveness of the Group’s operations at converting profits to cash.The net management fee margin has been included as an APM to increase transparency and aid understanding of the Group’s performance in the period. It is defined as the ratio of management fees less distribution costs to average assets under management for the period, and is a commonly-used industry performance measure.The charge for employee variable compensation as a proportion of earnings before variable compensation, interest and tax (EBVCIT). The linking of variable annual pay awards to the Group’s profitability is one of the principal methods by which the Group controls its operating costs. The charge for variable compensation is a component of personnel expenses.EBVCIT is defined as operating profit excluding the charge for variable compensation and seed capital-related items. The latter comprises gains/losses on investment securities; change in third-payrt interests in consolidated funds; and other expenses in respect of consolidated funds.The standard definition of earnings before interest, tax, depreciation and amortisation is operating profit before depreciation and amortisation. It provides a view of the operating performance of the business before certain non-cash items, financing income and charges, and taxation.Adjusted net revenue, adjusted operating costs and adjustedEBITDAAdjusted EBITDA marginNet revenueConversion of operating profits to cashNet management fee marginVariable compensation ratioEBITDA Business review continued34 Ashmore Group p|lc Annual Report and Accounts 2020Risk management structureAshmore Group plc BoardGroup Risk and Compliance CommitteeChairmanMembersThe Group’s three-phase The Group executes its strategy The Board has ultimate and The Board is responsible for strategy is designed to deliver using a distinctive business ongoing responsibility for the risk management, although it long-term growth to model, and identifies, evaluates Group’s strategy. Itformally has delegatedauthority to carry shareholders through cyclesby and manages the principal risks reviews the strategy at least out day-to-day functions to capitalisingon the powerful inherent in this businessmodel. annually and receives updates Executive Directors and economic, political and social at each Boardmeeting.specialised committees, convergence trends evident such as the Group Risk and across the Emerging Markets.Compliance Committee.The Board and its committees, including the Audit and Risk Committee, are ultimately responsible for the Group’s risk management and internal control systems, and for reviewing their effectivenessMaintains a sound risk management and internal control environment and assesses the impact of the Group’s activities on its regulatory and operational exposuresHead of Risk Management and ControlChief Executive OfficerGroup Head of Legal & Transaction ManagementGroup Head of FinanceGroup Finance DirectorGroup Head of Middle Office & ITGroup Head of DistributionGroup Head of ComplianceGroup Head of Human ResourcesHead of InternalAuditA KEY ELEMENT OF ASHMORE’S CULTUREAshmore’s strong risk management culture and internal control framework provide an ongoing process for identifying, evaluating and managing the Group’s principal and emerging risks. Risk managementREAD ABOUT ASHMORE’S STRATEGY READ ABOUT ASHMORE’S BUSINESS READ ASHMORE’S GOVERNANCE READ ABOUT ASHMORE’S PRINCIPAL ON PAGES2 TO 3MODEL ON PAGES4 TO 5REPORT ON PAGES63 TO 74AND EMERGING RISKS ON PAGES39 TO41 Strategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 35Risk management continuedThree lines of defenceThere are established policies and procedures to enable the ARC and In accordance with provision 29 of the 2018 version of the UK ultimately the Board, through its regular meetings, to monitor the Corporate Governance Code, the Board is ultimately responsible for effectiveness of the risk management and internal control systems, the Group’s risk management and internal control systems and for which cover all principal identified internal and external strategic, reviewing their effectiveness. Such systems and their review are operational, financial, compliance and other risks, including the designed to manage rather than eliminate the risk of failure to Group’s ability to comply with all applicable laws, regulations and achieve business objectives, and can only provide reasonable and clients’ requirements.not absolute assurance against material misstatement or loss.The ARC and/or Board receives regular compliance, risk and internal Within the Group’s over-arching corporate governance framework, audit reports while the Board receives regular financial and other through which the Board aims to maintain full and effective control management information related to the control of expenditure over appropriate strategic, financial, operational and compliance against budget and the making of investments, and for monitoring issues, an internal control framework has been established, against the Group’s business and its performance.which the Group is able to assess the effectiveness of its risk management and internal control systems.The Group’s system of internal control is integrated into the Group’s strategy andbusiness model and embedded within its routine business processes and operations, and a strongcontrol culture is combined with clear management responsibility and accountability for individual controls.The internal control framework provides an ongoing process for The Group has three lines of defence against unintended identifying, evaluating and managing the Group’s emerging risks and outcomes arising from the risks it faces.principal risks, and has been in place for the year under review and up to the date of approval of the Annual Report and Accounts. Theprocess is regularly reviewed by the Group’s Audit and Risk This rests with line managers, whether they are in Committee (ARC) and accords with the guidance in the document portfolio management, distribution or support functions. ‘Guidance on Risk Management, Internal Control and Related The senior management team takes the lead role with Financial and Business Reporting’ (theGuidance) published by the respect to implementing and maintaining appropriate Financial Reporting Council in September 2014.controls across thebusiness.The Executive Directors oversee the key risks and controls and the risk management process on a day-to-day basis, and there is an organisational structure with clearly defined lines of responsibility and delegation of authority.This is provided by Group Risk Management and The Group’s Risk and Compliance Committee (RCC), which meets Control, including the Group’s principal risk matrix, monthly, is responsible for maintaining a sound risk management and Group Compliance, including the compliance and internal control environment and for assessing the impact of the monitoring programme.Group’s ongoing activities on its regulatory and operational exposures. The RCC is chaired by the Head of Risk Management and Control, and the other members are the Chief Executive, the Group Finance Director, the Group Head of Compliance, the Group Group Internal Audit is the third line of defence and Head of Finance, the Group Head of Middle Office and IT, the Group provides independent assurance over agreed risk Head of Legal and Transaction Management, the Group Head of management, internal control and governance processes Distribution, the Head of Internal Audit, and the Group Head of aswellas recommendations to improve the effectiveness Human Resources. Responsibility for risk identification is shared ofthese processes.among these senior management personnel, with each individual being responsible for day-to-day control of risk in their business area.First: Risk ownershipSecond: Risk controlThird: Independent assurance Risk management and internalcontrol systems 36 Ashmore Group p|lc Annual Report and Accounts 2020The main features of the Group’s riskmanagement and internal – a risk appetite framework developed by engaging key control systems are as follows:stakeholders at the functional, business and executive levels of the organisation and accordingly, the Group’s risk appetite statement (and its associated components) is regularly reviewed – core values and policies together comprising the Group’s and updated in line with the evolving strategy, business model, high-level principles and controls, with which all staff are expected financial capacity, business opportunities, regulatory constraints to comply;and other internal and external factors;– manuals of policies and procedures, applicable to all business – a Risk and Compliance Committee (RCC) which as noted above is units, with procedures for reporting weaknesses and for responsible for internal control and for assessing the impact of monitoring corrective action;Ashmore’s ongoing activities on the firm’s regulatory and – a code of business conduct, with procedures for reporting operational exposures;compliancetherewith; and – a matrix of principal and emerging risks identifies key strategic and – a defined operational framework and organisational structure with business, client, treasury, investment and operational risks, and appropriate delegation of authority and segregation of duties and considers the likelihood of those risks crystallising and the accountability, that have regard to acceptable levels of risk.resultant impact. The inherent risk within each business activity is identified, with the adequacy and mitigating effect of existing processes being assessed to determine a current residual risk – a planning framework that incorporates a Board approved strategy, level for each such activity. On the basis that further mitigants and/with objectives;or controls may be employed over time, a target residual risk for – the FCA’s Senior Managers and Certification Regime, which each activity after one to two years is defined and progress to requires allocation of specific responsibilities to individuals and the target is formally tracked as appropriate;documentation of this through a management responsibilities map and the job descriptions of the individuals;In accordance with the provisions 30 and is reviewed by the Board in respect of the considered as part of the ICAAP and the 31 of the UK Corporate Governance Code, risks, prospects and financial planning of Board receives regular management the Directors have assessed the current the Group, which includes a three-year reporting against each risk to allow it to position and prospects of the Group over a detailed financial forecast alongside severe assess the effectiveness of the controls three-year period to June2023, which is but plausible scenario-based downside inplace.consistent with the planning horizon under stress-testing, including the impact of The Directors have a reasonable the Group’s Internal Capital Adequacy negative investment performance, a decline expectation that the Group will be able to Assessment Process (ICAAP). A robust in AuM and the COVID-19 pandemic. continue in operation, meet its liabilities as assessment of the principal and emerging Consequently, the Board regularly assesses they fall due and maintain sufficient risks implicit in the business model has the amount of capital that the Group is regulatory capital over the next three been made, alongside the controls and required to hold to cover its principal risks, years, as the Group is currently highly mitigants in operation within the Group, including the amounts required under a profitable, generates healthy cash flow and is presented in more detail on pages range of adverse planning scenarios.and the strong and liquid balance sheet is 39 to 41. Consideration of the risks arising The Group’s strategy and prospects are sufficient to withstand the financial impact from the COVID-19 pandemic has been regularly reviewed by the Board and of the range of adverse planning scenarios included within this assessment. qualitative and quantitative assessments modelled as part of the ICAAP.Theprincipal risks the Group faces are of the principal risks are presented to the Strategic, Client, Treasury, Investment and Group’s Audit and Risk Committee quarterly. Operational in nature. Regular information The Group’s Risk Appetite Statement is PoliciesProcessesLonger-term viability statementStrategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 37Risk management continued –key risk indicator (KRI) statistics are reported to and analysed by the RCC. The KRIs indicate trends in the Group’s risk profile, assist in the reduction of errors and potential financial losses, and seek to prevent exposure by dealing with a potential risk situation before an event occurs; –an established Media and Reputation Management Policy focusing on understanding the information that is currently publicly available on the Group, the Board and its senior client facing staff, especially that which could create negative reputational issues; –the Board reviews and approves an annual budget, which is subject to update through a forecasting process; –the Operating Committee regularly reviews the Group’s financial and operating performance to focus on delivery of the Group’s key strategic objectives; –detailed investment reports are prepared and discussed at each of the sub-committee meetings of the Group’s investment committees, which take place weekly, monthly or quarterly depending on investment theme, with follow up actions agreed and implemented within a strict operational framework; –the Group’s Pricing and Oversight Committee (POC) supervises the effectiveness of pricing policies for all investments held in Ashmore sponsored funds where a reliable pricing source is available. This includes the responsibility to ensure that appointed third-party pricing agents carry out the agreed pricing policy faithfully and manage the pricing sources appropriately; –the Group’s Pricing Methodology and Valuation Committee (PMVC) has oversight of the valuation methodologies used for clients’ fund investments that cannot be readily externally priced. It meets monthly to review the current valuation methodology for each of these investments and to propose an updated valuation methodology where appropriate; –the Group Compliance function, whose responsibilities and processes include: ensuring that the Group at all times meets its regulatory obligations; integrated regulatory compliance procedures and best practices within the Group; ongoing compliance monitoring programme covering all the relevant areas of the Group’s operations; and identifying any breach of compliance with applicable financial services regulation, which includes real-time investment restrictions monitoring of client mandate requirements. Results of the compliance monitoring programme are reported to the RCC in support of the overall risk management and internal control framework; –financial controls are maintained to ensure accurate accounting for transactions, appropriate authorisation limits to contain exposures, and reliability of data processing and integrity of information generated; –the Group’s Finance function is responsible for the preparation of the financial statements and is managed by appropriately qualified accountants. Review is undertaken by numerous parties including the Executive Directors and includes challenge by the Board. The Finance function works in conjunction with the Group’s auditors and other external advisers to ensure compliance with applicable accounting and reporting standards, prevailing regulations and industry best practice; –Board members receive monthly management information including accounts and other relevant reports, which highlight actual financial performance against budget/forecast and the prior year period; –there are well-defined procedures and thresholds governing the appraisal and approval of corporate investments, including seeding of funds and purchase of own shares, with detailed investment and divestment approval procedures, incorporating appropriate levels of authority and regular post-investment reviews; –oversight and management of the Group’s foreign currency cash flows and balance sheet exposures are the responsibility of the Foreign Exchange and Liquidity Management Committee, which determines the appropriate level of hedging, and ensures liquidity requirements are met; –the Group has secure information and communication systems capable of capturing relevant and up to date information by relevant personnel, with oversight and direction provided by the Group’s IT Steering Group, which implements the IT strategy, and establishment and oversight of all IT projects; –the development of new products, consideration of material changes to existing funds, and the restructuring of funds and products is the responsibility of the Product Committee and forms an important part of the Group’s business in responding to clients’ needs, changes in the financial markets and treating customers fairly; –an ESG Committee with oversight of Ashmore’s responsible investing framework and focus on the implementation of all elements of this framework across Ashmore’s corporate strategy and investment management activity;38 Ashmore Group plc | Annual Report and Accounts 2020– a Global Investment Performance Standards (GIPS) Committee, which acts as the primary decision making body within the Group Through the ARC, the Board has conducted an annual review and in relation to any changes to the existing set of composites, and assessment of the effectiveness of the risk management and approving the creation of new composites; andinternal control systems, and has identified no significant failings or weaknesses during this review. In conducting this review, the Board – a Research Oversight Committee (ROC) to address governance, and/or ARC has considered the periodic reports on compliance and oversight and ongoing reviews of third-party research procured risk matters, including reports provided by the Internal Audit function, byAshmore.and the annual report on risk management and internal control processes from the Group’s RCC. These reports were received – Internal Audit has ongoing responsibility for reviewing the throughout the year up to the latest practicable date prior to the assurance map and providing an independent assessment of approval of the Annual Report and Accounts. The Board is satisfied assurance on an annual basis. The assurance map documents the that appropriate planned actions continue to be effective in interaction from a Group perspective of the first, second and third improving controls as the Group develops, and its overall lines of defence with regard to the controls and mitigants of those assessment of the control framework continues to be satisfactory.principal risks assessed as high risk;Ashmore has or had during the year interests in certain joint – annual control reports are reviewed independently by the Group’s ventures/associates which operate risk management and internal external auditors pursuant to the International Standards on control systems that are not dealt with as part of the Group for the Assurance Engagements 3402 (ISAE 3402);purposes of this statement. These are:– the external auditors are engaged to express an opinion – Taiping Fund Management Company;on the annual financial statements and the condensed set of financial statements in the half-yearly financial report – VTB-Ashmore Capital Holdings Limited; andand also to independently and objectively review the – AA Development Capital Investment Managers (Mauritius) LLC.approach of management to reporting operating results For these entities, the Group has in pand financialresources;lace appproriate oversight including Board representation.– the Board, through the ARC,also receives half-yearly updates from the Group’s external auditors, which include any control matters that have come to their attention; andAshmore considers a number of risks and has described in the table on pages 40 to 41 those that it has assessed as being most – the Internal Audit function undertakes a programme of reviews of significant in this period, together with examples of associated systems, processes and procedures as agreed with the ARC, controls and mitigants. Reputational and conduct risks are common reporting the results together with its advice and recommendations, to most aspects ofthe strategy and business model.and assisting in the presentation of its findings to the ARC.The Group considers the assessment and management of emerging risks within its internal control framework, examples of which are:– the impact of passive funds on the asset management industry;– market and/or commercial impact of terrorism;– global political uncertainty;– high level of new regulatory obligations for the industry;– impact of a low oil price; and– the impact of the COVID-19 pandemic, with specific effects also considered under relevant principal risks and their associated controls and mitigants. ConfirmationVerificationPrincipal and emerging risks, controls and mitigantsStrategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 39Principal risks and associated controls and mitigantsDescription of principal risks Examples of associated controls and mitigantsStrategic and business risks (Responsibility: Ashmore Group plc Board) –Long-term downturn in Emerging Markets fundamentals/technicals/sentiment, and impact of broader industry changes including ESG and climate change risks –Group strategy is reviewed and approved by a Board with relevant industry experience –Diversification of investment capabilities and products –Ashmore has a strong balance sheet with no debt –Market capacity issues and increased competition constrain growth –Experienced Emerging Markets investment professionals, with deep market knowledge, participate in investment committees –Periodic investment theme capacity reviews –Barriers to entry remain high, e.g. demonstration of long-term investment track record –Failure to understand and plan for the potential impact of investor sentiment and regulatory changes relating to sustainability and climate change –Oversight by ESG Committee, which has overall responsibility for Ashmore’s sustainability and responsible investing framework across its corporate and investment activities –Head of Sustainability provides updates to the Board –Dedicated ESG funds Client risks (Responsibility: Product Committee and Group Risk and Compliance Committee) –Inappropriate marketing strategy and/or ineffective management of existing and potential fund investors and distributors, including impact of net outflows and fee margin pressure –Frequent and regular Product Committee meetings review product suitability and appropriateness –Experienced distribution team with appropriate geographic coverage –Investor education to ensure understanding of Ashmore investment themes and products –Inadequate client oversight including alignment of interests –Monitoring of client-related issues including a formal complaints handling process –Compliance and legal oversight to ensure clear and fair terms of business and disclosures, and appropriate client communications and financial promotions –Global distribution team appropriately structured for institutional and intermediary retail clientsTreasury risks (Responsibility: Chief Executive Officer and Group Finance Director) –Inaccurate financial projections and hedging of future cash flows and balance sheet –Defined risk appetite, and risk appetite measures updated quarterly –Group foreign exchange (FX) hedging policy and FX and Liquidity Management CommitteeInvestment risks (Responsibility: Group Investment Committees) –Downturn in long-term performance –Consistent investment philosophy over more than 27 years and numerous market cycles, with dedicated Emerging Markets focus including country visits and network of local offices –Manager non-performance including i) ineffective leverage, cash and liquidity management and similar portfolios being managed inconsistently; and ii) neglect of duty, market abuse –Funds in the same investment theme are managed by consistent investment management teams, and allocations approved by investment committees –Comprehensive policies in place to cover, for example, conflicts, best execution, market abuse and client order handling –Tools to manage liquidity issues as a result of redemptions including restrictions on illiquid exposures and ability to use in specie redemptions –Insufficient number of trading counterparties –Group Trading counterparty policy and sufficient counterparties to provide access to liquidity. Extensive trading relationships developed over the firm’s history of focusing on Emerging Markets investingRisk management continued40 Ashmore Group plc | Annual Report and Accounts 2020Description of principal risks Examples of associated controls and mitigantsOperational risks (Responsibility: Group Risk and Compliance Committee) –Inadequate security of information including cyber security and data protection –Information security and data protection policies, subject to annual review including cyber security review. Cyber security working group meets frequently and regularly –Inadequate business continuity planning (BCP) –Established BCP process with periodic updates to Group RCC –Inaccurate or invalid data including manual processes/reporting –Dedicated teams responsible for Transaction Processing, Fund Administration, and Pricing and Data Management –Pricing Oversight and Pricing Methodology and Valuation Committees, with PMVC valuations subject to external audit –Annual ISAE 3402 process and report –Failure of IT infrastructure, including inability to support business growth –Appropriate IT policies with annual review cycle –IT systems and environmental monitoring –Group IT platform incorporates local offices –Legal action, fraud or breach of contract perpetrated against the Group, its funds or investments –Independent Internal Audit function that considers risk of fraud in each audit –Financial crime policy covering the Group and its service providers –Whistleblowing policy including independent reporting line, and Board sponsor (the Senior Independent Director) –Due diligence on all new, and regular reviews of existing, service providers –Insurance policies with appropriate cover to ensure appropriate client litigation cover –Insufficient resources, including loss of key staff, inability to attract staff and health and safety issues, which hampers growth or the Group’s ability to execute its strategy –Committee-based investment management reduces key man risk –Appropriate remuneration policy with emphasis on performance-related pay and long-dated deferral of equity awards –Regular reviews of resource requirements and updates provided to the Board –Lack of understanding and compliance with global and local regulatory requirements, as well as conflicts of interest and not treating customers fairly; and financial crime, which includes money laundering, bribery and corruption, leading to high level publicity or regulatory sanction –Regulatory Development Working Group and compliance monitoring programme, which covers financial crime risks such as money laundering and bribery –Compliance policies covering global and local offices, for example global conflicts of interest and inducements policies –Conduct risk and organisational culture indicators are considered on a monthly basis by the Group RCC and on an annual basis by the Board –Internal Capital Adequacy Assessment Process (ICAAP) with ongoing engagement with the Board –Mandatory compliance training for all employees –Inadequate tax oversight or advice –Dedicated in-house tax specialist and Group Tax policy covering all Group entities with external advice sought as appropriate –Inadequate oversight of Ashmore overseas offices –Group Finance Director has oversight responsibility for overseas offices, and RCC has oversight of the operating model with annual reviews. Senior staff take local Board/advisory positions –Local RCCs held and Group RCC receives updates –Internal Audit reviews, and annual governance reviews reported to RCC –Ineffective or mismanaged third-party services –Due diligence on all new third parties and periodic meetings with core service providersStrategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 41ALIGNED TO ASHMORE’S PURPOSEEngaging with Ashmore’s stakeholdersSection 172(1) Statement and Statement of Engagement with Employees and Other StakeholdersEngaging with clientsEngaging with shareholdersIn accordance with the Companies Act 2006 (the ‘Act’) (as amended by the Companies (Miscellaneous Reporting) Regulations 2018), the Directors provide this statement describing how they have had regard to the matters set out in section 172(1) of the Act, when performing their duty to promote the success of the Company, under section 172. Further details on key actions in this regard are also contained within the Corporate governance report on pages 63 to 74 and the Directors’ report on pages 111 to 115. In accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended by the Companies (Miscellaneous Reporting) Regulations 2018) the sections below describe how the Directors have engaged (both directly and indirectly) with, and had regard to the interests of, keystakeholders.Delivering long-term investment performance for a diversified client The support of Ashmore’s shareholders, with an appropriately base is critical to Ashmore’s success as a specialist asset manager.long-term investment horizon, is important to enable Ashmore to fulfil its strategic growth ambitions.Ashmore engaged in frequent and regular contact with institutional and intermediary clients, including through the use of research and Shareholder engagement addressed important areas including thought-leadership pieces.Directors’ remuneration and the significant vote against the reappointment of the Chair of the Remuneration Committee The Board considered the need for heightened activity in response (seepage 63).to the global markets shock. Intermediary retail clients were expected to be more sensitive to market conditions.Consideration was given to making additional disclosures detailing the Group’s response to the COVID-19 virus and its ability to manage through severe market dislocations.Ashmore’s distribution teams have developed direct, long-term relationships with institutional and intermediary clients and there is ongoing engagement. There was comprehensive investor relations activity, involving Executive and Non-executive Directors. An Emerging Markets Clients receive frequent and regular reports on investment briefing was also provided by Ashmore’s Head of Research. performance and portfolio positioning.Theannual meeting with the UK Shareholder Association and retail shareholders took place again this year.Diversification and long-standing relationships (for institutional clients Ashmore seeks to build direct relationships with shareholders and more than seven years on average) ensures a balanced response to potential investors by managing the majority of roadshows and other market conditions.interactions in-house.Institutional flows continued to be biased towards existing clients who increased their Emerging Markets allocations, consistent with Ashmore has a stable shareholder base.Phase 1 of Ashmore’s strategy.In response to shareholder feedback, enhanced disclosure was provided in relation to remuneration philosophy and its links to longer-term strategy and Ashmore’s culture.There is a comprehensive shareholder and target investor engagement programme, with more than 250 investor meetings held during the year (see page 44 for the Investor Relations calendar).Both the Chairman and the Chair of the Remuneration Committee met with shareholders during the course of the year. Key factorsKey factorsWhat did we consider?What did we consider?How did we engage?How did we engage?What were the outcomes?What were the outcomes?42 Ashmore Group p|lc Annual Report and Accounts 2020Engaging with employeesEngaging with societyKey factorsKey factorsWhat did we consider?What did we consider?How did we engage?How did we engage?What were the outcomes?What were the outcomes?Ashmore considers its 306 employees to be its most important Ashmore recognises the impact its activities may have on wider asset and the Group’s priority is to attract, develop and retain society, and takes this responsibility seriously.employees in order to deliver the Group’s potential.Ashmore considered the impact of the COVID-19 pandemic The Board discussed whether existing workforce engagement might on fellow citizens and the need to reduce the spread of be enhanced.infection globally. The Group’s diversity policy was reviewed (see page 111).The Head of Sustainability and ESG has responsibility for oversight and coordination of all ESG activities across the Group.As the COVID-19 virus spread globally, the Board monitored and supported the implementation of the Group’s Business There were initiatives to mitigate and offset the Group’s Continuity Plan (BCP) and the swift transition to remote working COemissions.for all employees.The Ashmore Foundation engages with stakeholders in an effort Ashmore has a strong culture, supported by a lean organisation to make a positive and sustainable difference to disadvantaged structure, a distinctive remuneration philosophy and a clear ‘tone communities in the Emerging Markets in which Ashmore operates from the top’.and invests.The Board meets teams of employeeson a rotational basis at every Ashmore is a signatoryto the UN PRI and UN Global Compact and Board meeting, and the CEO provides regular briefings including a supports the Sustainable Development Goals agenda.quarterly newsletter.Ashmore engages with its suppliers and pursuant to the Modern The Board reviews a ‘culture dashboard’ annually, with input from Slavery Act 2015 the Board approves a Slavery and Human the Global Heads of HR and Compliance.Trafficking Statement each year.The Board has appointed one of its Non-executive Directors as The Group pursued an innovative approach to carbon offset through ‘Workforce engagement Director’ (see page 63).the Ashmore Foundation, with the objectives of supporting societal development in Emerging Markets.The London office was refurbished with enhanced facilities for staff.Ashmore expanded the Group’s dedicated ESG capabilities with the The Group’s BCP was successfully implementated, supported by launch of an equity ESG fund, alongside the existing blended debt Ashmore’s team-based culture and its employees’ continuing focus ESG fund.on delivering value to clients and other stakeholders.Ashmore supportsthe recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and further information is included on page 52. 2 Strategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 43Engaging with Ashmore’s stakeholders continuedEngaging with regulatorsQ1Q2Q3Engaging with third-party service providersQ4Key factorsInvestor relations calendar JulyWhat did we consider?SeptemberHow did we engage?OctoberNovemberWhat were the outcomes?DecemberJanuaryFebruaryKey factorsMarchWhat did we consider?How did we engage?AprilMayWhat were the outcomes?JuneAshmore’s business comprises global operating hubs and independent local asset management platforms, operating in a number of different regulatory jurisdictions.– Corporate governance roadshow with Chairman and Chair of Remuneration CommitteeIn support of business development, Ashmore established new – AuM statementrelationships with regulators in Ireland (CBI) and Colombia (SFC).The Group listed its Indonesian subsidiary on the Jakarta Stock – Full year results and annual report publishedExchange, as described on page 17.– Investor roadshow (UK)– BAML Financials conferenceAshmore’s Directors and senior management maintain strong working relationships with regulators in each of the Group’s jurisdictions and, where appropriate, participate in regulatory consultations and industry working groups. Ashmore imposes the – AuM statementhigher of local and head office (UK) regulatory and compliance – Annual General Meeting (attended by all Board standards, and is committed to compliance with all relevant laws members)andregulations.– Investor roadshow (Finland, Sweden, Denmark)The Group’s Regulatory Development Working Group ensures the business is kept abreast of the implications of developing and impending regulation and can engage where necessary.– Numis UK conference– Investor roadshow (US)As at 30 June 2020 no enforcement actions were in progress against – UBS Pan European conferenceAshmore entities by financial services regulators globally.In the light of the COVID-19 pandemic Ashmore shared detailed – Berenberg European conferenceinformation on its operational and financial resilience with regulators in the UK and Europe.– AuM statement– Interim results & report published– Investor roadshow (UK)The efficiency and scalability of Ashmore’s operating platform relies in part on high-quality thir-pydart service providers.– Annual meeting with UK Shareholder Association (UKSA) membersThe Group’s main supplier relationships were substantially unchanged during the year.– Chairman continues corporate governance engagement with shareholders– Berenberg UK conferenceAshmore communicated with its main suppliers as the COVID-19 pandemic took hold, to reassure them about its ongoing arrangements to maintain ‘business as usual’.Ashmore conducted due diligence on all new third-party service – AuM statementproviders, and reviewed its relationships with existing providers to – Emerging Markets briefings for shareholders and ensure appropriate service levels were achieved.sell-side analysts with Head of ResearchThe Group’s Supplier Code of Conduct outlines the minimum ethical standards that must be met in order to do business with the Group.– Goldman Sachs European Small & Midcap conference– UBS European Small & Midcap conferenceThe Group benefits from a stable supplier base globally. The quality and strength of Ashmore’s third-party supplier relationships was illustrated by the successful transition to remote – Goldman Sachs European Financials conferenceworking as a consequence of the COVID-19 pandemic.– European investor roadshows (France, Belgium, Holland, Germany)– Autonomous Financials conference 44 Ashmore Group p|lc Annual Report and Accounts 2020Section 172 case studiesAshmore’s preparation for Brexit ensured that the Group was appropriately positioned to deal with the significant regulatory change resulting from the UK’s departure from the EU. A case study is provided below.The COVID-19 pandemic rapidly became a global challenge for the Group, with all Ashmore’s offices and business units affected. The Group’s response had to be swift and tailored to the political and regulatory developments in each jurisdiction. A case study is provided on pages 10-11.Preparing for ‘Brexit’What did we decide to do? –Brexit was discussed at two Board meetings. It was decided to form a new investment management company in Ireland to manage the Group’s Luxembourg domiciled funds. This allowed the Group to continue to provide services to clients and investors in the EU seamlessly, post Brexit, and establishes an operating presence within the EU 27 to take advantage of future opportunities for growth. Who did we engage with? –Ashmore engaged with regulators, namely the Central Bank of Ireland (CBI) and the Commission de Surveillance du Secteur Financier (CSSF). –The Group also engaged with employees and prospective new employees, affected third-party suppliers (e.g. custodian), industry representatives, government agencies and industry professionals. How did we take account of their views? –Ireland was selected for reasons including a favourable cost/benefit assessment when compared with other potential jurisdictions. –Employees, including the CEO, were recruited locally with a focus on those with industry experience, to meet regulatory requirements and stakeholder demands. –The new investment management company appointed three Irish Independent Non-executive Directors and established a gender balanced Board with a diverse range of expertise. –There was continuity of Administrator and Depository custodian/transfer agent which meant minimal impact for Ashmore’s clients. –Ashmore partnered with a range of local service providers in Ireland to supply and support the business and its employees, and to support the local economy. –Ashmore structured the business to take account of key stakeholders’ expectations including regulators’.What were the outcomes? –Ashmore has secured the continuity of the relevant EU business. –Ashmore has established a base in the EU27 with a strong team of experienced professionals, led by a diverse and experienced Board, to ensure that it can continue to deliver on stakeholder expectations. Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 45SustainabilityAshmore recognises the role it plays in the deployment of its clients’ capital and the impact this can have on sustainability of the environment and broader society. As such, the Group has integrated sustainability and the understanding and consideration of environmental, social and governance (ESG) factors across its operations, with oversight by the Head of Sustainability and ESG Integration and Board accountability ensured through the Group’s specialised ESG Committee. Ashmore’s responsibility to ensure sustainability extends to all its stakeholders and therefore includes managing its operations in ways that effectively ensure the health and wellbeing of its employees. Ashmore’s response to the COVID-19 pandemic is described in a dedicated section earlier in this report, which together with the importance of its distinctive culture, means that Ashmore ensures that its employees work in a positive environment, enabling personal and professional development.Understanding and achieving sustainability can take many forms, but in the context of the United Nations’ Sustainable Development Goals (SDGs), described below, arguably the greatest impact and change can be achieved in the Emerging Markets. Two areas are particularly relevant to emerging countries: –Environmental challenges, and specifically the effects of climate change, can be acutely felt by companies and communities in which Ashmore operates and invests. Ashmore’s investment processes consider environmental factors in portfolio construction, and the Group is a supporter of global and industry-specific initiatives such as the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. –Inequality and wealth disparity can present significant challenges, and the social investments made by the Ashmore Foundation empower communities at the extreme end of these disparities.Ashmore’s broad and encompassing approach to sustainability is centred on three pillars, shown below, covering the breadth of its corporate operations, investment activities, and the social and impact investing by the Ashmore Foundation. These pillars are not mutually exclusive and they provide a framework to enable Ashmore to define and pursue its sustainability objectives. This report describes in more detail some of the factors relevant to each pillar.Ashmore’s commitment to ensuring sustainability in its activities extends to support for and membership of global and industry-specific initiatives, such as the UN Principles for Responsible Investment, the UN Global Compact, the TCFD recommendations, and Climate Action 100+. Ashmore will continue to develop its approach to sustainability as best practice and regulatory requirements evolve. SUSTAINABILITYCRITICAL TO SUCCESSAs an Emerging Markets focused investment manager, Ashmore's success has always been dependent on understanding sustainability in the markets in which it operates and invests.46 Ashmore Group plc | Annual Report and Accounts 2020Incorporating transparency, fairness, accountability and integrity into operationsSustainability governs our approach to investments, communities and the environment *The Ashmore Foundation is a company limited by guarantee, registered in England (6444943) and is a registered charity in England and Wales (1122351). The Ashmore Foundation is a separate and distinct legal entity from Ashmore Group plc.Enabling clients to deploy capital in line with responsible investing considerationsSocial and impact-first investing locally in Emerging Market communitiesCorporateInvestmentSocietal –Affiliations and membership –UNPRI (2013) –UN Global Compact (2019) –Policies and processes disclosed –ESG –Proxy voting –Engagement –Climate change position paper –Environmental impact/climate change –Carbon offsetting initiative –Recycling and waste management –Continued energy efficiencies –Constituent of FTSE4Good Index Series –UK Stewardship Code compliant –Equal opportunities and diversity –Employee wellbeing and health and safety –Corporate governance –ESG factor analysis –Assessment criteria and scoring process –ESG training for investment teams –External research/third-party data –ESG within the investment process –Integrated approach –Consistency across investment themes –Stewardship/collaborations –Proxy voting and engagement –Climate Action 100+ –Climate change –TCFD recommendations –Managing climate-related risks –Negative screening/exclusions –Controversial weapons –ESG funds specific screens –ESG governance –Adherence to UK Modern Slavery Act –Alignment/contribution to UN Sustainable Development Goals (SDGs) –Local social initiatives –London Crisis at Christmas –New York Cares –Employee volunteering –One paid volunteering day –The Ashmore Foundation* –Emerging Market philanthropy –Impact-first investing – concessionary loans –Impact investmentsStrategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 47Sustainability continuedCORPORATE SUSTAINABILITYAshmore’s approach to corporate sustainability recognises the role it pylas in wider society and is underpinned by values of transparency, fairness, accountability and integrity across the Group’s worldwide operations.The nature of Ashmore’s business as an investment manager – Supplier Code of Conductand its consistent single operating platform mean that corporate – Slavery& human trafficking statement sustainability can be considered and understood in a relatively small – Conflicts of interest statementnumber of areas, listed below and explained in more detail on the – Complaints handling procedurefollowing pages. In recognition of its approach to corporate sustainability, Ashmore is a constituent of the FTSE4Good and – UK Stewardship CodeDowJones Sustainability equity indices.– UK tax strategy– Hampton Alexander review dataIn a people business such as asset management, employees are a firm’s most important asset. Ashmore’s responsibilities to its 306 Ashmore employs 306 people in 11 countries worldwide and its employees across 11 countries are well understood and reflected in employees have always been its most important asset, at the heart its commitments to diversity, career development, health and safety, of everything it does. The Group’s priority is to attract, develop, including workplace benefits, and a remuneration policy that delivers manage and retain this talent in order to achieve its strategic growth a long-term alignment of interests between employees, clients objectives and to create value for its stakeholders. The success of andshareholders.Ashmore’s approach to human resources and its support to corporate sustainability is reflected in the low levels of unplanned Ashmore’s Board of Directors maintains a distinctive culture across staff turnover (FY2019/20: 8.6%). the firm, with a strong ‘tone from the top’ that outlines clear Ashmore aims to have employee policies and procedures that reflect expectations, standards and the importance of accountability to best practice within each of the countries where it has a presence, employees. In addition to the governance arrangements described in and Ashmore requires employees to act ethically and to uphold the Corporate Governance section on pages 63 to 69 and the clearly the standards expected by the Group’s clients. This means Section 172 statement on pages 42 to 45, corporate sustainability is having policies and practices that make Ashmore an attractive place also underpinned by the following factors:to work in respect of the day-to-day operating environment and – A commitment to upholding high ethical standards across the culture, and also in respect of medium to long-term growth for Group’s operations, and to minimising the risks associated with employees, personally, professionally and financially.financial crime.– The Board has ultimate responsibility for risk management and Diversity is integral to Ashmore’s culture and therefore it is control. This encompasses a wide range of principal and emerging committed to providing equal opportunities and to ensuring that its risks, as described in the Risk management section, but importantly workforce reflects, as far as is practicable, the diversity of the many in the prevailing remote working environment it includes the Group’s communities in which it operates and the 36 nationalities assessment, monitoring and control of cyber security-related risks.represented by its employees.– Ashmore has operations in multiple regulatory and tax jurisdictions Diversity encompasses, amongst other things, experience, skills, and manages its business in a responsible and transparent manner.tenure, age, geographical expertise, professional background, gender, ethnicity, disability and sexual orientation. Ashmore’s business is based primarily on intellectual capitalso its Ashmore’s culture is a meritocracy that values openness, fairness direct impact on the environment is limited. However, the Group and transparency and therefore there is no discrimination because of managesthe environmental risks it faces responsibly, and described age,disability, gender reassignment, marriageand civil partnership, below are specific developments in the areas of GHG emissions, pregnancy and maternity, race (which includes colour, nationality and recycling and carbon offsetting.ethnic or national origins), religion or belief, sex or sexual orientation or any other irrelevant factor.Ashmore has a number of policies and other documents that support Ashmore recognises that the financial services sector has historically its approach to corporate sustainability. These include documents been a male dominated industry. In attracting the best talent, that are for employee use, that are made available to the Group’s Ashmore is particularly keen to promote gender diversity and seeks clients, and that are publicly available on the Group’s website, such to attract female employees. Ashmore tracks gender diversity across as those listed below.all its offices globally and the Group’s gender balance is currently – ESG policy68% male and 32% female, and across senior management and their direct reports it is 82% male and 18% female.– Climate change position paper Human resourcesGovernanceEnvironmentPolicy documentsHuman resourcesDiversity48 Ashmore Group p|lc Annual Report and Accounts 2020Ashmore provides data to the Hampton Alexander review. This information can be found in Ashmore’s Sustainability report and on the Group’s website.Ashmore operates a zero tolerance policy towards harassment and bullying and has a formal policy that documents the organisation’s commitment to ensuring employees are treated with respect and dignity while at work.Career developmentAll employees are provided with a comprehensive induction on joining the business, providing an introduction to the Company’s structure, culture, operations and practices. This includes all elements of compliance issues, an understanding of the key business ethics operating within the Ashmore Group, and up-to-date information on relevant regulations.Ashmore recognises that development is a career-long activity and so also supports any professional development or qualifications that will assist employees in maintaining and developing their levels of competence. As part of this, Ashmore believes that constructive performance management is an essential tool in the effective management of its people and business. The performance management cycle comprises setting objectives and an annual performance appraisal against those agreed objectives. Output from this performance process is used to assist with decisions on remuneration, career development and progression.Ashmore is committed to internal progression of its employees whenever this is possible, to ensure that it retains the most talented people. The diverse and global nature of its business allows the Group to consider placing talented individuals into different business and career opportunities within its worldwide office network, in order to foster their development and to benefit clients.Health and safetyAshmore promotes high standards of health and safety at work and has a comprehensive health and safety policy that highlights the Group’s commitment to ensuring employees are provided with a safe and healthy working environment.For example, in London, Ashmore carries out regular risk assessments of premises and provides staff with safety training including the provision of training to fire wardens and first aid representatives. Ashmore also engages external consultants to carry out regular health and safety and fire assessments.There have been no reportable accidents in the financial year in the UK or overseas premises.Workplace benefitsAshmore recognises the diverse needs of its employees in managing the responsibilities of their work and personal lives, and believes that achieving an effective balance in these areas is beneficial to both Ashmore and the individual. Employee health and wellbeing is vital to sustained performance at work, and Ashmore therefore operates a range of schemes to support employees' physical and mental wellbeing. For example, in the UK, Ashmore operates an integrated healthcare approach whereby its private medical health provider and occupational health clinics work hand in hand to promote wellness amongst employees. It also operates a mental health wellbeing scheme, and has a designated Mental Health First Aider.Similar healthcare arrangements are also offered at many of Ashmore’s international offices.RemunerationAshmore’s distinctive remuneration philosophy, described in detail in the Remuneration report, is a critical factor in delivering corporate sustainability. It underpins the Group’s culture and achieves a long-term alignment between employee remuneration and the interests of clients, shareholders and other stakeholders.Ashmore recognises that individuals have different personal requirements dependent on the stage of their life or career. In response to this, it provides employees with a range of benefits, both non-financial and financial, in addition to basic salaries.GovernanceAshmore’s Board of Directors maintains a strong corporate culture employing high standards of integrity and fair dealing in the conduct of the Company’s activities, compliance with both the letter and the spirit of relevant laws and regulations and standards of good market practice in all jurisdictions where the Group’s business is carried out. The Board’s aim is to ensure that the Group is fit and proper to undertake its business, to safeguard the legitimate interests of Ashmore clients and to protect Ashmore’s reputation.Ethical standardsWhile there have been no whistleblowing reports this year, Ashmore considers it important that there is a clear and accessible process through which staff can raise such concerns. Therefore it has procedures in place to enable employees to raise concerns confidentially regarding behaviour or decisions that are perceived to be unethical. This includes use of a third-party agency to provide staff with an independent whistleblowing channel and the Senior Independent Director acts as the nominated Board Director for whistleblowing. Financial crime risksAshmore is committed to minimising the risk that the firm is used for the purposes of financial crime, including money laundering, bribery and corruption, fraud and market abuse. To achieve this aim, Ashmore has adopted a number of risk-based policies and procedures for each area of financial crime, as described in the Risk management section on pages 35 to 41. Training is provided to all employees in relation to anti-money laundering and countering terrorist financing, including customer due diligence requirements, identifying money laundering, suspicious activity and financial crime.Ashmore is also committed to ensuring that the identity of its customers is verified before a business relationship commences and is ongoing throughout the course of the relationship.Cyber security risksInformation security (including cyber security) is identified as a key principal risk to the business which is subject to Ashmore’s governance, policies and procedures and risk assessment. Ashmore assesses, monitors and controls data security risk, and ensures that there is adequate communication between the key stakeholders, which include senior management and IT, human resources, risk management and control, and legal and compliance departments.Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 49Ashmore has a layered security model, within which multiple complementary technologies and processes are employed. Ashmore staff undertake mandatory training in matters of Information Security (including cyber security). Ashmore routinely deploys security updates to its systems and undertakes regular vulnerability testing of its networks and systems using a specialist service provider. The Ashmore Audit and Risk Committee receives an annual report on the Group’s cyber security arrangements, and the Group has a culture of continuous improvement that means that improvements can and do occur throughout the year.Ashmore also affirms and/or attests with key partners on an annual basis that they have not been susceptible to cyber security attacks and vendors have taken all reasonable steps to continuously monitor and protect themselves on cyber security weaknesses.As a large, multi-national organisation with a diverse geographic footprint, Ashmore seeks to create value for its shareholders and clients by managing its business in a commercial, tax efficient and transparent manner, within the remit of applicable tax rules and bearing in mind the potential impact of its actions on its brand and reputation. Ashmore aims to comply with all relevant tax laws and fiscal obligations, including accurate calculation and punctual settlement of tax liabilities and correct and timely lodging of relevant tax returns and other required documentation with relevant tax authorities.As part of the Company’s wider efforts to develop its climate Ashmore is an investment management company whose business strategy, in 2019 Ashmore introduced a Carbon Offsetting is based principally on intellectual capital and it does not own its Initiative, to compensate for the CO emitted through its business premises. Therefore, the Group’s direct impact on the operational business activities. Ashmore recognises that environment is limited and consequently there are relatively few investing in offsetting initiatives will not in itself cancel out environmental risks associated with the Group’s activities. Ashmore’s environmental impact. Offsetting needs to be Nevertheless, Ashmore has a responsibility to manage these implemented within a broader set of activities over the long risks as effectively as possible.term to reduce Ashmore’s environmental impact and Ashmore’s largestoccupancy is at its headquarters at 61 Aldwych in contribute to climate change.London where it has a single floor of apporximately 19,000square feet in a nine-storeyAshmore has committed to offset its emissions (Scopes 1 – 3) multi-tenanted building. Electricity usage in London is separately monitored by floor, with energyefficient on an annual basis. This report therefore relates to emissions reported in the 2019 Annual Report. Emissions disclosed in the lighting installed. Mandatory greenhouse gas emissions (GHGs) current reporting year will be offset over the coming year.reporting information can be found in the Directors’ report.Ashmore’s largest source of carbon emissions is air travel. Its business Ashmore has set its internal carbon price based on the model inevitably requires that investment professionals and other recommendation of the High Level Commission on Carbon employees travel to countries for research and monitoring purposes. Prices which estimates that carbon prices of between US$40 However, wherever possible employees will avail the use of and US$80 per tonne of carbon dioxide (tCO) are required in technology to minimise air travel. The COVID-19 pandemic restricted 2020 to cost-effectively reduce emissions in line with the travel in the second half of the year and this has had an impact on temperature goals of the Paris Agreement. Ashmore will Ashmore’s total emissions for the year. Additionally, it has facilitated review its internal carbon price on a regular basis as global best greateruse of video conferencing facilities, which will benefit the practice evolves.Group in the coming years.Ashmore’s carbon offsetting initiative is implemented in The Group operates recycling programmes for appproriate disposable collaboration with the Ashmore Foundation. This approach has materials. It also seeks to minimise the use of paper and wherever been taken because Ashmore believes that for such initiatives possible chooses paper stocks that have been sustainably sourced to deliver sustainable impact, they need to encompass both and are Forest Stewardship Council (FSC) or equivalently accredited.environmental and social indicators. Ashmore believes that the Ashmore Foundation, with its strong focus on social change, is Ashmore commissioned a 'display energy certificate' assessment of able to identify and partner with the most appropriate initiatives its London office and complied with the UK Government’s Energy to deliver such objectives.Savings Opportunity Scheme (ESOS) Phase 2 before the deadline of 5 December 2019.Tax strategyEnvironmentCarbon offsetting22©1Sustainability continued50 Ashmore Group p|lc Annual Report and Accounts 20202019/20 initiativeThis year, the carbon offsetting initiative was implemented by the Indonesian non-governmental organisation IDEP Foundation. Headquartered in Bali, IDEP develops and delivers programmes on community development through permaculture and disaster-risk management. IDEP has been engaged in agroforestry initiatives with communities living on the edge of forests and national parks, known as buffer zones, for several years.Through this initiative, IDEP continues to expand its multi-approach conservation work in forest buffer zones. The work comprises a mix of climate mitigation, community awareness, forest protection, renewable energy and food security. The specific objectives were to:– Maximise use of 30 hectares of land around the West Bali National Park and protected forest areas for agroforestry– Increase protection and conservation of 330 hectares of protected forest within the buffer zone of West Bali National Park– Increase communities’ skills and knowledge of climate change impact and agroforestry for sustainability– Establish commitment between forest administrators, local government and communitiesTargetsEnvironmentalSocial– 3,000 indigenous tree saplings planted (Teak, Mahogany, – 400 school children improved knowledge of conservation and Acacia,Sengon)climate change– 19.5 tonnes of CO absorbed through the planting of 3,000 tree – 40 low-income families with improved incomesseedlings in 30 hectares of forest – 20 families able to produce post-harvest food from (first 12 months only)kitchengardens– 330 hectares of natural forest conserved over the year– 300 families trained in permaculture and agroforestry approaches – 3,118 tonnes CO absorbed through forest conservation and business management(first 12 months only)– 200 families identifying livelihoods alternative to timber activitiesAshmore, in partnership withthe Ashmore Foundation, is proud to be supporting the IDEP Foundation team in its work withcommunities to reduce climate-related impacts and develop more sustainable ways of living. 221. This approach means that the Initiative is not verified by a third–party certification body. Ashmore will review the requirements for certification over the coming years.Strategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 51Sustainability continuedAshmore considers climate-related risks and opportunities as they relate to both the Group’s operations and its investment activities, and assesses its current activities and disclosures under the TCFD’s Ashmore has limited direct exposure to material climate-related four thematic headings of Governance, Strategy, Risk management risks. Its GHG emissions, disclosed on page 114, primarily relate to and Metrics and targets. This is an ongoing process that will evolve air travel and its offices and are relatively low given the asset as regulatory and other developments provide clarity.management business model. Through the annual budget process and regular reporting of financial and other management information, the Board maintains oversight of the level of business travel and any changes in the office network.The Board has ultimate responsibility for the Group’s strategy and through its corporate governance framework it aims to maintain full As the regulatory environment evolves, Ashmore will seek to and effective control over appropriate strategic, financial, operational adhere to the TCFD’s princi ples and to satisfy the requirementsand compliance issues. This includes material climate-related issues.of its regulators and other relevant bodies as they relate to the assessment, management and disclosure of climate-related risks The Board has delegated authority to the executive management and opportunities.who in turn have formed a number of specialised committees with terms of reference to carry out the functions delegated to them. One such specialised committee is the ESG Committee, which has Ashmore’s investment teams engage with sovereign and corporate overall responsibility for Ashmore’s sustainability and responsible issuers on a range of topics, both directly and in collaboration with investing framework across its corporate and investment activities, other stakeholders, which include climate-related matters.and has as one of its objectives to update the Board on ESG-related Disclosure of climate-related data such as carbon emissions by matters including those relating to climate.Emerging Markets sovereign and corporate issuers is an evolving area and one in which Ashmore engages with those issuers. The Ashmore’s investment committees are ultimately responsible for Group is assessing the availability and use of carbon footprint data the management of client portfolios. With the oversight of these for client portfolios and relevant benchmarks within the relevant committees, the Group has integrated the assessment of ESG risks parts of its fixed income and equity investment themes. Ashmore and opportunities, including those related to climate, into its fixed will continue to review its ESG product offering in response to actual income and equities investment processes.or potential client demand.Ashmore’s internal control framework provides an ongoing process for identifying, evaluating and managing the Group’s emerging and principal risks. The principal risk framework includes climate risk and identifies associated controls and mitigants. Further detail is provided in the Risk management section on pages 35 to 41.Investment committees assess climate risks as part of the ongoing analysis of ESG factors. Ashmore’s fundamental analysis is primarily based on proprietary research, including engagement with issuers to identify potential investment opportunities. Additionally, the investment committees use third-party data to assist in the ESG scoring process.StrategyGovernanceRisk managementOperationalOperationalInvestmentInvestmentOperationalInvestmentCLIMATE RISKS & OPPORTUNITIESAshmore supports the aims of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) to provide stakeholders with consistent and reliable information relating to climate change and its effects.52 Ashmore Group p|lc Annual Report and Accounts 2020Metrics and targetsMarch 2020May 2020October 2020Late 2020 December 2022OperationalTimeline: recent and upcoming climate-related regulatory developmentsInvestmentAs required by the Companies Act, Ashmore reports annually on its GHG emissions and the latest disclosures can be found in the Directors’ report on pages 111 to 115.During the year, the Board examined ways to mitigate or to offset FCA published climate disclosure proposalthe Group’s carbon emissions. Recognising the importance of travel to its business model and the modest absolute levels of carbon emissions, it has provisionally decided to pursue a combined approach of seeking opportunities to reduce overall emissions levels with an offset strategy involving the Ashmore Foundation in order that any financial commitment can be used to support beneficial Consultation on EU’s Non-Financial Reporting activities in the Emerging Markets. This approach demonstrates Directive closedAshmore’s cohesive approach to sustainability.The impact of the COVID-19 pandemic meant that business travel was significantly curtailed or cancelled in the second half of the financial year, with a commensurate reduction in the Group’s Consultation on FCA climate disclosure GHGemissions.proposal closesAshmore expects its analysis and reporting of climate-related risks and opportunities and associated metrics and targets for portfolio investments will evolve, particularly as Emerging Markets issuers increasingly adopt measures such as the TCFD recommendations. FCA to publish climate-related disclosure For example, reporting the carbon footprint of portfolios and requirements aligned to TCFD benchmark indices requires further assessment due to the recommendationslimitations of current issuer disclosure and the robustness of estimates currently available from third-party service providers.EU to launch sustainability taxonomy Strategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 53Sustainability continuedWith over 25 years’ experience investing in Emerging Markets, Ashmore continues to use the spectrum of capital and investment Ashmore’s investment professionals have developed expertise in approaches, belownd describing , as a framework for understanding aunderstanding broader non-financial metrics and indicators, such as impact and the relational link between Ashmore’s investments and environmental, social and governance (ESG) risks, and their impact the social and environmental impact of the socially-driven on the financial returns they secure for clients.investments made through the Ashmore Foundation in countries where the Group has a presence.Ashmore appreciates that industry standards and norms in this area continue to develop and that many investors are still evaluating the role that ESG will play in their strategies and portfolios.INVESTMENT SUSTAINABILITYAs a specialist Emerging Markets asset manager, Ashmore recognises the impact its investments can have on the communities and societies in which they are made. Traditional Responsible Sustainable Themed Impact Impact First PhilanthropyInvestingInvestingInvestingInvestingInvestingLimited or no Negative Negative and Sectoral focus Sectoral focus Sectoral focus focus on ESG screening based positive addressing social addressing social addressing socialrisks or on ESG risks and/screening and and environment and environment and environment opportunities in or personal financial returns challenges that challenges that challenges where the underlying valuesdrive investment generates requires financial a financial return investmentsselectioncommercial return sacrificecannot be growthgeneratedFinancial returns Financial Financial Financial and Social and Social and onlyreturnsand returnsand positive social/environmental environmental negative social/positive social/environmental and some returns onlyenvironmental environmental returns:financial returns:screens:assessment:– Clean energy– Social – Weapons– Waste enterprises– Healthcarereduction– Alcohol– Trading – Microfinance– Gender charities– Pornographyequality– Gambling– B-Corps– SRI funds Financial Returns drivenESG Risk ManagementEnvironmental and Social Impact DrivenSource: Ashmore. Adapted from Bridges Ventures (2012). The Ashmore Foundation is a company limited by guarantee, registered in England (6444943) and is a registered charity in England and Wales(1122351). The Ashmore Foundation is a separate and distinct legal entity from Ashmore Group plc. 54 Ashmore Group p|lc Annual Report and Accounts 2020Responsible investing policyAshmore’s philosophy is underpinned by a fiduciary responsibility to its clients. Central to Ashmore’s investment process is the ability to deliver returns in line with clients’ objectives. As an integral part of this, Ashmore is committed to enabling clients to deploy their capital in a manner that most appropriately meets their responsible investing considerations.As an investment manager focused on Emerging Markets, Ashmore has developed a number of core capabilities that are among its distinguishing features. These, combined with a rigorous analytical approach in the Group's investment processes, can contribute to long-term sustainable returns.Ashmore’s ESG policy is available on its website and is reviewed on an annual basis. The policy applies to all public markets strategies and sets out minimum standards. The policy is based on current ESG norms and outlines ESG assessment and engagement processes. Ashmore expects its approach to evolve as access to robust and reliable data increases.Investment processAshmore has explicitly integrated the analysis of ESG factors into its investment processes. Responsibility for ESG analysis lies with the investment teams, and is undertaken alongside the traditional economic and financial assessment of an issuer.With 98 investment staff dedicated to Emerging Markets, Ashmore has always relied on its proprietary research and the approach to ESG analysis uses a similar process. Portfolio managers review a range of environmental, social and governance factors when assessing an issuer and use a variety of external secondary data sources, which are complemented by research visits and meetings with issuers. These add depth of understanding and substantiate the secondary data. ESG scores for each issuer are challenged and reviewed during the relevant theme sub-investment committee meetings, where they are used to help make investment decisions. The ESG risk and opportunity is incorporated into an overall view of an issuer through financial estimates and/or the valuation assessment. ESG scores are reviewed at a minimum on an annual basis, but will also be flagged for review on an event-led basis.Integrated Approach –ESG factor assessment fully integrated into Ashmore’s investment process –The portfolio manager undertaking the financial analysis carries out ESG assessment –Full incorporation of ESG risks and opportunities into decision-making provides a more comprehensive analysis of investments Proprietary Methodology –Unified approach and scoring system by issuer in all global public markets strategies – sovereign, corporate debt and equities –Internal research (research trips and meetings with issuers) complemented by external data sources –Portfolio managers complete Enhanced Financial Analysis (PRI Academy CFA Certified) training to undertake ESG assessment Investment Decisions –ESG score for each issuer reviewed and discussed at the relevant theme sub-IC as part of investment approval –ESG scores are reviewed annually at the respective theme sub-IC. Additional reviews triggered on an event-led basis –ESG risk/opportunity is incorporated through financial estimates and/or the valuation assessment ESG Governance –Sustainability and ESG integration across the firm led by the Head of Sustainability and ESG Integration –Integration approach and scoring methodology overseen by ESG Committee, chaired by the CIO with representation from each investment committee –Any ESG scores not reviewed for over 12 months will be flagged at the relevant theme sub-IC –Stewardship and engagement processes monitored by the Head of Sustainability and ESG IntegrationStrategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 55Sustainability continuedPublic markets strategiesEnvironmental, social and governance (ESG) risk analysis is explicitly integrated into the bottom up research process across all fixed income and equity strategies. The process is fundamentally driven and the issuer analysis encompasses a multitude of factors, including ESG.Ashmore’s assessment of an issuer’s ability to manage ESG risks successfully is integral to the determination of fair value (equity) and fair spread (credit). Both governments and corporate management teams that can demonstrate strong ESG credentials are more likely to deliver better economic and financial performance over time; for example by growing faster, reducing the cost of capital and generally managing risks better compared with their peers. Consequently, ESG factor analysis is integrated into the investment processes in the same way as the assessment of macro-economic risk, financial performance and credit metrics. It acts as both a form of risk management and a source of alpha generation. Ashmore also considers it part of its fiduciary duty as a steward of clients’ capital.Portfolio managers score all issuers using a consistent set of questions and data points to inform their view of an issuer’s current performance in comparison to ESG ‘best practice’ and alongside an assessment of the forward-looking performance. Portfolio managers explicitly record their views in a dedicated ESG scorecard.The investment thesis, including the ESG score, for an issuer is reviewed, challenged and agreed at the relevant theme sub-investment committee. The ESG risk/opportunity is incorporated through financial estimates and/or the valuation assessment. Taken in combination with other macro and micro-economic risk drivers, investment time horizon, liquidity considerations and the investable universe, ESG risk assessment therefore has a direct impact on investment decisions and portfolio construction.Alternatives investmentsAshmore’s alternatives theme covers a diverse range of real assets in private equity, healthcare, infrastructure, special situations, distressed debt, and real estate opportunities. As such, the approach to ESG integration is tailored to the context of each market.Ashmore considers relevant ESG issues as part of its due diligence process on prospective investments. When undertaking initial due diligence on any investments within the alternatives theme, Ashmore’s deal memorandum checklist takes into account the consideration of ESG issues within the investment analysis and decision-making process, and the investee company’s own ESG practices.Ashmore’s approach is designed to provide superior risk-adjusted returns by mitigating potential risks and increasing asset value. Wherever possible, Ashmore uses proprietary ESG assessment frameworks, which align to internationally accepted standards, including the PRI and the International Finance Corporation (IFC) Performance Standards. Furthermore, Ashmore’s investment teams seek to ensure that its frameworks comply with local regulations and standards.The due diligence process includes identifying the risk category of the proposed investment, analysing specific potential material risks and impacts in ESG areas, documenting best practices within the proposed investment, and evidencing the capacity to implement the required risk mitigation measures considered relevant for portfolio investment. The process concludes with the selection of ESG investment terms, which once agreed, are written into the investment covenants.Responsible investing solutionsIn addition to the integration of ESG analysis across all its public markets strategies, Ashmore has launched and seeded dedicated responsible investing products. In February 2019, the Ashmore SICAV Total Return ESG Fund was launched. The blended debt fund seeks to maximise total returns while explicitly integrating ESG performance criteria into the strategy.In April 2020, Ashmore added to the range with the Ashmore SICAV Emerging Markets Equity ESG Fund, which applies the same philosophy and investment approach applied by the EM All Cap sub-investment committee, but excludes specific industries as well as poor ESG stock performers according to Ashmore’s proprietary assessment and scoring.StewardshipAshmore seeks to engage with issuers, both at government and corporate levels, on how they can improve their ESG outcomes. This is carried out as part of an ongoing dialogue with government officials and company management and may involve other key stakeholders.This approach helps create a positive feedback loop, whereby investors reward positive performance with a lower cost of capital, and access to international capital markets, and penalise poor performance with withdrawal of capital. Over time, such incentives should lead to behaviour changes among issuers in favour of more sustainable economic development and corporate management models. As more asset managers implement similar investment processes, the changes in behaviour should accelerate across Emerging Markets issuers.In December 2019, in line with the Shareholders Rights Directive II, Ashmore published its engagement policy. During the reporting period, Ashmore's investment teams discussed ESG issues with over 80 companies. The chart below outlines the specific topics discussed.Board and committees 11%Business practices 14%Disclosure 33%%2 ytisreviDEmployee welfare 2%Environment 21%Minority protection 7%Remuneration 10%56 Ashmore Group plc | Annual Report and Accounts 2020A third of engagements and dialogues with investee companies centred on the need for improved corporate disclosure of sustainability issues. In particular, the need for greater disclosure on environmental metrics related to climate change, which also featured in the engagements and dialogues on the environment. More recently, with the global spread of COVID-19, dialogues with companies have centred on understanding the measures they are taking to protect staff and to adapt their operations.Across all alternatives investments, Ashmore seeks to engage those stakeholders affected by investment decisions as early on in the project as feasibly possible. This approach enables investment teams to deliver the most appropriate impact, while maintaining Ashmore’s objective to generate superior risk-adjusted returns. In many cases, Ashmore believes it to be beneficial to its investors to be active in promoting its brand locally by improving the livelihoods of the employees in those companies where it has a significant stake.Proxy votingIn keeping with Ashmore’s policy on proxy voting, equity portfolio managers aim to vote on all proxies presented to them. Where they have concerns, they seek to engage with company management and other key stakeholders to address these. The voting summary for the reporting year is summarised below.Total shareholder meetings at which votes were cast293Number of resolutions voted2,586Percentage voted with management recommendations83%Percentage voted against management recommendations9%Percentage of abstentions7%Percentage of votes withheld1%Industry engagementsAshmore believes that to continue to develop best practice, there is a need to engage, collaborate with and draw upon the expertise of peers.Ashmore has been a signatory of the UN Principles of Responsible Investment (UNPRI) since 2013 and seeks to continuously improve its annual assessment score and deepen its engagement in PRI initiatives. The Group's 2020 PRI scores can be found below.Category201820192020Strategy and GovernanceAAAListed Equity – IncorporationBBAListed Equity – Active OwnershipCBAFixed Income – SovereignBBAFixed Income – CorporateBAAProperty–BAInfrastructure–AAIn 2020, Ashmore signed up to the Climate Action 100+ investor initiative, that seeks to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. Ashmore looks forward to participating in the initiative in the coming years.Negative screeningAshmore believes that investments that do not meet minimum standards should be excluded from client portfolios. Ashmore seeks to comply with applicable government authorities, and, at a geographical level, screens all investments against the UN Security Council and EU/UK Sanctions and the US Office of Foreign Assets and Control lists.Ashmore is able to customise client portfolios to meet specific requirements for geographic, sector and stock specific restrictions, such as alcohol, animal/food products, armaments manufacturers or dealers, gambling, pornography, tobacco and coal.Controversial weaponsAshmore restricts investment in companies engaged in the manufacture, distribution and maintenance of controversial weapons. The scope and breadth of this restriction is outlined in Ashmore’s Controversial Weapons policy.Strategic reportGovernanceFinancial statementsAshmore Group plc | Annual Report and Accounts 2020 57This responsibility is particularly acute in the markets in which Ashmore operates. As such Ashmore seeks to behave in a manner The emergence and rapid spread of the COVID-19 pandemic saw that positively impacts not only its investors but also employees and unprecedented changes to every facet of our daily lives. In addition the communities in which it invests.to prioritising the health, safety and welfare of employees globally, Ashmore has sought to respond to societal pressures that the Ashmore continues to identify appropriate initiatives that will enable pandemic has surfaced.it to meet global best practice on the issues and themes that are important to the Group and its stakeholders, as well as wider In the UK, where Ashmore is headquartered and home to almost industry initiatives that contribute to better investment practices and half of its employees, a donation of £250,000 was made to NHS global growth and development.Charities Together to support the work of the NHS, with a focus on frontline workers, patient care and community social services.Ashmore supports the United Nations Universal Declaration of Additionally, Ashmore committed to matching all employee Human Rights. Ashmore has developed a Supplier Code of Conduct donations made to charities supporting the COVID-19 relief effort. that applies to all suppliers that provide goods or services to Based on employee contributions, in the UK donations were made Ashmore, and outlines the basic ethical requirements that suppliers to NHS Charities Together, Children in Need, and the Trussell Trust. must meet in order to do business with the Group, including In the US, donations were made to New York Presbyterian, the affording employees the freedom to choose employment and not Robin Hood Foundation, Jewish Support Services, and Homes using any form of forced, bonded or involuntary labour (including withHope.child labour).Ashmore India made donations to a number of local Mumbai hospitals, in response to appeals to support the procurement of Ashmore provides obsolescent computers to Computer Aid COVID-related medical equipment. This was supplemented by International. Computer Aid is a UK registered charity that aims personal donations from individual staff.to reduce poverty through practical ICT solutions. Computer Aid Ashmore Colombia made a donation to Colombia Cuida Colombia, sends these PCs to various projects across Africa and Latin America in support of the Association of Food Banks of Colombia, which and provides Ashmore with details of where they are used. seeks to improve the distribution of food, goods and services to Anyunits that are not usable are disposed of in an environmentally vulnerable communities. Furthermore, a number of investee friendly manner.companies have donated food (solidarity lunches and nutritional packages) and biosecurity kits (masks, alcohol wipes, antibacterial Ashmore recognises the positive impact it can have on the gel) to the communities and local authorities in their local areas.communities where it operates and is committed to creating lasting Ashmore wishes to thank all employees for the generous donations benefits in those locations where the Group has a presence. Beyond made to support those most in need at this time.support for the Ashmore Foundation, employees across all offices are encouraged to engage with and support local community projects. This commitment is reflected in Ashmore’s policy enabling The United Nations Global Compact (UNGC) was employees to take one day annually to support charitable projects.launched in 2000 to harness the power of collective action in the promotion of responsible Ashmore employees drive local volunteering initiatives and take part corporate citizenship. The Compact is a in a range of activities to support disadvantaged communities in their framework for businesses that are committed to local vicinity. Ashmore continues to make an annual donation to aligning their operations and strategies with the homeless charity Crisis, in support of its Christmas card campaign, ten universally accepted principles in the areas of as well as an annual donation of foreign coins and banknotes to the human rights, labour, the environment and anti-corruption.Alzheimer’s Society.Ashmore formally became a signatory to the United Nations Global Compact in 2019 and is pleased to reaffirm its support of the ten principles of the United Nations Global Compact in the areas of human rights, labour, environment and anti-corruption. Ashmore’s 2020 Communications on Progress (COP) is outlined in its 2020 Sustainability report.COVID-19 responseSupplier Code of Conduct and Modern SlaveryObsolete equipmentAshmore investing in local communitiesUnited Nations Global Compact Sustainability continuedSOCIETAL SUSTAINABILITYAshmore recognises that being a member of the global community brings with it responsibility to act in a manner that benefits widersociety. 58 Ashmore Group p|lc Annual Report and Accounts 2020The Ashmore Foundation’s approach is underpinned by the belief that, while economic growth continues in the Emerging Markets, many communities, particularly those in rural and isolated locations, remain locked out of this prosperity. Social and economic inequalities continue to increase and communities lack the skills and resources needed to participate fully in economic development.The Ashmore Foundation believes that with the right support, themost marginalised and disadvantaged communities can The Foundation was established in 2008 and seeks to make grow and prosper. The Foundation therefore focuses its social a positive and sustainable difference to disadvantaged investment strategy on programmes that aim to equip people communities in the Emerging Markets in which Ashmore with the skills and resources they need to increase their livelihood operates and invests.opportunities, enabling them to meet their basic needs while also To achieve this objective, the Ashmore Foundation aims supporting economic growth and beginning to address broader to develop long-term relationships with locally based societal inequalities.non-government organisations (NGOs). Since its inception in 2008, the Ashmore Foundation has dispersed over The Ashmore Foundation recognises that some social impact US$6.7million to 70 civil society organisations in 25 organisations will be generating revenue through their activities. Emerging Market countries.Toachieve their objectives these organisations often require working The Ashmore Foundation functions independently of capital to grow and scale. In 2016 the Foundation began making Ashmore and is registered in the United Kingdom as a programme related investments in organisations whose work aligns charity and company limited by guarantee. It is staffed by with its charitable objectives.a full time Executive Director who is responsible for managing For more information about the Ashmore Foundation and the social the Foundation’s affairs. The board of trustees consists investments made over the course of the reporting year, prefer lease of nine Ashmore employees, as well as one independent to Ashmore’s Sustainability report.trustee. Inaddition to the board of trustees, Ashmore employees are encouraged to engage directly in the governance of the Foundation through trusteeships and Since March 2020, the rapid spread of the COVID-19 virus has involvement in sub-committees.significantly impacted the way people conduct their day to day lives. This is particularly the case for communities in Emerging Markets. Ashmore supports the Foundation’s charitable activities Daily wage and migrant labourers have lost their livelihoods and through the provision of pro-bono office space, administrative disruptions to the supply chain mean that farmers have been unable support and a matched funding commitment for employee to sell produce. Moreover, government restrictions have suspended donations to the Ashmore Foundation. The Ashmore Foundation or diverted the interventions of many of the Foundation’s civil society is supported solely by Ashmore and its employees globally. partners, severyel impacting income.Crucially, this support from employees extends beyond financial aid to active engagement with NGOs through mentoring and In order to support communities and civil society partners, in helpgin them expand their network of contacts.April2020, trustees approved a ring-fenced sum of US$100,000 to support former and current grantees as they are impacted and Ashmore employees organise a range of events from wine respond to COVID-19. Trustees will continue to assess the impact of tastings to cake bakes to raise funds for the Foundation. In COVID-19 on plans for future periods.September 2019, 33 Ashmore employees from the Dublin, Jakarta, London, New York, Singapore and Tokyo offices participated in the Ashmore ‘Triathlon’. Split into three teams, they cycled, hiked/ran and canoed over 168km in 12 hours, raising over US$109,000 in support of the Foundation and its charitable partners. Social investing in Emerging MarketsImpact First InvestingSupporting emergenciesStrategic reportGovernanceFinancial statementsAshmore Group p|lc Annual Report and Accounts 2020 59Sustainable Development Goals (SDGs)To formalise its commitment to the United Nations Sustainable Development Goals (SDGs) and their achievement by 2030, Ashmore became a signatory to the United Nations Global Compact in 2019. Ashmore believes that its experience and engagement in the Emerging Markets enables it to contribute to the achievement of a number of the goals.Set out below are the ways in which Ashmore’s investments and social investments through the Ashmore Foundation over the past five years have contributed to the achievement of the SDGs.Sustainability continuedAshmore recognises that global development and sustainability issues are complex and will require continued investment and collaboration if they are to be achieved. To this end, Ashmore will continue to develop its process for assessing how it can most effectively contribute to their achievement.Ashmore’s contribution to the Sustainable Development Goals (SDGs)Below is a selection of ways in which Ashmore’s investments and social investments made through the Ashmore Foundation contribute or seek to contribute to the achievement of the SDGs.US$87,500 invested to support social entrepreneurs in IndonesiaUS$210,000 invested to improve technical and skills training and provide internship opportunities for school aged children in IndiaUS$183,000 invested to provide over 1,000 children and their families with improved nutrition and food securityUS$500,000 to provide financial capital, training, improved practices and access to formal markets to smallholder farmers across Latin America and sub-Saharan AfricaUS$149 million invested in improving transportation infrastructure across ColombiaUS$29 million investment in the construction of 136km of power transmission lines in northern Colombia US$100 million investment in healthcare infrastructure in the United Arab Emirates and Saudi ArabiaUS$10 million investment in oncology and diagnostics clinics in MoroccoUS$33 million invested in healthcare infrastructure and facilities in Colombia 100 children and young people in Colombia supported to reclaim public spaces from gangs19,277 low income housing units built in ColombiaUS$63 million investment in waste management (reduction, recovery and recycling) in Saudi ArabiaUS$164,000 to provide skills training for young people living in informal settlements in ColombiaUS$75 million invested in education infrastructure in Saudi ArabiaUS$10 million investment in largest school network in Colombia with aggregate student body of 6,000 US$135,000 invested to shelter over 100 young girls rescued from online sexual exploitation in the PhilippinesUS$151,000 invested in safeguarding for girls travelling to and from, and while at, school60 Ashmore Group plc | Annual Report and Accounts 2020Mark CoombsDavid BennettTom ShippeyClive AdamsonChief Executive Officer (Age 60)Non-executive Chairman (Age 58)Group Finance Director (Age 46)Senior Independent Director (Age 64).Appointed to the Board:Appointed to the Board: and as Chairman:(Independent on appointment).Skills, experience and contribution:Skills, experience and contribution:Other roles past and present:Other roles past and present:Appointed tothe Board: Skills, experience and contribution:, ROther roles past and present:Appointed to the Board:Skills, experience and contribution:Other roles past and present: N, R December 1998.October 2014 October2018 Mark Coombs led the buy-out of the business which became Ashmore and as Chief Executive, has overseen its successful David Bennett has a wealth of leadership experience in the financial growth for more than 20 years.services sector, especially in banking and investment management, having held roles as Chairman, CEO and CFO.He was appointed a Director on the incorporation of the Company and has served as its Chief Executive Officer since then. He held a He previously served as a Director of Alliance and Leicester plc number of positions at Australia and New Zealand Banking Group between 2001 and 2008, serving as Group Finance Director and then (ANZ) and led Ashmore’s buyout from ANZ in early 1999. He is Group Chief Executive until its sale to Santander in 2008. He has also Co-Chair of EMTA, the trade association for Emerging Markets, held a number of executive positions in Abbey National plc, having been on the Board since 1993. Mark has an MA in Law from Cheltenham & Gloucester plc, Lloyds TSB Group and the National Cambridge University.Bank of New Zealand. David is currently Chairman of Virgin Money UK plc and a Non-executive Director of PayPal (Europe) SARL et Cie, S.C.A. He has also served as a Non-executive Director of easyJet plc between 2005 and 2014 and as a Non-executive Director and November 2013.Chairman of Together Personal Finance Limited between 2010 and 2019. David holds an MA in Economics from Cambridge University.Tom Shippey is a chartered accountant with extensive experience in Committee membership: investment management, mergers and acquisitions, capital raising and financial and regulatory reporting.He was appointed to the Board as Group Finance Director in November 2013. Prior to joining Ashmore in 2007, he worked October 2015.for UBS Investment Bank, including advising on the Ashmore IPO in 2006. Tom qualified as a Chartered Accountant with Clive Adamson is highly experienced in financial services regulatory PricewaterhouseCoopers in 1999 and is a Fellow of the ICAEW. and public policy matters and has served on boards and held He has a BSc in International Business and German from executive positions during his career in financial services and AstonUniversity.corporate banking.He was Head of Supervision and an Executive Director of the Board of the Financial Conduct Authority until January 2015, and prior to that he held a number of senior roles within its predecessor, the Financial Services Authority. Between 1998 and 2000 he was a Senior Adviser in Banking Supervision at the Bank of England. Cliveis currently a Non-executive Director of JP Morgan Securities plc and Chairman of JP Morgan Europe Limited and a Non-executive Director and Chair of the Board Risk Committee of M&G plc.Clive is a Senior Adviser to McKinsey & Co. He was formerly a Non-executive Director and Chair of the Board Risk Committee of Virgin Money UK plc. He holds an MA in Economics from Cambridge University.Committee membership: NA,Board of DirectorsCOMMITTED TO ROBUST STANDARDS OFGOVERNANCE Ashmore Group p|lc Annual Report and Accounts 2020 61Strategic reportGovernanceFinancial statementsJennifer BinghamIndependent Non-executive Director (Age 68)Appointed to the Board: June 2018.Skills, experience and contribution:Jennifer Bingham has in-depth experience in investment oversight of the investment portfolios of family offices and charitable foundations and in her previous executive role in the emerging market fund management business.Other roles past and present:She is an accountant and between 1992 and 2003 she was a senior executive of Brunswick Capital Management Limited, an investment manager specialising in the Russian equity market. During this period she variously held the offices of Chief Executive, Chief Operating and Chief Financial Officer of the firm. Since 2003 Jennifer has held finance, administration and investment oversight roles with investment company PCHB Limited (part of the Cundill group of companies) and as Trustee and Chair of the Peter Cundill Foundation.Committee membership: A, N, RDame Anne Pringle DCMGIndependent Non-executive Director (Age 65)Appointed to the Board: February 2013.Skills, experience and contribution:Dame Anne Pringle has extensive experience in diplomacy, international relations and representing the interests of stakeholders, including Government, business and wider society.Other roles past and present:She was a diplomat with the Foreign and Commonwealth Office for over 30 years, focusing in particular on the EU, Russia and Eastern Europe. Between 2001 and 2004, Anne was the British Ambassador to the Czech Republic and from 2004 to 2007, Director of Strategy and Information at the FCO and a member of the FCO Board. From 2008 to 2011, she served as Ambassador to the Russian Federation. Anne is the Senior Governor on the Board of St Andrew’s University and a trustee on the Board of Shakespeare’s Globe Theatre.Committee membership: A, N, RBoard of Directors continuedBoard and committee attendanceThe table below sets out the number of scheduled meetings of the Board and its committees and individual attendance by the Directors.Meeting attendance between 1 July 2019 and 30 June 2020BoardN: Nominations CommitteeA: Audit and Risk CommitteeR: Remuneration Committee AttendedAttended Attended Attended Mark Coombs6/6–––Tom Shippey6/6–––Dame Anne Pringle6/62/24/4Chair 5/5David Bennett6/6Chair 2/2–5/5Clive Adamson6/62/2Chair 4/45/5Jennifer Bingham6/62/24/45/5Members of executive management are invited to attend Board committee meetings as required but do not attend as members of those committees.62 Ashmore Group plc | Annual Report and Accounts 2020Chairman’s statement and introduction to corporate governanceHELPING ASHMORE MEET THE CHALLENGEDear Shareholder,At last year’s Annual General Meeting (AGM) there was a significant dissenting vote (21.87%) against the resolution for the re-election of The last few months of the financial year have been dominated by the Chair of the Remuneration Committee. In April we provided an the COVID-19 pandemic, the speed and scale of which have been update, commenting that whilst there was broad-based support for unprecedented. In common with other companies the Group has Ashmore’s Group-wide remuneration policy, certain corporate had to switch rapidly to ‘working from home’ in all its offices, governance teams remained opposed to specific elements of that globally. The Group’s response to COVID-19 is explained in more policy. This continues to be our understanding of the relevant detail on pages 10 to 11, but I am pleased to say that from a shareholders’ views, and we will continue to engage with all our major shareholders on all aspects of our remuneration arrangements. governance perspective our arrangements have continued seamlessly and we have been able to maintain our normal schedule This year shareholders will have an opportunity to vote on the of Board and committee meetings remotely, with the Board focusing Directors’ Remuneration Policy in addition to the Remuneration on the pandemic and its implications for Ashmore at its meeting Report at the forthcoming AGM. More information on the Policy and earlier this year.the rationale underlygin our arrangements, can be found in the statement from the Chair of the Remuneration Committee on Last year, I explained the preparations we were making to comply page75.with the 2018 UK Corporate Governance Code and this financial year is the first in which we have had to report against it. The 2018 Code brings a change in emphasis and this, together with other changes in In this report last year, I explained how, over the past few years, reporting requirements has led us to continue to evolve and enhance the Board had engaged directly with the workforce. Small groups our governance arrangements during the year.of employees are invited into the Boardroom at the end of each scheduled meeting on a rotational basis, to talk to the Directors face-to-face. The format is a two-way informal discussion with no The efficiency and effectiveness of our governance structure is vital agenda or scripted questions. It is an opportunity for both employees to the delivery of the Group’s strategy. On page 69 is a summary of and Directors alike to ask questions of one another as part of a free the Board’s activities during the year, including the part that the flowing discussion. It has provided valuable insights into the culture Board played in setting the strategy and keeping it under review. of the business, particularly for the Non-executive Directors who get TheDelegated authorities and Schedule of matters reserved to the the opportunity to talk directly to employees at all levels of the Board are reviewed annually and ensure that any key decisions are organisation. This arrangement is workable because Ashmore has a brought to the Board. Once again this year, we reviewed the culture relatively small number of employees and it has allowed the Board to of the Group by reference to a dashboard of metrics. We also meet all UK-based teams over the periodsince its inception in 2016. approved a statement of the Company’s purpose and a description is This has been supplemented with the Board meeting included at page 1 above.representatives ofthe offices outside the UK through an ongoing cycle of presentations. Unfortunately, since the end of the financial In last year’s Annual Report we described who our stakeholders are, year, the Government ‘stay at home’ restrictions resulting from the and how we engage with them. This year we have provided more Coronavirus pandemic have meant that temporarily, it has not been information (pages 42 to 45) including the outcomes that resulted possible to hold face-to-face sessions and the ‘lockdown’ also meant from that engagement and two case studies to illustrate how we that a planned visit by the Board to the Singapore and Jakarta offices have had regard to stakeholder interests in real world situations.in April this year, had to be postponed.In addition to the existing arrangements, the Board took the step this As a Board, we have had direct engagement with our shareholders nting Jennifer Bingham as the Non-executive Director during the year. Recently, I met with one of our major shareholders year of appoiresponsible for workforce engagement. This isone of the three for a wide ranging discussion of how the Ashmore Board and methods for achieving workforceengagement specified bythe governance structure operates and the relationship between the Executive and Non-executive Directors. Together with the Chair of Code. Whilst the Board were comfortable with the level of the Remuneration Committee, there was also engagement with engagement prior to the introduction of the new Code, they major shareholders to discuss the Group’s remuneration practices. recognised that appointing a Non-executive Director to this role These engagement activities, along with those of the Chief would allow employees globally, to initiate contact with the Executive, the Group Finance Director and the Head of Investor Board at any time and on any topic. It was therefore, felt to be Relations, are reported back to the Board as part of a standing complementary to the scheduled ‘teams meet the Board’ sessions.agenda item. A calendar of shareholder engagement appears on The Board also has responsibility for oversight of the Group’s page 44.whistleblowing arrangements and the Senior Independent Director, Clive Adamson, acts as the nominated Director with responsibility for whistleblowing. An outside agency is retained to provide an independent channel through which staff can raise concerns. Once againthis year, there have been no whistleblowing reports. Engagement with employeesGovernance and company purposeEngagement with stakeholders Ashmore Group p|lc Annual Report and Accounts 2020 63Strategic reportGovernanceFinancial statementsHowever, it remains important that all employees are aware of, and have access to these arrangements, in case they are ever needed. The annual reminder of these arrangements, which included a copy of the policy was sent to all staff during July 2020.We have complied with the Code during the year and we have described how we have applied each of the Principles of the new Code on pages 65 to 66. The next triennial, externally-facilitated, evaluation will take place in2021. This year we conducted an internal Board evaluation which included an assessment of the effectiveness of the Board, its committees and individual directors. I led a discussion of the findings at our meeting in June. Separately, Clive Adamson, our Senior Along with other investment managers, Ashmore provides the Independent Director, led an evaluation of my performance and a means by which members of society can meet their long-term discussion of his findings (without me being present). Topics financial goals. As a specialist Emerging Markets manager, Ashmore covered in the Board evaluation included the format of committee contributes by enabling its clients to access a broad range of equity, meetings, the quality of board materials and reporting, board fixed income and alternatives strategies with a diversified set of succession planning and employee engagement. Details of what investment opportunities and risk/reward profiles. Our clients range each Director contributes to the Board are provided in the Directors’ from individuals, investing through intermediary retail channels, to profiles on pages 61 to 62 and the Board is recommending the large, sophisticated institutions such as pension funds, central banks re-election of all Directors at this year’s AGM.and corporate treasury functions, They all have the common goal of securing long-term financial benefits for themselves and their stakeholders. The structural growth challenges and persistently low Ashmore has a single remuneration policy which applies to its interest rates in the developed world mean it is increasingly workforce and Executive Directors alike. (There are some additional important to demonstrate and provide access to the growth, yield restrictions for Directors). More information on how Ashmore and investment return opportunities available across the Emerging invests in and rewards its people is provided in the Remuneration Markets. For private individuals investing in Ashmore funds Report on page 75.indirectly, via intermediaries, the returns they earn on their investments allow them to meet their financial objectives over the In order to achieve its strategy the Group needs to attract and longer term. develop a diverse workforce. We reported last year that we had met Interest in ESG, from both shareholders and clients alike, continues the target set by Lord Davies for gender diversity on the Board and to grow and Ashmore is mindful of the impact of its activities in the the gender diversity of our employees and senior management is countries in which it operates and invests. Our Section 172 reporting reported on page 48. Ashmore is an organisation which spans on pages 42 to 45 sets out how we have taken account of our multiple cultures and ethnicities, but we need to continue to take stakeholders and the Sustainability Report on pages 46 to 60 active steps to improve our diversity. Last year we reported on the describes the good work that has been done this year by the changes to the Nomination Committee’s terms of reference, aimed Ashmore Foundation and the offsetting of our carbon emissions.at achieving diversity in senior management appointments. This year the Board has discussed diversity at two of its meetings and enhanced its diversity policies. (These are described in the Directors’ In a year which ended with the COVID-19 pandemic and the Report on page 111). We believe we are already an inclusive resulting impact on markets globally, it is pleasing to report that the employer, but we continue to seek opportunities to improve our Company will still be in a position to pay a final dividend. The Group ethnic and gender diversity.has not furloughed any of its staff or voluntarily taken advantage of COVID-19 related Government support. The Board is recommending a final dividend of 12.10p per share, to give total dividends per share During the year there were changes to some of the Directors’ time for the year of 16.90 p. commitments outside Ashmore. Clive Adamson was appointed as a Non-Executive Director of a FTSE-100 company and I was appointed as Chairman of a FTSE-250 company. In both cases, any potential conflict and/or additional time commitment was declared to the ChairmanAshmore Group plc Board and approval given (without the relevant Director voting).These appointments were approved because the 10 September 2020overall time commitments of the relevant Director (bearing in mind any roles that had also been relinquished) was not considered to impinge on their duties to Ashmore. Nor were they considered to be ‘over-boaded’ as a result. (Details of all the Directors’ other commitments are provided on pages 61 to 62). Board evaluationWider societyRewarding our peopleDiversityDividendBoard time commitments David Bennett2018 UK Corporate Governance Code Compliance Statement:Chairman’s statement and introduction to corporate governance continued64 Ashmore Group p|lc Annual Report and Accounts 2020A. The Board provides effective and entrepreneurial leadership for F. The Chairman leads the Board and is responsible for its the Group. It is mindful of its role to promote long-term overall effectiveness. He was independent upon appointment. sustainable success. The success of the Board in delivering As described in his statement on page63, the Chairman shareholder value is illustrated on pages18 to 19, but the recognises the importance of a cohesive and open Board challenge is to ensure that this success continues and is culture, a constructive relationship with the executives and sustainable. Page 45 of this report includes examples of the Board proceedings that are based on clear, accurate and timely decisions taken by the Board during the year and the factors information flows.that were considered when making those decisions. The G. The Board has entrusted the Nominations Committee with Sustainability Report at page48 describes the Group’s approach responsibility for ensuring that through the combination of to being a responsible business and how we assess our impact Executive and Non-executive Directors (all of whom are on wider society.independent) there continues to be the right balance of skills B. The Board keeps under review the Company’s purpose, and experience on the Board with no one individual or group values and strategy and makes sure that these elements and of individuals dominating decision-making. As described in the culture of Ashmore remain aligned. The Board recognises the Committee’s Report on page74 the composition of the that the culture is determined by those who lead the business. Board and its structure is reviewed bi-annually. The division At page69 is a summary of the Board’s activity during the year, of responsibilities between the Chairman, the Chief Executive including how it reviews strategy and culture.and the Senior Independent Director was approved by the Board during the year and is described on page 68. A schedule C. The most important decisions for the Group rest with the Board of matters reserved to the Board ensures that there is a clear and it is the Board’s role to ensure that the necessary resources division of responsibilities between the Board and the executives are in place for the Group to achieve its strategy and deliver long and this is reviewed and if appropriate updated, annually.term performance. The risk management report on pages35 to 41 and the Audit and Risk Committee Report at page70 H. The time commitment expected of the Non-executive Directors describe the framework of controls which allow risks to be is set out in their appointment letters and they are required to evaluated and managed.seek approval for any significant new commitments in advance. The Board approved new commitments during the year and D. The Board recognises that effective engagement with details are set out in the Chairman’s Report on page63. shareholders and stakeholders is key to ensuring the Group’s None of these were judged to impinge upon the time commitment long-term sustainable success. The ways in which it has of the relevant Directors to the Board. The Directors’ other engaged with, and encouraged participation from shareholders commitments are listed at pages61 to 62 and their attendance and stakeholders alike during the year are described in the at meetings on page62. Further information on how the Chairman’s Statement on page63 and the Company’s Section Board operates, provides challenge and holds the executives 172 report on page42 respectively.to account is provided in the sections on the ‘Corporate E. At Ashmore it is fundamental that all policy and practice in Governance Framework’, the ‘Roles of the Board’ and relation to the Group’s employees is conducive to promoting ‘Boardactivity during the year’ on pages68 to 69.the long term sustainable success of the business and is consistent with the Group’s culture and values. The Senior Independent Director assumes the role of whistleblowing champion. (Further details areset out in the Chairman’s statement on page63). Corporate governance(The Code is available at: www.frc.org.uk)APPLYING THE PRINCIPLES OF THE GOVERNANCE CODEThe UK Corporate Governance Code 2018 (the ‘Code’) app the lied toCompany’s financial year ended 30 June 2020. The Company confirms that it applied the principles and complied with all the provisions of the Code. Using the alphabetical references which appear against each of the principles of the Code, the Company explains below how it has applied them. Ashmore Group p|lc Annual Report and Accounts 2020 65Strategic reportGovernanceFinancial statementsCorporate governance continuedI. The Chairman and the Group Company Secretary have a regular dialogue and meet together in advance of each scheduled meeting to discuss the agenda, the timings and the information and the presentations, which will be given to the Board. Other Directors are asked to give their feedback on these aspects, including as part of the annual Board evaluation. The Board’s committees are also given support as well as the time and resources needed to ensure that they function effectively and again this is considered as part of the annual evaluation. Further information on the functioning of the committees is provided in their respective reports on pages 70, 74 and 75.J. The process for making Board appointments is led by the Nominations Committee which makes recommendations to the Board. The Nominations Committee is also responsible for succession planning for both the Board and senior management and reviewed both during the year. The work of the Nominations Committee is described on page 74 which addresses how the Committee seeks to promote diversity.K. In reviewing the composition and tenure of the Board, the Nominations Committee will consider the skills, experience and knowledge of any candidate by comparison to those of the existing Board members taking account of the need to replace skills of any Director leaving the Board. In addition, the Chairman will ensure that there is provision of ongoing training to existing Board members and suitable induction training for new Directors. Further details of training provided during the year are set out in the summary of Board activity on page 69.L. An internally facilitated Board evaluation was carried out in the FY2019/20 with the last external evaluation having taken place in 2017/18 based on a three-year cycle. This year individual evaluation of Directors was carried out by the Chairman and the Executive Directors were subject to the employee performance management processes. The performance of the Chairman is the subject of a separate review, which is led by the Senior Independent Director, culminating in a discussion by the other Non-executive Directors. Further information on this year’s Board review and review of the Chairman’s performance is provided on page 64.M. The Audit and Risk Committee monitors the independence and effectiveness of the internal audit function and external auditors and has oversight of the Group’s financial reporting. (Further details are set out in the Audit and Risk Committee Report, page 70).N. The Board is responsible for ensuring that the Group’s annual and interim reporting are a fair, balanced and understandable assessment of the Company’s position and prospects. There is a robust process in place for ensuring that this is the case and it is described on page 71.O. The Board is ultimately responsible for aligning the risk appetite of the Group with its long-term strategic objectives, whilst taking account of the principal and emerging risks it faces. Risk is managed through Ashmore’s internal control framework which is described on pages 36 to 41. The Audit and Risk Committee has oversight of the effectiveness of internal controls and for developing proposals in respect of overall risk appetite and tolerance as well as metrics to monitor the Group’s risk management performance. (Further details are set out in the Audit and Risk Committee Report, page 70).P. The Group is committed to a Remuneration Policy which is substantially the same for all Group employees and aimed at promoting the long-term and sustainable success of the Company. The Remuneration Report on pages 75 to 109 provides further details. The Remuneration Policy can be found on pages 92 to 98. There will be a binding shareholder vote on the Remuneration Policy at the 2020 AGM. (Further details are set out in the Remuneration Report, page 75).Q. Ashmore has a formal and transparent procedure for developing the Remuneration Policy, and no director is involved in deciding their own remuneration. (Further details are set out in the Remuneration Report, page 75).R. The Remuneration Committee is comprised entirely of independent non-executive directors to ensure independent judgement with regard to remuneration outcomes. The Committee considers remuneration of Directors and senior managers on an annual basis and determines outcomes by assessing executive performance against performance criteria. (Further details are set out in the Remuneration Report, page 75).66 Ashmore Group plc | Annual Report and Accounts 2020plc Board of DirectorsResponsible for overall strategy, management and controlplc Remuneration CommitteeDetermines compensation for Code Staff and reviews compensation for Control Staffplc Audit and Risk CommitteeSeparate detailed terms of reference in line with corporate governance best practiceAuditorsExternal:Independent assurance via audit of Group Financial Statements and audit of internal control procedures under ISAE 3402 and SSAE 18Internally resourced:Independent assurance via audit directed at specific departmental control proceduresplc Executive Directors Senior ManagementResponsible for day to day managementCORPORATE GOVERNANCE FRAMEWORKSpecialised CommitteesResponsible for overseeing business, investments and internal controls –Investment Committees –Pricing Methodology and Valuation Committee –Product Committee –Global Investment Performance Standards Committee –Awards Committee –Disclosure Committee –Research Oversight Committee –Operating Committee –Risk and Compliance Committee –Pricing Oversight Committee –Foreign Exchange and Liquidity Management Committee –IT Steering Group –Best Execution Committee –ESG CommitteeAshmore Group plc | Annual Report and Accounts 2020 67Financial statementsGovernanceStrategic reportCorporate governance continuedChief ExecutiveChairmanSenior Independent DirectorGroup Finance DirectorNon-executive DirectorsCompany SecretaryResponsible for managing and leading Responsible for leading the Board and its the business and its employeesoverall effectivenessChair of the fixed income Building an effective and diverse Board investment committeewith complementary skills which is progressively refreshedChair of the equities investment committeeFacilitating and encouraging an Developing an effective relationship effective contribution from all Board memberswith the Chairman and the BoardEnsuring the Board have clear, accurate Leading the business towards and timely informationachievement of the strategyFacilitating an annual evaluation of the Board,Maintaining an effective dialogue its committees and individual Directorswith shareholders and stakeholdersMaking business decisions (within the frame-work of the Board’s delegated authorities)A sounding board for the Chairman and an intermediary forthe other Directors and shareholdersManaging the Group’s capital, Facilitating an annual review of the performance cash flow and liquidityof the Chairman Responsible for the Group’s financial reporting and leading the annual budget processMaintaining an effective dialogue with shareholders and analysts on the Providing oversight of, but not managing, performance of the CompanythebusinessResponsible for corporate development, Providing effective independent oversight including mergers and acquisitionsand challenge of the executive managementManaging the Group’s subsidiaries Scrutinising the performance of executive managementThe is responsible for advising the Board on all governance matters. (The appointment or removal of the Company Secretary is a matter for the whole Board). Executive rolesNon-executive rolesROLES OF THE BOARD68 Ashmore Group p|lc Annual Report and Accounts 2020BOARD ACTIVITY DURING THE YEARThe standing items on the agenda at each Board meeting include: –Declaration of Directors’ potential conflicts of interest and any significant additional time commitments –Reports from Chairs of committees –Monthly management report –Investor relations and communications –Strategy updatePost-meeting: –Teams meet the Board –Non-executive Directors’ private sessions –Board evaluationBoard training: –FCA Senior Managers and Certification Regime –Cyber security –Ongoing quarterly on-line training modulesIn addition to its regular business, specific topics considered by the Board at its meetings this year, included:September 2019 –Annual Review on the Effectiveness of Risk Management and Internal Control Systems –Internal Capital Adequacy Assessment Process (ICAAP) Report –‘Deep dive’ presentations on: –Healthcare –Distribution –The Ashmore FoundationOctober 2019 –Operations and IT ‘deep dive’ –Annual General Meeting arrangements, results of proxy voting and governance agency reports. –Annual review of Culture, Conduct and Diversity –Group strategy review –Annual review of delegated authorities and matters reserved to the Board –Modern Slavery Act statement –ESG ‘deep dive’ –Tax ‘deep dive’ –Programme of board presentations for the following year:December 2019February 2020 –Feedback to the Board from the Audit and Risk Committee’s annual Cyber Security review –Review of Diversity policy –Corporate Debt investment theme ‘deep dive’April 2020 –Review of the Group’s response to the COVID-19 pandemic –Board evaluation arrangements –Renewal of the Group’s insurancesJune 2020 –2020/21 Budget –Carbon offsetting –External Debt investment theme ‘deep dive’Ashmore Group plc | Annual Report and Accounts 2020 69Financial statementsGovernanceStrategic reportI am pleased to present the report on the activities of the Audit and Risk Committee forthe financial year ended 30June 2020. The Committee remains central to the oversight of the Group’s financial reporting, risk management, control and assurance processes and internal and externalaudit.With regard to the Committee’s membership, the Board is satisfied that for the year under review and going forward, I have recent and relevant financial experience and the Committee as a whole has competence relevant to the sector in which the Company operates. Clive AdamsonThe terms of reference for the Committee include the followingprovisions:– monitoring and challenging the integrity of the financial statements of the Company, any formal announcements relating to the Company’s financial statements or performance and any significant financial reporting issues and judgements contained inthem;– reviewing the contents of the Annual Report and Accounts and advising the Board on whether, taken as a whole, they are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy;Chair– developing proposals in respect of overall risk appetite and tolerance as well as metrics to monitor the Group’s risk management performance;The Committee held four scheduled meetings during the – reviewing the effectiveness of the Group’s internal control and risk year and its activities are described on page 71. During the management systems;year under review the following Non-executive Directors – overseeing and challenging the day-to-day risk management and served on the Committee, the membership of which was oversight arrangements of the executive;compliant with the Code:– overseeing and challenging the design and execution of stress and – Clive Adamson (Chair)scenario testing;– Jennifer Bingham– providing assurance to the Board to allow the Directors to confirm – Dame Anne Pringlethat they have carried out a robust assessment of the emerging and principal risks facing the Company;– considering and approving the remit of the compliance, internal audit and riskmanagement functions and ensuring that they have adequate independence;– monitoring and reviewing the effectiveness of the activities of the internal audit function and the Company’s overall riskmanagement and control systems;– reviewing and assessing the internal audit plan;– reviewing the external auditor’s plan for the audit of the Group’s financial statements, reviewing and monitoring their independence and objectivity and approving the terms of engagement and proposed fees for the audit;– reviewing and monitoring the effectiveness of the external auditprocess;– negotiating and approving the auditors’ remuneration, whether fees are for audit or non-audit services;– making recommendations to the Board for a resolution to be put to shareholders to approve the reappointment of the externalauditor;– reviewing the Company’s systems and controls for detecting fraud and the prevention of bribery; and– reviewing the Committee’s terms of reference and carrying out an annual performance evaluation exercise; and reporting to the Board on how it has discharged its responsibilities.Activities and membership Audit and Risk Committee reportTO PROVIDE OVERSIGHT AND CHALLENGE70 Ashmore Group p|lc Annual Report and Accounts 2020In assessing the various key matters relative to its terms of reference and to satisfy itself that the sources of assurance and Ashmore holds level 3 investments as a result of the Group’s information the Committee has used to carry out its role to review, seeding programme. The valuation of these investments is monitor and provide assurance or recommendations to the Board are judgemental and may involve a high level of estimate uncertainty. sufficient and objective, the Committee has adopted an integrated Themethodology adopted to value the investments and the assurance approach. This approach relies not only on the work of the sensitivity analysis around the valuation are discussed in note 20. external auditor, but also management assurances received from The key judgement and estimates involved are discussed in note 31. various reports including from the Group Finance Director, Group A report from the auditor regarding the valuation and control Head of Risk Management, Group Head of Compliance and also via processes around level 3 assets was received and reviewed by the the existing Ashmore governance framework such as specialised Committee in the year. The method of accounting for level 3 assets internal management committees. Otherindependent assurance is can be found on page 133.received from the Compliance Monitoring Programme and Internal Audit and from the externally audited ISAE 3402 report on the control environment. The Group Finance Director, Gprou Head During the year, the Committee received communications from of Risk Management, Head of Internal Audit and Group Head of management and from the external auditor on other accounting Compliance are invited to attend each pre-scheduled meeting of matters. The Committee has also reviewed the adoption of the theCommittee. going concern basis in preparing the interim and year end consolidated accounts and considered the longer-term viability For each of the half year and annual financial statements, a review statement for the Group, which is described in more detail on is undertaken by a panel comprising the Group Finance Director, page37.the Head of Group Finance, the Head of Investor Relations and the Company Secretary to ensure that the reporting is ‘fair, balanced and understandable’ and this is taken into account by the Committee in A separate Corporate Governance Report is included on pages 63 to advising the Board as to whether these criteria have been met. 74 which includes explanation of how the Group has applied each of the principles of the 2018 UK Corporate Governance Code.During the year the Committee considered a range of topics including a revised Corporate Foreign Exchange and Liquidity Policy, For FY2019/20 Thomas Brown was the KPMG audit partner, having the valuation of seed capital investments, cyber security and the first assumed responsibility for the audit of the Group in FY2016/17. new reporting requirements in connection with directors’ duties The FRC’s Ethical Standards forAuditors require that for a listed under Section 172 of the Companies Act 2006. The Committee entity, KPMG rotate the audit partners every fiveyears.received reports from the Group Head of Compliance, the Head of The external auditor attends all meetings of the Committee. It is the Internal Audit and the Group Head of Risk Management and Control, responsibility of the Committee to monitor the performance, including in relation to the Annual Review of Risk Management and objectivity and independence of the external auditor. The Committee Internal Control Systems. The number of Committee meetings and discusses and agrees the scope of the audit plan for the full year and their attendance by the Directors are set out in the table on page 62. the review plan for the interim statement with the auditor.The Committee met four times during the year under review. Scheduled meetings of the Committee take place on the day prior to The external auditor provides reports at each Committee meeting on a Board meeting to maximise the efficiency of interaction with the topics such as the control environment, key accounting matters and Board. The Chair, reports to the Board on the business of any mandatory communications.Committee meetings, as part of a separate agenda item at the next following Board meeting. All Non-executive Directors are invited to The Committee has agreed the types of permitted and non-attend meetings of the Committee.permitted non-audit services and those which require explicit prior The Chair of the Committee also holds one-to-one meetings, approval. All contracts for non-audit services in excess of £25,000 prior to each Committee meeting, with the Head of Internal Audit, must be notified to the Chair of the Committee and approved byme. the Group Head of Risk Management and Control, the Group Head KPMG announced in November 2018 that they would cease to of Compliance, the Group Finance Director and the external auditor.provide permissible non-audit services to their FTSE 350 audit clients (including the Company), unless the services in question are closely related to audit, which the majority of the services provided by The Committee reviewed the 2020 Annual Report, the interim KPMG to the Group are. results and reports from the external auditor, KPMG LLP, on the outcome of its reviews and audits in the FY 2019/20.During the year the Committee considered key accounting issues, matters and judgements in relation to the Group’s financial statements and disclosures specifically relatingto: UK Corporate Governance CodeMeetingsExternal auditorExternal auditor independenceFinancial statementsSignificant accounting mattersLevel 3 seed capital investmentsOther accounting mattersAshmore Group p|lc Annual Report and Accounts 2020 71Strategic reportGovernanceFinancial statementsAudit and Risk Committee report continuedDuring the year under review the value of non-audit services At the end of each Committee meeting, the Non-executive Directors provided by KPMG LLP amounted to £0.1 million (FY2018/19: meet with the external and internal auditors without the Executive £0.3million). Non-audit services as a proportion of total fees paid to Directors present so as to provide a forum to raise any matters of the auditor were approximately 17% (FY2018/19: 38%). Theoverall concern in confidence.quantum of non-audit services is not considered to be significant In order to assess the effectiveness of the external audit process, given that Ashmore operates within a highly regulated market and the Committee asked detailed questions of key members of that a significant proportion of the non-audit services provided relate management. Based on this review the Committee concurred with to the following matters:management’s view that there had been appropriate focus and – reporting on the half-year financial statements;challenge of the primary areas of audit risk and assessed the quality of the audit to be satisfactory. The Committee receives reports from – providing regular mandatory assurance reports in relation to client the auditors on current and pending legal and regulatory actions assets to the FCA (as the regulator of Ashmore Investment being brought against KPMG. The Committee is satisfied with the Management Limited and Ashmore Investment Advisors Limited);work of KPMG LLP and that it continues to remain objective and – reporting on the internal control systems applicable to Ashmore’s independent. The Committee has therefore recommended to the offices in London, New York and Singapore as required under the Board that a resolution be put to shareholders for the reappointment international standard ISAE 3402, pursuant to investment of the auditor, and its remuneration and terms of engagement, at the management industry standards; andAnnual General Meeting of the Company.– auditing the controls and procedures employed by the Company relating to the production of investment performance figures over The Group Head of Risk Management and Control attends each one, three and five-year periods to conform to the investment meeting of the Committee and provides reports to each. These management industry’s Global Investment Performance Standards.reports have addressed a number of risk-related topics and have The assurance provided by the Group’s external auditor on the items demonstrated how the output of the different Investment, Risk and listed above is considered by the Committee to be strictly necessary Compliance and Pricing and Valuation Methodology Committees’ in the interests of the business and, by their nature, these services discussions throughout the period have been effective in could not easily be provided by a separate professional auditing firm.highlighting, tracking and contributing towards managing key market, liquidity, credit, counterparty and operational risks. Inparticular, in During the year there were no circumstances where KPMG LLP was relation to operational risk, the Committee has also reviewed and engaged to provide services which might have led to a conflict of discussed the Group’s Principal Risk Matrix which continues to serve interests. In addition to KPMG’s own policy on non-audit services the as an effective tool to highlight and monitor the principal risks facing UK audit legislation restricts the non-audit services which can the Group and its continued evolution, and reflects changes in the beprovided by the auditor. In compliance with this requirement, business profile of the Group and the corresponding impact on Deloitte provide independent tax advice services to theGroup.internal controls and related processes.The UK audit legislation also imposes a feecap of 70% of the The Committee also received an annual report on, and conducted a average statutory audit fees paid in the last three consecutive years. review and evaluation of, the system of internal controls and risk This cap did not restrict KPMG from continuing to undertake management operated within the Company pursuant to the Financial assurance, verification and reporting work in other required areas Reporting Council guidance, ‘Guidance on Risk Management, described above such as to the FCA, Global Investment Performance Internal Control and Related Financial and Business Reporting’, prior Standards and ISAE 3402.to final review by the Board.The Committee is mindful of the various legal and regulatory A detailed description of the risk management framework and the requirements for rotation and tendering of the external audit manner in which risks are identified and managed is set out on including the EU Audit Regulation 537/14, now implemented in the UK through the Statutory Auditors and Third Country Auditors pages 35 to 41.regulations 2016 (SI 2016/649), (UKaudit legislation) the Competition and Markets Authority Order and the UK Corporate Governance Code. Mandatory audit firm rotation is required after 20 years and a re-tender must be conducted at least every 10 years. The Code requires disclosure of the lengthof tenure of the current audit firm and when a tender was last conducted, as well as advance notice of any re-tendering pas.ln KPMG LLP (and its prior entity KPMG Audit plc) have acted as the auditor to the Company since the IPO in October 2006 and the lead audit partner rotates every five years to assure independence. The Committee undertook a comprehensive tender process in March 2016 for the audit in relation to the year ending 30 June 2017 and has no plans to re-tender the audit at the present time. 1Internal controls and risk management systems1. Subject to transitional arrangements.72 Ashmore Group p|lc Annual Report and Accounts 2020Internal auditThe Head of Internal Audit has regular meetings with the Chair of the Committee and attends all meetings of the Committee to present reports on the internal audit findings and on the proposed programme of reviews. The Committee continues to monitor the internal audit plan on an ongoing basis to ensure that it remains relevant to the needs of the business and to ensure that it can be adapted or changed if a particular focus area necessitates this.During the year, the Committee received presentations from Internal Audit on a number of topics including the Internal Audit plan for the year and the outcomes of any internal audits conducted during the period under review. The Committee also received presentations from Internal Audit on the implementation of the assurance framework in the year and the results of the assurance review over the effectiveness of the controls and mitigants in place for the principal risks. Based on the work described, and in accordance with the requirements of the Chartered Institute of Internal Auditors’ revised Financial Services Code guidance, Internal Audit has provided the Committee with its assessment of the overall effectiveness of Ashmore’s governance and risk and control framework and its conclusions with regard to Ashmore’s adherence to its risk appetite framework.Internal Audit provides annual confirmations to the Committee on four areas: internal independence, internal audit‘s ongoing conformance with relevant professional standards, any potential conflicts of interest and the ongoing suitability of the internal audit terms of reference. In addition, the Financial Services Code recommends that Committees should obtain an independent and objective external assessment of the internal audit function at least every five years, and that this assessment should explicitly include whether Internal Audit conforms with the Financial Services Code guidance.After due consideration, and in accordance with the Financial Services Code guidance, the Committee remains satisfied that the quality, experience and expertise of the internal audit function are appropriate for the business and that it has adequate resources to fulfil its remit.ComplianceIn order to ensure a co-ordinated reporting process with the Risk Management and Internal Audit functions, the Group Head of Compliance is invited to attend and present to the Committee. Reports will include details of the Group’s relations with regulators; the Compliance monitoring programme; material breaches, errors and complaints; retail conduct risk, anti-money laundering controls and sanctions compliance. The Committee also approve the Compliance monitoring plan and review the Group’s procedures for ensuring compliance with regulatory reporting requirements.Information securityInformation security (including cyber security) is identified as a key principal risk to the business which is subject to Ashmore’s governance, policies and procedures and risk assessment. The Committee receives annual updates from the Ashmore IT Department on potential cyber security threats and how Ashmore would respond to a significant event. Committee members also attended a separate briefing with the Head of IT Infrastructure on Cyber Security matters, including minimising risk in respect of their own IT arrangements.Funds’ auditsThe Committee met with and received reports from the independent auditors of Ashmore’s SICAV, US 40-Act, Guernsey and Cayman funds on the conduct of those audits and outcomes from them.Audit and Risk Committee effectivenessThe Internal Board evaluation included a review of the effectiveness of the Committee as well as the individual Directors. Following this evaluation the Board has concluded that the Committee is working effectively.Clive AdamsonChair of the Audit and Risk Committee10 September 2020Ashmore Group plc | Annual Report and Accounts 2020 73Financial statementsGovernanceStrategic reportNominations Committee reportiii. make arrangements for existing Directors to seek Board approval in advance of taking on any significant new commitment with the reasons for approval being explained in the AnnualReport;iv. make recommendations to the Board concerning the diversity policy of the Group, ensuring that candidate pools for Board or senior management appointments (whilst begin assembled on merit) wherever possible include candidates of different gender, ethnic and social backgrounds;and v. ensure that, in normal circumstances, a Chair of the Board shall not serve for longer than nine years from the date on which they were first appointed to theBoard.In making recommendations to the Board concerning the diversity policy, the Committee takes account of the need for a ‘diversepipeline’ for succession to both Board and senior management positions whilst accepting that with a workforce of only 306 employees globally, it is unrealistic to expect a ‘diverse pipeline’ to be available from within the organisation for every senior management vacancy. To counter balance this, the Terms of Reference of the Committee provide that it will focus on diversity within candidate pools. (Ashmore’s policy on Chairmandiversity is described in the Directors’ report on page111).The Committee considers the appointment and replacement of During the year under review the Committee, which met Directors subject to the rules set out in the Articles of Association. In twice, comprised the following Non-executive Directors and accordance with the UK Corporate Governance Code the Committee was fully compliant with the Code:will consider the balance of skills, experience, independence and knowledge on the Board in filling any vacancies. The Committee – David Bennett (Chair)may engage an independent search consultant with no connection – Clive Adamsonto the Ashmore Group to find appropriate candidates for the Board with the requisite skills, and in doing so will take account of relevant – Jennifer Binghamguidelines and legislation relating to the appointment of individuals to – Dame Anne Pringleboards (including but not limited to the Equality Act 2010, relevant European Union law and guidance from the Equality and Human Rights Commission). The Committee may also consider candidates introduced to the Company from other sources. The Committee has not set any measurable objectives for diversity (including gender diversity) in making Board appointments, but meets the target set by The ongoing responsibilities of the Nominations Committee (the the Davies report of 33% female representation on the Board. Details of the gender balance of the senior management and the ‘Committee’) include the following:workforce as a whole are provided on page 48.– reviewing the structure, size and composition (including the skills, knowledge and experience) of the Boardand its committees; andThe members of the Committee have the appropriate balance of skills, experience, independence and knowledge of the Company to enable – reviewing annually the time required from each Non-executive them to discharge their respective duties and responsibilities effectively.Director, using performance evaluation to assess whether the Non-executive Director is giving sufficient commitment to the role.The number of Committee meetings and their attendance by the Directors are set out in the table on page62.The Committee’s terms of reference also include a number of provisions which were added specifically to ensure compliance with An internal evaluation of the Board, its committees and the Directors the 2018 UK Corporate Governance Code These include provisions was conducted during the year. Following the review the Board has for the Committee to:concluded that the Nominations Committee is working effectively.i. ensure candidates are not ‘overboarded’ and have sufficient time available to discharge their duties;ii. consider candidates on merit and against objective criteria and Chair of the Nominations Committeewithin this context promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths;10 September 2020 David BennettDavid BennettTO ENSURE A FAIR AND BALANCED BOARDThere were no changes to the membership of the Committee this year. The Company’s 2019/20 financial year was a year in which the Board and committee structure put in place in 2018 continued to operate effectively for the benefit of the Group.During the year, the Committee discussed succession planning for both the Board and the senior management. The Committee was able to satisfy itself that the plans in place, were suitable and could be relied upon in the event of any unexpected developments. Activities74 Ashmore Group p|lc Annual Report and Accounts 2020Remuneration report REMUNERATION COMMITTEEIntroduction Current Remuneration Policy The importance of remuneration in shaping a resilient culture The current market cycle has been a challenging one for Ashmore’s Ashmore’s incentive structures and Remuneration Policy have management team and there remains significant uncertainty about remained consistent since 1999 and before its listing on the the future economic and social impacts of COVID-19. London Stock Exchange in 2006. They weredesigned to incentivise staff to deliver appropriate outcomes for clients and the broader Ashmore has been very successful in maintaining its operational markets, instil a culture of accountability at all levels, and public effectiveness through this period of changing working patterns reward performance in a way that is aligned with the long-term and market volatility, but while the operational and financial risk-adjusted performance of the business. Ashmore’s Remuneration performance is solid, certain other short-term outcomes for Policy has required very little change to be compliant with the stakeholders have fallen below expectations. various remuneration codes introduced by the FCA over this period. While there are early indications that markets began to recover in The Remuneration Policy is deliberately simple and the principles the final quarter of the financial year, the snap-shot at 30 June 2020 supporting it are applied across all of Ashmore’s employees in shows 9% of AuM outperforming over one year and 17% over order to instil a common equity ownership culture based on pay three years. During the year US$24.3bn in gross subscriptions was for performance. matched by US$24.4bn in gross redemptions meaning that when combined with negative investment performance, AuM has fallen The key features of the Policy that help to shape Ashmore’s culture from US$91.8bn to US$83.6bn over the year. and resilience through cycles are outlined below. Base salaries are capped at £120,000 and are set towards the lower end of current market levels to ensure that in negative market cycles the Company is able to preserve its intellectual A distinctive feature of the Remuneration Policy at Ashmore is that capital through the retention of its employees, rather than face it has been designed to apply to all Ashmore Group employees, not the possible requirement to reduce fixed staff costs through just the Executive Directors, which is a material factor in defining enforced redundancies. and shaping both the Remuneration Policy and Ashmore’s culture as an organisation. This is demonstrated during the current period by the fact that the Group has not furloughed or made redundant any employees as a Ashmore’s team-based approach to investment management is result of the COVID-19 pandemic and nor has it voluntarily taken mirrored across all areas of the business, with a collegiate, advantage of any government or other support schemes in any of collaborative, pragmatic, client-focusedand mutually supportive the countries in which it operates. culture being the result. It is critical to the firm’s continued success that this is maintained through market cycles, with continuity of On an annual basis, the Company’s bonus pool is derived solely personnel in the investment management teams, distribution and from profits madeduring the performance periodand has been support functions. capped at 25% of earnings before variable compensation, interest and tax. The Remuneration Policy has been designed with this in mind and is a material driver of culture and employee retention, with its focus The Remuneration Committee is able to apply an ex-ante both on the long-term alignment of the interests of employees, risk adjustment to reduce the available bonus pool to reflect clients and shareholders, and a proportionality of reward outcome, any matters of concern in relation to financial performance, where the link between reward, strategy execution and long-term risk management, operational, conduisks. ct or reputational rperformance is very clear, and where poor performance outcomes All aspects of variable remuneration, whether cash or equity, are not rewarded. are expensed through the Group’s profit and loss account as While the 2020 calendar year has been a challenging one with the components of the total accrual for the variable remuneration pool, social and economic impacts of COVID-19 still being felt around which operates under the 25% cap described above. It is also the world, it is during periods such as this that the value of the worth noting that the Remuneration Committee has never utilised flexibility within the current policy shines through, and ensures that fully the capped 25% bonus pool with the historical range of remuneration outcomes are genuinely aligned with the long-term outcomes as a listed company, being between 14% and 22.5% interests of the Group’s stakeholders. of profits. .Ashmore Group p|lc Annual Report and Accounts 2020 75Strategic reportGovernanceFinancial statementsRemuneration report continued While there is a de facto cap provided by the limit on the proportion While there is broad based support for Ashmore’s flexible and of profits that can be awarded to employees in any given year, equity-orientated Group-wide remuneration policy, certain corporate the Remuneration Policy does not explicitly cap any individual governance teams remain opposed to specific elements of the employee’s variable pay award. The Remuneration Committee remuneration policy that, when looked at in isolation, do not believes it is appproriate to retain discretion and flexibility to reward conform to generic executive compensation guidelines. There have performance, and does not want to risk creating an incentive to been two consistent themes raised by certain investors through manage towards a particular financial threshold or to determine pay their feedback on Ashmore’s Remuneration Policy. Firstly, the fact outcomes through the application of a rigid formula. Furthermore, that Ashmore has one consistent Remuneration Policy for its there is anecdotal evidence that suggests that the introduction of employees including Executive Directors, meaning that Executive bonus caps in financial services and other sectors leads to adverse Directors have uncapped individual bonuses and the ability to consequences in terms of fixed salayr inflation or the introduction sacrifice up to half of their cash bonus for an equivalent value of of fixed or role based allowances which serve the same purpose. restricted shares which are deferred for five years and attract a This can have a negative effect onshareholder value over time as a matching restricted share award; and secondly, that the result of the inflexible cost structure causing business instability. Remuneration Committee had not provided detailed disclosure on the annual assessment of performance it undertakes for Executive Cash bonuses are at a reasonable market level subject to business Directors and how this process leads to annual bonus awards. and individual performance, to ensure short-term employee retention and reward. To that end, last year we provided a greater degree of disclosure on how the Remuneration Committee exercises strong governance, Total pay including deferred share awards is competitive, with up to control, and discretion to give a greater degree of reassurance to 77% of variable pay in the form of equity, which is deferred for five shareholders, and provided a more in-depth explanation of why we years and cliff vests. The Committee ensures that the mix of cash believe that our current Remuneration Policy achieves the most and shares is in line with relevant regulatory requirements.The appproriate outcomes for shareholders over time. The enhanced potentially dilutive effect of the equity awards has historically been level of disclosure has been maintained in this year’s Directors mitigated through the purchase of ordinary shares in the market by Remuneration Report. the Group’s Employee Benefit Trust, and it is expected that this approach will continue. The Company continues to maintain a dialogue with its shareholders in relation to all aspects of its remuneration arrangements, and as part of that ongoing communication process I will reiterate here why we believe that the current Remuneration To encourage and maintain Ashmore’s equity ownership culture, Policy remains the most appproriate structure for the Group, and is employees and Executive Directors may elect to reduce their cash entirely aligned with the interests of shareholders and supportive of bonus by up to 50%, and in exchange receive an equivalent value the business strategy and culture through market cycles. of restricted shares that are deferred and vest after five years, and At the forthcoming AGM we will ask shareholders to vote which will be matched in the form of a further award of restricted to approve the Remuneration Policy applicable to the two shares also vesting after five years. Executive Directors for the next triennial period. The Remuneration Committee believes it is important to ensure a While we are not proposing to make any substantive changes consistent treatment of deferred remuneration arrangements to the Remuneration Policy we have nevertheless drafted the across the Group, and so additional restricted shares can be proposed Policy to ensure we have the ability to respond to all awarded to Executive Directors in the same way as any other requirements under the UK equivalent of the new Investment employee, if they choose to reduce their cash bonus in exchange Firm Directive, which is expected to apply to variable pay awards for restricted shares, albeit that Executive Directors’ share awards for the performance year beginning on 1 July 2021. In addition, are in part subject to additional performance conditions. and as noted last year, we are also modifying the policy to include The remuneration model generates strong retention for employees, the requirement for Directors to maintain a 200% of salary who are able to build up a meaningful shareholding in the firm over shareholding for the period of two years post the termination time, thus aligning them with the long-term interests of clients, of their employment. shareholders and their colleagues, while also complygin with the various remuneration regulations. The five-year deferral and cliff vesting of share awards also provides a smoothing of incomeover time which again aids retention of employees through marketAs described above and unlike many peer organisations, Executive cycles. Approximately 40%of outstanding shares areeither owned Directors do not receive materially higher basic salaries, different directly or as restricted share awards by all eligible employees, who levels of pension contribution, benefits or long term incentive plans average over seven years of service. that are not available to other staff. The key difference being the application of performance conditions measured over the five-year vesting period for restricted share awards, which puts a significant During both the 2018/19 and 2019/20 financial years we spent proportion of Executive Directors’ deferred equity and therefore considerable time consulting with shareholders and listening to total pay at risk. their feedback, resulting in a substantially revised remuneration report being issued last year. Employee shareholding reinforces long-term alignment of interests Executive Directors at Ashmore are paid through the same structure as other staff The Directors Remuneration Policy 76 Ashmore Group p|lc Annual Report and Accounts 2020 The current and proposed Remuneration Policies ensure that Vesting of these restricted share awards is subject to three equally-between 40% and 77% of the variable pay of Executive Directors weighted performance conditions, applied over the five-year period. is deferred for five years. With a low basic salary, this also results in These directly correlate with the Group’s key performance a very high proportion of total remuneration being deferred, and indicators, relating to delivery of investment outperformance, also being subject to malus and clawback policies. growth in assets under management and profitability. The variable remuneration structure therefore allows the Remuneration The Remuneration Committee is also clear that measuring and Committee to exercise substantial discretion over the majority of total rewarding performance over very short-term quarterly, semi-annual compensation annually and flex the awards made to senior managers and annual results publication cycles risks delivering outcomes and Executive Directors in order to reflect the performance of both and an incentive structure which is at odds with the long-term the business and the individual in any given period. sustainable growth of the business and so may work against shareholder interests both in the short and long term. The The Group’s history demonstrates that there is significant Remuneration Committee also believes that a formulaic approach variability, in terms of both the proportion of profits made available to determining annual variable remuneration can often drive short-for variable remuneration and also the awards made to senior term decision making, the wrong behaviours, and thus incentivise managers and Executive Directors. The Remuneration Committee the wrong long-term outcomes for clients, shareholders and has a demonstrable record of paying Executive Directors only for employees; as very often the areas being measured are driven by performance, with zero awards in some years and occasions where factors outside management’s direct control, for example market discretion has been exercised to reduce awards in other years. cycles or client asset allocation policy decisions. This approach supports the Group’s strategy and provides significant cost flexibility in a cyclical business, thus aligning the interests of Therefore, to ensure a robust annual assessment process the clients, shareholders and employees through market cycles, and Remuneration Committee has established a thorough balanced which in combination with ongoing performance conditions, seeks scorecard of factors that it reviews in detail before decisions on to support and encourage long-term decision making. annual bonus awards are made. This structure has been in place as an evolving process since the Company listed, and is undertaken The Remuneration Committee considers the performance of senior through the Remuneration Committee meetings held in June, managers and Executive Directors over the long term. As such, July and September prior to the announcement of results. when assessing performance on an annual basis the Remuneration Each year the Remuneration Committee is presented with a Committee considers both progress over a multi-year period and substantial data set prepared by the Group’s Finance, Risk, annual performance in the context of the overall trajectory of the Human Resources, Middle Office, Distribution and Compliance business and progress made towards its strategic objectives and its teams that comprises a range of quantitative, qualitative, financial key performance indicators. and non-financial elements. The nature of the information reflects The business is focused on delivering against an established long-both those aspects that are directly in the control of management term strategy and clear key performance indicators, both of which and also those which can be impacted by external factors. have remained consistent for a number of years. The overarching For these elements the Remuneration Committee will examine strategy described in detail on pages 2 and 3 comprises the management’s response to events and their management of establishment of the Emerging Markets as an asset class, the the impact of events, rather than the specific resulting movements diversification of investment themes within this and the sourcing of in, for example assets under management or investment developed world capital as investors into these themes, and finally performance, that will have been outside of their direct control. the mobilisation of Emerging Markets capital both through For example, significant growth in assets under management will investors into global Emerging Market products and through the not in isolation deliver a higher variable pay award unless supported establishment of offices in a range of Emerging Market locations, by other positive factors, and the inverse. sourcing and managing local and international capital. The key The factors considered each year by the Remuneration Committee performance indicators put in place to measure achievement include at a Group level: against this strategy described in detail on pages 18 and 19 are the development over time of assets under management, delivering –Financial performance, including that reported results are a fair investment performance for clients and remaining profitable as a reflection of underlygperorance ad the Company’squidityin fmn li business while maintaining a strong balance sheet. and overall financial position; –The overall bonus pool available in the period, including within that, the sum required to fund bonuses for staff other than the The Remuneration Committee believes that it is right and proper to Executive Directors and senior management, at an appproriate assess the achievements of the Executive Directors and other level to ensure retention and an appproriate level of reward; senior managers against these strategic objectives and KPIs over –Input from the Heads of Risk and Compliance regarding time, to ensure the sustainable, long-term development of the organisational performance in these areas over the year, in order Group. Therefore the proportion of the Executive Directors’ that that the Remuneration Committee may consider any ex-ante annual bonus which is deferred for five years, and which only bonus pool adjustments; and vests subject to achievement against performance conditions, has similar measures applied. –Progress in relation to the Group’s strategic objectives. Thorough balanced scorecard Performance assessment Consistent assessment criteria ��Ashmore Group p|lc Annual Report and Accounts 2020 77Strategic reportGovernanceFinancial statementsRemuneration report continued To assist with the assessment of the senior managers and As can be seen in more detail later in the report, the outcome of the Executive Directors at an individual level, examples of the factors Remuneration Committees deliberations in this difficult year was to considered each year by the Remuneration Committee are: award no bonus to the CEO. Investment performance and growth in assets under management over the period, which tgoether form a –The annual appraisals or short-term performance measures for large part of the measurement of the CEOs performance, were not at each individual, assessing their overall achievements, impact and a satisfactory level, and despite the good work that has been done by contribution through the performance year; the GFD and the CEO in maintaining the smooth running of the –Group earnings before interest and taxes; business during an operationally challenging period, the Committee –Absolute and relative investment performance for each determined that it would exercise its discretion to both reduce the investment theme over one, three and five years; overall bonus pool available to 19.5% (FY 2018/19: 22.5%), and not –Movement in assets under management, with detailed reporting make an award to the CEO this year. The GFD has also has his bonus on subscriptions and redemptions by investment theme, client reduced relative to the prior period, but by a lesser amount, given his type and geography; focus on areas of the business which continued to peorfrm well during the period. –Movement in management fee margins; –FX, treasury and seed capital management outcomes; This year’s report is split into four sections to enable ready access –Cost management; to information which may be of specific interest to investors: –Subsidiary, local asset management and joint venture 1.An ‘at a glance’ summary, detailing this year’s remuneration development; outcomes for the CEO and GFD. –Employee turnover, retention of 2.The Remuneration Committee’s assessment of the Executive key employees, recruitment and succession panlning; Directors’ performance for the year ending 30 June 2020, –Culture and Conduct Risk indicators; including the key metrics behind that assessment. –Compliance with relevant regulatory and corporate governance 3.The Directors’ Remuneration Policy which, was approved requirements; by more than 85% of shareholders at the October 2017 –Management of the impact of in-year events, e.g. for the AGM for three years, and will therefore epxire this year. 2019/20 year, COVID-19; The new Directors’ Remuneration Policy proposed by the –Quality, accuracy and timeliness of financial reporting; and Committee is set out on pages 92 to 98. Shareholders will be –Whether any instances have occurred that may warrant the asked to approvethe new policy at the forthcoming AGM on application of malus or clawback to previously granted awards. 16 October 2020. This policy will take effect for Directors from the date it is approved and is expected to apply for three years. The Remuneration Committee considers these inputs and applies its judgement to determine the appropriate remuneration outcomes 4.The Annual Report on Remuneration, which explains how the for the business, Executive Directors and senior managers and current Remuneration Policy has been applied during the year each relevant individual for that year. The Remuneration and which will be subject to an advisory vote at the Annual Committee’s assessment of the Executive Directors for the most General Meeting on 16 October 2020. recent performance year can be seen on pages 84 to 91, and the I would like to thank all of Ashmore’s employees across our resulting remuneration outcomes can be seen in the summary ‘at a global offices for the dedication and hard work they have put glance’ information on page 82 and in more detail in the statutory in to maintain effective business operations through this very single figure tables on page 99. challenging period on behalf of our clients and other stakeholders. Together with my colleagues on the Remuneration Committee I I believe that it is important to emphasise that the Remuneration would welcome your support for the 2020 Directors’ Remuneration Committee is willing and able to use its discretion when Policy and Annual Report on Remuneration. determining awards. On several occasions it has either reduced awards from levels that would have been justified purely by reference to operating and other performance measures, or set them at zero to reflect the overall business performance at Chair of the Remuneration Committee particular points in the cycle. When taken together with the low fixed salary cap, this means that senior manager and Executive Director remuneration is genuinely aligned with the Group’s overall performance and shareholders’ experience through market cycles. This approach ensures that annual remuneration outcomes are aligned with Ashmore’s long-term growth strategy and allows for significant flexibility in the Group’s operating costs in the face of varying revenue levels through market cycles. Consequently, Ashmore is able to deliver high profitability and cash generation for shareholders even at the low point of a Global or an Emerging Markets cycle, whilst also delivering high levels of employee retention. ��Use of discretion aligns remuneration with strategy Dame Anne Pringle DCMG 78 Ashmore Group p|lc Annual Report and Accounts 2020 –reviewing the ongoing appproriateness and relevance of the Remuneration Policy; –reviewing the design of all share incentive plans for approval by the Board and shareholders; –Dame Anne Pringle –ensuring that members of the executive management of –Clive Adamson the Company are provided with appropriate incentives to –David Bennett encourage enhanced performance and that remuneration –Jennifer Bingham incentives are compatible with the Company’s risk policies and systems; The members of the Remuneration Committee have the appropriate balance of skills, experience, independence and –making recommendations to the Board as to the knowledge of the Company to enable them to discharge Company’s framework or policy for the remuneration of their respective duties and responsibilities effectively, the Chairman, the Executive Directors and the Company and met five times during the year. The Director’s attendance Secretary and to determine their total individual at the Remuneration Committee meetings is set out in the remuneration packages including bonuses, incentive table on page 62. payments and share options or other share awards; –ensuring that a significant proportion of Executive Directors’ remuneration is structured so as to link rewards to corporate and individual performance and that For remuneration relating to the year ending 30 June 2020, performanceconditions are stretching and designed to the Remuneration Committee has again ensured that pay will promote the long-term success of the Company; and be delivered to Executive Directors and other employees –ensuring that contractual terms on termination, and any categorised by the FCA as Identified Staff, consistent with the requirements of the Alternative Investment Fund Managers payments made, are fair to the individual and the Company, that failure is not rewarded and that the Directive. This has meant that Executive Directors and other duty to mitigate loss is fully recognised. relevant employees will receive a proportion of their cash bonus delivered as a further award of restricted shares which are retained and restricted from sale for a six-month period, rather than as cash. Further details of this can be found in the Annual Report on Remuneration on page 99. A malus and clawback principle applies to variable remuneration awarded to senior staff including Executive Directors, enabling the Remuneration Committee to recoup variable remuneration under certain circumstances. Malus and clawback can be applied to both the cash and share-based elements of variable remuneration, via the reduction or cancellation of any outstanding unvested deferred share awards regardless of the year to which they relate, or via the repayment of amounts to the Company. The Remuneration Committee considered there were no events or circumstancesthat would have made it appproriate to recoup remuneration during the year ending 30 June 2020. ACTIVITIES OF THE TERMS OF REFERENCE REMUNERATION COMMITTEE REGULATORY CONSIDERATIONS FOR THE YEAR ENDING 30 JUNE 2020 CONSIDERATION OF MALUS AND CLAWBACK FOR THE YEAR ENDING 30 JUNE 2020 The terms of reference for the During the year under review, the Remuneration Committee include: Remuneration Committee comprised the following Non-executive Directors and was fully compliant with the Code: ��Ashmore Group p|lc Annual Report and Accounts 2020 79Strategic reportGovernanceFinancial statementsRemuneration report continued ASHMORE’S APPROACH TO REMUNERATIONThe Remuneration Committee is guided by a …with a comprehensive approach to clear set of remuneration principles… determining variable pay outcomes… The Remuneration Committee determines annual bonus awards based on a balanced scorecard of factors at both the Group and individual level, and applies discretion rather than a formulaic approach in order to deliver outcomes which reflect the best value for shareholders. Factors considered include: 1 2 3 4 DISCRETION AND FLEXIBILITY ALIGNMENT WITH STAKEHOLDERS CONSISTENCY ACROSS THE GROUP PAY FOR LONG-TERM PERFORMANCE Variable remuneration is not formulaic or capped at an individual level and as such the Remuneration Committee has complete discretion to ensure that awards reflect business and individual performance, thus the behavioural risk arising from target based incentive plans is not present. Malus and clawback may be applied by the Remuneration Committee to all elements of variable remuneration. The Remuneration Committee is able to appyl an ex-ante risk adjustment to the bonus pool to reflect any concerns arising. Group financial performance; –The overall bonus pool available in the period; –Input from the Group Heads of Risk and Compliance Base salaries are capped and set at the lower end of market regarding organisational performance in these areas levels to ensure fixed costs are tightly controlled. over the year; –Progress in relation to the Group’s strategic objectives; On an annual basis the bonus pool is derived solely from –Annual appraisals or short-termperformance measures profits made in the year and has been capped at 25% of for each individual, assessing their overall achievements, earnings before variable compensation, interest and tax, impact and contribution through the performance year; ensuring predictability of overall outcomes. –Absolute and relative investment performance for each Up to 77% of variable remuneration is delivered in Ashmore investment theme over one, three and five years; Group plc shares, restricted and deferred for five years. –Movement in assets under management; A significant proportion of Executive Directors variable –Movement in management fee margins; remuneration will only vest subject to the achievement of –FX, treasury and seed capital management outcomes; stretching performance targets, closely aligned with the –Cost management; Group’s Key Performance indicators. –Subsidiary, local asset management and joint venture development; –Employee turnover, retention of key employees, recruitment The clear and simple Remuneration Policy applies to all and succession planning; Ashmore Group plc employees, including Executive Directors, –Culture and Conduct Risk indicators; which is a material factor in defining and shaping both the –Compliance with relevant regulatory and corporate Remuneration Policy and Ashmore’s culture as an organisation.governance requirements; Executive Directors receive the same level of pension –Management of the impact of in-year events; contributions as other employees. –Quality, accuracy and timeliness of financial reporting; and –Whether any instances have occurred that may warrant the application of malus or clawback to previously The Remuneration Committee considers the performance of granted awards. Executive Directors and senior managers over the long term, taking account of progress over a multi-year period and annual performance in the context of the business and progress made towards both its strategic objectives and its key performance indicators. Vesting of awards, which are subject to performance conditions, is subject to a five-year performance period. �� 80 Ashmore Group p|lc Annual Report and Accounts 2020 …underpinned by consistent key performance …delivering a strong equity indicators and strategic priorities… ownership culture Vesting of restricted share awards To align with, encourage and maintain is contingent on meeting stringent Ashmore’s equity ownership culture, long-term performance conditions, employees and Executive Directors may clearly aligned with the achievement elect to reduce their annual cash bonus by of the Group’s strategic objectives and up to 50%ve an , and in exchange receikey performance indicators, leading to a equivalent value of restricted shares, which proportionality of reward outcomes. are in turn matched with a further award of restricted shares. Approximately 40% of outstanding shares are either owned directly or as restricted share awards by employees, who average over seven years of service AuM DEVELOPMENT Compound increase in AuM (US$bn) INVESTMENT PERFORMANCE % of AuM outperforming benchmarksPROFITABILITY Diluted EPS performance relative to Emerging Markets Indices The remuneration model generates strong retention of employees, who are able to build up a meaningful shareholding in the firm over time, thus aligning them with the long-term interests of our clients, shareholders and their colleagues, while also complying with relevant remuneration regulations and encouraging behaviours consistent with Ashmore’s culture and strategy. The five-year deferral and cliff vesting of share awards also provides a smoothing of income over time which again aids retention of employees through market cycles. 40% 5 years743 years17202083.6201991.8201873.9201758.7201652.620203.0%201910.5%(9.6%)2018201723.6%(9.4%)2016Ashmore Group p|lc Annual Report and Accounts 2020 81Strategic reportGovernanceFinancial statementsRemuneration report continued REMUNERATION AT A GLANCE for the year ending 30th June 2020 The Chief Executive was not awarded a bonus for the year ending 30 June 2020, reflecting overall business performance The Group Finance Director has voluntarily elected to defer during the period andthe Remuneration Committee’s strict for five years the maximum 50% of his cash bonus into an application of its discretion. equivalent value of restricted shares, and as a result will receive a matching restricted share award. The Chief Executive was not awarded a bonus by the Remuneration Committee in 2014, also reflecting business The Group Finance Director’s annual bonus comprising cash performance at the time, and as such no shares were awarded and restricted share awards at grant value decreased from to the Chief Executive in 2014, vesting during the year ending £1,300,000 (FY2018/19) to £1,170,000. 30 June 2020. The total sum ultimately to be received by theGroup Finance Director will be dependent on achievement relative to the performance conditions, which means that up to £315,000 of this sum may not be paid out when the share awards vest in 2025. Shares awarded to the Group Finance Director in 2014 reached their vesting date during the year ending 30 June 2020. These awards were in part subject to a relative TSR performance condition and vested in full once this condition had been applied. In addition, the Group Finance Director received £70,638 in dividend equivalents which were rolled up and paid tothe extent the underlying awards vested. As has been the case in previous years, base salaries for Executive Directors have remained unchanged at £100,000, a level significantly below fixed pay levels for equivalent positions at peer organisations, consistent withthe Company’s management of its fixed cost base and strong belief inpay forperformance through variable remuneration. The Chief Executive’s remuneration outcomesThe Group Finance Director’s remuneration outcomes Annual cash bonus 22%Annual bonus deferred into equity 51%Annual bonus deferred into equity, with additional perfomance conditions 27%82 Ashmore Group p|lc Annual Report and Accounts 2020 The chart below shows variable remuneration awarded to the The chart below shows the share of annual revenues between CEO each year between 2009 and 2020. As can be seen, the shareholders, in the form of ordinary dividends and retained Remuneration Committee exercises its discretion in setting the earnings, employees and taxation. As revenues have fluctuated annual level of award at an appproriate level based on the CEO’s through the market cycle, the Remuneration Policy has provided performance and the performance of the business each year; significant cost flexibility and therefore protected returns and as such, the variation in award level is reflective of the range to shareholders. of annual outcomes. In addition, as a result of the stretching performance conditions measured over the five-year deferral period of restricted awards, the amount eventually received by the CEO when awards vest can vary significantly from the original award amount. Chief Executive Officer – variable remuneration Impact of Remuneration Policy on shareholder outcomes over time returns across market cycles 12 1.This chart includes data on shares awarded between 2010 and 2014 which vested between 2015 and 2019. No shares were awarded in 2009, 2014 or 2020 to reflect business performance and the Remuneration Committee’s application of strict discretion. The chart will be updated in future years to show the vesting outcomes for shares awarded from 2015 onwards. 2.Dividends includes the estimated cost of the proposed final dividend for FY2019/20. ��£m121086420Bonus awardedBonus acceptedBonus receivedBonus awarded – includes cash paid in the year and restricted, bonus and matching shares at grant valueBonus received – includes cash paid in the year and the vesting value of any shares 900201021102210231024102510261027102810291020202��100%90%80%70%60%50%40%30%20%10%0%Retained earningsDividendsTaxationBonus (pre tax)Salary (pre tax)9002010211022102210231024102510261027102810291020202Ashmore Group p|lc Annual Report and Accounts 2020 83Strategic reportGovernanceFinancial statementsRemuneration report continued Performance assessment of Executive Directors for the year ending 30 June 2020 Factors the Remuneration Committee considers at a Group level Group financial performance, including that reported results are a fair reflection of underlying performance and the Company’s liquidity and overall financial position Quantitative or qualitative: Quantitative Financial or Non-Financial: Financial Ashmore’s business model delivered a 5% growth in adjusted net revenues and 10% growth in adjusted EBITDA, as although over the 12-month period AuM declined by 9%, average AuM was higher. Continued focus on cost management meant that the adjusted EBITDA margin increased to 68%. Diluted EPS increased by 3% to 25.7p. The Group’s strong and liquid balance sheet was maintained with capital resources of £702.5 million and excess regulatory capital of £555.2 million. The Remuneration Committee is satisfied the Group has been profitable over the period and has sufficient funds available to pay staff bonuses without any negative impact to the Company’s liquidity and overall financial position. The overall bonus pool available in the period, including within that, the sum required to fund bonuses for staff other than the Executive Directors and senior management, at an appropriate level to ensure retention and an appropriate level of reward Quantitative or qualitative: Quantitative Financial or Non-Financial: Financial The Awards Committee, which is chaired by the Chief Executive Officer and which receives significant input from the Human Resources department and line managers, proposes to the Remuneration Committee a total sum to be made available for annual bonuses. The aggregate sum is reached through a thorough process which includes: All employees taking part in an annual appraisal and performance review process during which their individual performance is assessed by line managers, and reviewed by relevant senior management. The Human Resources team performs a detailed annual benchmarking exercise, reviewing data from a number of external providers to determine current market ranges for individual roles, including for the Executive Directors. This takes into account Ashmore’s overarching pay model within which basic salaries are capped, and so greater attention is paid to total compensation levels than base salaries as employee remuneration levels increase. Line managers, in conjunction with Human Resources, review individual employees in the context of their personal performance, benchmarking data points and business performance and will propose bonus sums to the Awards Committee. The Human Resources team aggregates bonus proposals in order to determine total proposed spend. For those employees whose variable remuneration is determined by the Remuneration Committee detailed proposals and supporting information, including copies of the employees’ annual appraisals, is provided to the Remuneration Committee to assist in its determination of both individual bonuses and the total bonus pool required. Once the Remuneration Committee determines the overall bonus pool, individual bonuses for Executive Directors and senior managers are then determined by the Remuneration Committee to ensure that the total amount proposed fits within the total sum available for distribution. Ashmore has been very successful in maintaining its operational effectiveness through this period of changing working patterns and market volatility, but while the operational and financial performance is solid, certain other short-term outcomes for stakeholders have fallen below expectations. In order that there is alignment between the experience of Ashmore’s clients, shareholders and employees, the Remuneration Committee has exercised its discretion to reduce the available bonus pool relative to the prior period, setting it at 19.5% (FY 2018/19: 22.5%), and substantially below the potential maximum of 25%. The Remuneration Committee has considered and determined variable remuneration outcomes for the senior management team and Executive Directors, and has reviewed and approved remuneration proposals for all Control Function employees (Risk, Compliance and Audit). In considering the sums required for these groups, the Remuneration Committee has also discussed remuneration outcomes for all other employees with the management team and has satisfied itself that there remains sufficient funding to retain and reward employees appropriately within the agreed 19.5% bonus pool. 84 Ashmore Group plc | Annual Report and Accounts 2020 Qualitative and Quantitative Non-Financial The Remuneration Committee received a report, provided to the Board’s Audit and Risk Committee, detailing the measures undertaken by the Company in regard to ensuring that all compliance and risk management processes have been adhered to, and highlighting any issues that the Global Heads of Risk and Compliance felt should be brought to the attention of the Remuneration Committee. There have been no matters of concern during the period that would warrant the Remuneration Committee considering reducing the potential bonus pool available for staff awards for the year ending 30 June 2020. Qualitative and Quantitative Financial and Non-Financial Ashmore’s clients continue to raise allocations to Emerging Markets. Approximately 80% of institutional net flows were from existing clients increasing allocations within existing mandates or broadening their Emerging Markets investments, however investor risk appetite was impacted by the COVID-19 crisis in H2. 1.Ashmore’s equities business performed well this year, delivering net flows in every quarter and totalling US$1.2 billion over the year2.Launched and seeded Equity ESG fund 3.Client demand was broad-based across Ashmore’s investment themes 1.Ashmore Indonesia undertook an IPO and listed on the Jakarta Stock Exchange in January 2020 2.Local asset management platforms manage US$5 billion, 6% of the Group’s total AuM 3.More than a quarter (26%) of Group AuM is sourced from clients in the Emerging Markets Overall progress towards these three strategic goals has been slower that expected during this period in relation to fund performance, especially in regard to certain Fixed Income products, and in regard to AuM development, with flat net flows and an overall reduction in AuM over the period, which has meant that progress has been slower than expected in these areas. Input from the Global Heads of Risk and Compliance regarding organisational performance in these areas over the year, in order that the Remuneration Committee may consider any ex-ante bonus pool adjustments Progress in relation to the Company’s strategic objectives Quantitative or qualitative: Financial or Non-Financial: Quantitative or qualitative: Financial or Non-Financial: Phase 1: Establish Emerging Markets asset class Phase 2: Diversify investment themes and developed world capital sources Phase 3: Mobilise Emerging Markets capital ��Ashmore Group p|lc Annual Report and Accounts 2020 85Strategic reportGovernanceFinancial statementsRemuneration report continued Factors the Remuneration Committee considers as indicators of in-year performance Group earnings before interest and taxes (EBIT) Quantitative or qualitative: Quantitative Financial or Non-Financial: Financial 2018/19: £202.8m 2019/20: £209.7m Absolute and relative investment performance for each of the principal investment themes over one, three and five years Quantitative or qualitative: Quantitative Financial or Non-Financial: Financial Absolute performance by theme % AuM outperformance within each theme as at 30 June 2020 By AuM 1 year By AuM 3 year By AuM 5 year External debt 13% External debt 31% External debt 45% Local currency 1% Local currency 1% Local currency 99% Corporate debt 39% Corporate debt 46% Corporate debt 43% Blended debt 0% Blended debt 6% Blended debt 87% Equities 14% Equities 34% Equities 43% Multi-asset 0% Multi-asset 0% Multi-asset 100% Overall 9% Overall 17% Overall 74% The majority of the Group’s AuM is demonstrating short-term underperformance relative to benchmarks with 9% of AuM outperforming over one year and 17% over three years. 74% of assets are outperforming benchmarks over five years. Relative performance by theme (quartiles) 1 year 3 year 5 year External debt Q4 Q4Q3 Local currency Q4 Q3Q2 Corporate debt Q4 Q3Q2 Blended debt Q4 Q4Q4 Frontier Markets equity Q3 Q1Q1 All Cap Emerging Markets equity Q1 Q1Q1 Active equity Q3 Q2Q1 Multi-asset There is no relevant Multi-asset peer group Investment performance relative to peers is weak in all fixed income themes over one and three years. Local Currency and Corporate Debt performance is more positive over 5 years. All Cap equity performance is very positive over 1, 3 and 5 years, but 1 year relative performance in frontier and active equity is below expectations. 86 Ashmore Group plc | Annual Report and Accounts 2020 Quantitative Financial Opening AuM at 30 June 2019 was US$91.8bn Year end AuM was US$83.6bn External debt 19.1 (1.1)2.3(3.2)(0.9) – Local currency 19.7 (1.7)5.8(5.1)0.7 – Corporate debt 15.5(1.9)6.7(9.2)(2.5) (0.5) Blended debt 24.3 (2.2)4.5(3.8)0.7 0.5 Equities 4.4 (1.0)2.2(1.0)1.2 – Multi-asset 0.5 (0.1)–(0.1)(0.1) – Alternatives 1.6 (0.2)0.1(0.1)– – Cash Management 6.7 0.12.7(1.9)0.8 – – The first half of the period was one of strong asset growth to US$98.4bn at December 2019, since which time the combination of poor fund performance in certain Fixed Income investment themes and redemptions has reduced the year end AuM to US$8.2bn below the opening point. Quantitative Financial 2018/19: 48bps 2019/20: 45bps The three basis points decline in the net management fee margin compared with the prior year is the result of net flows into existing and new large mandates (1.5 basis points), investment theme mix (1basis point) and mutual fund net redemptions in the corporate debt and local currency themes (0.5 basis point). Factors such as competition and other product mix effects broadly offset each other. Movement in assets under management for each of the principal investment themes Movement in management fee margins Quantitative or qualitative: Financial or Non-Financial: Quantitative or qualitative: Financial or Non-Financial: AuM GrossReclassification/30 June 2019 PerformancesubscriptionsGross redemptionsNet flows other US$bn US$bn US$bn US$bn US$bn US$bn AuM30 June 2020US$bn 17.119.710.623.34.60.31.47.6Total 91.8 (8.1)24.3(24.4)(0.1) 83.6Ashmore Group p|lc Annual Report and Accounts 2020 87Strategic reportGovernanceFinancial statementsRemuneration report continued FX, treasury and seed capital management outcomes Quantitative or qualitative: Quantitative Financial or Non-Financial: Financial During the financial year, the Group made new seed investments of £51.4 million and successfully redeemed £84.0 million of previous investments. The consequent net redemption of £32.6 million together with unrealised mark-to-market losses of £6.8m mean the market value of the Group’s seed capital investments reduced from £277.8 million to £238.4 million. Ashmore has also committed £20.0 million of seed capital to funds in the alternatives theme that were undrawn at the period end, giving a total committed value for the seed capital programme of £258.4 million. The seed capital investments generated a total loss of £7.6 million in the period (FY2018/19: £10.7 million gain) including a realised gain of £4.0 million. This comprises a £9.0 million mark-to-market loss in respect of consolidated funds, including £4.8 million of finance income, and a £1.4 million gain in respect of unconsolidated funds that is reported in finance income. Revenues include a £7.0 million foreign exchange gain, delivered through active management of the Group’s sterling and foreign currency balances. Cost management Quantitative or qualitative: Quantitative Financial or Non-Financial: Financial Total operating costs of £110.0 million include £2.2 million of expenses incurred by seeded funds that are required to be consolidated, as disclosed in Note 20. On an adjusted basis, excluding the impact of seed capital and the variable compensation accrual on foreign exchange translation gains, operating costs were reduced by 4% to £106.7 million (FY2018/19: £111.1 million). At constant exchange rates, adjusted operating costs declined by 5% compared with the prior year period. Adjusted operating costs before variable compensation were 5% lower at £52.1 million (FY2018/19: £54.8 million), with an increase in fixed staff costs more than offset by a 10% reduction in other operating costs and a lower depreciation and amortisation expense. Subsidiary, local asset management and joint venture development Quantitative or qualitative: Qualitative and Quantitative Financial or Non-Financial: Financial and Non-Financial The portfolio of local market businesses is now delivering good growth and all platforms are profitable. Aggregate AuM of subsidiaries is US$5 billion, 6% of the Group’s total AuM. Ashmore Indonesia undertook an IPO and listed on the Jakarta Stock Exchange in January 2020. Ashmore Saudi Arabia has developed particularly well during this period, with AuM managed locally increasing by 43%. The AshmoreAVENIDA Real Estate business has not grown as quickly as had been anticipated. 88 Ashmore Group plc | Annual Report and Accounts 2020 Quantitative Non-Financial The Group’s permanent headcount was stable over the year at 306 employees of which 291 are involved in investment-management related activities (30 June 2019: 307 and 288, respectively), demonstrating strong cost control. Employee turnover remained lowunplanned turnover for the Group excluding the subsidiaries at 6.0% (FY2018/19: 5.5%) and at , with 8.6% including the subsidiaries (FY2018/19: 9.9%bsidiaries reflects the different nature of the employment ), the increase including suenvironments the subsidiaries operate in. All key employees were retained during the period. Succession plans are in place for all key positions. The Group has been successful in its recruitment activities, and has been able to hire experienced and appropriately qualified staff where and when required. The Finance, Corporate Development, Investor Relations, Company Secretarial and Facilities departments, managedy b the Group Finance Director, have been managed effectively throughout the period, with effective succession planning and internal promotions occurring in a number of departments. The Remuneration Committee is satisfied that the Group is managed effectively and adequately resourced. Quantitative Non-Financial The Remuneration Committee reviews a dashboard of indicators on an annual basis which seek to measure and monitor aspects of organisational culture. During the period 22 indicators were reported on under the headings of ‘tone from the top’, incentive structures and remuneration, effectiveness of management and governance and individual accountability. There were no matters of concern arising during the period that would warrant the Remuneration Committee questioning the management of the Group or indicating poor organisational culture or conduct risks. Employee turnover, retention of key employees, recruitment and succession planning Culture and Conduct Risk indicators Quantitative or qualitative: Financial or Non-Financial: Quantitative or qualitative: Financial or Non-Financial: Ashmore Group p|lc Annual Report and Accounts 2020 89Strategic reportGovernanceFinancial statementsRemuneration report continued Compliance with relevant regulatory and corporate governance requirements Quantitative or qualitative: Qualitative and Quantitative Financial or Non-Financial: Non-financial The Group has in place an effective governance framework and has sufficiently independent and adequately resourced control functions, which have operated effectively over the period. The Group has been effective in implementing the FCA’s Senior Managers and Certification Regime during the period. The Remuneration Committee is satisfied that all relevant regulatory and corporate governance requirements have been met appropriately. Management of the impact of in-year events Quantitative or qualitative: Qualitative and Quantitative Financial or Non-Financial: Financial and Non-Financial The Remuneration Committee members are confident, through their interactions with members of the management team and through the regular reporting received, that the business has reacted appropriately to events arising through the year. During the period the most material event was the COVID-19 global pandemic, which has been covered in more detail on pages 10 and 11 of the annual report. The Chief Executive and Group Finance Director have managed and overseen the establishment of effective working from home, and in some locations have managed the partial return to office based working. This has been a significant set of actions, which had the potential to cause severe business disruption. However, to date the process has worked well and business operations have continued with no disruption, and with all investment, distribution, support and governance activities continuing unchanged. The Remuneration Committee is satisfied that the management team responded in an appropriate and timely manner, and delivered an effective outcome for the Group. Quality, accuracy and timeliness of financial reporting Quantitative or qualitative: Quantitative Financial or Non-Financial: Financial The financial reporting delivered to the Board and its Committees and to senior management has continued to be appropriate and accurate. Whether any instances have occurred which may warrant the application of malus or clawback to previously granted awards Quantitative or qualitative: Qualitative and Quantitative Financial or Non-Financial: Financial and Non-financial Having reviewed all of the information provided to it, the Remuneration Committee has determined that there is no cause to apply malus or clawback to any previously granted awards. 90 Ashmore Group plc | Annual Report and Accounts 2020 The Remuneration Committee considered the qualitative and quantitative inputs provided to it by the management team across the range of areas detailed above and, to assist investors in understanding their decision making, summarises their assessment of performance as follows: Chief Executive Officer Group Finance Director The CEO’s short-term performance is assessed 75% on financial The GFD’s short-term performance measures are based 35% on his performance measures including effectively managing investment management of the departments which report to him (Finance, performance to deliver consistent growth relative to each investment Corporate Development, Investor Relations, Company Secretarial theme, maintaining and increasing AuM and maintaining and and Facilities); 30% on his management of subsidiary business increasing EBIT; and 25% on non-financial management performance,activities outside the UK, including joint ventures, focused on including strategy development and implementation, recruitment, business growth and development of profitability and scale, staff turnover and succession planning and regulatory and integration of offices and effectiveness of joint venture relationships;compliance adherence. 30% on contribution to the development and implementation of strategic goals and increasing value for shareholders; and 5% on The financial measures represent the greater proportion of the areas investor relations and communication, broadening the shareholder considered by the Remuneration Committee in determining annual base and communicating effectively with external parties, the Board remuneration, in order that there is a clear alignment of annual and all other relevant stakeholders. incentives with the Group’s key performance indicators and the delivery over time of value for shareholders. In the Remuneration Committee’s assessment, the GFD has been very effective in his role during the period, managing well across a The Remuneration Committee’s assessment of achievement broad scope of activities both during the first half of the year, and relative to the balanced scorecard of non-financial performance also during the more challenging second half of the year, during measures, confirmed to it that the business remains well run and which in addition to those areas noted above he has taken a leading effectively managed through a challenging period, including an role in managing Ashmore’s response to COVID-19. ongoing and disciplined focus on controlling operating costs and a clear focus on the importance of maintaining organisational culture. Management of cash resources, FX and tax efficiency have been beneficial for the Group during the period, in combination Although Ashmore has been very successful in maintaining its with a thorough review of operating costs as part of the response operational effectiveness through this challenging period oftime, to COVID-19. certain other short-term outcomes for stakeholders have fallen below expectations. In order that there is alignment between the The departments he is responsible for have continued to be run experience of Ashmore’s clients, shareholders and employees, the effectively, he and his team played an important role in the IPO of Remuneration Committee has exercised its discretion to both Ashmore’s Indonesian business and the other subsidiary businesses reduce the overall bonus pool available and to reduce the CEO’s have continued to operate profitably. award to zero. The Remuneration Committee has considered these inputs and has The Committee discussed at some length whether the CEO’s determined that the Group Finance Director will be awarded an positive management of the business, ongoing leadership and annual bonus of £900,000 for his performance during the year consistent maintenance of Ashmore’s culture through a period of all ending 30 June 2020. staff working remotely warranted a reduced bonus, rather than no bonus, but ultimately determined that the flexibility of Ashmore’s remuneration policy allowed theirdiscretion to be applied to its fullest extent, as it would also determine to do in a year where there is markedly positive performance to reward. Ashmore Group p|lc Annual Report and Accounts 2020 91Strategic reportGovernanceFinancial statementsDirectors’ Remuneration Policy This section of the Remuneration report has been prepared in accordance with Part 4 of The Large and Medium-sized Companies The Company applies a consistent remuneration philosophy for and Groups (Accounts and Reports) (Amendment) Regulations employees at all levels. 2013. It sets out the Remuneration Policy for the Company. The The cap on base salary means that Executive Directors’ base Policy has been developed taking into account the principles of the salaries are set at a similar level to other senior investment and UK Corporate Governance Code 2018 and shareholders’ executive professional employees in the Company, and the base salary range remuneration guidelines. The current Policy was approved by a from lowest to highest in the Company is considerably narrower binding shareholder vote in October 2017, and can be found on than the market norm. All employees are eligible for a performance-pages 56 to 60 of the 2018 Annual Report and Accounts. This related annual bonus, and the principle of bonus deferral into policy was approved for three years and therefore will expire this Company shares or equivalent applies to annual bonuses for all year. The new Directors’ Remuneration Policy proposed by the employees who have at least one full year’s service. Employees Committee is set out on pages 92 to 98. Shareholders will be asked other than Executive Directors may elect to receive up to the first to approve the new policy at the forthcomg AGM. This policy will £50,000 (or local currency equivalent) of their annual bonus take effect for Directors from the date it is approved and is delivered as 90% cash and 10% as restricted shares, rather than in expected to apply for three years. the Company’s usual proportions of 60% cash and 40% restricted shares. Rates of pension contribution and fringe benefit provisions The Remuneration Committee determines, and agrees with the are consistent between executives and other employees within Board, the Company’s policy on the remuneration of the Board each country where the Company operates. Chairman, Executive Directors and Senior Managers including The Company does not operate formal employee consultation on employees designated as Code or Identified Staff under the FCA’s remuneration. However, employees are able to provide direct Remuneration Codes. The Remuneration Committee’s terms of feedback on the Company’s Remuneration Policy to their line reference are available on the Company’s website. managers, the Human Resources department or to the Board In determining the Remuneration Policy, the Remuneration directly through our regular process of teams meeting the board, Committee takes into account the following: or individually to the Company’s nominated non-executive director for workforce engagement. –the need to encourage and promote the long-term success of the Company; The Remuneration Committee monitors the effectiveness of the Company’s Remuneration Policy in recruiting, retaining, –the need to attract, retain and motivate talented Executive engaging and motivating employees, and receives reports from Directors and senior management; the Chief Executive Officer on how the Company’s remuneration –consistency with the remuneration principles applied to Ashmore policies are viewed by employees and whether they are meeting employees as a whole; business needs. –external comparisons toexamine current market trends and practices and equivalent roles in similar companies taking into The Remuneration Committee does not seek to apply fixed ratios account their size, business complexity, international scope and between the total remuneration levels of different roles in relative performance; and the Company, as this would prevent it from recruiting and retaining the necessary talent in a highly competitive employment market. –the requirements of the Remuneration Codes of the UK financial However, the base salary multiple between the highest and lowest services regulator. paid UK-based employees in the Company is less than 4.5x. The Remuneration Committee regularly compares the Company’s Remuneration Policy with shareholder guidelines, and takes account of the results of shareholder votes on remuneration. If material changes to the Remuneration Policy arecontemplated, the Remuneration Committee Chairman consults with major shareholders about these in advance. Details of votes cast to approve the Directors’ Remuneration Policy and last year’s Annual Report on Remuneration are provided in the Annual Report on Remuneration section of this report. During the period, the Chairman of the Board, the Chair of the Remuneration Committee and other senior Company representatives engaged with shareholders and proxy voting agencies, both in writing and through formal meetings, in order to provide information and solicit comments and feedback on the Company’s remuneration practices and outcomes, and have considered these discussions as part of their decision-making process. Consistent company-wide approach Policy overview How the views of shareholders are taken into account ��92 Ashmore Group p|lc Annual Report and Accounts 2020 Figure 1 Remuneration Policy (the Policy) for Executive Directors Policy table The table below summarises the key aspects of the Company’s Remuneration Policy for Executive Directors which, if approved by shareholders at the Company’s AGM, will be effective from 16 October 2020. Provides a level of fixed remuneration sufficient to permit a zero Base salaries are capped. bonus payment, should that be appropriate. The cap on base salary helps to contain fixed costs. The current cap is £120,000. The cap is reviewed periodically; the Policy permits the cap to be changed if this is deemed necessary to meet business, legislative or regulatory requirements. Provide cost-effective benefits, to support the wellbeing The Company currently provides benefits such as medical of employees. insurance and life insurance. In the event of relocation of an executive, the Company could consider appropriate relocation assistance. Specific benefits provision may be subject to minor change from time to time, within the Policy. Fringe benefits are not subject to a specific cap, but represent only a small percentage of total remuneration. Provides a basic level of Company contribution, which employees Company contributions are made, normally on a defined can supplement with their contributions. contribution basis, either to a pension plan or in the form of an equivalent cash allowance. The current level of Company contribution is 9% of base salary, with a further matching contribution of up to 1% of base salary, should the Executive Director make a personal contribution of an equivalent amount. The contribution level for Directors is aligned with the general workforce, and is reviewed periodically; the Policy permits the Company-wide contribution rate to be amended if necessary to reflect trends in market practice and changes to pensions legislation. BASE SALARY (FIXED PAY) PURPOSE AND LINK TO SHORT AND LONG-TERM OPERATION, PERFORMANCE MEASURES AND STRATEGY PERIODS, DEFERRAL AND CLAWBACK MAXIMUM OPPORTUNITY FRINGE BENEFITS (FIXED PAY) PURPOSE AND LINK TO SHORT AND LONG-TERM OPERATION, PERFORMANCE MEASURESAND STRATEGY PERIODS, DEFERRAL AND CLAWBACK MAXIMUM OPPORTUNITY PENSION (FIXED PAY) PURPOSE AND LINK TO SHORT AND LONG-TERM OPERATION, PERFORMANCE MEASURES AND STRATEGY PERIODS, DEFERRAL AND CLAWBACK MAXIMUM OPPORTUNITY Ashmore Group p|lc Annual Report and Accounts 2020 93Strategic reportGovernanceFinancial statementsDirectors’ Remuneration Policy continued VARIABLE COMPENSATION (DISCRETIONARY) PURPOSE AND LINK TO SHORT AND LONG-TERM STRATEGY Rewards performance and ensures interests of executives are closely aligned with other shareholders. OPERATION, PERFORMANCE MEASURES AND PERIODS, DEFERRAL AND CLAWBACK Executive Directors are considered each year for a discretionary variable pay award depending on personal and Company performance, by applying a range of performance indicators such as growth in AuM, investment performance, profits, and strategic and operational achievements. The variable pay award comprises a cash bonus (part of which may be voluntarily deferred into restricted shares) and a long-term incentive in the form of both a restricted share award and a restricted matching share award on any voluntarily deferred cash bonus. 1. Cash bonus (60% of total award) The executive may voluntarily commute up to half of the cash bonus in return for the same value in a restricted bonus share award (or phantom equivalent) deferred for five years. The deferred shares are eligible for restricted matching shares (or phantom equivalent) vesting after five years subject to conditions (see 3 below). Long-term incentives under the Company Executive Omnibus Incentive Plan (Omnibus Plan) 2. Restricted shares award (40% of total award) There is no separate long-term incentive plan, rather 40% of the executive’s annual bonus is compulsorily deferred into Company shares (or phantom equivalent) for a period of five years and does not qualify for matching. Half of this deferred portion is subject to additional performance conditions on vesting. The Policy permits the Remuneration Committee to set suitable performance conditions each year for each award type. The performance condition for the most recent awards was a combination of: –(cid:3)33% investment outperformance; relative to the relevant benchmarks over three and five years. –(cid:3)33% growth in AuM; a compound increase in AuM over the five-year performance period. –(cid:3)33% profitability; Ashmore’s diluted earnings per share (EPS) performance relative to a comparator index over the five-year performance period. These performance conditions have been chosen to closely align the remuneration outcomes for the Directors with the performance of the business relative to its KPIs. Targets are set that are appropriately challenging relative to relevant internal and external benchmarks. The maximum level of vesting for achieving threshold performance relative to these performance conditions is 25%. Where required by regulation, the amount of variable pay which is deferred will be increased to ensure compliance with regulatory deferral levels for all variable pay. 3. Restricted matching shares awarded on the voluntarily commuted cash bonus (from 1 above) Matching is provided on the voluntarily commuted cash bonus, subject to the same performance conditions on half of the matching award as that described in 2 above. The maximum match used to date on any award made under the current Policy was one-for-one; the Policy permits the matching level to be changed for future awards but not to exceed three-for-one. Dividends or dividend equivalents on deferred restricted bonus share (or phantom equivalent) awards and on the portion of restricted share and restricted matching share awards that are not subject to a performance condition vesting after five years will be paid out in line with the Company’s dividend payment schedule. Dividends or dividend equivalents on the portion of restricted and restricted matching share (or phantom equivalent) awards which are subject to a performance condition will be accrued and paid out at the time the award vests and to the extent of vesting. For any awards made to a Director prior to his or her appointment as a Director, the dividend or dividend equivalent payments are made on share awards in full, under previous commitments made to participants. The Remuneration Policy permits the award of deferred remuneration in alternative forms such as share options, although none have been granted in recent years, and to vary the percentage split of award between cash and share awards to meet business, legislative or regulatory requirements. Awards will be delivered in the appropriate combination of cash and shares, in line with prevailing regulatory requirements. The combination of cash and instruments will be determined each year by the Committee. The Remuneration Committee also retains discretion, if required by regulation, to include a minimum retention period for incentive awards in addition to or as partial replacement for a deferral period (usually with a combined deferral / retention period of at least five years). 94 Ashmore Group plc | Annual Report and Accounts 2020 MAXIMUM OPPORTUNITY PERSONAL SHAREHOLDING MALUS AND CLAWBACK POST-EMPLOYMENT SHAREHOLDING The Remuneration Committee may, in its discretion, determine The agggreate variable compensation pool for all employees, at any time prior to the sixth anniversary of the date of grant or including executives, is capped, cuyat 25% of earnings such longer period as the Remuneration Committee rrentl before variable compensation, interest and tax (EBVCIT). determines is required by any applicable law or regulation to: The Policy permits the Remuneration Committee to vary this –reduce or extinguish the number of shares to which an cap if necessary to meet business needs. award relates; The Policy is to cap the aggregate sum available for variable –cancel an award; compensation rather than to cap individual variable –impose further conditions on an award; compensation awards. –impose further restrictions on the shares subjectto an award; The high proportion of variable compensation deferral, –require a participant to make a cashpayment to the Company with vesting after five years and subject in part to ongoing in respect of some or all of the shares or cash delivered to performance conditions, encourages a prudent approach to risk him under the award and the basis on which the amount of management, in support of the Company’s risk and compliance cash or shares is calculated including whether and if so to controls. Most importantly, though, the remuneration structure what extent to take account of any tax or social security is designed to support and fit with the long-term strategy of the liability applicable to the award; and/or business. The Group operates in a growth sector which –require a participant to transfer for nil consideration some or experiences market cycles and this aspect of the Remuneration all of the shares delivered to him under the award. Policy plays a key role in providing flexibility in variable costs, enabling key staff retention during times of market stress, and thereby aligns the interests of clients, shareholders and Existing Executive Directors are usually required to build up and employees including Directors through such cycles. then maintain a shareholding equivalent to 200% of salary over the three-year period from October 2017, and from the first five-year vesting date for newly appointed Executive Directors. In addition to the performance condition described above, The minimum number of shares to be held is based on the the Remuneration Committee has the discretion to apply malus closing price of Ashmore Group plc shares on 30 June 2020, and clawback provisions to all elements of variable which was £4.172. remuneration, including to unvested equity awards made in prior periods. The Remuneration Committee may choose to exercise this discretion for a number of reasons, for example: Executive Directors are usually required to maintain a shareholding of 200% of salary for two years post termination –a material misstatement of the Company’s or any other Group of their employment. The minimum number of shares to be company’s financial results; held is based on the market price of Ashmore Group plc shares –an error in assessing a performance condition applicable to an on the year end date of 30 June prior to their termination date award or in the information or assumptions on which the The Committee retains discretion to waive this guideline if it is award was granted or vests; not considered appropriate in the specific circumstances. –a material failure of risk management by the Company, any other Group company or a relevant business unit; –serious reputational damage to the Company, any other Group company or a relevant business unit; –misconduct on the part of the participant; or –any other circumstances which the Remuneration Committee in its discretion considers to be similar in their nature or effect. ��Ashmore Group p|lc Annual Report and Accounts 2020 95Strategic reportGovernanceFinancial statementsDirectors’ Remuneration Policy continued Differences in Remuneration Policy for Executive Directors compared with other employees The Remuneration Policy for the Executive Directors is generally consistent with that for employees across the Company as a whole. However, there are some differences which the Remuneration Committee believes are necessary to reflect the different responsibilities of employees across the Company. Below Executive Director level, while the same five-year deferral policy applies, share awards are not subject to additional performance conditions. Employees other than Executive Directors may elect to receive up to the first £50,000 (or local currency equivalent) of their annual bonus delivered as 90% cash and 10% as restricted shares, rather than in the Company’s usual proportions of 60% cash and 40% restricted shares. External Non-executive Director positions Executive Directors are permitted to serve as Non-executive Directors of other companies where there is no competition with the Company’s business activities and where these duties do not interfere with the individual’s ability to perform his or her duties for the Company. Tom Shippey holds one unpaid external appointment with a charitable organisation unconnected to the asset management industry. Other than as noted above, Executive Directors do not presently hold any external appointments with any non-Ashmore-related companies. Where an outside appointment is accepted in furtherance of the Company’s business, any fees received are remitted to the Company. If the appointment is not connected to the Company’s business, the Executive Director is entitled to retain any fees received. Approach to remuneration for new Executive Director appointments The remuneration package for an externally recruited new Executive Director would be set in accordance with the terms and maximum levels of the Company’s approved Remuneration Policy in force at the time of appointment. In addition, the Remuneration Committee may offer additional cash and/or share-based elements to take account of any remuneration relinquished when leaving the former employer, when it considers these to be in the best interests of the Company (and therefore shareholders). In considering any such payments, the Committee would take account of the nature, vesting dates and any performance requirements attached to the relinquished remuneration. The Committee may determine to make any such recruitment related awards outside the variable pay pool cap. For an internal appointment, any variable pay element awarded in respect of the prior role may be allowed to be paid out according to its terms, adjusted if necessary, to take into account the appointment. For external and internal appointments, the Company may meet certain relocation expenses as appropriate including but not limited to assistance with housing, immigration, taxes and travel. Service contracts and loss of office payment policy Service contracts normally continue until the Executive Director’s agreed retirement date or such other date as the parties agree. The service contracts contain provisions for early termination. Notice periods are limited to 12 months by either party. Service agreements contain no contractual entitlement to receive variable pay; participation in these arrangements is at the Remuneration Committee’s discretion. The Executive Directors’ service contracts are available for inspection at the Company’s registered office during normal business hours. If the employment of an Executive Director is terminated without giving the period of notice required under the contract, the Executive Director would be entitled to claim recompense for up to one year’s remuneration subject to consideration of the obligation to mitigate the loss. Such recompense is expected to be limited to base salary due for any unexpired notice period, and any amount assessed by the Remuneration Committee as representing the value of other contractual benefits and pension which would have been received during the period. In the event of a change of control of the Company, there is no enhancement to these terms. In summary, the contractual provisions are as follows: Provision Detailed terms Notice period 12 months Termination payment in the event of termination by the Company without due notice Base salary plus value of benefits (including pension) paid monthly and subject to mitigation Change of control Same terms as above on terminationAny outstanding share-based entitlements granted to an Executive Director under the Company’s share plans will be determined based on the relevant plan rules. An Executive Director’s service contract may be terminated without notice and without any further payment or compensation, except for sums accrued up to the date of termination, on the occurrence of certain events such as gross misconduct. The Committee reserves the right to make any other payments in connection with a director’s cessation of office or employment where the payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of a compromise or settlement of any claim arising in connection with the cessation of a director’s office or employment. Any such payments may include but are not limited to paying any fees for outplacement assistance and/or the director’s legal and/or professional advice fees in connection with cessation of office or employment and/or retirement gifts. 96 Ashmore Group plc | Annual Report and Accounts 2020 Incentive plan discretions Non-executive Directors Compliance with the Remuneration Codes Reward scenarios Legacy arrangements The Remuneration Committee will operate the current share plans Non-executive Directors are engaged under letters of appointment in accordance with their respective rules and the policy set out and do not have contracts of service. They are appointed for an above, and in accordance with the Listing Rules and relevant initial three-year period, subject to annual shareholder re-election. legislation or regulation. As is consistent with market practice, Their continued engagement is subject to the requirements of the the Remuneration Committee retains discretion over a number Company’s Articles relating to the retirement of Directors by of areas relating to operating and administrating these plans. rotation. The letters of appointment are available for inspection at These include (but are not limited to) the following: the Company’s registered office during normal business hours.Who participates in the plans; The timing of the grant of an award and/or payment; The Remuneration Committee regularly reviews its Remuneration Policy’s compliance with the principles of the Remuneration Codes The size of an award and/or a payment within the plan limits of the UK financial services regulator, as applicable to Ashmore. approved by shareholders; The Remuneration Policy is designed to be consistent with the The choice of (and adjustment of) performance measures and prudent management of risk, and the sustained, long-term targets in accordance with the policy set out above and the rules performance of the Company. of each plan (including the treatment of delisted companies for the purpose of the TSR comparator group); Discretion relating to the measurement of performance in the event The Company’s Policy results in the majority of the remuneration of a change of control or reconstruction; received by the Executive Directors being dependent on performance, and being deferred for five years into Determination of a good leaver (in addition to any specified restricted shares. categories) for incentive plan purposes, based on the rules of each plan and the appropriate treatment under the plan rules; As noted earlier, the policy is not to cap individual awards, but rather the agggreate pool. As such, it is not possible to demonstrate Adjustments required in order to comply with any new regulatory maximum remuneration levels. In lieu of this, the minimum (fixed) requirements which the Company is compelled to adhere to; and remuneration is illustrated in Figure 2, which provides an indication Adjustments required in certain circumstances (e.g. rights issues, of the potential range of total remuneration using the highest and corporate restructuring, special dividends and on a change of control). lowest variable pay awards in a rolling five-year period. The variable pay awards are shown assuming full vesting five years later of the Any use of the above discretions would, where relevant, be long-term incentivecomponents based on achievement relative to explained in the Annual Report on Remuneration. As appproriate, the performance conditions, both at the grant price and also with it might also be the subject of consultation with the Company’s 50% share pricegoth. rw major shareholders. The Committee may make minor amendments to this policy (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder approval for that amendment. For the avoidance of doubt, this Policy includes authority for the Companyto honour any commitments entered into with current or former Directors that have been disclosed to shareholders in previous Remuneration reports. Details of any payments to former Directors will be set out in the Annual Report on Remuneration as they arise. Ashmore Group p|lc Annual Report and Accounts 2020 97Strategic reportGovernanceFinancial statementsDirectors’ Remuneration Policy continued Figure 2 Figure 3 –(cid:3)Fees policy for the Board Chairman and other Non-executive Directors Element Purpose and link to strategy Operation Maximum –(cid:3)Board Chairman fee –(cid:3)To pay an all-inclusive basic fee that takes account of the role and responsibilities –(cid:3)The Board Chairman is paid a single fee for all his responsibilities. The level of the fee is reviewed periodically by the Committee, with reference to market levels in comparably sized FTSE companies, and a recommendation is then made to the Board (without the Chairman being present) –(cid:3)The Board Chairman may also be paid expenses in relation to the performance of his role –(cid:3)The overall fees payable to Non-executive Directors will remain within the limit stated in the Articles of Association, currently £750,000 –(cid:3)The current level of fees is disclosed in the Annual Report on Remuneration –(cid:3)Non-executive Director fees –(cid:3)To pay an all-inclusive basic fee that takes account of the role and responsibilities –(cid:3)The Non-executive Directors are paid a single inclusive basic fee. There are no supplements for Committee Chairmanships or memberships; the fee levels are reviewed periodically by the Chairman and Executive Directors –(cid:3)The Non-executive Directors may also be paid expenses in relation to the performance of their roles –(cid:3)The overall fees payable to Non-executive Directors will remain within the limit stated in the Articles of Association, currently £750,000 –(cid:3)The current level of fees is disclosed in the Annual Report on Remuneration CEOExecutive Director total remuneration at different levels of performance (£’000) PensionShare bonus (face value using share price at grant)Base salaryCash bonusLTI: restricted shares and matching awards (face value using share price at grant)(cid:36)(cid:71)(cid:80)(cid:71)(cid:386)(cid:86)(cid:85)Additional value created should LTI increase in value by 50%Fixed/MinimumLowest pay (cid:84)(cid:71)(cid:69)(cid:71)(cid:75)(cid:88)(cid:71)(cid:70)(cid:2)(cid:75)(cid:80)(cid:2)(cid:386)(cid:88)(cid:71)(cid:2)(cid:91)(cid:71)(cid:67)(cid:84)(cid:2)rolling periodHighest pay (cid:84)(cid:71)(cid:69)(cid:71)(cid:75)(cid:88)(cid:71)(cid:70)(cid:2)(cid:75)(cid:80)(cid:2)(cid:386)(cid:88)(cid:71)(cid:2)(cid:91)(cid:71)(cid:67)(cid:84)(cid:2)rolling periodFixed/MinimumLowest pay (cid:84)(cid:71)(cid:69)(cid:71)(cid:75)(cid:88)(cid:71)(cid:70)(cid:2)(cid:75)(cid:80)(cid:2)(cid:386)(cid:88)(cid:71)(cid:2)(cid:91)(cid:71)(cid:67)(cid:84)(cid:2)rolling periodHighest pay (cid:84)(cid:71)(cid:69)(cid:71)(cid:75)(cid:88)(cid:71)(cid:70)(cid:2)(cid:75)(cid:80)(cid:2)(cid:386)(cid:88)(cid:71)(cid:2)(cid:91)(cid:71)(cid:67)(cid:84)(cid:2)rolling period£116£11289%2%9%£1,35549%22%1%19%9%£1,76221%21%50%1%7%£116£5,86217%25%56%£5,861.92%86%6%8%86%6%8%£0£1,000£2,000£3,000£4,000£5,000£6,000CFO98 Ashmore Group plc | Annual Report and Accounts 2020Annual report on remuneration This part of the report has been prepared in accordance with Part 3 of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and 9.8.6R of the Listing Rules. The table below sets out the remuneration received by the Directors in the year ending 30 June 2020. Figure 4 Remuneration for the year ending 30 June 2020 – audited information Executive Directors Mark Tom Clive David Dame CoombsShippeyAdamsonBennett Jennifer BinghamAnne Pringle DCMG 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 1.Benefits for both Executive Directors include membership of the Company medical scheme, and for Mark Coombs includes the Company’s contribution towards transportation costs in relation to his role. 2.Benefits for David Bennett relate to transportation costs and the associated income tax and national insurance costs in relation to his role. 3.Long-term incentives vesting relates to share awards with performance conditions where the performance period has ended in the relevant financial year plus the value of any dividend equivalents. 4.The figure of £997,173 shown as the value of Mark Coombs’ 2019 Long Term Incentives Vesting reflects £44,706 of share price depreciation over the period between grant and vest. The figure of £369,311 shown as the value of Tom Shippey’s 2020 Long Term Incentives Vesting includes £114,920 of share price appreciation over the period between grant and vest. 5.In respect of the year ending 30 June 2019, Mark Coombs chose to waive 10% of any element of his potential non-AIF related variable remuneration award in return for the Remuneration Committee considering and approving a contribution to charity or charities nominated by himself in the form of phantom share awards; the numbers in the table above exclude any waived variable remuneration. Had he not waived these amounts, Mark Coombs’ total bonus in respect of the year ending 30 June 2019 prior to any voluntary deferral of cash in favour of an equivalent amount of bonus share or phantom bonus share awards would have been £2,400,000. 6.Mark Coombs and Tom Shippey may voluntarily defer up to 50% of their cash bonus in favour of an equivalent amount of bonus share or phantom bonus share awards and an equivalent value in matching share or phantom matching share awards. All share or phantom share awards will be reported in the Directors’ share and phantom share award tables in the year of grant. Both Mark Coombs and Tom Shippey chose to commute 50% of their cash bonus in 2019 for an equivalent value in bonus share awards. Tom Shippey chose to commute 50% of his cash bonus in 2020 for an equivalent value in bonus share awards. Bonus shares are deferred for five years with no service condition attached. 7.From the year ending 30 June 2015 onward, additional performance conditions are applied to 50% of any restricted or matching share award. The amounts shown in the column labelled mandatorily deferred share bonus represent the 50% of restricted and matching share awards that do not have additional performance conditions attached. These amounts represent the cash value of shares awarded at grant, which will vest after five years subject to continued employment. 8.In order to comply with the Alternative Investment Fund Managers Directive Tom Shippey received a proportion of his bonus which would have otherwise been delivered in cash, as an additional award of restricted shares which will vest after a retention period. In 2020, the value of this award for Mark Coombs was £0 (FY2018/19: £36,000), and for Tom Shippey was £10,800 (FY2018/19: £12,000). 9.In respect of prior year deferred share awards which have been waived to charity, any dividend equivalents associated with the amounts waived are paid directly to the nominated charities. The figures shown exclude the amounts waived. 10.Dividends or dividend equivalents were paid relating to voluntarily and mandatorily deferred share or phantom share awards in the period. 11.Mark Coombs receives cash in lieu of a pension contribution. Tom Shippey’s pension contribution includes an employee contribution via salary sacrifice; in 2020 this was £500 (2019: £500). 12.Total short-term benefits for key management personnel, including salary and fees, taxable benefits and cash bonuses, as reported in note 28 of the financial statements is £840,257 in 2020.13.The committee exercised its discretion to not make an award to the CEO this year and to determine the CFO’s variable remuneration based on various factors. The discretion has not been exercised as a result of share price appreciation or depreciation for annual incentives and LTIPs. 1, 5, 9, 10, 11, 131, 7, 8, 10, 132Salary and fees 100,000 100,000 82,013 130,583 60,000 70,519Taxable benefits 7,6272,395 2,631 –––Pensions 9,00010,000–– ––Cash bonus 781,200288,000–– ––Voluntarily deferred share bonus 817,200300,000– –––Mandatorily deferred share bonus 892,800362,000– –––Total bonus 2,491,200950,000–– ––Long-term incentives vesting 997,173––– ––Total for year ending 30 June 2020 Total for year ending 30 June 2019 3,605,0001,062,39582,013133,214 60,00070,519Total Fixed Remuneration 116,627112,39582,013133,214 60,00070,519–Total Variable Remuneration 3,488,373950,000–– ––2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 100,000 100,000 85,000 150,000 60,000 75,0007,2032,258 –1,597 ––9,00010,000–– –––259,200–– –––270,000–– ––325,800– –––––855,000–– ––– 369,311 –– ––116,2031,336,56985,000 151,597 60,000 75,000116,203112,25885,000 151,597 60,000 75,0001,224,311–– ––673, 412��Ashmore Group p|lc Annual Report and Accounts 2020 99Strategic reportGovernanceFinancial statementsAnnual report on remuneration continued For additional information, Figure 5 shows the history of financial results for the last five years. Figure 5 Five-year summary of financial results 2020 2019 2018 2017 2016 AuM US$ billion (at period end) 83.691.873.9 58.752.6Operating profit £ million 209.7202.8176.5 166.8137.9Figure 6 Long-term incentive awards made during the year ended 30 June 2020 – audited information Name Type of award No. of shares Date of award Share award price3 (£) Face value(£) Face value (% of salary) Performance period end date Mark Coombs1, 2 Restricted shares 248,580 13 September 2019£4.3833£1,089,6011090% 12 September 2024Mark Coombs1, 2 Matching shares 186,435 13 September 2019£4.3833£817,201817% 12 September 2024Tom Shippey2 Restricted shares 91.256 13 September 2019£4.3833 £400,002 400% 12 September 2024Tom Shippey2 Matching shares 68,442 13 September 2019£4.3833 £300,002 300% 12 September 20241.(cid:3)In respect of the year ended 30 June 2019, Mark Coombs chose to waive 10% of any element of his potential non AIF related variable remuneration award in return for the Remuneration Committee considering and approving a contribution to charity or charities nominated by himself; the numbers in Figure 6 exclude any waived variable remuneration. 2.(cid:3)In addition, executives voluntarily defer their bonus into shares in order to receive an equivalent level of matching shares and are also required under the AIFMD rules to defer a portion of their cash bonus for six months. These awards are not subject to any performance conditions and full details can be found in Figure 9. 3.(cid:3)Based on the five day average share price prior to the grant date. Long-term incentive awards made during the year ended 30 June 2020 – performance conditions Figure 6 provides details of the long-term incentive awards that were made during the year. These represent the restricted and matching share awards, 50% of which are subject to additional performance conditions, and will vest on the fifth anniversary of the award date, to the extent that the performance conditions are met. The remaining 50% are subject to continued employment. The performance conditions for the most recent awards were a combination of: –(cid:3)33.3% investment outperformance, relative to the relevant benchmarks over three and five years. –(cid:3)33.3% growth in assets under management, demonstrated through a compound increase in AuM over the five-year performance period. –(cid:3)33.3% profitability, demonstrated through Ashmore's diluted earnings per share (EPS) performance relative to a comparator index over the five-year performance period. The performance conditions’ vesting scale and TSR peer group are shown in Figures 7 and 8 respectively. 100 Ashmore Group plc | Annual Report and Accounts 2020 Figure 7 Performance conditions’ vesting scale Chief Executive’s 2014 long-term incentive awards Performance and vesting outcome for the Group Financial Director’s 2014 long-term incentive awards which vested during the year ended 30 June 2020 Performance condition Performance % of award vesting Investment outperformance Below 50% of assets outperforming the benchmarks Zero over three and five years 50% of assets outperforming the benchmarks over 25% three and five years Between 50% and 75% of assets outperforming the Straight-line proportionate vesting benchmarks over three and five years 75% or above of assets outperforming the 100% benchmarks over three and five years Growth in assets under management Below 5% compound increase in AuM over the Zero five-year performance period 5% compound increase in AuM over the five-year 25% performance period Between 5% and 10% compound increase in AuM Straight-line proportionate vesting over the five-year performance period 10% or above compound increase in AuM over the 100% five-year performance period Profitability – Ashmore’s diluted EPS Below the benchmark return Zero performance relative to a combination of At the benchmark return 25% Emerging Market indices representative Between the benchmark return and 10% Straight-line proportionate vesting of the markets in which Ashmore invests, outperformance determined by the Remuneration At or above 10% outperformance relative to the 100% Committee and based on the underlying benchmark return structure of the business. In 2014 Mark Coombs did not receive an annual bonus or long-term incentive award, reflecting the performance of the business at that time. During the period, shares awarded to Tom Shippey in 2014 reached their vesting date. On the vesting date, all bonus shares vested, and the TSR performance condition was applied to the vesting of restricted and matching shares, based on calculations and advice provided by Aon. The Company’s TSR was 83.4%, which ranked Ashmore at 1.94 relative to the TSR peer group of 15 companies; the upper quartile rank which would have resulted in 100% vesting was 4.25 or a TSR of 61.2%. Therefore 100% of the restricted and matching share awards vested. Ashmore Group p|lc Annual Report and Accounts 2020 101Strategic reportGovernanceFinancial statementsAnnual report on remuneration continued Figure 8 TSR peer group Company Country of listing Company Country of listing Aberdeen Asset Management (removed in August 2017) UK Henderson Group (removed in May 2017) UK Affiliated Managers USA Invesco USA AGF Management (2013 and 2014 awards only) Canada Janus Capital Group (Removed in May 2017) USA Alliance Bernstein USA Janus Henderson Investors (added in May 2017) USA & Australia Azimut (2013 and 2014 awards only) Italy Jupiter Fund Management UK BlackRock USA Man Group UK CI Financial Income Fund Canada Partners Group Holding (2013 and 2014 awards only) Switzerland Eaton Vance USA Schroders UK Federated Investors USA SEI Investments USA Franklin Templeton USA T Rowe Price USA GAM Holding (2015, 2016 and 2017 awards only) Switzerland Waddell and Reed USA The Remuneration Committee decided to remove relative total shareholder return (TSR) as a vesting condition from July 2018 onwards, based upon its observations over the past decade and combined with external advice, that there are no other listed asset managers dedicated to managing investments in Emerging Markets and therefore whose share price is influenced by particular external macroeconomic factors in the same way as Ashmore’s. The TSR peer group therefore relates only to awards granted in 2014, 2015, 2016 and 2017. 102 Ashmore Group plc | Annual Report and Accounts 2020 Figure 9 Outstanding share awards The table below sets out details of Executive Directors’ outstanding share awards. Mark Coombs RS 22 September 2015 £2.4278494,271–––494,271 5 years21 September 2020 RBS 22 September 2015 £2.4278370,703–––370,703 5 years21 September 2020 RMS 22 September 2015 £2.4278370,703–––370,703 5 years21 September 2020 RS 16 September 2016 £3.3955––––– 6 months15 March 2017 RS 16 September 2016 £3.3955161,330161,330 5 years15 September 2021––– RBS 16 September 2016 £3.3955120,999120,999 5 years15 September 2021––– RMS 16 September 2016 £3.3955121,000121,000 5 years15 September 2021––– RS 14 September 2017 £3.2353– 6 months13 March 2018–––– RS 14 September 2017 £3.2353449,542449,542 –––5 years13 September 2022 RBS 14 September 2017 £3.2353337,1565 years13 September 2022337,156 ––– RMS 14 September 2017 £3.2353337,15613 September 2022337,156 5 years––– RS 14 September 2018 £3.3269– 6 months––––13 March 2019 RS 14 September 2018 £3.3269218,342–––218,342 5 years13 September 2023 RBS 14 September 2018 £3.3269163,757–––163,757 5 years13 September 2023RMS 14 September 2018 £3.3269163,757–––163,757 5 years13 September 2023RS 13 September 2019 £4.3833–8,2138,213–– 6 months12 March 2020RS 13 September 2019 £4.3833248,580248,580 –––5 years12 September 2024RBS 13 September 2019 £4.3833186,435186,435 5 years12 September 2024–––RMS 13 September 2019 £4.3833186,435186,435 5 years12 September 2024––– RS – Restricted shares RBS – Restricted bonus shares RMS – Restricted matching shares Type of Number of Granted Vested Lapsed Number of Omnibus Share award shares at during during during shares at Performance Executive award Date of award price 30 June 2019 year year year 30 June 2020 period Vesting/release date 1.In respect of the years ending 30 June 2016, 30 June 2017, 30 June 2018 and 30 June 2019 Mark Coombs chose to waive 10% of his potential non-AIF related variable remunerationaward in return for the Remuneration Committee considering and approving a contribution to a charity or charities nominated by himself. The 'Number of shares at 30 June 2019', 'Granted during year' and 'Number of shares at 30 June 2020' figures are shown excluding the amounts waived. On the vesting/release date, any shares waived to charity will vest to them to the extent that any relevant performance conditions have been satisfied. 2111211121112111 Total 3,308,716629,6638,213515,9073,930,166 � KEY Ashmore Group p|lc Annual Report and Accounts 2020 103Strategic reportGovernanceFinancial statementsAnnual report on remuneration continued Figure 9 continued Outstanding share awards Executive Type of Omnibus award Date of award Share award price Number of shares at 30 June 2019 Granted during year Vested during year Lapsed during year Number of shares at 30 June 2020 Performance period Vesting/release date Tom Shippey RS 30 September 2014 £3.0900 58,253–58,253––5 years 29 September 2019 RBS 30 September 2014 £3.0900 43,690–43,690––5 years 29 September 2019 RMS 30 September 2014 £3.0900 43,690–43,690––5 years 29 September 2019 RS 22 September 2015 £2.4278 164,757–––164,7575 years 21 September 2020 RBS 22 September 2015 £2.4278 123,568–––123,5685 years 21 September 2020 RMS 22 September 2015 £2.4278 123,568–––123,5685 years 21 September 2020 RS2 16 September 2016 £3.3955 –––––6 months 15 March 2017 RS 16 September 2016 £3.3955 88,353–––88,3535 years 15 September 2021 RBS 16 September 2016 £3.3955 66,265–––66,2655 years 15 September 2021 RMS 16 September 2016 £3.3955 66,265–––66,2655 years 15 September 2021 RS2 14 September 2017 £3.2353 –––––6 months 13 March 2018 RS 14 September 2017 £3.2353 117,455–––117,4555 years 13 September 2022 RBS 14 September 2017 £3.2353 88,091–––88,0915 years 13 September 2022 RMS 14 September 2017 £3.2353 88,091–––88,0915 years 13 September 2022 RS2 14 September 2018 £3.3269 –––––6 months 13 March 2019 RS 14 September 2018 £3.3269 105,204–––105,2045 years 13 September 2023 RBS 14 September 2018 £3.3269 22,544–––22,5445 years 13 September 2023 RMS 14 September 2018 £3.3269 22,544–––22,5445 years 13 September 2023 RS2 13 September 2019 £4.3833 –2,7382,738––6 months 12 March 2020 RS 13 September 2019 £4.3833 –91,256––91,2565 years 12 September 2024 RBS 13 September 2019 £4.3833 –68,442––68,4425 years 12 September 2024 RMS 13 September 2019 £4.3833 –68,442––68,4425 years 12 September 2024Total 1,222,338230,878148,371–1,304,845 2.(cid:3)In order to comply with the Alternative Investment Fund Managers Directive remuneration principles in regard to the delivery of remuneration in retained instruments, a proportion of Mark Coombs’ and Tom Shippey’s cash bonuses relating to the year ending 30 June 2019 were delivered in the form of restricted shares, subject to a six-month retention period, rather than being delivered in cash. These shares vested in full on the date shown and were not subject to any additional performance conditions. KEY RS – Restricted shares RBS – Restricted Bonus shares RMS – Restricted Matching shares The Company’s obligations under its employee share plans can be met by newly issued shares in the Company, or shares purchased in the market by the trustees of the Employee Benefit Trust (EBT). As detailed in the Business review, the EBT continues to make market purchases of shares to satisfy awards. The overall limits on new issuance operated under the existing share plans were established on the listing of the Company in 2006. Under these agreed limits, the number of shares which may be issued in aggregate under employee share plans of the Company over any ten-year period following the date of the Company’s Admission in 2006 is limited to 15% of the Company’s issued share capital. It is expected that all of the awards made to date will be satisfied by the acquisition of shares in the market, thus none of the Company’s obligations under its employee share plans have been met by newly issued shares. As at 30 June 2020, the Company had 6.21% of the Company’s issued share capital outstanding under employee share plans to its staff. Defined benefit pension entitlements None of the Directors has any entitlements under Company defined benefit pension plans. 104 Ashmore Group plc | Annual Report and Accounts 2020 Directors’ shareholding and share interests Share interests of Directors and connected persons at30 June 2020 – audited infor mation Details of the Directors’ interests in shares are shown in the table below. The Director’s Remuneration Policy, approved by binding shareholder vote at the 20 October 2017 AGM, introduced a formal requirement for Executive Directors to build an unrestricted, post vesting shareholding equivalent to 200% of salary, to be built up over the three-year period following the approval of the Remuneration Policy by shareholders or from the first five-year vesting date for newly appointed Executive Directors. The closing price of Ashmore Group plc shares on 30 June 2020 was £4.172 which means that on 20 October 2020 both Mark Coombs and Tom Shippey must hold at least 47,939 unrestricted shares to meet the shareholding requirement. Mark Coombs 243,447,4732,751,116 1,179,050 247,377,639 Tom Shippey 1,451368,910 935,935 1,306,296 Clive Adamson 2,051– – 2.051 David Bennett 11,619– – 11,619 Jennifer Bingham 0– – 0 Dame Anne Pringle DCMG 4,288– – 4,288 thFigure 10 Outstanding restricted and Outstanding voluntarily deferred Beneficially owned matching share awards bonus share awards Total interest in shares 1.Half of the restricted shares and matching shares awarded in 2015, 2016, 2017, 2018 and 2019 are subject to performance conditions. 2.Voluntarily deferred bonus shares are not subject to performance conditions. 3.Save as described above, there have been no changes in the shareholdings of the Directors between 30 June and 10 September 2020 The Directors are permitted to hold their shares as collateral for loans with the express permission of the Board. 123Executive Directors Non-executive Directors ��Ashmore Group p|lc Annual Report and Accounts 2020 105Strategic reportGovernanceFinancial statementsAnnual report on remuneration continued Figure 11 Percentage change in the remuneration of the Executive Directors and the fees of Non-executive Directors relative to the remuneration of a relevant comparator employee 2019 to 2020 % change 2018 to 2019 % change 2017 to 2018 % change 2016 to 2017 % change 2015 to 2016 % change Mark Coombs base salary 0%0%0% 0%0%Tom Shippey base salary 0%0%0% 0%0%Clive Adamson fees2 4%22%13% 29%David Bennett fees3, 10 15%63%7% 7%76%Hon Michael Benson fees4 (67%)Jennifer Bingham fees5 0% Simon Fraser fees6 (50%) 10%29%Peter Gibbs fees7 (69%)0% 38%990%Nick Land fees8 (75%)(27%)Dame Anne Pringle DCMG fees9 6%18%0% 0%0%Relevant Comparator employees base salary 1%3%0% 0%26%Mark Coombs taxable benefits (6%)(8%)(1%) 0%0%Tom Shippey taxable benefits (6%)(4%)8% 10%1%David Bennett taxable benefits2 (39%)103%46% (46%)(2%)Relevant Comparator employees taxable benefits 0%(5%)(9%) 10%1%Mark Coombs annual bonus (100%)50%(50%) 167%(50%)Tom Shippey annual bonus (10%)14%(8%) 27%(25%)Relevant Comparator employees annual bonus (12%)10%5% 22%(13%)1.(cid:3)Non-executive directors do not receive a bonus. 2.(cid:3)Clive Adamson joined the board on 22/10/15 and chaired the Remuneration Committee from 31/12/17 until 19/10/18, he became the Senior Independent Director and Audit and Risk Committee chair on 19/10/18. 3.(cid:3)David Bennett joined the board on 30/10/14 and chaired the Audit and Risk Committee from 22/10/15 until 19/10/18, he acted as Senior Indpendent Director from 31/12/17 until 19/10/18 and was appointed as Chairman on 19/10/18 4.(cid:3)Hon. Michael Benson left the board on 22/10/16, the percentage decrease in fees shown in the 2015 to 2016 % change column is as a result of Michael only working for part of the year. 5.(cid:3)Jennifer Bingham joined the board on 29/06/16 and so was in post for only one day of the 2018 year. 6.(cid:3)Simon Fraser left the board on 31/12/17, and chaired the Remuneration Committee from 30/10/13 until 31/12/17, he acted as Senior Independent Director from 22/10/15 until 31/12/17. The percentage decrease in fees shown in the 2017 to 2018 % change column is as a result of Simon only working for part of the year. 7.(cid:3)Peter Gibbs joined the board on 29/04/15 and left the board on 19/10/18, the percentage increase shown in the 2015 to 2016 % change column is as a result of Peter having been in post for only part of the 2015 year and for the full year in 2016. The percentage decrease in fees shown in the 2018 to 2019 % change column is as a result of Peter only working for part of the year. 8.(cid:3)Nick Land left the board on 21/10/16, he ceased to act as Senior Independent Director effective from 22/10/15. 9.(cid:3)Dame Anne Pringle began to chair the Remuneration Committee on 19/10/18 10.(cid:3)David Bennett’s taxable benefits relate to transportation costs and the associated income tax and national insurance costs in relation to his role. Figure 11 compares the percentage change from 2015 to 2020 in remuneration elements for the Chief Executive, the Group Finance Director and the Non-executive Directors with the average year-on-year change across relevant comparator employees as a whole. Relevant employees are full-time employees of Ashmore Group who have been employed throughout the full performance year. Figures do not include amounts of cash waived to charity. 106 Ashmore Group plc | Annual Report and Accounts 2020 Performance chart Total shareholder return – value of hypothetical £100 holding Chief Executive Relative importance of spend on pay Figure 12 shows the Company’s TSR performance (with dividends reinvested) against the performance of the FTSE 250 and FTSE 100 for the period since 30 June 2010. These indicies have been chosen as they represent companies of a broadly similar market capitalisation to Ashmore. Each point at a financial year end is calculated using an average total shareholder return value over the month of June (i.e. 1 June to 30 June inclusive). As the chart indicates, £100 invested in Ashmore on 30 June 2010 was worth £276 ten years later, compared with £177 for the same investment in the FTSE 100 index, and £236 for the same investment in the FTSE 250 index. Figure 13 shows the total remuneration figure forthe Chief Executive Officer during each of the financial years shown in the TSR chart. The total remuneration figure includes theannual bonus and share awards, which vested based on performance in those years. As there is no cap on the maximum individual bonus award, a percentage of maximum annual bonus is not shown. 2020 £100,000 £7,203£9,000– £116,203––2019 £100,000 £7,627£9,000£2,491,200£997,173 30.23%£3,605,0002018 £100,000 £8,293£9,000£1,261,277– £1,378,570–2017 £100,000 £8,404£9,000£3,071,748£95,574 £3,284,726–2016 £100,000 £8,400 £9,000 £1,083,458 £284,932 £1,485,790 –2015 £100,000 £8,388 £8,000 £2,415,000 £462,159 – £2,993,547 2014 £100,000 £8,934 £7,000 – £452,386 – £568,320 2013 £100,000 £9,330 £7,000 £2,430,000 £421,668 – £2,967,998 2012 £100,000 £9,322 £7,000 £1,620,000 £323,677 – £2,059,999 2011 £100,000 £8,967 £7,000 £3,840,000 £145,962 – £4,101,929 Remuneration paid to or receivable byall employees of the Group (i.e. accounting cost) £82.4m(1%)Average headcount 2981%Distributions to shareholders (dividends and/or share buybacks) £118.3m1%Figure 12 Figure 13 Figure 14 Performance-related Percentage of restrictedAnnual restricted and matching and matching phantomYear ended 30 June Salary Benefits Pension bonus phantom shares vested shares vested Total 1.Performance-related restricted and matching or phantom share equivalent awards vested during the year ending 30 June 2019 plus the value of any dividend equivalents. The sums shown in earlier years relate to dividends or dividend equivalents paid on share or phantom share awards. 2019 to 2020Metric 2019 % change 1�2020 £81.3m 301 £120.0m £)desaber ()£ (eluaV350300250200150100500£276£236£17730 June 1030 June 1130 June 1230 June 1330 June 1430 June 1530 June 1630 June 1730 June 1830 June 1930 June 20Ashmore GroupFTSE 250 IndexFTSE 100 IndexThis graph shows the value, by 30 June 2019, of £100 invested in Ashmore Group on 30 June 2009, compared with the value of £100 invested in the FTSE 100 and FTSE 250 Indices on the same date.Source: FactSetAshmore Group p|lc Annual Report and Accounts 2020 107Strategic reportGovernanceFinancial statementsAnnual report on remuneration continued Statement on implementation of the Remuneration Policy in the year commencing 1 July 2020 Compliance with the 2018 UK Corporate Governance Code and Secondary Legislation The proposed Directors’ Remuneration Policy is subject to a binding shareholder vote at the forthcoming AGM. If approved, the Policy will apply to the performance years ending 30 June 2021, 2022 and 2023. Under the new proposed policy the Remuneration Committee intends to continue to apply broadly the same metrics and weightings to annual variable remuneration in the year ending 30 June 2021 as have been applied in the current period. The committee also intends to apply the same three performance conditions to any long term incentives awards made, these being in relation to investment outperformance, growth in assets under management and profitability. The Company is required to report against the 2018 UK CorporateGovernance Code (the Code) and secondary legislation for the first time in respect of the financial year ending 30June 2020. As noted in the Chair’s letter, Ashmore has a relatively small UK business from a headcount perspective, and as such falls well below the number of UK employees which would require it to report on the CEO to employee pay ratio or on gender pay matters. The Remuneration Committee recognises the statistical challenges of reporting on these topics with such a small group of employees, where the appointment of a single employee can alter reported percentages. However, the Committee is also cognisant of the importance of equality of pay and opportunity for employees irrespective of gender or other factors, and in reviewing the fixed and variable pay of employees will always seek to ensure that pay levels are appproriate and equitable. Ashmore’s pay structure, with relatively low, capped, fixepyd a ensures that employees are paid within a narrow pay band in respect of basic salary, with variabpyle a reflecting the performance of both the Company and the individual. Ashmore has had in place a mechanism for workforce engagement with the Board since 2016 and intends to continue with the existing programme of employees meeting with the board in person after each full board meeting, but in addition, has appointed one of its Non-Executive Directors as its Workforce Engagement Director, which is one of the three methods for workforce engagement prescribed by the Code. Whilst the original arrangements continue to operate effectively, appointment of a Workforce Engagement Director allows employees to initiate contact with the Board at any time and on any topic. It is a Code requirement that the Remuneration Committee oversees and reviews Company-wide remuneration policies and the alignment of incentives and rewards with culture. Both workforce and executive remuneration should be aligned with culture. As described in some detail above, Ashmore’s Remuneration Policy applies to all its employees, which is an important determinant of organisational culture. The Culture and Conduct Risk dashboard is circulated annually to the Committee and the alignment of incentives and rewards with culture is reviewed. As such, we have complied with Code requirements in this regard. The Code also requires that the Remuneration Committee has discretion to override formulaic outcomes of incentive plans. Ashmore does not have a formulaic incentive plan in regard to the setting of annual award levels and as such the Remuneration Committee has complete discretion to set awards at levels it feels are appropriate when all areas have been assessed. The Remuneration Committee also has the flexibility to apply malus to vesting share awards if they believe that there is good reason for doing so, thus giving the Committee the ability to reduce the level of vesting if appropriate. Ashmore’s Remuneration Committee has determined pay levels for all employees identified as Code or Identified staff under the FCA’s Remuneration guidelines since these came into force in 2010. Initially comprising a relatively narrow group of senior control function managers, this was extended through compliance with the Alternative Investment Fund Managers Directive in 2014 to include all UK based senior managers. For the financial year ending 30 June 2020 reported on in the 2020 Annual Report, this has been extended to include any relevant senior managers based outside the UK. The Code requires the Remuneration Committee Chair to have served on the Remuneration Committee for at least a year before taking on the Chair. I have been a member of the Remuneration Committee since 2013 and so Ashmore is in compliance with the Code, and we will seek to ensure that remains the case for future appointments. The Code requires pension contribution rates for Executive Directors to be aligned with those available to the wider workforce. As noted above, this has always been the case under Ashmore’s Remuneration Policy. The current level of Company contribution is 9% of base salary, with a further matching contribution of up to 1% of base salary, should the employee or Executive Director make a personal contribution of an equivalent amount. The contribution level is reviewed periodically and is currently capped at £10,000 per annum. Notwithstanding that the Remuneration Policy allows for the establishment of a significant unvested shareholding, and that Mark Coombs’ position as founder of the Company means his shareholding is substantial, the Remuneration Policy also includes a formal shareholding requirement for Executive Directors. This is set at 200% of salary, to be established by October 2020 (based on the market price of Ashmore Group plc shares on the previous year end date of 30 June) for the current Executive Directors, and from the first five-year vesting date for newly-appointed Executive Directors. The new Code also requires the implementation of a post-employment shareholding policy, which has been included within the Directors Remuneration policy, to be proposed for approval by shareholders at the forthcoming AGM, and which will come into force with effect from the AGM should the policy be approved. This policy will require Executive Directors to maintain a shareholding of 200% of salary (based on the market price of Ashmore Group plc shares on the previous year end date of 30 June prior to their termination of employment) for two years post the termination of their employment. 108 Ashmore Group p|lc Annual Report and Accounts 2020 Membership of the Remuneration Committee External advisers Statement of shareholder voting Approval The members of the Remuneration Committee are listed in the table below. All of these are independent Non-executive Directors, as defined under the Corporate Governance Code, with the exception of the Company Chairman who was independent on his appointment. Dame Anne Pringle DCMG 100%Clive Adamson 100%David Bennett 100%Jennifer Bingham 100%The Company’s CEO attends the meetings by invitation and assists the Remuneration Committee in its decision-making, except when his personal remuneration is discussed. No Directors are involved in deciding their own remuneration. The Company Secretary acts as Secretary to the Remuneration Committee. Other executives may be invited to attend as the Remuneration Committee requests. The Remuneration Committee received independent advice from Aon throughout the period from 1 July 2019 to 14 June 2020. Aon abides by the Remuneration Consultants’ Code of Conduct, which requires it to provide objective and impartial advice. Aon’s fees for the year ending 30 June 2020 were £28,300 and were charged on a time and materials basis. Aon does not provide other services to the Company. At the end of this period, Aon informed the Remuneration Committee that it would be ceasing to provide remuneration consulting services. The Remuneration Committee undertook a selection process to determine which firm should provide these services to the Committee for the year commencing 1 July 2020, and Deloitte was selected. At last year’s AGM, the Directors’ Remuneration report received the following votes from shareholders: Votes cast in favour 481,052,71384.83%Votes cast against 86,023,84415.17%Total votes cast 567,076,557100.00%Abstentions 26,472,846N/AAt the 2017 AGM, the Directors’ Remuneration Policy received the following votes from shareholders: Votes cast in favour 515,865,05485.05%Votes cast against 90,707,20214.95%Total votes cast 606,572,256100.00%Abstentions 1,151,359N/AThis Directors’ Remuneration report including both the proposed Directors’ Remuneration Policy and the Annual Report on Remuneration has been approved by the Board of Directors. Signed on behalf of the Board of Directors. Chair of the Remuneration Committee 10 September 2020 Remuneration Committee attendance Figure 15 Percentage of meetings attended out of potential maximum 2019 AGM resolution to approve the Directors’ Remuneration report % of for the year ended 30 June 2019 votes cast 2017 AGM resolution to approve the Directors’ Remuneration report % of for the year ended 30 June 2018, 2019 and 2020 votes cast Remuneration Report Remuneration Policy Dame Anne Pringle DCMG Ashmore Group p|lc Annual Report and Accounts 2020 109Strategic reportGovernanceFinancial statementsStatement of Directors’ responsibilitiesThe Directors are responsible for preparing the Annual Report and the Group and parent company financial statements in accordance with applicable law and regulations. The names and functions of the Directors are listed on pages 61, 62 and 68 of the Annual Report.Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and applicable law and have elected to prepare the parent company financial statements on the same basis.Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit and loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to: –select suitable accounting policies and then apply them consistently; –make judgements and estimates that are reasonable, relevant and reliable; –state whether they have been prepared in accordance with IFRSs as adopted by the EU; –assess the Group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and –use the going concern basis of accounting unless they either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors’ report, Directors’ remuneration report and corporate governance statement that comply with that law and those regulations.The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.Responsibility statement of the Directors in respect of the annual financial reportWe confirm that to the best of our knowledge: –the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and –the Strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.David BennettChairman10 September 2020110 Ashmore Group plc | Annual Report and Accounts 2020Directors’ reportThe Directors present their Annual Report and financial statements for the year ended 30 June 2020.The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.Principal activity and business reviewThe principal activity of the Group is the provision of investment management services. The Company is required to set out in this report a fair review of the business of the Group during the financial year ended 30 June 2020 and of the position of the Group at the end of that financial year and a description of the principal risks and uncertainties facing the Group (referred to as the Business review). The information that fulfils the requirements of the Business review, along with an indication of the likely future developments in the business, can be found in the financial highlights on the inside front cover, the Chief Executive Officer’s review on pages 14 to 17, the Business review on pages 28 to 34 and the Corporate governance report on pages 63 to 74.The Group's approach to financial risk management and the principal risks facing the business, including price risk, credit risk, liquidity risk and cash flow risk and a description of the risk management policy are detailed on pages 35 to 41.Results and dividendsThe results of the Group for the year are set out in the consolidated statement of comprehensive income on page 123.The Directors recommend a final dividend of 12.10 pence per share (FY2018/19: 12.10 pence) which, together with the interim dividend of 4.80 pence per share (FY2018/19: 4.55 pence) already declared, makes a total for the year ended 30 June 2020 of 16.90 pence per share (2019: 16.65 pence). Details of the interim dividend payment are set out in note 14 to the financial statements.Subject to approval at the Annual General Meeting, the final dividend will be paid on 11 December 2020 to shareholders on the register on 6 November 2020 (the ex-dividend date being 5 November 2020).Related party transactionsDetails of related party transactions are set out in note 28 to the financial statements.Post-balance sheet eventsThere were no post balance sheet events requiring adjustment or disclosure herein.DirectorsThe members of the Board together with their biographical details are shown on pages 61 to 62. All members of the Board served as Directors throughout the year.Details of the service contracts of the current Directors are described on page 115..Under the Articles, the minimum number of Directors is two and the maximum is nine. Directors may be appointed by the Company by ordinary resolution or by the Board. A Director appointed by the Board must offer himself/herself for election at the next Annual General Meeting of the Company following their appointment, but he or she is not taken into account in determining the Directors or the number of Directors who are to retire by rotation at that meeting. Notwithstanding these provisions, the Board has adopted provision 18 of the 2018 Code and all Directors will retire and seek re-election at each Annual General Meeting. The Listing Rules require that the election/re-election of independent directors is by a majority of votes cast by independent shareholders as well as by a majority of votes cast by all shareholders. The Board confirms that the Company and Mark Coombs entered into a relationship agreement on 1 July 2014 as required under UK Listing Rule 9.2.2ADR(1); and that: (i) the Company has complied with the independence provisions included in that agreement; (ii) so far as the Company is aware, Mark Coombs has complied with the independence provisions included in that agreement; and (iii) so far as the Company is aware, Mark Coombs has complied with the procurement obligation included in that agreement pursuant to UK Listing Rule 9.2.2BR(2)(a), in each case during the financial reporting period ending on 30 June 2020. DiversityThe Nominations Committee and the Board recognise the importance of diversity and believe that this is a wider issue than solely gender. The Committee will make recommendations to the Board concerning the diversity policy of the Group, ensuring that candidate pools for Board or senior management appointments (whilst being assembled on merit and objective criteria) wherever possible include candidates of different gender, ethnic and social backgrounds. The Nominations Committee, in assessing the suitability of a prospective Director, will consider whether the candidate is ‘overboarded’ and has sufficient time available to discharge their duties and the overall balance of skills, experience and knowledge on the Board. The Board currently consists of two Executive and four Non-executive Directors, of whom two are female. The Nominations Committee from time to time engages the services of an external search consultant for the purpose of seeking new candidates for Board membership, conditional upon such consultant having no connection to the Company.It is Ashmore’s policy to attract and retain a diverse workforce. Whilst there are no quotas set in respect of gender, age or educational or professional background, Ashmore is committed to providing equal opportunities and seeks to ensure that its workforce reflects, as far as is practicable, the diversity of the many communities in which it operates. As at 30 June 2020 Ashmore employed 36 different nationalities throughout the organisation. Details of the gender balance across the Group and in relation to senior management and their direct reports are provided on page 48. It is the Group’s policy to give appropriate consideration to applications from disabled persons, having regard to their particular aptitudes and abilities. For the purposes of training, career development and progression (including those who become disabled during the course of their employment) all are treated on equal terms with other employees.Insurance and indemnification of DirectorsDirectors’ and officers’ liability insurance is maintained by the Company for all Directors. To the extent permissible by law, the Articles of Association also permit the Company to indemnify Directors and former Directors against any liability incurred whilst serving in such capacity.Ashmore Group plc | Annual Report and Accounts 2020 111Financial statementsGovernanceStrategic reportDirectors’ conflicts of interestThe Companies Act 2006 imposes upon Directors a statutory duty to avoid unauthorised conflicts of interest with the Company. The Company’s Articles of Association enable Directors to approve conflicts of interest and also include other conflict of interest provisions. The Company has implemented processes to identify potential and actual conflicts of interest. Such conflicts are then considered for approval by the Board, subject, where necessary, to appropriate conditions.Save as disclosed on page 61, Executive Directors do not presently hold any external appointments with any non-Ashmore-related companies.Directors’ share interestsThe interests of Directors in the Company’s shares are shown on page 105 within the Annual report on remuneration.Significant agreements with provisions applicable to a change in control of the CompanySave as described, there are no agreements in place applicable to a change in control of the Company.Resolution 18 in the Notice of Annual General Meeting will seek approval from shareholders to a waiver of the provisions of Rule 9 of the Takeover Code in respect of the obligation that could arise for Mark Coombs to make a mandatory offer for the Company in the event that the Company exercises the authority to make market purchases of its own shares. Further details will be contained in the separate Notice of AGM.Substantial shareholdingsThe Company has been notified of the following significant interests in accordance with the Financial Conduct Authority’s (FCA) Disclosure and Transparency Rules (other than those of the Directors which are disclosed separately on page 105) in the Company’s ordinary shares of 0.01 pence each as set out in the table below. Substantial shareholdings1 (as disclosed to the Company in accordance with DTR 5) Number of voting rights disclosed as at 30 June 2020Percentageinterests3Number of voting rights disclosed as at 10 September 2020Percentageinterests3Overseas Pensions and Benefits Limited (formerly Carey Pensions and Benefits Limited) as Trustees of the Ashmore 2004 Employee Benefit Trust250,648,181 7.1050,648,181 7.10Standard Life Aberdeen plc49,997,436 7.01 49,997,4367.01Schroders plc34,589,1044.85 34,589,1044.85Allianz Global Investors GmbH32,695,2204.5832,695,2204.58UBS Group AG27,343,9293.8427,343,9293.841. The shareholding of Mark Coombs, a Director and substantial shareholder, is disclosed separately on page 105.2. In addition to the interests in the Company’s ordinary shares referred to above, each Executive Director and employee of the Group has an interest in the Company’s ordinary shares held by Overseas Pensions and Benefits Limited (formerly Carey Pensions and Benefits Limited) under the terms of the Ashmore 2004 Employee Benefit Trust (EBT). The voting rights disclosed for the EBT in this table reflect the last notification made to the Company in accordance with DTR 5. The actual number of shares held by the EBT as at 30 June 2020 is disclosed in note 23 to the financial statements.3. Percentage interests are based upon 712,740,804 shares in issue (2019: 712,740,804).Relations with shareholdersThe Company places great importance on communication with its investors and aims to keep shareholders informed by means of regular communication with institutional shareholders, analysts and the financial press throughout the year. During the year the Chairman of the Board and the Chair of the Remuneration Committee engaged with the Company’s major shareholders in relation to remuneration and corporate governance. Further details are provided in the Annual Report at pages 63 and 64.Annual and interim reports and quarterly assets under management updates are widely distributed to other parties who may have an interest in the Group’s performance. These documents are also made available on the Company’s website where formal regulatory information service announcements are posted. The Chief Executive Officer and Group Finance Director report to the Board on investor relations and on specific discussions with major shareholders and the Board receives copies of research published on the Company. The Company will be issuing a separate circular and notice of meeting in respect of this year's AGM. This will include details of any special arrangements that may be required as a result of the COVID-19 pandemic. The Group will announce via a regulatory information service the number of votes cast on resolutions at the Annual General Meeting.The Senior Independent Director is available to shareholders if they have concerns which contact through the normal channels of Chairman, Chief Executive Officer or Group Finance Director has failed to resolve or for which such contact is inappropriate. The Company continues to offer major shareholders the opportunity to meet any or all of the Chairman, the Senior Independent Director and any new Directors.Share capitalThe Company has a single class of share capital, ordinary shares of 0.01 pence, each of which rank pari passu in respect of participation and voting rights. The shares are in registered form. The issued share capital of the Company at 30 June 2020 was 712,740,804 shares. There were no shares held in Treasury.Details of the structure of and changes in share capital are set out in note 22 to the financial statements.Restrictions on voting rightsA member shall not be entitled to vote at any general meeting or class meeting in respect of any share held by him if any call or other sum then payable by him in respect of that share remains unpaid or if a member has been served with a restriction notice (as defined in the Articles of Association) after failure to provide the Company with information concerning interests in those shares required to be provided under the Companies Act. Votes may be exercised in person or by proxy. The Articles of Association currently provide a deadline for submission of proxy forms of 48 hours before the meeting.Directors’ report continued112 Ashmore Group plc | Annual Report and Accounts 2020Purchase of own sharesIn the year under review, the Company did not purchase any of its own shares for Treasury. The Company is, until the date of the next Annual General Meeting, generally and unconditionally authorised to buy back up to 35,637,040 of its own issued shares. The Company is seeking a renewal of the share buyback authority at the 2020 Annual General Meeting.Power to issue and allot sharesThe Directors are generally and unconditionally authorised to allot unissued shares in the Company up to a maximum nominal amount of £23,758.03 (and £47,516.05 in connection with an offer by way of a rights issue).A further authority has been granted to the Directors to allot the Company’s shares for cash, up to a maximum nominal amount of £23,758.03, without regard to the pre-emption provisions of the Companies Acts. No such shares have been issued or allotted under these authorities, nor is there any current intention to do so, other than to satisfy outstanding obligations under the employee share schemes where necessary.These authorities are valid until the date of the next Annual General Meeting. A resolution for the renewal of such authorities will be proposed at the 2020 Annual General Meeting.EmployeesDetails of the Company’s employment practices (including the employment of disabled persons) can be found in the Sustainability section on pages 48 to 60.Overseas Pensions and Benefits Limited (formerly Carey Pensions and Benefits Limited) as trustee of the Ashmore 2004 Employee Benefit Trust has discretion as to the exercise of voting rights over shares which it holds in respect of unallocated shares, namely those shares in which no employee beneficial interests exist.Corporate governanceThe Company is governed according to the applicable provisions of company law and by the Company’s Articles. As a listed company, the Company must also comply with the Listing Rules and the Disclosure Guidance and Transparency Rules issued by the United Kingdom Financial Conduct Authority (FCA). Listed companies are expected to comply as far as possible with the Financial Reporting Council’s UK Corporate Governance Code, and to state how its principles have been applied. There is a report from the Chairman on corporate governance on pages 63 to 64 and a description of how the Company has complied with each of the Principles of the Code on pages 65 to 66. The Company complied throughout the accounting period under review with all the relevant provisions set out in the Code.Mandatory greenhouse gas emissions reporting and SECR requirementsIn line with the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013, since 1st October 2013 all companies listed on the main market of the London Stock Exchange have been required to report their greenhouse gas emissions (GHG emissions) in their annual report. In addition, effective from 1st April 2019, Ashmore Group plc is also required to adhere to the mandatory Streamlined Energy and Carbon Reporting regulation introduced by the UK Government.Operational control methodologyThe Group has adopted the operational control method of reporting. The emissions reported below are for the 10 offices around the world where the Group exercised direct operational control in the 2019/20 financial year. These office emissions, as well as emissions originating from their operations, are those which are considered material to Ashmore. The Group has a policy of carbon offsetting and further details are provided on page 50.Emission scopesMandatory GHG reporting requires emissions associated with Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity, heating and cooling) to be reported1. Revisions to the GHG Protocol, to which this reporting exercise adheres, require organisations to calculate their Scope 2 emissions both in terms of ‘market-based’ emissions and ‘location-based’ emissions2. This information is set out below.It is not obligatory to report Scope 3 (indirect emissions from the inputs and outputs to the main business activity – i.e. supply chain and consumer/end-user related emissions). However, for completeness, the Group will continue to report on some Scope 3 emission categories in order to offer a wider picture to stakeholders and investors.Exclusions & EstimationWhilst every effort has been made to collect full and consistent data from all international offices, in some cases information was not available. The following approaches were therefore taken to account for this: –In those instances, where a full 12 months' data was not available, estimation techniques have been applied to estimate missing consumption periods. Where no country data was available for the current reporting year, previous years have been used to estimate 2019/20 consumption based on headcount numbers. –A number of offices were only able to provide data for the whole building in which they reside. No sub-metered data was available for each tenant in these cases. In these instances, the share of the total floor area occupied by the Group was used to apportion the total consumption. –Missing, or anomalous, water data was estimated using an average consumption figure of 15m3 per full-time employee, as sourced from a UK-based water company. This figure is broadly consistent with the average ‘per employee’ consumption of those offices which were able to provide data. –For those offices where the landlord utilities charge was the only possible source of data, energy and water consumption have been estimated using the average governmental utility prices for the respective countries. –Where offices were not able to provide any waste data for their buildings it was not deemed appropriate to estimate this, due to the uncertainties surrounding the varying nature of building sizes, modes of working and cities’ waste disposal infrastructure, amongst other factors. It has also not been possible to make use of data supplied in litres, as the density of the waste is unknown. –The Group recharges partner organisations for 50% of the flights which are booked for the UK, Singapore and Japan offices. In order to account for this, only half of all the flight mileage booked by the Group for these offices is included in the GHG footprint. The same methodology is expected to be applied in subsequent years. The USA office recharge rate was confirmed to be 49%.1. Ashmore’s Scope 1 emissions relate to gas combustion and refrigerant usage.Ashmore’s Scope 2 emissions relate to purchased electricity.Ashmore’s Scope 3 emissions relate to water usage, air travel and office waste.2. www.ghgprotocol.org/files/ghgp/Scope%202%20Guidance_Final.pdf.Ashmore Group plc | Annual Report and Accounts 2020 113Financial statementsGovernanceStrategic reportEmissions by source7Emissions by ScopeScopeSource Tonnes CO2e2018/19Absolute totals Tonnes CO2e (2018/19)Tonnes CO2e2019/20Absolute totals Tonnes CO2e (2019/20)Scope 1Natural gas34.6934.6935.1435.14Scope 1Refrigerants0.000.00Scope 2Electricity – location based223.54223.54200.10200.10Scope 2Electricity – market based4223.80223.80233.35233.35Scope 3Air travel748.30754.71407.48421.25Scope 3Water3.933.78Scope 3Waste2.489.99Total (using market-based Scope 2 emissions) 1,013.19 689.731. http://www.ghgprotocol.org/.2. All UK related emissions factors have been selected from the emissions conversion factors published annually by UK Government.: https://www.gov.uk/government/collections/government-conversion-factors-for-company-reporting#conversion-factors-2020.3. All international electricity emissions factors were taken from the International Energy Agency’s statistics report “CO2 Emissions from Fuel Combustion” (2019 Edition). Purchased under license.4. This figure is based on a combination of market based and location based emission factors. Market based emissions factors were provided for one Ashmore office: Japan. This figure uses the market based emission factor for this office. The UK and Ireland offices uses residual mix figures as supply specific emissions factors could not be obtained. All other offices’ Scope 2 emissions are calculated using the location based factor. This figure is hereafter referred to as ‘market-based emissions’.5. FTE 2018/19 = 284.5 employees; FTE 2019/20 = 291.5 employees.6. Using market-based emissions.7. Using market-based emissions.MethodologyAll data has been collected and analysed in line with the GHG Protocol Corporate Accounting and Reporting Standard1. UK Government 2020 emission factors2 have been applied for all calculations, except the international offices’ electricity consumption, for which the International Energy Agency’s 2019 emissions factors3 have been used.The data inputs and outputs have been reviewed by Ricardo Energy & Environment.Consumption and emissionsThe overall GHG emissions decreased by 31.9% compared to the last year. This is primarily due to the impact of the COVID-19 global pandemic which resulted in a reduction in office-based working and air travel. Analysis of the energy efficiency of the new offices demonstrates that more energy efficient buildings are joining the portfolio, however the increase in full time employees overrides the potential emissions reductions. Air travel emissions decreased by 46% due to the effect of the COVID-19 pandemic resulting in a significant reduction in air travel during March to June. This category, however, still remains the largest contributor to the Group’s emissions breakdown with 407 tCO2e (59%). The second largest contributor to the GHG footprint, purchased electricity, has increased slightly this year due to the use of European Residual Mix emission factors for market-based emissions calculations, and now accounts for 233 tCO2e or 34%. Waste, water and refrigerants (based on the available data) account for the lowest levels of emissions.Emissions by SourceEmissions by Source2018/192019/20Natural gas (kWh)188,664191,095Refrigerants (kg)––Electricity (kWh)613,050510,107Air travel (km)4,014,5722,499,532Water (m3)3,7333,588Waste (kg)29,68626,555Total4,849,7063,230,877Emissions have also been calculated using an ‘intensity metric’, which enables the Group to monitor how well it is controlling emissions on an annual basis, independent of fluctuations in the levels of its activity. As the Group is a “people” business, the most suitable metric is ‘emissions per full-time equivalent (FTE) employee’. The Group’s emissions per FTE are shown in the table below. Due to the overall increase in emissions, tonnes of CO2e emitted per FTE has also risen since last year5.Emissions per full-time employeeScopeTonnes CO2e2018/19 Tonnes CO2e2019/20 Scope 10.10.1Scope 260.80.8Scope 32.71.4Total3.62.4Natural gas 35.14 (5.1%)Refrigerants 0.00 (0%)Electricity 233.35 (33.82%)Air travel 407.48 (59.1%)Water 3.78 (0.54%)Waste 9.99 (1.44%)Directors’ report continuedThe Group has continued to undertake actions to improve the energy efficiency of its sites. This includes: –The continued roll-out of LED lighting replacements where appropriate: –Reviewing the weekend and out of hours control of the plant to confirm nothing is mistakenly left on with no demand;114 Ashmore Group plc | Annual Report and Accounts 2020 –The boiler management settings and controls to ensure they are set appropriately with regards to the outside temperature. (including the 2018 boiler replacement); –Practising good “switch off” practices at all times; –Reduction of air travel and development of virtual meetings.CO2 emissions at 61 Aldwych (London – Ashmore’s largest office) have decreased by 22.2% for the period April 2019 to March 2020 when compared to April 2018 to March 2019. 61 Aldwych has exceeded the 5% annual emissions reduction target. Furthermore, the CO2 emissions last quarter (January to March 2020) have decreased by 29.7% against the same quarter in 2019. Overall, the building is performing adequately, with total energy consumption roughly equivalent to the REEB ‘Typical Practice’ benchmark for this type of building. The overall Landlord electricity consumption in Q1 2020 has decreased by 20% when compared to the same period in 2019.Charitable and political contributionsDuring the year, the Group made charitable donations of £0.4 million (FY2018/2019: £0.1 million). Further details of the donations made in connection with the COVID-19 pandemic are provided on page 11. The work of the Ashmore Foundation is described in the Sustainability section of this report on pages 48 to 60. It is the Group’s policy not to make contributions for political purposes.Creditor payment policyThe Group’s policy and practice in the UK is to follow its suppliers’ terms of payment and to make payment in accordance with those terms subject to receipt of satisfactory invoicing. Unless otherwise agreed, payments to creditors are made within 30 days of receipt of an invoice. At 30 June 2020, the amount owed to the Group’s trade creditors in the UK represented approximately 17 days’ average purchases from suppliers (FY2018/19: 15 days).Auditors and the disclosure of information to auditorsThe Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware, and each Director has taken all the steps that they ought to have taken as Directors to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.The summary below provides details of the Directors’ service agreements/letters of appointment:Directors’ service contractsDate appointed DirectorCommencement dateNotice periodExpiry/review dateExecutive directors Mark Coombs3 December 199821 September 20061 yearRolling Tom Shippey25 November 2013 25 November 20131 yearRollingNon-executive directors David Bennett – Chairman30 October 201430 October 20141 month30 October 2020Clive Adamson22 October 201522 October 20151 month22 October 2021Jennifer Bingham29 June 201829 June 20181 month29 June 2021Dame Anne Pringle19 February 201319 February 20131 month19 February 2022Approved by the Board and signed on its behalf by:John TaylorCompany Secretary10 September 2020Resolutions will be proposed at the Annual General Meeting to reappoint KPMG LLP as auditor and to authorise the Audit and Risk Committee to agree their remuneration. Note 11 to the financial statements sets out details of the auditor’s remuneration.2020 Annual General MeetingDetails of the Annual General Meeting (AGM) will be given in the separate circular and Notice of Meeting. A special resolution to adopt revised Articles of Association and a summary of the proposed changes will be included in the circular.Going concernThe Company and Group have considerable financial resources and the Directors believe that both are well placed to manage their business risks successfully. The impact of the COVID-19 pandemic on the Group’s business is described on pages 10 to 11. Further information regarding the Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out on pages 28 to 34.After making enquiries, the Directors are satisfied that the Company and the Group have adequate resources to continue to operate for the next 12 months from the date of this report and confirm that the Company and the Group are going concerns. For this reason they continue to adopt the going concern basis in preparing these financial statements.Companies Act 2006This Directors’ report on pages 111 to 115 inclusive has been drawn up and presented in accordance with and in reliance on English company law and the liabilities of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law.References in this Directors’ report to the financial highlights, the Business review, the Corporate governance report and the Remuneration report are deemed to be included by reference in this Directors’ report.Ashmore Group plc | Annual Report and Accounts 2020 115Financial statementsGovernanceStrategic reportIndependent auditor’s report to the members of Ashmore Group plc only Year ended 30 June 2020 Our opinion is unmodified We have audited the financial statements of Ashmore Group plc (“the Company”) for the year ended 30 June 2020 which comprise the Consolidated statement of comprehensive income, Consolidated balance sheet, Company balance sheet, Consolidated statement of changes in equity, Company statement of changes in equity, Consolidated cash flow statement, Company cash flow statement, and the related notes, including the accounting policies in notes 1 to 4. In our opinion: –(cid:3)the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 30 June 2020 and of the Group’s profit for the year then ended; –(cid:3)the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU); –(cid:3)the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and –(cid:3)the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the Audit and Risk Committee. We were first appointed as auditor of the Company (then Ashmore Group Limited) by the Directors following its incorporation on 30 November 1998. Subsequent to the Company’s conversion into a public limited company and the public listing of its shares on the London Stock Exchange on 3 October 2006, we were reappointed as auditor of Ashmore Group plc by the Directors on 31 October 2007. The period of total uninterrupted engagement is 21 years ended 30 June 2020 (13 years since the Company’s public listing). We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided. Overview Materiality: Group financial statements as a whole £11.0m (2019: £11.0m)5% (2019: 5%) of Group profit before taxCoverage 98% (2019: 95%) of Group profit before tax Key audit matters vs 2019Recurring risks Valuation of level 3 seed capital investments (cid:379)(cid:3)(cid:377)(cid:3) Recoverability of parent Company’s loan to subsidiaries (cid:379)(cid:3)(cid:377)(cid:3) 116 Ashmore Group plc | Annual Report and Accounts 2020 Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and our findings from those procedures in order that the Company’s members as a body may better understand the process by which we arrived at our audit opinion. These matters were addressed, and our findings are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters. –––––––– The risk Our response Valuation of Level 3 Subjective valuation Our procedures included: investments Control design Historical comparisons Methodology choice Our valuations experience Comparing valuations Approximately 7% of the Group’s £77.4 million; (2019: £105.7m) total assets (by value) are held in We obtained an understanding of the Group’s processes for determining investments valued using valuation the fair value of level 3 investments. We documented and assessed the Refer to page 71 (Audit and lise inputs Risk Committee report), techniques that utidesign and implementation of the investment valuation processesand page 133 (accountingp olicy) unobservable in the market controls. (i.e. level 3 investments), and therefore and page 153 (financial these valuations include a level of disclosures). We assessed investment realisations in the year by comparing actual subjectivity due to judgement used in investment disposal proceeds to prior year-end valuations to identify any determining the underlying assumptions significant variances and determine whether they are indicative of bias or and appropriate valuation. error in the Group’s approach to valuations. Where the funds are consolidated We independently obtained and reviewed the latest audited financial (by virtue of the Group having a statements for any exceptions, and compared the audited NAV to the controlling interest in the fund under unaudited NAV as at the same date to assess the reliability of the IFRS 10), the level 3 investments unaudited NAV. comprise the underlying unquoted investment securities within the consolidated funds (unquoted In the context of observed industry best practice and the provisions of the securities). Where the funds are not Internal Private Equity and Venture Capital Valuation Guidelines, we consolidated, the level 3 investments challenged the appproriateness of the valuation basis selected. represent the Group’s proportionate share of the net asset values in the With the assistance from our valuation specialists: funds (unquoted funds). We challenged key judgements affecting the unquoted securities All the level 3 investments are valuation such as discount rates and the choice of benchmark for earnings measured at fair value, which is multiples. We compared key underlying financial data inputs to external established in accordance with the sources such as financial information of comparable businesses, the International Private Equity and Venture investee companyaudited accounts and management information Capital Valuation Guidelines by using as applicable. measurements of value such as price of We challenged the assumptionsaround sustainability of ea recent orderly transactions, earnings rnings based on our knowledge of the investee company and the industry. multiples, discounted cash flow and net asset value (NAV). Our work included consideration of events (including both market and entity specific factors) which occurred subsequent to the year end up until The effect of these matters is that, the date of this audit report. as part of our risk assessment, we determined that the valuation of level 3 investments has a high degree of For unquoted funds, we obtained and agreed the latest reported NAV estimation uncertainty, with a potential from the fund manager and/or the fund administrator and agreed the NAV range of reasonable outcomes greater attributable to Ashmore to the reported valuation. than our materiality for the financial statements as a whole. The financial statements (note 19) disclose the sensitivity estimated by the Group. ��Ashmore Group p|lc Annual Report and Accounts 2020 117Strategic reportGovernanceFinancial statementsIndependent auditor’s report to the members of Ashmore Group plc only continued Year ended 30 June 2020 The risk Our response Valuation of Level 3 Assessing transparency investments (continued) Our findings Recoverability of Low risk, high value Our procedures included: parent Company’s Test of details loan to subsidiaries Assessing subsidiary audits: Our findings We considered the appropriateness of the disclosure made in respect of level 3 investments against the relevant accounting standards and the effect of changing one or more inputs to reasonably possible alternative valuation assumptions. We also considered the impact that COVID-19 has had on the valuation of Level 3 investments and assessed the appropriateness and completeness of disclosures related to this impact. We found the valuation of level 3 investments to be balanced with proportionate disclosure (2019: balanced with proportionate disclosure) of the related assumptions and sensitivities. The carrying amount of the parent Company’s loan to one subsidiary We assessed the parent Company’s loan with reference to the £464.8 million; represents 70% (2019: 67%) subsidiary’s audited balance sheet, to identify whether the subsidiary had (2019: £471.9 million) of the Company’s total assets. a positive net asset value, and therefore coverage of the debt owed, as The recoverability of the loan is not at well as assessing whether the subsidiary had historically been profit-Refer to page 134 making. (accounting policy) and page high risk of significant misstatement or subject to significant judgement. 151 (financial disclosures). However, due to its materiality in the We considered the results of the work we performed on the subsidiary context of the parent Company financial audit on the net assets, including assessing the ability of the subsidiary statements, this is considered to be the to obtain liquid funds and therefore, its ability to fund the repayment of area that had the greatest effort on our the receivable. overall parent Company audit. We found the parent Company’s estimated recoverable amount of the loan to be balanced (2019: balanced). –––––– We continue to perform procedures over management fee rebates. However, following the reduction of the manual elements of the rebate calculation, we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year. ��118 Ashmore Group p|lc Annual Report and Accounts 2020 Our application of materiality and an overview of the scope of our audit Materiality for the Group financial statements as a whole was set at £11.0 million (2019: £11.0 million), determined with reference to a benchmark of Group profit before tax, of which it represents 5% (2019: 5%). Materiality for the parent Company financial statements as a whole was set at £7.7 million (2019: £7.8 million), determined with reference to a benchmark of Company total assets, of which it represents 1% (2019: 1%). We agreed to report to the Group Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding £0.55 million (2019: £0.55 million), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the Group’s 28 reporting components (2019: 29 components), we subjected four (2019: four) to full scope audits for Group reporting purposes and one (2019: none) to specified risk-focused audit procedures. The latter was not individually financially significant enough to requirea full scope audit for Group purposes, but did present specific individual risks that needed to be addressed. The components within the scope of our work accounted for the percentages illustrated opposite. For the residual components, we performed analysis at an agggreated Group level to re-examine our assessment that there were no significant risks of material misstatement within the components. The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group team approved the component materialities, which ranged from £2.0 million to £7.7 million, having regard to the mix of size and risk profile of the Group across the components. The work on one of the five components (2019: none of the four components) was performed by component auditors and the rest, including the audit of the parent Company, was performed by the Group team. £221.5m (2019: £219.9m)£11.0m (2019: £11.0m)£221.5m£11.0m(2019: £0.55m)��£7.7m£0.55mGroup net revenue 34969596942299100969899%98%98%100%(2019: 96%)(2019: 95%)(2019: 99%)(2019: 100%)Full scope for group audit purposes 2020Full scope for group audit purposes 2019Residual componentsAshmore Group p|lc Annual Report and Accounts 2020 119Strategic reportGovernanceFinancial statementsIndependent auditor’s report to the members of Ashmore Group plc only continued Year ended 30 June 2020 We have nothing to report on going concern We have nothing to report on the other information in the Annual Report The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the The Directors are responsible for the other information presented Group or to cease their operations, and as they have concluded that in the Annual Report together with the financial statements. the Company’s and the Group’s financial position means that this is Our opinion on the financial statements does not cover the realistic. They have also concluded that there are no material other information and, accordingly, we do not express an audit uncertainties that could have cast significant doubt over their ability opinion or, except as explicitly stated below, any form of assurance to continue as a going concern for at least a year from the date of conclusion thereon. approval of the financial statements (“the going concern period”). Our responsibility is to read the other information and, in doing so, Our responsibility is to conclude on the appropriateness of the consider whether, based on our financial statements audit work, Directors’ conclusions and, had there been a material uncertainty the information therein is materially misstated or inconsistent with related to going concern, to make reference to that in this audit the financial statements or our audit knowledge. Based solely on report. However, as we cannot predict all future events or that work we have not identified material misstatements in the conditions and as subsequent events may result in outcomes that other information. are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty Based solely on our work on the other information: in this auditor’s report is not a guarantee that the Group and the Company will continue in operation. –we have not identified material misstatements in the Strategic report and the Directors’ report; In our evaluation of the Directors’ conclusions, we considered the –in our opinion the information giveninherent risks to the Group’s and Company’s business model, in those reports for the financial year is consistent with the financial statements; and including the impact of Brexit and analysed how those risks might affect the Group’s and Company’s financial resources or ability to –in our opinion those reports have been prepared in accordance continue operations over the going concern period. We evaluated with the Companies Act 2006. those risks and concluded that they were not significant enough to require us to perform additional procedures. In our opinion the part of the Directors’ Remuneration Report to be Based on this work, we are required to report to you if: audited has been properly prepared in accordance with the Companies Act 2006. –we have anything material to add or draw attention to in relation to the Directors’ statement in note 2 to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over Based on the knowledge we acquired during our financial the Group and Company’s use of that basis for a period of at statements audit, we have nothing material to add or draw least 12 months from the date of approval of the financial attention to in relation to: statements; or –the related statement under the Listing Rules set out on page –the Directors’ confirmation within the longer-term viability 111 is materially inconsistent with our audit knowledge. statement on page 37 that they have carried out a robust assessment of the emerging and principal risks facing the Group, We have nothing to report in these respects, and we did not including those that would threaten its business model, future identify going concern as a key audit matter. performance, solvency and liquidity; –the Principal Risks disclosures describing these risks and explaining how they are being managed and mitigated; and –the Directors’ explanation in the longer-term viability statement of how they have assessed the prospects of the Group, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. ��Strategic report and Directors’ report Directors’ remuneration report Disclosures of emerging and principal risks and longer-term viability 120 Ashmore Group p|lc Annual Report and Accounts 2020 Under the Listing Rules we are required to review the longer-term viability statement. We have nothing to report in this respect. As explained more fully in their statement set out on page 110, Our work is limited to assessing these matters in the context of the Directors are responsible for: the preparation of the financial only the knowledge acquired during our financial statements audit. statements including being satisfied that they give a true and fair As we cannot predict all future events or conditions and as viewsubsequent events may result in outcomes that are inconsistent ; such internal control as they determine is necessary to enable the preparation of financial statements that are free from with judgements that were reasonable at the time they were material misstatement, whether due to fraud or error; assessing made, the absence of anything to report on these statements is not the Group and parent Company’s ability to continue as a going a guarantee as to the Group’s and Company’s longer-term viability. concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either We are required to report to you if: intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. –we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the Directors’ statement that they consider that the Annual Our objectives are to obtain reasonable assurance about whether Report and financial statements taken as a whole is fair, balanced the financial statements as a whole are free from material and understandable and provides the information necessary for misstatement, whether due to fraud or other irregularities shareholders to assess the Group’s position and performance, (see below), or error, and to issue our opinion in an auditor’s report. business model and strategy; or Reasonable assurance is a high levelof assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) –the section of the Annual Report describing the work of the will always detect a material misstatement when it exists. Audit and Risk Committee does not appropriately address Misstatements can arise from fraud, other irregularities or error and matters communicated by us to the Audit and Risk Committee. are considered material if, individually or in aggregate, they could We are required to report to you if the Corporate Governance reasonably be expected to influence the economic decisions of Statement does not properly disclose a departure from the users taken on the basis of the financial statements. 11 provisions of the UK Corporate Governance Code specified A fuller description of our responsibilities is provided on the FRC’s by the Listing Rules for our review. website at www.frc.org.uk/auditorsresponsibilities. We have nothing to report in these respects. We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements Under the Companies Act 2006, we are rqeuired to report to you if, from our general commercial and sector experience, through in our opinion: discussion with the Directors and other management (as required by auditing standards), and from inspection of the Group’s regulatory –adequate accounting records have not been kept by the parent and legal correspondence and discussed with the Directors Company, or returns adequate for our audit have not been and other management the policies and procedures regarding received from branches not visited by us; or compliance with laws and regulations. We communicated identified –the parent Company financial statements and the part of the laws and regulations throughout our team and remained alert to any Directors’ Remuneration Report to be audited are not in indications of non-compliance throughout the audit. This included agreement with the accounting records and returns; or communication from the Group to component audit teams of –certain disclosures of Directors’ remuneration specified by law relevant laws and regulations identified at Group level. The potential are not made; or effect of these laws and regulations on the financial statements –we have not received all the information and explanations we varies considerably. require for our audit. Firstly, the Group is subject to laws and regulations that directly We have nothing to report in these respects. affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation, and taxation legislation, and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. Directors’ responsibilities Corporate governance disclosures Auditor’s responsibilities Irregularities – ability to detect ��Respective responsibilities We have nothing to report on the other matters on which we are required to report by exception Ashmore Group p|lc Annual Report and Accounts 2020 121Strategic reportGovernanceFinancial statementsIndependent auditor’s report to the members of Ashmore Group plc only continued Year ended 30 June 2020 Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for This report is made solely to the Company’s members, as a body, instance through the imposition of fines or litigation. We identified in accordance with Chapter 3 of Part 16 of the Companies Act 2006 the following areas as those most likely to have such an effect: and the terms of our engagement by the Company. Our audit work the Listing Rules and certain aspects of company legislation has been undertaken so that we might state to the Company’s recognising the financial and regulated nature of the Group’s members those matters we are required to state to them in an activities and its legal form. Auditing standards limit the required auditor’s report, and the further matters we are required to state to audit procedures to identify non-compliance with these laws and them in accordance with the terms agreed with the Company, and regulations to enquiry of the Directors and other management for no other purpose. To the fullest extent permitted by lawdo , we and inspectionof regulatory and legalcorrespondence, if any. not accept or assume responsibility to anyone other than the Through these procedures we becameaware of actual or Company and the Company’s members, as a body, for our audit suspected non-compliance and considered the effect as part work, for this report, or for the opinions we have formed. of our procedures on the related financial statement items. The identified actual or suspected non-compliance was not sufficiently significant to our audit to result in our response being identified as a key audit matter. Chartered Accountants Owing to the inherent limitations of an audit, there is an 15 Canada Square unavoidable risk that we may not have detected some material London E14 5GL misstatements in the financial statements, even though we have properly planned and performed our audit in accordance 10 September 2020 with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. Inaddition, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations. The purpose of our audit work and to whom we owe our responsibilities Thomas Brown (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor 122 Ashmore Group p|lc Annual Report and Accounts 2020Consolidated statement of comprehensive income For the year ended 30 June 2020 2019 Notes £m2020£mManagement fees 307.6 Performance fees 2.8 Other revenue 5.9 316.3 Distribution costs (13.3)Foreign exchange 7 11.3 314.3 Gains/(losses) on investment securities 20 0.5 Change in third-party interests in consolidated funds 20 3.8 Personnel expenses 9 (84.2)Other expenses 11 (31.6) 202.8 Finance income 8 17.4Share of losses from associates and joint ventures 26 (0.3) 219.9 Tax expense 12 (38.4) 181.5 Items that may be reclassified subsequently to profit or loss: Foreign currencytranslation differences arising on foreign operations 14.7Cash flow hedge intrinsic value losses – 14.7 196.2 Equity holders of the parent 178.6 Non-controlling interests 2.9 181.5 Equity holders of the parent 193.2 Non-controlling interests 3.0 196.2 Basic 13 26.57pDiluted 13 25.04pThe notes on pages 130 to 170 form an integral part of these financial statements. 330.0 3.9 4.1 Total revenue 338.0 (14.5)7.0 Net revenue 330.5 (19.1)7.5 (82.6)(26.6)Operating profit 209.712.0(0.2)Profit before tax 221.5(36.8)Profit for the year 184.7 Other comprehensive income, net of related tax effect 12.8 (0.1)Other comprehensive income, net of tax 12.7Total comprehensive income for the year 197.4Profit attributable to: 182.1 2.6 Profit for the year 184.7 Total comprehensive income attributable to: 194.72.7 Total comprehensive income for the year 197.4Earnings per share 27.35p25.68pAshmore Group p|lc Annual Report and Accounts 2020 123Strategic reportGovernanceFinancial statementsConsolidated balance sheet As at 30 June 2020 Notes 2020£m 2019£mAssets Non-current assets Goodwill and intangible assets 15 89.7 87.3 Property, plant and equipment 16 11.7 1.5 Investment in associates and joint ventures 26 0.6 1.8 Non-current financial assets measured at fair value 20 28.0 31.6 Deferred acquisition costs 0.7 0.8 Deferred tax assets 18 30.6 30.2 161.3 153.2 Current assets Investment securities 20 234.5 278.7Financial assets measured at fair value 20 11.616.0 Trade and other receivables 17 96.279.4 Cash and cash equivalents 500.9 477.2 843.2 851.3 Non-current assets held for sale 20 43.1 44.7 Total assets 1,047.6 1,049.2 Equity and liabilities Capital and reserves – attributable to equity holders of the parent Issued capital 22 0.1 0.1Share premium 15.6 15.6Retained earnings 813.2812.6 Foreign exchange reserve 27.6 14.9 Cash flow hedging reserve (0.1)– 856.4 843.2Non-controlling interests 30 22.6 10.9 Total equity 879.0854.1Liabilities Non-current liabilities Lease liabilities 16 8.2 –Deferred tax liabilities 18 6.9 8.4 15.1 8.4 Current liabilities Lease liabilities 16 2.0 –Current tax 8.5 22.5 Third-party interests in consolidated funds 20 86.1 107.0 Derivative financial instruments 21 1.7 1.1 Trade and other payables 24 50.7 56.1 149.0186.7 Non-current liabilities held for sale 20 4.5–Total liabilities 168.6195.1 Total equity and liabilities 1,047.61,049.2 The notes on pages 130 to 170 form an integral part of these financial statements. Approved by the Board on 10 September 2020 and signed on its behalf by: Mark Coombs Tom Shippey Chief Executive Officer Group Finance Director 124 Ashmore Group plc | Annual Report and Accounts 2020Consolidated statement of changes in equity For the year ended 30 June 2020 Attributable to equity holders of the parent Foreign Cash flow Non-Issued Share Retained exchange hedging controlling Total capital premiumearningsreserve reserve Total interests equity£m £m£m£m £m £m £m £mBalance at 30 June 2018 Total comprehensive income/(loss) Total contributions and distributions Balance at 30 June 2019 Adjusted balance at 1 July 2019 ––182.1– – 182.12.6184.7 12.7 – 12.70.112.8––––––– (0.1) (0.1)–(0.1)Total comprehensive income/(loss) ––182.112.7 (0.1) 194.72.7197.4 (89.5)––(89.5)– – (89.5)–––28.6– – 28.6–28.6– (0.4)11.711.3––(0.4)– (120.0)(120.0)––– – (120.0)––––– – –(2.7)(2.7)Total contributions and distributions ––(181.3)– – (181.3)9.0(172.3)Balance at 30 June 2020 0.1 15.6 813.2 27.6 (0.1) 856.422.6 879.00.115.6 743.20.3 – 759.21.3 760.5 Profit for the year 178.6– – 178.62.9––181.5Other comprehensive income/(loss): Foreign currency translation differences arising on foreign operations –––14.6 – 14.60.114.7178.6 14.6 – 193.2 3.0 196.2 ––Transactions with owners: Purchase of own shares (23.7)––– – (23.7)(23.7)–Acquisition of subsidiary with non-controlling interest 5.2– – 5.29.014.2––Share-based payments ––27.6– – 27.6–27.6Dividends to equity holders – – (118.3)3)––(118.3)(118.–Dividends to non-controlling interests – – ––––(2.4)(2.4)(109.2)– – ––(109.2)6.6(102.6)0.115.6 812.6 14.9 – 843.2 10.9 854.1 Adjustment on adoption of IFRS 16 (note 3) (0.2)––(0.2)– – (0.2)–0.115.6 812.4 14.9 – 843.0 10.9 853.9 Profit for the year Other comprehensive income/(loss): Foreign currency translation differences arising on foreign operations Cash flow hedge intrinsic value losses Transactions with owners: Purchase of own shares Share-based payments Issue of shares to non-controlling interests (note 30) Dividends to equity holders Dividends to non-controlling interests The notes on pages 130 to 170 form an integral part of these financial statements. Ashmore Group p|lc Annual Report and Accounts 2020 125Strategic reportGovernanceFinancial statementsConsolidated cash flow statement For the year ended 30 June 2020 2020£m 2019£mOperating activities Operating profit 209.7202.8Adjustments for non-cash items: Depreciation and amortisation 3.4 4.8 Accrual for variable compensation 33.9 27.6 Unrealised foreign exchange gains (7.0) (11.3)Other non-cash items 10.6 (4.3)Cash generated from operations before working capital changes 250.6 219.6 Changes in working capital: Decrease/(increase) in trade and other receivables 9.1 (8.2)Increase in derivative financial instruments 0.6 1.0 Decrease in trade and other payables (5.4) (1.2)Cash generated from operations 254.9 211.2 Taxes paid (52.1) (22.1)Net cash generated from operating activities 202.8 189.1 Investing activities Interest and investment income received 14.7 15.4Proceeds on disposal of associates 0.6 –Acquisition of subsidiary, net of cash acquired –(4.9)Purchase of non-current financial assets measured at fair value (3.6) (4.8)Purchase of financial assets held for sale (43.6) (64.0)Purchase of financial assets measured at fair value – (0.3)(Purchase)/sale of investment securities (9.1)4.7Sale of non-current financial assets measured at fair value 2.5 24.0 Sale of financial assets held for sale 8.4 19.4 Sale of financial assets measured at fair value 25.1 4.4Net cash on initial consolidation of seed capital investments (0.4) 3.5Purchase of property, plant and equipment (1.0) (0.8)Net cash used in investing activities (6.4) (3.4) Financing activities Dividends paid to equity holders (120.0) (118.3)Dividends paid to non-controlling interests (2.7) (2.4)Third-party subscriptions into consolidated funds 50.0 2.7Third-party redemptions from consolidated funds (29.6) (10.3)Distributions paid by consolidated funds (1.9) (1.5)Proceeds on issue of shares to non-controlling interests (note 30) 11.3–Payment of lease liabilities (note 16) (2.3)–Interest paid (note 16) (0.5)–Purchase of own shares (89.5) (23.7)Net cash used in financing activities (185.2) (153.5) Net increase in cash and cash equivalents 11.232.2 Cash and cash equivalents at beginning of year 477.2 433.0 Effect of exchange rate changes on cash and cash equivalents 12.5 12.0Cash and cash equivalents at end of year 500.9 477.2 Cash and cash equivalents at end of year comprise: Cash at bank and in hand 68.5 73.9 Daily dealing liquidity funds 368.0 243.3 Deposits 64.4 160.0 500.9 477.2 The notes on pages 130 to 170 form an integral part of these financial statements.126 Ashmore Group plc | Annual Report and Accounts 2020Company balance sheet As at 30 June 2020 2019 Notes £m2020£mAssets Non-current assets 4.1 6.8 19.9 0.7 20.6 52.1 Current assets 518.2 91.8610.0Total assets 662.1Equity and liabilities Capitaland reserves 0.1 15.6 583.5 (0.1)Total equity attributable to equity holders of the Company 599.1Liabilities Non-current liabilities 4.8Current liabilities 1.11.755.463.0Total equity and liabilities 662.1Mark Coombs Tom Shippey Goodwill 15 4.1Property, plant and equipment 16 0.5Investment in subsidiaries 25 19.9Deferred acquisition costs 0.8Deferred tax assets 18 16.6 41.9 Trade and other receivables 17 495.0Cash and cash equivalents 150.3 645.3 687.2 Issued capital 22 0.1Share premium 15.6Retained earnings 632.6Cash flow hedging reserve – 648.3 Lease liability 16 – Lease liability 16 –Derivative financial instruments 0.7Trade and other payables 24 38.2 38.9 687.2The notes on pages 130 to 170 form an integral part of these financial statements. Approved by the Board on 10 September 2020 and signed on its behalf by: Chief Executive Officer Group Finance Director Ashmore Group p|lc Annual Report and Accounts 2020 127Strategic reportGovernanceFinancial statementsCompany statement of changes in equity For the year ended 30 June 2020 Issued capital £m Share premium£mRetained earnings £m Cash flow hedging reserve£mTotal equity attributable to equity holders of the parent £mBalance at 30 June 2018 0.115.6 573.8 –589.5 Profit for the year ––178.4 –178.4 Purchase of own shares ––(23.7) –(23.7)Acquisition of subsidiary ––5.2 –5.2 Share-based payments ––17.2 –17.2 Dividends to equity holders ––(118.3) –(118.3)Balance at 30 June 2019 0.115.6632.6 –648.3 Profit for the year ––120.7 –120.7Cash flow hedge intrinsic value losses ––– (0.1)(0.1)Purchase of own shares ––(89.5) –(89.5)Share-based payments ––39.7 –39.7Dividends to equity holders ––(120.0) –(120.0)Balance at 30 June 2020 0.115.6583.5 (0.1)599.1The notes on pages 130 to 170 form an integral part of these financial statements. 128 Ashmore Group plc | Annual Report and Accounts 2020Company cash flow statement For the year ended 30 June 2020 2019 £m2020£mOperating activities 116.91.521.7 (13.9)(122.0)4.222.41.0 17.2 44.8 (38.4)6.4Investing activities 1.4(111.8)135.1 122.0 (0.9)Net cash generated from investing activities 145.8 Financing activities (120.0)(1.0)(0.3)(89.5)Net cash used in financing activities (210.8)Net decrease in cash and cash equivalents (58.6)150.30.1Cash and cash equivalents at end of year 91.8Cash and cash equivalents at end of year comprise: 16.931.943.091.8Operating profit 178.4Adjustments for: Depreciation and amortisation 0.3 Accrual for variable compensation 17.2Unrealised foreign exchange gains(15.5)Dividends received from subsidiaries (174.4)Cash generated from operations before working capital changes 6.0Changes in working capital: Decrease/(increase) in trade and other receivables (9.7)Increase in derivative financial instruments 0.7 Increase/(decrease) in trade and other payables (37.8)Cash generated from/(used in) operations (40.8)Taxes paid (12.5)Net cash generated from/(used in) operating activities (53.3) Interest received 0.7 Acquisition of subsidiary –(5.2)Loans advanced to subsidiaries (66.8)Loans repaid by subsidiaries 80.1 Dividends received from subsidiaries 174.4 Purchase of property, p and equipment lant (0.3)182.9 Dividends paid (118.3)Payment of lease liability –Interest paid –Purchase of own shares (23.7)(142.0) (12.4) Cash and cash equivalents at beginning of year 159.2 Effect of exchange rate changes on cash and cash equivalents 3.5 150.3 Cash at bank and in hand 19.6 Daily dealing liquidity funds 10.7 Deposits 120.0 150.3 The notes on pages 130 to 170 form an integral part of these financial statements. Ashmore Group p|lc Annual Report and Accounts 2020 129Strategic reportGovernanceFinancial statementsNotes to the financial statements 1) General information 3) New Standards and Interpretations adopted by the Group 2) Basis of preparation New Standards and Interpretations not yet adopted Ashmore Group plc (the Company) is a public limited company listed on the London Stock Exchange and incorporated and The Group has applied IFRS 16 Leases (IFRS 16) and IFRIC 23 domiciled in the United Kingdom. The consolidated financial Uncertainty over Income Tax Treatments from 1 July 2019. statements of the Company and its subsidiaries (together the The nature and effect of the adoption of these standards are Group) for the year ended 30 June 2020 were authorised for issue disclosed below. by the Board of Directors on 10 September 2020. The principal activity of the Group is described in the Directors’ report on page 111. The Group has applied IFRS 16 for the first time for its annual reporting period commencing on 1 July 2019. IFRS 16 replaces IAS 17 Leases and became effective for reportingperiods beg inning on The Group and Company financial statements have been prepared or after 1 January 2019.On adoptionof IFRS 16, the Group has in accordance with International Financial Reporting Standards measured the right-of-use(ROU)assets as if the standard had (IFRSs) as adopted by the European Union (EU) effective for the always been applied but based on an incremental borrowing rate at Group’s reporting for the year ended 30 June 2020 and applied in 1 July 2019. Lease liabilities were recognised based on the present accordance with the provisions of the Companies Act 2006. value of the remaining lease payments, discounted using the incremental borrowing rate as at 1 July 2019. The financial statements have been prepared on a going concern basis under the historical cost convention, except for the measurement Comparative information has not been restated as the Group has at fair value of derivative financial instruments and financial assets applied IFRS 16 using the modified retrospective approach with the and liabilities that are held at fair value through profit or loss. cumulative effect of initially applygin the standard recognised as an adjustment to the opening retained earnings at 1 July 2019. The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 that allows it not to present its The Group has applied the optional exemption contained within individual statement of comprehensive income and related notes. IFRS 16, which permits the cost of short-term (less than 12 months) leases to be expensed on a straight-line basis over the lease term. The preparation of financial statements requires management to These lease arrangements are not material to the Group. make judgements, estimates andassumptionsthat affectthe application of policies and reportedamounts of assets and liabilities, At 30 June 2019, the Group had non-cancellable operating lease income and expenses. The estimates and associated assumptions commitments of £13.8 million. As a result of applygin IFRS 16, the are based on historical experience and various other factors that are Group has recognised a lease liability and ROU asset at 1 July 2019 believed to be reasonable under the circumstances, the results of of £12.8 million and £12.6 million respectively. This reduced the which form the basis of making the judgements about carrying Group’s net assets by £0.2 million, recognised as a reduction in values of assets and liabilities that are not readily apparent from retained earnings at 1 July 2019. The weighted average lessee’s other sources. Actual results may differ from these estimates. incremental borrowing rate applied to measure the lease liabilities Further information about key assumptions and other key sources on 1 July 2019 was 4.8%. of estimation and areas of judgement are set out in note 31. The Group’s accounting policies in respect of IFRS 16 are set out in note 4 and additional disclosure on the Group’s recognised ROU The Board of Directors has considered the resilience of the Group, assets and lease liabilities is provided in note 16. taking into account its current financial position, and the principal and emerging risks facing the business including the impact of IFRIC 23 became effective on 1 January 2019 and provides COVID-19 on global markets and potential implications for the clarification as to how the recognition and measurement Group’s financial performance. The Board reviewed cash flow requirements of IAS 12 Income Tax should be applied. IFRIC 23 forecasts for a period of 12 months from the date of approval of does not have a material impact on the Group. these financial statements which indicate that, taking account of downsides which could reasonably be anticipated, the Group will have sufficient funds to meet its liabilities as they fall due for that There were no other Standards or Interpretations that were in period. The Board considered the impact of COVID-19 by applying issue and required to be adopted by the Group as at the date of stressed scenarios, including severe but plausible downside authorisation of these consolidated financial statements. No other assumptions, and the ipmact on assets under management, Standards or Interpretations have been issued that are expected to profitabilityof the Group and known commitments. While there are have a material impact on the Group’s financial statements. significant wider market uncertainties that may impact the Group, the stressed scenarios, which assumed a significant reduction in revenue for the entire forecast period, show that the Group and Company would continue to operate profitably and meet their liabilities as they fall due for a period of at least 12 months from the date of approval of the annual financial statements. The financial statements have therefore been prepared on a going concern basis. IFRS 16 Leases Going concern IFRIC 23 Uncertainty over Income Tax Treatments 130 Ashmore Group p|lc Annual Report and Accounts 2020 4) Significant accounting policies Where the Group’s financial year is not coterminous with those of The following principal accounting policies have been applied its associates or joint ventures, unaudited interim financial consistently where applicable to all years presented in dealing information is used after appropriate adjustments have been made. with items considered material in relation to the Group and Company financial statements, unless otherwise stated. The Group acts as fund manager to investment funds that are considered to be structured entities. Structured entities are entities The consolidated financial statements of the Group comprise that have been designed so that voting or similar rights are not the the financial statements of the Company and its subsidiaries, dominant factor in deciding which party has control: for example, associates and joint ventures. This includes an Employee Benefitwhen any voting rights relate to administrative tasks only and the Trust (EBT) established for the employee share-based awards and relevant activities of the entity are directed by means of contractual consolidated investment funds. arrangements. The Group’s assets under management are managed within structured entities. These structured entities typically consist of unitised vehicles such as Société d’Investissement à Capital Subsidiaries are entities, including investment funds, over which the Variable (SICAVs), limited partnerships, unit trusts and open-ended Group has control as defined by IFRS 10. The Group has control if it and closed-ended vehicles which entitle third-party investors to a is exposed to, or has rights to, variable returns from its involvement with percentage of the vehicle’s net asset value. the entity and has the ability to affect those returns through its power The Group has interests in structured entities as a result of the over the entity. The financial statements of subsidiaries are included in management of assets on behalf of its clients. Where the Group the consolidated financial statements from the date on which control commences until the date when control ceases. The Group reassesses holds a direct interest in a closed-ended fund, private equity fund or whether or not it controls an entity if facts and circumstances indicate open-ended pooled fund such as a SICAV, the interest is accounted that there are changes to one or more of the elements of control. for either as a consolidated structured entity or as a financial asset, depending on whether the Group has control over the fund or not. The profit or loss and each component of other comprehensive Control is determined in accordance with IFRS 10, based on an income are attributed to the equity holders of the Company and to assessment of the level of power and aggregate economic interest any non-controlling interests. Based on their nature, the interests of that the Group has over the fund, relative to third-party investors. third parties in consolidated funds are classified as liabilities and Power is normally conveyed to the Group through the existence of appear as ‘Third-party interests in consolidated funds’ on the an investment management agreement and/or other contractual Group’s balance sheet. Associates and joint ventures are presented arrangements. Aggregate economic interest is a measure of the as single-line items in the statement of comprehensive income and Group’s exposure to variable returns in the fund through a balance sheet (refer to note 26). Intercompany transactions and combination of direct interest, expected share of performance fees, balances are eliminated on consolidation. Consistent accounting expected management fees, fair value gains or losses, and policies have been applied across the Group in the preparation of distributions receivable from the fund. the consolidated financial statements as at 30 June 2020. The Group concludes that it acts as a principahen the power it l wA change in the ownership interest of a consolidated entity that has over the fund is deemed to be exercised for self-benefit, does not result in a loss of control by the Group is accounted for considering the level of aggregate economic exposure in the fund as an equity transaction. If the Group loses control over a and the assessed strength of third-party investors’ kick-out rights. consolidated entity, it derecognises the related assets, goodwill, The Group concludes that it acts as an agent when the power it has liabilities, non-controlling interest and other components of equity, over the fund is deemed to be exercised for the benefit of third-and any gain or loss is recognised in consolidated comprehensive party investors. income. Any investment retained is recognised at its fair value at The Group concludes that it has control and, therefore, will the date of loss of control. consolidate a fund as if it were a subsidiary where the Group acts as a principal. If the Group concludes that it does not have control Associates are partly owned entities over which the Group has over the fund, the Group accounts for its interest in the fund as a significant influence but no control. Joint ventures are entities financial asset. through which the Group and other parties undertake an economic activity which is subject to joint control. Investments in associates and interests in joint ventures are measured using the equity method of accounting. Under this method, the investments are initially recognised at cost, including attributable goodwill, and are adjusted thereafter for the post-acquisition changes in the Group’s share of net assets. The Group’s share of post-acquisition profit or loss is recognised in the statement of comprehensive income. Interests in consolidated structured entities Basis of consolidation Interests in subsidiaries Interests in associates and joint arrangements Ashmore Group p|lc Annual Report and Accounts 2020 131Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 4) Significant accounting policies continued Interests in unconsolidated structured entities Business combinations Foreign currency Goodwill Foreign currency differences are recognised in other comprehensive income, and accumulated in the foreign currency translation reserve, except to the extent that the translation The Group classifies the following investment funds as difference is allocated to non-controlling interests. unconsolidated structured entities: When a foreign operation is disposed of such that control is lost, –Segregated mandates and pooled funds managed where the the cumulative amount in the foreign currency translation reserve Group does not hold any direct interest. In this case, the Group related to that foreign operation is reclassified to comprehensive considers that its agggreate economic exposure is insignificant income as part of the gain or loss on disposal. If the Group and, in relation to segregated mandates, the third-party investor disposes of only part of its interest in a subsidiary that includes a has the practical ability to remove the Group from acting as fund foreign operation while retaining control, the relevant proportion of manager, without cause. As a result, the Group concludes that the cumulative amount is reattributed to non-controlling interests. it acts as an agent for third-party investors. –Pooled funds managed by the Group where the Group holds a If the settlement of a monetary item receivable from or payable to a direct interest, for example seed capital investments, and the foreign operation is neither planned nor likely in the foreseeable Group’s aggregate economic exposure in the fund relative to future, foreign currency differences arising on the item form part third-payrt investors is less than 20% (i.e. the threshold of the net investment in the foreign operation and are recognised established by the Group for determining agent versus principal in other comprehensive income, and accumulated in the foreign classification). As a result, the Group concludes that it is an agent currency translation reserve within equity. for third-party investors and, therefore, will account for its beneficial interest in the fund as a financial asset. Business combinations are accounted for using the acquisition The disclosure of the AuM in respect of consolidated and method as at the acquisition date. The acquisition date is the date unconsolidated structured entities is provided in note 27. on which the acquirer effectively obtains control of the acquiree. The consideration transferred for the acquisition is generally The Group’s financial statements are presented in Pounds Sterling measured at the acquisition date fair value, as are the identifiable (Sterling), which is also the Company’s functional and presentation net assets acquired, liabilities incurred (including any asset or currency. Items included in the financial statements of each of the liability resulting from a contingent consideration arrangement) Group’s entities are measured using the functional currency, which and equity instruments issued by the Group in exchange for control is the currency that prevails in the primary economic environment of the acquiree. in which the entity operates. Acquisition-related costs are expensed as incurred, except if they are related to the issue of debt or equity securities. Transactions in foreign currencies are translated into the respective Contingent consideration is classified either as equity or a financial functional currencies of the Group entities at the spot exchange liability. Amounts classified as a financial liability are subsequently rates at the date of the transactions. remeasured to fair value with changes in fair value recognised in profit or loss. If the contingent consideration is classified as Monetary assets and liabilities denominated in foreign currencies equity, it will not be remeasured and settlement is accounted at the balance sheet date are translated into the functional currency for within equity. at the spot exchange rate at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign If the business combination is achieved in stages,the acquisition currency are translated using the exchange rate at the date of date carrying value of the acquirer’s previously held equity interest the transaction. in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are Foreign currency differences arising on translation are generally recognised in profit or loss. recognised in comprehensive income, except for qualifying cash flow hedges to the extent that the hedge is effective, in which case foreign currency differences arising are recognised in other The cost of a business combination in excess of the fair value of comprehensive income. net identifiable assets or liabilities acquired, including intangible assets identified, is recognised as goodwill and stated at cost less any accumulated impairment losses. Goodwill has an indefinite The assets and liabilities of foreign operations, includingg oodwill useful life, is not subject to amortisation and is tested annually for and fair value adjustments arising on consolidation, are translated impairment or when there is an indication of impairment. into Sterling at the spot exchange rates at the balance sheet date. The revenues and expenses of foreign operations are translated into Sterling at rates appoxiatingto the foreign exchange rates rm ruling atthe dates of the transactions. ��Foreign currency transactions Foreign operations 132 Ashmore Group p|lc Annual Report and Accounts 2020 Intangible assets Non-controlling interests (NCI) Property, plant and equipment Financial assets Deferred acquisition costs Financial instruments The cost of intangible assets, such as management contracts The subsequent measurement of financial instruments depends and brand names, acquired as part of a business combination on their classification in accordance with IFRS 9 Financial is their fair value as at the date of acquisition. The fair value at the Instruments and IFRS 5 Non-current Assets Held for Sale and date of acquisition is calculated using the discounted cash flow Discontinued Operations. methodology and represents the valuation of the profits expected Under IFRS 9, the Group classifies its financial assets into to be earned from the management contracts and brand name in two measurement categories: amortised cost and FVTPL. place at the date of acquisition. The classification of financial assets under IFRS 9 is generally Following initial recognition, intangible assets are carried at cost based on the business model in which a financial asset is managed less any accumulated amortisation and impairment losses. and its contractual cash flow characteristics. A financial asset is Intangible assets with finite life are amortised on a systematic basis measured at amortised cost if it meets both of the following over their useful lives. The useful life of an intangible asset which conditions and is not designated as at FVTPL: has arisen from contractual or other legal rights does not exceed –it is held within a business model whose objective is to hold the period of the contractual or other legal rights. assets to collect contractual cash flows; and –its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal The Group recognises NCI in an acquired entity either at fair value amount outstanding. or at the NCI’s proportionate share of the acquired entity’s net identifiable assets. This decision is made on an acquisition-by-All financial assets not classified as measured at amortised cost are acquisition basis. Changes to the Group’s interest in a subsidiary measured at FVTPL. The Group classifies its financial liabilities at that do not result in a loss of control are accounted for as amortised cost or derivative liabilities measured at FVTPL. equity transactions. Amortised cost is the amount determined based on moving the initial amount recognised for the financial instrument to the maturity value on a systematic basis using a fixed interest rate (effective Property, plant and equipment are stated at cost less accumulated interest rate), taking account of repayment dates and initial depreciation and impairment losses. Cost is determined on the basis premiums or discounts. of the direct and indirect costs that are directly attributable. Property, plant and equipment are depreciated using the straight-line method over the estimated useful lives, assessed to be five years for office The Group classifies its financial assets into the following equipment and four years for IT equipment. The residual values and categories: investment securities at FVTPL, non-current financial useful lives of assets are reviewed at least annually. assets held for sale, financial assets at FVTPL and financial assets measured at amortised cost. Costs that are directly attributable to securing an investment The Group may, from time to time, invest seed capital in funds management contract are deferred if they can be identified where a subsidiary is the investment manager or an adviser. separately and measured reliably and it is probable that they will be Where the holding in such investments is deemed to represent recovered. Deferred acquisition costs represent the incremental a controlling stake and is acquired exclusively with a view to costs incurred by the Group to acquire an investment management subsequent disposal through sale or dilution,these seed capita l contract, typically on a closed-ended fund. The Group amortises the investments are recognised as non-current financialassets held deferred acquisition asset recognised on a systematic basis, in line for sale in accordance with IFRS 5. The Group recognises 100% with the revenue generated from providing the investment of the investment in the fund as a ‘held for sale’ asset and the management services over the life of the fund. interest held by other parties as a ‘liability held for sale’. Where control is not deemed to exist, and the assets are readily realisable, they are recognised as financial assets measured at FVTPL in accordance with IFRS 9. Where the assets are not readily Financial instruments are recognised when the Group becomes realisable, they are recognised as non-current financial assets party to the contractual provisions of an instrument, initially at fair measured at FVTPL. If a seed capital investment remains under the value plus transaction costs except for financial assets classified at control of the Group for more than one year from the original fair value through profit or loss. Purchases or sales of financial investment date, the underlying fund is consolidated line by line. assets are recognised on the trade date, being the date that the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive Investment securities represent securities, other than derivatives, cash flows from the investments have expired or been transferred held by consolidated funds. These securities are measured at fair or when the Group has transferred substantially all risks and value with gains and losses recognised through the consolidated rewards of ownership. Financial liabilities are derecognised statement of comprehensive income. when the obligation under the liability has been discharged, cancelled or expires. Subsequent measurement Recognition and initial measurement Investment securities at FVTPL ��Ashmore Group p|lc Annual Report and Accounts 2020 133Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 4) Significant accounting policies continued Financial assets measured at amortised cost Non-current financial assets held for sale (HFS) Financial assets at FVTPL Non-current financial liabilities held for sale Financial liabilities at FVTPL Financial liabilities at amortised cost Non-current financial assets held for sale are measured at the lower Trade and other receivables are initially recorded at fair value plus of their carrying amount and fair value less costs to sell except transaction costs. The fair value on acquisition is normally the cost. where measurement and remeasurement is outside the scope of Impairment losses with respect to the estimated irrecoverable IFRS 5. Where investments that have initially been recognised as amount are recognised through the statement of comprehensive non-current financial assets held for sale, because the Group has income when there is appropriate evidence that trade and other been deemed to hold a controlling stake, are subsequently disposed receivables are impaired. Subsequent to initial recognition these of or diluted such that the Group’s holding is no longer deemed a assets are measured at amortised cost less any impairment losses. controlling stake, the investment will subsequently be classified as financial assets measured at FVTPL in accordance with IFRS 9. Subsequent movements will be recognised in accordance with the Cash represents cash at bank and in hand, and cash equivalents Group’s accounting policy for the newly adopted classification. comprise short-term deposits and investments in money market instruments that are redeemable on demand or with an original maturity of three months or less. The carrying amount of these Financial assets at FVTPL include certain readily realisable interests assets approximates to their fair value. in seeded funds, non-current financial assets measured at fair value and derivatives. From the date the financial asset is recognised, all subsequent changes in fair value, foreign exchangedifferences, The Group classifies its financial liabilities into the following interest and dividends are reflected in the consolidated statement categories: non-current financial liabilities held for sale, of comprehensive income and presented in finance income financial liabilities at FVTPL and financial liabilities or expense. at amortised cost. Non-current financial assets include closed-end funds that are Non-current financial liabilities represent interests held by other measured at FVTPL. They are held at fair value with changes in fair parties in funds in which the Group recognises 100% of the value being recognised through the consolidated statement of investment in the fund as a held for sale financial asset. These comprehensive income. liabilities are carried at fair value with gains or losses recognised in the statement of comprehensive income within finance income or expense. The Group classifies readily realisable interests in newly seeded funds as financial assets measured at FVTPL with fair value changes being directly recognised through the consolidated Financial liabilities at FVTPL include derivative financial instruments statement of comprehensive income. Fair value is measured based and third-party interests in consolidated funds. They are carried at fair on the proportionate net asset value in the fund. value with gains or losses recognised in the consolidated statement of comprehensive income within finance income or expense. Derivatives include foreign exchange forward contracts and options used by the Group to manage its foreign currency exposures and Other financial liabilities including trade and other payables are those held in consolidated funds. Derivatives are initially recognised subsequently measured at amortised cost using the effective at fair value on the date on which a derivative contract is entered interest rate method. Interest expense is recognised as it is into and subsequently remeasured at fair value. Transaction costs incurred using the effective interest method, which allocates are recognised immediately in the statement of comprehensive interest at a constant rate of return over the expected life of the income. All derivatives are carried as financial assets when the financial instrument based on the estimated future cash flows. fair value is positive and as financial liabilities when the fair value is negative. Fair value is defined as the price that would be received to sell an Any gains or losses arising from changes in the fair value of asset or paid to transfer a liability (i.e. the ‘exit price’) in an orderly derivatives are taken directly in comprehensive income, except for transaction between market participants at the measurement date. the effective portion of cash flow hedges, which is recognised in In determining fair value, the Group uses various valuation other comprehensive income. approaches and establishes a hierarchy for inputs used in measuring fair value that maximises the use of relevant observable inputsand m inimises the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputsare inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Group. (i) Trade and other receivables (ii) Cash and cash equivalents (i) Non-current financial assets measured at fair value (ii) Financial assets measured at fair value (iii) Derivatives Financial liabilities Fair value of financial instruments 134 Ashmore Group p|lc Annual Report and Accounts 2020 Unobservable inputs are inputs that reflect the Group’s judgements The Group applies cash flow hedge accounting when the about the assumptions other market participants would use in transaction meets the specified hedge accounting criteria. pricing the asset or liability, developed based on the best To qualify, the following conditions must be met: information available in the circumstances. –formal documentation of the relationship between the hedging Securities listed on a recognised stock exchange, or dealt on any instrument(s) and hedged item(s) must exist at inception; other regulated market that operates regularly, is recognised and –the hedged cash flows must be highly probable and must open to the public, are valued at the last known available closing bid present an exposure to variations in cash flows that could price. If a security is traded on several actively traded and organised ultimately affect comprehensive income; financial markets, the valuation is made on the basis of the last –the effectiveness of the hedge can be reliably measured; and known bid price on the main market on which the securities are –the hedge must be highly effective, with effectiveness assessed traded. In the case of securities for which trading on an actively on an ongoing basis. traded and organised financial market is not significant, but which are bought and sold on a secondary market with regulated trading For qualifying cash flow hedges,the change in fair value of the among security dealers (with the effect that the price is set on a effective hedging instrument is initially recognised in other market basis), the valuation may be based on this secondary market. comprehensive income and is released to comprehensive income in the same period during which the relevant financial asset or Where instruments are not listed on any stock exchange or not liability affects the Group’s results. traded on any regulated markets, valuation techniques are used by valuation specialists. These techniques include the market Where the hedge is highly effective overall, any ineffective portion approach, the income approach or the cost approach. The use of of the hedge is immediately recognised in comprehensive income. the market approach generally consists of using comparable market Where the instrument ceases to be highly effective as a hedge, or transactions or using techniques based on market observable is sold, terminated or exercised, hedge accounting is discontinued. inputs, while the use of the income approach generally consists of the net present value of estimated future cash flows, adjusted as deemed appropriate for liquidity, credit, market and/or other The Group derecognises a financial asset oynl when the contractual risk factors. rights tothe cash flows from the asset expire, or when it transfers the financial asset and substantially all the risk and rewards of Investments in funds are valued on the basis of the last available ownership of the asset. The Group derecognises a financial net asset value of the units or shares of such funds. liability when the Group’s obligations are discharged, cancelled or The fair value of the derivatives is their quoted market price at the they expire. balance sheet date. Under IFRS 9, impairment losses on the Group’s financial assets at The Group applies the general hedge accountgin model in IFRS 9. amortised cost are measured using an expected credit loss (ECL) This requiresthe Group to ensure that hedge accounting model. Under this model, the Group is required to account for relationships are aligned with its risk management objectives and expected credit losses, and changes in those expected credit strategy and to apply a more qualitative and forward-looking losses over the life of the instrument. The amount of expected approach to assessing hedge effectiveness. credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition and, consequently, more timely The Group uses forward and option contracts to hedge the information is provided about expected credit losses. A three stage variability in cash flows arising from changes in foreign exchange model is used for calculating expected credit losses, which requires rates relating to management fee revenues. The Group designates financial assets to be assessed as: only the change in fair value of the spot element of the forward and option contracts in cash flow hedging relationships. The effective –Performing (stage 1) financial assets where there has been no portion of changes in fair value of hedging instruments is significant increase in credit risk since original recognition; or accumulated in a cash flow hedge reserve as a separate –Under-performing (stage 2) financial assets where there has component of equity. been a significant increase in credit risk since initial recognition, but no default event; or –Non-performing (stage 3) financial assets that are in default. Expected credit losses for stage 1 financial assets are calculated based on possible default events within the 12 months after the reporting date. Expected credit losses for stage 2 and 3 financial assets are calculated based on lifetime expected credit losses that result from all possible default events over the expected life of a financial instrument. The Group applies the simplified approach to calculate expected credit losses for financial assets measured at amortised cost. Under this approach, financial assets are not categorised into three stages and expected credit losses are calculated based on the life of the instrument. Derecognition of financial assets and liabilities Impairment of financial assets Hedge accounting ��Ashmore Group p|lc Annual Report and Accounts 2020 135Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 4) Significant accounting policies continued Assets measured at amortised cost Management fees Performance fees The business of the Group is managed as a single unit, with asset allocations, research and other such operational practices reflecting the commonality of approach across all fund themes. Therefore, for The Group measures loss allowances at an amount equal to the purpose of testing goodwill for impairment, the Group is lifetime expected credit losses. Expected credit loss allowances considered to have one cash-generating unit to which all goodwill is for financial assets measured at amortised cost are deducted from allocated and, as a result, no further split of goodwill into smaller the gross carrying amount of the assets. The Group’s financial cash-generating units is possible and the impairment review is assets subject to impairment assessment under the ECL model conducted for the Group as a whole. comprise cash deposits held with banks and trade receivables. In assessing the impairment of financial assets under the An impairment loss in respect of goodwill cannot be reversed. ECL model, the Group assesses whether the risk of default has increased significantly since initial recognition, by considering both quantitative and qualitative information, and the analysis is Net revenue is total revenue less distribution costs and including based on the Group’s historical experience of credit default, foreign exchange. The Group’s total revenue includes management including forward-looking information. fees, performance fees and other revenue. The primary revenue source for the Group is fee income received or receivable for the The Group’s trade receivables comprise balances due from provision of investment management services. management fees, performance fees, expense recoveries from funds managed, and are generally short term and do not contain The Group recognises revenue in accordance with the principles of financing components. Factors considered in determining whether IFRS 15 Revenue from Contracts with Customers. a default has taken place include how many days past the due date The core principle of IFRS 15 is that revenue is recognised to a payment is, deterioration in the credit quality of a counterparty, reflect the transfer of promised goods or services to customers in and knowledge of specific events that could influence a an amount that reflects the consideration to which the entity counterparty’s ability to pay. The Group assesses lifetime expected expects to be entitled to in exchange forthosegoodsor services. credit losses based on historical observed default rates, adjusted The Group applies the IFRS 15 fiveby forward-looking e-step model for recognising stimates regarding the economic conditions revenue, which consists of identifying the contract with the within the next year. Externally derived credit ratings have been customer; identifying the relevant performance obligations; identified as representing the best available determinant of determining the amount of consideration to be received under the counterparty credit risk for cash balances and credit risk is deemed contract; allocating the consideration to each performance to have increased significantly if the credit rating has significantly obligation; and earning the revenue as the performance obligations deteriorated at the reporting date relative to the credit rating at the are satisfied. date of initial recognition. The Group’s principal revenue recognition policies are summarised below: For all other assets other than goodwill, an impairment test is performed annually or whenever events or changes in circumstances indicate that the carrying amount may not be Management fees are presented net of rebates, and are calculated recoverable. An impairment loss is recognised for the amount by as a percentage of net fund assets managed in accordance with which the asset’s carrying amount exceeds its recoverable amount. individual management agreements. Management fees are The recoverable amount is the higher of an asset’s fair value less calculated and recognised on a monthly basis in accordance with costs of disposal and value in use. For the purposes of assessing the terms of the management fee agreements. Management fees impairment, assets are grouped at the lowest levels for which are typically collected on monthly or quarterly basis. there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets, other Performance fees are presented net of rebates, and are calculated than goodwill, that have suffered an impairment are reviewed as a percentage of the appreciation in the net asset value of a fund for possible reversal of the impairment at the end of each above a defined hurdle. Performance fees are earned from some reporting period. arrangements when contractually agreed performance levels are exceeded within specified performance measurement periods, typically over one year. The fees are recognised when they can Goodwill is tested for impairment annually or whenever there is an be reliably estimated and/or crystallised, and there is deemed indication that the carrying amount may not be recoverable based to be a low probability of a significant reversal in future periods. on management’s judgements regarding the future prospects of This is usually at the end of the performance period or upon early the business, estimates of future cash flows and discount rates. redemption by a fund investor. Once crystallised, performance fees When assessing the appproriateness of the carrying value of typically cannot be clawed-back. goodwillat year end, the recoverable amount is considered to be the greater of fair value less costs to sell or value in use. The pre- tax discount rate applied is based on the Group’s weighted average cost of capital after making allowances for anyspecific risks. Net revenue Impairment of non-financial assets Goodwill 136 Ashmore Group p|lc Annual Report and Accounts 2020 Rebates Other revenue Current tax Rebates relate to repayments of management and performance The Group’s lease arrangements primarily consist of operating fees charged subject to a rebate agreement, typically with leases relating to office space. institutional investors, and are calculated based on an agreed IFRS 16 replaced IAS 17 Leases on 1 January 2019. Until 30 June percentage of net fund assets managed and recognised as the 2019, in accordance with IAS 17, obligations under lease agreements service is received. Where rebate agreements exist, management were not recorded on the Group’s consolidated statement of and performance fees are presented on a net basis in the financial position but were disclosed as lease commitments. The consolidated statement of comprehensive income. Group has not restated comparative information. The Group initially records a lease liability reflecting the present Other revenue principally comprises fees for other services, value of the future contractual cash flows to be made over the which are typically driven by the volume of transactions, along with lease term, discounted using the rate implicit in the lease, being the revenues that vary in accordance with the volume of fund project rate that the lessee would have to pay to borrow the funds development activities. Other revenue includes transaction, necessary to obtain an asset of similar value to the ROU asset in a structuring and administration fees, project management fees, similar economic environment with similar terms, security and and reimbursement by funds of costs incurred by the Group. conditions. Where this rate is not readily available, the Group This revenue is recognised as the relevant service is provided applies the incrementalborrowing rate applicable for each lease and it is probable that the fee will be collected. arrangement. A ROU asset isalso recorded at the value of the lease liability plus any directly related costs and estimated dilapidation expenses and is presented within property, plant and Distribution costs are costs of sales payable to external equipment (see note 16). Interest is accrued on the lease liability intermediaries for marketing and investor servicing. Distribution using the effective interest rate method to give a constant rate of costs vary based on fund assets managed and the associated return over the life of the lease whilst the balance is reduced as management fee revenue, and are expensed over the period in lease payments are made. The ROU asset is depreciated over the which the service is provided. life of the lease as the benefit of the lease is consumed. After the commencement date, the Group reassesses the lease Obligations forcontributions to defined contribution pensionplans term if there is a significant event or change in circumstances that are recognised as an expense in the statement of comprehensive is within its control and affects the likelihood that it will exercise (or income when payable inaccordance with the scheme particulars. not exercise) a term extension option. The cost of short-term (less than 12 months) leases is expensed on The Group issues share awards to its employees under share-a straight-line basis over the lease term. based compensation plans. For equity-settled awards, the fair value of the amounts payable to Finance income includes interest receivable on the Group’s cash employees is recognised as an expense with a corresponding and cash equivalents, and both realised and unrealised gains on increase in equity over the vesting period after adjusting for the financial assets at FVTPL. estimated number of shares that are expected to vest. The fair Finance expense includes both realised and unrealised losses on value is measured at the grant date using an appropriate valuation financial assets at FVTPL. Interest expense on lease liabilities is model, taking into account the terms and conditions upon which presented within finance expense. the instruments were granted. At each balance sheet date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management’s best estimate of Tax expense for the year comprises current and deferred tax. Tax is the awards that are ultimately expected to vest is calculated. The recognised in the consolidated statement of comprehensive movement in cumulative expense is recognised in the statement of income except to the extent that it relates to items recognised comprehensive income with a corresponding entry within equity. directly in equit which case it is recognised in equity. y, inFor cash-settled awards, the fair value of the amounts payable to employees is recognised as an expense with a corresponding Current tax comprises the expected tax payable or receivable on liability on the Group’s balance sheet. The fair value is measured the taxable income or loss for the year, and any adjustment to the using an appropriate valuation model, taking into account the tax payable or receivable in respect of previous years. It is estimated number of awards that are expected to vest and the measured using tax rates enacted or substantively enacted at the terms and conditions upon which the instruments were granted. balance sheet date in the countries where the Group operates. During the vesting period, the liability recognised represents the Current tax also includes withholding tax arising from dividends. portion of the vesting period that has expired at the balance sheet date multiplied by the fair value of the awards at that date. Movements in the liability are recognised in the statement of comprehensive income. Leases Distribution costs Employee benefits Share-based payments Finance income and expense Taxation Ashmore Group p|lc Annual Report and Accounts 2020 137Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 4) Significant accounting policies continued Company-only accounting policies Deferred tax Investment in subsidiaries Key management information, including revenues, margins, Deferred tax is recognised using the balance sheet liability method, investment performance, distribution costs and AuM flows, which in respect of temporary differences between the carrying amounts is relevant to the operation of the Group, is reported to and of assets and liabilities for financial reporting purposes and the reviewed by the Board on the basis of the investment management amounts used for taxation purposes. The following differences are business as a whole. Hence, the Group’s management considers not provided for: that the Group’s services and its operations are not run on a discrete geographic basis and comprise one business segment l not deductible for tax purposes and –goodwil(being provision of investment management services). –differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. In addition to the above accounting policies, the following The amount of deferred tax provided is based on the expected specifically relates to the Company: manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Investments by the Company in subsidiaries are stated at cost less, Deferred tax assets are recognised only to the extent that it is where appropriate, provisions for impairment. probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reviewed at each reportingdateand are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the balance sheet date. Dividends are recognised when shareholders’ rights to receive payments have been established. The Company’s ordinary shares of 0.01 pence each are classified as equity instruments. Ordinary shares issued by the Company are recorded at the fair value of the consideration received or the market price at the day of issue. Direct issue costs, net of tax, are deducted from equity through share premium. When share capital is repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity. Own shares are held by the Employee Benefit Trust (EBT). The holding of the EBT comprises own shares that have not vested unconditionally to employees of theGroup. In both the Group andCompany, own shares are recorded at cost and are deducted from retained earnings. ��Segmental information Dividends Equity shares Own shares 138 Ashmore Group p|lc Annual Report and Accounts 2020 5) Segmental information 6) Revenue 7) Foreign exchange The Group’s operations are reported to and reviewed by the Board on the basis of the investment management business as a whole, hence the Group is treated as a single segment. The key management information considered is adjusted EBITDA which is £222.5 million for the year as reconciled on page 28 (FY2018/19: adjusted EBITDA of £201.8 million was derived by adjusting operating profit by £4.8 million of depreciation and amortisation expense, £1.0 million of income related to seed capital and £4.8 million of foreign exchange gains). The disclosures below are supplementary, and provide the location of the Group’s non-current assets at year end other than financial assets and deferred tax assets. Disclosures relating to revenue by location are in note 6. United Kingdom and Ireland 20.6United States 69.3Other 1.591.4Management fees are accrued throughout the year in line with prevailing levels of assets under management and performance fees are recognised when they can be estimated reliably and it is probable that they will crystallise. The Group is not considered to be reliant on any single source of revenue. During the year, none of the Group’s funds (FY2018/19: none) provided more than 10% of total revenue in the year respectively when considering management fees and performance fees on a combined basis. United Kingdom and Ireland 265.1United States 24.1Other 27.1316.3 The foreign exchange rates which had a material impact on the Group’s results are the US dollar, the Euro, the Indonesian rupiah and the Colombian peso. US dollar 1.2727 1.2958Euro 1.1176 1.1345 Indonesian rupiah 17,980 18,660Colombian peso 4,082 4,058Foreign exchange gains and losses are shown below. Net realised and unrealised hedging gains 5.1Translation gains on non-Sterling denominated monetary assets and liabilities 6.211.3 Analysis of non-current assets by geography Analysis of revenue by geography 2019 £m 2019 £mAverage rate Closing rate year ended as at 30 June 30 June2019 2019 2019 £m2020£m2020£mAverage rate Closing rate year ended as at 30 June 30 June 2020 20202020£m26.472.43.9Total non-current assets 102.7287.024.326.7Total revenue 338.0 1.2356 1.2637 1.1001 1.1331 17,651 18,1344,620 4,4681.55.5Total foreign exchange gains 7.0£1 Ashmore Group p|lc Annual Report and Accounts 2020 139Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 8) Finance income 2020£m 2019£mFinance income Interest and investment income 11.113.2Net realised gains on seed capital investments measured at fair value 4.02.4Net unrealised gains/(losses) on seed capital investments measured at fair value (2.6)1.8Interest expense on lease liabilities (note 16) (0.5)–Total finance income 12.017.4Included within interest and investment income are gains of £4.8 million (FY 2018/19: £5.5 million gains) from investment securities on consolidated funds (note 20d). Included within net realised and unrealised gains on seed capital investments measured at fair value are £2.8 million gains (FY2018/19: £3.2 million gains) in relation to held for sale investments (note 20a), £0.8 million losses (FY2018/19: £0.3 million gains) on financial assets measured at FVTPL (note 20b) and £4.5 million losses (FY2018/19: £0.7 million gains) on non-current financial assets measured at fair value (note 20c). 9) Personnel expenses Personnel expenses during the year comprised the following: 2020£m 2019£mWages and salaries 22.2 21.2 Performance-related cash bonuses 21.1 26.4 Share-based payments 33.9 31.3 Social security costs 1.9 1.9 Pension costs 1.9 1.6 Other costs 1.6 1.8 Total personnel expenses 82.6 84.2 Number of employees At 30 June 2020, the number of investment management employees of the Group (including Executive Directors) during the year was as follows: Average for the year ended 30 June 2020NumberAverage for the year ended 30 June 2019 Number At 30 June 2020NumberAt 30 June 2019NumberTotal investment management employees 292281 291288Directors’ remuneration Disclosures of Directors’ remuneration during the year as required by the Companies Act 2006 are included in the Remuneration report on pages 75 to 109. There are retirement benefits accruing to two Executive Directors under a defined contribution scheme (FY2018/19: two). 10) Share-based payments The cost related to share-based payments recognised by the Group in the statement of comprehensive income is shown below: Group 2020£m 2019£mOmnibus Plan 33.531.3Phantom Bonus Plan 0.4–Total share-based payments expense 33.931.3The total expense recognised for the year in respect of equity-settled share-based payment awards was £28.9 million (FY2018/19: £27.3 million), of which £2.0m (FY2018/19: £1.9m) relates to share awards granted to key management personnel. 140 Ashmore Group plc | Annual Report and Accounts 2020 The Executive Omnibus Incentive Plan (Omnibus Plan) Total expense by year awards were granted (excluding national insurance) i) Equity-settled awards The Omnibus Plan was introduced prior to the Company listing in October 2006 and provides for the grant of share awards, market value options, premium cost options, discounted options, linked options, phantoms and/or nil-cost options to employees. The Omnibus Plan will also allow bonuses to be deferred in the form of share awards with or without matching shares. Awards granted under the Omnibus Plan typically vest after five years from date of grant, with the exception of bonus awards which vest after the shorter of five years from date of grant or on the date of termination of employment. Awards under the Omnibus Plan are accounted for as equity-settled, with the exception of phantoms which are classified as cash-settled. The combined cash and equity-settled payments below represent the share-based payments relating to the Omnibus Plan. 2014 2.0 2015 3.4 2016 2.7 2017 3.8 2018 3.8 2019 11.62020 – 27.3 Awards outstanding under the Omnibus Plan were as follows: At the beginning of the year 22,155,889 £3.14 Granted 4,606,773 £3.33 Vested (4,828,408)£3.69 Forfeited (700,481)£3.44 Awards outstanding at year end 21,233,773 £3.04 At the beginning of the year 9,151,992 £3.12 Granted 2,435,432 £3.33 Vested (1,882,268)£3.76 Forfeited ––Awards outstanding at year end 9,705,156£3.07 At the beginning of the year 9,162,119 £3.15 Granted 2,450,926 £3.33 Vested (1,598,210)£3.78 Forfeited (284,830)£3.60 Awards outstanding at year end 9,730,005 £3.08 Total 40,668,934 £3.06 Group and Company Year of grant Group and Company 2020£m2020 Number of 2020 shares Weighted subject to average awards share price 2019£m2019 2019Number of Weighted shares subject average to awardsshare price– 3.3 2.7 3.7 3.8 4.8 10.9 Total Omnibus share-based payments expense reported in comprehensive income 29.2 Restricted share awards 21,233,773 £3.04 4,026,981 £4.39 (3,063,448) £3.16 (123,968) £3.04 22,073,338 £3.27 Bonus share awards 9,705,156 £3.07 2,060,811 £4.38 (1,072,680) £3.09 – – 10,693,287 £3.32 Matching share awards 9,730,005 £3.08 2,092,986 £4.38 (1,072,680) £3.09 – – 10,750,311 £3.33 43,516,936 £3.30 Ashmore Group p|lc Annual Report and Accounts 2020 141Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 10) Share-based payments continued ii) Cash-settled awards Group and Company 2020 Number of shares subject to awards2020 Weighted average share price 2019 Number of shares subject to awards2019 Weighted average share priceRestricted share awards At the beginning of the year 119,514 £3.18 143,542 £3.37 Granted 31,345 £4.38 22,920 £3.33 Vested (9,062)£3.09 (14,192)£3.83 Forfeited (500)£4.38 (32,756)£3.83 Awards outstanding at year end 141,297 £3.45 119,514 £3.18 Bonus share awards At the beginning of the year 68,054 £3.21 86,673 £3.44 Granted 18,890 £4.38 16,592 £3.33 Vested –– (35,211)£3.83 Forfeited –– ––Awards outstanding at year end 86,944£3.47 68,054£3.21 Matching share awards At the beginning of the year 68,054 £3.21 86,673 £3.44 Granted 18,890 £4.38 16,592 £3.33 Vested –– (10,644)£3.83 Forfeited –– (24,567)£3.83 Awards outstanding at year end 86,944 £3.47 68,054 £3.21 Total 315,185 £3.46 255,622 £3.20 142 Ashmore Group plc | Annual Report and Accounts 2020 iii) Total awards The Approved Company Share Optioan (CSOP) n PlGroup and Company 2020 Number of 2020 shares Weighted subject to average awards share price 20192019 Number of Weighted shares subject average to awardsshare priceRestricted share awards 21,353,287 £3.04 4,058,326 £4.39 (3,072,510) £3.16 (124,468) £3.05 22,214,635 £3.27 Bonus share awards 9,773,210 £3.07 2,079,701 £4.38 (1,072,680) £3.09 – – 10,780,231 £3.33 Matching share awards 8 9,798,059 £3.02,111,876 £4.38 (1,072,680) £3.09 – – 10,837,255 £3.33 Total 43,832,121 £3.30 At the beginning of the year 22,299,431 £3.14 Granted 4,629,693 £3.33 Vested (4,842,600)£3.69 Forfeited (733,237)£3.46 Awards outstanding at year end 21,353,287 £3.04 At the beginning of the year 9,238,665 £3.12 Granted 2,452,024 £3.33 Vested (1,917,479)£3.76 Forfeited ––Awards outstanding at year end 9,773,210£3.07 At the beginning of theyear 9,248,792 £3.15 Granted 2,467,518 £3.33 Vested (1,608,854)£3.78 Forfeited (309,397)£3.62 Awards outstanding at year end 9,798,059 £3.08 40,924,556 £3.06 The weighted average fair value of awards granted to employees under the Omnibus Plan during the year was £4.38 (FY2018/19: £3.33), calculated as the average Ashmore Group plc closing share price for the five business days prior to grant. For Executive Directors, the fair value of awards also takes into account the performance conditions set out in the Remuneration report. Where the grant of restricted and matching share awards is linked to the annual bonus process, the fair value of the awards is spread over a ir vesting date when the grantee becomes unconditionally period including the current financialyearand the subsequent five years to theentitled to the underlying shares. The fair value of the remaining awards is spreadover the period from the date of grant to the vesting date. The liability arising from cash-settled awards under the Omnibus Plan at the end of the year and reported within trade and other payables on the Group consolidated balance sheet is £0.8 million (30 June 2019: £0.5 million) of which £nil (30 June 2019: £nil) relates to vested awards. The CSOP was also introduced prior to the Company listing in October 2006 and is an option scheme providing for the grant of market value options to employees with the agggreate value of outstanding options not exceeding £30,000 per employee. The CSOP qualifies as a UK tax approved company shareoption plan and approval thereto has been obtained from HMRC. To date, there have been no awards made under the CSOP. Ashmore Group p|lc Annual Report and Accounts 2020 143Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 11) Other expenses Other expenses consist of the following: 2020 £m2019 £mTravel 1.72.7Professional fees 4.95.6Information technology and communications 6.86.1Amortisation of intangible assets (note 15) 0.24.1Operating leases 0.12.7Depreciation of property, plant and equipment (note 16) 3.20.7Premises-related costs 1.21.3Insurance 0.60.6Research costs 0.50.5Auditor’s remuneration (see below) 0.60.8Consolidated funds (note 20d) 2.23.3Other expenses 4.63.2 26.631.6Operating leases expense in the current year relates to short-term leases where the Group has applied the optional exemption contained within IFRS 16, which permits the cost of short-term (less than 12 months) leases to be expensed on a straight-line basis over the lease term. Auditor’s remuneration 2020£m2019£mFees for statutory audit services: –(cid:3)Fees payable to the Company’s auditor for the audit of the Group’s accounts 0.20.2–(cid:3)Fees payable to the Company’s auditor and its associates for the audit of the Company’s subsidiaries pursuant to legislation 0.30.3 Fees for non-audit services: –(cid:3)Other non-audit services required by regulation 0.10.1–(cid:3)Other assurance services –0.1–(cid:3)Tax services –0.1 0.60.8144 Ashmore Group plc | Annual Report and Accounts 2020 12) Taxation Analysis of tax charge for the year: UK corporation tax on profits for the year 36.3 Overseas corporation tax charge 8.2 Adjustments in respect of prior years (2.7) 41.8 Origination and reversal of temporary differences (see note 18) (3.4)Effect on deferred tax balance of changes in corporation tax rates (see note 18) –38.4Profit before tax 219.9 Profit on ordinary activities multiplied by the UK tax rate of 19% (FY2018/19: 19%) 41.8 Non-deductible expenses 0.3Deduction in respect of vested shares/exercised options (Part 12, Corporation Tax Act 2009) (1.1)Different rate of taxes on overseas profits 1.5 Non-taxable income (0.3)Derecognition/(recognition) of historical deferred tax assets (0.8)Other items (0.3)Adjustments in respect of prior years (2.7)38.4The tax charge recognised in reserves within other comprehensive income is as follows: Current tax expense on foreign exchange gains 0.40.4The expected reduction in the UK tax rate to 17% from 1 April 2020 enacted by Finance Act 2016 was reversed in Finance Act 2020. The UK statutory tax rate remains 19% and hence, the measurement of the Group’s UK deferred tax assets and liabilities has been updated to reflect the statutory tax rate of 19% as at 30 June 2020. 2019 £m2019 £m2019 £m2020£m2020£m2020£mCurrent tax 24.716.8(2.8)38.7Deferred tax (1.2)(0.7)Tax expense 36.8221.542.1Effects of: 0.5(1.2)(4.2)(0.1)2.90.3(3.5)Tax expense 36.8–Tax credit recognised in reserves –Factors affecting tax charge for the year Ashmore Group p|lc Annual Report and Accounts 2020 145Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 13) Earnings per share Basic earnings per share at 30 June 2020 of 27.35 pence (30 June 2019: 26.57 pence) is calculated by dividing the profit after tax for the financial year attributable to equity holders of the parent of £182.1 million (FY2018/19: £178.6 million) by the weighted average number of ordinary shares in issue during the year, excluding own shares. Diluted earnings per share is calculated based on basic earnings per share adjusted for all dilutive potential ordinary shares. There is no difference between the profit for the year attributable to equity holders of the parent used in the basic and diluted earnings per share calculations. Reconciliation of the weighted average number of shares used in calculating basic and diluted earnings per share is shown below. 2020 Number of ordinary shares2019 Number of ordinary sharesWeighted average number of ordinary shares used in the calculation of basic earnings per share 666,019,404672,361,489Effect of dilutive potential ordinary shares – share awards 43,241,70241,007,535Weighted average number of ordinary shares used in the calculation of diluted earnings per share 709,261,106713,369,02414) Dividends Dividends paid in the year Company 2020£m2019£mFinal dividend for FY2018/19 – 12.10p (FY2017/18: 12.10p) 86.086.0Interim dividend for FY2019/20 – 4.80p (FY2018/19: 4.55p) 34.032.3 120.0118.3In addition, the Group paid £2.7 million (FY2018/19: £2.4 million) of dividends to non-controlling interests. Dividends declared/proposed in respect of the year Company 2020pence2019penceInterim dividend per share paid 4.804.55Final dividend per share proposed 12.1012.10 16.9016.65On 10 September 2020, the Board proposed a final dividend of 12.10 pence per share for the year ended 30 June 2020. This has not been recognised as a liability of the Group at the year end as it has not yet been approved by shareholders. Based on the number of shares in issue at the year end that qualify to receive a dividend, the total amount payable would be £85.5 million. 146 Ashmore Group plc | Annual Report and Accounts 2020 15) Goodwill and intangible assets Group Company Fund management intangible Goodwill assetsTotal£m £m£m* Foreign exchange revaluation through reserves is a result of the retranslation of US dollar-denominated intangibles and goodwill. Goodwill£mCost (at original exchange rate) At 30 June 2020 and 2019 70.4 0.971.3Accumulated amortisation and impairment – (0.2)(0.2)At 30 June 2020 – (0.3)(0.3)Net book value – (0.2)(0.2)2.6 –2.6At 30 June 2020 89.1 0.689.7Cost Net carrying amount at 30 June 2020 and 2019 4.1 At 30 June 2018 57.5 39.597.0Acquisitions 12.9 0.913.8Fully amortised – (39.5)(39.5) At 30 June 2018 – (39.9)(39.9)Amortisation charge for the year – (4.1) (4.1)Fully amortised – 43.943.9At 30 June 2019 – (0.1) (0.1)Amortisation charge for the year At 30 June 2018 70.3 3.974.2Acquisitions 12.9 0.913.8Accumulated amortisation for the year – (4.1) (4.1)Foreign exchange revaluation through reserves 3.3 0.1 3.4 At 30 June 2019 86.5 0.887.3Accumulated amortisation for the year Foreign exchange revaluation through reserves At the beginning and end of the year 4.1 **Ashmore Group p|lc Annual Report and Accounts 2020 147Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 15) Goodwill and intangible assets continued Goodwill Fund management intangible assets The Group’s goodwill balance relates to the acquisition of subsidiaries. The Company’s goodwill balance relates to the acquisition of the business from ANZ in 1999. Goodwill acquired in a business combination is allocated to the cash-generating units that are expected to benefit from that business combination. It is the Group’s judgement that the lowest level of cash-generating unit used to determine impairment is the investment management segment level. The Group has assessed that it consists of a single cash-generating unit for the purposes of monitoring and assessing goodwill for impairment. This reflects the Group’s global operating model, based on a single operatingp latform, into which acquired businesses are fully integrated and from which acquisition-related synergies are expected to be realised. Based on this model, the Group’s investment management activities are considered as a single cash-generating unit, for which key management regularly receive and review internal financial information. An annual impairment review of goodwill was undertaken for the year ending 30 June 2020, and no factors indicating potential impairment of goodwill were noted. Goodwill is tested for impairment annually or whenever there is an indication that the carrying amount may not be recoverable based on management’s judgements regarding the future prospects of the business, market capitalisation, macroeconomic and market considerations. The key assumption used to determine the recoverable amount is based on a fair value calculation using the Company’s market share price. Based on the calculation as at 30 June 2020 using a market share price of £4.17, the recoverable amount was in excess of the carrying value of goodwill and no impairment was implied. In addition, the sensitivity of the recoverable amount to a 10% change in the Company’s market share price will not lead to any impairment. Therefore, no impairment loss has been recognised in the current or preceding years. Intangible assets as at 30 June 2020 comprise fund management contracts and a contractually agreed share of carried interest recognised by the Group on the acquisition of Ashmore Avenida (Real Estate) Investments LLP in July 2018. An annual impairment review was undertaken for the year ending 30 June 2020 and no factors were identified suggesting that fund management contracts intangible assets were impaired. The impairment review compares the carrying value to the recoverable amount of the intangible asset, determined as the greater of fair value less costs to sell and the updated discounted valuation of the remaining net earnings. Any impairment is recognised immediately in the statement of comprehensive income but may be reversed if relevant conditions improve. The discounted value is calculated from the cumulative pre-tax net earnings anticipated to be generated over the remaining economic life, discounted to present value using relevant pre-tax discount rates between 20% and 33% per annum. Cumulative net earnings associated with the fund management contracts were derived from the annual operating profit contribution that would arise from the managed fund assets. The recoverable amounts of the intangible assets were determined to be higher than the carrying values as at 30 June 2020. Accordingly, no impairment charge was recognised during the year. The sensitivity of the recoverable amounts of intangible assets to a 5% increase in pre-tax discount rate used in calculating the recoverable amount was immaterial. The remaining amortisation periods for fund management contracts range between one to five years. 148 Ashmore Group p|lc Annual Report and Accounts 2020 16) Property,p lant and equipment The Group’s property, plant and equipment include ROU assets recognised on the adoption of IFRS 16 Leases on 1 July 2019 (see note 3). Property, plant and equipment owned by the Group 1.81.1Right-of-use assets 9.95.7The movement in property, plant and equipment is provided below: At the beginning of the year 6.5 ROU assets recognised on adoption of IFRS 16 (note 3) –Additions 0.9 Disposals –Foreign exchange revaluation 0.3At the end of the year 7.7 At the beginning of the year 5.4Disposals –Depreciation charge for the year 0.7Foreign exchange revaluation 0.1At the end of the year 6.21.5 At the beginning of the year 3.9 ROU asset recognised on adoption of IFRS 16 (note 3) –Additions 0.3 At the end of the year 4.2 At the beginning of the year 3.4 Depreciation charge for year 0.3 At the end of the year 3.70.5 Group Company GroupCompany£m£m2020 Premises, plant and equipment£m2020 Premises, plant and equipment£mNet book value at 30 June 2020 11.76.8Cost 7.712.61.0(0.3)(0.2)20.8Accumulated depreciation 6.2(0.3)3.2–9.1Net book value at 30 June 11.7Cost 4.26.90.912.0Accumulated depreciation 3.71.55.2Net book value at 30 June 6.82019Fixtures,fittings and equipment£m2019 Fixtures,fittings and equipment£mAshmore Group p|lc Annual Report and Accounts 2020 149Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 16) Property, plant and equipment continued Lease arrangements The Group leases office space in various countries and enters into operating lease agreements on office premises for lease periods of 12 months to 10 years. Lease terms are negotiated on an individual basis and contain varying terms and conditions depending on location. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. From 1 July 2019, the Group recognises operating leases as ROU assets with corresponding liabilities in accordance with the requirements of IFRS 16 Leases. The Group calculated the lease liabilities using the lessee’s incremental borrowing rates that resulted in a weighted average incremental borrowing rate of 4.8%. The carrying value of ROU assets, lease liabilities and the movement during the year are set out below. Group Company ROU assets£mLease liabilities £m ROU asset£mLease liability£mAt 1 July 2019 (adoption of IFRS 16, note 3) 12.612.8 6.96.9Lease payments –(2.8) –(1.3)Interest expense (note 8) –0.5 –0.3Depreciation charge (2.5)– (1.2)–Foreign exchange revaluation through reserves (0.2)(0.3) ––At 30 June 2020 9.910.2 5.75.9The contractual maturities on the minimum lease payments under lease liabilities are provided below: Group CompanyMaturity analysis – contractual undiscounted cash flows 30 June 2020£m30 June 2019 £m 30 June 2020£m30 June 2019£mWithin 1 year 2.62.5 1.31.3Between 1 and 5 years 8.28.7 5.25.2Later than 5 years 1.12.6 –1.0Total undiscounted lease liabilities 11.913.8 6.57.5 Lease liabilities are presented in the balance sheet as follows: Current 2.0– 1.1–Non-current 8.2– 4.8–Total lease liabilities 10.2– 5.9– Amounts recognised under financing activities in the cash flow statement: Payment of lease liabilities 2.3– 1.0–Interest paid 0.5– 0.3–Total cash outflow for leases 2.8– 1.3– 150 Ashmore Group plc | Annual Report and Accounts 2020 17) Trade and other receivables 18) Deferred taxation Group Company2020 2020£m £m2020 Other temporary Share-based differencespaymentsTotal £m£m£m 2020 Other temporary Share-based differencespaymentsTotal £m£m£m 2019 2019£m £m2019Other temporary Share-based differences paymentsTotal£m £m£m 2019Other temporary Share-based differences paymentsTotal£m £m£mCurrent 90.5 1.63.9 1.4– 464.8– 50.31.8 0.1Total trade and other receivables 96.2 518.27.7 22.9 30.6 (6.9) –(6.9) 0.8 22.9 23.7 0.1 20.5 20.6 Trade debtors 73.9 3.7 Prepayments 4.1 1.3 Loans due from subsidiaries – 471.9 Amounts due from subsidiaries – 17.7 Other receivables 1.4 0.4 79.4 495.0 Group trade debtors include accrued management and performance fees in respect of investment management services provided up to 30 June 2020. Management fees are received in cash when the funds’ net asset values are determined, typically every month or every quarter. Performance fees are accrued when crystallised, and amounted to £0.1 million as at 30 June 2020 (30 June 2019: £4.3 million). The majority of fees are deducted from the net asset values of the respective funds by independent administrators and therefore, the credit risk of fee receivables is minimal. As at 30 June 2020, no balances are past due and the assessed provision under the IFRS 9 expected credit loss model was immaterial (30 June 2019: no balances are past due and immaterial provision assessed under IFRS 9 expected credit loss model). Loans due from subsidiaries for the Company include intercompany loans related to seed capital investments held by subsidiaries. Amounts due from subsidiaries represent trading balances that are short term in nature and regularly settled during the year. The majority of the intercompany loans are held with subsidiaries that hold seed capital investments and cash invested in daily-traded investment funds. Under the IFRS 9 expected credit loss model, credit risk is assessed by determining the borrower’s capacity to meet contractual cash flow obligations, taking into account the available net assets to repay the intercompany loan in future periods. As at 30 June 2020, no balances are past due and the assessed provision for expected credit losses was immaterial (30 June 2019: no balances are past due and immaterial provision assessed under IFRS 9 expected credit loss model). Deferred tax assets and liabilities recognised by the Group and Company at year end are attributable to the following: Deferred tax assets 12.0 18.2 30.2 Deferred tax liabilities (8.4) (8.4)– 3.6 18.2 21.8Deferred tax assets 0.3 16.316.6 Group Company Ashmore Group p|lc Annual Report and Accounts 2020 151Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 18) Deferred taxation continued Movement of deferred tax balances The movement in the deferred tax balances between the balance sheet dates has been reflected in the statement of comprehensive income as follows: Group Other temporary differences £m Share-based payments£mTotal£mAt 30 June 2018 3.7 14.818.5Credited/(charged) to the consolidated statement of comprehensive income (0.1) 3.4 3.3 At 30 June 2019 3.6 18.2 21.8Credited/(charged) to the consolidated statement of comprehensive income (2.8) 4.7 1.9 At 30 June 2020 0.8 22.923.7 Company Other temporary differences £m Share-based payments£mTotal£mAt 30 June 2018 0.2 12.8 13.0 Credited/(charged) to the statement of comprehensive income 0.1 3.5 3.6At 30 June 2019 0.3 16.316.6Credited/(charged) to the statement of comprehensive income (0.2) 4.2 4.0At 30 June 2020 0.1 20.5 20.6 Refer to note 12 for details on changes to the UK corporation tax rate which have been reflected in the Group’s deferred tax position. 19) Fair value of financial instruments The Group has an established control framework with respect to the measurement of fair values. This framework includes committees that have overall responsibility for all significant fair value measurements. Each committee regularly reviews significant inputs and valuation adjustments. If third-party information is used to measure fair value, the committee assesses and documents the evidence obtained from the third parties to support such valuations. There are no material differences between the carrying amounts of financial assets and liabilities and their fair values at the balance sheet date. Fair value hierarchy The Group measures fair values using the following fair value levels that reflect the significance of inputs used in making the measurements, based on the degree to which the fair value is observable: –(cid:3)Level 1: Valuation is based upon a quoted market price in an active market for an identical instrument. This fair value measure relates to the valuation of quoted and exchange traded equity and debt securities. –(cid:3)Level 2: Valuation techniques are based upon observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This fair value measure relates to the valuation of quoted equity securities in inactive markets or in interests in unlisted funds whose net asset values are referenced to the fair values of the listed or exchange traded securities held by those funds. Valuation techniques may include using a broker quote in an inactive market or an evaluated price based on a compilation of primarily observable market information utilising information readily available via external sources. –(cid:3)Level 3: Fair value measurements are derived from valuation techniques that include inputs not based on observable market data. For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of the financial year. 152 Ashmore Group plc | Annual Report and Accounts 2020 The fair value hierarchy of financial instruments which are carried at fair value at year end is summarised below: Investment securities 170.4 35.8 72.5 278.7 Non-current assets held for sale – 44.7 44.7–Financial assets measured at FVTPL – 14.4 1.6 16.0 Non-current financial assets at fair value – – 31.6 31.6 170.4 94.9 105.7 371.0 Third-party interests in consolidated funds 70.6 12.6 23.8 107.0 Non-current liabilities held for sale – – – – Derivative financial instruments – 1.1 – 1.1 70.6 13.7 23.8 108.1 The Group recognises transfers into and transfers out of fair value hierarchy levels at each reporting period based on assessments of price inputs used in the valuation of financial assets. There were no transfers between level 1, level 2 and level 3 of the fair value hierarchy during the year. The following table presents the changes in level 3 items for the years ended 30 June 2020 and 2019: At 30 June 2018 69.7 – 23.9 32.7 Reclassification on adoption of IFRS 9 5.6 –––Additions 20.2– 9.3 5.9Disposals (6.6)(2.2) (0.8)(3.9)Transfers to level 1 (16.5)– –(8.3)Unrealised gains/(losses) recognised in finance income 1.3(1.8) (0.9)(2.6)Unrealised gains recognised in reserves 4.4– 0.1–At 30 June 2019 72.51.6 31.6 23.8Additions Disposals Unrealised losses recognised in finance income Unrealised losses recognised in reserves 2019Level 1 Level 2Level 3Total £m £m£m£mThird-party Financial Non-current interests in Investment assets measured financial assets at consolidated securitiesat FVTPL fair valuefunds£m£m £m£m2020Level 1Level 2Level 3Total£m£m£m£mFinancial assets 125.1 60.6 48.8 234.5 – 43.1 – 43.1 – 10.9 0.7 11.6 – 0.1 27.9 28.0 125.1114.777.4317.2Financial liabilities 65.1 10.6 10.4 86.1 –4.5–4.5 – 1.7 – 1.7 65.1 16.810.492.311.7– 3.7 3.9(26.7)(0.1) (2.6)(9.8)(6.1)(0.8) (4.7)(7.5)(2.6)– (0.1)–At 30 June 2020 48.8 0.7 27.9 10.4 Transfers between levels Fair value measurements using significant unobservable inputs (level 3) Ashmore Group p|lc Annual Report and Accounts 2020 153Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 19) Fair value of financial instruments continued Valuation of level 3 financial assets recognised at fair value on a recurring basis using valuation techniques Investments valued using valuation techniques include financial investments which, by their nature, do not have an externally quoted price based on regular trades, and financial investments for which markets are no longer active as a result of market conditions, e.g. market illiquidity. The valuation techniques used include comparison to recent arm’s length transactions, market approach making reference to other instruments that are substantially the same, discounted cash flow analysis, enterprise valuation and net assets approach. These techniques may include a number of assumptions relating to variables such as interest rate and price earnings multiples. Changes in assumptions relating to these variables could positively or negatively impact the reported fair value of these instruments. When determining the inputs into the valuation techniques used, priority is given to publicly available prices from independent sources when available, but overall the source of pricing is chosen with the objective of arriving at a fair value measurement that reflects the price at which an orderly transaction would take place between market participants on the measurement date. The fair value estimates are made at a specific point in time, based upon available market information and judgements about the financial instruments, including estimates of the timing and amount of expected future cash flows. Such estimates could include a marketability adjustment to reflect illiquidity and/or non-transferability that could result from offering for sale at one time the Group’s entire holdings of a particular financial instrument. The estimates of fair value reflect the impact of the COVID-19 pandemic up to the end of the reporting period. Further details on the estimates and judgements applied by the Group are provided in note 31. The following tables show the valuation techniques and the significant unobservable inputs used to estimate the fair value of level 3 investments as at 30 June 2020 and 2019, and the associated sensitivity to changes in unobservable inputs to a reasonable alternative. Asset class and valuation technique 2020Fair value £mSignificant unobservable inputs Range of estimates Sensitivity factor Change in fair value£mUnquoted securities Market multiple and discount 14.0EBITDA multiple 10x-20x +/- 1x +/- 1.4Marketability adjustment 10%-30% +/- 5% -/+ 0.9Market multiple, discounted cash flows and discount 34.6Market multiple 5x-10x +/- 1x +/- 2.4Marketability adjustment 10%-30% +/- 5% -/+ 4.4Discount rate 10%-20% +/- 5% -/+ 4.0Unquoted funds Net assets approach 28.8NAV 1x +/- 5% +/- 1.4Total level 3 investments 77.4 Asset class and valuation technique 2019Fair value £mSignificant unobservable inputs Range of estimates Sensitivity factor Change in fair value£mUnquoted securities Market multiple and discount, recent transaction 42.6EBITDA multiple 10x-20x +/- 1x +/- 2.1Marketability adjustment 10%-30% +/- 5% -/+ 1.4Market multiple, discounted cash flows and discount 26.2Market multiple 5x-10x +/- 1x +/- 1.8Marketability adjustment 10%-30% +/- 5% -/+ 3.2Discount rate 10%-20% +/- 5% -/+ 3.6Adjusted value, broker quotes 3.1Marketability adjustment 20%-35% +/- 5% -/+ 0.2Unquoted funds Net assets approach 33.8NAV 1x +/- 5% +/- 1.7Total level 3 investments 105.7 The sensitivity demonstrates the effect of a change in one unobservable input while other assumptions remain unchanged. There may be a correlation between the unobservable inputs and other factors that has not been considered. It should also be noted that some of the sensitivities are non-linear, therefore, larger or smaller impacts should not be interpolated or extrapolated from these results. 154 Ashmore Group plc | Annual Report and Accounts 2020 Financial instruments not measured at fair value Financial assets and liabilities that are not measured at fair value include cash and cash equivalents, trade and other receivables, and trade and other payables. The carrying value of financial assets and financial liabilities not measured at fair value is considered a reasonable approximation of fair value as at 30 June 2020 and 2019. The Group considers itself a sponsor of an investment fund when it facilitates the establishment of a fund in which the Group is the investment manager. The Group ordinarily provides seed capital in order to provide initial scale and facilitate marketing of the funds to third-party investors. Aggregate interests held by the Group include seed capital, management fees and performance fees. The Group generates management and performance fee income from managing the assets on behalf of third-party investors. The movements of seed capital investments and related items during the year are as follows: Carrying amount at 30 June 2018 6.8 5.6 23.5 219.1 5.5 (76.1) 43.9 228.3 Reclassification: Adoption of IFRS 9 (5.6)– – – 5.6–––HFS investments to consolidated funds (10.9)–– 11.6– (0.7)––FVTPL to consolidated funds (25.6)––(9.8)35.4– ––Consolidated funds to FVTPL 1.2 (2.0) ––– 0.8 ––Net purchases, disposals and fair value changes 48.8– (4.5) 14.6 8.3 (5.4) (12.3) 49.5Carrying amount at 30 June 2019 44.7– 16.0 278.7 13.8 (107.0) 31.6 277.8 Reclassification: HFS investments to consolidated funds Consolidated funds to FVTPL Net purchases, disposals and fair value changes 20) Seed capital investments Group Investment Non-current Financial securities Other Third-party financial Held Available-assets (relating to terests in (relating to inassets for sale for-sale measured at consolidated consolidated consolidated measured at investmentsinvestmentsfair valuefunds) funds) fundsfair valueTotal£m£m£m£m £m £m £m£m* Investment securities in consolidated funds are measured at FVTPL. ** Relates to cash and other assets in consolidated funds that are not investment securities, see note 20(d). *** Included in net purchases, disposals and fair value changes are third-party subscriptions of £50.0 million, redemptions and distributions of £31.5 million, fair value movements of £7.5 million and other non-cash movements in relation to consolidated funds (FY 2018/19: third-party subscriptions of £2.7 million, redemptions of £10.3 million and fair value movements of £3.8 million and other non-cash movements in relation to consolidated funds). ****** (35.7) – – 44.2 – (8.5) – – – – 41.4 (77.1) – 35.7 – – 29.6(45.8)(11.3)(2.0) (6.3)(3.6)(39.4)Carrying amount at 30 June 2020 38.6 – 11.6 234.5 11.8 (86.1) 28.0 238.4 Ashmore Group p|lc Annual Report and Accounts 2020 155Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 20) Seed capital investments continued a) Non-current assets and non-current liabilities held for sale Where Group companies invest seed capital into funds operated and controlled by the Group and the Group is actively seeking to reduce its investment and it is considered highly probable that it will relinquish control within a year, the interests in the funds are treated as held for sale and are recognised as financial assets and liabilities held for sale. During the year, six funds (FY2018/19: four) were seeded in this manner, met the above criteria, and consequently the assets and liabilities of these funds were initially classified as held for sale. The non-current assets and liabilities held for sale at 30 June 2020 were as follows: 2020£m2019£mNon-current financial assets held for sale 43.1 44.7Non-current financial liabilities held for sale (4.5)–Non-current assets held for sale 38.6 44.7Investments cease to be classified as held for sale when they are no longer controlled by the Group. A loss of control may happen through sale of the investment and/or dilution of the Group’s holding. When investments cease to be classified as held for sale, they are classified as financial assets at FVTPL. No such fund was transferred to the FVTPL category during the year (FY2018/19: none). If the fund remains under the control of the Group for more than one year from the original investment date, it will cease to be classified as held for sale, and will be consolidated line by line after it is assessed that the Group controls the investment fund in accordance with the requirements of IFRS 10. During the year, three such funds (FY2018/19: two) with an aggregate carrying amount of £35.7 million (FY2018/19: £10.9 million) were transferred from held for sale to consolidated funds category. There was no impact on net assets or comprehensive income as a result of the transfer. Included within finance income are gains of £2.8 million (FY2018/19: gains of £3.2 million) in relation to held for sale investments. As the Group considers itself to have one segment (refer to note 4), no additional segmental disclosure of held for sale assets or liabilities is applicable. b) Financial assets measured at fair value through profit or loss FVTPL investments at 30 June 2020 comprise shares held in debt and equity funds as follows: 2020£m2019£mEquity funds 3.24.8Debt funds 8.411.2Financial assets measured at fair value 11.616.0Included within finance income are losses of £0.8 million (FY2018/19: gains of £0.3 million) on the Group’s financial assets measured at FVTPL. c) Non-current financial assets measured at fair value Non-current asset investments relate to the Group’s holding in closed-end funds and are measured at FVTPL. Fair value is assessed by taking account of the extent to which potential dilution of gains or losses may arise as a result of additional investors subscribing to the fund where the final close of a fund has not occurred. 2020£m2019£mReal estate funds 3.5 4.9 Infrastructure funds 17.5 17.8 Other funds 7.0 8.9 Non-current financial assets measured at fair value 28.0 31.6 Included within finance income are losses of £4.5 million (FY2018/19: gains of £0.7 million) on the Group’s non-current asset investments. 156 Ashmore Group plc | Annual Report and Accounts 2020 d) Consolidated funds The Group has consolidated 12 investment funds as at 30 June 2020 (30 June 2019: 13 investment funds), over which the Group is deemed to have control (refer to note 25). Consolidated funds represent seed capital investments where the Group has held its position for a period greater than one year and its interest represents a controlling stake in the fund in accordance with IFRS 10. Consolidated fund assets and liabilities are presented line by line after intercompany eliminations. The table below sets out an analysis of the carrying amounts of interests held by the Group in consolidated investment funds. Investment securities 278.7 Cash and cash equivalents 14.1 Other (0.3)Third-party interests in consolidated funds (107.0) 185.5 The maximum exposure to loss is the carrying amount of the assets held. The Group has not provided financial support or otherwise agreed to be responsible for supporting any consolidated or unconsolidated funds financially. Included within the consolidated statement of comprehensive income are net losses of £9.0 million (FY2018/19: £6.5 million gains) relating to the Group’s share of the results of the individual statements of comprehensive income for each of the consolidated funds, as follows: Interest and dividend income 5.5 Gains/(losses) on investment securities 0.5 Change in third-party interests in consolidated funds 3.8 Other expenses (3.3) 6.5 Included in the Group’s cash generated from operations is £3.0 million cash utilised in operations (FY2018/19: £3.1 million cash utilised in operations) relating to consolidated funds. As of 30 June 2020, the Group’s consolidated funds were domiciled in Guernsey, Indonesia, Luxembourg, Saudi Arabia and the United States. 2019 £m* Investment securities represent trading securities held by consolidated investment funds and are measured at FVTPL. Note 25 provides a list of the consolidated funds by asset class, and further detailed information at the security level is available in the individual fund financial statements. ** Other includes trade receivables, trade payables and accruals. 2019 £m2020£m2020£m*** 234.5 10.8 1.0 (86.1)Consolidated seed capital investments 160.2 4.8 (19.1) 7.5 (2.2)Net gains/(losses) on consolidated funds (9.0)Ashmore Group p|lc Annual Report and Accounts 2020 157Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 21) Financial instrument risk management Group The Group is subject to strategic and business, client, investment, treasury and operational risks throughout its business as discussed in the Risk management section. This note discusses the Group’s exposure to and management of the following principal risks which arise from the financial instruments it uses: credit risk, liquidity risk, interest rate risk, foreign exchange risk and price risk. Where the Group holds units in investment funds, classified either as held for sale, FVTPL or non-current financial assets, the related financial instrument risk disclosures in the note below categorise exposures based on the Group’s direct interest in those funds without looking through to the nature of underlying securities. Risk management is the ultimate responsibility of the Board, as noted in the Risk management section on pages 35 to 41. Capital management It is the Group’s policy that all entities within the Group have sufficient capital to meet regulatory and working capital requirements and it conducts regular reviews of its capital requirements relative to its capital resources. As the Group is regulated by the United Kingdom Financial Conduct Authority (FCA), it is required to maintain appropriate capital and perform regular calculations of capital requirements. This includes development of an Internal Capital Adequacy Assessment Process (ICAAP), based upon the FCA’s methodologies under the Capital Requirements Directive. The Group’s Pillar III disclosures can be found on the Group’s website at www.ashmoregroup.com. These disclosures indicate that the Group had excess capital of £555.2 million as at 30 June 2020 (30 June 2019: excess capital of £557.6 million) over the level of capital required under a Pillar II assessment. The objective of the assessment is to check that the Group has adequate capital to manage identified risks and the process includes conducting stress tests to identify capital and liquidity requirements under different future scenarios including a potential downturn. Credit risk The Group has exposure to credit risk from its normal activities where the risk is that a counterparty will be unable to pay in full amounts when due. Exposure to credit risk is monitored on an ongoing basis by senior management and the Group’s Risk Management and Control function. The Group has a counterparty and cash management policy in place which, in addition to other controls, restricts exposure to any single counterparty by setting exposure limits and requiring approval and diversification of counterparty banks and other financial institutions. The Group’s maximum exposure to credit risk is represented by the carrying value of its financial assets. The table below lists financial assets subject to credit risk. Notes 2020£m2019£mInvestment securities 19 234.5278.7Non-current financial assets held for sale 19 43.144.7Financial assets measured at fair value 19 11.616.0Trade and other receivables 17 96.279.4Cash and cash equivalents 500.9477.2Total 886.3896.0Ashmore recognises investment securities by virtue of including consolidated funds on its balance sheet on a line-by-line basis. The risk management policies and procedures for the consolidated funds are the responsibility of the governing bodies of the funds. The associated exposures on credit risk, market risk and foreign exchange risk on the investment securities are monitored by the Group’s Risk Management and Control function. In addition, non-current financial assets held for sale and financial assets measured at fair value through profit or loss expose the Group to credit risk from various counterparties, which is monitored and reviewed by the Group. The Group’s cash and cash equivalents, comprising short-term deposits with banks and liquidity funds, are predominantly held with counterparties with credit ratings ranging from A to AAA- as at 30 June 2020 (30 June 2019: A+ to AAA). As at 30 June 2020, the Group held £368.0m (2019: £243.3m) in the Ashmore Global Liquidity Fund. All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2019: none). They include fee debtors that arise principally within the Group’s investment management business. They are monitored regularly and, historically, default levels have been insignificant, and, unless a client has withdrawn funds, there is an ongoing relationship between the Group and the client. There is no significant concentration of credit risk in respect of fees owing from clients. 158 Ashmore Group plc | Annual Report and Accounts 2020 Liquidity risk Interest rate risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or other financial assets. In order to manage liquidity risk, there is a Group Liquidity Policy to ensure that there is sufficient access to funds to cover all forecast committed requirements for the next 12 months. The maturity profile of the Group’s contractual undiscounted financial liabilities is as follows: Third-party interests in consolidated funds Derivative financial instruments Current trade and other payables Non-current financial liabilities held for sale Third-party interests in consolidated funds 83.2 23.8 107.0–Derivative financial instruments 1.1 – –1.1Current trade and other payables 56.1 – –56.1 140.4 23.8 –164.2Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates. The principal interest rate risk is the risk that the Group will sustain a reduction in interest income through adverse movements in interest rates. This relates to deposits with banks and liquidity funds held in the ordinary course of business. The Group has a cash management policy which monitors cash levels and returns within set parameters on a continuing basis. Bank and similar deposits held at year end are shown on the consolidated balance sheet as cash and cash equivalents. The effective interest earned on bank and similar deposits during the year is given in the table below: Deposits with banks and liquidity funds 1.69Deposits with banks and liquidity funds are repriced at intervals of less than one year. At 30 June 2020, if interest rates over the year had been 50 basis points higher/lower with all other variables held constant, profit before tax for the year would have been £2.4 million higher/lower (FY2018/19: £2.3 million higher/lower), mainly as a result of higher/lower interest on cash balances. An assumption that the fair value of assets and liabilities will not be affected by a change in interest rates was used in the model to calculate the effect on profit before tax. In addition, the Group is indirectly exposed to interest rate risk where the Group holds seed capital investments in funds that invest in debt securities. At 30 June 2020 At 30 June 2019 Effective interest rates applicable to bank deposits More than Within 1 year 1-5 years 5 yearsTotal£m £m £m£m More than Within 1 year 1-5 years 5 yearsTotal£m £m £m£m2020%86.1 – –86.11.7 – 1.7–50.7 – 50.7–4.5 – –4.5143.0 – –143.01.312019 %Ashmore Group p|lc Annual Report and Accounts 2020 159Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 21) Financial instrument risk management continued Group Foreign exchange risk Foreign exchange risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in foreign exchange rates. The Group’s revenue is almost entirely denominated in US dollars, while the majority of the Group’s costs are denominated in Sterling. Consequently, the Group has an exposure to movements in the GBP:USD exchange rate. In addition, the Group operates globally, which means that it may enter into contracts and other arrangements denominated in local currencies in various countries. The Group also holds a number of seed capital investments denominated mainly in US dollars, Colombian pesos and Indonesian rupiah. The Group’s policy is to hedge a proportion of the Group’s revenue by using a combination of forward foreign exchange contracts and options for a period of up to two years forward. The Group also sells US dollars at spot rates when opportunities arise. The table below shows the Group’s sensitivity to a 1% exchange movement in the US dollar, Colombian peso, Indonesian rupiah and the Euro, net of hedging activities. 2020 2019Foreign currency sensitivity test Impact on profitbefore tax£mImpact on equity £m Impact on profitbefore tax£mImpact on equity£mUS dollar +/- 1% 1.3 5.3 0.8 4.4 Colombian peso +/- 1% 0.1 0.1 0.1 0.1 Indonesian rupiah +/- 1% –0.1 ––Euro +/- 1% 0.1 0.1 0.1 0.1 Price risk Price risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of market changes. Seed capital The Group is exposed to the risk of changes in market prices in respect of seed capital investments. Such price risk is borne by the Group directly through interests in financial assets measured at fair value or indirectly either through line-by-line consolidation of underlying financial performance and positions held in certain funds or potential impairments when fair values less costs to sell of seed investments held for sale are less than carrying amounts. Details of seed capital investments held are given in note 20. The Group has well-defined procedures governing the appraisal, approval and monitoring of seed capital investments. At 30 June 2020, a 5% movement in the fair value of these investments would have a £11.9 million (FY2018/19: £13.9 million) impact on net assets and profit before tax. Management and performance fees The Group is also indirectly exposed to price risk in connection with the Group’s management fees, which are based on a percentage of value of AuM, and fees based on performance. Movements in market prices, exchange and interest rates could cause the AuM to fluctuate, which in turn could affect fees earned. Performance fee revenues could also be reduced depending upon market conditions. Management and performance fees are diversified across a range of investment themes and are not measurably correlated to any single market index in Emerging Markets. In addition, the policy of having funds with year ends staged throughout the financial year has meant that in periods of steep market decline, some performance fees have still been recorded. The profitability impact is likely to be less than this, as cost mitigation actions would apply, including the reduction of the variable compensation paid to employees. Using the year end AuM level of US$83.6 billion and applying the year’s average net management fee rate of 45bps, a 5% movement in AuM would have a US$18.7 million impact, equivalent to £15.2 million using year end exchange rate of 1.2356, on management fee revenues (FY2018/19: using year end AuM level of US$91.8 billion and applying the year’s average net management fee rate of 48bps, a 5% movement in AuM would have a US$21.8 million impact, equivalent to £17.1 million using year end exchange rate of 1.2727, on management fee revenues). Hedging activities The Group uses forward and option contracts to hedge its exposure to foreign currency risk. These hedges, which have been assessed as effective cash flow hedges as at 30 June 2020, protect a proportion of the Group’s revenue cash flows from foreign exchange movements. The cumulative fair value of the outstanding foreign exchange hedges liability at 30 June 2020 was £1.7 million (30 June 2019: £0.7 million foreign exchange hedges liability) and is included within the Group’s derivative financial instrument liabilities. 160 Ashmore Group plc | Annual Report and Accounts 2020 The notional and fair values of foreign exchange hedging instruments were as follows: Cash flow hedges Foreign exchange nil-cost option collars 160.0(0.7) 160.0(0.7)The maturity profile of the Group’s outstanding hedges is shown below. Notional amount of option collars maturing: Within 6 months 60.0Between 6 and 12 months 60.0Later than 12 months 40.0 160.0 When hedges are assessed as effective, intrinsic value gains and losses are initially recognised in other comprehensive income and later reclassified to comprehensive income as the corresponding hedged cash flows crystallise. Time value in relation to the Group’s hedges is excluded from being part of the hedging item and, as a result, the net unrealised loss related to the time value of the hedges is recognised in the consolidated statement of comprehensive income for the year. An intrinsic loss of £0.1 million (FY2018/19: £nil) on the Group’s hedges has been recognised through other comprehensive income and £0.1 million intrinsic value gain (FY2018/19: £0.9 million intrinsic value gain) was reclassified from equity to the statement of comprehensive income in the year. Included within the net realised and unrealised hedging gain of £1.5 million (note 7) recognised at 30 June 2020 (£5.1 million gain at 30 June 2019) are: –a £0.9 million loss in respect of foreign exchange hedges covering net management fee income for the financial year ending 30 June 2020 (FY2018/19: £0.3 million gain in respect of foreign exchange hedges covering net management fee income for the financial year ended 30 June 2019); and –a £2.4 million gain in respect of crystallised foreign exchange contracts (FY2018/19: £4.8 million gain). The risk management processes of the Company, including those relating to the specific risk exposures covered below, are aligned with those of the Group as a whole unless stated otherwise. In addition, the risk definitions that apply to the Group are also relevant for the Company. The Company’s maximum exposure to credit risk is represented by the carrying value of its financial assets. The table below lists financial assets subject to credit risk by credit rating: Cash and cash equivalents 150.3Trade and other receivables 495.0 645.3The Company’s cash and cash equivalents comprise short-term deposits held with banks and liquidity funds which have credit ratings ranging from A to AAA- as at 30 June 2020 (30 June 2019: A+ to AAA). All trade and other receivables are considered to be fully recoverable and none were overdue at year end (30 June 2019: none). The contractual undiscounted cash flows relating to the Company’s financial liabilities all fall due within one year. Details on other commitments are provided in note 29. 2020 Fair value Notional assets/ amount (liabilities) £m £m 2020£m2020£m2019Fair value Notional assets/amount(liabilities) £m£m2019£m2019 £m 120.0 (1.7) 120.0 (1.7) 60.050.010.0120.0 91.8518.2Total 610.0��Company Credit risk Liquidity risk Ashmore Group p|lc Annual Report and Accounts 2020 161Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 21) Financial instrument risk management continued Company Interest rate risk The principal interest rate risk for the Company is that it could sustain a reduction in interest revenue from bank deposits held in the ordinary course of business through adverse movements in interest rates. Bank and similar deposits held at year end are shown on the Company’s balance sheet as cash and cash equivalents. The effective interest earned on bank and similar deposits during the year is given in the table below: Effective interest rates applicable to bank deposits 2020%2019%Deposits with banks and liquidity funds 0.660.84Deposits with banks and liquidity funds are repriced at intervals of less than one year. At 30 June 2020, if interest rates over the year had been 50 basis points higher/lower with all other variables held constant, post-tax profit for the year would have been £0.6 million higher/lower (FY2018/19: £0.8 million higher/lower), mainly as a result of higher/lower interest on cash balances. An assumption that the fair value of assets and liabilities will not be affected by a change in interest rates was used in the model to calculate the effect on post-tax profits. Foreign exchange risk The Company is exposed primarily to foreign exchange risk in respect of US dollar cash balances and US dollar-denominated intercompany balances. However, such risk is not hedged by the Company. At 30 June 2020, if the US dollar had strengthened/weakened by 1% against Sterling with all other variables held constant, profit before tax for the year would have increased/decreased by £4.8 million (FY2018/19: increased/decreased by £4.9 million). 22) Share capital Authorised share capital Group and Company 2020 Number of shares2020 Nominal value £’000 2019 Number of shares2019 Nominal value£’000Ordinary shares of 0.01p each 900,000,00090 900,000,00090Issued share capital – allotted and fully paid Group and Company 2020Number of shares2020 Nominal value £’000 2019 Number of shares2019 Nominalvalue£’000Ordinary shares of 0.01p each 712,740,80471 712,740,80471All the above ordinary shares represent equity of the Company and rank pari passu in respect of participation and voting rights. At 30 June 2020, there were equity-settled share awards issued under the Omnibus Plan totalling 43,516,936 (30 June 2019: 40,668,934) shares that have release dates ranging from September 2020 to September 2024. Further details are provided in note 10. 23) Own shares The Trustees of The Ashmore 2004 Employee Benefit Trust (EBT) acquire and hold shares in Ashmore Group plc with a view to facilitating the vesting of share awards. As at 30 June 2020, the EBT owned 56,477,466 (30 June 2019: 40,355,103) ordinary shares of 0.01p with a nominal value of £5,648 (30 June 2019: £4,036) and shareholders’ funds are reduced by £192.7 million (30 June 2019: £119.1 million) in this respect. The EBT is periodically funded by the Company for these purposes. 162 Ashmore Group plc | Annual Report and Accounts 2020 24) Trade and other payables 25) Interests in subsidiaries Group Company2020 2020£m £m2020£m% of equity shares held by the GroupGroup Company 2019 2019£m £m2019£mCountry of incorporation/ formation and principal place of operationCurrent 20.1 2.530.6 20.4– 32.5 55.450.7 19.9100.00100.00100.0061.3853.6656.00100.0060.04100.00100.0055.00100.00100.00100.00100.00100.00 Trade payables 22.1 1.6Accruals and provisions 34.0 29.3Amounts due to subsidiaries – 7.3Total trade and other payables 56.1 38.2There were no movements in investments in subsidiaries held by the Company during the year. Cost At 30 June 2020 and 2019 19.9In the opinion of the Directors, the following subsidiary undertakings principally affected the Group’s results or financial position at 30 June 2020. A full list of the Group’s subsidiaries and all related undertakings is disclosed in note 33. Ashmore Investments (UK) Limited EnglandAshmore Investment Management Limited EnglandAshmore Investment Advisors Limited EnglandAshmore Management Company Colombia SAS ColombiaAshmore CAF-AM Management Company SAS ColombiaAshmore Avenida (Real Estate) Investments LLP ColombiaAshmore Management Company Limited GuernseyPT Ashmore Asset Management Indonesia Tbk IndonesiaAshmore Investment Management (Ireland) Limited IrelandAshmore Japan Co. Limited JapanAA Development Capital Investment Managers (Mauritius) LLC MauritiusAshmore Investments (Holdings) Limited MauritiusAshmore Investments Saudi Arabia Saudi ArabiaAshmore Investment Management (Singapore) Pte. Ltd. SingaporeAshmore Investment Management (US) Corporation USAAshmore Investment Advisors (US) Corporation USA Operating subsidiaries held by the Company Company Name Ashmore Group p|lc Annual Report and Accounts 2020 163Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 25) Interests in subsidiaries continued Consolidated funds The Group consolidated the following 12 investment funds as at 30 June 2020 over which the Group is deemed to have control: Name Type of fund Country of incorporation/ principal place of operation% of net asset value held by the GroupAshmore Special Opportunities Fund LP Alternatives Guernsey50.00Ashmore Emerging Markets Debt and Currency Fund Limited Blended debt Guernsey89.60Ashmore SICAV Emerging Markets China Bond Fund Local currency Luxembourg100.00Ashmore SICAV Emerging Markets Equity Fund Equity Luxembourg48.86Ashmore SICAV Emerging Markets IG Total Return Fund Blended debt Luxembourg80.10Ashmore SICAV Emerging Markets Indonesian Equity Fund Equity Luxembourg100.00Ashmore SICAV Emerging Markets Multi-Asset Fund Multi-asset Luxembourg54.58Ashmore SICAV Emerging Markets Total Return ESG Fund Blended debt Luxembourg100.00Ashmore SICAV Emerging Markets Global Small-Cap Equity Fund Equity Luxembourg45.47Ashmore SICAV Emerging Markets Volatility-Managed Local Currency Bond Fund Local currency Luxembourg100.00Ashmore Saudi Equity Fund Equity Saudi Arabia100.00Ashmore Emerging Markets Equity Fund Equity USA42.2026) Interests in associates and joint ventures The Group held interests in the following associates as at 30 June 2020 that are unlisted: Name TypeNature of businessCountry of incorporation/formation and principal place of operation% of equity shares held by the GroupAshmore Investment Management India LLP AssociateInvestment managementIndia30.00%Taiping Fund Management Company AssociateInvestment managementChina8.50%During the year, the Group disposed of its associate and joint interests in Everbright Ashmore, VTB-Ashmore Capital Holdings Limited and Mesa Capital Advisors LLC for total proceeds of £1.2 million and has recognised a gain on disposal of £0.1 million. The movement in the carrying value of investments in associates and joint ventures for the year is provided below: Associates and joint ventures 2020£m2019£mAt the beginning of the year 1.81.7Additions/(disposals) (1.1)0.4Share of loss (0.2)(0.3)Foreign exchange revaluation 0.1–At the end of the year 0.61.8The summarised aggregate financial information is shown below. Associates and joint ventures 2020£m2019£mTotal assets 24.1 23.7 Total liabilities (17.9) (9.1)Net assets 6.2 14.6 Group’s share of net assets 0.6 2.1 Revenue for the year 8.9 9.2 Loss for the year (2.3) (1.3)Group’s share of loss for the year (0.2) (0.3)The carrying value of the investments in associates represents the cost of acquisition subsequently adjusted for share of profit or loss and other comprehensive income or loss. No permanent impairment is believed to exist relating to the associates as at 30 June 2020. The Group had no undrawn capital commitments (30 June 2019: £nil) to investment funds managed by the associates. 164 Ashmore Group plc | Annual Report and Accounts 2020 27) Interests in structured entities 28) Related party transactions The Group has interests in structured entities as a result of the management of assets on behalf of its clients. Where the Group holds a direct interest in a closed-ended fund, private equity fund or open-ended pooled fund such as a SICAV, the interest is accounted for either as a consolidated structured entity or as a financial asset, depending on whether the Group has control over the fund or not. The Group’s interest in structured entities is reflected in the Group’s AuM. The Group is exposed to movements in AuM of structured entities through the potential loss of fee income as a result of client withdrawals. Outflows from funds are dependent on market sentiment, asset performance and investor considerations. Further information on these risks can be found in the Business review. Considering the potential for changes in AuM of structured entities, management has determined that the Group’s unconsolidated structured entities include segregated mandates and pooled funds vehicles. Disclosure of the Group’s exposure to unconsolidated structured entities has been made on this basis. The reconciliation of AuM reported by the Group within unconsolidated structured entities is shown below. 30 June 2019 91.8 0.491.4Included in the Group’s consolidated management fees of £330.0 million (FY2018/19: £307.6 million) are management fees amounting to £328.3 million (FY2018/19: £305.1 million) earned from unconsolidated structured entities. The table below shows the carrying values of the Group’s interests in unconsolidated structured entities, recognised in the Group balance sheet, which are equal to the Group’s maximum exposure to loss from those interests. Management fees receivable 46.4Trade and other receivables 1.7Seed capital investments* 92.3Total exposure 140.4The main risk the Group faces from its beneficial interests in unconsolidated structured entities arises from a potential decrease in the fair value of seed capital investments. The Group’s beneficial interests in seed capital investments are disclosed in note 20. Note 21 includes further information on the Group’s exposure to market risk arising from seed capital investments. Related parties of the Group include key management personnel, close family members of key management personnel, subsidiaries, associates, joint ventures, Ashmore funds, the EBT and the Ashmore Foundation. The compensation paid to or payable to key management personnel is shown below: Short-term benefits 1.7Defined contribution pension costs –Share-based payment benefits 1.6 3.3Short-term benefits include salary and fees, benefits and cash bonus. Share-based payment benefits represent the fair value charge to the statement of comprehensive income of current year share awards. Details of the remuneration of Directors are given in the Remuneration report on pages 75 to 109. During the year, there were no other transactions entered into with key management personnel (FY2018/19: none). Aggregate key management personnel interests in consolidated funds at 30 June 2020 were £33.9 million (30 June 2019: £44.6 million).Less:AuM withinAuM within unconsolidated consolidated structured Total AuM fundsentitiesUS$bn US$bnUS$bn2020 £m2020£m30 June 2020 83.6 0.383.355.726.678.2160.50.8–0.41.22019£m* Comprise held for sale investments, financial assets measured at fair value and non-current financial assets measured at fair value (refer to note 20). 2019£mKey management personnel – Group and Company Ashmore Group p|lc Annual Report and Accounts 2020 165Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 28) Related party transactions continued Transactions with subsidiaries – Company Details of transactions between the Company and its subsidiaries are shown below: 2020£m2019£mTransactions during the year Management fees 78.477.1Net dividends 122.0174.4Loans repaid by subsidiaries 23.38.1Amounts receivable or payable to subsidiaries are disclosed in notes 17 and 24 respectively. Transactions with Ashmore funds – Group During the year, the Group received £174.9 million of gross management fees and performance fees (FY2018/19: £158.9 million) from the 109 funds (FY2018/19: 109 funds) it manages and which are classified as related parties. As at 30 June 2020, the Group had receivables due from funds of £35.0 million (30 June 2019: £6.7 million) that are classified as related parties. Transactions with the EBT – Group and Company The EBT has been provided with a loan facility to allow it to acquire Ashmore shares in order to satisfy outstanding unvested share awards. The EBT is included within the results of the Group and the Company. As at 30 June 2020, the loan outstanding was £167.0 million (30 June 2019: £106.3 million). Transactions with the Ashmore Foundation – Group and Company The Ashmore Foundation is a related party to the Group. The Foundation was set up to provide financial grants to worthwhile causes within the Emerging Markets countries in which Ashmore invests and/or operates with a view to giving back to the countries and communities. The Group donated £0.1 million to the Foundation during the year (FY2018/19: £0.1 million). 29) Commitments The Group has undrawn investment commitments relating to seed capital investments as follows: Group 2020£m2019£m Ashmore Andean Fund II, LP 0.30.5Ashmore Avenida Colombia Real Estate Fund I (Cayman) LP 0.10.3Ashmore I – CAF Colombian Infrastructure Senior Debt Fund 11.612.7Ashmore Special Opportunities Fund LP 8.07.7Total undrawn investment commitments 20.021.2Company The Company has undrawn loan commitments to other Group entities totalling £297.8 million (30 June 2019: £276.6 million) to support their investment activities but has no investment commitments of its own (30 June 2019: none). 166 Ashmore Group plc | Annual Report and Accounts 2020 30) Non-controlling interests In January 2020 the Group listed PT Ashmore Asset Management Indonesia Tbk (Ashmore Indonesia) on the Jakarta Stock Exchange through an initial public offering (IPO) and issued 10.0% of the subsidiary’s shares to the public. No shares were sold by existing shareholders and this diluted the Group’s interest by 6.6% to 60.0%. Total proceeds of £11.7m were received on the new issue of shares and transaction costs of £0.4m were paid in relation to the issue of the shares. As a result of this transaction, the equity attributable to owners decreased by £0.4m and non-controlling interests increased by £11.7m. The IPO has raised Ashmore Indonesia’s profile in the region and diversified its shareholder register. The Group’s material NCI as at 30 June 2020 were held in two subsidiaries, Ashmore Indonesia and Ashmore Avenida (Real Estate) Investments LLP (Ashmore Avenida). Set out below is summarised financial information for the two subsidiaries and the amounts disclosed are before intercompany eliminations. Total assets 7.8 7.0 Total liabilities (5.3) (0.5)Net assets 2.5 6.5Accumulated NCI 0.4 9.0 Net revenue 10.3 4.5 Profit for the period 4.6 1.4Other comprehensive income 0.2 0.2Total comprehensive income 4.8 1.6Profit allocated to NCI 1.5 0.5Dividends paid to NCI .1.5 05 Cash flows from operating activities 6.0 0.7Cash flows from investing activities 0.2 0.2Cash flows from financing activities (4.6) (0.5)Net increase/(decrease) in cash and cash equivalents 1.6 0.4 Summarised balance sheet Summarised statement of comprehensive income Summarised cash flows 40% NCI interest 44% NCI interest Ashmore Indonesia Ashmore Avenida2019 2019£m £m 20202020£m £m22.0 6.6(5.0) (1.2)17.0 5.413.4 8.19.7 3.7 5.1 0.10.4 0.15.5 0.21.9 –0.7 0.93.8 0.40.5 0.98.9 (1.5)13.2 (0.2)Ashmore Group p|lc Annual Report and Accounts 2020 167Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 31) Significant accounting estimates and judgements 32) Post-balance sheet events The preparation of the financial statements in conformity with IFRS requires the use of certain accounting estimates, and management to exercise its judgement in the process of applying the Group’s accounting policies. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year relate to the valuation of unquoted investment securities using unobservable inputs. In determining the fair value of seed capital investments, the Group makes estimates to determine the inputs used in valuation techniques. The degree of estimation involveddependson the individual financia l instrument and is reflected in the fair value hierarchy. The fair value hierarchy also reflects the extent of judgements used in the valuation. Judgement may include determining the accounting classification, the appopatealuation appoach to use as well as determining appopate assumptons. For level 3 estments, the judgementapped rri vrriiinvr liby the Group gives rise to an estimate of fair value. As at 30 June 2020, approximately 7% of the Group’s total assets by value are level 3 investments, whose fair value has been estimated using valuation techniques incorporating inputs that are not based on observable market data. The Group’s level 3 investments comprise unquoted securities held in consolidated funds and interests in unconsolidated funds. The securities may include all asset types but are frequently special situations investments, typically incorporating distressed, illiquid or private investments. The methodology and models used to determine fair value are created in accordance with International Private Equity and Venture Capital Valuation Guidelines. Due to the high level of judgement involved, the Group has a separate Pricing Methodology and Valuation Committee (PMVC) to review the valuation methodologies, inputs and assumptions used to value individual investments. Smaller investments may be valued directly by the PMVC but material investments are valued by an independent third-party valuation specialist. Such valuations are subject to review and approval by the PMVC, whose activities are included in the Risk management section on pages 35 and 41. Valuation techniques used include the market approach, the income approach or the net assets approach depending on the availability of reliable information. The market approach consists of using comparable transactions and applying either EBITDA (earnings before interest, tax, depreciation and amortisation) multiples or market multiples (based on comparable public company information). The use of the income approach consists of using the net present value derived from discounting estimated future cash flows using the weighted average cost of capital, adjusted as deemed appropriate for liquidity, credit, market and other risk factors. The net assets approach is based on the net asset value (NAV) for the level 3 fund investments determined as at year end. The significant unobservable inputs used in valuation techniques are EBITDA and market multiples for the market approach, discount rate for the income approach and NAV for the net assets approach. A marketability adjustment is applied for certain level 3 investment securities to reflect illiquidity and/or non-transferability that could result from offering for sale at one time the Group’s entire holdings of a particular financial instrument. The valuation of these investments is considered a significant source of estimation uncertainty as in aggregate the range of possible outcomes in respect to the unobservable inputs could have a material impact on the valuation. Further details on the valuation methodologies applied by the Group in the valuation of level 3 investments as at 30 June 2020 are provided in note 19, including details of the significant unobservable inputs and the associated sensitivities to changes in unobservable inputs to a reasonable alternative. There are no post-balance sheet events that require adjustment or disclosure in the Group consolidated financial statements. Valuation of unquoted investments 168 Ashmore Group p|lc Annual Report and Accounts 2020 33) Subsidiaries and related undertakings The following is a full list of the Ashmore Group plc subsidiaries and related undertakings as at 30 June 2020, along with the registered address and the percentage of equity owned by the Group. Related undertakings comprise significant holdings in associated undertakings, joint ventures and Ashmore sponsored public funds in which the Group owns greater than 20% interest. Ashmore Investments (UK) Limited Subsidiary100.0061 Aldwych, London WC2B 4AE United KingdomAshmore Investment Management Limited Subsidiary100.00Ashmore Investment Advisors Limited Subsidiary100.00Aldwych Administration Services Limited Subsidiary100.00Ashmore Asset Management Limited Subsidiary100.00Ashmore Avenida (Real Estate) Investments LLP Subsidiary56.00Ashmore Investment Management (Ireland) Limited Subsidiary100.0032 Molesworth Street, Dublin 2, D02 Y512Ashmore Investment Management (US) Corporation Subsidiary100.00475 Fifth Avenue, 15th FloorNew York, 10017Ashmore Investment Advisors (US) Corporation Subsidiary100.00USAAshmore Equities Investment Management (US) LLC (in liquidation) Subsidiary100.00Avenida Partners LLC Subsidiary100.00Avenida CREF I Manager Cayman LLC Subsidiary100.00Avenida CREF I Manager LLC Subsidiary100.00Avenida A2 Partners LLC Subsidiary100.00Avenida Colombia Member LLC Subsidiary83.30Avenida CREF II Partners LLC Subsidiary100.00Avenida CREF II GP LLC Subsidiary100.00MCA Partners LLC Subsidiary100.00Avenida REF Holding SA Subsidiary100.00Yamandu 1321, 11500 Avenida CREF II Manager SRL Subsidiary99.00MontevideoUruguayAvenida CREF Partners SRL Subsidiary99.00Avenida CREF II GP SRL Subsidiary85.00Ashmore Investment Management (Singapore) Pte. Ltd. Subsidiary100.001 George Street, #15-04, Singapore 049145PT Ashmore Asset Management Indonesia Tbk Subsidiary60.04Pacific Century Place, 18 Floor, SCBD Lot 10, Jl. Jenderal. Sudirman Kav.52-53 Jakarta 12190, Indonesia Ashmore Management Company Colombia SAS Subsidiary61.38Carrera 7 No. 75 -66,Ashmore-CAF-AM Management Company SAS Office 701 & 702 Subsidiary53.66Bogotá, ColombiaAshmore Holdings Colombia S.A.S. Subsidiary100.00Ashmore Investment Advisors Colombia S.A. Sociedad Fiduciaria Subsidiary 100.00Ashmore Management Backup Company S.A.S Subsidiary 100.00Avenida Colombia Management Company SAS Subsidiary 100.00Ashmore Peru SAC Subsidiary99.00Av. de la Floresta No. 497, Quinto Piso, San Borja, Lima, Perú Ashmore Japan Co. Limited Subsidiary100.0011F, Shin Marunouchi Building 1-5-1 Marunouchi Chiyoda-kuTokyo Japan 100-6511Ashmore Investments (Colombia) SL Subsidiary100.00c/ Hermosilla 11, 4ºA, 28001 Madrid, SpainAshmore Management (DIFC ) Limited Subsidiary100.00Office 105, Gate Village 03, Level 1 Dubai International Financial Centre Dubai, UAEAshmore Investment Advisors (India) Private Limited (in liquidation) Subsidiary99.82507A Kakad Chambers, Dr Annie Besant Road, Worli Mumbai 400 018, India Name % voting ClassificationinterestRegistered address and place of incorporationthAshmore Group p|lc Annual Report and Accounts 2020 169Strategic reportGovernanceFinancial statementsNotes to the financial statements continued 33) Subsidiaries and related undertakings continued Name Classification% voting interestRegistered address and place of incorporationAshmore Investment Saudi Arabia Subsidiary100.003rd Floor Tower B, Olaya TowersOlaya Main Street Riyadh, Saudi ArabiaAshmore Saudi Equity Fund Consolidated fund100.00Ashmore AISA Cayman Limited Subsidiary100.00Ugland House, Grand Cayman, KY1-1104, Cayman IslandsAA Development Capital Investment Managers (Mauritius) LLC Subsidiary55.00Les Cascades Building33 Edith Cavell Street, Port LouisMauritiusAshmore Investments (Holdings) Limited Subsidiary100.00Ashmore EM Special Situation Opportunities Fund (GP) Limited Subsidiary100.00Trafalgar CourtLes BanquesSt Peter PortGY1 3QLGuernseyAshmore Management Company Limited Subsidiary100.00Ashmore Global Special Situations Fund 3 (GP) Limited Subsidiary100.00Ashmore Global Special Situations Fund 4 (GP) Limited Subsidiary100.00Ashmore Global Special Situations Fund 5 (GP) Limited Subsidiary100.00Ashmore Special Opportunities (GP) Limited Subsidiary100.00Ashmore Special Opportunities Fund LP Consolidated fund50.00Ashmore Emerging Markets Debt and Currency Fund Limited Consolidated fund89.60Ashmore SICAV Emerging Markets Equity ESG Fund HFS investment 100.0010, rue du Chateau d’EauL-3364 LeudelangeGrand-Duchy of LuxembourgAshmore SICAV Emerging Markets IG Short Duration Fund HFS investment 65.46Ashmore SICAV Emerging Markets China Bond Fund Consolidated fund100.00Ashmore SICAV Emerging Markets Equity Fund Consolidated fund48.86Ashmore SICAV Emerging Markets Global Small-Cap Equity Fund Consolidated fund45.47Ashmore SICAV Emerging Markets IG Total Return Fund Consolidated fund80.10Ashmore SICAV Emerging Markets Total Return ESG Fund Consolidated fund100.00Ashmore SICAV Emerging Markets Indonesian Equity Fund Consolidated fund100.00Ashmore SICAV Emerging Markets Multi-Asset Fund Consolidated fund54.58Ashmore SICAV Emerging Markets Volatility-Managed LCBF Consolidated fund100.00Ashmore SICAV Emerging Markets Absolute Return Debt Fund Significant holding30.44Ashmore Emerging Markets Active Equity Feeder Fund HFS investment 100.0050 South LaSalle StreetChicago, Illinois 60603Ashmore Emerging Markets Equity ESG Fund HFS investment 100.00Ashmore Emerging Markets Short Duration Select Fund HFS investment 100.00Ashmore Emerging Markets Equity Fund Consolidated fund42.20Ashmore Investment Management India LLP Associate30.00507A Kakad Chambers, Dr Annie Besant Road Worli, Mumbai 400 018, IndiaTaiping Fund Management Company Associate8.50Unit 101, Building No.5, 135 Handan Road, Shanghai, China Cautionary statement regarding forward-looking statementsIt is possible that this document could or may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning. Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group’s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are several factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. The Group undertakes no obligation to revise or update any forward-looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise. 170 Ashmore Group plc | Annual Report and Accounts 2020Five-year summary 2020£m2019 2018 20172016£m £m £m£mManagement fees 307.6 259.7 226.2197.1Performance fees 2.8 21.9 28.310.4Other revenue 5.9 4.1 2.74.1 316.3 285.7 257.2211.6Distribution costs (13.3) (9.2) (4.6)(1.2)Foreign exchange 11.3 (0.2) 5.022.1 314.3 276.3 257.6232.5Gain/(loss) on investment securities 0.5 3.0 22.4(5.7)Change in third-party interests in consolidated funds 3.8 (2.4) (12.5)3.4Personnel expenses (26.5) (24.2) (24.8)(24.1)Variable compensation (57.7) (48.6) (43.0)(35.6)Other operating expenses (31.6) (27.6) (32.9)(32.6)Total operating expenses 0.7) (115.8) (100.4) (10(92.3) 202.8 176.5 166.8137.9Finance income 17.4 15.2 38.631.5Finance expenses – – –(0.2)Share of profits/(losses) from associates and joint ventures (0.3) (0.4) 0.8(1.7) 219.9 191.3 206.2167.5Tax expense (38.4) (37.8) (36.7)(38.8) 181.5 153.5 169.5128.7 EPS (basic) 26.6p 22.6p 25.1p19.1pDividend per share 16.7p 16.7p 16.7p16.7p AuM at year end (US$bn) 91.8 73.9 58.752.6Average AuM (US$bn) 80.5 69.2 54.852.1Average GBP:USD exchange rate for the year 1.30 1.35 1.281.48Period end GBP:USD exchange rate for the year 1.27 1.32 1.291.32 330.0 3.9 4.1 Total revenue 338.0 (14.5) 7.0 Net revenue 330.5 (19.1) 7.5 (27.6) (55.0) (26.6) (109.2)Operating profit 209.7 12.0 – (0.2)Profit before tax 221.5 (36.8)Profit for the year 184.7 27.4p16.9pOther operating data (unaudited) 83.6 89.6 1.26 1.24 Ashmore Group p|lc Annual Report and Accounts 2020 171Strategic reportGovernanceFinancial statementsAshmore Group plcRegistered in England and Wales.Company No. 3675683Registered office61 AldwychLondon WC2B 4AETel: +44 (0) 20 3077 6000Fax: +44 (0) 20 3077 6001Principal UK trading subsidiaryAshmore Investment Management LimitedRegistered in England and Wales, Company No. 3344281.Business address and registered office as above.Further information on Ashmore Group plc can be found on the Company’s website: www.ashmoregroup.com.Financial calendarFirst quarter AuM statement14 October 2020Annual General Meeting16 October 2020Ex-dividend date5 November 2020Record date6 November 2020Final dividend payment date11 December 2020Second quarter AuM statementJanuary 2021Announcement of unaudited interim results for the six months ending 31 December 2020February 2021Third quarter AuM statement April 2021Fourth quarter AuM statement July 2021Announcement of results for the year ending 30 June 2021September 2021RegistrarEquiniti RegistrarsAspect HouseSpencer RoadWest SussexBN99 6DAUK shareholder helpline: 0371 384 2812. Lines are open 8.30am to 5.30pm, Monday to Friday.International shareholder helpline: +44 121 415 7047.Further information about the Registrar is available on its website www.equiniti.com.Up-to-date information about current holdings on the register is also available at www.shareview.co.uk.Shareholders will need their reference number (account number) and postcode to view information on their own holding.Share price informationShare price information can be found at www.ashmoregroup.com or through your broker.Share dealingShares may be sold through a stockbroker or share dealing service. There are a variety of services available. Equiniti Registrars offer a secure, free and easy-to-use internet-based share dealing service known as Shareview Dealing.You can log on at www.shareview.co.uk/dealing to access this service, or contact the helpline on 0345 603 7037 to deal by telephone.You may also use the Shareview service to access and manage your share investments and view balance movements, indicative share prices, information on recent dividends, portfolio valuation and general information for shareholders.Shareholders must register at www.shareview.co.uk, entering the shareholder reference on the share certificate and other personal details.Having selected a personal PIN, a user ID will be issued by the Registrar.Electronic copies of the 2020 Annual Report and Accounts and other publicationsCopies of the 2020 Annual Report and financial statements, the Notice of Annual General Meeting, other corporate publications, press releases and announcements are available on the Company’s website at www.ashmoregroup.com.Information for shareholders172 Ashmore Group plc | Annual Report and Accounts 2020SharegiftShareholders with only a small number of shares whose value makes them uneconomic to sell may wish to consider donating to charity through Sharegift, an independent charity share donation(cid:124)scheme.For further information, please contact either the Registrar or see the Sharegift website at www.sharegift.org.Frequent shareholder enquiriesEnquiries and notifications concerning dividends, share certificates or transfers and address changes should be sent to the Registrar; the Company’s governance reports, corporate governance guidelines and the terms of reference of the Board committees can be found on the Company’s website at www.ashmoregroup.com.Notifying the Company of a change of addressYou should notify Equiniti Registrars in writing.If you hold shares in joint names, the notification to change address must be signed by the first-named shareholder. You may choose to do this online, by logging on to www.shareview.co.uk. You will need your shareholder reference number to access this service – this can be found on your share certificate or from a dividend counterfoil.You will be asked to select your own PIN and a user ID will be posted to you.Notifying the Company of a change of nameYou should notify Equiniti Registrars in writing of your new name and previous name. You should attach a copy of your marriage certificate or your change of name deed, together with your share certificates and any un-cashed dividend cheques in your old name, so that the Registrar can reissue them.Dividend payments directly into bank or building society(cid:124)accountsWe recommend that all dividend payments are made directly into a bank or building society account. Dividends are paid via BACS, providing tighter security and access to funds more quickly. To(cid:124)apply for a dividend mandate form, contact the Registrar, or you can find one by logging on to www.shareview.co.uk (under Frequently Asked Questions) or by calling the helpline on 0371 384 2812 (linesare open 8.30am to 5.30pm, Monday to Friday).International shareholder helpline: +44 121 415 7047.Transferring Ashmore Group plc sharesTransferring some or all of your shares to someone else (for example your partner or a member of your family) requires completion of a share transfer form, which is available from Equiniti Registrars. The form should be fully completed and returned with your share certificate representing at least the number of shares being transferred. The Registrar will then process the transfer and issue a balance share certificate to you if applicable. The Registrar will be able to help you with any questions you may have.Lost share certificate(s)Shareholders who lose their share certificate(s) or have their certificate(s) stolen should inform Equiniti Registrars immediately by calling the shareholder helpline on 0371 384 2812 (lines are open 8.30am to 5.30pm, Monday to Friday).International shareholder helpline: +44 121 415 7047.Disability helplineFor shareholders with hearing difficulties, a special text phone number is available: 0371 384 2255.Ashmore Group plc | Annual Report and Accounts 2020 173Ashmore Group plcwww.ashmoregroup.com61 AldwychLondon WC2B 4AEUnited KingdomThis report is printed on Essential Velvet, and manufactured at a mill that is FSC accredited and certified to the ISO 14001 Environmental Standard. Printed by Principal Colour. Principal Colour are ISO 14001 certified, Alcohol Free and FSC Chain of Custody certified.Designed and produced by Black Sun Plc.®®

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