Ashmore : FULL YEAR RESULTS FOR YEAR ENDING 30.6.2021

Ashmore Group plc

3 September 2021

RESULTS FOR YEAR ENDING 30 JUNE 2021

Ashmore Group plc (Ashmore, the Group), the specialist Emerging Markets asset manager, today announces its audited results for the year ending 30 June 2021.

• Assets under management (AuM) increased 13% to US$94.4 billion
• • Investment performance of US$9.6 billion and net inflows of US$1.2 billion
• Strong outperformance through active management
• • 96% of AuM outperforming benchmarks over one year, 57% over three years and 79% over five years
• Efficient business model delivering diversified profit growth and strong cash flow
• • Investment performance delivered performance fees of £11.9 million and seed capital gains of £92.5 million
  • Adjusted net revenue of £296.6 million, 9% lower YoY reflecting stage in the recovery cycle and impact of mix effects on net management fee margin
  • Strict cost management reduced non-VC operating costs by 6% and delivered adjusted EBITDA margin of 66%
  • Adjusted EBITDA declined by 12% to £195.7 million
  • Profit before tax increased 28% to £282.5 million
  • Operating cash flow of £213.1 million and well-capitalised, liquid balance sheet maintained
  • Diluted EPS increased 33% to 34.2 pence and adjusted diluted EPS fell by 11% to 23.3 pence
  • Proposed final dividend per share of 12.1 pence to give total dividends of 16.9 pence for the year
• Growth and diversification from strategic initiatives
• • Equities AuM increased by 61% YoY to US$7.4 billion, reflecting strong investment performance and net inflows
  • Local platforms delivered AuM growth of 44% YoY to more than US$7 billion
• Significant progress made with consistent and comprehensive approach to sustainability
• • ESG factors integrated across all asset classes
  • Launched dedicated ESG strategies in external debt and corporate debt
  • Joined the Net Zero Asset Managers and Climate Action 100+ industry initiatives
• Positive outlook for Emerging Markets reflects superior growth, stronger economic fundamentals and attractive valuations

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

"Ashmore has made significant progress against its strategic objectives over the past year, generated outperformance for clients, and the Group's robust business model has delivered a financial performance that reflects the early stages of a cyclical recovery.

"As vaccination rates increase across the world and governments ease social restrictions, economic activity is picking up and reinforcing the Emerging Markets growth premium, and hawkish central banks in many emerging countries are acting to contain inflation. This environment provides attractive opportunities for investors to increase allocations with heavily discounted equity valuations in Emerging Markets and high real yields compared with the negative rates in Developed Markets.

"Against this positive backdrop, Ashmore's investment performance track record positions the firm well to capitalise on the significant opportunities available across the diversified Emerging Markets."

Analysts briefing

There will be an online presentation for analysts at 9.30am on 3 September 2021. A copy of the presentation will be made available on the Group's website at www.ashmoregroup.com.

Contacts

For further information please contact:

Ashmore Group plc

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

FTI Consulting

Neil Doyle	[phone]
Kit Dunford	[phone]

CHIEF EXECUTIVE'S REVIEW

The Group's established business model has operated as expected over the past 12 months and delivered strong investment performance, higher performance fees and a return to net inflows in the second half of the year. While there was strong growth in statutory profits, lower adjusted profits reflect the stage of the recovery cycle.

Strong investment performance

Ashmore's active management of client portfolios has delivered exceptionally strong performance across all investment themes over the past 12 months, resulting in 96% of AuM outperforming benchmarks over one year. The longer-term track records are also robust with 57% of AuM outperforming over three years and 79% over five years.

As anticipated, this represents a significant improvement from a year ago, when the initial impact of the COVID-19 pandemic led to severe risk aversion and market dislocations and consequently some underperformance (30 June 2020: 9% AuM outperforming benchmarks over one year; 17% over three years; and 74% over five years). Notwithstanding that this cycle has its own distinctive features, Ashmore's experienced investment teams ensured that the investment processes followed a consistent approach in identifying oversold assets, subsequently adding risk to portfolios, and maintaining a diligent focus on liquidity.

The pace and scale of the market recovery has to some extent mirrored the sharp market drawdown in early 2020, but, as described in the Market review, the combination of a positive macro-economic outlook and attractive valuations across both fixed income and equity markets means that investors should expect further outperformance by Emerging Markets assets. While the trajectory of the recovery is unlikely to be linear and there will inevitably be periods of price volatility, Ashmore will continue to exploit these market opportunities to add value to portfolios and underpin its successful long-term investment track records.

Robust business model

With the notable exception of a period of remote working, discussed further below, Ashmore's business model has remained unchanged through this cycle and has continued to deliver significant benefits for its stakeholders, including clients, employees and shareholders.

The conservative financial model, with an emphasis on balance sheet strength and operating cost flexibility, has ensured stability in the operating platform, with uninterrupted operating processes, high levels of employee retention, strong profit growth, and continued investment in the business to support the achievement of strategic objectives.

• Well-capitalised,liquid balance sheet with over £750 million of financial resources and a Pillar II capital requirement of £156 million
• Adjusted operating costs reduced by 2%
• Operating profitability maintained, with an adjusted EBITDA margin of 66%
• Unplanned employee turnover of less than 7%
• Profit before tax increased by 28% and diluted EPS increased by 33% to 34.2 pence per share
• On an adjusted basis, diluted EPS fell by 11% to 23.3 pence per share

The strength of Ashmore's team-based culture has served it well over the past 18 months, a period during which remote working has been the norm for most of the Group's employees, but the culture is ultimately reinforced by employees working together in close-knit teams in an office environment. Therefore, as governments around the world review and ease social restrictions over the coming months, Ashmore hopes to re-open its office network and steadily return to previously established operating practices. Undoubtedly, some of the working practices developed during the remote working period will persist, particularly the intelligent use of communications technology that may allow for greater efficiency. However, the Ashmore investment processes, distribution model and other functions will still place a heavy emphasis on establishing and developing long-term relationships and knowledge that is best achieved through physical meetings.

Continued growth in equities

The equities business has good momentum, with AuM growth of +61% or US$2.8 billion over the past 12 months. Excellent investment performance has been delivered across all strategies over the past 12 months with absolute returns of 41% to 66%, and nearly 1,700 basis points of outperformance in the All Cap strategy. This track record is delivering decent client flows, with net inflows of US$0.9 billion over the past 12 months and eight consecutive quarters of net inflows to the Group's equity strategies.

Ashmore's equity investment committee and the teams it oversees operate independently of the fixed income investment process, providing diversification benefits, but there is collaboration and sharing of investment research and insights between the two asset classes. For example, the equity teams have the ability to draw upon long-standing, specialist expertise in Emerging Markets macro-economic and political analysis if required.

Continued growth in equity assets under management is a strategic priority for Ashmore, consistent with its objective to diversify its business in order to provide multiple independent sources of fee income. With just under 10% of Group AuM invested in equity strategies, and no capacity constraints in terms of investment capabilities, operational processes, or market size, there is significant growth opportunity in this business and over the medium term it should represent two to three times the current proportion of AuM.

Strategic opportunity in intermediary retail

Similar to the strategic opportunity in equities, the Group intends to increase the proportion of assets managed for intermediary retail clients, to provide diversification alongside its institutional client base. While there is no single type of intermediary client, in

the same way that institutional investors all vary in their objectives and behaviour, it is observable that intermediary retail clients tend to be more sensitive to short-term market conditions and investment performance, and therefore usually have shorter holding periods than the typical institutional investor. Nonetheless, over time intermediary retail capital could represent 20% to 30% of Ashmore's assets under management, a significant increase from the current level of 8%. In addition to diversification of the client base, growth in intermediary retail assets also benefits the Group's net management fee margin.

Over the past year, it is notable that Ashmore's intermediary retail clients have been relatively slow to return to Emerging Markets. While there is a positive trend in terms of reducing net outflows over the period, cumulatively intermediary retail flows reduced AuM by US$2.9 billion over the 12 months and investment performance added US$1.3 billion.

Therefore, while the 8% of AuM from intermediary retail clients is broadly similar to a year ago, it is lower than the 15% reached before the impact of the COVID-19 pandemic. In contrast, the institutional business delivered net inflows of US$4.1 billion over the year, largely as a consequence of typically direct relationships with the investors, and the fact that, on average, Ashmore's institutional assets have been managed by the firm for more than eight years and therefore the investors have more experience of market cycles and the opportunities that they can present.

Increasing importance of investment grade credit

The ongoing development of emerging countries means that an increasing number of countries and companies have achieved investment grade (IG) status. For example, IG bonds now represent more than half of the external debt and corporate debt benchmark indices (53% and 57%, respectively). While there will inevitably be cyclical influences on issuers' ratings, the growth in IG issuance is expected to continue and is a trend that is echoed in the demand by investors as they recognise the attractive characteristics of the IG asset class such as lower volatility during periods of risk aversion, stronger macro-economic fundamentals, higher yields than developed world bonds, increasing diversification, no defaults and therefore good risk-adjusted returns.

Ashmore provides access to investment grade strategies across the four fixed income investment themes of external debt, local currency, corporate debt and blended debt, and manages portfolios in both mutual fund and segregated account structures. Investment performance is strong, for example the corporate debt IG strategy has a gross annualised return of +9.3% over three years and has significantly outperformed its benchmark index return of +7.1%.

Over the 12 months, Ashmore has continued to experience good demand for investment grade strategies from both existing and new institutional clients, and its strong investment performance underpins the potential for further capital raising.

Local offices performing well

The third phase of Ashmore's strategy focuses on mobilising Emerging Markets capital, including managing assets locally for domestic institutional and intermediary retail clients in certain emerging countries. Ashmore currently has local asset management operations in Colombia, India, Indonesia, Peru, Saudi Arabia and the United Arab Emirates, and has a financial investment in an onshore mutual fund business in China.

Collectively, these businesses represent more than US$7 billion of assets and delivered AuM growth of +44% over the past 12 months. The platforms are performing well and each has a highly scalable operating model, replicating the Group's disciplined approach to managing operating costs and a simple, common operating infrastructure. This means that as AuM grows, the profitability of these businesses is trending towards the Group's level.

During the period there was particularly strong asset growth in India and Indonesia, significant new institutional client wins in Saudi Arabia, and in Colombia the Group is marketing its third private equity fund and a regional real estate fund. Following its IPO in January 2020, and consistent with its strategy to use technology to access new distribution channels and improve access to financial services, Ashmore Indonesia invested in BIB, a local online distribution platform, in December 2020.

Significantly, although the offices are designed primarily to raise and manage domestic capital, most of them also manage assets for the Group's larger institutional clients, where the investor wishes to take single country or regional risk, have it managed by the local investment team, and within the Ashmore Group governance and risk management framework.

The local businesses should continue to contribute to Ashmore's growth and profitability over the longer term as each of the local management teams delivers on its strategic objectives and participates in the development of an independent asset management industry in its country. These platforms also help to diversify the Group's revenues and profits through independent investment processes, uncorrelated investment returns and different product structures and client bases. Ashmore will consider opportunities to expand the local office network, through scaling up and diversifying the existing businesses, and by considering new markets with attractive growth characteristics.

An integrated approach to sustainability

Sustainability, including the consideration of environmental, societal and governance (ESG) factors, has always been an important topic for companies and for investment managers, but issues such as the impact of climate change, employee diversity and remuneration incentives are under increasing scrutiny from investors, regulators, politicians and other stakeholders.

Ashmore has developed a comprehensive and consistent approach to sustainability across its operations and investment management activities. The Board is ultimately responsible for ESG matters and has delegated the day-to-day oversight and management to a specialised ESG Committee. This committee meets frequently and regularly, and has representatives from across the firm, including the local offices, ensuring that relevant ESG matters are brought to the attention of all concerned and that the approach to sustainability is consistent across the Group.

The consideration of ESG factors is integrated into all of Ashmore's investment processes, covering fixed income, equity and alternatives strategies, and the Group has launched a range of dedicated ESG funds in the external debt, corporate debt, blended debt and equity themes. It has been a signatory to the UNPRI since 2013 and, to support the achievement of the UN Sustainable Development Goals, it is a signatory to the UN Global Compact.

Environment

From an operational perspective, the asset management business model does not have a significant direct impact on the environment. For example, there are no long, complex supply chains with material environmental considerations, the 'product' is investment performance, and the firm's assets are predominantly people and financial instruments including cash. However, travel and office occupancy is inherent in Ashmore's business model, both of which result in modest levels of greenhouse gas emissions. Ashmore has an objective to achieve net zero emissions from its operations, and while the ability to reduce materially the gross emissions is limited, through The Ashmore Foundation the Group seeks to offset its gross emissions each year by supporting environmentally and socially beneficial projects in developing countries.

From an investment perspective, Ashmore joined two important industry initiatives during the period: the Net Zero Asset Managers Initiative and the Climate Action 100+ industry group. Respectively, these will help the Group define and manage a net zero plan, with an interim target to be set over the next 12 months, and will enable Ashmore to collaborate with other investors to achieve environment-related outcomes with certain investee companies.

Society

Ashmore wishes to be recognised as a responsible company that has a positive impact on society. The definition of society is broad, but includes the Group's clients, employees, shareholders and other stakeholders. Of particular importance to Ashmore's approach is The Ashmore Foundation, which provides grants to projects that seek to make a positive and sustainable difference to disadvantaged communities in the developing countries in which Ashmore operates and invests.

To enhance the impact and sustainability of the Foundation's projects and to increase the overall scale of the Group's philanthropic activities, the Board approved an annual charitable contribution equivalent to 0.5% of the Group's profit before tax excluding unrealised seed capital gains. This means that in respect of FY2020/21, the Group made a payment of £1.0 million to The Ashmore Foundation and other charitable activities.

Governance

Ashmore is a UK company with a premium listing on the London Stock Exchange and at all times seeks to comply with, and to respect the spirit of, relevant laws and regulations, with the objective of upholding robust standards of corporate governance. This means that for its local offices, Ashmore will impose the higher of local or global standards in order to ensure that governance is appropriate.

Employees and culture

For many Ashmore employees, the past year has been challenging with all of the Group's offices remaining closed, or experiencing intermittent re-openings, in line with local government guidance and laws. On behalf of the Board, I would like to thank everyone for their hard work and unwavering commitment to delivering strong performance for our clients, for upholding high standards of professionalism and conduct while working remotely, and for helping to maintain Ashmore's distinctive, team- based culture even in the absence of face-to-face contact.

As vaccination programmes deliver tangible results, governments around the world can start to ease the social and economic restrictions that have characterised the past 18 months. This will enable Ashmore to return to the office-based operating model that has served the firm well for the vast majority of its life, and to reinforce the social connectivity that inevitably has become looser after a protracted period of remote working. While the remote working environment has been challenging, it has also highlighted how the innovative use of technology can play a meaningful role in the industry, and so Ashmore will keep its operating model under review in order to ensure that it optimises the culture of the firm, its effectiveness for clients, and overall productivity.

Outlook

The recovery in economic performance is well-established across the Emerging Markets, with superior GDP growth to the developed world and a widening of the growth premium expected over the next few years. Importantly, after an initial lag, vaccination rates in the developing world have accelerated and are expected to match the levels achieved in developed countries by the end of 2021. This underpins the growth outlook as governments can ease restrictions and allow economies to reopen, leading to higher levels of domestic activity and international trade.

In aggregate, developing countries are emerging from the COVID-19 pandemic in a stronger position than Developed Markets. Economic growth is higher, debt levels are manageable even after the recent fiscal stimulus, inflation is under control and hawkish central banks should ensure that remains the case, and valuations remain attractive and should support continued capital flows.

The main risk to a positive outlook for Emerging Markets is a period of widespread investor risk aversion, which history suggests would typically follow an unexpected event in the developed world rather than an isolated development in one of the more than 70 different emerging nations. While current US inflation suggests that there is a possibility of significantly higher interest rates, this is mitigated by the very high US government indebtedness and the potential for inflation to drift lower over the next 12 to 24 months as base effects roll off and deflationary pressures increase. Furthermore, as explained in the Market review, the impact on Emerging Markets is likely to be less severe than in the 2013 to 2016 cycle given the significant improvement in economic conditions and the low absolute level of nominal and real US interest rates today. Indeed, a world in which there is decent growth,