Annual Financial Report

Annual Financial Report

Genesis Emerging Markets Fund Ld

GENESIS EMERGING MARKETS FUND LIMITED
(the “Company”; the “Fund”)
(Registration Number: 20790)

STOCK EXCHANGE ANNOUNCEMENT

ANNUAL FINANCIAL REPORT

The Company has today, in accordance with DTR 6.3.5, released its Annual Financial Report for the year ending 30^th June 2011. The Report will shortly be available from the Company's website www.giml.co.uk and will shortly be available for inspection on the National Storage Mechanism, which is located at http://hemscott.com/nsm.do where users can access the regulated information provided by listed entities.

INVESTMENT OBJECTIVE

To achieve capital growth over the medium to long term, primarily through investment in equity securities quoted on Emerging Markets.

BENCHMARK

MSCI Emerging Markets Index (Total Return).

MATERIAL EVENTS

Â	Â	30th June 2011 US$	Â	30th June 2010 US$
Total net assets   Net assets per Participating Share   Total income per Participating Share		1,237,202,432   9.17   1.95		974,358,807   7.22   1.78

CHAIRMAN’S STATEMENT

Performance

The overall return figure for emerging markets over the Fund’s financial year was an attractive one, but (following the pattern of the 2009-10 financial year) this was down to strong performance in the first half, the final six months of 2010, with much more uneasy market conditions in 2011. Over the last few weeks, of course, markets have seen significant declines, leaving investors facing a more difficult and uncertain outlook.

The Fund’s net asset value (“NAV”) per share rose 18.1%, from £4.85 to £5.73, over the twelve-month period, slightly underperforming the MSCI EM (TR) index. I refer shareholders to the Report of the Manager on the following pages which comments on the factors driving these returns, as well as describing the economic environment and some of the changes to the Fund’s holdings over the year.

Returns from emerging markets over the recent past have been very pleasing (over the last three years, a period that encompassed the Lehman crash in late 2008 and its aftermath, the Fund has generated an average return of 15.5% per annum). When assessing the Manager’s performance, however, as Directors we do need to consider the potential long-term returns available to shareholders, and in particular how the Manager will be able to continue to generate performance for shareholders in what may be an environment of sustained uncertainty and volatility.

The Manager’s approach focuses on identifying companies it feels are high quality and which appear cheap relative to the market’s valuation of them. This has in the past had the effect of somewhat protecting the Fund’s value during periods of stock price declines, with the Fund’s value falling less than that of the market. We remain confident that – given the Manager’s stability of process and personnel – this is likely to continue to be the case if the current negative environment persists.

The Directors’ opinion is therefore that the ongoing appointment of the Manager is in the best interests of the Fund’s shareholders.

The average discount over the period was 6.1%, which is notably lower than during recent years, and this figure additionally appears to be somewhat less volatile. It seems likely that this is at least partly due to the higher levels of trading volumes which have been evident since the restructuring of the Fund in late 2009. As well as the higher volumes, a notable broadening of the shareholder base has also continued. Both effects are of course very welcome.

The Board

The Notice convening the Annual General Meeting to be held on 28^th October 2011 can be found at the end of the Annual Financial Report.

I would like to draw shareholders’ attention to various items with respect to the Board of Directors, for which we request approval by vote as detailed on the Notice.

In the Interim Report six months ago, we noted the appointment to the Board of Dr. Geng Xiao. Dr. Xiao’s work in economics is internationally known and well-respected in the government, corporate, and academic arenas, and he has already shown that his knowledge, especially with respect to Chinese economic policy, will be extremely valuable to the Board. I therefore thoroughly endorse his election by shareholders at the forthcoming Annual General Meeting.

It is with great pleasure that we recently announced to shareholders the appointment of Mr. Saffet Karpat to the Board. A Turkish national, Mr. Karpat is currently General Manager of Procter & Gamble’s business in Turkey, the Caucuses and Central Asia, and in previous roles in his career has taken responsibility for Proctor & Gamble’s business in Egypt and the Arabian peninsula. His appointment is very much in line with our desire to have Directors on the Board representing a variety of different business backgrounds, and I am confident that Mr. Karpat’s many years’ experience of managing consumer businesses in a number of emerging markets will be a tremendous source of insight for the Directors. I therefore wholeheartedly endorse his election by the shareholders.

In accordance with the Articles of Association and with regulatory requirements, Michael Hamson offers himself for re-election at the forthcoming Annual General Meeting. Mr. Hamson has been an extremely valuable member of the Board during his time as a Director, and I have no hesitation in recommending to shareholders that he continues to serve on the Board.

I will also be standing for re-election at the Meeting, and I hope very much that shareholders will feel able to vote in favour of my re-election and allow me to continue to serve them as Chairman of the Board of Directors.

Against this, however, it is with much sadness that I have to announce the retirement of the Hon. John Train as a member of the Board, effective from the forthcoming Annual General Meeting.

Mr. Train has been a member of the Board for many years, during which he has served the Fund and its shareholders with utmost distinction, and has contributed very significantly to the Fund’s success. It would be no exaggeration to say that he is exceptional as an investor and as an expert political commentator, and it is his long experience in investment matters and his deep knowledge of the politics of developing countries that have made him an invaluable source of guidance to his fellow Directors. On behalf of the Board, I would like to express my gratitude to Mr. Train for his many contributions. His insight, intellect and wit will be sorely missed.

We will be holding an Information Meeting in London on 4^th November 2011. An invitation is enclosed in the Annual Reports, and we hope to see as many shareholders as possible at this event.

Outlook

At the time of writing – in mid September – the Fund’s NAV has fallen some 13.7% since its high point at the end of 2010, and clearly investor sentiment remains significantly negative in an environment where growth is slowing and there is substantial concern over the indebtedness of much of Europe and the US, in particular.

The last few weeks have demonstrated that whenever equity markets in the developed world suffer, emerging markets are not immune from the effects. It is important to note that at the individual business level, however, emerging market companies (and in particular those represented in the Fund’s holdings) are still seeing broadly healthy growth – so even though economic growth in the developed world may be rather more anaemic (and the news headlines may also focus on declines in Chinese economic growth), the underlying emerging markets growth dynamic is still present.

The positive side of the market decline of the past few weeks is, of course, that many attractive companies now have rather cheaper prices than they did earlier this year. Given the Manager’s stock selection-focused investment approach, this is presenting opportunities for them to invest in new, and existing, holdings that the market appears to be under-pricing.

The broader investment environment remains nervous, but we are confident that emerging market companies in general will continue to be able to capitalise on improving trends in management ability, technology, infrastructure, and demographics to outpace the growth of their developed world counterparts. In conclusion, our expectations for emerging markets therefore remain extremely positive, and I, in common with my colleagues on the Board, believe very strongly that over the medium to long term the Fund will continue to generate highly attractive returns.

Coen Teulings
Chairman
September 2011

DIRECTOR’S REPORT

RESULTS

The total profit for the year for the Fund amounted to $262,843,625 compared to a total profit of $240,098,718 in the previous year. The Directors do not recommend the payment of a dividend in respect of the year ended 30^th June 2011 (2010: Nil).

CAPITAL VALUES

At 30^th June 2011, the value of Equity Shareholders’ Funds was $1,237,202,432 (2010: $974,358,807), the Equity per Participating Preference Share was $9.17 (2010: $7.22).

PRINCIPAL RISKS AND UNCERTAINTIES

The investment objective of the Fund is to achieve capital growth over the medium to long term, primarily through investment in equity securities quoted on emerging markets. The main risks to the value of its assets arising from the Fund’s investment in financial instruments are unanticipated adverse changes in market prices and foreign currency exchange rates and an absence of liquidity. The Board reviews and agrees with the Manager policies for managing each of these risks and they are summarised below. These policies have remained unchanged since the beginning of the period to which these financial statements relate.

The economies, the currencies and the financial markets of a number of developing countries in which the Fund invests may be extremely volatile. To manage the risks posed by adverse price fluctuations the Fund’s investments are geographically diversified, and will continue to be so. The Fund will not normally invest more than 25% of its assets (at the time the investment is made) in any one country. Further, the exposure to any one company or group (other than an investment company, unit trust or mutual fund) is unlikely to exceed 5% of the Fund’s net assets at the time the investment is made. The Articles of Incorporation place a limit of 10% for securities issued by one company but the Directors use 5% for monitoring purposes.

The Fund’s assets will be invested in securities of companies in various countries and income will be received by the Fund in a variety of currencies. However, the Fund will compute its net asset value and make any distributions in dollars. The value of the assets of the Fund as measured in dollars may be affected favourably or unfavourably by fluctuations in currency rates and exchange control regulations. Further, the Fund may incur costs in connection with conversions between various currencies.

Trading volumes on the stock exchanges of developing countries can be substantially less than in the leading stock markets of the developed world. This lower level of liquidity exaggerates the fluctuations in the value of investments described previously. The restrictions on concentration and the diversification requirements detailed above also serve normally to protect the overall value of the Fund from the risks created by the lower level of liquidity in the markets in which the Fund operates.

The Fund is also exposed to operational risks such as custody risk. Custody risk is the risk of loss of securities held in custody occasioned by the insolvency or negligence of the custodian. Although an appropriate legal framework is in place that eliminates the risk of loss of value of the securities held by the custodian, in the event of its failure, the ability of the Fund to transfer the securities might be temporarily impaired. The day to day management of these risks is carried out by the Manager under policies approved by the Board of Directors.

MANAGER

In the opinion of the Directors, in order to achieve the investment objective of the Fund, and having taken into consideration the performance of the Fund, the continuing appointment of the Manager is in the interests of the shareholders as a whole. A more detailed commentary of important events that have occurred during the year and their impact on these accounts and a description of the principal risks and uncertainties are contained in the Manager’s Review.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for preparing the financial statements for each financial year so that they give a true and fair view, in accordance with applicable Guernsey Law and International Financial Reporting Standards, of the state of affairs of the Fund and of the profit or loss of the Fund for that year.

In the preparation of these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• ensure the financial statements are prepared on a going concern basis unless it is inappropriate to presume that the Fund will continue in business; and
• state whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the financial statements.

The Directors confirm that they have complied with the above requirements in preparing the financial statements. The Directors are responsible for ensuring that the Fund keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Fund and enable them to ensure that the financial statements comply with The Guernsey Companies Law, 2008. They are also responsible for ensuring the safeguarding of the assets of the Fund and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The financial statements are published on the website www.giml.co.uk, which is maintained by the Fund’s Investment Adviser. The maintenance and integrity of the website is, so far as relates to the Fund, the responsibility of the Investment Adviser. The work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

AUDITORS AND DISCLOSURE OF INFORMATION TO AUDITORS

In the case of each of the persons who are Directors at the time when the report is approved, the following applies:

• so far as the Director is aware, there is no relevant audit information of which the Fund’s auditors are unaware; and
• they have taken all steps that ought to have been taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Fund’s auditors are aware of that information.

DIRECTORS' INTERESTS

The following Directors who served throughout the period under review (except Christian Baillet who resigned 29^th October 2010 and Dr. Geng Xiao who was appointed on 1^st March 2011) had a beneficial interest in the share capital of the Fund at 30^th June 2011

	Â	Participating
Directors		Preference Shares
Coen Teulings		40,000
Michael Hamson (including family interests)		8,700
The Hon. John Train (including family interests)		20,510
Christian Baillet (resigned on 29th October 2010)		-
Dr. John Llewellyn		-
Dr. Geng Xiao		-

MANAGER’S REVIEW

The Fund ended the year to 30^th June 2011 up 18.1% in Sterling terms (calculated based on published net asset value).

Following a period of strong market performance during the first half of the year under review, the second half saw various major events, such as the Japanese earthquake and the Greek debt crisis, which subdued market sentiment. Since the year-end, equity markets have been suffering from trauma of their own as investor concerns over economic growth and government indebtedness in the developed world led to stock prices collapsing in August.

Looking specifically at the twelve-month period under review, consumer-related stocks generally led the market, although the materials sector in general also performed well. The strong performance of Zambian copper miner First Quantum Minerals, and Chinese cement producer Anhui Conch, helped drive portfolio performance, along with positive stock selection in India (particularly Sun Pharmaceuticals and Asian Paints). Against this, the portfolio was negatively affected by the poor stock price performance of Chinese sportswear manufacturer Li Ning, and – in relative terms – by the lack of holding in firstly Gazprom, and secondly in the more cyclical businesses of HTC in Taiwan, and Hyundai Motor of South Korea.

Significant changes to the Fund’s positioning included increases in technology companies (and long-term holdings) Samsung Electronics and TSMC, both of which are global leaders in their fields and continue to offer attractive valuations. We have also added to Li Ning and to Korean electric utility Kepco, both of whose underperformance in market price terms have given us an opportunity to buy more of businesses which we feel have a strong investment case, despite the market’s negative short-term view.

Against this, the Fund’s exposure to Russia was reduced (we sold three positions there; MDM Bank, Mobile Telesystems, and Lukoil) and we scaled back exposure to First Quantum and Anhui Conch following their strong performance. The Fund’s turnover, at around 17% over the period, remains on the low side of historic averages.

In terms of the investment outlook, it would of course have been unrealistic to think that a global equity sell-off would not impact emerging markets too, but while investors may have significant worries about growth in the developed world, emerging market economies are in a rather stronger position in terms of growth.

Emerging markets are slowing too, however, partly because of global demand issues and partly due to local monetary tightening activity to control inflation. Sure enough, as a result, some companies’ earnings releases are finally beginning to show signs of margin pressure and slower demand. For example, TSMC, one of the Fund’s major holdings and a bellwether for the Asian technology industry, has reduced expectations for semiconductor demand in 2011 due to “weaker economic conditions”. Against that, the Fund’s largest holding Anglo American said recently it has not seen any slowdown in demand in bulk commodities or industrial metals, where prices have mainly continued to move higher. (This may reflect the fact that the demand for Anglo’s products largely emanates from emerging markets, while the global semiconductor market is more skewed to developed countries.)

The general picture is one where profit margins remain above long-term averages and demand growth is still healthy. The company results we have seen from the second quarter remain reasonably strong. In many countries, the peak of inflation has probably been seen, as interest rates have been raised and various tightening measures implemented to restrict credit growth and generally curb demand. Inflation data have yet to soften in China but credit and money supply growth have slowed and the authorities have made clear that they intend consumer price rises to be firmly under control.

While inflation, or more accurately the policy responses to it, may not be as much of a headwind in future for emerging equity markets as it has been so far this year, there is another, longer-term, concern: increasing competition resulting from both the arrival in emerging markets of developed market businesses as well as companies from other emerging markets.

Overall, however, we feel that the investments held by the Fund represent those businesses that can maintain their competitive position and continue to grow. Generally, stocks in our markets do not feel too expensive, especially now that the price action of the last few weeks has left many companies’ stock prices seemingly discounting some very poor business scenarios. While the high returns of 2009 and 2010 are unlikely to be repeated, we are confident that the Fund’s holdings will continue to deliver attractive returns to its shareholders over the medium to long term.

Genesis Asset Managers, LLP
September 2011

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30^th June 2011

Â	Â			Â	2011	Â	2010
					$		$
							Â
		ASSETS
		Current Assets
		Financial assets at fair value through profit or loss			1,219,924,732		960,328,412
		Amounts due from brokers			5,340,370		131,002
		Dividends receivable			5,002,712		1,895,408
		Other receivables and prepayments			161,691		155,295
		Cash and cash equivalents			13,495,617		13,689,031
					Â		Â
		TOTAL ASSETS			1,243,925,122		976,199,148
							Â
		LIABILITIES
		Current Liabilities
		Amounts due to brokers			2,635,513		257,983
		Capital gains tax payable			2,053,400		33,817
		Payables and accrued expenses			2,033,777		1,548,539
		Bank overdraft			-		2
					Â		Â
		TOTAL LIABILITIES			6,722,690		1,840,341
							Â
		TOTAL NET ASSETS			1,237,202,432		974,358,807
							Â
		EQUITY
		Share premium			134,348,973		134,348,973
		Capital reserve			1,068,728,454		804,245,831
		Revenue account			34,125,005		35,764,003
					Â		Â
							Â
		TOTAL EQUITY			1,237,202,432		974,358,807
							Â
		EQUITY PER PARTICIPATING
		PREFERENCE SHARE*			$9.17		$7.22

* Calculated on an average number of 134,963,060 Participating Preference Shares outstanding (2010: 134,963,060).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30^th June 2011

Â	Â			Â	2011		Â	2010
					$			$
								Â
		INCOME
		Net change in financial assets at fair value through profit or loss	265,037,087					245,000,942
		Net exchange losses			(554,464)			(449,957)
		Dividend income			25,395,679			15,755,331
		Operating income			21,215			26,097
					Â			Â
					289,899,517			260,332,413
								Â
		EXPENSES
		Management fees			(17,629,348)			(14,241,355)
		Custodian fees			(1,475,671)			(1,262,244)
		Transaction costs			(990,520)			(1,143,840)
		Directors’ fees and expenses			(413,466)			(294,992)
		Administration fees			(171,711)			(160,763)
		Audit fees			(53,032)			(36,680)
		Other expenses			(182,376)			(317,390)
					Â			Â
		TOTAL OPERATING EXPENSES			(20,916,124)			(17,457,264)
								Â
		OPERATING PROFIT			268,983,393			242,875,149
								Â
		FINANCE COSTS
		Bank charges			(512)			(1,824)
		Interest expense			(341)			(31,907)
					Â			Â
		TOTAL FINANCE COSTS			(853)			(33,731)
								Â
		Capital gains tax			(3,340,340)			(1,165,675)
		Withholding taxes			(2,798,575)			(1,577,025)
					Â			Â
								Â
		PROFIT FOR THE YEAR ATTRIBUTABLE TO PARTICIPATING PREFERENCE SHARES			262,843,625			240,098,718
								Â
		Other comprehensive income			-			-
					Â			Â
								Â
		TOTAL COMPREHENSIVE INCOME			262,843,625			240,098,718
								Â
		EARNINGS PER PARTICIPATING PREFERENCE SHARE*			$1.95			$1.78

* Calculated on an average number of 134,963,060 Participating Preference Shares outstanding (2010: 134,963,060).

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30^th June 2011

Â			2011
						Â		Â		Â		Â
							Share		Capital		Revenue
							Premium		Reserve		Account		Total
							$		$		$		$
														Â
Net assets at the beginning of the year							134,348,973		804,245,831		35,764,003		974,358,807
														Â
Profit for the year							-		-		262,843,625		262,843,625
														Â
Transfer to Capital Reserve							-		264,482,623		(264,482,623)		-
							Â		Â		Â		Â
Net assets at the end of the year							134,348,973		1,068,728,454		34,125,005		1,237,202,432
				Â
														Â
					2010
														Â
					Share		Share		Capital		Revenue
					Capital		Premium		Reserve		Account		Total
					$		$		$		$		$
														Â
Net assets at the beginning
of the year					270,633		134,078,340		559,694,846		40,216,270		734,260,089
														Â
Redenomination of shares*					(270,633)		270,633		-		-		-
														Â
Profit for the year					-		-		-		240,098,718		240,098,718
														Â
Transfer to Capital Reserve					-		-		244,550,985		(244,550,985)		-
					Â		Â		Â		Â		Â
Net assets at the end of the year					-		134,348,973		804,245,831		35,764,003		974,358,807
														Â
														Â
* At the Extraordinary General Meeting held at the end of October 2009 it was resolved to re-denominate the share capital so as to permit the shares to be quoted in Sterling rather than US dollars, and secondly a division of each existing share into ten, thereby reducing the market price of each share.

CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30^th June 2011

	Â	2011	Â	2010
		$		$
				Â
OPERATING ACTIVITIES
Dividends received		22,288,375		15,814,306
Taxation paid		(4,119,332)		(2,742,700)
Purchase of investments		(202,054,447)		(202,533,312)
Proceeds from sale of investments		204,663,376		208,427,237
Interest received		21,215		28,900
Operating expenses paid		(20,438,135)		(17,146,628)
Foreign exchange loss		(860)		(71)
		Â		Â
NET CASH INFLOW FROM OPERATING ACTIVITIES		360,192		1,847,732
				Â
NET INCREASE IN CASH AND CASH EQUIVALENTS		360,192		1,847,732
Effect of exchange rate fluctuations on cash and cash equivalents		(553,604)		(449,886)
		Â		Â
		(193,412)		1,397,846
				Â
Net cash and cash equivalents at the beginning of the year		13,689,029		12,291,183
		Â		Â
NET CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR		13,495,617		13,689,029
				Â
				Â
Comprising:
				Â
Cash and cash equivalents		13,495,617		13,689,031
Bank overdraft		-		(2)
		Â		Â
NET CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR		13,495,617		13,689,029

1. BASIS OF PREPARATION

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and interpretations by the International Financial Reporting Interpretations Committee of the International Accounting Standards Board.

The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss.

The preparation of consolidated financial statements in conformity with IFRS may require management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions, relating to unlisted securities, are based on the historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

2. RECONCILIATION OF PUBLISHED NET ASSET VALUE ATTRIBUTABLE TO EQUITY SHAREHOLDERS TO THE IFRS EQUIVALENT

	Â	2011	Â	Per Participating
		Total		Preference Share
		$		$
Published Net Asset Value		1,241,698,534		9.20
Change from mid market pricing to bid pricing for investments		(4,496,102)		(0.03)
Net Asset Value under IFRS		1,237,202,432		9.17
					Â
		2010		Per Participating
		Total		Preference Share
		$		$
Published Net Asset Value		979,819,807		7.26
Change from mid market pricing to bid pricing for investments		(5,461,000)		(0.04)
Net Asset Value under IFRS		974,358,807		7.22

3. SIGNIFICANT AGREEMENTS AND RELATED PARTIES

MANAGER’S REMUNERATION AND TERMS OF APPOINTMENT

The Manager’s appointment is under a rolling contract which may be terminated by three months written notice given by the Fund and twelve months by the Manager.

Under the Management Agreement, the Manager is entitled to receive a management fee from the Fund, payable monthly, equal to 1.5% per annum, calculated and accrued on the Net Asset Value of the Fund as at each Valuation Day (being the 15^th day and last day of each month), except for investments in other funds, where the Manager will absorb the expenses of the management of other such funds to a maximum of 1% per annum of the value of the Fund’s holding in the relevant fund at the relevant time. The effective management fee on the average Net Assets of the Fund was 1.49% (2010: 1.49%). Where, in order to gain access to a particular market, investment is made in a vehicle directly managed by the Genesis group, no fee will be payable by the Fund on that proportion of its assets so invested, unless no management fee is charged to that vehicle.

ADMINISTRATION FEES

The Administrator, HSBC Securities Services (Guernsey) Limited, is entitled to receive a fee, payable monthly, based on time incurred. Administration fees were $171,711 (2010: $160,763) for the year.

CUSTODIAN FEE

Under the Custodian Agreement, HSBC Custody Services (Guernsey) Limited, as Custodian to the Fund, is entitled to receive a fee payable monthly, based on the Net Asset Value of the Fund. Under the agreement between the Custodian and the Sub-Custodian, JP Morgan Chase Bank, the latter is also entitled to receive a fee calculated on the same basis as the Custodian’s fee. The Fund also reimburses the charges and expenses of other organisations with whom securities are held. The total of all Custodian fees for the year represented approximately 0.12% (2010: 0.13%) per annum of the average Net Assets of the Fund.

DIRECTORS’ FEES AND EXPENSES

Included in Directors’ fees and expenses are Directors’ fees for the year of $170,023 in total (2010: $141,333). Also included are travelling, hotel and other expenses which the Directors are entitled to when properly incurred by them in travelling to, attending and returning from meetings and while on other business of the Fund.

RELATED PARTIES

The Genesis Indian Investment Company Limited and Genesis Smaller Companies SICAV were related parties of the Fund by virtue of having a common Manager in Genesis Asset Managers, LLP. The Fund’s holdings in these funds are summarised in the portfolio statement of the Annual Financial Report, subscriptions and redemptions during the year under review are detailed below. There were no other transactions between the Fund and such related parties during the year except as noted above and there are no outstanding balances between these entities at 30^th June 2011. Directors’ related party interests are included within the Directors’ Report.

	Â	2011
		Subscriptions	Â	Redemptions
		$		$
Genesis Indian Investment Company Limited		11,003,376		8,457,906
Genesis Smaller Companies SICAV		999,662		25,148,663
					Â
					Â
		2010
		Subscriptions		Redemptions
		$		$
Genesis Indian Investment Company Limited		14,594,207		14,335,255
Genesis Smaller Companies SICAV		-		19,025,584

These are not the full statutory accounts. The full Annual Financial Report for the year ending 30^th June 2011 will be sent to shareholders and will be available for inspection at the registered office: Arnold House, St. Julian’s Avenue, St. Peter Port, Guernsey, GY1 3NF.

For Genesis Emerging Markets Fund Limited
HSBC Securities Services (Guernsey) Limited, Secretary
September 2011

END