Half Year Financial Results to 31 December 2020

RNS Number : 2450Q

Genesis Emerging Markets Fund Ld

25 February 2021

 

Genesis Emerging Markets Fund Limited (the 'Fund' or 'GEMF')

(Registered in Guernsey, Registration Number: 20790)

Half Year Report and Unaudited Financial Statements for the six months ended 31 December 2020

The Directors of Genesis Emerging Markets Fund Limited (the 'Fund' or 'GEMF') announce the Fund's results for the six months ended 31 December 2020. The Half Year Report and Unaudited Financial Statements will shortly be available from the Fund's website www.genesisemf.com and via the National Storage Mechanism, which is located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism where users can access the regulated information provided by listed entities.

 

Financial Highlights and Performance

GEMF Total Return in GBP for the Six Months to 31 December 2020

25.9%	19.1%	18.8%
Share Price Total Return(1)	Net Asset Value per Participating Preference Share Total Return(1)	MSCI EM (TR) Index(2)

	31 December	30 June
	2020	2020	% change
USD
Net Assets(3)	$1,606.5m	$1,235.8m	30.0
Net Asset Value per Participating Preference Share(3)	$13.23	$10.17	30.1
Dividend per Participating Preference Share(3)	$0.17	$0.17	-
GBP
Net Assets(4)	£1,175.3m	£1,000.1m	17.5
Net Asset Value per Participating Preference Share(4)	£9.68	£8.23	17.6
Share Price	£8.90	£7.18	24.0
Discount of Share Price to Net Asset Value per
Participating Preference Share(1)	8.1%	12.8%
Number of Participating Preference Shares	121,466,754	121,466,754
Ongoing charges ratio(1)	1.05%	1.07%
Countries represented in portfolio	28	30
Number of holdings	100	96

⁽¹⁾  Alternative Performance Measures

⁽²⁾  MSCI Emerging Markets (Total Return) Index.

⁽³⁾  IFRS measure.

⁽⁴⁾  Translation of the USD measures using the GBP/USD exchange rate as at 31 December 2020 of 1.3669 (30 June 2020: 1.2356).

 

Chairman's Statement

I have pleasure in presenting to shareholders the Half Year Report and Unaudited Financial Statements for the six months ended 31 December 2020.

Overview

In   the first six months of the financial year the Fund's net asset value ('NAV') rose by 19.1% in sterling total return terms to £9.67 per Participating Preference Share. This compares to a rise of 18.8% in the Fund's benchmark, the MSCI Emerging Markets (Total Return) Index (the 'MSCI EM (TR) Index' or the 'Index'). Over the same period, the Fund's share price rose by 25.9% to £8.90 (adjusted for dividends paid). In 2020 the Fund's NAV rose by 13.1% against an Index return of 15.0% (the share price rose by 14.1%).

A rapid rebound in the global economy in the third quarter as lockdowns were lifted, and news of effective vaccines in the fourth quarter, propelled emerging market equities upwards in the second half of 2020. Two areas dominated. First, a recovery in some of the countries which Covid had hit hardest. Second, continued strength in semiconductor companies, particularly the large-cap behemoths TSMC and Samsung Electronics, two stocks which together contributed a quarter of the Index return. During the period, the Fund benefitted from its exposure to early-stage markets, many of which rebounded strongly from the impacts of the pandemic, but the concentration of index performance created headwinds given the Investment Manager's diversified approach to portfolio management.

In the six-month period under review, the Investment Manager has demonstrated strong stock selection within countries. The Board continues to believe investors with a long-term horizon should be well served by the Investment Manager's bottom-up approach to investing, applying a rigorous investment process to populate a diversified portfolio with quality businesses at attractive prices. We appreciate the Investment Manager's consideration of Environmental, Social and Governance ('ESG') factors as we believe this is important for sustainability of earnings. In a normalised environment, the stock selection shown in this and recent periods is likely to create substantial value for shareholders.

A more detailed explanation of the Fund's performance is provided in the Investment Manager's Review.

The   Fund held its Annual General Meeting ('AGM') on 2 November 2020, and as ever, I appreciate shareholders' support and thank you for your approval of all resolutions presented at the meeting. The subsequent Shareholder Information Meeting on 3 November 2020 provided shareholders an opportunity to hear from, and ask questions of, representatives of the Investment Manager.

A dividend of 12.95p (17.0 cents) per Participating Preference Share was paid to shareholders on 11 December 2020. As discussed in the 2020 Annual Report, the Board considers that this level of dividend represents an appropriate balance between the various differing interests, and opinions, held across the shareholder base - while ensuring the Fund's primary objective remains capital growth.

Discount

The discount of the share price to NAV at the end of the period was 8%. The average discount over the six months under review was 11.4% and has fluctuated within a range of 7.8 to 15.1%. The Board continues to analyse carefully the size of the discount, how it compares with an appropriate peer group, and potential options for active management of the discount. As a reminder, a tender offer took place in 2018. As previously announced, the Board intends that if the Fund's NAV Total Return over 5 years ending 30 June 2021 does not exceed the Fund's benchmark NAV Total Return, the Fund will undertake a tender offer for up to 25% of the Fund's issued share capital (excluding any shares held in treasury). In recent years marketing activity has been stepped up in support of increasing the Fund's liquidity and widening its shareholder base, and this activity has continued despite remote working. The Fund's website (www.genesisemf.com) has been upgraded and now includes a range of information, including interviews with the Investment Manager.

The Board

At the June 2020 Board meeting Mr Torsten Koster was appointed as an independent Non-Executive Director of the Fund. He was also appointed as a Member of the Audit and Risk Committee of the Fund with effect from 2 November 2020. Mr Koster has over 30 years' experience working for large multi-nationals, mainly consumer goods companies. The retirement of Mr Saffet Karpat as an independent Non-Executive Director was noted following the 2020 AGM, with the Board thanking him for nine years of excellent service. Shareholders approved Mr Koster's appointment at the AGM, at which, the remaining five Directors stood for re-election in accordance with the requirements of the AIC Code of Corporate Governance, and were duly re-elected. As ever, we continue to review how best the Board can provide the appropriate mix of skill, expertise and experience necessary in representing the interests of all shareholders. I continue to feel we have such a combination and will ensure that we remain current with best market practice.

AGM, Shareholder Meeting and Shareholder Communication

The Board wishes to ensure shareholders can access a range of up-to-date information about the Fund. As well as releasing announcements to the London Stock Exchange and issuing the Annual and Half-Yearly Reports, we encourage all shareholders to refer to the information on investment performance and portfolio activity contained in the Fund's monthly factsheets. These - and other Fund information - can be found on the Fund's website: www.genesisemf.com, which is regularly updated. Shareholders may also wish to join the semi-annual shareholder call organised by the Investment Manager, details of which are also available on the Fund's website. In general, the Investment Manager will usually be best placed to address queries from shareholders. Clearly, however, it is important for shareholders to be able to communicate directly with the Board when necessary. Russell Edey (as Senior Independent Director) and I have continued to speak regularly with major shareholders over the year and we invite any shareholders to contact us or indeed any of the Board, with comments and feedback. We can be reached via either the Investment Manager or the Administrator.

Outlook

There is reason to be optimistic in the near-term outlook despite the uncertainties caused by Covid. The Investment Manager's Report below notes revenue growth for the companies in the portfolio should accelerate in 2021 and valuations appear attractive, despite the strong returns seen in the period under review. Further, the Investment Manager observes many of the portfolio holdings have enhanced their competitive positions during this challenging period and will capitalise on this improvement during the years ahead.

Longer term, the investment opportunity in emerging markets ('EM') appears attractive. The Investment Manager expects positive demographics in many low- and middle-income economies and structural growth in manufacturing-led economies to support high GDP growth. The quality of policy making in some countries should also improve. The Investment Manager therefore anticipates a favourable environment for emerging market companies to grow.

A defining characteristic of EM over the past six years has been the outperformance of larger capitalisations stocks. This represents a significant headwind to the portfolio's less concentrated exposure. One of the central tenets of your Investment Manager's investment process is to obtain diversification by restricting individual holding sizes to 500bps at the time of purchase. This has served the Fund well over many years, delivering strong risk adjusted returns. The Board is sensitive to this issue and the Investment Manager continues to evaluate the drivers behind this phenomenon, including the possibility that it may persist in the future.

ESG matters continue to gain recognition in EMs, both with investors, who want more accountability, and the companies themselves, where real change happens. In 2020 the Investment Manager strengthened its ESG process so stakeholder analysis informs all stages of investment decisions and the investment team now systematically tracks engagements and assesses outcomes. The Board remains assured the Investment Manager remains in step with best practice and works hard with the Fund's investee companies to improve. The Investment Manager will publish the second version of its annual ESG report during Q1 2021 and this will be available on the Fund's website, detailing all ESG activity over the period.

Hélène Ploix

Chairman

24 February 2021

Investment Manager's Review

Investment Environment

Emerging Markets began the six-month period under review in recovery mode. The momentum which began in the second quarter continued into July and much of August, before pausing in September and October. Then November and December brought news of vaccines, with high efficacy levels, to fight Covid-19 and markets climbed sharply - albeit not quite as quickly as they plummeted in March. The MSCI EM (TR) Index posted a return of 13.3% in Q4 2020, the second-best quarterly return since the 2009 recovery from the global financial crisis. From the low point in March to the end of the year EMs rose by 47% in aggregate. Some of the more vulnerable markets that had been hit hard earlier in the year bounced back in the period under review, most notably Brazil, Mexico, Indonesia and Turkey. In this environment, the Fund's NAV marginally outperformed the Index in sterling terms over the six-month period, gaining 19.1% versus 18.8% for the Index.

Absolute returns have been strong and, frankly, surprising, given the pandemic. Overall, 2020 was a year that did not favour our consistent approach of managing a diversified portfolio of good quality businesses. A narrow set of stocks dominated Index performance for much of the year and the Fund's more diversified portfolio, despite strong and widespread stock selection, lagged slightly.

This narrowly led Index performance is partly explained by north Asia's particularly effective response to the Covid pandemic. Markets seemed to reward this as China, South Korea and Taiwan, which by year-end collectively accounted for two-thirds of EMs by Index weight, together returned 35% in 2020. Other EMs declined 4% during the year. The Fund, which has long had a relatively larger share of investments outside north Asia with an emphasis on earlier stage markets, suffered from this allocation gap. Looking ahead, we believe we are well positioned for a broad EM recovery, which we would hope to see as vaccines are rolled out across our markets.

Performance

Country Contributors

China - key driver: stock selection - 260 basis points ('bps')

Together, the Fund's investments in China returned 20% compared to MSCI China's 13%. The holdings in white spirit - baijiu - producers Jiangsu Yanghe (up 119% in GBP) and Wuliangye (up 67%) were major contributors and were supported by strong performance from the digital advertiser Focus Media (up 75%) and sportswear company Anta (up 63%). Value was also added through the underweight position in Alibaba (down 2%) which was impacted by factors including the shock suspension of the massive IPO of Ant Group, of which it owns 33%, and the Chinese regulator's anti-monopoly investigation into the company.

Russia - key driver: stock selection - 100bps

The 'Google of Russia' Yandex (up 26%) and Sberbank (up 27%), the largest businesses in their respective industries, were the leading contributors.

India - key driver: stock selection - 100bps

IT services company Infosys rose by 60% as tech spend by many companies rises to accommodate changing working practices. Kotak Mahindra Bank (up 37%) and consumer goods company Crompton Greaves (up 50%) also outperformed, the latter as it continued its strong recovery from the initial impact of the pandemic earlier in the year.

Country Detractors

South Korea - key driver: underweight to a strong market - 115bps

The large holding in Samsung Electronics (up 58%) was a notable performer, however the Fund has a lower weighting than the index which meant relative value was lost over this period.

South Africa - key driver: stock selection - 75bps

The main factor was the weak performance of foodservice distributor Bidcorp (down 1%) as the return of Covid restrictions impacted its share price. That said, we believe Bidcorp is well positioned as on-premise consumption returns. Separately, the largely non-domestic businesses of Naspers (up 2%) and Mediclinic (up 7%) also underperformed.

Thailand - key drivers: overweight to a weak market and stock selection - 70bps

Thailand's crucial tourism and export sectors have both been impacted by the pandemic. Private healthcare group Bangkok Dusit (down 14%) was hit by a reduction in medical tourism and CP ALL (down 20%) was impacted by lower footfall at its 7-Eleven stores.

Sector Contributors

The Fund added 205bps in financials: Kotak Mahindra and Sberbank were supported by strong performance from other banks, including HDFC Bank (up 26%) and Bancolombia (up 42%). The Fund also benefitted from not holding the large state-owned Chinese banksin the Index which underperformed. 130bps was added in communication services, largely due to the performance of Focus Media and Yandex, and the underweight position in Tencent, which only gained 2%. 90bps was added from having no exposure to the weak energy sector, which is dominated by state-owned oil and gas companies.

Sector Detractors

These gains were partially offset by 110bps lost by companies in the healthcare sector, where the Chinese companies CSPC Pharmaceutical (down 21%) and 3SBio (down 35%) underperformed, along with hospital groups Bangkok Dusit and Mediclinic. A further 85bps was lost from the Fund's underweight position in the materials sector, while a similar story in IT cost 65bps.

Relative   Performance   A tt ribution   in   GBP - 6 Months to December 2020

GEMF   vs.   MSCI Emerging Markets (TR) Index

Top 10 Stock Contributors	%		Top 10 Stock Detractors	%
Jiangsu Yanghe Brewery (China)	1.17		NIO (China)	(0.62)
Wuliangye Yibin (China)	0.99		Bangkok Dusit (Thailand)	(0.57)
Focus Media (China)	0.69		Meituan (China)	(0.49)
Alibaba (China)	0.43		WH Group (China)	(0.42)
Infosys (India)	0.41		CSPC Pharmaceutical (China)	(0.41)
Anta Sports (China)	0.40		Samsung Electronics (South Korea)	(0.40)
Hanon Systems (South Korea)	0.39		CP All (Thailand)	(0.39)
China Construction Bank (China)	0.37		Xiaomi (China)	(0.37)
Tencent (China)	0.32		58.com (China)	(0.37)
China Mengniu Dairy (China)	0.31		Bidcorp (South Africa)	(0.33)

			Top 5 Country			Top 5 Country
Sector	%		Contributors	%		Detractors	%
Financials	2.05		China	2.61		South Korea	(1.16)
Communication Services	1.29		Russia	1.02		South Africa	(0.73)
Energy	0.90		India	1.00		Thailand	(0.71)
Real Estate	0.56		Taiwan	0.46		Mexico	(0.61)
Utilities	0.31		Saudi Arabia	0.30		Philippines	(0.37)
Consumer Staples	0.10
Industrials	0.08
Investment Companies	(0.27)
Consumer Discretionary	(0.50)
IT	(0.65)
Materials	(0.85)
Health Care	(1.12)

Source: Calculated by FactSet

Portfolio activity

During the six-month period under review, purchase and sales activity centred around China, with trading resulting in a small net decrease in exposure. Purchases were dominated by two new holdings during the period: air conditioning manufacturer Gree Electric was repurchased after being sold from the Fund in 2016, and vitamin and dietary supplement provider By-Health was introduced. There was also an addition to property management service provider Country Garden Services, where a position had been initiated in Q2 2020. Elsewhere in China, Tencent was topped up as strategic initiatives around ecommerce and short video started to see traction, and tutoring company TAL Education (also introduced in Q2 2020), was increased as capital was redeployed from New Oriental Education. The standout sales were in the baijiu producers, Jiangsu Yanghe and Wuliangye, as their share prices soared. In response, the aggregate position was cut by 220bps to 4% of portfolios at year end - still a meaningful position, reflecting the strong prospects of these companies despite demanding valuations. Wuliangye, for example, started 2020 on 24 times our 2020 estimates and ended the year on 50 times. Focus Media was also reduced following strong share price performance, while Sina exited the portfolio in August.

India saw the largest net reduction during the period. The IT services companies in the Fund were all reduced following share price strength, with the position in Tata Consultancy more than halved. Kotak Mahindra Bank was trimmed after a steep share price increase and Sun Pharmaceutical exited the Fund after being held since 2000. Purchases saw the introduction of two insurance companies, SBI Life and ICICI Prudential, both of which were added to the Fund in September. South Korea also saw notable trading activity as a new position was initiated in video game publisher Nexon, and beauty and cosmetics conglomerate Amorepacific was increased following relative share price weakness. Internet search engine Naver and tech hardware mega-cap Samsung Electronics were both reduced following strong share price performance. Naver remains well placed to capture the digital opportunity in Korea and Japan, but competition and Naver's management's less-than-perfect capital allocation history limits the appropriate weighting at a now premium valuation.

Elsewhere, a further nine new holdings were initiated, including Mexico's largest food retailer Walmex, Philippine fixed broadband operator Converge, Brazil's second largest credit bureau Boa Vista (both via IPOs), and Kenya's leading mobile network operator Safaricom, which was repurchased. The position in food delivery firm Delivery Hero was added to following increased conviction, and Heineken - which has significant business in EMs - was also topped up. Brazilian healthcare provider Intermédica was also scaled up during a secondary equity offering.

In terms of sales, the portfolio's sole UAE holding, DP World, was eliminated in July following the announcement in February of a privatisation offer, at a 29% premium, by its largest shareholder, Port & Free Zone World. The position in Brazilian software company Linx was sold following the approval of a merger with StoneCo. CP All was reduced as we became less optimistic for growth in Thailand, and the positions in Russian retailer Magnit and internet company Yandex were trimmed. Mexican bank Inbursa and telecoms company América Móvil exited the Fund, both having been held for 13 years.

At the end of the period there were 100 holdings in the Fund, with 14 new positions and 10 sold.

Outlook

2021 will be a recovery year: we estimate revenue growth for the portfolio will accelerate to 19%. Looking forward, the portfolio is in fact showing an attractive five-year IRR of nearly 10% annualised in US dollars. Our companies have on the whole exploited the difficult environment and used their superior franchise and balance sheet strength to expand market share. They should now be in a stronger position as we exit the disruptions caused by Covid.

Our diversified portfolio typically performs better when small- and mid-capitalisation stocks do well. The last six years have seen us battling a heavy relative performance headwind. In each year from 2015 to 2020, the capitalisation-weighted MSCI EM (TR) Index has outperformed its equal-weighted version. The cumulative return gap between these indices over those six years is 18%. We believe this large cap performance skew is historically anomalous, but is a phenomenon which we continue to evaluate on a company-by-company basis.

Since the Fund's inception in 1989 we have generated 11.6% annualised returns in GBP, net of fees. This is above the MSCI EM (TR) Index, which has returned 10.0%, and the MSCI World Index, which has returned 8.4%. As a firm. we remain focused on global emerging markets equity and believe our team remains globally competitive. The Investment Manager's four pillars of success remain in place: (1) sophisticated clients; (2) our aligned structure as an owner-managed single-strategy partnership; (3) our long-term investment time horizon and rigorous fundamental research process; and (4) our diverse team of skilled and experienced professionals.

Genesis Investment Management, LLP

24 February 2021

 

Directors' Report

Financial Performance

Results and Dividends

The total profit for the six months ended 31 December 2020 amounted to $391,434,000 compared to a profit of $113,484,000 for the six months ended 31 December 2019.

A dividend of 17.0¢ per Participating Preference Share in respect of the 30 June 2020 results (2019: 19.0¢) was approved by Shareholders at the AGM and paid on 11 December 2020.

Capital Values

At 31 December 2020, the value of Equity Shareholders' Funds was $1,606,539,000 (30 June 2020: $1,235,754,000) and the Net Asset Value per Participating Preference Share was $13.23 (30 June 2020: $10.17), or in sterling terms, £9.68 (30 June 2020: £8.23).

Principal Risks and Uncertainties

The main risks to the value of its assets arising from the Fund's investment in financial instruments (principally equity securities) are unanticipated adverse changes in market prices and foreign currency exchange rates and an absence of liquidity. The Board reviews and agrees with the Investment Manager's 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.

Volatility of emerging markets and market risk

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 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 Board use 5% for monitoring purposes.

Foreign currency exposure

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 distribution in US dollars. The value of the assets of the Fund as measured in US 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. The Fund has opted not to engage in any active management of foreign currency risk, and therefore all its open foreign exchange positions are typically unhedged.

Lack of liquidity

Trading volumes on the stock exchanges of developing countries can be substantially less than in the leading stock markets of the developed world and trading may even be temporarily suspended during certain periods. Liquidity can also be negatively impacted by temporary capital controls in certain markets. A lower level of liquidity can exaggerate 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.

Custody risk and cyber security

The Fund is also exposed to operational risks such as custody risk and cyber security breaches. 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 Investment Manager under policies approved by the Board.

The risk represented by breaches in cyber security is carefully monitored by the Investment Manager, Custodian and Administrator with appropriately designed and tested controls.

Investment policy and process

Inappropriate investment policies and processes may result in under performance against the Fund's peer group. The Board manages these risks by ensuring a diversification of investments and regularly reviewing the portfolio asset allocation and investment process. In addition, certain investment restrictions have been set and these are monitored as appropriate.

Investment strategy and share price movements

The objective of the Fund is to achieve long term capital growth and it is exposed to the effect of variations in the price of its investments. A fall in the value of its portfolio will have an adverse effect on shareholders' funds. The Board reviews the Fund's investment strategy and the risk of adverse share price movements at its Board meetings taking into account the economic climate, market conditions and other factors that may have an effect on the sectors in which the Fund invests. There can be no assurances that depreciation in the value of the Fund's investments will not occur, but the Board seeks to reduce this risk.

Discount to net asset value

A discount in the price at which the Fund's shares trade to net asset value would mean that shareholders would be unable to realise the true underlying value of their investment. As a means of controlling the discount to net asset value the Board has the ability to buy back shares. The Board reviews the Fund's discount to net asset value on a regular basis.

Credit and counterparty risk

The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Fund suffering a loss.

Operational

Failure of the core accounting systems, or a disastrous disruption to the Administrator's or Investment Manager's business, could lead to an inability to provide accurate reporting and monitoring.

Loss of Key Personnel

The day-to-day management of the Fund has been delegated to the Investment Manager. Loss of the Investment Manager's key employees could affect investment returns. The Board is aware that GIM, LLP recognises the importance of its employees to the success of its business. Its remuneration policy is designed to be market competitive in order to motivate and retain staff and succession planning is regularly reviewed.

Investment 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 Investment Manager is in the interests of the shareholders as a whole.

A more detailed commentary of important events that have occurred during the period and their impact on these financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year are contained in the Investment Manager's Review.

Directors

The following directors served throughout the period under review: Hélène Ploix, Sujit Banerji, Dr Simon Colson, Russell Edey, Torsten Koster and Katherine Tsang. Saffet Karpat retired as a director of the Fund on 2 November 2020.

As at 31 December 2020, Participating Preference Shares were held by Sujit Banerji (10,000), Dr Simon Colson (4,416), Russell Edey (10,000) and Hélène Ploix (15,000).

Related Party Transactions

During the reporting period, there were no transactions with related parties which materially affected the financial position or performance of the Fund. However, details of related party transactions are contained in the Annual Financial Report for the year ended 30 June 2020 which should be read in conjunction with this Half Year Report.

Going Concern

The Directors believe that the Fund has adequate resources to continue in operational existence for twelve months from the approval date of the Half Year Report. This is based on various factors including the Fund's forecast expenditure, its ability to meet its current liabilities, the highly liquid nature of its assets, its market price volatility and its closed-ended legal structure. For these reasons, the Directors continue to adopt the going concern basis in preparing these Financial Statements.

Statement of Directors' Responsibilities

In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' and gives a true and fair view of the assets, liabilities, financial position and return of the Fund;

· the Half Year Report includes a fair review of important events that have occurred during the first six months of the financial year, their impact on the condensed financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· the Half Year Report includes a fair review of the information concerning related party transactions.

Approved by the Board

Hélène Ploix	Russell Edey
Chairman	Director
24 February 2021

Unaudited Statement of Financial Position

as at 31 December 2020 and 30 June 2020

		(Audited)
	31 December	30 June
	2020	2020
	$'000	$'000
Asset
Current Assets
Financial assets at fair value through profit or loss	1,570,200	1,205,287
Amounts due from brokers	18,313	15,541
Dividends receivable	2,192	2,809
Other receivables and prepayments	240	212
Cash and cash equivalents	23,786	16,530
Total Assets	1,614,731	1,240,379
Liabilities
Current Liabilities
Amounts due to brokers	-	1,474
Capital gains tax payable	6,640	1,739
Payables and accrued expenses	1,552	1,412
Total Liabilities	8,192	4,625
Total Net Assets	1,606,539	1,235,754
Equity
Share premium	6,291	6,291
Capital reserve	1,560,756	1,178,583
Revenue account	39,492	50.880
Total Equity	1,606,539	1,235,754
Net Asset Value per Participating Preference Share	$13.23	$10.17

* Calculated on a closing number of 121,466,754 Participating Preference Shares in issue (30 June 2020: 121,466,754).

Unaudited Statement of Comprehensive Income

for the six months ended 31 December 2020 and 31 December 2019

	2020			2019
	Capital	Revenue		Capital	Revenue
	Reserve	Account	Total	Reserve	Account	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Income
Net change in financial assets at
fair value through profit or loss	393,186	-	393,186	114,135	-	114,135
Net exchange losses	(431)	-	(431)	(891)	-	(891)
Dividend income	-	13,255	13,255	-	9,237	9,237
Interest income	-	32	32	-	235	235
Securities lending income	-	-	-	-	146	146
Total income	392,755	31,287	406,042	113,244	9,618	122,862
Expenses
Management fees†	(5,093)	(1,273)	(6,366)	(4,867)	(1,217)	(6,084)
Transaction costs†	(588)	-	(588)	(906)	-	(906)
Custodian fees	-	(466)	(466)	-	(466)	(466)
Administration fees	-	(157)	(157)	-	(151)	(151)
Directors' fees and expenses	-	(153)	(153)	-	(189)	(189)
Legal and professional fees	-	(60)	(60)	-	(21)	(21)
Audit fees	-	(24)	(24)	-	(19)	(19)
Other expenses	-	(124)	(124)	-	(110)	(110)
Total operating expenses	(5,681)	(2,257)	(7,938)	(5,773)	(2,173)	(7,946)
Operating profit	387,074	11,030	398,104	107,471	7,445	114,916
Finance costs
Bank charges	-	-	-	-	(4)	(4)
Total finance costs	-	-	-	-	(4)	(4)
Taxation
Capital gains tax†	(4,901)	-	(4,901)	(508)	-	(508)
Withholding taxes	-	(1,769)	(1,769)	-	(920)	(920)
Total taxation	(4,901)	(1,769)	(6,670)	(508)	(920)	(1,428)
Profit after tax attributable to
Participating Preference Shares	382,173	9,261	391,434	106,963	6,521	113,484
Total comprehensive income	382,173	9,261	391,434	106,963	6,521	113,484
Earnings per Participating
Preference Share*	$3.15	$0.07	$3.22	$0.88	$0.05	$0.93

* Calculated on an average number of 121,466,754 Participating Preference Shares in issue (31 December 2019: 121,466,754).

^† 80% of Management fees and all Transaction costs and Capital gains tax have been allocated to the Capital Reserve.

Unaudited Statement of Changes in Equity

for the six months ended 31 December 2020 and 31 December 2019

	2020
	Share	Capital	Revenue
	Premium	Reserve	Account	Total
	$'000	$'000	$'000	$'000
Balance at the beginning of the period	6,291	1,178.583	50,880	1,235,754
Total Comprehensive Income	-	382,173	9,261	391,434
Dividend paid in the period	-	-	(20,649)	(20,649)
Balance at the end of the period	6,291	1,560,756	39,492	1,606,539

	2019
	Share	Capital	Revenue
	Premium	Reserve	Account	Total
	$'000	$'000	$'000	$'000
Balance at the beginning of the period	6,291	1,242,603	56,366	1,305,260
Total Comprehensive Income	-	106,963	6,521	113,484
Dividend paid in the period	-	-	(23,079)	(23,079)
Balance at the end of the period	6,291	1,349,566	39,808	1,395,665

Unaudited Statement of Cash Flows

for the six months ended 31 December 2020 and 31 December 2019

	2020	2019
	$'000	$'000
Operating activities
Dividends and interest received	13,904	10,090
Securities lending income received	-	146
Taxation paid	(1,769)	(918)
Purchase of investments	(145,928)	(246,369)
Proceeds from sale of investments	169,955	269,342
Interest paid	-	(4)
Operating expenses paid	(7,826)	(8,164)
Net cash inflow from operating activities	28,336	24,123
Financing activities
Dividends paid	(20,649)	(23,079)
Net cash outflow from financing activities	(20,649)	(23,079)
Effect of exchange losses on cash and cash equivalents	(431)	(891)
Net increase in cash and cash equivalents	7,256	153
Net cash and cash equivalents at the beginning of the period	16,530	19,487
Net cash and cash equivalents at the end of the period	23,786	19,640
Comprising:
Cash and cash equivalents	23,786	19,640

Notes to the Unaudited Financial Statements

for the six months ended 31 December 2020

1.  Basis of Preparation

The Interim Financial Information for the six months ended 31 December 2020 has been prepared in accordance with International Accounting Standards 34, 'Interim Financial Reporting'. The Interim Financial Information should be read in conjunction with the Annual Financial Statements for the year ended 30 June 2020, which have been prepared in accordance with International Financial Reporting Standards ('IFRS').

The unaudited 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.

2.  Transaction costs

During the period, expenses were incurred in acquiring or disposing of investments.

	31 December	31 December
	2020	2019
	$'000	$'000
Acquiring	310	397
Disposing	278	509
	588	906

 

3.  Dividend

	31 December	31 December
	2020	2019
	$'000	$'000
Dividend Paid
2020 final dividend of 17.0 cents (2019: 19.0 cents)
per Participating Preference Share	20,649	23,079

 

4.  Segment Information

The Directors, after having considered the way in which internal reporting is provided to them, are of the opinion that the Fund continues to be engaged in a single segment of business, being the provision of a diversified portfolio of investments in Emerging Markets.

All of the Funds' activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Fund operating in one segment.

The financial positions and results from this segment are equivalent to those per the financial statements of the Fund as a whole, as internal reports are prepared on a consistent basis in accordance with the measurement and recognition principles of IFRS.

As at 31 December 2020 and 30 June 2020, the Fund has no assets classified as non-current assets.

The Fund is domiciled in Guernsey. All of the Fund's income from investment is from entities in countries or jurisdictions other than Guernsey.

For further information, please contact:

Nick Archer

Genesis Investment Management, LLP

020 7201 7200

J.P. Morgan Administration Services (Guernsey) Limited

Company Secretary

01481 758 620

25 February 2021

[END]

 

END

 

 

IR SEAFILEFSEDE