Half Year Report to 31 December 2018

RNS Number : 3594Q

Genesis Emerging Markets Fund Ld

18 February 2019

 

Genesis EMERGING MARKETS FUND LIMITED

Half Year Report and Unaudited Financial Statements
for the six months ended 31^st December 2018

The Directors of Genesis Emerging Markets Fund Limited (the 'Fund' or 'GEMF') announce the Fund's results for the six months ended 31^st December 2018. The Half Year Report and Unaudited Financial Statements will shortly be available from the Fund's website www.genesisemf.com and also for inspection on the National Storage Mechanism, which is located at www.morningstar.co.uk/uk/NSM where users can access the regulated information provided by listed entities.

Introduction

Objective

The objective of GEMF is to achieve long-term capital growth, primarily through investment in equity markets of low- and middle-income countries.

 

Structure

GEMF is a Guernsey based Authorised Closed-Ended Investment Scheme with the ability to issue additional shares. The Fund's shares are listed on the premium segment of the Official List of the UK Listing Authority, traded on the London Stock Exchange and are included in the FTSE 250. The number of Participating Preference Shares outstanding is 121,466,754, as at 31^st December 2018 (30^th June 2018: 134,963,060).

Investment Approach

The investment approach is to identify companies which are able to take advantage of growth opportunities in emerging markets and invest in them when they are trading at an attractive discount to the Manager's assessment of their intrinsic value.

New Shares

Shares may be issued twice monthly subject to the following conditions:

i)      the Fund is invested as to at least 75% in emerging market securities;

ii)     the Fund will only issue new shares if it is unable, on behalf of the new subscriber, to acquire shares in the secondary market at a price equivalent to or below the price at which new shares would be issued; and

iii)    the issued share capital of the Fund is not increased by more than 10% in any twelve month period.

 

Highlights and Performance

GEMF Total Return in GBP for the Six Months to 31^st December 2018

(6.6)%	(7.7)%	(4.9)%
Share Price*	Net asset value per Participating	MSCI EM (TR) Index†
	Preference Share*

	31st December	30th June
Published Data	2018	2018	% change
Net assets	£868.6m	£1,066.8m	(18.6)
Net assets	$1,106.3m	$1,408.5	(21.5)
Net asset value per Participating Preference Share	£7.15	£7.90	(9.5)
Net asset value per Participating Preference Share	$9.11	$10.44	(12.7)
Share priceØ	£6.36	£6.97	(8.8)
Discount of Share Price to Net Asset Value per
Participating Preference Share	11.0%	11.9%
Dividend paid per Participating Preference Share	$0.190	nil
Number of Participating Preference Shares	121,466,754	134,963,060
Ongoing charges ratio	1.12%	1.10%
Countries represented in portfolio	34	35
Number of holdings	118	126

* Actual returns adjusted for dividends paid

^Ø The percentage change in share price excludes the impact of dividends paid

^† MSCI Emerging Markets (Total Return) Index

 

Chairman's Statement

Looking back over the five years to the end of 2018, emerging markets have generated an annual return of just 2% in US dollars. As investors will be well aware, however, this headline figure masks huge swings in stockmarket levels - both up and down - over recent years.

Following the strong performance of 2016 and 2017, global equity markets were brought down in 2018 as a result of investor concerns across a range of factors. Slower global growth and rising interest rates were arguably the two most fundamental. But we have also seen an increasingly challenging regulatory environment for the dominant internet businesses, an issue which has particularly affected the formerly high-flying companies in this sector in China. The weak performance of technology companies in emerging markets (combined with a stronger US dollar, disputes over trade, and concerns about economic management in certain countries, Turkey being a prime example) was behind the -14% US dollar return for the MSCI EM Index in 2018. For the second half of 2018 - the period under review in this report - the return was -8%.

The further weakness of sterling against the US dollar - a reflection of the current political situation in the UK - at least meant that UK-based investors were protected from some of this decline: the MSCI EM Index was down only -5% in sterling terms in the last six months.

Against this, the Fund's Net Asset Value per share declined from 790.4p to 715.4p over the half-year, representing a return of -8% (adjusted for dividends paid). (The Fund's share price fell by slightly less, -7%; the narrowing of the Fund's discount to NAV meant it ended 2018 at 11%).

The Fund's underperformance relative to the benchmark during the period largely related to weakness in some of the portfolio's holdings in consumer companies. Details on this and other factors - as well as comments on the current environment and investment outlook for emerging markets - are presented in the Manager's Report that follows this Statement.

The Fund held its Annual General Meeting on 13^th November; as ever, we appreciate shareholders' support and thank them for their approval of all proposals presented at the Meeting. The Fund's subsequent Shareholder Information Meeting on 14^th November provided shareholders an opportunity to hear from, and ask questions of, representatives of the Manager.

A dividend of 14.76p (19.0 cents) per share was paid to shareholders in early December.

My fellow Directors and I continue to engage with shareholders in order to hear your comments and understand any concerns you may have. I noted in the Annual Report six months ago the range of actions being implemented as part of efforts to reduce the discount to the benefit of shareholders, including the tender offer of 10% of shares that was implemented in the third quarter of 2018. We continue these initiatives to help ensure the Fund meets your expectations and requirements as investors.

Naturally we understand that these expectations include the Fund's NAV outperforming the market over the medium to long term. Both the Board and the Manager acknowledge that performance in recent years has not been at the level that shareholders have historically come to expect, and this remains a key focus of our regular discussions with the Manager.

Fundamentally, we remain confident that the Manager is well-placed to generate outperformance. It has reduced the number of holdings in the portfolio to enable deeper research on each company, and attracted new investment team members with a focus on emerging Asia, the fastest-growing part of the opportunity set. We believe these actions have helped ensure the Manager's continued competitiveness in running an emerging markets strategy.

The portfolio, too, gives reasons for confidence, consisting as it does of a diversified set of quality investments in the consumer sector, in smaller companies and frontier markets, in banks in less developed economies, and in entrepreneurial new economy businesses (primarily in China). As the Manager notes in the Report following, the environment of the last few years which has acted as a headwind to portfolio performance by favouring large-cap stocks is, arguably, unlikely to persist. Additionally, following 2018's market performance, some of the valuations currently available in emerging markets are highly attractive relative to history.

Looking ahead, emerging markets still face challenges. Despite the recent softening in the US Federal Reserve's approach to interest rate rises, the prolonged trade dispute between the US and China is a reminder that emerging markets' development as part of an open and cooperative global economy is not always smooth. More data continues to appear offering evidence for a slowing of the Chinese economy, which given its central, dominant, position in emerging markets is a cause for some concern. Politically, the outcome of the recent election in Mexico has generated uncertainty for investors, while the reaction to Brazil's election may yet turn out to be over-optimistic. Major emerging markets India, Indonesia, Nigeria and Thailand will all hold elections in the next few months, with South Africa following later in the year: some surprises may result.

As a Board, however, we share with the Manager a continued optimism on the long-term investment opportunity in emerging markets. Incomes in low- and middle-income economies should continue to converge with those in high-income economies over time, while institutional quality continues to improve - albeit stutteringly in some cases.

The emerging markets are home to many high-quality companies which volatile markets may cause to be mispriced in the short-term, creating opportunities for active investors. We remain confident that a straightforward approach of applying deep fundamental research to identify long-term investments in quality businesses at attractive prices remains thoroughly relevant.

Hélène Ploix

Chairman

15^th February 2019

 

Manager's Review

In the 2018 calendar year, the Fund declined 10.6% in sterling terms net of fees. The return was slightly worse than that of the MSCI Emerging Markets (EM) Index, which declined 8.9%. Normally we would expect to do relatively better in a year where markets are weak. While our longer-term relative performance net of fees remains positive, we are keenly aware of the need to build continually on that track record.

Performance

Over the second half of 2018, the investments in emerging market consumer franchises, which are about one-third of the Fund, performed poorly. These losses were predominantly the result of multiple de-rating rather than fundamental changes in earnings power. While the approximately one-fifth of the Fund in early-stage emerging market banks performed relatively well, it was an insufficient offset. Furthermore, state-owned enterprises were among the best performing stocks in emerging markets; our long-running strategy has been to avoid these generally poorly-managed businesses.

In this environment, the Fund's NAV underperformed the Index over the six-month period, falling by 7.7% versus an Index return of -4.9%.

By sector, substantial gains were made in IT from a combination of being underweight in both Taiwanese tech hardware and Chinese internet, and from the strong performance by the Brazilian software company Linx. However, these were offset by losses in the consumer sectors, largely due to the Chinese and Russian companies mentioned below, and from being underweight in the strong energy sector where several SOEs not held in the Fund outperformed.

Relative gains were achieved over the period in Taiwan as TSMC (up 7%) outperformed several of the larger Taiwanese tech hardware positions in the Index. Further value was added in China where the portfolio benefited from being underweight in the Chinese internet space, notably Tencent, Baidu and Alibaba, although some of these gains were offset by underperformance from consumer staples holdings including baijiu producers Wuliangye Yibin (down 32%), Jiangsu Yanghe Brewery (down 28%) and Tingyi (down 40%). Elsewhere, value was added in Indonesia following strong performance from BCA (up 25%), and in Brazil where a number of positions outperformed including BB Seguridade (up 26%), Itaú (up 39%) and software solutions company Linx which doubled in value as it released a new fintech payment platform and benefited from expensive deals elsewhere in the sector.

Substantial value was lost versus the benchmark from underperforming stocks in Russia. Sberbank (down 20%) was impacted by weak macroeconomic conditions in Turkey due to concerns over the transaction to sell its Turkish subsidiary Deniz, while food retailers Magnit and Lenta fell 23% and 42% respectively in a market where competitive overlap has increased dramatically. Significant value was also lost in South Africa, although this was due to the performance of Mediclinic (down 38%) and Naspers (down 18%), both of which have little exposure to the domestic economy. Naspers was impacted by the fall in Tencent's share price, in which Naspers has a significant stake. Further value was lost in Turkey, impacted by lira depreciation and the accompanying macroeconomic dislocation, as the Fund has a 2% overweight position.

Relative Performance Attribution in GBP - Six Months to 31^st December 2018

GEMF vs. MSCI Emerging Markets (TR) Index

Top 10 Stock Contributors	%		Top 10 Stock Detractors	%
Tencent (China)	0.66		Mediclinic (South Africa)	(0.52)
Baidu (China)	0.35		Wuliangye Yibin (China)	(0.50)
BCA (Indonesia)	0.33		Jiangsu Yanghe Brewery (China)	(0.41)
BB Seguridade (Brazil)	0.30		Naspers (South Africa)	(0.40)
Linx (Brazil)	0.30		Banco Bradesco (Brazil)	(0.31)
Axis Bank (India)	0.30		58.com (China)	(0.31)
Central Pattana (Thailand)	0.24		Sberbank (Russia)	(0.27)
Itaú (Brazil)	0.22		Tingyi (China)	(0.27)
Alibaba (China)	0.21		Petrobras (Brazil)	(0.27)
Semen Indonesia (Indonesia)	0.20		LiLAC (United Kingdom)	(0.26)

Stocks in italics are not held in the portfolio but are part of the Index at period end

			Top 5 Country			Top 5 Country
Sector Contributions	%		Contributors	%		Detractors	%
IT	1.72		Taiwan	0.31		South Africa	(1.06)
Real Estate	0.28		China	0.31		Russia	(1.04)
Health Care	0.27		Indonesia	0.29		Turkey	(0.33)
Materials	0.22		Brazil	0.23		Poland	(0.31)
Consumer Discretionary	0.06		South Korea	0.22		Qatar	(0.26)
Utilities	(0.25)
Financials	(0.30)
Industrials	(0.46)
Energy	(0.74)
Communication Services	(0.95)
Consumer Staples	(2.26)

Source: Calculated by FactSet

 

Portfolio Activity

Purchases in China dominated activity during the period with market weakness presenting opportunities as four new stocks were introduced: New Oriental Education, Sina, Weibo and Focus Media. There were also additions to some of the Fund's larger positions: internet companies Alibaba and 58.com and baijiu producers Wuliangye Yibin and Jiangsu Yanghe Brewery, while a sharp price correction saw AAC Technologies added to. These purchases were partly funded by the exit of JD.com, sold following indications that they are struggling in the grocery segment, limiting their growth potential. Other sales in China included China South Publishing & Media and Hengan, while price strength prompted sales in China Overseas Land and Investment.

Purchase activity elsewhere saw Yandex and Sberbank (both Russia) and Mediclinic (South Africa) added to following share price weakness, while exposure to Turkish banks was consolidated at the end of September with the sale of Yapı Kredi in favour of its more robust counterpart Garanti, which has a better-provisioned book, higher capital adequacy ratio and higher ROE. Other new holdings included Colgate, the renowned global brand in oral care and personal products which derives more than 50% of revenue from emerging markets; Indocement and Semen Indonesia, as a fall in the Indonesian cement price and a positive change in industry dynamics led to their reintroduction; and there were two new holdings in South Korea as positions in Amorepacific Group and Kangwon Land were initiated.

India and Brazil saw significant sales activity as several holdings were reduced following strong relative share price performance. In Brazil, Itaú and Rumo both saw reductions as the Brazilian market rallied, while GPA and Ultrapar exited the portfolio, the latter due to limited opportunities for growth. In India, there were sizeable sales in banks, Axis and Kotak, IT services company Infosys, and Dabur. Elsewhere, there were notable reductions in the IT hardware giants TSMC and Samsung Electronics (South Korea), with the latter's main cashflow generator, memory chips, approaching the peak of their cycle with margins likely to decline from here. Other positions from the financial sector saw activity as BCA (Indonesia) was reduced on share price strength and South Korean insurer Samsung Fire & Marine was scaled back, while health care provider Bangkok Dusit (Thailand) was also reduced. In a busy period, other positions exiting the Fund included Aspen Pharmacare (South Africa), Tullow Oil and Kosmos Energy (Ghana) along with a number of smaller positions including Andina (Chile) and ADES International (Egypt). At the end of the period there were 118 holdings, with nine new positions introduced and 17 positions sold.

Outlook

Our primary focus is on identifying and investing in high-quality companies, which we characterise as those with a persistent capacity to generate sustainable excess returns, at attractive valuations. We evaluate a wide range of factors that have a material impact on long-term shareholder value, including Environmental, Social and Governance ('ESG') matters. As a bottom-up fundamental investor, our investment approach naturally benefits from the integration of ESG factors at the company level quality assessment.

We think the investment environment in the next five years may be more conducive to our strategy performing compared to the last five. A defining characteristic of the 2014 to 2018 period was the outperformance of larger capitalisation stocks. This is reflected in the 12% cumulative outperformance of the capitalisation-weighted MSCI EM Index versus the equal-weighted index. The fact that the capitalisation-weighted version outperformed by so much and for so long is historically anomalous. There are two reasons why our strategy performs better when small and mid-capitalisation stocks outperform: (1) our strategy includes a structural preference for less efficiently priced smaller capitalisation stocks and frontier markets; and (2) our team manages a well-diversified portfolio in which individual position sizes rarely reach 500bps. Of course, it is possible that large capitalisation stocks continue to outperform, but history does not support this outcome.

Genesis Asset Managers, LLP

February 2019

 

Directors' Report

Financial Performance

Results and Dividends

The total loss for the six months ended 31^st December 2018 amounted to $150,487,000 compared to a profit of $195,529,000 for the six months ended 31^st December 2017.

A dividend of 19.0 US cents per Participating Preference Share in respect of the 30^th June 2018 results (2017: 14.0 US cents) was approved by Shareholders at the AGM and paid on 21^st December 2018.

Capital Values

At 31^st December 2018, the value of Equity Shareholders' Funds was $1,106,842,000 (30^th June 2018: $1,408,466,000) and the Net Asset Value per Participating Preference Share was $9.11 (30^th June 2018: $10.44), or in sterling terms, £7.15 (30^th June 2018: £7.90).

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 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.

Volatility of emerging markets and market risk

The economies, the currencies and the financial markets of a number of low- and middle-income countries in which the Fund invests can 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. While the exposure to any one company or group (other than an investment company, unit trust or mutual fund) is formally limited to 10% of the Fund's net assets, this exposure is unlikely to exceed 5% at the time the investment is made.

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 in US dollars. The value of the assets of the Fund as measured in US dollars may be affected favorably or unfavorably by fluctuations in currency rates and exchange control regulations. Further, the Fund may incur costs in connection with conversions between various currencies.

Lack of liquidity

Trading volumes on the stock exchanges of low- and middle-income countries can be substantially less than in the leading stock markets of the high-income countries. 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.

Custody risk and cyber security

The Fund's key operational risk is 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.

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

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 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 Manager's Review.

Directors

The following directors served throughout the period under review: Hélène Ploix, Sujit Banerji, Russell Edey, Saffet Karpat, Dr John Llewellyn and Katherine Tsang.

As at 31^st December 2018, Participating Preference Shares were held by Sujit Banerji (10,000), Saffet Karpat (20,000) 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^th June 2018 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
Director	Director
	15th February 2019

Unaudited Statement of Financial Position

as at 31^st December 2018 and 30^th June 2018

		(Audited)
	31st December	30th June
	2018	2018
	$'000	$'000
ASSETS
Current assets
Financial assets at fair value through profit or loss	1,089,978	1,383,056
Amounts due from brokers	373	2,375
Dividends receivable	2,561	4,287
Other receivables and prepayments	210	204
Cash and cash equivalents	18,175	25,260
TOTAL ASSETS	1,111,297	1,415,182
LIABILITIES
Current Liabilities
Amounts due to brokers	11	3,649
Capital gains tax payable	2,899	1,239
Payables and accrued expenses	2,121	1,828
TOTAL LIABILITIES	5,031	6,716
TOTAL NET ASSETS	1,106,266	1,408,466
EQUITY
Share premium†	6,291	134,349
Capital reserve	1,059,122	1,217,468
Revenue account	40,853	56,649
TOTAL EQUITY	1,106,266	1,408,466
NET ASSET VALUE PER PARTICIPATING PREFERENCE SHARE*	$9.11	$10.44

 

* Calculated on a closing number of 121,466,754 Participating Preference Shares outstanding (30^th June 2018: 134,963,060).

^† The decrease in Share premium is due to the repurchase and cancellation of the Fund's own shares (see Unaudited Statement of Changes in Equity).

 

Unaudited Statement of Comprehensive Income

for the six months ended 31^st December 2018 and 31^st December 2017

	2018			2017
	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	(151,513)	-	(151,513)	192,168	-	192,168
Net exchange gains	473	-	473	150	-	150
Dividend income	-	11,109	11,109	-	14,460	14,460
Securities lending income	-	386	386	-	306	306
Interest income	-	26	26	-	23	23
	(151,040)	11,521	(139,519)	192,318	14,789	207,107
EXPENSES
Management fees†	(4,619)	(1,155)	(5,774)	(5,354)	(1,339)	(6,693)
Transaction costs†	(1,018)	-	(1,018)	(898)	-	(898)
Custodian fees	-	(561)	(561)	-	(622)	(622)
Directors' fees and expenses	-	(153)	(153)	-	(153)	(153)
Administration fees	-	(144)	(144)	-	(187)	(187)
Audit fees	-	(24)	(24)	-	(28)	(28)
Legal and professional fees	-	(713)	(713)	-	(52)	(52)
Other expenses	-	(110)	(110)	-	(65)	(65)
TOTAL OPERATING EXPENSES	(5,637)	(2,860)	(8,497)	(6,252)	(2,446)	(8,698)
OPERATING (LOSS)/PROFIT	(156,677)	8,661	(148,016)	186,066	12,343	198,409
Finance Costs	-	(8)	(8)	-	(7)	(7)
(LOSS)/PROFIT BEFORE TAX	(156,677)	8,653	(148,024)	186,066	12,336	198,402
Capital gains tax†	(1,669)	-	(1,669)	(1,308)	-	(1,308)
Withholding taxes	-	(1,370)	(1,370)	-	(1,565)	(1,565)
(LOSS)/PROFIT AFTER TAX	(158,346)	7,283	(151,063)	184,758	10,771	195,529
Other Comprehensive Income	-	-	-	-	-	-
TOTAL COMPREHENSIVE
(LOSS)/ INCOME ATTRIBUTABLE
TO PARTICIPATING
PREFERENCE SHARE	(158,346)	7,283	(151,063)	184,758	10,771	195,529
(LOSSES)/EARNINGS PER
PARTICIPATING PREFERENCE
SHARE*	$(1.27)	$0.06	$(1.21)	$1.37	$0.08	$1.45

* Calculated on an average number of 124,914,180 Participating Preference Shares outstanding (31^st December 2017: 134,963,060).

^† With effect from 1^st July 2017, 80% of the Management fees and all the 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^st December 2018 and 31^st December 2017

	2018
	Share	Capital	Revenue
	Premium	Reserve	Account	Total
	$'000	$'000	$'000	$'000
Balance at the beginning of the period	134,349	1,217,468	56,649	1,408,466
Repurchase and cancellation of the
Fund's own shares	(128,058)	-	-	(128,058)
Total Comprehensive (Loss)/Income	-	(158,346)	7,283	(151,063)
Dividend paid in the period	-	-	(23,079)	(23,079)
Balance at the end of the period	6,291	1,059,122	40,853	1,106,266

	2017
	Share	Capital	Revenue
	Premium	Reserve	Account	Total
	$'000	$'000	$'000	$'000
Balance at the beginning of the period	134,349	1,132,448	47,387	1,314,184
Total Comprehensive Income	-	184,758	10,771	195,529
Dividend paid in the period	-	-	(18,895)	(18,895)
Balance at the end of the period	134,349	1,317,206	39,263	1,490,818

 

Unaudited Statement of Cash Flows

for the six months ended 31^st December 2018 and 31^st December 2017

	2018	2017
	$'000	$'000
OPERATING ACTIVITIES
Dividends and interest received	12,861	14,377
Securities lending income received	386	306
Taxation paid	(1,379)	(1,565)
Purchase of investments	(207,579)	(244,918)
Proceeds from sale of investments	347,508	259,097
Interest paid	(8)	(7)
Operating expenses paid	(8,210)	(8,933)
NET CASH INFLOW FROM OPERATING ACTIVITIES	143,579	18,357
FINANCING ACTIVITIES
Dividends paid	(23,079)	(18,895)
Repurchase and cancellation of the Fund's own shares	(128,058)	-
NET CASH OUTFLOW FROM FINANCING ACTIVITIES	(151,137)	(18,895)
Effect of exchange gains on cash and cash equivalents	473	150
NET DECREASE IN CASH AND CASH EQUIVALENTS	(7,085)	(388)
Net cash and cash equivalents at the beginning of the period	25,260	35,059
NET CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	18,175	34,671
Comprising:
Cash and cash equivalents	18,175	34,671

 

Notes to the Unaudited Financial Statements

for the six months ended 31^st December 2018

1.   Basis of Preparation

The Interim Financial Information for the six months ended 31^st December 2018 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^th June 2018, 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.

	31st December	31st December
	2018	2017
	$'000	$'000
Acquiring	283	435
Disposing	735	463
	1,018	898

 

3.  Dividend

	31st December	31st December
	2018	2017
	$'000	$'000
Dividend Paid
2018 final dividend of 19.0 cents (2017: 14.0 cents)
per Participating Preference Share	23,079	18,895

 

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^st December 2018 and 30^th June 2018, 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:

Chris Ellyatt

Genesis Investment Management, LLP

020 7201 7200

J.P. Morgan Administration Services (Guernsey) Limited

Company Secretary

01481758 620

18^th February 2019

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