GENESIS EMERGING MARKETS FUND LIMITED
(The 'Company'; the 'Fund')
(Registration Number : 20790)
STOCK EXCHANGE ANNOUNCEMENT
ANNUAL FINANCIAL REPORT
The Directors of Genesis Emerging Markets Fund Limited announce the Fund's results for the year ended 30th June 2015. The Annual Financial Report will shortly be available from the Manager's website www.giml.co.uk and also for inspection on the National Storage Mechanism, which is located at http://www.morningstar.co.uk/uk/NSM where users can access the regulated information provided by listed entities.
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.
BENCHMARK
MSCI Emerging Markets (Total Return) Index.
RESULTS
|
30th June 2015 |
30th June 2014 |
|
|
|
Published net asset value* |
£771.4m |
£780.1m |
Published net asset value per Participating Preference Share* |
£5.72 |
£5.78 |
Published net asset value per Participating Preference Share* |
US$8.99 |
US$9.88 |
Earnings per Participating Preference Share |
($0.89) |
$1.40 |
* Figures are based on the last traded price for investments.
CHAIRMAN'S STATEMENT
Performance
Emerging markets have been a source of nervousness for investors over the last twelve months. Local political issues (including political scandal in Brazil and geopolitical tension in Russia) have combined with global economic issues (such as China's declining growth, substantial falls in commodity prices and potential interest rate rises in the developed world) to reduce the appetite for emerging markets that many investors perceive as volatile.
The outlook for equity investments in emerging markets remains uncertain. It has been apparent for some while (and has been noted in these pages) that the companies that in aggregate make up the Fund's (potential) holdings continue to face a number of challenges and the prospect of lower profitability as competition increases and more obvious business penetration opportunities gradually decline.
China's growth - and its impact on the rest of the world - remains a headline concern. It is also true that historically US interest rate "normalisation" tends to be associated with crises in emerging markets - and, sadly, not enough countries have implemented the necessary reforms over the mostly benign environment of the last decade that may have mitigated the heightened risks.
The Manager's Review touches on some of these themes and also makes the point that despite disappointing performance in recent years, the fact that much of it was due to the weakness of emerging market currencies against the US dollar means that many companies are still not necessarily cheap in their own local context.
All that said, we continue to share the Manager's confidence in the high quality of the companies invested in by the Fund, and their potential to generate returns for shareholders over the next several years. There are some exciting developments in parts of the opportunity set (thinking in particular of businesses in the Chinese A-share market that appear to be attractive long-term investments - notwithstanding the volatility which has been a characteristic of this market in recent months - and in which the Fund has taken some meaningful positions over the last two years), and again as we have noted on previous occasions, the challenging global environment provides an excellent opportunity for good businesses to outperform their peers and gain market share.
Stock selection remains a key skill in such an environment, and the Board believes that the Manager's approach and process will continue to generate the long-term returns that our shareholders have come to expect.
Coen Teulings
Chairman
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 core element of our strategy is to appoint and retain a high quality manager whose investment philosophy best matches the Fund's objective and carefully monitor the Fund's performance.
Genesis, the Fund's Manager, believe that superior long-term investment returns in emerging market equities are delivered by identifying underpriced companies through independent research and disciplined analysis, and by using a bottom-up investment approach to create a diversified portfolio. They believe it is necessary to be patient to achieve these returns, and therefore invest with at least a five-year time horizon.
The Fund has no employees or premises and the Board is comprised of non-executive Directors. The day-to-day operations and functions of the Fund have been delegated to third party service providers who are subject to the oversight of the Board.
During the year under review Genesis provided investment and risk management services, JP Morgan Chase Bank was the Custodian and JP Morgan Administration Services (Guernsey) Limited was the Administrator and Company Secretary.
The Board regularly reviews the performance and risks of its primary service providers and that they have appropriate frameworks in place for the oversight of their internal controls, monitoring and reporting.
The Manager's investment process aims to identify those companies best able to take advantage of emerging market growth opportunities and which are found to be trading at an attractive discount to their assessed intrinsic value. This leads the portfolio to have a 'growth' component (containing companies with entrepreneurial management, attractive volume growth prospects and high returns on incremental capital investment), as well as a 'value' component (where the companies have established market positions, healthy balance sheets and strong cashflows). As an investor in emerging markets, the Manager looks to take advantage of:
Structural Changes: the natural course of economic development creates a dynamic investment environment, but one in which the opportunities are unlikely to be captured by those investors focused on the short term, as changes will unfold over years rather than months;
Change at the Corporate Level: structural changes are unlikely to be universally beneficial to companies, but can lead to a more competitive operating environment which challenges management and widens the disparities between individual companies, thus providing further opportunities for investors; and
Stockmarket Inefficiencies: for various reasons, including less publicly available analysis, emerging markets tend to be less efficient at pricing shares than developed markets. Detailed analysis enables the Manager to identify those stocks which are selling at the greatest discount to their assessed intrinsic value.
The portfolio is diversified and will typically have approximately 140-170 individual positions, across a large number of emerging market countries (many of which are not represented in the standard indices). These holdings include a substantial number of smaller companies in emerging markets, which in general the Manager feels can be a source of particularly attractive long-term investment opportunities. In terms of internal weighting constraints the Manager specifies a 5% limit in any individual stock and a 25% limit in any country, at the time of purchase.
In line with the Fund's long-term investment horizon, portfolio turnover is low; typically of the order of 20-25% per annum. The weighted average holding period of positions within the portfolio is currently over seven years.
The portfolio's investments are primarily listed equity securities. However, the Fund also holds positions in Genesis affiliated investment companies, Participatory notes and Investee Funds, where appropriate.
The Fund does not engage in any active management of foreign currency risk and the portfolio is unleveraged.
The total loss for the year for the Fund amounted to $120,705,000 compared to a total gain of $188,714,000 in the previous year. Refer to the Manager's Review for an explanation of the Fund's performance. The Directors do not recommend the payment of a dividend in respect of the year ended 30th June 2015 (2014: nil).
At 30th June 2015, the value of Equity Shareholders' Funds was $1,213,314,000 (2014: $1,334,019,000), a reduction of $120,705,000. The Net Asset Value per Participating Preference Share was $8.99 (2014: $9.88).
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 on the following page. These policies have remained unchanged since the beginning of the period to which these financial statements relate.
The economies, 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 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 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.
Trading volumes on the stock exchanges of developing countries can be substantially less than in the leading stockmarkets of the developed world and trading may even be temporarily suspended during certain periods. 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.
The Board is accountable to shareholders for the governance of the Fund's affairs. The Directors use this Report to detail the Fund's corporate governance statement.
The Fund is a member of the Association of Investment Companies ('AIC') and the Board has considered the principles and recommendations of the 2012 AIC Code of Corporate Governance ('AIC Code') by reference to the AIC Corporate Governance Guide for Investment Companies ('AIC Guide'). The AIC Code addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Fund.
As a Guernsey incorporated company listed on the London Stock Exchange within the FTSE 250, the Fund is required to comply with Listing Rule 9.8.7 (for overseas incorporated companies). This requires the Fund to state how it has applied the main principles set out in the 2012 UK Corporate Governance Code and whether it has complied with these provisions throughout the accounting period.
The Fund is an Authorised Closed-Ended Investment Scheme regulated by the Guernsey Financial Services Commission ('GFSC'). The GFSC requires compliance with the principles set out in the Finance Sector Code of Corporate Governance ('Guernsey Code'), or alternative codes accepted by the GFSC, in the context of the nature, scale and complexity of the business.
The Board considers that by adhering to the principles and recommendations of the AIC Code, the Fund complies with the 2012 UK Corporate Governance Code and the Guernsey Code.
The Directors believe that during the year under review, they have complied with the provisions of the AIC Code and therefore, insofar as they apply to the Fund's business, with the provisions of the 2012 UK Corporate Governance Code and Guernsey Code except as noted below.
The Board, chaired by Coen Teulings, consists of non-executive Directors, all of whom are considered to be independent of the Manager. Coen Teulings and Michael Hamson have served on the Board for more than nine years and continue to perform their duties independently. The Board has consisted of no more than seven Directors during the year and the Board feels that given its size and the fact that the Directors do not have executive roles, it is not necessary to appoint a Senior Independent Director or to establish separate Remuneration or Management Engagement Committees. The Audit Committee is chaired by Saffet Karpat and has formally delegated duties and responsibilities with written terms of reference, which are available on request from the Manager. All seven Directors form the Nomination Committee, chaired by Coen Teulings.
The Board regularly reviews both the performance of, and the contractual arrangements with the Manager, and is satisfied that the continuing appointment of the Manager is in the best interests of shareholders. The management agreement sets out matters over which the Manager has authority and includes management of the Fund's assets and the provision of administrative duties, including accounting, secretarial and administrative services. The agreement further permits the Manager to delegate its administrative duties, subject to the Board's prior consent. All other matters are reserved for the approval of the Board. Under this agreement, the Manager is entitled to receive a management fee from the Fund, payable monthly, equal to 1.25% per annum, calculated and accrued on the Net Asset Value of the Fund as at each Valuation Day. 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' written notice given by the Manager.
The Audit Committee reviews the performance of, and the contractual arrangements with the Administrator and the Custodian. The Board is satisfied that the continuing appointment of the Administrator and the Custodian is in the best interests of shareholders.
The Board meets at least three times during the year and between these meetings there is regular contact with the Manager who provides the Board with appropriate and timely information. Attendance at those meetings is given in the table below.
Director |
Board Meetings Attended |
Audit Committee Meetings Attended |
Coen Teulings |
3 |
2 |
Sujit Banerji |
3 |
n/a |
Russell Edey (appointed 1st January 2015) |
2 |
1 |
Michael Hamson |
3 |
3 |
Saffet Karpat |
3 |
3 |
Dr. John Llewellyn |
3 |
n/a |
Hélène Ploix |
3 |
n/a |
All members of the Board consider new Board appointments. The Chairman, Manager or other appropriate persons provide new appointees to the Board with a preliminary briefing on the workings of the Fund. When appointing a new Director, the Board takes care to ensure that the new Director enhances the balance of skills and experience appropriate to the requirements of the Fund and that a new Director has enough time available to properly fulfil their duties. The Directors also have access, where necessary in the furtherance of their duties, to independent professional advice at the Fund's expense. Directors are initially appointed until the following Annual General Meeting when, under the Fund's Articles of Incorporation, it is required that they be elected by shareholders.
Rusell Edey was appointed as a Director from 1st January 2015 and replaced Coen Teulings on the Audit Committee from 10th June 2015.
All of the Directors are retiring in accordance with the AIC Code, and with the exception of Coen Teulings, will offer themselves for re-election. As each Director has maintained their effectiveness and commitment to the Fund, the Board endorses them and commends their re-election to the shareholders.
The Board evaluates its performance on an annual basis, and considers that the blend of skills, experience, age, gender and length of service is appropriate for the requirements of the Fund. In accordance with the AIC Code, an independent evaluation of the Board's performance is carried out and the next tri-annual review will be in 2016. The Board is aware of the requirements of the 2012 UK Corporate Governance Code and regularly reviews its succession plan. As noted in the Chairman's statement, the Fund's new Chairman will be appointed, and the decision approved and announced, in early October.
The Directors are entitled to receive fees for their services which shall not exceed $400,000, exclusive of relevant expenses, in aggregate per annum. This was approved by Shareholders at the AGM on 2nd November 2012 and can only be amended by Shareholder approval at a general meeting.
The level of Directors' Fees is independently assessed and was last reviewed in 2013. Each Director receives £30,000 per annum, with a further £5,000 per annum for Audit Committee Directors and a further £10,000 per annum for the Chairman. Such remuneration is deemed to accrue on a daily basis.
The Directors are also entitled to be paid all travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the Directors or any committee of the Directors or General Meetings of the Fund or in connection with the business of the Fund.
The Directors served throughout the year under review (except Russell Edey who was appointed on 1st January 2015). The following (who were Directors during the financial year) had a beneficial interest in the share capital of the Fund at 30th June 2015:
Directors |
Beneficial interest in Participating
|
Coen Teulings |
40,000 |
Sujit Banerji |
10,000 |
Michael Hamson (including family interests) |
8,700 |
Saffet Karpat |
20,000 |
Hélène Ploix |
7,690 |
Directors' and Officers' liability insurance cover is held by the Fund to cover Directors against certain liabilities that may arise in the course of their duties.
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 as adopted by the European Union, 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 Companies (Guernsey) 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.
Having taken all available information into consideration, the Board has concluded that the Annual Financial Report for the year ended 30th June 2015, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Fund's performance, business model and strategy.
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.
Compliance with disclosure and transparency directive
The Directors confirm to the best of their knowledge that:
· the financial statements are prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Fund; and
· the Annual Financial Report includes a fair review of the development and performance of the business and the position of the Fund, together with a description of the principal risks and uncertainties that exist.
MANAGER'S REVIEW
The Fund's financial year encompassed an intensifying financial crisis in Greece, the gradual revelation of the enormous scale of the Petrobras scandal in Brazil, dramatic volatility in the Chinese stock market (which of course subsequently continued throughout the summer), and weak corporate results in a number of emerging markets. But despite this the MSCI EM (TR) Index ended the period in positive territory, returning 3.5% in sterling terms, thanks to a stabilisation of commodity prices early in 2015, and a corresponding uptick in confidence about the global economy. The Fund's NAV, however, underperformed the MSCI EM (TR) Index over the period, with a 1.1% loss. We should note, however, that over the two months since the end of the financial year, renewed negative sentiment on global economic growth (particularly with respect to China) saw the MSCI EM (TR) Index fall 13% in Sterling terms between 30th June and 28th August (with the Fund's NAV falling slightly less than this).
China and India, at around 15% each, are the largest markets represented in the portfolio. In India, stock prices have stabilised somewhat over the last few months following a three-year bull market. Against this generally exuberant backdrop, however, local company managers seem less enthused about near-term economic prospects, with corporate capex likely to remain subdued for some time. Certainly, the recording of an official year-on-year GDP growth figure for Q1 2015 of 7.5% did not correlate with recent weak corporate performance, and was met with some confusion and scepticism.
China, with an index weight that had risen to around 25% by the end of the period, continued to dominate investor discussion. Significant concerns remain about an overall debt-to-GDP level of 250%, the extent to which corporate borrowing makes up a particularly large proportion of that figure, and the pace at which debt has reached this level. GDP growth continues to slow, but there are counter-arguments to suggest that the high level of debt is mitigated by the assets the Chinese state has available on the other side of the balance sheet, their control over both the banking system and the corporates doing the borrowing, and their potential ability - given the low levels of inflation - to print as much renminbi as is necessary. Hence it may be premature to write off China's economy, although the ham-fisted way in which the Chinese authorities have interfered with the stockmarket and the currency over the summer has damaged their recently-improved reputation for sound management, and in our view makes a hard landing more likely than previously. But a degree of optimism and entrepreneurial blossoming remains, driven by lower costs of capital, and while the Fund is not invested in Chinese hyper-growth small companies due to the eye-watering speculative valuations that are still in place despite recent market falls, even in the less exciting, more cash-generative businesses in which we invest there are many compelling developments.
One-year relative performance to the end of the financial year has been disappointing, impacted by two main elements. First, holdings from the materials and energy sectors were prominent as their balance sheets felt the strain of lower commodity prices and weak market sentiment. Three such holdings were the African oil exploration company Tullow Oil (down 60%), the diversified global mining company Anglo American (down 32%) and First Quantum Minerals (down 33%), all of which had a significant negative impact on relative performance. Second, the underweight in the strong Chinese market also held the portfolio back. Historically the Fund's portfolio has tended to underperform when dominant markets - such as China - have risen very rapidly over a short period, but (as in 2008-9 following the excess of 2006-7) we would expect to see that relative performance recover as the market returns to a more rational viewpoint - as indeed has been the case to some degree during July and August. On the positive side, a number of Indian companies, notably Kotak Mahindra Bank (up 61%), Lupin (up 60%) and Axis Bank (up 50%), were high on the list of contributors, while the portfolio's overweight in this market was also beneficial. Stock selection gains in South Korea and being underweight in the weak Brazilian market were further positive drivers.
India and China dominated the Fund's trading activity over the period. Many holdings in the former performed strongly, allowing us to take profits, while the extreme market volatility in the latter provided opportunities to both buy and sell positions. In India there were significant reductions to Kotak Mahindra Bank, Sun Pharmaceutical, Axis Bank and Lupin, while Shriram Transport and Maruti Suzuki exited the portfolio. New purchases in China included ICBC, one of China's 'Big Four' state-owned commercial banks, premium baijiu producer Kweichow Moutai and car windscreen manufacturer Fuyao Glass. Other notable additions were made to the portfolio's food and beverage stocks, including WH Group and instant noodle manufacturer Tingyi. On the sell side there were reductions to Belle, China Mengniu Dairy and China Merchants Bank, while Beijing Yanjing Brewery was sold from the portfolio.
Away from these markets, new positions included messaging service provider Naver (South Korea), Aspen Pharmacare (South Africa), Hypermarcas (Brazil) and Caribbean telecom service provider Cable & Wireless, and there were additions to three banks, Itau Unibanco (Brazil), Credicorp (Peru) and Garanti Bank (Turkey). Further highlights on the sell side included taking sizeable profits in TSMC (Taiwan) - although it remains the largest individual holding in the Fund - and reducing the position in America Movil (Mexico) whilst Indocement (Indonesia) was sold from the portfolio.
As we have noted in previous reports, we feel an adjustment is underway as many emerging markets companies adapt to a more challenging economic environment incorporating slower growth, higher interest rates, lower commodity prices, increased competition, and a gradual decline in penetration opportunities - and ultimately therefore, for most businesses, lower profitability. Yet, valuations remain challenging in many sectors, and in aggregate emerging markets are no cheaper than they were three years ago as US dollar strength has masked the fact that in local terms companies' stock prices have still performed relatively well.
Given the uncertainty, this kind of environment should reward a focus on stock selection. While the extreme market volatility we have seen in recent months has resulted in weak relative performance in the short run, we remain confident that the Fund's holdings are companies of high quality which are likely to generate strong relative and absolute returns for shareholders over the medium and long term.
Genesis Asset Managers, LLP
September 2015
STATEMENT OF FINANCIAL POSITION
as at 30th June 2015
|
|
2015 $'000 |
|
2014 $'000 |
ASSETS |
|
|
|
|
Current assets |
|
|
|
|
Financial assets at fair value through profit or loss |
|
1,196,264 |
|
1,310,219 |
Amounts due from brokers |
|
231 |
|
7,637 |
Dividends receivable |
|
4,170 |
|
1,426 |
Other receivables and prepayments |
|
208 |
|
167 |
Cash and cash equivalents |
|
23,729 |
|
17,416 |
TOTAL ASSETS |
|
1,224,602 |
|
1,336,865 |
LIABILITIES |
|
|
|
|
Current Liabilities |
|
|
|
|
Capital gains tax payable |
|
217 |
|
267 |
Amounts due to brokers |
|
8,992 |
|
265 |
Payables and accrued expenses |
|
2,079 |
|
2,314 |
TOTAL LIABILITIES |
|
11,288 |
|
2,846 |
TOTAL NET ASSETS |
|
1,213,314 |
|
1,334,019 |
|
|
|
|
|
EQUITY |
|
|
|
|
Share premium |
|
134,349 |
|
134,349 |
Capital reserve |
|
1,045,055 |
|
1,169,925 |
Revenue account |
|
33,910 |
|
29,745 |
TOTAL EQUITY |
|
1,213,314 |
|
1,334,019 |
|
|
|
|
|
NET ASSET VALUE PER PARTICIPATING PREFERNCE SHARE* |
|
$8.99
|
|
$9.88
|
|
|
|
|
|
* Calculated on an average number of 134,963,060 Participating Preference Shares outstanding (2014: 134,963,060).
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30th June 2015
|
|
2015 $'000 |
|
2014 $'000 |
|
|
|
|
|
INCOME |
|
|
|
|
Net change in financial assets at fair value through profit or loss |
|
(126,208) |
|
187,622 |
Net exchange gains |
|
1,338 |
|
135 |
Dividend income |
|
28,426 |
|
25,201 |
Miscellaneous income |
|
3 |
|
7 |
|
|
(96,441) |
|
212,965 |
EXPENSES |
|
|
|
|
Management fees |
|
(17,442) |
|
(18,440) |
Custodian fees |
|
(924) |
|
(1,008) |
Transaction costs |
|
(1,836) |
|
(1,455) |
Directors' fees and expenses |
|
(570) |
|
(523) |
Administration fees |
|
(289) |
|
(298) |
Audit fees |
|
(81) |
|
(100) |
Other expenses |
|
(206) |
|
(151) |
TOTAL OPERATING EXPENSES |
|
(21,348) |
|
(21,975) |
OPERATING (LOSS)/PROFIT |
|
(117,789) |
|
190,990 |
Capital gains tax |
|
50 |
|
(20) |
Withholding taxes |
|
(2,966) |
|
(2,256) |
|
|
(2,916) |
|
(2,276) |
(LOSS)/PROFIT AFTER TAX FOR THE YEAR ATTRIBUTABLE TO PARTICIPATING PREFERENCE SHARES |
|
(120,705) |
|
188,714 |
Other Comprehensive Income |
|
- |
|
- |
|
|
|
|
|
TOTAL COMPREHENSIVE (LOSS)/INCOME |
|
(120,705) |
|
188,714 |
|
|
|
|
|
(LOSS)/EARNINGS PER PARTICIPATING PREFERENCE SHARE* |
|
$(0.89) |
|
$1.40 |
|
|
|
|
|
* Calculated on an average number of 134,963,060 Participating Preference Shares outstanding (2014: 134,963,060).
STATEMENT OF CHANGES IN EQUITY
for the year ended 30th June 2015
|
2015 |
||||||
|
Share Premium $'000 |
|
Capital Reserve $'000 |
|
Revenue Account $'000 |
|
Total $'000 |
|
|
|
|
|
|
|
|
Balance at the beginning of the year |
134,349 |
|
1,169,925 |
|
29,745 |
|
1,334,019 |
Total Comprehensive Income |
- |
|
- |
|
(120,705) |
|
(120,705) |
Transfer to Capital Reserves |
- |
|
(124,870) |
|
124,870 |
|
- |
Balance at the end of the year |
134,349 |
|
1,045,055 |
|
33,910 |
|
1,213,314 |
|
|
|
|
|
|
|
|
|
2014 |
||||||
|
Share Premium $'000 |
|
Capital Reserve $'000 |
|
Revenue Account $'000 |
|
Total $'000 |
|
|
|
|
|
|
|
|
Balance at the beginning of the year |
134,349 |
|
982,168 |
|
28,788 |
|
1,145,305 |
Total Comprehensive Income |
- |
|
- |
|
188,714 |
|
188,714 |
Transfer to Capital Reserves |
- |
|
187,757 |
|
(187,757) |
|
- |
Balance at the end of the year |
134,349 |
|
1,169,925 |
|
29,745 |
|
1,334,019 |
STATEMENT OF CASH FLOWS
for the year ended 30th June 2015
|
|
2015 $'000 |
|
2014 $'000 |
||
OPERATING ACTIVITIES |
|
|
|
|
||
Dividends received |
|
25,685 |
|
25,627 |
||
Taxation paid |
|
(2,966) |
|
(2,256) |
||
Purchase of investments |
|
(268,571) |
|
(227,103) |
||
Proceeds from sale of investments |
|
272,451 |
|
233,365 |
||
Operating expenses paid |
|
(21,624) |
|
(21,741) |
||
NET CASH INFLOW FROM OPERATING ACTIVITIES |
|
4,975 |
|
7,892 |
||
Effect of exchange gains on cash and cash equivalents |
|
1,338 |
|
135 |
||
|
|
|
|
|
||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
6,313 |
|
8,027 |
||
Net cash and cash equivalents at the beginning of the year |
|
17,416 |
|
9,389 |
||
NET CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR |
|
23,729 |
|
17,416 |
||
Comprising: Cash and cash equivalents |
|
23,729 |
|
17,416 |
||
1. BASIS OF PREPARATION
The principal accounting policies applied in the preparation of these financial statements on a going concern basis are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS') and interpretations by the International Financial Reporting Interpretations Committee of the International Accounting Standards Board.
The 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 financial statements in conformity with IFRS may require management to make critical accounting 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 about the future which are made by management relating to unlisted securities, are made using models generally recognised as standard within the industry and inputs 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.
Valuations use observable data to the extent practicable. Changes in any assumptions could affect the reported fair value of the financial instruments. The determination of what constitutes observable requires significant judgement by the Fund. The Fund considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
New standards, amendments and interpretations effective from 1st July 2014
The following new standards and amendments to existing standards are relevant to the Fund's operations and are mandatory for accounting periods ending on 30th June 2015:
Amendments to IFRS 10, IFRS 12 and IAS 27, 'Investment Entities' (effective 1st January 2015).
Amendments to IAS 32, 'Financial instruments: assets and liabilities offsetting' (effective 1st January 2015).
Amendments to IAS 36, 'Recoverable Amount Disclosures for Non-Financial Assets' (effective 1st January 2015).
New standards, amendments and interpretations issued but not yet effective
The following standards and interpretations have been issued and are expected to be relevant to the Fund in future periods, with effective dates on or after 1st July 2015:
Amendments to IAS 27, 'Separate financial statements' (effective 1st January 2016).
Amendments to IFRS 10, IFRS 12 and IAS 28, 'Investment Entities: Applying the Consolidation Exception' (effective 1st January 2016).
Amendments to IAS 1, 'Disclosure Initiative' (effective 1st January 2016).
Amendments to IFRS 9, 'Financial Instruments' (effective 1st January 2016).
Annual improvements 2014 (effective 1st January 2016).
The Directors are currently reviewing these standards with a view to implementation on their effective date, however they do not believe their adoption will have a significant impact on the financial statements.
Early adoption of standards
The Fund did not early adopt any new or amended standards/interpretations for the year ended 30th June 2015.
2. RELATED PARTIES AND OTHER MATERIAL AGREEMENTS
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.
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 in arrears equal to 1.25% per annum (1.50% prior to 31st December 2014). It is calculated and accrued on the Net Asset Value of the Fund as at each weekly Valuation Day, except for investments in Investee Funds, where the Manager will absorb the expenses of the management of 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 two Genesis affiliated investment companies (noted below) do not charge a separate management fee to the Manager.
Administration fees
The Administrator is entitled to receive a fee, payable monthly, based on time incurred. Administration fees for the year were $289,000 and charged by JP Morgan Administration Services (Guernsey) Limited (2014: $298,000).
Custodian fee
Under the Custodian Agreement, the Custodian to the Fund is entitled to receive a fee payable monthly, based on the Net Asset Value of the Fund. Since 1st May 2013 all custody services have been performed by JP Morgan Chase Bank.
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 0.07% (2014: 0.08%) 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 $352,000 (2014: $374,000). 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.
Other group investments
The Genesis Indian Investment Company Limited and Genesis Smaller Companies SICAV are 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 in the Annual Financial Report, subscriptions and redemptions during the year under review are detailed in the table below. No dividends were received from these funds during the year (2014: nil).
There were no other transactions between the Fund and such related parties during the year except as disclosed in Notes 9 (a), (b), (c) and (d) in the Annual Financial Report and there were no outstanding balances between these entities at 30th June 2015.
|
2015 |
||
|
Subscriptions $'000 |
|
Redemptions $'000 |
Genesis Indian Investment Company Limited |
- |
|
7,785 |
Genesis Smaller Companies SICAV |
241 |
|
1,346 |
|
2014 |
||
|
Subscriptions $'000 |
|
Redemptions $'000 |
Genesis Indian Investment Company Limited |
- |
|
3,987 |
Genesis Smaller Companies SICAV |
- |
|
5,267 |
This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30th June 2015 and 30th June 2014 but is derived from those accounts.
The audited Annual Financial Report for the year ended 30th June 2015 will be sent to shareholders shortly and will be available for inspection at the registered office: 1st Floor, Les Echelons Court, Les Echelons, South Esplanade, St. Peter Port, Guernsey GY1 6JB, Channel Islands.
For Genesis Emerging Markets Fund Limited
J.P. Morgan Administration Services (Guernsey) Limited
28th September 2015