Genesis Emerging Markets Fund Ld Half-year Report (9221E)

TIDMGSS

RNS Number : 9221E

Genesis Emerging Markets Fund Ld

14 February 2018

Genesis EMERGING MARKETS FUND LIMITED

Half Year Report and Unaudited Financial Statements

for the six months ended 31(st) December 2017

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 2017. The Half Year Report will shortly be available from the Fund's website www.giml.co.uk 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 the GEMF is to achieve long-term capital growth, primarily through investment in equity markets of developing 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 134,963,060, as at 31(st) December 2017 (30(th) June 2017: 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 2017

 
     12.3%               10.4%                11.5% 
 Share Price(*)     Net asset value     MSCI EM (TR) Index 
                   per Participating 
                  Preference Share(*) 
---------------  --------------------  ------------------- 
 
 
                                                              30(th) 
                                        31(st) December         June 
Published Data                                     2017         2017  % change 
--------------------------------------  ---------------  -----------  -------- 
Net assets                                  GBP1,102.0m  GBP1,011.6m       8.9 
Net assets                                    $1,490.8m    $1,314.2m      13.4 
Net asset value per Participating 
 Preference Share                               GBP8.16      GBP7.50       8.9 
Net asset value per Participating 
 Preference Share                                $11.05        $9.74      13.4 
Share price                                     GBP7.22      GBP6.53      10.7 
Discount of Share Price 
 to Net Asset Value per Participating 
 Preference Share                                 11.6%        12.9% 
Dividend per Participating 
 Preference Share                                $0.140          nil       n/a 
Management fee                                    0.95%        1.25% 
Ongoing charges ratio                             1.11%        1.43% 
Countries represented in 
 portfolio                                           40           36 
Number of holdings                                  134          125 
 

* Actual returns adjusted for dividends paid

MSCI Emerging Markets (Total Return) Index

Chairman's Statement

Investors in emerging markets have been handsomely rewarded in the last two years. The MSCI EM (TR) Index (the 'Index') rose 37.8% in US$ terms in 2017, and - with the previous year having also been relatively strong - the Index has generated some 77.1% in US$ terms since the beginning of 2016. In the six month period to December (under review in this report), the Index in sterling terms was up 11.5% (and rose 25.8% over 2017 as a whole).

Against this backdrop, the Fund's share price (adjusted for dividends paid) increased by 12.3% over the half-year, the discount of share price to NAV narrowed slightly to 11.6% and the Fund's NAV (also adjusted for dividends paid) rose by 10.4%.

Shareholders will be aware that the Managers' investment process has a firm grounding in valuation, meaning that investments the Manager views as expensive will generally not be held at particularly high weights, if at all. This explains the fact that the Fund's performance has lagged that of the Index over the recent past given an investment environment where the market has been largely driven upwards by a narrow set of highly popular stocks and sectors - this time in the form of large technology companies, both in global hardware and Chinese internet, in which the Fund's holding is lower than that in the Index.

The Fund held its Annual General Meeting on 6(th) November with all proposed resolutions passed by shareholders (including the approval of the appointment of Katherine Tsang as a Director, and the payment of a dividend); as always, we would like to thank them for their support. The Fund held its regular Shareholder Information Meeting on the following day, allowing shareholders an opportunity to hear from, and ask questions of, representatives of the Manager.

The dividend of 14.0 cents per Participating Preference Share was paid to shareholders in early December.

The positive mood surrounding global equity markets, including those in the developing world, continues to persist. The Manager's Review notes, in particular, the higher GDP growth and recovery in corporate earnings, and the expectations for corporate profitability. Against that, of course, the potential macro-economic risks to all emerging markets stemming from the imbalances in the financial system in China (now one-third of the market cap of the index), or potentially higher interest rates in the US, remains a significant concern. After the performance of the last two years valuations of many companies can fairly be described as stretched - and one does not have to look too far into history (2015 was not a long time ago) to be reminded of the potential short-term volatility in emerging markets.

Looking forward, while it seems unlikely in the near-term that emerging markets will continue to emulate the performance of the last two years, we - along with the Manager - remain highly confident about the potential long-term returns that the Fund can generate.

The Board and the Manager would readily acknowledge that the Fund's performance relative to the Index over the last three and five years has not been at the level that shareholders have typically experienced. But one aspect of the Manager's culture is its commitment to understanding where things have not worked as well as they should have, and the implementation of evolutionary improvements to the investment process in response, as occurred in the past two years. This helps support our continued belief that the Manager's investment approach provides an effective framework for seeking out high-quality emerging markets companies that appear to be mispriced; and thus for allocating shareholders' capital profitably.

My colleagues and I look forward to continuing our engagement with shareholders, in order to hear and understand your views on the Fund and how it operates. These comments, naturally, inform our discussions about how we can better address your concerns, and ultimately ensure the Fund meets your expectations and requirements as investors.

Hélène Ploix

Chairman

14(th) February 2018

Manager's Review

Investment Environment

In 2017 the Fund gained 21.2% in sterling terms net of fees. A strong year indeed, but disappointingly our performance lagged that of the MSCI EM (TR) Index (the 'Index'), which returned 25.8%. The current rally in emerging markets ('EM') stocks dates to January 2016 and the cumulative Index return since then has been 85%, whereas our performance has been lower at 75%. As risk-aware investors who build diversified portfolios of quality companies for long-term clients, we have at times over our 28-year history struggled to keep pace with sharp market rallies. This has been the case now for almost two years.

The second half of 2017 - the focus of this Review - saw a continuation of the narrowly-focused rally in mega-cap tech, namely Tencent (and Naspers), Alibaba and Samsung Electronics. Performance outside this magic circle was noticeably different; the median stock within the Index was up only 5% over the same period, lagging the overall Index performance by 7%.

In this environment, the Fund's net asset value failed to match the return of the Index over the six-month period, gaining 10.4% versus an Index return of 11.5%.

Performance

Relative to the benchmark, the portfolio enjoyed strong performance from consumer stocks including instant noodle producer Tingyi (up 59%) and from the A-share positions in baijiu producers Kweichow Moutai (up 50%) and Jiangsu Yanghe Brewery (up 32%). Significant value was also added in the weak Taiwanese market due to the underweight position and from good stock performance from the dominant Vietnamese dairy producer Vinamilk, which rose by 30%.

These were outweighed, however, by the portfolio's negative contributors. The largest country detractor was India due to the Fund's exposure to pharmaceutical companies. Sun (up 1%) and Lupin (down 25%), were impacted by a combination of delayed approvals by the US FDA of new generic drugs due to continuing manufacturing compliance issues, and increased pricing pressure in the key US market. Value was also lost in Turkey particularly from the two banks, Garanti (down 2%) and Yapi Kredi (down 14%), as the impact of the government announcing an increase in the corporate tax rate on banks and currency weakness was felt. In Russia, the weak performance from food retailer Magnit (down 31%) led to further losses. Magnit had announced disappointing quarterly results as a combination of a weak consumer environment and heightened competitive intensity impacting sales. However, we have conviction in Magnit's management quality and see a favourable outlook for market consolidation in food retail.

Other significant detractors were the strongly performing Chinese internet companies despite notable gains from the portfolio positions in Naspers (which derives the majority of its value from its holding in the Chinese internet company Tencent) and Alibaba as they rose 38% and 18% respectively. However, the portfolio's smaller weighting compared to the index in this sector resulted in these positions costing the portfolio in terms of relative performance.

Relative Performance Attribution in GBP - Six Months to 31(st) December 2017

GEMF vs. MSCI Emerging Markets (TR) Index

 
 Top 10 Stock Contributors     %     Top 10 Stock Detractors            % 
---------------------------  -----  -------------------------------  ------- 
                                     Tencent (China)/ Naspers 
 Kweichow Moutai (China)      0.52    (South Africa)                  (0.77) 
 Sberbank (Russia)            0.41   Magnit (Russia)                  (0.53) 
 Tingyi (China)               0.36   LiLAC (United Kingdom)           (0.32) 
 Jiangsu Yanghe Brewery              Ping An Insurance 
  (China)                     0.35    (China)                         (0.31) 
 Hon Hai Precision                   Samsung Fire & Marine 
  (Taiwan)                    0.35    (South Korea)                   (0.28) 
 Steinhoff International             Hikma Pharmaceuticals 
  (South Africa)              0.34    (Jordan)                        (0.24) 
 Vinamilk (Vietnam)           0.34   Lupin (India)                    (0.23) 
 Anglo American (South 
  Africa)                     0.28   Universal Robina (Philippines)   (0.22) 
 China Mengniu Dairy                 Jerónimo Martins 
  (China)                     0.26    (Poland)                        (0.18) 
 Tullow Oil (United 
  Kingdom)                    0.19   Heineken (Netherlands)           (0.18) 
 

Stocks in italics are omissions at end of period

 
                                    Top 5 Country          Top 5 Country 
 Sector Contributions        %      Contributors     %     Detractors        % 
------------------------  -------  --------------  -----  --------------  ------- 
 Consumer Discretionary     1.10    Taiwan          1.17   India           (0.67) 
 Industrials                0.75    South Africa    0.53   Turkey          (0.51) 
 Consumer Staples           0.54    Vietnam         0.32   Russia          (0.51) 
 Utilities                  0.20    Mexico          0.31   Jordan          (0.24) 
 Real Estate                0.05    Indonesia       0.20   Philippines     (0.20) 
 Telecoms                  (0.03) 
 Materials                 (0.04) 
 Investment 
  Companies                (0.24) 
 Energy                    (0.47) 
 Financials                (0.59) 
 IT                        (0.73) 
 Health Care               (0.93) 
 

Source: Calculated by FactSet, treating Genesis' affiliated investment company on a look-through basis

Portfolio Activity

There was significant trading activity over the six-month period, with 19 positions initiated. In addition, there were considerable changes to the weights of certain holdings, mainly in response to strong performance or due to a change in our assessment of intrinsic value. On an annualised basis, portfolio turnover amounted to 34%, slightly higher than the long-term average.

A large portion of activity over the period was in the IT sector, including further investment in Tencent via Naspers, which made it the largest position in the portfolio, and the new addition in 58.com. Elsewhere Magnit (Russia) and Mediclinic (South Africa) were added to on price weakness and Almarai (Saudi Arabia) was repurchased for the Fund. Recently initiated positions, such as Yum China and BB Seguridade, were also built upon.

Purchases were largely funded through sales in Kweichow Moutai and Jiangsu Yanghe Brewery following strong share price performance, the sale of Anhui Conch Cement, and reductions in a number of South African names. Anglo American was sold as its share price hit a three-year high, Bid Corp and Bidvest Group were reduced and Aspen Pharmacare was trimmed as we consider its transition from a South African generics company into a global speciality pharmaceutical company is now more challenging than initially expected. In India, Tata Consultancy Services and Infosys were reduced, based on their respective valuations. Elsewhere in India, the aggregate pharmaceutical exposure was reduced considerably; Sun saw its position cut by approximately a quarter and Lupin exited the portfolio. This was considered prudent considering the lack of clarity on FDA clearance and margin erosion.

Outlook

We are optimistic about the performance prospects for your portfolio in 2018 and beyond. This confidence stems from several considerations. First, we are long-term bullish on the investment opportunity in EM. We expect incomes in low- and middle-income economies to continue to converge with those in high-income economies. Improving institutional quality should further enhance returns. And we are convinced that emerging market equities are less price efficient compared with those in developed markets.

Second, we are confident in the current positioning of your portfolio. Broadly speaking, the portfolio is overweight in consumer franchises, expressing our view on income convergence; overweight smaller companies and frontier markets where we see the most mis-pricing; underweight technology where we are cautious on valuations; and underweight state-owned enterprises, given our scepticism on governance. This positioning is consistent with our long-term preference for investing alongside good management teams in quality businesses at attractive prices.

While we are positive about emerging markets and the portfolio's positioning, macro-economic risks in China and elsewhere deserve consideration, as do the now less-forgiving valuations. As we have discussed elsewhere, China's financial imbalances continue to loom menacingly. According to EM Advisors, outstanding credit to GDP is about 260% and the system credit/deposit ratio is about 120%. These numbers are high. Furthermore, bottom-up measures of growth in China are slowing and, we believe, are now below 5% on an annualised basis. Any renewed debt stimulus to boost this number would add to our concerns.

Genesis Asset Managers, LLP

February 2018

Directors' Report

Capital Values

At 31(st) December 2017, the value of Equity Shareholders' Funds was $1,490,818,000 (30(th) June 2017: $1,314,184,000) and the Equity per Participating Preference Share was $11.05 (30(th) June 2017: $9.74), or in sterling terms, GBP8.16 (30(th) June 2017: GBP7.50).

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

Custody risk

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.

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 (except where noted otherwise): Hélène Ploix, Sujit Banerji, Russell Edey, Saffet Karpat, Dr John Llewellyn and Katherine Tsang. Katherine Tsang was appointed a Director from 19(th) July 2017.

As at 31(st) December 2017, 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 2017 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

14(th) February 2018

Unaudited Statement of Financial Position

as at 31(st) December 2017 and 30(th) June 2017

 
                                                      (Audited) 
                                                         30(th) 
                                    31(st) December        June 
                                               2017        2017 
                                              $'000       $'000 
                                    ---------------  ---------- 
ASSETS 
Current assets 
Financial assets at fair value 
 through profit or loss                   1,445,934   1,279,759 
Amounts due from brokers                     15,518       4,636 
Dividends receivable                          2,401       2,295 
Other receivables and prepayments               208         172 
Cash and cash equivalents                    34,671      35,059 
                                    ---------------  ---------- 
TOTAL ASSETS                              1,498,732   1,321,921 
                                    ---------------  ---------- 
 
LIABILITIES 
Current Liabilities 
Amounts due to brokers                        3,712       4,644 
Capital gains tax payable                     2,346       1,038 
Payables and accrued expenses                 1,856       2,055 
                                    ---------------  ---------- 
TOTAL LIABILITIES                             7,914       7,737 
                                    ---------------  ---------- 
 
TOTAL NET ASSETS                          1,490,818   1,314,184 
                                    ===============  ========== 
 
EQUITY 
Share premium                               134,349     134,349 
Capital reserve                           1,317,206   1,132,448 
Revenue account                              39,263      47,387 
                                    ---------------  ---------- 
TOTAL EQUITY                              1,490,818   1,314,184 
                                    ===============  ========== 
NET ASSET VALUE PER PARTICIPATING 
 PREFERENCE SHARE*                           $11.05       $9.74 
                                    ===============  ========== 
 

* Calculated on an average number of 134,963,060 Participating Preference Shares outstanding (30(th) June 2017: 134,963,060).

Unaudited Statement of Comprehensive Income

for the six months ended 31(st) December 2017 and 31(st) December 2016

 
                                         2017                        2016 
                              ---------------------------  ------------------------- 
                               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                192,168        -   192,168   15,423        -   15,423 
Net exchange gains/(losses)        150        -       150    (203)        -    (203) 
Dividend income                      -   14,460    14,460        -   12,170   12,170 
Securities lending 
 income                              -      306       306        -       45       45 
Interest income                      -       23        23        -       46       46 
                              --------  -------  --------  -------  -------  ------- 
                               192,318   14,789   207,107   15,220   12,261   27,481 
                              --------  -------  --------  -------  -------  ------- 
EXPENSES 
Management fees                (5,354)  (1,339)   (6,693)        -  (7,276)  (7,276) 
Transaction costs                (898)        -     (898)        -    (925)    (925) 
Custodian fees                       -    (622)     (622)        -    (551)    (551) 
Directors' fees 
 and expenses                        -    (153)     (153)        -    (162)    (162) 
Administration 
 fees                                -    (187)     (187)        -    (137)    (137) 
Audit fees                           -     (28)      (28)        -     (32)     (32) 
Legal and professional 
 fees                                -     (52)      (52)        -     (49)     (49) 
Other expenses                       -     (65)      (65)        -    (113)    (113) 
                              --------  -------  --------  -------  -------  ------- 
TOTAL OPERATING 
EXPENSES                       (6,252)  (2,446)   (8,698)        -  (9,245)  (9,245) 
                              --------  -------  --------  -------  -------  ------- 
OPERATING PROFIT               186,066   12,343   198,409   15,220    3,016   18,236 
Finance Costs                        -      (7)       (7)        -      (3)      (3) 
                              --------  -------  --------  -------  -------  ------- 
PROFIT BEFORE TAX              186,066   12,336   198,402   15,220    3,013   18,233 
Capital gains tax              (1,308)        -   (1,308)        -    (130)    (130) 
Withholding taxes                    -  (1,565)   (1,565)        -  (1,261)  (1,261) 
                              --------  -------  --------  -------  -------  ------- 
PROFIT AFTER TAX               184,758   10,771   195,529   15,220    1,622   16,842 
                              --------  -------  --------  -------  -------  ------- 
Other Comprehensive 
 Income                              -        -         -        -        -        - 
                              --------  -------  --------  -------  -------  ------- 
TOTAL COMPREHENSIVE 
INCOME ATTRIBUTABLE 
 TO 
PARTICIPATING 
PREFERENCE SHARE               184,758   10,771   195,529   15,220    1,622   16,842 
                              ========  =======  ========  =======  =======  ======= 
EARNINGS PER 
PARTICIPATING 
PREFERENCE SHARE*                                   $1.45                      $0.12 
                                                 ========                    ======= 
 

* Calculated on an average number of 134,963,060 Participating Preference Shares outstanding (31(st) December 2016: 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 2017 and 31(st) December 2016

 
                                               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 
                              =======  =========  ========  ========= 
 
 
                                             2016 
                               Share  Capital  Revenue 
                             Premium  Reserve  Account      Total 
                               $'000    $'000    $'000      $'000 
                             -------  -------  -------  --------- 
Balance at the beginning 
 of the period               134,349  946,972   39,997  1,121,318 
Total Comprehensive Income         -   15,220    1,622     16,842 
                             -------  -------  -------  --------- 
Balance at the end of 
 the period                  134,349  962,192   41,619  1,138,160 
                             =======  =======  =======  ========= 
 

Unaudited Statement of Cash Flows

for the six months ended 31(st) December 2017 and 31(st) December 2016

 
                                                  2017       2016 
                                                 $'000      $'000 
                                             ---------  --------- 
OPERATING ACTIVITIES 
Dividends and interest received                 14,377     13,950 
Securities lending income received                 306         45 
Taxation paid                                  (1,565)    (1,261) 
Purchase of investments                      (244,918)  (163,194) 
Proceeds from sale of investments              259,097    157,289 
Interest paid                                      (7)        (3) 
Operating expenses paid                        (8,933)    (9,454) 
                                             ---------  --------- 
NET CASH INFLOW/(OUTFLOW) FROM OPERATING 
 ACTIVITIES                                     18,357    (2,628) 
                                             =========  ========= 
FINANCING ACTIVITIES 
Dividends paid                                (18,895)          - 
                                             ---------  --------- 
NET CASH OUTFLOW FROM FINANCING ACTIVITIES    (18,895)          - 
                                             =========  ========= 
Effect of exchange gains/(losses) 
 on cash and cash equivalents                      150      (203) 
                                             ---------  --------- 
NET DECREASE IN CASH AND CASH EQUIVALENTS        (388)    (2,831) 
Net cash and cash equivalents at the 
 beginning of the period                        35,059     20,245 
                                             ---------  --------- 
NET CASH AND CASH EQUIVALENTS AT THE 
 END OF THE PERIOD                              34,671     17,414 
                                             =========  ========= 
Comprising: 
Cash and cash equivalents                       34,671     17,414 
                                             =========  ========= 
 

Notes to the Unaudited Financial Statements

for the six months ended 31(st) December 2017

1. Basis of Preparation

The Interim Financial Information for the six months ended 31(st) December 2017 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 2017, 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(st) December  31(st) December 
                       2017             2016 
                      $'000            $'000 
            ---------------  --------------- 
Acquiring               435              456 
Disposing               463              469 
            ---------------  --------------- 
                        898              925 
            ===============  =============== 
 

3. Dividend

 
                                      31(st) December  31(st) December 
                                                 2017             2016 
Dividend Paid                                   $'000            $'000 
                                      ---------------  --------------- 
2017 final dividend of 14.0 
 cents (2016: nil) per Participating 
 Preference Share                              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 2017 and 30(th) June 2017, 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.

[END]

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February 14, 2018 11:33 ET (16:33 GMT)