GSS: Genesis Emerging Markets Fund Ld: Half-yearly Report

  GSS: Genesis Emerging Markets Fund Ld: Half-yearly Report

UK Regulatory Announcement

LONDON

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

                         STOCK EXCHANGE ANNOUNCEMENT

HALF YEAR REPORT

The Directors of Genesis Emerging Markets Fund Limited announce the Fund’s
Half Year Report for the six months ended 31^st December 2012. The 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://hemscott.com/nsm.do where users can access the regulated information
provided by listed entities.

INVESTMENT OBJECTIVE

The investment approach is to identify companies which are able to take
advantage of growth opportunities in emerging markets for the benefit of
shareholders, 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

                                       31^st December 2012  31^st December
                                                               2011
                                                            
Published net asset value*               £759.8m               £662.2m
Published net assets per Participating   £5.65                 £4.91
Preference Share*
Published net assets per Participating   $9.15                 $7.64
Preference Share*†
Earnings per Participating Preference    $1.09                 ($1.56)
Share

* The figures are based on mid-market prices.

† ^ A reconciliation to the net asset value under International Financial
Reporting Standards is shown in note 2.

CHAIRMAN’S STATEMENT

Performance

The investment environment has been rather uncertain over the last six months,
following the negative sentiment which dominated in the spring of last year.
Despite this, however, equity markets have performed reasonably well. The
Fund’s net asset value per share (“NAV”) rose by 9.6% in sterling terms over
the half-year period, marginally underperforming the MSCI Emerging Markets
Index which increased by 10.0%.

The share price, however, rose by 14.8% over the same period, partly driven by
some significant additional purchases by one of the Fund’s major shareholders,
and supported by a trend of considerable interest from investors in emerging
markets more generally. This activity meant that the shares in fact traded
briefly at a small premium to its NAV in mid-October, before the discount
moved back towards more typical levels, finishing the period at 3.3%.

The Board

The Fund held its Annual General Meeting on 2^nd November 2012, at which
Hélène Ploix was elected to the Board. As I noted to shareholders in the
Annual Report six months ago, Mrs Ploix’s extensive international experience
in finance and investment will bring a valuable contribution to the Board’s
deliberations, and its discussions with the Manager. Mrs Ploix’s appointment
brings the number of Board Members to six, representing a range of financial
and business backgrounds and skills, and we will, as a group, continue to
strive to meet shareholders’ expectations and protect their interests.

I am also pleased to report that shareholders voted in favour of all proposals
at the Annual General Meeting, and I thank them for their continuing support.

A number of shareholders attended the Fund’s Annual Information Meeting in
London in October. All holders are welcome to this event, which allows them to
hear presentations from representatives of the Manager. The discussion
provided a detailed view of the Manager’s outlook for emerging markets as well
as the current positioning and recent performance of the Fund, and on this
occasion also incorporated a presentation on south-east Asia, a region the
Manager currently feels is a source of particularly attractive companies, and
a number of interesting developments.

The Manager’s Review that follows this Statement explains some of the activity
in the portfolio over the last few months, and comments on the investment
environment.

Outlook

Looking forward we believe that the environment will remain challenging for
investors during 2013. One feature of recent months has been that those
companies (often in the consumer sector) which appear to have some level of
predictability of income or cashflow have performed well, as investors have
trended towards “safe” investments in both developed and emerging markets. It
is worth remembering, however, a point often emphasised by the IMF (whose view
of the outlook the Manager also quotes from on the following page) while
better policy choices in emerging economies over the last decade have led to
improved stock market performance, they have generally helped economic growth
by lengthening the duration of the upturns rather than muting the magnitude of
the downturns. As a result investors looking for short-term “safe” investments
in emerging markets may be disappointed. Conversely, those with a longer-term
perspective should continue to do well in emerging markets, where the best
companies have the ability to use volatility or downturns to their great
advantage.

Coen Teulings
Chairman
February 2013

RESULTS

The total profit for the period for the Fund amounted to $146,613,000 compared
to a total loss of $210,408,000 for the same period in the previous year. The
Directors do not recommend the payment of a dividend in respect of the period
ended 31^st December 2012 (2011: nil).

CAPITAL VALUES

At 31^st December 2012, the value of Equity Shareholders’ Funds was
$1,228,173,000 (30^th June 2012: $1,081,560,000) and the Equity per
Participating Preference Share was $9.10 (30^th June 2012: $8.02).

PRINCIPAL RISKS AND UNCERTAINTIES

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

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

The Fund’s assets will be invested in securities of companies in various
countries and income will be received by the Fund in a variety of currencies.
However, the Fund will compute its net asset value and make any distributions
in 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 stock markets of the developed world.
This lower level of liquidity exaggerates the fluctuations in the value of
investments described previously. The restrictions on concentration and the
diversification requirements detailed above also serve normally to protect the
overall value of the Fund from the risks created by the lower level of
liquidity in the markets in which the Fund operates.

The Fund’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 accounts are
contained in the Manager’s Review.

DIRECTORS

The following Directors had a beneficial interest in the share capital of the
Fund at 31^st December 2012:

                                             Participating Preference Shares
Directors                                    at 31^st December 2012
Coen Teulings                                 40,000
Michael Hamson (including family interests)  8,700

RELATED PARTY TRANSACTIONS

During the reporting period, there is no transaction with related parties
which has materially affected the financial position or performance of the
Fund. However, details of related party transactions are contained in the
Annual Financial Statement for the year ended 30^th June 2012 which should be
read in conjunction with this Interim Financial Statement.

GOING CONCERN

The Directors believe that the Fund has adequate resources to continue in
operational existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the financial
statements.

RESPONSIBILITY STATEMENT

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’;
  *as required by DTR 4.2.7R of the FSA’s Disclosure and Transparency Rules,
    the interim management report includes a fair review of important events
    that have occurred during the first six months of the financial year and
    their impact on the condensed set of financial statements, and a
    description of the principal risks and uncertainties for the remaining six
    months of the financial year; and
  *the interim management report includes a fair review of the information
    concerning related party transactions required by DTR 4.2.8R.

Signed on behalf of the Board
Coen Teulings

Dr. John Llewellyn
February 2013

MANAGER’S REVIEW

Equities have rallied over the last six months, recovering somewhat from the
severe retreat in risk appetite that closed the Fund’s last financial year.
Caution remains appropriate, however, and it would be difficult to improve on
the IMF’s October summary of the current global economic outlook: “The
recovery continues, but it has weakened. In advanced economies, growth is now
too low to make a substantial dent in unemployment. And in major emerging
market economies, growth that had been strong earlier has also decreased.”
Developing economies continue to provide the bulk of the IMF’s 1.5% global
growth estimate for 2013, but are affected by the tortuous unwinding of the
developed world’s debt overhang, mainly through the slowdown in global trade.

The Fund’s return was roughly in line with that of the MSCI Emerging Markets
Index over the half-year. In terms of significant drivers of relative
performance, the Fund’s two major materials sector holdings have had
contrasting experiences. Anglo American was a major detractor from portfolio
performance and has had a torrid year, not only with generally weaker product
prices but also continued doubts over its capital allocation process centered
on its large, costly and much-delayed Minas Rio iron ore project in Brazil. On
the positive side, First Quantum Minerals continued on its growth path,
successfully commissioning a new project in Finland and announcing a
substantial expansion to its flagship mine in Zambia as well as two new
projects in that country. The company ended the year by bidding for a fellow
mid-tier copper miner with a large undeveloped project in Panama. The absence
of any holding in the underperforming Vale (Brazil) also had a positive effect
on performance.

In other sectors, energy companies Tullow Oil and OGX (Brazil) underperformed
their peers, while retail mall developer Central Pattana (Thailand) continued
its very strong 2012 performance to December.

Looking at portfolio changes, India has been the market seeing most purchase
activity for the Fund in recent months, with auto manufacturer Maruti Suzuki
and Cognizant, an IT services firm that complements the holdings in Infosys
and TCS, added to the portfolio during the second half of 2012. Elsewhere the
Fund instigated positions in a number of new holdings in several markets,
including Novolipetsk Steel (Russia), milk company China Mengniu Dairy,
Robinson Department Stores in Thailand, and First Bank, the largest bank in
Nigeria by assets, deposits and loans. The holdings of Bank of Ayudhya
(Thailand) and Santander Brasil were also increased, along with Anglo American
(in response to its price weakness), while a number of Indonesian banks and
cement holdings were reduced after a prolonged period of strong performance.

The expected return of the portfolio remains in double digits. We forecast
that earnings growth in 2013 will accelerate to the mid-teens following
approximately 10% growth in 2012. While pockets of the portfolio appear
expensive, particularly some consumer holdings, others remain attractive, most
notably in the financials and materials sectors. Our estimates suggest that,
in aggregate, the companies we follow in Russia and South Korea are on
single-digit earnings multiples for 2013, with companies in the major markets
of China and Brazil trading only a touch higher. This is enticing, we believe,
given that we are talking about the best quality companies in these countries.

Genesis Asset Managers, LLP
February 2013

            UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                             (Audited)
                                         31^st December 2012   30^th June 2012
                                         $’000                 $’000
                                                               
ASSETS
Current Assets
Financial assets at fair value through   1,213,431             1,068,101
profit or loss
Amounts due from brokers                 44                    3,952
Dividends receivable                     890                   2,810
Other receivables and prepayments        154                   160
Cash and cash equivalents                18,863                10,407
TOTAL ASSETS                             1,233,382             1,085,430
                                                               
LIABILITIES
Current Liabilities
Amounts due to brokers                   1,250                 160
Capital gains tax accrued                2,048                 1,664
Payables and accrued expenses            1,911                 2,046
                                                              
TOTAL LIABILITIES                        5,209                 3,870
                                                               
TOTAL NET ASSETS                         1,228,173             1,081,560
                                                               
EQUITY
Share premium                            134,349               134,349
Capital reserve                          1,066,689             916,195
Revenue account                          27,135                31,016
                                                               
TOTAL EQUITY                             1,228,173             1,081,560
                                                               
EQUITY PER PARTICIPATING
PREFERENCE SHARE*                        $9.10                 $8.02

* Calculated on an average number of 134,963,060 Participating Preference
Shares outstanding as at 31^st December 2012 (30^th June 2012: 134,963,060).

           UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                 for the six months ended 31^st December 2012

                                                          2012      2011
                                                          $’000      $’000
INCOME
Net change in financial assets at fair value through      150,621    (207,091)
profit or loss
Net exchange losses                                       (127)      (134)
Dividend income                                           8,472      7,137
Deposit interest                                          -          7
Miscellaneous income                                      17         94
                                                          158,983    (199,987)
                                                                     
EXPENSES
Management fees                                           (8,715)    (8,133)
Custodian fees                                            (677)      (706)
Transaction costs                                         (593)      (644)
Directors' fees and expenses                              (163)      (150)
Administration fees                                       (106)      (115)
Audit fees                                                (36)       (24)
Other expenses                                            (107)      (74)
                                                                    
TOTAL OPERATING EXPENSES                                  (10,397)   (9,846)
                                                                     
OPERATING PROFIT/(LOSS)                                   148,586    (209,833)
                                                                    
FINANCE COSTS                                             -          -
                                                                     
Capital gains tax                                         (1,008)    (1)
Withholding taxes                                         (965)      (574)
                                                                    
PROFIT/(LOSS) AFTER TAX                                   146,613    (210,408)
                                                                     
Other Comprehensive Income                                -          -
                                                                     
TOTAL COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO         146,613    (210,408)
PARTICIPATING PREFERENCE SHARES
EARNINGS PER PARTICIPATING PREFERENCE SHARE*              $1.09      $(1.56)

* Calculated on an average number of 134,963,060 Participating Preference
Shares outstanding as at 31^st December 2012 (30^th June 2012: 134,963,060).

            UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                 for the six months ended 31^st December 2012

                             For the six months ended 31^st December 2012
                                                                 
                                  Share      Capital     Revenue     Total
                                  Premium    Reserve     Account
                                  $’000     $’000      $’000      $’000
                                                                     
Balance at the beginning of the   134,349    916,195     31,016      1,081,560
year
                                                                     
Total Comprehensive Income        -          -           146,613     146,613
                                                                     
Transfer to Capital Reserve       -          150,494     (150,494)   -
                                                               
Balance at the end of the         134,349   1,066,689  27,135     1,228,173
period
                                                                     
                                 For the six months ended 31^st December 2011
                                                                     
                                  Share      Capital     Revenue     Total
                                  Premium    Reserve     Account
                                  $’000     $’000      $’000      $’000
                                                                     
                                                                     
Balance at the beginning of the   134,349    1,068,728   34,125      1,237,203
year
                                                                     
Total Comprehensive Loss          -          -           (210,408)   (210,408)
                                                                     
Transfer from Capital                        (207,224)   207,224     -
Reserve
                                                               
Balance at the end of the         134,349   861,504    30,941     1,026,795
period

                UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
                   for the period ended 31^st December 2012

                                                        2012      2011
                                                         $’000      $’000
                                                                    
OPERATING ACTIVITIES
Dividends received                                       10,409     11,409
Taxation paid                                            (1,589)    (1,345)
Purchase of investments                                  (99,514)   (112,080)
Proceeds from sale of investments                        109,803    109,166
Interest received                                        -          7
Operating expenses paid                                  (10,526)   (10,229)
                                                                   
                                                                    
NET CASH INFLOW/(OUTFLOW) FROM
                                                         8,583      (3,072)
OPERATING ACTIVITIES
                                                                    
Effect of exchange losses on cash and cash equivalents   (127)      (133)
                                                                   
NET INCREASE /(DECREASE) IN
                                                         8,456      (3,205)
CASH AND CASH EQUIVALENTS
                                                                    
Net cash and cash equivalents at the
                                                         10,407     13,496
beginning of the period
                                                                   
NET CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD   18,863     10,291
                                                                    
Comprising:
                                                                    
Cash and cash equivalents                                18,863     10,291

1. BASIS OF PREPARATION

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

The Interim Financial Information for the six months ended 31^st December 2012
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 2012, which have been prepared in accordance with International
Financial Reporting Standards (‘IFRS’).

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

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

                                               
                                      31^st December 2012
                                      Total       Per Participating Preference
                                                  Share
                                      $’000      $
Published net asset value             1,234,771   9.15
Change from mid-market pricing to     (6,598)    (0.05)
bid pricing for investments
Net asset value under IFRS            1,228,173  9.10
                                                  
                                      30^th June 2012
                                                  Per Participating
                                      Total       Preference Share
                                      $’000      $
Published net asset value             1,087,287   8.06
Change from mid-market pricing to     (5,727)    (0.04)
bid pricing for investments
Net asset value under IFRS            1,081,560  8.02

3. COST OF INVESTMENT TRANSACTIONS

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

           For the six months ended  For the six months ended
           31^st December 2012        31^st December 2011
            $’000                      $’000
                                       
Acquiring   281                        300
Disposing   312                        344
            593                        644

4. SEGMENT INFORMATION

The Fund treats all of its operations, for management purposes, as a single
operating segment as it does not aim at controlling or having any significant
influence over the entities in which it holds its investments.

The Fund is invested in equity securities. All of the Fund’s activities are
interrelated, and each activity is dependent on the others. Accordingly, all
significant operating decisions are based upon analysis of the Fund as one
segment.

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

The table below analyses the Fund’s operating income by investment:

                    For the six months ended   For the six month ended
                                            
                    31^st December 2012        31^st December 2011
                    $’000                      $’000
Equity Securities   158,983                    (199,987)

For Genesis Emerging Markets Fund Limited
HSBC Securities Services (Guernsey) Limited, Secretary
February 2013

Contact:

Genesis Emerging Markets Fund Ld
 
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