GENESIS MALAYSIA MAJU FUND LIMITED
STOCK EXCHANGE ANNOUNCEMENT
The Directors of Genesis Malaysia Maju Fund Limited announce the following
results for the year ended 31st December 2007:-
2007 2006
US$ US$
Total net assets US$117,358,661 US$79,792,385
Net assets per Participating Share 77.15 52.45
Total income per Participating Share 24.70 16.04
Commenting on the results the Chairman has made the following statement:
Year Under Review
I have pleasure in presenting to shareholders the Fund's results for the year to
31st December 2007.
During the year, the Fund's net asset value per share rose from US$52.45 to
US$77.15, generating a return for shareholders of 47.1% in US dollar terms. This
compares favourably to the rise in the Kuala Lumpur Stock Exchange index of
40.7% over the same period. In particular the Fund's resilience in the second
half of 2007 - a period when smaller companies tended to be out of favour
relative to their larger peers - was highly satisfactory, especially given the
credit concerns that affected financial markets in the latter part of the year.
The Directors do not recommend payment of a dividend.
There were no changes in the composition of the Board of Directors over the
year.
In the report on the following pages, the Manager gives an overview of
developments in Malaysia over the past year, and their expectations for 2008 and
beyond. Clearly the Malaysian economy has been enjoying a highly positive
environment over the past twelve months with strong economic growth, increased
consumer spending and business investment (both domestic and foreign) as well as
high commodity prices. This benign economic environment has largely continued
into 2008.
But we feel a note of caution is appropriate after the spectacular returns that
emerging markets have produced over the last five years. Given the current
uncertainty in financial markets, it seems unlikely to us that the Fund's
returns over the short term will match recent experience. The IMF are
forecasting global growth to slow to just over 4% in 2008, from nearly 5% last
year, and the Malaysian economy would not be immune from a slowdown in developed
economies. Indeed, the first three months of 2008 have seen significant stock
market falls globally, with the Kuala Lumpur Stock Exchange down 10.6% in the
first quarter of the year. Against this backdrop the Fund's NAV has also
declined, from US$77.15 at year-end to US$64.55 at the end of March, a fall of
16.3%.
That said, we share the Manager's positive long-term view. The Malaysian economy
is well-diversified, minimising the effect of any decline in economic growth,
and while institutional governance reforms have perhaps been more gradual than
we might have hoped, there is a general trend of improvement. The outlook for
corporate earnings remains strong, and the universe of small and mid-sized
entrepreneurial companies in Malaysia continues to expand rapidly, offering
plentiful opportunities for the Fund and its shareholders.
Investment Manager
The Board has reviewed the management services provided to the Fund by Genesis
Asset Managers, LLP (GAM). This annual review has included their performance
record, management processes, investment style, resources and risk control
mechanisms. The Board was satisfied with the results of the review and therefore
in the opinion of the Directors, the continuing appointment of GAM for the
provision of these services, on the terms agreed, is in the best interests of
shareholders as a whole.
Annual General Meeting
This year's Annual General Meeting will be held at Arnold House, St. Julian's
Avenue, St. Peter Port, Guernsey at 10.00 am on 30th May 2008.
Gordon Young
Chairman
29th April 2008
Commenting on the results the Manager has made the following statement:
Review
The environment in Malaysia remained supportive for stock market investors in
2007 in spite of some volatility. The KLSE Index in US dollars returned 40.7%
while the Fund rose 47.1%. However, during the second half of the year - and
indeed through the first quarter of 2008, during which the Fund's NAV fell by
16.3% - smaller stocks have struggled for attention. The preference for big, and
therefore supposedly safer, stocks appears to be a global trend and is perhaps
an unsurprising response to uncertainty. The best of the Fund's performance thus
occurred in the first half.
Economic growth picked up slightly in the second half of 2007, so that growth
for the year as a whole is likely to come in well above 6%. This represents a
slight acceleration from 2006. The huge increase in civil servants' pay in the
summer no doubt contributed to the strength in consumer spending, and the
disbursement of the Ninth Malaysia Plan monies boosted both construction and
domestic investment. As for external trade, Malaysia has enjoyed a very strong
position due to super-strong commodity prices, particularly palm oil and
petroleum. Exports of manufactured goods have begun to decline, as is to be
expected in the face of a slower US economy, but commodities have compensated.
It is often said that Malaysia is lucky - when one area of the economy is soft
there is often strength elsewhere thanks to a very diverse economic base.
In fact Malaysia is heading for a surprisingly large current account surplus,
perhaps around 13% of GDP for 2007. A surplus this big is slightly strange after
five years of business expansion. It highlights the low level of investment made
by the domestic private sector, which is an odd phenomenon compared with the
rising sums of foreign direct investment that apparently find the country a good
place in which to operate. Indeed, foreign direct investment was running at a
new high in the ten months to October 2007, at a rate of nearly 6% of GDP. It
seems overseas businesses may have a more positive view on Malaysia's outlook
than the locals.
The authorities have tended to handle the currency with an eye to supporting
Malaysia's industrial development, so in recent times, particularly in 2007,
there has been quiet intervention to keep the ringgit from appreciating too fast
against the US dollar. This has helped to boost foreign exchange reserves to
nearly US$100 billion, or 7.5 times short term external debt. It seems
reasonable to expect more of the same in the foreseeable future, simply because
the government would like to keep the currency competitive. In fact the ringgit
has more or less followed the renminbi against the US dollar, and it would not
be surprising if this path continues.
2008 is a general election year, and although the outcome is very likely to be
another victory for the coalition, the quality of the win will be important to
the Prime Minister. He will need a strong endorsement ahead of his UMNO party
elections later in the year to allow him to consolidate power. The shape of the
new cabinet will also be interesting, as it seems there will be more of a
reshuffle than happened at the last election. Back then, in 2004, the Prime
Minister kept almost the same cabinet as had been in place under former Prime
Minister Mahathir. This is therefore an opportunity for him to show how he will
chart his own course.
The new government is likely to pursue its familiar pro-growth policies, which
will be welcome to the business community. The recent announcement of four
growth "corridors" (one each for the north, south, peninsular east and one for
Sabah) aim to keep up the momentum of foreign direct investment, and they also
present a geographical focus for development over the next few years. It is also
likely that the government will continue to support the initiatives of its
investment arm, Khazanah, to bring greater efficiency to government-linked
companies. Khazanah has had some notable successes, including the turnaround of
the serially failed bank BumiCommerce (held in the portfolio). Unfortunately it
has also had a high-profile disappointment in the form of the local car company
Proton, which failed to sign with a strategic partner by its self-imposed
deadline. The failure to agree terms does not make it easy for Malaysia to
present itself abroad as a place of reform.
The outlook for Fund earnings is healthy, and the recent selldown offers the
opportunity to buy some cheap growth stocks. This is particularly true among the
smaller companies, which, as noted above, seem to have been dropped in favour of
larger ones. Valuations at the time of writing are towards the lower end of
where they have been over the last few years, as the strong stock performance in
recent years has been driven largely by earnings growth.
Manager
April 2008
GENESIS MALAYSIA MAJU FUND
PRELIMINARY ANNOUNCEMENT (continued)
BALANCE SHEET
as at 31st December, 2007
2007 2006
$ $
___________ ___________
FIXED ASSETS
Investments at valuation
(cost 2007 $57,338,170;
2006 $48,992,453) 116,882,779 79,387,939
___________ ___________
CURRENT ASSETS
Amounts due from brokers 1,366,338 -
Dividends and interest 120,715 119,188
receivable
Prepaid expenses 3,651 2,512
Other debtors 10,790 10,790
Bank balances 572,793 1,078,588
___________ ___________
2,074,287 1,211,078
___________ ___________
CURRENT LIABILITIES
Amounts due to brokers 1,235,665 12,349
Creditors and accrued 341,600 473,725
expenses
Bank overdraft 21,140 320,558
___________ ___________
1,598,405 806,632
___________ ___________
NET CURRENT ASSETS 475,882 404,446
___________ ___________
NET ASSETS $117,358,661 $79,792,385
___________ ___________
___________ ___________
CAPITAL AND RESERVES
Called-up share capital 26,000 26,000
Share premium 13,736,332 13,736,332
Capital reserve 92,245,448 56,105,027
Revenue account 11,350,881 9,925,026
___________ ___________
EQUITY SHAREHOLDERS' FUNDS $117,358,661 $79,792,385
___________ ___________
___________ ___________
EQUITY PER PARTICIPATING
PREFERENCE SHARE $77.15 $52.45
___________ ___________
___________ ___________
GENESIS MALAYSIA MAJU FUND LIMITED
PRELIMINARY ANNOUNCEMENT (continued)
INCOME STATEMENT
for the year ended 31st December, 2007
2007 2006
$ $
___________ ___________
Gains (losses) realised on 8,557,814 (695,991)
investments sold
Movement in unrealised gains 29,149,123 24,869,843
on investments
Net exchange (losses) gains (36,616) 104,807
Dividend income 2,759,070 2,133,775
Interest income 61,824 56,214
___________ ___________
GROSS INCOME 40,491,215 26,468,648
Expenses
(2,270,272) (1,528,515)
___________ ___________
INCOME BEFORE TAXATION 38,220,943 24,940,133
Taxation (654,667) (548,651)
___________ ___________
TOTAL INCOME ATTRIBUTABLE TO
PARTICIPATING PREFERENCE $37,566,276 $24,391,482
SHAREHOLDERS ___________ ___________
___________ ___________
TOTAL INCOME PER
PARTICIPATING PREFERENCE SHARE $24.698 $16.036
* ___________ ___________
___________ ___________
* Calculated on a weighted average number of
participating preference shares in issue of
1,521,022 (2006 - 1,521,022)
GENESIS MALAYSIA MAJU FUND LIMITED
PRELIMINARY ANNOUNCEMENT (continued)
STATEMENT OF CASH FLOWS
for the year ended 31st December, 2007
2007 2006
$ $
___________ ___________
OPERATING ACTIVITIES
Investment income 2,099,685 1,532,735
received
Interest received 65,015 55,233
Expenses (2,403,536)
(1,479,839)
Purchase of
investments (24,776,236) (17,953,277)
Sale of investments 24,845,311 14,185,253
___________ ___________
NET CASH OUTFLOW
FROM OPERATING $(169,761) $(3,659,895)
ACTIVITIES ___________ ___________
___________ ___________
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET FUNDS
for the year ended 31st December, 2007
2007 2006
$ $
___________ ___________
Net cash outflow from (169,761) (3,659,895)
operating activities
Exchange (36,616) 104,807
(losses)/gains ___________ ___________
(206,377) (3,555,088)
Net liquid funds at 758,030 4,313,118
beginning of year ___________ ___________
Net liquid funds at $551,653 $758,030
end of year ___________ ___________
___________ ___________
RECONCILIATION OF NET ASSET VALUE
TO PUBLISHED NET ASSET VALUE
2007 2007
Total Per
Share
$ $
___________ ___________
Published Net 117,347,871 77.15
Asset Value
Equity share 10,790 0.01
capital ___________ ___________
Net Asset Value $117,358,661 77.16
under UK GAAP ___________ ___________
___________ ___________
2006 2006
Total Per
Share
$ $
___________ ___________
Published Net 79,781,595 52.45
Asset Value
Equity share 10,790 0.01
capital ___________ ___________
Net Asset Value $79,792,385 52.46
under UK GAAP ___________ ___________
___________ ___________
GENESIS MALAYSIA MAJU FUND LIMITED
PRELIMINARY ANNOUNCEMENT (continued)
Notes
1. Accounting policies
The Fund financial statements have been prepared in accordance with applicable
accounting standards in the United Kingdom.
2. Status of preliminary announcement
The financial information set out in this preliminary announcement does not
constitute the Fund's statutory financial statements for the years ended 31st
December 2007 or 2006. The financial information for the year ended 31st
December 2007 is derived from the statutory financial statements for that year.
The auditors reported on those financial statements; their report was
unqualified. The statutory financial statements for the year ended 31st December
2007 will be finalised on the basis of the information presented by the
Directors in this preliminary announcement following the approval of the
financial statements by the Board of Directors. Whilst the financial information
included in this preliminary announcement has been computed in accordance with
applicable accounting standards in the United Kingdom, this announcement does
not in itself contain sufficient information to comply with applicable
accounting standards in the United Kingdom. The Fund expects to publish full
financial statements that comply with applicable accounting standards in the
United Kingdom following the approval of the financial statements by the Board
of Directors.
For Genesis Malaysia Maju Fund Limited
HSBC Securities Services (Guernsey) Limited, Secretary
29th April 2008
END
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