Legal Notice and Regulatory Information

Compliance with the UK Stewardship Code

Pillar 3 Disclosure – Capital

Pillar 3 Disclosure – Remuneration

Terms and Conditions

This website (the “Site”) is owned and maintained by Genesis Investment Management, LLP (”Genesis”). It is important that you read and understand the terms in this Legal Notice which govern the use of this Site. These terms are for the benefit of, and may be relied on by Genesis, its partners, employees and affiliates, including, without limitation, Affiliated Managers Group, Inc.  By using this Site you indicate that you accept these terms and conditions and that you agree to abide by them.  If you do not agree to these terms and conditions, please refrain from using this Site.

Information About Us

We are a limited liability partnership in England and Wales with our address at 21 Grosvenor Place, London SW1X 7HU. We are authorised and regulated by the Financial Conduct Authority.

This Site is established in the UK in accordance with the laws of England and Wales and use of this Site and the interpretation and effect of this Legal Notice will be governed by the laws of that country unless otherwise required by applicable law. When you use this Site, you accept that your use of the Site and any information on the Site, will also be governed by the laws of England and Wales and if any dispute arises from your use of the Site or any of the information on it, you agree to allow such dispute to be heard exclusively in the English courts unless otherwise required by applicable law.

Where you are using this Site on behalf of a partnership, company or other business entity, you confirm that you have authority to agree to these terms on behalf of that entity.

No Warranties and Representations: Exclusion of Liability

We have provided the contents of this Site for your information only. The distribution of information on the Site may be restricted by local law or regulation in certain jurisdictions. This information is not intended for distribution to, or use by, any person or entity in any such jurisdiction and persons accessing these pages should inform themselves about and observe any such restrictions. The contents of this Site do not constitute a financial promotion (as defined in the Financial Services and Markets Act 2000). This material is for information only and does not constitute an offer or recommendation to buy or sell any investment, or subscribe to any investment management or advisory service. This information does not constitute an offer or solicitation in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer or solicitation.

We have given the information on the Site in good faith. We have taken the information from our own and other sources which we believe to be reliable. Although we have made all reasonable efforts to ensure that all of the information on the Site is accurate at the time of inclusion, we do not represent that this is the case and it should not be relied upon as such. Any opinions and estimates expressed reflect our judgement at this date, but we make no representations regarding their accuracy or completeness and you agree not to hold us responsible for any inaccuracies or omissions.

The material displayed on our Site is provided without any guarantees, conditions or warranties to its accuracy. Save for liability for fraud, and any other liability that may not be excluded or restricted by applicable laws, Genesis accepts no liability of any description, including liability for negligence, and for any damages whatsoever resulting from loss of use, data or profits, arising out of or in connection with the viewing, use or performance of this Site or its contents.

Please note that we may update or alter the information on this Site at any time without giving notice of the alterations. Genesis reserves the right to suspend or withdraw access to any page(s) and/or functionality included on this Site without notice at any time and accepts no responsibility for these pages and/or functionality not being available.

Access to Information and Confidentiality

Information about some of the products and services on this Site is subject to specific restrictions concerning the persons to whom such information may be made available. Details of such restrictions are set out on the pages to which they relate and you should read those details carefully before proceeding to the rest of the relevant page.

Linking and Downloads

Some pages on this Site contain hypertext links to web sites not maintained by us. You are reminded that when you enter other web sites via such hypertext links, you will not be subject to these terms and conditions and you will not benefit from the protections afforded to you in using our Site. Genesis is not responsible for the content of websites to which this Site links and you agree that Genesis has no liability for any loss, damage or expense which you may incur as a result of leaving this Site. You are not permitted to alter the contents or functionality of this Site or to create a link to this Site from any other website without the express written permission of Genesis.

Variations

We may revise these terms and conditions from time to time. These changes will be brought to your attention by publishing them on the Site. Please read it carefully to understand our views and practices regarding your personal data and how we will treat it.

Privacy Policy

This policy describes how Genesis will collect and process your personal information as a result of your use of this Site. Please read it carefully to understand our views and practices regarding your personal data and how we will treat it.

How Do We Collect Your Personal Information?

We may collect your personal information as a result of your use of this Site if you log in to the Site, if you complete an online form or if you otherwise submit any personal data to us via this Site.

How Do We Use Your Personal Information?

Genesis will retain and use your personal information to allow you to access this Site and to provide products and services as requested by you. Genesis may also retain and use your personal information for any additional purposes disclosed to you at the time of collecting your personal information.

You agree that Genesis may use your personal information to contact you, whether in relation to products or services which you have requested, or in relation to new products and services and other related matters which we feel may be of interest to you. You agree and consent to the use by Genesis of electronic mail to communicate with you for this purpose.

Genesis will not intentionally disclose your personal information to any third party without your consent, unless it is necessary to do so in order to deal with any request or inquiry you have made, or in the event of any sale of the business of Genesis, or where we are required to do so by law, save that, we may disclose your personal information to our affiliates, partners and services providers, including, without limitation, brokers, administrators, accounting firms and agents, if such disclosure is necessary to provide products or services requested by you or to facilitate your use of our Services, including your access to this Site.

Genesis may transfer your personal information to countries outside the European Economic Area (EEA), which may not have privacy or data protection laws comparable to European law. Such transfers may take place when we instruct service providers or advisers which are located outside of the EEA.  By submitting your personal data, you agree to this transfer.  We will take all steps reasonably necessary to ensure that your data is treated securely and in accordance with this privacy policy. 

Unfortunately, the transmission of information via the internet is not completely secure.  Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our Site; any transmission is at your own risk.  Once we have received your information, we will use strict procedures and security features to try and prevent unauthorised access.

Accessing Your Personal Information

Under the UK Data Protection Act 1998, you may have the right to request a copy of any personal information Genesis holds about you. To request this information please write to:

Genesis Investment Management, LLP
21 Grosvenor Place
London
SW1X 7HU

If you wish to withdraw consent you have previously given to any use of your personal information, or if you believe that we are storing information relating to you that is incorrect, please write to The Data Protection Officer at the above address.

Changes to this Privacy Policy

We may change this privacy policy from time to time. These changes will be brought to your attention by publishing them on the Site.

Cookie Policy

We use cookies on our website. By using our website you agree to this Policy and you consent to our use of cookies in accordance with the terms of this Policy.

About Cookies

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There are two main kinds of cookies: "session" cookies and "persistent" cookies. Session cookies only last for the duration of users using the website and are deleted from your computer when you close your browser, whereas persistent cookies outlast user sessions and remain stored on your computer until deleted, or until they reach their expiry date.

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We are committed to ensuring that your information is secure. In order to prevent unauthorised access or disclosure we have put in place suitable physical, electronic and managerial procedures to safeguard and secure the information we collect online.

You can choose to accept or decline cookies. Most web browsers automatically accept cookies, but you can usually modify your browser setting to decline cookies if you prefer. This may prevent you from taking full advantage of the website.

Generally, we use cookies to help us administer this website, to improve the website’s usability and for marketing purposes. We may also use cookies to identify which pages are being used. This helps us analyse data about webpage traffic and improve our website in order to tailor it to customer needs. We only use this information for statistical analysis purposes and then the data is removed from the system.

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Intellectual Property Rights

We are the owners or the licensee of all intellectual property rights on our Site, and in the material published on it. The contents of all the pages contained in this Site are © Genesis Investment Management, LLP. The name “Genesis” and the associated logo are trade marks of Genesis and are subject to protection under UK, US and international laws. All such rights are reserved. Extraction, reproduction, or other re-utilisation of part or all of the contents of this Site in any form is prohibited except that:

The permissions above do not permit incorporation of the contents of this Site or any part of it in any other work or publication, whether in hard copy or electronic or any other form. In particular (but without limitation) no part of the Site may be distributed or copied for any commercial purpose.

You must not modify the paper or digital copies of any materials that you have printed off or downloaded in any way, and you must not use any illustrations, photographs, video or audio sequences or any graphics separately from any accompanying text.

Our status (and that of any identified contributors) as the authors of material on our Site must always be acknowledged. 

If you print off, copy or download any part of our Site in breach of these terms and conditions, your right to use our Site will cease immediately and you must, at our option, return or destroy any copies of the materials you have made.

No part of this Site may be reproduced on or transmitted to or stored in any form of electronic retrieval system other than as expressly permitted by applicable laws.

Viruses, Hacking and Other Offences

You must not misuse our Site by knowingly introducing viruses, trojans, worms, logic bombs or other material which is malicious or technologically harmful. You must not attempt to gain unauthorised access to our Site, the server, computer or database connected to our Site. You must not attack our Site via a denial-of-service attack.

Important Information Regarding Risk Factors

In addition to the information provided elsewhere, prospective investors in the Genesis Funds should consider the risks involved in investing in the Genesis Funds including, but not limited to, those specifically discussed below.

General

Investments in the Genesis Funds are subject to the normal market fluctuations and other risks inherent in equity investment. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. The Funds should be considered long term investments. It is important to note that past performance is not necessarily a guide to future performance and there is no guarantee that any stated investment objectives will be achieved.

Illiquidity of Shares

Shares in some of the Genesis Funds are subject to restrictions on redemption, with extensive notice periods being required for voluntary withdrawals by shareholders. In such situations, the redeeming Shareholder will bear the market risk of a decline in the value of the Fund’s assets occurring between the date the notice of redemption is given and the relevant Valuation Day.

Investments in Emerging Markets

Investment in Emerging Markets may involve additional risks not typically associated with investing in more developed markets. These include:

Currency Exchange Rates

The Funds will compute their Net Asset Value in US dollars. Currency exchange rate movements may affect the value of an investment favourably or unfavourably, separately from the gains or losses otherwise made by such investments.

Smaller Companies/Limited Operating History

Funds investing in smaller companies invest in securities which may be both more volatile and less liquid than the securities of larger companies, as a result of inadequate trading volume or restrictions on trading. Investments in companies with limited operating histories are more speculative and entail greater risk than do investments in companies with an established operating record.

Tax

The Funds could be adversely affected by future changes in the applicable tax laws, including without limitation those relating to foreign withholding.

Aggregation of Orders

In managing the Funds, the Investment Manager may combine orders for the Funds with those of other clients. This procedure may operate on some occasions to the disadvantage of the Funds and on others to the advantage of the Funds.

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Compliance with the UK Stewardship Code

The disclosure below describes how Genesis complies with the UK Stewardship Code as published by the Financial Reporting Council.

Principle 1 – How stewardship responsibilities are discharged

The role of stewardship within the investment process

Genesis is a specialist investment manager which focuses purely on investment in emerging market equities for institutional investors. Our goal is to identify and invest in high-quality companies, which we characterise as those with a persistent capacity to generate sustainable excess returns. We recognise that environmental, social and governance (ESG) factors can expose potential investment opportunities and risks, reflect the quality of management and impact a company’s financial performance. We believe the evaluation of ESG factors contributes to our broader and deeper understanding of the strategic direction of a company and allows for a more accurate assessment of the risks and future costs or burdens facing a company.

As a bottom-up investor, our investment approach lends itself naturally to the integration of ESG factors at the company level. Genesis meaningfully integrates ESG factors into our investment process as part of our initial and as part of our ongoing qualitative judgement of a company's sustainable competitive advantage. We formally rank companies based on our qualitative judgement of their sustainable competitive advantage or economic 'moat', and hence the likely persistence of excess returns. Our Investment Team documents the quality rating of a company as part of their investment recommendations and the quality rating covers a range of material factors including the views on ESG and potential ESG issues, where relevant. Our systematic assessment of the quality of a company continues for so long as the holding is in client portfolios; in line with our investment approach, we aim to maintain an investment for several years. Our quality assessment is informed by our ongoing research, monitoring of a company's business and engagement with company management.

Our investment process is founded on proprietary internal research with particular emphasis on adding value at the company analysis level. The distinctive feature of our research process is its independence: views are formed by visiting countries and meeting companies. Every company we cover is assigned a'stock owner' from our Investment Team who takes the lead role on the research and engagement with that company.

We maintain an on-going dialogue with company management through meetings, site visits, calls and correspondence and we use these meetings to discuss the company's strategy, governance and to raise concerns, including concerns on ESG matters, we feel may have an impact on long-term performance and valuation.

When authorised, we aim to vote on all resolutions. Voting decisions are based on our set of corporate governance principles (which are available via the link below) and made in the best interests of clients. We are mindful of the varied market practices across emerging market countries and we recognise that more than one governance model may be effective. Thus we take a pragmatic approach considering the circumstances of each vote and each company. We view voting as an investment function and we provide feedback to boards and management on significant voting matters and this in turn informs our ongoing monitoring strategy and company engagements.

Principle 2 – Managing conflicts of interest in relation to stewardship

Our sole business is to provide investment management and advisory services to institutional clients invested in emerging markets equities. Genesis acts independently of its parent, Affiliated Managers Group, Inc. (AMG) and all of the other affiliates of AMG. Genesis does not invest as a principal nor does it make markets or underwrite. Genesis does not hold client money or assets nor provide investment research to third parties. Genesis does not permit personal trading in companies which are held in client accounts. Genesis' investment process is team based. All material operating decisions are determined by committees and we maintain both a strict segregation of duties between operating areas, and a robust control environment.

We maintain a Conflicts of Interest document that identifies actual and potential conflicts of interest, and outlines how conflicts are monitored, the controls in place to mitigate conflicts and the steps we take to resolve potential conflicts. Our Conflicts of Interest document is available via the link below.

If a conflict of interest should arise and potentially damage the interests of a client and the steps taken to manage the conflict have not achieved, Genesis will consider whether disclosure is appropriate or, bearing in mind the risks involved, refraining from acting. In any event we would expect to inform the client and seek further instructions.

Principle 3 – Monitoring of investee companies

As noted above, our investment process is founded on proprietary internal research with particular emphasis on adding value at the company analysis level. We believe that interviews with company management are the most effective insight into stocks in emerging markets and they make up the core of our research process. We do not make an investment without interviewing a company's management (often several times).

Management quality is assessed by our Investment Team through ongoing dialogue with the board and company management via regular meetings, site visits, calls and correspondence. During these interactions, the stock owners engage on a variety of material issues, including strategy, financial performance, ESG issues, or other matters affecting long-term shareholder value. We look for management's enlightened and long-term commitment to a sustainable business model including their attention to and understanding of ESG risks and opportunities. We carefully review management's track record focusing on relationships with various stakeholders, accountability, past practices and progress. A key issue is the alignment of interests with minority shareholders. We also take into account the quality of a company's reporting.

Our monitoring of investee companies is ongoing and we regularly engage with companies outside of the shareholder meeting/voting cycle. Meeting notes are maintained in a central database available to the full Investment Team to assist and inform the monitoring and engagement process and also to track a company's progress.

In 2015 we conducted over 1,000 interviews with companies (potential and existing investments, competitors and supply chain entities) in order to further develop knowledge of individual companies and allow a comparison with peers and competitors globally, including in developed markets. Our aim is that our communications with investee companies are honest, frank and constructive. As a result we have a strong preference that such engagement activities remain private.

During the course of Genesis' business activities, we may be asked by a company if we are willing to become an insider. Generally, we are not willing to do this as we want to retain the ability to trade in companies that are held in client portfolios; however, in limited circumstances (for example to become a cornerstone investor) and typically for a limited period of time, we may decide to become insiders. Our approach to being made insiders is managed by the provisions set out in our Code of Ethics.

Principle 4 – Escalation of activities to protect and enhance shareholder value

As noted, we engage with companies both prior to any initial investment and regularly throughout the period of investment. Engagement with company management is fundamental to our investment process and takes various forms, formal and informal. Each engagement is tailored to the specific company and relevant issues as determine by the stock owner.

We have been fortunate to develop good long-term relationships with our investee companies and feel that our views are considered seriously by management and boards. If there was a particular issue where we felt a company was not managing its risks and or opportunities in a responsible manner, then the stock owner would engage in a more focused dialogue and management's reaction and receptiveness to such discussions is often meaningful. Because of the emphasis we place on the quality of management, the incidence of these types of discussion are, in our experience, infrequent.

If however the normal dialogue with management has failed to achieve the desired outcome (for example, where we have concerns on strategy, remuneration or governance structures), we will consider a range of options, including for example meeting privately with the CEO or Board, speaking directly with one or more independent directors, or formalising our concerns in a letter to the Board.

Where appropriate and where permissible under applicable laws, we may discuss our stewardship concerns with other shareholders or join in a communication to the Board (see Principle 5 below). We may also consider voting against management, reducing or selling the position or more extreme action such as litigation.

Each case is assessed by the stock owner on its merits and in the best interests of our clients but where we decide to escalate our engagement activities, our long-term investment approach is generally an advantage with respect to management's receptiveness to our concerns. Where engagement requires escalation, the stock owner will involve other members of the Investment Team and, where appropriate, additional internal and external resources such as legal, compliance and other specialists.

Principle 5 – Acting collectively with other investors

As outlined above, our stock owners engage with companies on an ongoing and regular basis and we prefer one-on-one meetings with company management and sharing any concerns privately in order to improve the outcome for our clients. Where companies in client portfolios start behaving in a manner detrimental to minority shareholders' interests we may consider collaborating with other investors and engaging collectively with the management of a company regarding particularly serious corporate issues. As long-term investors, we are often aware of other investors and managers which have or represent significant long-term investments in a company and it is with such long-term investors that we are most likely to find common ground. In such instances and subject to applicable laws and regulations, we may share our views with other institutions, or draft or join a collective communication to a company or its Board to effect change. We will also consider joining engagement activities coordinated by corporate governance bodies. For example, we have pooled positions with other shareholders to nominate and elect independent directors. We will also consider publicly supporting a letter drafted by shareholders' rights groups.

Any collective engagement would be undertaken on a case-by-case basis and with due regard to the relevant regulatory provisions concerning acting in concert and insider dealing. Collective engagements are limited to when we believe it will be in our clients' best interests. Parties interested in contacting Genesis regarding any collective engagement activities should in the first instance get in touch with Marguerite Mills, Head of Investment Governance.

Principle 6 – Voting and disclosure of voting activity

Where clients have delegated to us the responsibility to vote proxies, we vote in the best interests of such clients and aim to vote all of their shares in all markets. Our Proxy Voting Guidelines outline our overall approach to voting and ensure that it is conducted in an appropriate manner.

In evaluating specific voting issues, stock owners may engage directly with company management and directors and we may also contact interest groups, other shareholders and research providers. Where appropriate, and particularly where we vote against management, we will contact the company to explain our decision-making process and promote best practice.

Subject to the provisions of individual client mandates, securities lending is undertaken. Where securities are on loan ahead of a general meeting or corporate action and Genesis has proxy voting responsibility, it is our policy to request that such securities be recalled to enable us to vote the shares.

Genesis has contracted with Institutional Shareholder Services, Inc. (ISS), an independent third-party provider of proxy voting and corporate governance services. Specifically, ISS has been retained to provide proxy research and recommendations, execute votes as instructed by Genesis and keep various records necessary for tracking proxy voting materials and proxy voting actions taken for our clients' accounts.

ISS recommendations are one form of external research which is factored into the decision-making process by our Investment Team. We analyse each voting issue independently and do not necessarily vote in line with company management or the ISS recommendations.

Principle 7 – Reporting on stewardship and voting activities

We provide a range of qualitative and quantitative information to our clients, typically on a quarterly basis. Furthermore, we have calls, reviews and meetings with clients and their appointed representatives on a regular basis at which we will discuss specific topics of interest arising from the stewardship process and engagement with investee companies.

Furthermore, we provide all clients with a copy of our Proxy Voting Guidelines and regular (typically semi-annual) reports of all proxy voting matters. This proxy voting report includes details of the frequency, matters and reasons why we may have voted against management. In addition, our voting record for the last five years is available at: https://vds.issgovernance.com/vds/#/MTcy/

The holdings in client portfolios are formally reviewed on a regular basis with a focus on transparency to promote robust and constructive challenge from across the Investment Team. A sub-committee of the Investment Team ensures that the investment process has been followed. In addition, Genesis’ internal controls, including those concerning proxy voting arrangements, are subject to independent, external review by PricewaterhouseCoopers LLP through the annual completion of a Report on Internal Controls (ISAE 3402 and AAF 01/06). A copy of the Report on Internal Controls is provided to all clients.

Any queries regarding Genesis' compliance with the UK Stewardship Code should be addressed in the first instance to the Client Services Department (email: ClientRelationshipsTeam@giml.co.uk; Tel: 020 7201 7200).

Genesis Group Conflicts of Interest Document

Corporate Governance Framework – Core Principles

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Pillar 3 Disclosure – Capital

Introduction

The European Union Capital Requirements Regulation and Directive (“CRR” and “CRD 4”) have created a regulatory capital framework across Europe governing how much capital financial services firms must retain, based upon the risks associated with the firm’s business and the firm’s control environment. In the United Kingdom, these requirements have been implemented by the Financial Conduct Authority (“FCA”) which has created rules and guidance in the General Prudential Sourcebook (“GENPRU”) and the Prudential Sourcebook for Banks, Building Societies and Investment Firms (“BIPRU”).

The FCA framework consists of three ‘Pillars’:

The provisions for Pillar 3 disclosure are set out in Rule 11 of BIPRU and this document has been produced in order to meet the disclosure obligations of Genesis Investment Management, LLP (“GIM”).

The rules provide that a firm may omit one or more of the required disclosures if it believes that the information is immaterial, confidential or proprietary in nature. In these instances GIM has outlined the reasons for non-disclosure.

Background Information about the Firm

GIM provides investment management services to institutional investors in Emerging Markets and provides investment advisory and portfolio administration services to fellow entities of the Genesis Group. GIM commenced operations on 17th June 2004 and is authorised and regulated by the FCA and SEC. GIM is classified by the FCA as a limited licence BIPRU firm as it does not hold any client assets or deal on its own account.

GIM is part of the Genesis Group. Given the close operational relationship between the key members of the Group and their financial interdependence, capital adequacy has been assessed on a consolidated basis for the whole group and for each critical subsidiary even though GIM is the only regulated member of the Group operating within the European Economic Area.

There are no current or foreseen material, practical or legal impediments to the prompt transfer of capital resources within the Group or repayment of inter Group liabilities.   

Genesis Group EntityAbbreviation
Country of Organisation
Prudential Regulator
Genesis Asset Managers, LLPGAMUS SEC, GFSC
Genesis Investment Management, LLPGIMUK FCA, SEC
Genesis Asset Managers International LtdGAMILUKN/A
Genesis Management Australia LtdGMALAustralia ASIC
GIML LtdGIMLUKN/A
IntergenesisInterChile N/A

Risk Appetite

Although Genesis executes its strategy within a volatile asset class, its appetite for risk is low and the business has been structured to minimise risk to clients, owners and employees. This means that:-

Risk Management Framework

The GAM Operating Committee acts as the principal strategy and policy setting forum for GAM. It meets quarterly, and receives formal reports on investment, operations, risk and compliance matters. The Operating Committee approves changes to material Firm-wide policies (e.g. conflicts of interest). Given the size of the GAM Operating Committee, all matters are considered by that Committee as a whole with the exception of i) risk management and internal control matters and ii) finance and audit, which are the responsibility of the Group Risk and Group Audit Committees respectively.

The Group Risk Committee, which is composed of three Independent Members of the GAM Operating Committee (attended by the CRO and Enterprise Risk Officer), is responsible for:

The Group Audit Committee is composed of two Independent Members of the GAM Operating Committee and is responsible for:

Key Committees

Day-to-day business is overseen by a number of formal committees of GIM, the most important of which are:

GIM’s internal control framework is also subject to annual independent audit. A Report on Internal Controls (ISAE 3402 and AAF 01/06) is produced annually for clients and is audited by PwC.

Principal Risks

The principal risks faced by Genesis and GIM are business and operational.

Business risks are mainly reputational as investment under performance or loss of key personnel may result in clients choosing to withdraw the funds that Genesis manage and hence reduce revenues. Other business risks include volatility in emerging markets and emerging markets becoming unattractive as an asset class. These risks are mitigated by Genesis’ experienced Investment Team through their disciplined investment approach, aligned long term incentives and the business’ strong cost controls.

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk. As the majority of risks faced are classified as either operational or business risks, most of GIM’s risk management efforts are focussed on these risks, where they can be mitigated, as outlined above under the Risk Management Framework section.

Other risks considered in the ICAAP include the following:

Credit risk is the risk of financial loss arising from a counterparty failing to meet its obligations to repay outstanding amounts as they fall due. GIM is not exposed to high levels of credit risk, as it does not undertake any principal trading in relation to its own account, only places cash on deposit with a select list of highly rated counterparties and non-payment of management fees has historically been negligible.

The market risk due to adverse changes in market prices and/or exchange rates reducing the value of client portfolios and impacting revenues is treated as a business risk rather than a market risk. GIM is subject to a small amount of foreign exchange market risk as some management fees and assets are denominated in euros. At the Group level, foreign exchange risk is carefully monitored as management fees are earned in US dollars and most costs are paid in £ sterling.

Interest rate risk is negligible as GIM and the Group do not have any borrowings. Cash balances are subject to changes in interest rates, although interest income is only a small element of total revenues.

Liquidity risk is the risk that the firm does not have sufficient financial resources to enable it to meet its obligations as they fall due. Group policy is to hold minimum liquidity levels at all times. Liquidity risk is however not considered a key risk due to the monitoring of management fee receipts, strong control over costs and the timing of remuneration payments.

Remuneration risk is addressed by the policies and practices described in the separate Pillar 3 Disclosure – Remuneration, below.

Insurance risk is considered annually by the Risk Management Committee and Group Risk Management Committee.

Other risks are considered as part of the Risk Management Framework but are not considered necessary for disclosure due to their perceived lower significance.

With respect to stress testing, the anticipated worst case for each of the business and operational risks identified was estimated through the impact on fees earned and significant one-off losses. It was determined that the impact of these worst risk outcomes do not pose a strategic risk to GIM’s business. The results of the reverse stress testing reflect those from the stress testing and did not identify any need for changes to either the controls currently in place or the Firm’s overall strategy.     

Capital Requirements and Resources

Pillar 1 Capital Requirement

GIM’s Pillar 1 Minimum Capital Requirement is the greater of:

The Minimum Capital Requirement was determined as being the fixed overhead requirement and calculated as £2,470,000 for 2015.

Pillar 2 Capital Requirement

GIM’s Pillar 2 Capital Requirement is assessed as part of the Internal Capital Adequacy Assessment Process (“ICAAP”). This involves detailed assessment of all relevant risks, scenario analysis and stress testing, reverse stress testing and wind down analysis. The fixed overhead requirement under Pillar 1 is deemed by GIM to be sufficient capital to meet its current needs. As no additional capital is currently required under Pillar 2, GIM’s Pillar 1 requirement is the minimum regulatory Capital Requirement to be held.   

Capital Resources as at 30th November 2015 
 
£000
Core Tier 1 Capital
24,131
Deductions from Tier 1 Capital
(5,781)
Total Tier 2 and Tier 3 Capital
Nil
Total Capital Resources, Net of Deductions
18,350
   
Pillar 1 Capital Requirement
2,470
Additional Requirement under Pillar 2
Nil
Total Pillar 1 and Pillar 2 Capital Requirement
2,470
   
Surplus Capital
15,880

Frequency of review of disclosures

The disclosures within this document will be updated at least annually. They will be updated every year following the annual production of the GIM ICAAP and will also be updated in response to any significant occurrence which will adversely affect the Genesis Group’s capital and risk position.

As part of the annual review, the Pillar 3 Disclosure Document will be reviewed by the GIM Operating Board and approved by the GAM Operating Committee.

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Pillar 3 Disclosure – Remuneration

Under the UK Financial Conduct Authority BIPRU Remuneration Code (“Code”), Genesis Investment Management, LLP (“GIM”) must disclose certain information regarding its remuneration policies and practices for individuals whose professional activities have a material impact on its risk profile (“Code Staff”).

The disclosure provided below for GIM is appropriate given the firm’s size, internal organisation and the nature, scope and complexity of its activities.

Remuneration arrangements at GIM aim to promote effective risk management and are consistent with Genesis’ risk profile, risk appetite and risk strategy. GIM adopts a prudent approach when determining the total amount of variable remuneration distributable. The disclosure includes profit for the financial year available for discretionary division among members.

GIM’s remuneration policy has evolved over the life of the Firm. The key requirements of the Code were already reflected in GIM’s remuneration arrangements before the Firm became subject to the Code, only enhancements to documentation related to remuneration have been undertaken in response to the Code.

The decision-making process

The following arrangements are in place:

The link between pay and performance

Remuneration arrangements for the four categories of individuals identified as meeting the FCA’s criteria for Code Staff are described below.

Partners

Individual partners have each contributed capital to Genesis and entered into a commitment to remain in Genesis for a minimum fixed period. Genesis’ compensation culture is focused upon performance rather than entitlement, and long-term business viability rather than short-term personal gain. All Partners are assessed on a four-year rolling basis and rewarded on their contribution and long-term impact on the business. Partners’ remuneration from GIM is comprised of share of net profits on a discretionary basis, determined by the overall profitability of the Firm in a given year, together with recognition of individual contribution. Although GIM, as a BIPRU firm, is not required to operate a deferral scheme, 25% of all Partner remuneration from GIM is deferred for three years. Genesis Partners can choose to receive their remuneration in cash or units in Genesis-managed funds with at least 50% of the deferred amount in Genesis-managed funds.

Members of the Pre-Partnership Scheme ("PPS")

Staff who are members of the PPS receive a fixed salary and an annual discretionary payment under the PPS long term incentive scheme determined using similar criteria to that for Investment Partners.

Investment Team Staff Members

Investment Team Staff members receive a salary (capped at the level of Partners’ drawings) and a discretionary bonus based on their investment performance. Guarantees for bonuses may only be offered in the initial year of joining.  

Non-Executive Directors on the GAM Operating Committee ("NEDs")

Remuneration arrangements are recorded in relevant letters of engagement. NEDs receive a fixed fee.

Aggregate quantitative information on remuneration

The aggregate remuneration of Code Staff from GIM in 2014 was £65,082,000.

All Code Staff were senior managers, risk takers or non-executive directors.

GIM has only one business line: the provision of investment management and advisory services to institutional clients investing in equity securities in emerging markets.

23rd December 2015

Genesis Remuneration Policy Overview

AIFMD Disclosure for GEMF

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