We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Baring Emerging Europe Plc | LSE:BEE | London | Ordinary Share | GB0032273343 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 637.00 | 630.00 | 644.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
Premium
TIDMBEE
Baring Emerging Europe PLC
Annual Report & Audited
Financial Statements
for the year ended 30 September 2016
Contents
Directors and officers 2
Financial highlights 3
Performance 3
Discount 3
Investment objective 3
Financial calendar 3
The Alternative Investment Fund Manager & 4
AIFMD disclosures
Special considerations and risk factors 6
Chairman's statement 7
Report of the Alternative Investment Fund 10
Manager:
Review 10
Investment portfolio 14
Classification of assets 16
Strategic report 17
Report of the Directors 22
Statement of Corporate Governance report 27
Audit Committee report 33
Statement of Directors' responsibilities in 34
respect of the Annual Report and the
financial statements
Directors' remuneration report 35
Independent Auditor's report 38
Income statement 40
Statement of financial position 41
Statement of changes in equity 42
Notes to the accounts 43
Notice of Annual General Meeting 56
Notes to the Notice of Annual General 58
Meeting
Directors and officers
Directors
Steven Bates, Chairman
Jonathan Woollett
Ivo Coulson
Frances Daley
Nadya Wells
Saul Estrin (retired 13 January 2016)
Secretary
M. J. Nokes F.C.A.
Registered office
155 Bishopsgate
London EC2M 3XY
Company number
4560726
Alternative Investment Fund Manager
Baring Fund Managers Limited
155 Bishopsgate
London EC2M 3XY
Telephone: 020 7628 6000
Facsimile: 020 7638 7928
Auditor
KPMG LLP
15 Canada Square
London E14 5GL
Custodian & Depositary
State Street Bank & Trust Company Limited
20 Churchill Place
Canary Wharf
London E14 5HJ
Administrator
Northern Trust Global Services Limited
50 Bank Street
Canary Wharf
London E14 5NT
Telephone: 0207 982 2000
Registrars and transfer office
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300 Overseas: +44 208 639 3399 (Calls cost 12p per minute
plus your phone company's access charge. Calls outside the United Kingdom will
be charged at the applicable international rate.)
Email: ssd@capitaregistrars.com
Website
www.bee-plc.com
Financial highlights
2016 2015
Net asset value per ordinary 722.82p 534.87p
share ("NAV")
Revenue return per ordinary 21.39p 22.05p
share
Dividends per ordinary share 23.0p 23.0p
Share price 638.00p 487.00p
Ongoing charges (based on 1.49% 1.49%
average NAV)
Gearing Ratio - Gross basis 105% 109%
Gearing Ratio - Commitment 110% 112%
basis
Performance (total return basis)
Year ended 30 September 2016
Net asset value per ordinary share# +41.0%
Share price# +37.6%
Benchmark* +27.1%
*The Benchmark Index is the MSCI EM Europe
10/40 Index.
#Source: AIC.
Discount (at 30 September)
2016 2015
Discount to net asset value 11.7% 8.9%
per share*
*Based on the net asset
value including income.
Investment objective
The investment objective is to achieve long-term capital growth, principally
through investment in securities listed on or traded on an Emerging European
securities market or in securities of companies listed or traded elsewhere,
whose revenues and/or profits are, or are expected to be, derived from
activities in Emerging Europe.
Financial calendar
Date
Annual general meeting for 2016 24 January 2017
Announcement of interim results May
Announcement of final results December
Interim report posted May
Annual report posted December
The Company's share price is published in the Financial Times.
The Alternative Investment Fund Manager & AIFMD disclosures
The Alternative Investment Fund Manager
The Alternative Investment Fund Manager ("AIFM") of Baring Emerging Europe Plc
("the Fund") is Baring Fund Managers Limited ("BFM"), authorised by the FCA as
an Alternative Investment Fund Manager ("AIFM") under the Alternative
Investment Fund Managers Directive ("AIFMD").
AIFMD disclosures
Pre-Investment Disclosures
BFM and the Company are required to make certain disclosures available to
investors in accordance with the Alternative Investment Fund Managers Directive
("AIFMD"). Those disclosures that are required to be made pre-investment can be
found on the Company's website www.bee-plc.com under the prospectus and
literature heading, the document is titled "Pre-investment disclosures", dated
September 2016. There have been no material changes to the disclosures
contained within the document since publication in July 2015.
Leverage Disclosure
For the purposes of this disclosure, leverage is any method by which the
Company's exposure is increased, whether through borrowing cash or securities,
or leverage embedded in contracts for difference or by any other means. The
AIFMD requires that each leverage ratio be expressed as the ratio between a
Company's exposure and its NAV, and prescribes two required methodologies, the
Gross Methodology and the Commitment Methodology (as set out in AIFMD Level 2
Implementation Guidance), for calculating such exposure. Using the
methodologies prescribed under the AIFMD, the leverage ratios of the Company
calculated on a Gross Basis was 105% and on a Commitment Basis was 110% as at
30 September 2016.
Remuneration Disclosure
BFM's Remuneration Policy ensures that the remuneration arrangements of AIFMD
remuneration 'Identified Staff' as defined in "ESMA's Guidelines on Sound
Remuneration Policy under AIFMD, ESMA 2013/201" (the 'ESMA Guidelines'), (as
amended) are:
(i) consistent with and promote sound and effective risk management and do not
encourage risk-taking which is inconsistent with the risk profile, rules or
instruments of incorporation of BFM or the Fund; and
(ii) consistent with BFM's business strategy, objectives, values and interests
and includes measures to avoid conflicts of interest.
BFM is also subject to the FCA's AIFM Remuneration Code (SYSC 19B). An AIFM
firm must comply with the AIFMD remuneration principles in a way and to the
extent that is appropriate to its size and business.
Remuneration Committee
Due to the size and nature of BFM the Board considers it appropriate to
dis-apply the requirement to appoint a remuneration committee.
Baring Asset Management Limited ("BAML") employs and remunerates all UK staff
within the Barings group (which includes BFM). BAML is also the appointed
delegate to carry out Investment Management.
BAML has an HR and Salaries Committee as well as a Remuneration Committee to
ensure the fair and proportionate application of the remuneration rules and
requirements across the Barings' group. The Committees ensure that potential
conflicts arising from remuneration are managed and mitigated appropriately.
All staff are subject to the Barings' Performance Management Review process,
which includes both financial and non-financial criteria as appropriate.
AIFMD Remuneration Identified Staff
BFM must determine its Identified Staff, whose professional activities have a
material impact on its risk profile. Identified Staff consists of staff whose
professional activities have a material impact on the risk profiles of the AIFM
or the Fund, which includes senior managers, controlled functions and risk
takers.
a) Senior Managers and controlled functions
BFM has a Board of Directors (the "Board") which comprises of four directors.
The Directors have waived their entitlement to receive a director's fee from
BFM. The Directors are all employees of BAML and accordingly are remunerated by
BAML.
b) Risk takers
Risk takers as defined by the BFM Remuneration Policy are as follows:
i. The Permanent Risk Management Function ("PRMF"): BFM's PRMF comprises of an
Organisational Risk team and an Investment Risk team. The individuals who
discharge these functions are identified staff and are remunerated by BAML.
Their remuneration is not directly linked to the performance of the Fund.
ii. Investment Managers: BFM has delegated investment management to BAML and
accordingly the Investment managers are remunerated by BAML under an equivalent
remuneration regime (BAML and its subsidiaries are subject to remuneration
rules contained in the Capital Requirements Directive ("CRD") and these are
considered to be equally as effective as those contained in the AIFMD).
There are no other controlled functions, senior management or Identified Staff
employed by BFM.
Remuneration Disclosure: Baring Emerging Europe Plc
The table below summarises the fixed and variable remuneration paid to
Identified Staff as well as other Barings' staff (remunerated by BAML) that
carry out activities for the AIFM, for BFM's financial year ending 31 December
2015. The disclosures below show remuneration relevant to the Fund, apportioned
using total Barings' Assets Under Management ("AUM").
Number of Total Fixed Total Variable Total
beneficiaries Remuneration for Remuneration for Remuneration
the period the period
AIF Level
AIFM Staff 328 GBP117,470 GBP108,852 GBP226,322
Identified Staff 7 GBP75,182 GBP85,167 GBP160,349
Notes:
1. AIFM staff: this assumes all UK staff employed by BAML carry out some
activities on behalf of BFM. Remuneration is apportioned based on the relevant
AUM. Other than the Identified Staff noted above, none of the staff are
considered to be senior managers or others whose actions may have a material
impact on the risk profile of the Fund.
2. Identified Staff: These are as defined in the BFM Remuneration Policy; no
direct payments are received by code staff from BFM. Remuneration is paid by
BAML and is apportioned on an AUM basis.
3. Variable remuneration consists of cash bonus and deferred awards awarded in
the period.
4. The Fund does not pay either performance related fees or carried interests
to any person.
Special considerations and risk factors
Shareholders should be aware that the value of the Company's Shares and the
income from them may fluctuate. In addition, there is no guarantee that the
market prices of shares in investment trusts will fully reflect their
underlying Net Asset Value.
The risks inherent in investments by the Company in Emerging Europe are of a
nature and degree not typically encountered in investing in securities of
companies listed on the major securities markets. Such risks are both political
and economic and in addition to the normal risks inherent in any equity
investment.
Investments in the Company should be regarded as long-term in nature. There can
be no guarantee that the Company's investment objectives will be achieved.
Chairman'sstatement
After several poor years in Emerging Europe, where geopolitical influences held
sway, markets delivered an excellent return, boosted further, for BEE
shareholders, by the devaluation of Sterling. The political scene, which had
glowered over stock markets, did not improve significantly - indeed, in the
case of Turkey it deteriorated rather sharply, but this inertia was overcome by
a combination of improving commodity prices and the sheer exhaustion brought
about by sharp falls last year. Everybody who wanted to sell the region had
sold and that meant that even the barest glimmer of light had a
disproportionate effect. As you will see in Matthias Siller's report, which
follows this, corporate earnings have started to improve and efforts have been
made to address some of the failings in corporate governance, which have
plagued the region.
It wasn't all plain sailing of course: Russian markets rose sharply as the fog
cleared a little and even Turkey managed a rise for the year to 30th September.
Poland, though, fell by 15% in USD terms as a new government acted to implement
a socially conservative programme, which includes an intolerance of opposition
sadly visible in a growing number of countries around the world. This has
included a dismantling of the private pension system and effectively a
re-nationalisation and consolidation of the banking sector. At the same time,
it introduced measures to put the economy on a sounder trajectory and this has
benefitted the smaller private sector companies, which Matthias favours.
Performance
It was a good year. In Sterling terms, the Net Asset Value per share on a total
return basis rose by 41%, which compares with a rise of 27% in the Company's
benchmark, the MSCI Emerging Europe 10/40 Index. Part of this was attributable
to the decline in Sterling; in Dollar terms the increase in Net Asset Value was
around 16%.
Like a broken record, I will repeat the Board's view that one year's numbers,
while very welcome, are not a good basis on which to measure the success or
otherwise of your manager. Over the three years to 30 September 2016 the NAV
total return fell by 1.9% and the benchmark by 15.2%. Over five years the NAV
total return increased by 3.3% and the benchmark by 0.4%. These are very good
numbers in relative terms and a testament to the manager's skills, even if the
absolute numbers leave something to be desired.
As in previous years, we keep an eye on the peer group, not because it is in
any way influential in Matthias's stock selection, but because it represents an
approximation of the opportunity set open to an investor interested in this
region. Compared to this, we rank 4th out of 43 funds in this universe for the
year ended 30 September 2016, over 3 years to 30 September 2016 ranked 14th out
of 42 funds and over 5 years it was ranked 5th out of 41 funds.
Matthias has been responsible for the management of your portfolio for 8 years
and I think it is fair to point out that in the Board's view he has done an
excellent job over this period. Following a reorganisation of the investment
management teams at Barings and in recognition of his track record, Matthias
has recently been promoted to a role as head of the EMEA team. Barings are also
expanding the team in this area and investing in the research team, he
continues to be responsible for the management of your Company and takes the
helm of a talented team with the resources required to seek good opportunities
in a complex investing environment. We offer him our congratulations. Matthias
continues to be ably supported by Maria Szczesna.
Discount Management
Here, the news is not so good. In common with many other investment trusts our
discount widened post the Brexit vote as retail investors retrenched. During
the year, the discount has averaged 14.4% and has traded in a range between
18.8% and 7.9%. We have repurchased and cancelled 1,364,512 shares over the
period, for a net consideration of just under GBP7.5 million. This has added
about 6 pence per share to NAV, accounting for just under 1% of the total
return to shareholders.
Despite this effort to control matters, we have failed to meet the target we
set in 2013 of keeping the discount to an average of less than 12% over the
course of the year.
Looking to the reasons why it has been impossible to meet this goal, we can
point to three factors: first, investors have generally been indifferent to the
charms of the region - indeed, this is one of the reasons it has done so well
as relatively small inflows into the markets have been richly rewarded in the
re-rating of stocks; second, trading volumes in BEE shares have been very
subdued. A total of 5 million shares were traded during the course of the year,
so the buyback accounted for more than a quarter of all the shares traded
during the year; lastly, there have been some technical changes as a result of
the implementation of the Market Abuse Regime which have limited our
flexibility in an unhelpful way.
In any event, because we did not meet the 12% target, the Board has agreed that
a tender offer along with certain other proposals to add greater flexibility to
our current discount control process will be proposed to shareholders. The
Company has in the past indicated that such a tender offer may be for up to 15
per cent. of the issued share capital, priced at 95% of NAV. The Board is
reviewing this scale and pricing and will announce its proposals to
shareholders in due course.
Governance
Regulation
For once, this has been an uneventful year for regulation. It probably won't
stay that way, but for now we can be grateful.
Dividend and Income Account
The flow of income from investments has remained robust in the current year and
reasonable dividends have now established themselves as a regular feature of
Emerging European markets. Our income account shows a surplus of 21.39 pence
per share as compared with 22.05 pence in 2015. This year, we are proposing a
dividend of 23.00 pence, the same as the annual dividend of 23.00 pence paid
last year. This equates to a pay out of 104% of our income account. As you will
have read, the Board believes that a sustainably attractive dividend is
potentially useful in broadening the shareholder base and so helping to keep
the discount at reasonable levels. The yield on the current share price of GBP
6.405 implied by this year's dividend is 3.6% (at 8 December 2016).
Borrowing
We have a borrowing facility of up to $17 million and this has been deployed to
the tune of $13 million, which equates to an effective gearing ratio for the
Company of 105%. The cost of this borrowing during the year was $250,000 or an
interest rate of 1.9%. Clearly, given the return on the portfolio of 41% in
sterling (21% in US Dollars), the borrowing has added to the Net Asset Value
per share to the tune of 6 pence. Performance Fee Earlier this year, we agreed with the manager that the performance fee would be discontinued from 31st March 2016. A settlement of GBP63,000 was made at that date to discharge an accrued liability for fees earned. I would note that this decision has led to a considerable saving for shareholders in the second half of our fiscal year and we are grateful to the manager for their flexibility and understanding. Our ongoing charges amounted to 1.49%, unchanged from last year. Directorate There have been no changes this year, but the Board is mindful of the need to keep refreshing itself and it is likely that there will be some change in the year ahead. It has been three years since the last binding resolution on the Company's remuneration policy was put to the shareholder vote. Resolution 2 will be put to a binding shareholder vote at this AGM, it is proposed that there is no change to the existing remuneration policy currently in place. In line with best practice, all the members of the Board will be standing for re-election at the AGM in January. Shareholder Communication This annual report is an important part of our communication with you. In addition, my colleagues and I are ready to address any concerns you may have. Please email the Company at mps5@ntrs.com with any questions you would like us to answer. At the AGM, despite the quantum of formal material which has to be tackled, Matthias will as usual be giving his presentation on the markets and outlook for the year ahead. We have decided not to post the interim report and accounts for the half year to 31 March 2017, these will be available on the Company's website www.bee-plc.com. Outlook 2016 has turned out to be a year of political shock - a feature with which investors in our region are all too familiar. It is a surprise then to see similar disruption visited on the developed world. While changes to the institutional arrangements surrounding trade and foreign relations are inevitable, they are unlikely to dilute the positive case for investing in our region. This is based on an improving economic outlook, recovering profitability and low valuations. Steven Bates Chairman 9 December 2016 Report of the Alternative Investment Fund Manager for the year ended 30 September 2016 How we manage the Company At Baring Fund Managers Limited, we believe that a sound research process is the starting point of any successful investment approach. In our view, it is most effective to analyse both companies and countries, with the goal of investing in the most attractive companies in the most attractive countries. Our research focuses on growth at a reasonable price, on sensitivity to currency movements, and to other external factors; on the soundness or otherwise of government policy (in the case of a country), or business plan (in the case of a company); and last but not least, on the level of valuation. This research gives rise to an assessment of the fundamental drivers of return, and to this we add a subjective judgement as to the level of return we expect from each asset in which we might invest. We also check that these rankings are consistent with the broader thematic developments we expect as a firm. These rankings then allow us to construct a disciplined and relatively concentrated portfolio of our most attractive candidates. Baring Emerging Europe PLC - NAV per share, share price, % discount [GRAPHIC REMOVED] Performance In an environment where Emerging European equity markets stayed volatile but where the overall tone turned substantially more positive over the course of the year the Net Asset value per share of the Company rose by 41%, outperforming the MSCI Emerging Europe 10/40 benchmark by 14%. Crucially, corporate profitability started to improve after enduring year-long headwinds such as falling commodity prices, rising interest rates or hostile regulatory environments. This is testament, in our view, to the growing managerial ability, growing awareness of corporate governance standards and strong underlying growth potential of Emerging European economies. While the Company's NAV benefitted from the substantial decline of the GBP versus most Emerging European currencies it is noteworthy to highlight that the largest part of earnings (generated from dividend payments) were booked before the sharp correction of the GBP over the summer. All things being equal, the lower GBP exchange rate will lend extra support to GBP earnings generation in the coming year. The Company continued to benefit from its diversification, delivering healthy returns while being less volatile than, for example, the individual stock markets of Russia or Turkey, the region's largest countries and economies. In sharp contrast to last year the individual countries' USD returns were not homogenous and rarely was there a year where Emerging European stock markets delivered a more diverse set of results. Amongst the larger countries, the Russian stock market fared best rising by more than 20% (in USD terms) over the course of the year. Turkey, plagued by many setbacks, still delivered a positive return of approximately 4%, while Poland, prolonging the sorry trend that started last year, suffered from political interference and shed almost 18% (in USD terms). On the surface the underwhelming performance of the Polish stock market gives little reason for an optimistic assessment of the prevailing situation. A more nuanced picture, however, emerges when the Polish small and midcap sector is taken into consideration. In contrast to Polish blue chips, the largely private sector medium sized companies lived up to their reputation as the backbone of the country's economy and impressed through business acumen, innovation and flexibility in the face of an increasingly difficult local and European political backdrop. Not surprisingly, these stocks attracted increased attention over the course of the year, delivered outstanding results and successfully de-coupled from the overall down-beat environment on the Warsaw stock exchange. Hungary's stealthy improvement continued this year and catapulted the small Central European nation's stock market to the top of the region's rankings for the second time in a row, with a return of more than 30%. The overall return of stock markets in other smaller new EU member states such as Romania or Czech Republic was more muted, but still offered opportunities at the single stock level, partially mirroring the situation in Poland. The Greek stock market could not sustain the relief rally staged after a successful recapitalisation of the Greek banking sector in December 2015 and suffered particularly after the leave vote in the UK's EU referendum. While the Company's exposure to different markets helped to control risk, it was good stock selection that contributed the lion's share of the 14% outperformance over the course of the year, most of it stemming from the Company's holdings in Russian equities. The Company's two largest holdings (both significant overweight positions relative to the benchmark) Sberbank (the largest bank in Russia) and Lukoil (a leading Russian energy producer) are a case in point. Generating more than 100% and 50% USD total return, respectively, over the course of the year the two largest holdings in the Company's portfolio did much of "heavy lifting" which, by 30th September, brought the Company's net asset value per share close to the highs of 2014. It goes without saying that this is a positive outturn and we deem the underlying reasons to be supportive for our long-standing argument that Baring Emerging Europe plc's long term performance potential is not defined by oil price fluctuations or geopolitics but is a product of multiple growth avenues present in a geography of more than 300 million inhabitants. Geographically Given the impressive results the Russian stock market delivered this year it is relatively easy to forget how jittery the market was when oil prices tested levels of USD 30 and below in January. While it first took a stabilisation of energy prices before Russian equities, bonds and the Rouble found firmer footing it is important to point out that Russian capital markets functioned well throughout the crisis. In our view this is largely due to the successful policies implemented by the Russian Central Bank, which continued its uncompromising inflation targeting policy. Determined to anchor inflation expectations as the Russian economy rebalanced and began to enter an expansion phase, Central Bank governor Elvira Nabiullina kept a hawkish stance and yet again proved her independence from political influence. Further, corporate earnings (of listed companies), measured in US Dollars, started to improve, presaging the broader economy's move out of recession. This is clearly a very positive development and, in our view, an indication that well managed Russian companies use an environment of tight credit and relatively weak demand to gain market share and successfully consolidate the market. Politically the year was characterised by continued broad-based support for President Putin's policies, culminating in September's parliamentary elections, where, contrary to the events in 2011, the ruling United Russia Party's victory was largely uncontested domestically and internationally. As for foreign policy, Russia's controversial involvement in Syria has stabilised the Assad regime. While it is very hard to draw conclusions about the success of Russian foreign policy at this stage and the plight of the Syrian people remains, any advancement to an eventual peace process in Syria seems all but impossible without the endorsement of Russia. The Syrian war theatre, a long simmering issue in Russian - Turkish relations, suddenly turned into a serious international crisis when Turkish fighter jets downed a Russian war plane over alleged infringement of Turkish sovereign
airspace. This incident led to a diplomatic ice age in the bilateral
relationship and to sanctions affecting the sale of Turkish goods (machinery,
food) and services (travel industry, tourism) to Russia. With the Turkish
tourism industry already suffering from falling arrivals in the wake of an
increase of terrorist activity on Turkish soil the travel ban for Russian tour
operators couldn't have come at a worse time. As the extended election cycle in
Turkey finally came to a market-friendly conclusion on 1 November 2015, market
participants welcomed the fact that President Erdogan's AK Party found itself
in a position to form a single party government but fell short of a
constitutional majority in parliament. This enabled the implementation of a
long overdue reform programme without having to compromise on the system of
checks and balances. Unperturbed by political campaigning economic agents would
finally be able to plan longer term, allowing the full achievement of Turkey's
high trend rate of potential economic growth. While the situation in Syria gave
cause for concern, it is also a sharp reminder to EU members about the crucial
role Turkey plays in the Union's plans to get refugee flows under control. The
positive attitude of market participants would prove unfounded however: the
resurgence of political risk factors on the back of the continuous criticism by
the President of prime minister's Davutoglu's policies (followed by his
dismissal) and ongoing meddling with the Central Banks independence culminated
in one of the most extraordinary developments in the last year in the shape of
the coup attempt of a junta of generals on the weekend of July 15th. The
overwhelming commitment of the Turkish population to democracy saw millions of
people disobeying a junta imposed curfew and taking to streets where, in the
early hours of the next day, it become clear that democracy had won, sadly at
the cost of 256 lives. In our view this powerful statement of Turkish citizens
of all backgrounds and walks of life serves as a reminder of the strong uniting
elements in Turkish society even in the face of its fractious politics.
President Erdogan's actions seem less concerned with the country's progress but
are focused rather on unravelling the tentacles across Turkish institutions of
US-based preacher Abdullah Gulen, who has been accused of fomenting the coup.
From the outside perspective the President's attempt to clear state
institutions of Gulenists quickly turned into a broad-based witch hunt, sending
thousands to jail. Long term, the erosion of the balancing powers of
independent state institutions poses a clear risk to Turkish economic growth
and was indirectly referred to as one of the key reasons when rating agency
Moody's downgraded its assessment of Turkish sovereign bonds.
In Poland, market participants saw their worst fears come true when, after the
widely expected election victory, the right wing, conservative PiS movement
wasted little time and implemented a catalogue of legislative and fiscal
measures aimed at raising much needed budget revenues (mostly to finance
increased child benefits, a key election promise) and impose a higher degree of
control over the country's financial sector. While clearly inexperienced in
communicating with market participants, it is important to highlight that over
the course of the year the PiS government toned down its rhetoric markedly and
key players, such as the Minister for economic development Morawiecki, came
forward with a more balanced approach to important issues such as the pension
reform, consolidation in the Polish banking sector, budget policies and long
term economic strategy. The willingness of the government to take on board
constructive criticism was taken positively by market participants and could
open the path to an environment where the positive economic development in the
country will finally be reflected in the earnings of large cap companies, and
not only smaller and medium sized, privately owned enterprises.
The Greek economy, burdened by ongoing fiscal consolidation, capital controls
and the slow implementation of structural reforms, continued to struggle.
Nevertheless, supported by a bumper tourist season, the ongoing healing process
could well turn into a virtuous circle of economic growth aided by the
political willingness to co-operate with the supranational institutions
involved, thereby increasing tax revenues, partially lifting capital controls,
restructuring external debt, healing loan portfolios and allowing some room for
fiscal expansion.
Company weighting versus Benchmark Index by country of operation at 30
September 2016
Country of operation Company Benchmark
Czech Republic 3.4% 2.2%
Greece 1.7% 4.7%
Hungary - 4.2%
Poland 14.4% 16.0%
Russia 58.7% 55.4%
Turkey 18.5% 17.5%
Other 8.4% -
Net current liabilities -5.1% -
100.0% 100.0%
Source: Barings, MSCI.
Strategy
The Company has made use of a gearing facility of up to 10% of NAV for the
entire year, as part of its strategy aimed at enhancing returns and earnings
(dividend income) for shareholders. Use of this facility in the future will
depend on the opportunity set present on Emerging European Equity markets.
Portfolio-wise, over the course of last year, the Company's strategic exposure
to smaller and medium sized companies at the expense of larger capitalised
stocks remained, though substantial changes in sector and geographic allocation
took place. Most notably, in reaction to a weakening economic and institutional
outlook, the exposure to the Turkish banking sector was reduced by selling our
holdings in Akbank and Vakif Bank. While a part of these funds was used to
build a position in the Turkish conglomerate Sabanci Holding, the largest part
was re-invested in stocks in Poland and Russia. Within smaller capitalized
stocks in Turkey the Company sold parts of the holdings in the industrials Ford
Otosan and Turk Traktor, as price targets were reached, and invested in the VW
car retailer Dogus Otomotif.
Stocks in the Russian agricultural sector, a key beneficiary of the local
production support measures and falling input costs saw a significant increase
in valuation as investors sought to participate in positive operational
developments. Taking advantage of this trend Rusagro and Kernel were sold over
the course of the year. Moscow Stock Exchange, a stock that was added to the
portfolio at an attractive valuation in the volatile period at the beginning of
2016, was subsequently sold as the share's rapid price increase and the sharp
drop in Russian interest rates (a key profit contributor to Moscow Stock
Exchange's main business line) rendered it overvalued relative to other
investment opportunities - one of which was the world's leading diamond miner
Alrosa, where a combination of growth potential and a strong dividend payout
proposal underscore the company's attractiveness. Within the Russian internet
space we took the decision to rotate a large part of our holdings in Mail.ru,
the leading social network operator, into Yandex, the leading search engine as
we grew more comfortable that the latter's margins would eventually stabilise
and the revenue line would be supported by a renewal in advertising growth. In
Central Europe the company took part in the IPO of GE Capital's Czech consumer
lending business, rebranded as "Moneta". Its parent's intention to sell various
subsidiaries due to regulatory constraints offers the opportunity, in our view,
to participate in a strongly capitalised company operating in one of the
healthiest consumer markets globally. In the small and mid-cap space the
Polish-German motor industry supplier Uniwheels was sold as the stock went
beyond its price target while we invested in extruded product and aluminum
packaging producer Kety, also from Poland.
Overall the Company's portfolio characteristics remain poised towards growth
opportunities. We do feel, however, that we need not compromise on potential
yield generation pursuing this strategy. This quite unique feature of Emerging
European stock markets serves to demonstrate the potential offered by Emerging
European equity markets and should contribute to market resilience should
global interest rates rise or global growth prospects disappoint.
Performance versus Benchmark Index
for the year ended 30 September 2016
[GRAPHIC REMOVED]
NAV total return (Source: AIC)
Share price total return (Source: AIC)
Benchmark Index? (Source: MSCI)
? The Benchmark Index is the MSCI EM Europe 10/40 Index.
Fund, Benchmark Index and country returns (GBP)
- 30 September 2015 to 30 September 2016
[GRAPHIC REMOVED]
Benchmark Index 27.1%
Bee PLC 41.0%
Russia 46.9%
Czech Republic 1.7%
Poland -1.6%
Turkey 23.4%
Hungary 61.0%
Greece -27.6%
Source: Barings
Outlook
We believe that Emerging European stock markets provide a rich opportunity set
for investors given the combination of a solid earnings growth potential, a
resilient, improving economic backdrop and low valuations. While the recent
increase in earnings expectations on Emerging European equity markets must be
treated with some level of caution, it is encouraging to see that fundamentals
in the region are firmly in place and have withstood a taxing global backdrop
of currency depreciation, generally underwhelming global economic growth and
political turbulence of all sorts. A confirmation of the positive trend in
Emerging European companies' earnings potential, which we believe is in the
realm of the possible, would underscore the region's companies' ability to
compete globally, attract investment and deliver growth and shareholder
returns. While this year's events in Turkey once more highlight the political
risks involved, we are encouraged by the high level of protection a broadly
diversified portfolio of carefully selected equities has offered over the
course of the year without having to compromise on performance. This serves as
a reminder that there is a wide spectrum of investment and growth opportunities
in Emerging European equity markets, a feature, we believe that will prove
increasingly attractive to investors globally, given the growing correlation of
asset classes all over the world.
Investment portfolio
The Company's investment portfolio at 30 September 2016, is set out in the
following table:
Holding Primary country Market value GBP000 % of investment
of investment portfolio
1 Sberbank Russia 13,364 11.28
2 Lukoil Holdings Russia 12,277 10.37
3 PZU Poland 6,906 5.83
4 Magnit Russia 6,065 5.12
5 Novatek Russia 5,987 5.06
6 Halk Bank Turkey 5,565 4.70
7 Grupa Kety Poland 4,008 3.38
8 Phosagro Russia 3,664 3.09
9 Dogus Otomotiv Turkey 3,581 3.02
10 AO Tatneft Russia 3,318 2.80
11 Alrosa Russia 3,095 2.61
12 Gazprom Russia 3,093 2.61
13 Haci Omer Sabanci Turkey 3,032 2.56
Holdings
14 Yandex Russia 2,914 2.46
15 M Video Russia 2,795 2.36
16 Alior Bank Poland 2,582 2.18
17 Tupras Petrol Turkey 2,515 2.12
18 Moneta Money Bank Czech Republic 2,275 1.92
19 CCC Poland 2,237 1.89
20 LSR Russia 2,152 1.82
21 Coca Cola Icecek Turkey 2,133 1.80
22 TCS Russia 2,126 1.79
23 Electrica Romania 2,029 1.71
24 BCA Transilvania Romania 1,972 1.67
25 Wienerberger Austria 1,882 1.59
26 Megafon Russia 1,799 1.52
27 Kofola Czech Republic 1,796 1.52
Cekoslovensko
28 MD Medical Russia 1,590 1.34
29 National Bank of Greece 1,583 1.34
Greece
30 Globaltrans Russia 1,513 1.28
31 Mail.ru Russia 1,501 1.27
32 Vostok New Russia 1,359 1.15
Ventures Ltd
33 Cyfrowy Polsat Poland 1,324 1.12
34 Ford Otomotiv Turkey 1,314 1.11
Sanayi
35 Epam Systems Belarus 1,212 1.02
36 Turk Traktor Turkey 1,168 0.99
37 Turk Turkey 1,116 0.94
Telekomunikasyon
38 Brisa Bridgestone Turkey 938 0.79
Sabanci
39 Cineworld UK 856 0.72
40 MHP Ukraine 837 0.71
41 Kcell Kazakhstan 632 0.53
42 Globalworth Real Romania 626 0.53
Estate
43 Migros Ticaret Turkey 526 0.44
44 Sollers Russia 417 0.35
45 Global Ports Russia 409 0.35
46 OPAP Greece 404 0.34
47 Norilsk Nickel Russia 40 0.03
Total investments 124,527 105.13
Net current (6,077) (5.13)
liabilities
Net assets 118,450 100.00
Review of Top Ten Holdings at 30 September 2016
Holding Sector Market value % of End weighting Company comment
GBP000 investment relative to
portfolio benchmark
Sberbank Financials 13,364 11.28 Overweight Russia's largest
bank, successful
implementation
of modernisation
strategy offers
scope for
further
improvement of
profitability.
Lukoil Energy 12,277 10.37 Overweight High yielding
Russian oil
stock with
potential for
further dividend
growth.
PZU Financials 6,906 5.83 Overweight Largest Polish
insurer. Its
capital base
allows for
substantial
dividend payout
ratios.
Potential
consolidator in
the Emerging
European
financial
sector.
Magnit Consumer 6,065 5.12 Overweight Russia's leading
Staples supermarket.
Benefitting from
solid margins
and strongly
growing sales.
Novatek Energy 5,987 5.06 Overweight Largest
independent gas
producer in
Russia.
Liquified
Natural Gas
strategy
provides
significant
growth
potential.
Halk Bank Financials 5,565 4.70 Overweight Largest listed
state-controlled
Bank in Turkey.
Low cost deposit
base supports
superior
interest
margins.
Grupa Kety Industrials 4,008 3.38 Overweight Polish
manufacturer of
aluminum
extruded
products.
Invests in
innovative
technologies.
Benefits from
investment cycle
in Poland
(construction)
and recovery in
Europe (auto
industry).
Phosagro Materials 3,664 3.09 Overweight A leading
phosphate-based
fertiliser and
phosphate rock
producer from
Russia. Its
substantial,
high grade
phosphate rock
mines provide
cost advantage
over peers and
allow for growth
opportunities.
Dogus Consumer 3,581 3.02 Overweight Turkish VW-Group
Otomotiv Discretionary car importer and
retailer.
Outside its core
activities,
growth in
business lines
such as second
hand car
dealerships and
spare parts
render Dogus'
profit margins
less cyclical.
AO Tatneft Energy 3,318 2.80 Overweight Local energy
champion in the
Russian
independent
republic of
Tatarstan.
Strong cash
flows allow for
high dividend
payout ratios
and pursuit of
downstream
growth strategy.
64,735 54.65
Classification of assets
The Company's portfolio as per MSCI at 30 September 2016 was:
Percentage classification of assets based on valuation
Russia Poland Czech Turkey Other Net Current Total Total
Republic Countries Liabilities 2016 2015
Consumer 2.8 3.0 - 4.9 1.0 - 11.7 7.6
Discretionary
Consumer Staples 5.2 - 1.5 2.2 0.6 - 9.5 14.7
Energy 21.0 - - 2.1 - - 23.1 22.9
Financials 13.5 8.0 1.9 7.2 4.0 - 34.6 39.0
Healthcare 1.5 - - - - - 1.5 1.1
Industrials 1.7 3.4 - 1.1 - - 6.2 4.1
Materials 5.7 - - - 1.4 - 7.1 7.3
Telecommunication 1.6 - - 1.0 0.4 - 3.0 4.8
Services
Information 3.8 - - - 0.9 - 4.7 3.8
Technology
Real Estate 1.9 - - - 0.4 - 2.3 -
Utilities - - - - 1.4 - 1.4 3.9
Total equity 58.7 14.4 3.4 18.5 10.1 - 105.1 109.2
investment
Net current - - - - - (5.1) (5.1) (9.2)
liabilities
Total 2016 58.7 14.4 3.4 18.5 10.1 (5.1) 100.0
Total 2015 56.1 21.7 - 25.1 6.3 (9.2) 100.0
Sector distribution of portfolio (%) at 30 September 2016
Portfolio weight Benchmark Index weight
2016 % 2015
%
Consumer Discretionary 11.7 4.1
Consumer Staples 9.5 7.2
Energy 23.1 34.1
Financials 34.6 33.8
Healthcare 1.5 1.0
Industrials 6.2 1.9
Materials 7.1 0.0
Telecommunication Services 3.0 8.8
Information Technology 4.7 0.7
Real Estate 2.3 5.4
Utilities 1.4 3.0
Total equity investment 105.1 -
Net current liabilities (5.1) 0.0
Baring Fund Managers Limited
9 December 2016
Strategic report
for the year ended 30 September 2016
The Directors submit to the shareholders their Strategic report, Director's
report and the audited financial statements of the Company for the year ended
30 September 2016.
Business and tax status
In the opinion of the Directors, the Company has conducted its affairs during
the period under review, and subsequently, so as to maintain its status as an
investment trust for the purposes of Chapter 4 of Part 24 of the Corporation
Tax Act 2010. The Company has obtained written approval as an investment trust
from HM Revenue & Customs for all accounting periods up to the year ended 30
September 2013 and has made a successful application under Regulation 5 of the
Investment Trust (Approved Company) (Tax) Regulations 2011 for investment trust
status to apply to all accounting periods starting on or after 1 October 2013
subject to the Company continuing to meet the eligibility conditions contained
in Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements
outlined in Chapter 3 of Part 2 of the Regulations.
The Company is an investment company as defined in Section 833 of the Companies
Act 2006. The Company is not a close company for taxation purposes.
Alternative Investment Fund Management Directive ("AIFMD")
In order to comply with AIFMD, the Company has appointed Baring Fund Managers
Limited ("BFM") to act as its Alternative Investment Fund Manager ("AIFM")
pursuant to an Alternative Investment Fund Management Agreement entered into by
the Company and the AIFM on 21 July 2014 (the "AIFM Agreement"). BFM has been
approved as an AIFM by the UK's Financial Conduct Authority. The investment
management agreement entered into by the Company and Baring Asset Management
Limited ("BAM") on 12 November 2002 (the "IMA") has been terminated although
BFM has delegated the portfolio management of the Company's portfolio of assets
to BAM. The AIFM Agreement is based on the IMA and differs to the extent
necessary to ensure that the relationship between the Company and BFM is
compliant with the requirements of AIFMD. The fees payable to BFM and the
notice period under the AIFM Agreement are unchanged from the IMA. The Company
and BFM have also entered into a Depositary Agreement with State Street
Trustees Limited ("State Street") pursuant to which State Street has been
appointed as the Company's Depositary for the purposes of AIFMD.
The Company is managed by external parties in respect of investment management,
custodial services and the day-to-day accounting and company secretarial
requirements. As noted above the Alternative Investment Fund Manager is BFM and
details of the agreement with BFM are given in note 3 to the accounts. The
Depositary and Custodian is State Street Bank & Trust Company Limited.
Secretarial services are provided by Northern Trust Global Services Limited.
The Company has no employees. The Directors are all non-executive.
Investment objective
The investment objective is to achieve long-term capital growth, principally
through investment in securities listed on or traded on an Emerging European
securities market or in securities of companies listed or traded elsewhere,
whose revenues and/or profits are, or are expected to be, derived from
activities in Emerging Europe.
Investment policy
The policy of the Directors is that, in normal market conditions, the portfolio
of the Company should consist primarily of diversified securities listed or
traded on Emerging European securities markets (including over the counter
markets). Equity securities for this purpose include equity-related instruments
such as preference shares, convertible securities, options, warrants and other
rights to subscribe for or acquire, or relating to, equity securities. The
Company may also invest in debt instruments such as bonds, bills, notes,
certificates of deposit and other debt instruments issued by private and public
sector entities in Emerging Europe.
In addition, Emerging European exposure may be obtained by indirect means.
Investments may, for example, be made in securities of companies listed on
securities markets outside Emerging Europe that derive, or are expected by the
Directors to derive, the majority of their revenues and/or profits and/or
growth from activities in Emerging Europe.
The Company may also invest in other funds in order to gain exposure to
Emerging Europe where, for example, such funds afford one of the few
practicable means of access to a particular market, or where such a fund
represents an attractive investment in its own right. The Company will not
invest more than 15% of its gross assets in other UK listed investment
companies (including investment trusts).
The Company may from time to time invest in unquoted securities, but the amount
of such investment is not expected to be material. Furthermore the Board has
agreed that the maximum exposure to unquoted securities should be restricted to
5% of the Company's net assets. At the year end there were no unquoted
investments in the portfolio.
For the purposes of this investment policy the Board has defined Emerging
Europe as the successor countries of the former Soviet Union, Poland, Hungary,
the Czech Republic, Slovakia, Turkey, the States of former Yugoslavia, Romania,
Bulgaria, Albania and Greece. There is no restriction on the proportion that
may be invested in these countries.
In addition the Board has agreed that up to 5% of the total assets may be
invested in other countries provided that any investments made are companies
listed on a regulated stock exchange.
The Board has agreed that the maximum value of any one investment should not
exceed 12% of the Company's total portfolio save with the prior written consent
of the Board. Where excess occurs due to market movement the manager will
notify the Board of this and will reduce the holding to below 12% within six
months.
In addition to the above restriction on investment in a single company the
Board seeks to achieve a spread of risk in the portfolio through monitoring the
country and sector weightings of the portfolio. There will be a minimum of 30
stocks in the portfolio.
The Company's Articles provide that the Company may borrow an amount equal to
its share capital and reserves. At 30 September 2016, the only loan facility in
place was a US$17 million loan facility with State Street Bank and Trust
Company Limited which can be used as a source of gearing. In order to provide a
mechanism to gear the portfolio the Board has authorised the Alternative
Investment Fund Manager to invest in long only derivatives in Polish, Russian
and Turkish index futures where feasible. The Alternative Investment Fund
Manager has discretion to operate with an overall exposure of the portfolio to
the market of between 90% and 110%, to include the effect of any derivative
positions. Gearing was employed during the year, US$13 million was drawn down
on 13 July 2016 and remained at this level up to and including 30 September
2016.
Return per ordinary share
30 September 30 September 30 September 30 September 30 September 30 September
2016 2016 2016 2015 2015 2015
Revenue Capital Total Revenue Capital Total
Return per 21.39p 184.53p 205.92p 22.05p (168.86)p (146.81)p
ordinary
share
Revenue return (earnings) per ordinary share is based on the net revenue on
ordinary activities after taxation of GBP3,623,000 (2015: GBP4,057,000). Capital
return per ordinary share is based on net capital gains for the financial year
of GBP31,261,000 (2015: net capital losses of GBP(31,064,000)). These calculations
are based on the weighted average of 16,940,616 (2015: 18,395,544) ordinary
shares in issue during the year.
At 30 September 2016 there were 16,387,212 ordinary shares of 10 pence each in
issue (2015: 17,751,724) which excludes 3,318,207 ordinary shares held in
treasury (2015: 3,318,207 shares held in treasury). The shares held in treasury
are treated as not being in issue when calculating the weighted average of
ordinary shares in issue during the year. All shares repurchased during the
year were cancelled.
Dividends
The Board recommends an annual dividend of 23p per share the same as the annual
dividend 23p for the previous year. Subject to approval of the Annual General
Meeting, the recommended annual dividend will be paid on 16 February 2017 to
members on the register at the close of business on 20 January 2017. The shares
will be marked ex-dividend on 19 January 2017.
Discount
The Directors have adopted a policy with regard to the market rating of the
Company's shares and seek to limit the discount to NAV at which the Company's
shares trade to a level significantly lower than 10%, using as necessary the
Company's share repurchase authority. During the year ended 30 September 2016,
1,364,512 shares were repurchased at a cost of GBP7,453,000 (1,152,319 shares
were repurchased during the year ended 30 September 2015 at a cost of GBP
6,060,000). Any shares repurchased will either be held in treasury and may be
issued at a later date at or above net asset value, or cancelled.
If the average closing mid-market price at which the Company's shares trade in
the market in the 365 day period prior to the publication of the Company's
results for the financial year is greater than a 12% discount, the Company will
offer to repurchase, by way of Tender available to all shareholders, up to 15%
of the outstanding issued share capital at 95% of NAV (after taking into
account of any expenses including the cost of selling investments in order to
fund the repurchase). The relevant NAV number for these purposes is the NAV cum
income. During the 365 day period prior to the publication of the results for
the year ended 30 September 2016 the average discount was 14.8%.
Viability statement
In accordance with provision C.2.2 of the Code, the Directors have assessed the
prospects of the Company over a longer period than the 12 months required by
the "Going Concern" provision. The Board conducted this review for a period of
three years which was selected because it was considered to be a reasonable
time horizon given that the Company invests in Emerging markets which may be
more volatile than developed markets. The Board also regularly considers the
strategic position of the Company including investor demand for the Company's
shares and a three year period is considered to be a reasonable time horizon for this. The Directors' have carried out a robust assessment of the Company's principal risks and its current position. The principal risks faced by the Company and the procedures in place to monitor and mitigate them are detailed below. As the Company's portfolio consists of shares which are listed on regulated markets, many of which are highly liquid, funds can be raised to meet the Company's liabilities as they fall due. The Company has no long term debt. At 30 September 2016 the Company had drawn down US$13 million from its loan facility with State Street Bank as a result of which the Company's portfolio was 5.1% geared. This exposure does increase risk but is carefully monitored by the Board and in any event is limited to 10% of gross assets. The interest cost of the loan is covered 19 times by the revenue surplus. On the basis of the current portfolio yield, the Directors expect the Company to continue to generate a revenue surplus. Based on the above assessment the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities over the three year period to December 2019. Performance At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives of which the most important are as follows: * Performance against the peer group The Board monitors performance relative to a broad range of competitor funds, as defined by the Morningstar Emerging Europe Universe. In the year ended 30 September 2016 the Company was ranked 4th out of 43 funds in this universe. Over three years to 30 September 2016 it was ranked 14th out of 42 funds and over five years it was ranked 5th out of 41 funds. * Performance against the Benchmark Index A chart of NAV performance versus Benchmark Index for the eight years ended 30 September 2016 (total return) is set out in the Directors' Remuneration report on page 36. * Discount to NAV During the 365 day period prior to the publication of the results for the year ended 30 September 2016 the average discount was 14.8%. * Ongoing charges The annualised ongoing charges figure for the year was 1.49% (2015: 1.49%). This figure, which has been prepared in accordance with the recommended methodology of the Association of Investment Companies represents the annual percentage reduction in shareholder returns as a result of recurring operational expenses excluding performance fee. The Board reviews each year an analysis of the Company's ongoing charges figure and a comparison with its peers. Principal risks The key risks to the Company fall broadly under the following categories: * Investment and strategy The Board regularly reviews the investment mandate and long-term investment strategy in relation to the market and economic conditions. The Board also regularly monitors the Company's investment performance against the Benchmark Index and the peer group and its compliance with the investment guidelines. * Accounting, legal and regulatory In order to qualify as an investment trust, the Company must comply with the provisions contained in Section 1158 of the Corporation Taxes Act 2010. A breach of Section 1158 in an accounting period could lead to the Company being subject to corporation tax on gains realised in that accounting period. Section 1158 qualification criteria are continually monitored by Baring Fund Managers Limited and the results reported to the Board at its regular meetings. The Company must also comply with the Companies Act and the UKLA Listing Rules. The Board relies on the services of the administrator, Northern Trust Global Services Limited and its professional advisers to ensure compliance with the Companies Act and the UKLA Listing Rules. * Loss of investment team or Alternative Investment Fund Manager A sudden departure of the Alternative Investment Fund Manager or several members of the investment management team could result in a short-term deterioration in investment performance. The Alternative Investment Fund Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team-based approach, as well as special efforts to retain key personnel. * Discount A disproportionate widening of the discount relative to the Company's peers could result in loss of value for shareholders. The Board regularly discusses discount policy and has set parameters for the Company's broker to follow with regard to the buy-back of shares. * Corporate governance and shareholder relations Details of the Company's compliance with corporate governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report on pages 27 to 32. * Operational Like most other investment trust companies, the Company has no employees. The Board currently consists of five non-executive Directors, two of whom are female and the other three are male and is chaired by Steven Bates. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Alternative Investment Fund Manager and the Company's service providers. The security of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These are regularly tested and monitored. The Depositary and Custodian and the Alternative Investment Fund Manager also produce annual reports on internal controls which are reviewed by their respective auditors and give assurance regarding the effective operation of controls. * Financial The financial risks faced by the Company are disclosed in note 18 on pages 51 to 55. * Future developments The future development of the Company is much dependent upon the success of the Company's investment strategy in the light of economic and equity market developments in the countries in which it invests. The Alternative Investment Fund Manager discusses the outlook in its report on page 13. * Social, community and human rights The Company does not have any specific policies on social, community or human rights issues as it is an investment company which does not have any physical assets, property, employees or operations of its own. For and on behalf of the Board Steven Bates Chairman 9 December 2016 Report of the Directors Directors The present Directors are listed below and on page 2. They are all non-executive and have served throughout the year apart from Saul Estrin who retired from the Board on 13 January 2016. The Board consists of two females and three males. Steven Bates spent 18 years with the Fleming group until 2002, latterly as head of emerging markets of JPMorgan Fleming Asset Management. He has extensive experience in both emerging and developed markets. He is a director of GuardCap which is a specialist asset management business and is also the chief investment officer of Salisbury Partners. He is also on the boards of a number of financial companies. He was appointed a Director of Baring Emerging Europe PLC on 27 January 2003 and was appointed Chairman of Baring Emerging Europe PLC on 19 January 2010. Jonathan Woollett is the founding partner of Acoro Capital Partners LLP, an investment partnership and a director of Thames Capital Holdings Limited, a London property company. He has over 20 years experience in the region as a director at the European Bank for Reconstruction and Development and prior to EBRD, a director at Credit Suisse Asset Management and CS First Boston. Prior to Credit Suisse, he worked for UBS, having started his banking career with Deutsche Bank in 1979. He was appointed a Director of Baring Emerging Europe PLC on 23 July 2008. Ivo Coulson has over 25 years of experience in the City, first with BZW as a director in their investment management division and then as a director with SG Warburg in their equity trading operation, latterly heading up their closed end fund team. He is currently head of portfolio management at Stanhope Capital LLP, a prominent multi family office based in the West End of London and a non executive director of JPMorgan Smaller Companies Investment Trust PLC. He was appointed a Director of Baring Emerging Europe PLC on 29September 2010. Frances Daley trained as a Chartered Accountant with a predecessor firm to EY and spent 9 years in Corporate Finance followed by 18 years in various CFO roles. From 2007 to 2012 she was group finance director of the private equity backed Lifeways Group, the UK's largest provider of specialist support to adults with learning disabilities and mental health needs. She is also Chair of Haven House Children's Hospice and Chair of James Allen's Girls' School and a non-executive director of Henderson Opportunities Trust PLC. She was appointed a Director of Baring Emerging Europe PLC on 29 April 2014. Nadya Wells is a Non-Executive Director with over 20 years Emerging and frontier markets experience as a long-term investor and governance specialist. Latterly she spent 13 years with the Capital Group until 2015, as a portfolio manager and analyst with a focus on EMEA markets. Prior to that she was a portfolio manager at Invesco Asset Management investing in Eastern Europe in closed end funds until 1999. She started her career with EY in management consulting. She is also an independent non-executive director on the Supervisory Board of Sberbank of Russia where she sits on audit, risk and strategy committees and a non-executive director of ECEX AB in Sweden. She has an MBA from INSEAD. She was appointed to the Board of Baring Emerging Europe PLC on 23 September 2015. There were no contracts or arrangements subsisting during or at the end of the financial year in which any Director is or was materially interested. No
Director held a shareholding in any of the investments in the Company's
portfolio during the year ended 30 September 2016.
Substantial shareholdings
At 8 December 2016, the Company had received notification of the following
disclosable interests in the ordinary share capital of the Company:
Number of shares %
City of London Investment 2,990,964 shares 18.86%
Management Company Ltd
Lazard Asset Management LLC 1,737,404 shares 10.96%
City of Bradford 929,000 shares 5.86%
Metropolitan District
Council
Corporate governance
The statement of Corporate Governance, as shown on pages 27 to 32, is
incorporated by cross reference into this report.
Going concern
The Directors believe that, having considered the Company's investment
objectives, risk management policies, capital management policies and
procedures, nature of the portfolio and expenditure projections, the Company
has adequate resources and an appropriate financial structure in place to
continue in operational existence for the foreseeable future. The assets of the
Company consist mainly of securities which are readily realisable. For these
reasons, they consider that there is reasonable evidence to continue to adopt
the going concern basis in preparing the accounts.
Performance against the peer group
The Board monitors performance relative to a broad range of competitor funds,
as defined by the Morningstar Emerging Europe Universe. In the year ended 30
September 2016 the Company was ranked 4th out of 43 funds in this universe.
Over three years to 30 September 2016 it was ranked 14th out of 42 funds and
over five years it was ranked 5th out of 41 funds.
Socially responsible investment
The Board has delegated the investment management function to Baring Fund
Managers Limited. The Alternative Investment Fund Manager's primary objective
is to produce superior financial returns to investors. It believes that over
the long term sound social, environmental and ethical policies make good
business sense and takes these issues into account when, in its view, they have
a material impact on either the investment risk or the expected return from an
investment.
Global greenhouse gas emissions for the year ended 30 September 2016
The Company has no greenhouse gas emissions to report from the operations of
the Company, nor does it have responsibility for any other emission producing
sources under the Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013.
Annual General Meeting ("AGM")
THIS SECTION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to any aspect of the proposals referred to in this
document or as to the action you should take, you should seek your own advice
from a stockbroker, solicitor, accountant, or other professional adviser.
If you have sold or otherwise transferred all of your shares, please pass this
document together with the accompanying documents to the purchaser or
transferee, or to the person who arranged the sale or transfer so they can pass
these documents to the person who now holds the shares.
The AGM will be held on Tuesday, 24 January 2017 at 2.30pm. The formal notice
of the AGM is set out on pages 56 and 57. Separate resolutions are proposed for
each substantive issue. Resolutions relating to the following items of special
business will be proposed at the AGM, for which shareholder approval is
required in order to comply with the Companies Act 2006.
Authorities to allot shares and to disapply pre-emption rights (Resolutions 12
and 13)
Approval is sought to give the Board the authority to allot ordinary shares or
grant rights to subscribe for or convert any securities into ordinary shares up
to an aggregate nominal amount equal to GBP79,297 (representing 792,970 ordinary
shares of 10 pence each). This amount represents approximately 5% of the issued
ordinary share capital (excluding treasury shares) of the Company as at 8
December 2016, being the latest practicable date prior to publication of the
notice of meeting on pages 56 and 57 (the "Notice"). As at the date of the
Notice, 3,318,207 ordinary shares are held by the Company in treasury.
The Directors do not intend to allot ordinary shares pursuant to this power
other than to take advantage of opportunities in the market as they arise and
only if they believe it is advantageous to the Company's existing shareholders
to do so.
Resolution 13 would, if passed, give the Board the authority to allot shares
(or sell any shares held in treasury) for cash on a non pre-emptive basis up to
an aggregate amount of GBP95,888. This amount represents 958,878 shares and is
approximately 5% of the total share capital of the Company in issue (including
treasury shares) as at 8 December 2016, being the latest practicable date prior
to publication of the Notice. This will enable the Company to issue new shares
(or to sell treasury shares) to investors when the Directors consider that it
is in the best interests of shareholders to do so. This power will not be
utilised when it would result in any dilution of the net asset value per
ordinary share.
In respect of this amount, the Board confirm their intention to follow the
provisions of the Pre-Emption Group's Statement of Principles regarding
cumulative usage of authorities within a rolling three year period. The
Principles provide that usage in excess of 7.5% of share capital should not
take place without prior consultation with shareholders.
The full text of the resolutions is set out in the Notice.
If Resolutions 12 and 13 are approved, the authorities will expire at the
conclusion of the AGM in 2018.
Authority to purchase own shares (Resolution 14)
At the AGM held on 13 January 2016, shareholders renewed the Director's
authority to buyback up to 14.99% of the Company's ordinary shares. Pursuant to
this authority, a total of 598,033 shares were purchased and cancelled during
the year under review. This represented 3.65% of the issued share capital at 30
September 2016. The prices paid for these shares ranged from 403.78p to 638.66p
and the total cost amounted to GBP3,430,000. 527,848 further shares have been
brought back since the Company's year end.
The Board proposes that the Company should be given renewed authority to
purchase ordinary shares in the market either for cancellation or to be held,
sold, transferred or otherwise dealt with as treasury shares in accordance with
the Companies Act.
The Directors consider that the renewal of this authority is in the interests
of shareholders as a whole as the repurchase of ordinary shares at a discount
to their net asset value ("NAV") would enhance the NAV of the remaining
ordinary shares. Accordingly a special resolution will be proposed at the AGM
to authorise the Company to make market purchases of up to 14.99% of the
ordinary shares in issue, equivalent to 2,377,318 ordinary shares as at 8
December 2016, being the latest practicable date prior to publication of the
Notice. Under the Listing Rules of the Financial Conduct Authority, this is the
maximum percentage of its equity share capital that a company may purchase
through the market pursuant to such authority.
Purchases of shares will be made within guidelines set from time to time by the
Board and will only be made in the market at prices below the prevailing NAV
and, in any event, not below a minimum price of 10 pence per share.
The authority for the Company to purchase its own ordinary shares will, by
virtue of the Treasury Share Regulations 2003 and the Companies (Share Capital
and Acquisition by a Company of its Own Shares) Regulations 2009, allow the
Company to hold ordinary shares so purchased in treasury, as an alternative to
immediate cancellation.
Any exercise by the Company of the authority to purchase shares will occur only
when market conditions are appropriate. Purchases will be funded either by
using available cash resources, debt or by selling investments.
This authority shall expire at the earlier of the conclusion of the AGM in 2018
or 23 July 2018, unless such authority has been renewed prior to such time.
The Board considers that all the resolutions to be put to the meeting are in
the best interests of the Company and its shareholders as a whole. The Board
unanimously recommends that you vote in favour of them.
Conflict of interest
Section 175 of the Companies Act 2006, which came in to effect on 1 October
2009, introduced a duty for directors to avoid unauthorised conflicts of
interest. The Articles of Association approved by Resolution 2 at the General
Meeting held on 15 January 2009 allows the Directors to authorise such
conflicts and potential conflicts, where appropriate. The Board has expanded
the terms of reference of the Audit Committee to review conflicts and potential
conflicts and make recommendations to the Board as to whether any such
conflicts should be authorised.
Companies Act 2006 Disclosures
In accordance with Section 992 of the Companies Act 2006 the Directors disclose
the following information:
* the Company's capital structure is summarised on page 49, voting rights are
summarised on page 58, and there are no restrictions on voting rights nor any
agreement between holders of securities that result in restrictions on the
transfer of securities or on voting rights;
* there exist no securities carrying special rights with regard to the control
of the Company;
* details of the substantial shareholders in the Company are listed on page 23;
* the Company does not have an employees' share scheme;
* the rules concerning the appointment and replacement of Directors, amendment
of the Articles of Association and powers to issue or buy back the Company's
shares are contained in the Articles of Association of the Company and the
Companies Act 2006;
* there exist no agreements to which the Company is party to that may affect
its control following a takeover bid; and
* there exist no agreements between the Company and its Directors providing for
compensation for loss of office that may occur because of a takeover bid.
The Board recognises the requirement under Section 417(5) of the Act to detail
information about environmental matters (including the impact of the Company's
business on the environment), any Company employees and social and community
issues; including information about any policies it has in relation to these
matters and effectiveness of these policies. As the Company has no employees or
policies in these matters this requirement does not apply. Notwithstanding, the
Alternative Investment Fund Manager takes into account these considerations
when making investment decisions and determines its voting instructions at
investee company meetings accordingly.
Auditor
The Company's Auditor, KPMG LLP, has indicated its willingness to continue in
office. Resolutions for the re-appointment of KPMG LLP and to authorise the
Board to determine its remuneration will be proposed at the Annual General
Meeting.
By order of the Board
M. J. Nokes F.C.A.
Secretary
9 December 2016
Statement of Corporate Governance
Introduction
The Board is accountable to the Company's shareholders for the governance of
the Company's affairs and this statement describes how the principles of the
2014 UK Corporate Governance Code ("the Code") issued by the Financial
Reporting Council have been applied to the affairs of the Company. In applying
the principles of the Code, the Directors have also taken account of the Code
of Corporate Governance published by the Association of Investment Companies
("the AIC Code"), which has established a framework of best practice
specifically for the boards of investment trust companies. There is some
overlap in the principles laid down by the two Codes and there are some areas
where the AIC Code is more appropriate for investment trust companies.
Applications of the Code's principles
The Board is committed to high standards of corporate governance and seeks to
observe the principles identified in the Code and in the AIC Code. It should be
noted that, as an investment trust, most of the Company's day-to-day
responsibilities are delegated to third parties and the Directors are all
non-executive. Thus not all the provisions of the Code are directly applicable
to the Company.
The Board
The Board currently consists of five non-executive Directors, two of whom are
female and the other three are male and is chaired by Steven Bates. The
Chairman has served on the Board for over nine years and under the Code may not
be considered to be independent of the Company and the Alternative Investment
Fund Manager. The Board however, takes the view that independence is not
necessarily compromised by length of tenure on the Board and experience can add
significantly to the Board's strength. It has therefore been determined that in
performing the role as a Director, the Chairman remains wholly independent and
all the Directors are considered by the Board to be independent of the Company
and the Alternative Investment Fund Manager. Their biographies are set out on
page 22. Collectively the Board has the requisite range of business and
financial experience which enables it to provide clear and effective leadership
and proper stewardship of the Company.
The number of meetings of the Board, the Audit Committee and the Nomination
Committee held during the financial year and the attendance of individual
Directors are shown below:
Board Audit Committee Nomination Committee
Number of meetings in 5 2 1
the year
Steven Bates 5 2 1
Jonathan Woollett 5 2 1
Ivo Coulson 5 2 1
Frances Daley 5 2 1
Nadya Wells 5 2 1
Saul Estrin (retired 2 1 n/a
13 January 2016)
All of the Directors attended the Annual General Meeting held in January 2016.
The Board deals with the Company's affairs, including the consideration of
overall strategy, the setting and monitoring of investment policy and the
review of investment performance. The Alternative Investment Fund Manager takes
decisions as to asset allocation and the purchase and sale of individual
investments. The Board papers circulated before each meeting contain full
information on the financial condition of the Company. Key representatives of
the Alternative Investment Fund Manager attend most of the Board meetings,
enabling Directors to probe further or seek clarification on matters of
concern.
Matters specifically reserved for discussion by the full Board have been
defined and a procedure adopted for the Directors to take independent
professional advice if necessary at the Company's expense.
The Chairman of the Company is a non-executive Director. A senior non-executive
Director has not been identified as the Board is comprised entirely of
non-executive Directors.
Performance evaluation/re-election of Directors
An appraisal process has been established in order to review the effectiveness
of the Board, the Committees and individual Directors. This process involves
the Chairman meeting with individual Directors to obtain their views on the
performance of the Board and its Committees. In addition, the other Directors
meet collectively once a year to evaluate the performance of the Chairman. The
Board has also reviewed the Chairman's and Directors' other commitments and is
satisfied that the Chairman and other Directors are capable of devoting
sufficient time to the Company.
The performance of the Company is considered in detail at each Board meeting.
Board Committees
The Board believes that the interests of shareholders in an investment trust
company are best served by limiting its size so that all Directors are able to
participate fully in all the activities of the Board. It is for this reason
that the membership of the Audit and Nomination Committees is the same as that
of the Board as a whole. Functions normally carried out by a remuneration
committee are dealt with by the whole Board, all Directors are non-executive.
Matters which would fall under a management engagement committee are carried
out by the Board as a whole.
Audit Committee
The Directors have appointed an Audit Committee consisting of the whole Board,
and is chaired by Frances Daley. The Board's view is that the members of the
Committee, taken as a whole, have the necessary recent and relevant financial
experience. The Audit Committee reviews audit matters within clearly-defined
written terms of reference (copies of which are available upon request from the
Company Secretary).
In particular, the Committee shall review and challenge where necessary:
* the consistency of, and any changes to, accounting policies both on a year on
year basis and across the Company;
* the methods used to account for significant or unusual transactions where
different approaches are possible;
* whether the Company has followed appropriate accounting standards and made
appropriate estimates and judgements, taking into account the views of the
external auditor;
* the clarity of disclosure in the Company's financial reports and the context
in which statements are made; and
* all material information presented with the financial statements, such as the
Strategic Report and the Statement of Corporate Governance (insofar as it
relates to the audit and risk management).
The main significant issue that the Committee has considered is around the
completeness, valuation and existence of quoted investments at the year ended
30 September 2016. The Committee is satisfied that the investments at the year
ended 30 September 2016 exist and are correctly valued at fair value (which is
the bid market price for listed investments).
The Committee meets at least twice a year and is responsible for reviewing the
annual and interim reports, the nature and scope of the external audit and the
findings therefrom, and the terms of appointment of the Auditor, including its
remuneration and the provision of any non-audit services. Non audit services
provided by the Auditor mainly comprised work on the Company's taxation
affairs. The Committee has considered the independence of the Auditor and the
objectivity of the audit process and is satisfied that KPMG LLP has fulfilled
its obligations to shareholders. The Audit Committee will meet if required with
the Auditor to review the proposed audit programme of work and the findings of
the Auditor. The Committee shall also use this as an opportunity to assess the
effectiveness of the audit process. KPMG LLP has been the Company's Auditor for
the last fourteen years and there has been no re-tendering of the Audit in that
time. To comply with the provision in the Code the Company will review the
option to re-tender the external audit on a regular basis.
The Audit Committee regularly reviews the terms of the different service
providers to the Company including contracts with the Alternative Investment
Fund Manager, the Company Secretary and the Depositary and Custodian. The Audit
Committee meets representatives of the Alternative Investment Fund Manager and
its Compliance Officer who provides reports on the proper conduct of business
in accordance with the regulatory environment in which both the Company and the
Alternative Investment Fund Manager operate. The Company's external Auditor
also attends this Committee at its request and report on its findings in
relation to the Company's statutory audit.
As the Company has no employees, section C.3.4 of the Code, which deals with
arrangements for staff to raise concerns in confidence about possible
improprieties in respect of financial reporting or other matters, is not
directly relevant to it. The Audit Committee has however, confirmed with the
Alternative Investment Fund Manager and the administrator that they do have
"whistle blowing" policies in place for their staff.
The Chairman of the Audit Committee will be present at the AGM to deal with
questions relating to the financial statements.
Nomination Committee
The Nomination Committee consists of the whole Board and is chaired by the
Chairman. The Committee meets at least annually and terms of reference are in
place which include reviewing the Board's size, structure and diversity,
succession planning and training. Possible new Directors are identified against
the requirements of the Company's business and the need to have a balanced
Board. External search consultants may be used to ensure that a wide range of
candidates can be considered.
A Director who has been appointed during the year is required under the
provisions of the Company's Articles of Association, to retire and seek
election by shareholders at the next Annual General Meeting. The Articles also
require a Director who has held office at the time of the two preceding Annual
General Meetings and who did not retire at either to seek re-election. In
addition, a Director who has held office with the Company, other than
employment or executive office, for a continuous period of nine years or more
at the date of the meeting, shall retire from office and may seek re-election
by the members. Notwithstanding the provisions of the Articles of Association,
the Board has adopted a policy that Directors will offer themselves for annual
re-election except where they intend to retire at an Annual General Meeting.
The Committee recommended to the Board, with the relevant Directors absenting
themselves from these discussions, the nominations for re-election of the
Chairman, Mr Coulson, Mr Woollett, Frances Daley and Nadya Wells for the
following reasons:
* The Chairman, who was appointed a Director in 2003, has significant
experience in both emerging and developed markets and has continued to lead the
Board well.
* Ivo Coulson, who was appointed a Director in 2010, has significant experience
in the investment management industry and has been actively involved with the
Boards' shareholder relations.
* Jonathan Woollett, who was appointed a Director in 2008, has over 20 years
experience in the Emerging European region with experience in both private
equity and financial services.
* Frances Daley, who was appointed a Director on 29 April 2014, has significant
financial and accounting experience.
* Nadya Wells, who was appointed a Director on 23 September 2015, has
significant experience in the investment management industry and in the
Emerging European region.
Remuneration
Functions normally carried out by a remuneration committee are dealt with by
the whole Board, all Directors are non-executive. The Directors' Remuneration
policy and Directors' fees are detailed in the Directors' Remuneration report
on page 35.
Risk management and internal control
The 2014 UK Corporate Governance Code requires the Directors, at least
annually, to review the effectiveness of the Company's system of risk
management and internal control and to report to shareholders that they have
done so. This encompasses a review of all controls, which the Board has
identified as including business, financial, operational, compliance and risk
management.
The Directors are responsible for the Company's system of risk management and
internal control which is designed to safeguard shareholders' investment and
the Company's assets, maintain proper accounting records and ensure that
financial information used within the business, or published, is reliable.
However, such a system can only be designed to manage rather than eliminate the
risk of failure to achieve business objectives and therefore can only provide
reasonable, but not absolute, assurance against fraud, material misstatement or
loss
The Board as a whole is primarily responsible for the monitoring and review of
risks associated with investment matters and the Audit Committee is primarily
responsible for other risks.
As the Board has contractually delegated to external parties the investment
management, the depositary and custodial services and the day-to-day accounting
and company secretarial requirements, the Company relies significantly upon the
internal controls operated by those companies. Therefore the Directors have
concluded that the Company should not establish its own internal audit
function. The Board continues to monitor its system of internal control in
order to ensure it operates as intended and the Directors review annually
whether an internal audit function is required. Alternative investment fund
management services are provided by BFM and details of the agreement with BFM
are given in note 3 to the accounts. The Depositary and Custodian is State
Street Bank & Trust Company Limited. Secretarial services are provided by
Northern Trust Global Services Limited.
The risk map has been considered at all regular meetings of the Board and Audit
Committee. As part of the risk review process, regular reports are received
from the Alternative Investment Fund Manager on all investment matters
including compliance with the investment mandate, the performance of the
portfolio compared with the Benchmark Index and compliance with investment
trust status requirements.
The Board also receives and reviews annual reports from the Alternative
Investment Fund Manager and the Depositary and Custodian on their internal
controls and their operation. These reports are designed to provide details of
the internal control procedures operated by the relevant entity and include a
report by an independent reporting accountant.
The Board confirms that appropriate procedures to review the effectiveness of
the Company's system of internal control have been in place which cover all
controls including financial, operational and compliance controls and risk
management. An assessment of internal control, which includes a review of the
Company's risk map, an assessment of the quality of reports on internal control
from the service providers and the effectiveness of the Company's reporting
process, is carried out on an annual basis.
Accountability and audit
Set out on page 34 is a Statement by the Directors of their responsibilities in
respect of the accounts.
As noted earlier, an Audit Committee has been established consisting of
independent Directors.
The Board as a whole regularly reviews the terms of the management and
secretarial contracts.
The Directors who held office at the date of approval of this Directors' report
confirm that, so far as they are each aware, there is no relevant audit
information of which the Company's Auditor is unaware; and each Director has
taken all the steps that they ought to have taken as Directors to make
themselves aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.
The Directors were covered by directors' and officers' insurance that was in
place during the financial year and at the date of this report.
As permitted by the Company's Articles of Association, the Directors have the
benefit of an indemnity which is a qualifying third party indemnity, as defined
by Section 234 of the Companies Act 2006. The indemnities were executed on 20
April 2011 and are currently in force.
Relations with shareholders
The Board regularly reviews the Alternative Investment Fund Manager's contacts
with the Company's shareholders and monitors its shareholder profile. The Board
supplements this with some direct contact with shareholders and is available to
speak with any shareholder who wishes to do so. The Board supports the
principle that the Annual General Meeting be used to communicate with private
investors. The full Board attends the Annual General Meeting and the Chairman
of the Board chairs the meeting. Details of the proxy votes received in respect
of each resolution are made available to shareholders at the meeting. The
Alternative Investment Fund Manager attends to give a presentation to the
meeting. A quarterly newsletter is produced by the Alternative Investment Fund
Manager and is available to shareholders.
If a shareholder would like to contact the Board directly, he or she should
write to the Chairman at 155 Bishopsgate, London EC2M 3XY and mark their letter
private and confidential.
Corporate Governance and Voting Policy
The Company delegates responsibility for voting to its Alternative Investment
Fund Manager, Baring Fund Managers Limited ("BFM"). BFM have in turn delegated
this responsibility to Baring Asset Management Limited ("BAM"). The following
is a summary of Barings statement on corporate governance and voting policy
which has been noted by the Board. The full policy is available from the
Barings website (www.barings.com) and is contained within the paper titled
"Corporate engagement at Barings" dated June 2015.
"Barings is charged to secure a satisfactory rate of return on capital
entrusted to it by its clients. We do this by providing companies with their
risk capital, buying stocks and shares which we believe will outperform the
broader market and deliver these returns to our clients.
We assess these companies and decide which to invest in through a process of
fundamental research. As long-term investors, corporate engagement is at the
heart of what we do. It is particularly relevant for equity investing, where we
will develop and maintain a purposeful dialogue on strategy, performance and
the management of risk, but it is also an integral part of the investment process for sub-investment grade (or "high yield") credit. In our assessment of the risk factors, before making an investment in these classes we will take in to account the corporate governance structure of the company; judging whether the structure could inhibit the delivery of good returns and whether the interests of the management are aligned with those of the investors in the company. We make use of an external agency, Institutional Shareholder Services (ISS) Voting Services to assist on our voting procedures. ISS gives recommendations which we assess and then we vote in accordance with what we believe to be in the best interests of our clients." Evaluation of performance of Alternative Investment Fund Manager Investment performance is reviewed at each regular Board meeting at which representatives of the Alternative Investment Fund Manager are required to provide answers to any questions raised by the Board. The Board conducts an annual formal review of the Alternative Investment Fund Manager which includes consideration of: * performance compared with Benchmark Index and peer group; * investment resources dedicated to the Company; * investment management fee arrangements and notice period compared with the peer group; and * marketing effort and resources provided to the Company. The Board believes that Baring Fund Managers Limited has served the Company well both in terms of investment portfolio management and general support and confirms the continuation of its appointment. Statement of compliance The Board considers that it has complied with all the material provisions set out in Section 1 of the Code throughout the year. It did not, however, comply with the following provisions as explained above: * a senior non-executive Director has not been identified; * the Chairman is a member of the Audit Committee; and * there is no internal audit function. By order of the Board M. J. Nokes F.C.A. Secretary 9 December 2016 Audit Committee report The composition and summary terms of reference of the Audit Committee are set out on pages 28 and 29. The Audit Committee met in April 2016 and considered the form and content of the Company's half year report to 31 March 2016 which was published on 4 May 2016. The Committee also reviewed the key risks of the Company and the Internal control framework operating to control risk. The Committee also reviewed the terms of engagement of the audit firm and its proposed programme for the year end audit. The Committee met again in November 2016 and reviewed the outcome of the audit work and the final draft of the financial statements for the year ended 30 September 2016. During this review the Audit Committee met with representatives of both the Alternative Investment Fund Manager and the Administrator and sought assurances where necessary. Significant accounting matters The Audit Committee in its work consider that the key accounting issue in relation to the financial statements is the valuation and existence of quoted investments. Valuation and existence of quoted investments As part of the day to day controls of the Company there are regular reconciliations between the accounting records and the records kept by the custodian of the assets they safeguard which are owned by the Company. During the year and at the year end there were no matters brought to light which call in to question that the key controls in this area were not working, or that the existence of assets recorded in the books of account are not held in safe custody. As more fully explained in note 1 (b) on page 43 at the year ended 30 September 2016 the Committee agreed that the fair value of quoted investments is the bid market price. The external Auditor attended the year end Audit Committee meeting on 17 November 2016 and presented a report on the audit findings which did not include any significant issues in relation to the financial statements. During that meeting the Audit Committee satisfied itself that the Auditor was independent and also concluded to keep under review putting the audit out to tender. KPMG LLP have been the Auditor since the launch of the Company in 2002 and during that time the audit has not been put out to tender. Contracts for non-audit services must be notified to the Audit committee who consider any such engagement in the light of the requirement to maintain audit independence. The Committee believe that all such appointments for non-audit work were appropriate and unlikely to influence the audit independence. During the year the value of non-audit services provided by KPMG LLP amounted to GBP7,250 (30 September 2015: GBP24,000). Whilst non-audit services as a proportion of audit services amount to approximately 23%, the overall quantum of non-audit services is not considered to be material and a significant proportion of the non-audit services provided relate to the following matters: * the provision of tax compliance work GBP7,250 (30 September 2015: GBP7,250); * the provision of withholding tax recovery work in Russia GBPnil (30 September 2015: GBP13,000); and * the provision of withholding tax recovery work in Poland GBPnil (30 September 2015: GBP4,000). In finalising the financial statements for recommendation to the Board for approval the Committee has considered whether the going concern principle is appropriate, and concluded that it is. The Audit Committee has also satisfied itself that the Annual Report and financial statements taken as a whole are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. Frances Daley Chairman of the Audit Committee 9 December 2016 Statement of Directors' responsibilities in respect of the Annual Report and the financial statements The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law, including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland". Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: * select suitable accounting policies and then apply them consistently; * make judgments and estimates that are reasonable and prudent; * state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and * prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' report, Directors' Remuneration report and Corporate Governance statement that comply with that law and those regulations. The financial statements are published on the www.bee-plc.com website, which is maintained by Baring Asset Management Limited. The maintenance and integrity of the website maintained by Baring Asset Management Limited is, so far as it relates to the Company, the responsibility of Baring Asset Management Limited. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility statement of the Directors in respect of the annual report We confirm to the best of our knowledge that: a) the financial information has been prepared in accordance with applicable UK accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; b) the Annual Report and financial statements, to be published shortly, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face; and c) the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. For and on behalf of the Board Steven Bates Chairman 9 December 2016 Directors' Remuneration report for the year ended 30 September 2016 This report is presented in accordance with Section 421 of the Companies Act 2006. As the Board of Directors is comprised solely of non-executive Directors, it is exempt under the Listing Rules from appointing a Remuneration Committee. The determination of the level of fees paid to Directors, which are reviewed on a periodic basis, is dealt with by the whole Board. The Directors' and their families' interests in the Company's shares are stated below (non-audited): Beneficial 8 December 2016 30 September 2016 30 September 2015 Steven Bates 3,000 3,000 3,000
Jonathan Woollett 3,000 3,000 3,000
Ivo Coulson 2,000 2,000 2,000
Frances Daley 3,000 3,000 3,000
Nadya Wells - - -
Directors' remuneration policy (Resolution 2)
The Company's Articles of Association limit the aggregate fees payable to the
Board of Directors. Subject to this overall limit, currently GBP175,000, it is
the Company's policy to determine the level of Directors' fees having regard to
fees payable to non-executive Directors in the industry generally, the role
that individual Directors fulfil, and the time committed to the Company's
affairs.
No Director has a service contract with the Company. A Director may be removed
without notice and compensation will not be due on leaving office.
The Company does not provide pension benefits, rights to any bonuses, share
options or long-term incentive schemes for Directors.
Directors' emoluments for the year (audited)
The Directors who served during the year received the following emoluments in
the form of fees:
2016 2015
GBP000 GBP000
Steven Bates 33.0 33.0
Jonathan Woollett 25.0 25.0
Ivo Coulson 25.0 25.0
Frances Daley 27.5 26.8
Nadya Wells 25.0 0.6
Saul Estrin (retired 13 7.0 25.0
January 2016)
Josephine Dixon - 8.0
Total 142.5 143.4
During the year ended 30 September 2016 the Chairman received a fee of GBP33,000
per annum, the Chairman of the Audit Committee received a fee of GBP27,500 per
annum and other Directors GBP25,000 per annum.
Share price performance (not audited)
The following graph compares the share price and net asset value performance
against the Benchmark Index?:
[GRAPHIC REMOVED]
Relative importance of spend on pay (audited)
The following table compares the remuneration paid to the Directors with
aggregate distributions to shareholders in the year to 30 September 2016 and
the prior year. This disclosure is a statutory requirement, however, the
Directors consider that comparison of Directors' remuneration with annual
dividends does not provide a meaningful measure relative to the Company's
overall performance as an investment trust with an objective of providing
shareholders with long-term capital growth.
Year ended 30 Year ended 30 Change GBP000
September 2016 GBP000 September 2015 GBP000
Aggregate Directors' 143 143 -
emoluments plus
expenses
Aggregate shareholder 3,769 4,083 (314)
distributions in
respect of the year
Statement of voting at the Annual General Meeting
At the Annual General Meeting of the Company held on 14 January 2014 a binding
resolution was put to shareholders to approve the Directors' Remuneration
policy set out in the 2013 annual financial report. This resolution was passed
on a show of hands. The proxy votes registered in respect of the binding
resolution were:
For Against Withheld
Number of proxy votes 9,570,895 68,943 5,334
Voting at last Annual General Meeting
At the Annual General Meeting of the Company held on 13 January 2016 an
advisory resolution was put to shareholders to approve the Directors'
Remuneration report, set out in the 2015 annual financial report. This
resolution was passed on a show of hands. The proxy votes registered in respect
of the advisory resolution were:
For Against Withheld
Number of proxy votes 8,264,755 80,016 5,308
Approval
Resolutions for the approval of the Directors' Remuneration Policy and the
Directors' Remuneration report for the year ended 30September 2016 will be
proposed at the Annual General Meeting.
By order of the Board
M. J. Nokes F.C.A.
Secretary
9 December 2016
Independent Auditor's report
to the members of Baring Emerging Europe PLC only
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of Baring Emerging Europe plc for the
year ended 30 September 2016 set out on pages 40 to 55. In our opinion the
financial statements:
* give a true and fair view of the state of the Company's affairs as at 30
September 2016 and of its profit for the year then ended;
* have been properly prepared in accordance with UK Accounting Standards (UK
Generally Accepted Accounting Practice), including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland; and
* have been prepared in accordance with the requirements of the Companies Act
2006.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the risk of
material misstatement that had the greatest effect on our audit was as follows:
Carrying amount of quoted investments GBP124.5m (2015: GBP103.7m). Risk vs 2015: 73
Refer to page 33 (Audit Committee Report), page 43 (accounting policy) and
pages 47 to 55 (financial disclosures).
The risk:
The Company's portfolio of quoted investments makes up 95.8% of the Company's
Total Assets (by value) and is the key driver of performance results. We do not
consider these investments to be at high risk of material misstatement, or to
be subject to a significant level of judgment because they comprise largely
liquid and quoted investments. However, due to their materiality in the context
of the financial statements as a whole, they are considered to be the area
which had the greatest effect on our overall audit strategy and allocation of
resources in planning and completing our audit.
Our response:
Our procedures over the completeness, valuation and existence of the Company's
quoted investment portfolio included; but not limited to:
* documenting and assessing the processes in place to record investment
transactions and to value the portfolio;
* agreeing the valuation of 100% of investments in the portfolio to externally
quoted prices; and
* agreeing 100% of investment holdings in the portfolio to independently
received third party confirmations.
3 Our application of materiality and an overview of the scope of our audit
The materiality for the financial statements as a whole was set at GBP1.12m
(2015: GBP1.07m), determined with reference to a benchmark of Total Assets, of GBP
112.0m (2015: GBP106.6m), of which it represents 1% reflecting industry consensus
levels (2015: 1%).
We report to the Audit Committee any corrected and uncorrected identified
misstatements exceeding GBP56,000, in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified
above and was all performed at the administrator's head office in London.
4 Our opinion on other matters prescribed by the Companies Act 2006 is
unmodified
In our opinion:
* the part of the Directors' Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006;
* the information given in the Strategic Report and the Directors' Report for
the financial year for which the financial statements are prepared is
consistent with the financial statements; and
* the information given in the Corporate Governance Statement set out on page
30 with respect to internal control and risk management systems in relation to
financial reporting processes and about share capital structures is consistent
with the financial statements.
5 We have nothing to report on the disclosures of principal risks
Based on the knowledge we acquired during our audit, we have nothing material
to add or draw attention to in relation to:
* the Directors' Statement of Viability on page 19, concerning the principal
risks, their management, and, based on that, the Directors' assessment and
expectations of the Company's continuing in operation over the 3 years to
December 2019; or
* the disclosures in note 1 of the financial statements concerning the use of
the going concern basis of accounting.
6 We have nothing to report in respect of the matters on which we are required
to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the
knowledge we acquired during our audit, we have identified other information in
the annual report that contains a material inconsistency with either that
knowledge or the financial statements, a material misstatement of fact, or that
is otherwise misleading.
In particular, we are required to report to you if:
* we have identified material inconsistencies between the knowledge we acquired
during our audit and the Directors' Statement that they consider that the
annual report and financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy; or
* the Audit Committee Report does not appropriately address matters
communicated by us to the audit committee.
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
* adequate accounting records have not been kept by the Company, or returns
adequate for our audit have not been received from branches not visited by us;
or
* the financial statements and the part of the Directors' Remuneration Report
to be audited are not in agreement with the accounting records and returns; or
* certain disclosures of Directors' remuneration specified by law are not made;
or
* we have not received all the information and explanations we require for our
audit; or
* a Corporate Governance Statement has not been prepared by the Company.
Under the Listing Rules we are required to review:
* the Directors' Statement, set out on pages 23 and 19, in relation to going
concern and longer term viability; and
* the part of the Corporate Governance Statement on pages 27 to 32 relating to
the Company's compliance with the eleven provisions of the 2014 UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope and responsibilities
As explained more fully in the Directors' Responsibilities Statement set out on
page 34, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. A
description of the scope of an audit of financial statements is provided on the
Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate.
This report is made solely to the Company's members as a body and is subject to
important explanations and disclaimers regarding our responsibilities,
published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are
incorporated into this report as if set out in full and should be read to
provide an understanding of the purpose of this report, the work we have
undertaken and the basis of our opinions.
Ravi Lamba (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
9 December 2016
Income statement
(incorporating the Revenue Account*) for the year ended 30 September 2016
Year ended Year ended Year Year ended Year ended Year ended
30 30 ended 30 30 30 30
September September September September September September
2016 2016 2016 2015 2015 2015
Revenue Capital Total Revenue Capital Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gains/(losses) 14 - 31,822 31,822 - (30,590) (30,590)
on investments
held at fair
value through
profit or loss
Income 2 5,363 - 5,363 5,569 - 5,569
Investment 3 (402) (465) (867) (434) (434) (868)
management fee
Other expenses 4 (711) - (711) (806) - (806)
Return on 4,250 31,357 35,607 4,329 (31,024) (26,695)
ordinary
activities
Finance costs 5 (96) (96) (192) (54) (40) (94)
Return on 4,154 31,261 35,415 4,275 (31,064) (26,789)
ordinary
activities
before taxation
Taxation 6 (531) - (531) (218) - (218)
Return for the 3,623 31,261 34,884 4,057 (31,064) (27,007)
year
Return per 8 21.39p 184.53p 205.92p 22.05p (168.86)p (146.81)p
ordinary share
*The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
The annexed notes on pages 43 to 55 form part of these accounts.
The supplementary revenue and capital columns are both prepared under the
guidance published by the Association of Investment Companies.
There is no other comprehensive income and therefore the return for the year is
also the total comprehensive income for the year.
Statement of financial position
as at 30 September 2016
2016 2015
Notes GBP000 GBP000
Fixed assets
Investments at fair 9 124,527 103,676
value through profit
or loss
Current assets
Debtors 10 3,473 890
Cash and cash 1,934 2,080
equivalents
5,407 2,970
Current liabilities
Creditors: amounts 11 (11,484) (11,698)
falling due within
one year
Net current (6,077) (8,728)
liabilities
Net assets 118,450 94,948
Capital and reserves
Called-up share 12 1,971 2,107
capital
Share premium account 1,411 1,411
Redemption reserve 2,817 2,681
Capital reserve 104,459 80,672
Revenue reserve 7,792 8,077
Total Shareholders' 118,450 94,948
funds
Net asset value per 13 722.82p 534.87p
share
The financial statements on pages 40 to 55 were approved by the Board on 9
December 2016 and signed on its behalf by:
Steven Bates
Chairman
The annexed notes on pages 43 to 55 form part of these accounts.
Company registration number 4560726
Statement of changes in equity
for the year ended 30 September 2016
Called-up Share
share premium Redemption Capital Revenue
capital account reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
For the year
ended 30
September 2016
Beginning of 2,107 1,411 2,681 80,672 8,077 94,948
year
Return for the - - - 31,261 3,623 34,884
year
Buyback of own - - - (7,474) - (7,474)
shares for
cancellation
Transfer to (136) - 136 - - -
capital
redemption
reserve
Dividends paid - - - - (3,908) (3,908)
Balance at 30 1,971 1,411 2,817 104,459 7,792 118,450
September 2016
Called-up Share
share premium Redemption Capital Revenue
capital account reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
For the year
ended 30
September 2015
Beginning of 2,222 1,411 2,566 117,796 7,561 131,556
year
Return for the - - - (31,064) 4,057 (27,007)
year
Buyback of own - - - (6,060) - (6,060)
shares for
cancellation
Transfer to (115) - 115 - - -
capital
redemption
reserve
Dividends paid - - - - (3,541) (3,541)
Balance at 30 2,107 1,411 2,681 80,672 8,077 94,948
September 2015
The annexed notes on pages 43 to 55 form part of these accounts.
Distributable reserves comprise: the revenue reserve and capital reserves
attributable to realised profits.
All investments are held at fair value through profit or loss. When the Company
revalues the investments still held during the period, any gains or losses
arising are credited/charged to the capital reserve.
Notes to the accounts
1. Accounting policies
A summary of the principal policies, all of which have been applied
consistently throughout the year, is set out below:
(a) Basis of accounting
The financial statements have been prepared in accordance with the applicable
UK Accounting Standards, being FRS102 - The Financial Reporting Standard - and
with the Statement of Recommended Practice "Financial Statements of Investment
Trust Companies and Venture Capital Trusts" (issued in November 2014).
Previously, the financial statements were prepared in accordance with UK
Generally Accepted Accounting Practice ("UK GAAP"). The transition to FRS did
not result in any significant changes to the accounting policies.
The financial information for the year ended 30 September 2015 included in this
report, has been taken from the Company's full accounts, as restated to comply
with FRS from the transition date 1 October 2015. Restatement of opening
balances relating to equity values, assets and liabilities and profits and
losses of the Company between UK GAAP as previously reported and under FRS as
restated have not been presented as there have been no required changes to the
reported amounts. Therefore restatement tables have not been prepared for any
of the primary statements.
They have also been prepared on the assumption that approval as an investment
trust will continue to be granted. The financial statements have been prepared
on a going concern basis.
(b) Valuation of investments
Upon initial recognition the investments are designated by the Company as "at
fair value through profit or loss". They are included initially at fair value
which is taken to be their cost, including expenses incidental to purchase.
Subsequently the investments are valued at fair value which is bid market price
for listed investments. Unquoted investments are included at a valuation
determined by the Directors after discussion with the Alternative Investment
Fund Manager on the basis of the latest accounting and other relevant
information.
Changes in the fair value of investments held at fair value through profit or
loss and gains or losses on disposal are included in the capital column of the
income statement within "Gains/(losses) from investments held at fair value
through profit or loss". All purchases and sales are accounted for on a trade
date basis.
Year-end exchange rates are used to translate the value of investments which
are denominated in foreign currencies.
(c) Foreign currency
Transactions denominated in foreign currencies are translated into sterling at
actual exchange rates as at the date of the transaction or, where appropriate,
at the rate of exchange in a related forward exchange contract. Monetary assets
and liabilities denominated in foreign currencies at the year-end are reported
at the rates of exchange prevailing at the year-end or, where appropriate, at
the rate of exchange in a related forward exchange contract. Any gain or loss
arising from a change in exchange rates subsequent to the date of the
transaction is included as an exchange gain or loss in capital reserve. Foreign
exchange movements on fixed asset investments are included in the Income
Statement within gains on investments held at fair value through profit or
loss.
(d) Income
Investment income, which includes related taxation, has been accounted for on
an ex-dividend basis or when the Company's right to the income is established.
Interest receivable on deposits is accounted for on an accruals basis.
(e) Expenses
All expenses are accounted for on an accruals basis and are charged as follows:
* the basic investment management fee is charged 50% to revenue and 50% to
capital;
* any investment performance bonus payable to Baring Fund Managers Limited is
charged wholly to capital;
* dealing costs are charged wholly to capital; and
* other expenses are charged wholly to revenue.
(f) Interest payable
Interest payable is accounted for on an accruals basis, and is charged 50% to
revenue and 50% to capital.
(g) Capital reserve
Gains or losses on disposal of investments and changes in fair values of
investments are transferred to the capital reserve. Any investment performance
fee payable to Baring Fund Managers Limited is accounted for in the capital
reserve.
(h) Special reserve
Pursuant to a special resolution passed on 8 November 2002, the Company's
application to reduce its share premium account was approved by the High Court
and registered with the Registrar of Companies on 18 December 2002. The amount
of the reduction was GBP86,624,982, representing the share premium arising on the
issue of shares by the Company on 17 December 2002. This amount was transferred
to a special reserve which has been utilised for the repurchase by the Company
of its own shares.
(i) Taxation
The charge for taxation is based upon the net revenue for the year. The tax
charge is allocated to the revenue and capital accounts according to the
marginal basis whereby revenue expenses are first matched against taxable
income arising in the revenue account; the effect of this for the year ended 30
September 2016 was that all the deductions for tax purposes went to the revenue
account.
Deferred taxation will be recognised as an asset or a liability if transactions
have occurred at the balance sheet date that give rise to an obligation to pay
more taxation in the future, or a right to pay less taxation in the future. An
asset will not be recognised to the extent that the transfer of economic
benefit is uncertain.
2. Income
2016 2015
GBP000 GBP000
Income from investments
Overseas dividends - Quoted 5,363 5,427
Interest received* - 142
5,363 5,569
*Interest on withholding tax recovered from the Polish tax authorities.
3. Investment management fee
Baring Fund Managers Limited ("BFM") acts as the Alternative Investment Fund
Manager ("AIFM") of the Company under an agreement terminable by either party
giving not less than six months' written notice. Under this agreement BFM
receives a basic fee (charged 50% to revenue and 50% to capital) which is
calculated monthly and payable at an annual rate of 0.8% of the net asset value
of the Company.
In addition under the agreement BFM is entitled to a performance fee (charged
to capital) which is payable at the rate of 10% of the amount by which the
change in the Company's net asset value per share (on a total return basis)
exceeds the Benchmark Index and any previous underperformance must be recovered
before any fee is payable. The performance fee is capped at 0.6% of the net
asset value of the Company on the first day of the performance period. The
final performance fee was calculated on 31 March 2016. The whole of the
performance fee is charged to the capital account as it is deemed to have
arisen entirely as a result of the capital performance of the Company. A
performance fee of GBP63,000 was paid for the year ended 30 September 2016 (30
September 2015: GBPnil). From 1 April 2016 the performance fee has been
discontinued.
The investment management fee comprises:
2016 2015
GBP000 GBP000
Basic fee (50% charged to 402 434
revenue)
Basic fee (50% charged to 402 434
capital)
Performance fee (100% 63 -
charged to capital)
867 868
At 30 September 2016, GBP78,000 (30 September 2015: GBP130,000) of this fee
remained outstanding.
4. Other expenses
2016 2015
GBP000 GBP000
Custody and administration 531 609
expenses
Auditor's remuneration for:
- audit 30 30
- other services* 7 24
Directors' fees 143 143
711 806
*KPMG LLP other services are GBP7,250 for corporation tax compliance work (2015:
GBP13,000 for withholding tax recovery work in Russia, GBP4,000 for withholding tax
recovery work in Poland and GBP7,250 for corporation tax compliance work).
5. Finance costs
2016 2015
GBP000 GBP000
On short-term loan and
gearing facility with State
Street Bank & Trust Company
repayable within 5 years,
not by installments
Bank committment fee (100% - 14
charged to revenue)
Bank loan interest (50% 96 40
charged to revenue)
Bank loan interest (50% 96 40
charged to capital)
192 94
6. Taxation
(a) Current tax charge for the year:
2016 2016 2016 2015 2015 2015
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Overseas 531 - 531 218 - 218
taxation*
(note 6(b))
*For 2015 overseas taxation is shown net of GBP224,000 which was recovered from
the Polish tax authorities and of GBP20,000 which was recovered from the Russian
tax authorities.
(b) Factors affecting the current tax charge for the year
The taxation rate assessed for the year is different from the standard rate of
corporation taxation in the UK. The differences are explained below:
2016 2016 2016 2015 2015 2015
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Return on 4,154 31,261 35,415 4,275 (31,064) (26,789)
ordinary
activities
before
taxation
Return on 831 6,252 7,083 876 (6,368) (5,492)
ordinary
activities
multiplied
by the
standard
rate of
corporation
tax of 20.0%
(2015:
20.5%)
Effects of:
Non taxable (1,068) - (1,068) (1,113) - (1,113)
overseas
dividends
Non taxable (5) - (5) - - -
UK dividends
Overseas 531 - 531 218 - 218
withholding
tax
Capital - (6,364) (6,364) - 6,271 6,271
gains not
deductible
for tax
Loan 19 19 38 - 8 8
relationship
deficit not
utilised
Management 223 93 316 237 89 326
expenses not
utilised
Current tax 531 - 531 218 - 218
charge for
the year
The Company is not liable to tax on capital gains due to its status as an
investment trust.
The Company has an unrecognised deferred tax asset of GBP1,570,000 (2015: GBP
1,491,000) based on the long term prospective corporation tax rate of 17%
(2015: 20.0%). This asset has accumulated because deductible expenses have
exceeded taxable income in past years. No asset has been recognised in the
accounts because, given the composition of the Company's portfolio, it is not
likely that this asset will be utilised in the foreseeable future.
7. Dividend
2016 2016 2015 2015
Pence per share GBP000 Pence per share GBP000
Annual dividend 23.00p 3,769 23.00p 4,083
per ordinary
share
8. Return per ordinary share
Total Total
Revenue Capital 2016 Revenue Capital 2015
Return per 21.39p 184.53p 205.92p 22.05p (168.86)p (146.81)p
ordinary
share
Revenue return (earnings) per ordinary share is based on the net revenue on
ordinary activities after taxation of GBP3,623,000 (2015: GBP4,057,000).
Capital return per ordinary share is based on net capital profit for the
financial year of GBP31,261,000 (2015: net capital losses of GBP(31,064,000).
These calculations are based on the weighted average of 16,940,616 (2015:
18,395,544) ordinary shares in issue during the year.
At 30 September 2016 there were 16,387,212 ordinary shares of 10 pence each in
issue (2015: 17,751,724) which excludes 3,318,207 ordinary shares held in
treasury (2015: 3,318,207 shares held in treasury). The shares held in treasury
are treated as not being in issue when calculating the weighted average of
ordinary shares in issue during the year.
9. (i) Fixed asset investments
Quoted Total Quoted Total
overseas 2016 overseas 2015
Primary country GBP000 GBP000 GBP000 GBP000
of investment
Georgia - - 1,379 1,379
Austria 1,882 1,882 - -
Czech Republic 4,071 4,071 - -
Poland 17,057 17,057 19,407 19,407
Russia 69,478 69,478 54,978 54,978
Turkey 21,888 21,888 23,747 23,747
Greece 1,987 1,987 - -
Other 8,164 8,164 4,165 4,165
Total 124,527 124,527 103,676 103,676
9. (ii) Movements in the year
Quoted Total Quoted Total
overseas 2016 overseas Unquoted 2015
GBP000 GBP000 GBP000 GBP000 GBP000
Book cost at 134,026 134,026 143,748 26 143,774
beginning of year
Losses on (30,350) (30,350) (13,048) (26) (13,074)
investments held
at beginning of
year
Valuation at 103,676 103,676 130,700 - 130,700
beginning of year
Movements in year:
Purchases at cost 50,748 50,748 106,921 - 106,921
Sales proceeds (62,781) (62,781) (103,650) - (103,650)
Losses on (4,062) (4,062) (13,019) - (13,019)
investments sold
in year
Gains/(losses) on 36,946 36,946 (17,276) - (17,276)
investments held
at year end
Valuation at end 124,527 124,527 103,676 - 103,676
of year
Expenses incidental to the purchase or sale of investments are included within
the purchase cost or deducted from sales proceeds. Transaction costs on
purchases for the year ended 30 September 2016 amounted to GBP72,000 (2015: GBP
169,000) and on sales for the year they amounted to GBP100,000 (2015: GBP143,000).
A list of the Company's investments by market value is shown on pages 14 and
15, and a geographical classification and industrial classification of the
investment portfolio are shown on pages 12 and 16.
10. Debtors
2016 2015
GBP000 GBP000
Amounts due within one year
Amounts due from brokers 2,663 85
Prepayments and accrued 775 771
income
Other debtors 35 34
3,473 890
11. Creditors
2016 2015
GBP000 GBP000
Amounts falling due within
one year
Bank loans 10,008 11,223
Amounts outstanding to 1,167 121
brokers due to the buyback
of own shares
Other creditors 309 354
11,484 11,698
The Company has a US$17 million loan facility with State Street Bank and Trust
Company. Under this facility, the Company may draw up to a maximum principal
amount of US$17 million in varying proportions and for varying periods at
prevailing interest rates. The amount outstanding in relation to this facility
at 30 September 2016 was US$13 million (at 30 September 2015: US$17 million),
which is repayable on 31 December 2016, interest is charged at the rate of
LIBOR plus 1.25%.
12. Called-up share capital
2016 2015
GBP000 GBP000
Allotted, issued and fully
paid up
19,705,419 (2015: 1,971 2,107
21,069,931) ordinary shares
of 10 pence (fully paid)
During the year 1,364,512 ordinary shares were repurchased for cancellation for
GBP7,474,000 (2015: 1,152,319 ordinary shares were repurchased for cancellation
for GBP6,060,000). During the year no ordinary shares were repurchased to be held
in treasury and no ordinary shares which were held in treasury were cancelled.
The Company holds 3,318,207 ordinary shares in treasury which are treated as
not being in issue when calculating the number of ordinary shares in issue
during the year (2015: 3,318,207 ordinary shares were held in treasury). Shares
held in treasury are non-voting and not eligible for receipt of dividends.
Subsequent to the year end a further 527,848 shares have been repurchased for
cancellation.
13. Net asset value per share
Total shareholders' funds and the net asset value per share attributable to the
ordinary shareholders at the year-end calculated in accordance with the
Articles of Association were as follows:
2016 2015
Total shareholders' funds (GBP 118,450 94,948
000)
Net asset value (pence per 722.82p 534.87p
share)
The net asset value per share is based on total shareholders' funds above, and
on 16,387,212 ordinary shares in issue at the year end (2015: 17,751,724
ordinary shares in issue) which excludes 3,318,207 ordinary shares held in
treasury (2015: 3,318,207 ordinary shares held in treasury). The ordinary
shares held in treasury are treated as not being in issue when calculating the
net asset value per share.
14. Capital reserve
Capital reserve
Gains/(losses) Investment holdings
on sale of gains/(losses) Total
investments
GBP000 GBP000 GBP000
At 1 October 2015 111,023 (30,351) 80,672
Net losses on (4,062) - (4,062)
disposal of
investments
Repurchase of share (7,474) - (7,474)
costs
Net movement in - 36,975 36,975
unrealised
appreciation of
investments
Losses on foreign - (1,091) (1,091)
exchange
Management fees (402) - (402)
charged to capital
Performance fees (63) - (63)
charged to capital
Finance charges (96) - (96)
charged to capital
At 30 September 2016 98,926 5,533 104,459
15. Financial commitments
At 30 September 2016, there were no outstanding capital commitments (2015: GBP
nil).
16. Custodian's lien
Under the terms of the Depositary and Custody Agreement with State Street Bank
& Trust Company ("State Street"), the Company has granted a lien over its
securities and other assets that are deposited with State Street to cover all
sums due in connection with the loan facility and the Depositary and Custody
Agreement.
17. Related party disclosures and transactions with the Alternative Investment
Fund Manager
The Company is required to provide additional information concerning its
relationship with the Alternative Investment Fund Manager, BFM, and details of
the investment management fee charged by Baring Fund Managers Limited are set
out in note 3. The ultimate holding company of BFM is Massachusetts Mutual Life
Insurance Company. Fees paid to the Directors and full details of Directors'
interests are disclosed in the Directors' Remuneration report on page 35.
18. Risk management policies and procedures
As an investment trust the Company invests in equities and other investments
for the long-term so as to secure its investment objective stated on page 3. In
pursuing its investment objective, the Company is exposed to a variety of risks
that could result in either a reduction in the Company's net assets or a
reduction of the profits available for dividends.
These risks, include market risk (comprising currency risk, interest rate risk,
and other price risk), liquidity risk, and credit risk, and the Directors'
approach to the management of them are set out below.
The objectives, policies and processes for managing the risks, and the methods
used to measure the risks, that are set out below, have not changed from the
previous accounting period.
(a) Market risk
Special considerations and risk factors associated with the Company's
investments are discussed on page 6. The fair value or future cash flows of a
financial instrument held by the Company may fluctuate because of changes in
market prices. This market risk comprises three elements - currency risk (see
(b) below), interest rate risk (see (c) below) and other price risk (see (d)
below). The Board of Directors reviews and agrees policies for managing these
risks, which have remained substantially unchanged from those applying in the
year ended 30 September 2015. The Company's Alternative Investment Fund Manager
assesses the exposure to market risk when making each investment decision, and
monitors the overall level of market risk on the whole of the investment
portfolio on an ongoing basis.
(b) Currency risk
Most of the Company's assets, liabilities, and income, are denominated in
currencies other than sterling (the Company's functional currency, and in which
it reports its results). As a result, movements in the rate of exchange between
sterling and the currencies of the countries in which the Company invests,
which are identified in the table shown in note 9, may affect the sterling
value of those items. In addition the Company's uninvested cash balances are
usually held in US dollars.
Management of the risk
The Alternative Investment Fund Manager monitors the Company's exposure and
reports to the Board on a regular basis.
Income denominated in foreign currencies is converted to sterling on receipt.
The Company does not use financial instruments to mitigate the currency
exposure in the period between the time that income is included in the
financial statements and its receipt.
Foreign currency exposures
At 30 September 2016 monetary assets included cash balances totalling GBP
1,934,000 (2015: GBP2,080,000) that were held in US dollars.
At 30 September 2016 monetary liabilities included a bank loan totalling GBP
10,008,000 (2015: GBP11,223,000) that was due in US dollars.
At 30 September 2016 and at 30 September 2015 all of the equity investments
were priced in a foreign currency.
Foreign currency sensitivity
The following table illustrates the sensitivity of the revenue return for the
year in regard to the Company's monetary financial assets to changes in the
exchange rates for the various currencies to which the Company is exposed.
If sterling had weakened by an average of 10%, this would have had the
following effect:
2016 2015
GBP000 GBP000
Income statement - profit
after taxation:
Revenue return - increase 382 419
Capital return - increase 12,453 10,368
Total 12,835 10,787
If sterling had strengthened by an average of 10%, this would have had the
following effect:
2016 2016
GBP000 GBP000
Income statement - profit
after taxation:
Revenue return - decrease (382) (419)
Capital return - decrease (12,453) (10,368)
Total (12,835) (10,787)
Impact on capital return is disclosed in note 18 (d).
(c) Interest rate risk
Interest rate movements may affect the level of income receivable on cash
deposits.
Cash at bank at 30 September 2016 (and 30 September 2015) was held at floating
interesting rates, linked to current short-term market rates.
Interest rate movements may affect the interest payable on the Company's
variable rate borrowings.
Management of the risk
The possible effects on fair value and cash flows that could arise as a result
of changes in interest rates are taken into account when borrowing under the
bank loan facility.
Interest rate exposure
The exposure at 30 September 2016 of financial assets and financial liabilities
to floating interest rates is shown below:
2016 2015
Total Total
(within one year) (within one year)
GBP000 GBP000
Exposure to floating
interest rates:
Cash at bank 1,934 2,080
Creditors:
Borrowings under bank loan (10,008) (11,223)
facility
(8,074) (9,143)
Interest rate sensitivity
The Company is primarily exposed to interest rate risk through its bank loan
facility.
Due to the insignificant impact of fluctuations in interest rates no
sensitivity analysis is shown.
(d) Other price risk
Other price risk (i.e. changes in market prices other than those arising from
interest rate risk or currency risk) may affect the value of the quoted and
unquoted equity investments.
Management of the risk
The Board of Directors believe that as the Company's investment objective is to
provide exposure to Emerging European Securities its neutral position in
respect of this risk is full exposure to the market as represented by its
Benchmark Index. The Alternative Investment Fund Manager has been given
discretion around the Benchmark Index to enable it to add value. The amount by
which the portfolio diverges from the Benchmark Index is closely monitored by
the Board with the goal of ensuring that the risk taken is proportionate to the
value added.
Concentration of exposure to other price risk
An analysis of the Company weighting versus Benchmark Index and a sector
breakdown and geographical allocation of the portfolio is contained in the
Alternative Investment Fund Manager's report on pages 12 and16.
Other price risk sensitivity
The following table illustrates the sensitivity of the profit after taxation
for the year and the equity to an increase or decrease of 10% in the fair
values of the Company's equities. This level of change is considered to be
reasonably possible based on observation of current market conditions. The
sensitivity analysis is based on the Company's equities at each balance sheet
date, with all other variables held constant.
Increase in Decrease in Increase in Decrease in
fair value fair value fair value fair value
2016 2016 2015 2015
GBP000 GBP000 GBP000 GBP000
Income statement
- profit after
taxation:
Capital return - 12,453 (12,453) 10,368 (10,368)
increase/
(decrease)
Total profit 12,453 (12,453) 10,368 (10,368)
after taxation
other than
arising from
interest rate or
currency risk -
increase/
(decrease)
Equity 12,453 (12,453) 10,368 (10,368)
(e) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting
obligations associated with financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the Company's assets are
investments in quoted equities that are readily realisable.
The Company has a bank loan facility of US$17 million of which GBP10,008,000
(2015: GBP11,223,000) was drawn down at 30 September 2016.
Liquidity risk exposure
The contractual maturities of the financial liabilities at 30 September 2016,
based on the earliest date on which payment can be required were as follows:
2016 2015
Total Total
(due within one year) (due within one year)
GBP000 GBP000
Bank loan 10,008 11,223
Other creditors and accruals 1,476 475
11,484 11,698
The Board gives guidance to the Alternative Investment Fund Manager as to the
maximum amount of the Company's resources that should be invested in any one
holding.
(f) Credit risk
The failure of the counterparty to a transaction to discharge its obligations
under that transaction could result in the Company suffering a loss.
Management of the risk
This risk is not significant, and is managed as follows:
* the majority of transactions take place through clearing houses on a delivery
versus payment basis;
* investment transactions are carried out with an approved list of brokers,
whose credit-standing is reviewed periodically by the Alternative Investment
Fund Manager, and limits are set on the amount that may be due from any one
broker; and
* cash at bank is held only with reputable banks with high quality external
credit ratings.
None of the Company's financial assets are secured by collateral or other
credit enhancements.
(g) Fair values of financial assets and liabilities
Financial assets and liabilities are either carried in the balance sheet at
their fair value (investments), or the balance sheet amount if it is a
reasonable approximation of fair value (amounts due from brokers, dividends
receivable, accrued income, amounts due to brokers, accruals and cash
balances).
The table below sets out fair value measurements using the fair value
hierarchy.
Total
Financial assets at fair Level 1 2016
value through profit or loss
at 30 September 2016:
GBP000 GBP000
Equity investments 124,527 124,527
Total 124,527 124,527
Total
Financial assets at fair Level 1 2015
value through profit or loss
at 30 September 2015:
GBP000 GBP000
Equity investments 103,676 103,676
Total 103,676 103,676
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset as follows:
Level 1 - valued using quoted prices in active markets for identical assets.
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted prices included within Level 1 (there are no Level 2
investments at 30 September 2016).
Level 3 - valued by reference to valuation techniques using inputs that are not
based on observable market data (there are no Level 3 investments at 30
September 2016).
In preparing these financial statements the Company has adopted "Amendments to
FRS102: fair value hierarchy disclosure (March 2016)" published by the FRC.
The valuation techniques used by the Company are explained in the accounting
policies note on page 43.
Notice of Annual General Meeting
THIS SECTION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to any aspect of the proposals referred to in this
document or as to the action you should take, you should seek your own advice
from a stockbroker, solicitor, accountant, or other professional adviser.
If you have sold or otherwise transferred all of your shares, please pass this
document together with the accompanying documents to the purchaser or
transferee, or to the person who arranged the sale or transfer so they can pass
these documents to the person who now holds the shares.
Notice is hereby given that the Annual General Meeting of the Company will be
held at 155 Bishopsgate, London EC2M 3XY on Tuesday, 24 January 2017, at 2:30pm
to consider and, if thought fit, pass the following resolutions, which will be
proposed as to resolutions 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 as ordinary
resolutions, and as to resolutions 13 and 14 as special resolutions:
Ordinary business
1. To receive the Directors' report and statement of accounts for the year
ended 30 September 2016.
2. To approve the Directors' Remuneration policy.
3. To approve the Directors' Remuneration report for the year ended 30
September 2016.
4. To approve the annual dividend.
5. To re-elect Steven Bates as a Director of the Company.
6. To re-elect Ivo Coulson as a Director of the Company.
7. To re-elect Jonathan Woollett as a Director of the Company.
8. To re-elect Frances Daley as a Director of the Company.
9. To re-elect Nadya Wells as a Director of the Company.
10. To re-appoint KPMG LLP as Auditor of the Company from the conclusion of
this meeting until the conclusion of the next general meeting at which the
financial statements are laid before members.
11. To authorise the Directors to determine the Auditor's remuneration.
Special business
12. Authority to allot new ordinary shares - Ordinary Resolution:
That, the Board be and it is hereby generally and unconditionally authorised to
exercise all powers of the Company to allot shares and to grant rights to
subscribe for or convert any security into shares in the Company (within the
meaning of Section 551 of the Companies Act 2006) up to an aggregate nominal
amount of GBP79,297, (being approximately 5% of the issued share capital of the
Company as at 8 December 2016 being the latest practicable date prior to the
publication of this notice of meeting excluding shares held in treasury at that
date) PROVIDED THAT this authority shall expire at the conclusion of the next
Annual General Meeting of the Company after the passing of this resolution,
save that the Company may before such expiry make one or more offers or
agreements which would or might require relevant securities to be allotted or
rights to subscribe for or convert securities into shares to be granted after
such expiry and the Board may allot relevant securities or grant rights to
subscribe for or convert securities into shares in pursuance of such offers or
agreements as if the authority conferred hereby had not expired.
13. Authority to disapply pre-emption rights on allotment of ordinary shares -
Special Resolution:
That if resolution 12 set out in the notice convening the Annual General
Meeting of the Company dated 9 December 2016 (the "Notice") is passed, the
Board be given power to allot equity securities (as defined in the Companies
Act 2006) for cash under the authority given by that resolution and/or where
the allotment is treated as an allotment of equity securities under section 560
(3) of the Companies Act 2006, free of the restriction in section 561(1) of the
Companies Act 2006, such power to be limited:
(a) to the allotment of equity securities in connection with an offer of equity
securities to ordinary shareholders in proportion (as nearly as may be
practicable) to their existing holdings, and so that the Board may impose any
limits or restrictions and make any arrangements which it considers necessary
or appropriate to deal with treasury shares, fractional entitlements, record
dates, legal, regulatory or practical problems in, or under the laws of, any
territory or any other matter; and
(b) in the case of the authority granted under resolution 12 of the Notice and/
or in the case of any transfer of treasury shares which is treated as an
allotment of equity securities under section 560(3) of the Companies Act 2006,
to the allotment or such transfer (otherwise than under paragraph (a) above) of
equity securities up to a nominal amount of GBP95,888;
such power to apply until the earlier of the conclusion of the Annual General
Meeting of the Company in 2018, or 23 July 2018, but during this period the
Company may make offers, and enter into agreements, which would, or might,
require equity securities to be allotted after the power ends and the Board may
allot equity securities under any such offer or agreement as if the power had
not ended.
14. Authority to repurchase the Company's shares - Special Resolution:
That, the Company be and is hereby generally and unconditionally authorised in
accordance with Section 701 of the Act to make market purchases (within the
meaning of Section 693 of the Act) of ordinary shares of 10 pence each in the
capital of the Company (the "shares") provided that:
(a) the maximum number of shares hereby authorised to be purchased shall be 2,377,318 (being approximately 14.99% of the issued share capital of the Company as at 8 December 2016 being the latest practicable date prior to the publication of this notice of meeting, excluding shares held in treasury); (b) the minimum price (exclusive of any expenses) which may be paid for a share is 10 pence; (c) the maximum price (exclusive of any expenses) which may be paid for a share is an amount equal to the highest of: (i) 105% of the average of the middle market quotations for a share taken from the London Stock Exchange Daily Official List for the 5 business days immediately preceding the day on which the share is purchased; or (ii) the higher of the price of the last independent trade and the highest current independent bid on the trading venues where the purchase is carried out; (d) the authority hereby conferred shall expire at the earlier of the conclusion of the Annual General Meeting of the Company in 2018, or 23 July 2018, unless such authority is renewed prior to such time; (e) the Company may make a contract to purchase shares under the authority hereby conferred prior to the expiry of such authority which will be or may be executed wholly or partly after the expiration of such authority and may make a purchase of shares pursuant to any such contract; and (f) all shares purchased pursuant to the said authority shall be either: (i) cancelled immediately upon completion of the purchase; or (ii) held, sold, transferred or otherwise dealt with as treasury shares in accordance with the provisions of the Act. By order of the Board M. J. Nokes F.C.A. Secretary 155 Bishopsgate London EC2M 3XY 9 December 2016 Notes to the Notice of Annual General Meeting 1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company. A proxy form which may be used to make such appointment and give proxy instructions accompanies this notice. If you do not have a proxy form and believe that you should have one, or if you require additional forms, please contact the Company's registrars, Capita Asset Services (contact details can be found on page 2). 2. To be valid any proxy form or other instrument appointing a proxy must be received by post using the enclosed Business Reply Envelope, or (during normal business hours only) by hand at the offices of the Company's registrars, Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU no later than 2:30pm on Friday, 20 January 2017 (or, in the event of any adjournment, on the date which is two days before the time of the adjourned meeting for the purposes of which no account is to be taken of any part of a day that is not a working day). 3. The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described in paragraph 9 below) will not prevent a shareholder attending the Annual General Meeting and voting in person if he/she wishes to do so. 4. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a "Nominated Person") may, under an agreement between him/her and the shareholder by whom he /she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights. 5. The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 2 above does not apply to Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company. 6. To be entitled to attend and vote at the Annual General Meeting (and for the purpose of the determination by the Company of the votes they may cast), Shareholders must be registered in the Register of Members of the Company at the close of business on Friday, 20 January 2017 (or, in the event of any adjournment, on the date which is two days before the time of the adjourned meeting for the purposes of which no account is to be taken of any part of a day that is not a working day). Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting. 7. As at 8 December 2016 (being the last business day prior to the publication of this Notice) the Company's issued share capital consisted of 15,859,364 ordinary shares, carrying one vote each (excluding 3,318,207 shares held in treasury by the Company in relation to which voting rights are suspended). Therefore, the total voting rights in the Company as at 8 December 2016 are 15,859,364. 8. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 9. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications, and must contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer's agent (ID RA10) by 2:30pm on Friday, 20 January 2017 (or, in the event of any adjournment, on the date which is two days before the time of the adjourned meeting for the purposes of which no account is to be taken of any part of a day that is not a working day). For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. 10. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. 11. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 12. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares. 13. Under section 527 of the Companies Act 2006 members meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company's accounts (including the auditor's report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under section 527 of the Companies Act 2006, it must forward the statement to the Company's auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under section 527 of the Companies Act 2006 to publish on a website. 14. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the
question be answered. 15. A copy of this notice, and other information required by s311A of the Companies Act 2006, can be found at www.bee-plc.com. Inspection of documents The following documents will be available for inspection at the Company's registered office from 9 December 2016 until the time of the AGM and at the AGM location from 15 minutes before the AGM until it ends: * Copies of letters of appointment of the non-executive Directors Baring Asset Management Limited 155 Bishopsgate London EC2M 3XY Telephone: 020 7628 6000 (Authorised and regulated by the Financial Conduct Authority) www.barings.com Registered in England and Wales no: 02915887 Registered offce as above. END
(END) Dow Jones Newswires
December 09, 2016 09:45 ET (14:45 GMT)
1 Year Baring Emerging Europe Chart |
1 Month Baring Emerging Europe Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
