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Barings Emerging EMEA Opportunities Plc - Annual Financial Report

12/06/2021 | 02:02am EDT

Barings Emerging EMEA Opportunities PLC

(formerly Baring Emerging Europe PLC)


Annual Report & Audited Financial Statements for the year ended 30 September 2021

The Directors present the Annual Financial Report of Barings Emerging EMEA Opportunities PLC (the “Company”) for the year ended 30 September 2021. The full Annual Report and Accounts can be accessed via the Company’s website, or by contacting the Company Secretary on 01392 477571.


Barings Emerging EMEA Opportunities PLC (the “Company”) was incorporated on 11 October 2002 as a public limited company and is an investment company in accordance with the provisions of Section 833 of the Companies Act 2006 (the “Act”). It is a member of the Association of Investment Companies (the “AIC”). The ticker is BEMO.

As an investment trust, the Company has appointed an Alternative Investment Fund Manager, Baring Fund Managers Limited (the “AIFM”), to manage its investments.

The AIFM is authorised and regulated by the Financial Conduct Authority (the “FCA”). The AIFM has delegated responsibility for the investment management of the portfolio to Baring Asset Management Limited (the “Investment Manager” or “Manager”). Further information on the Investment Manager, their investment philosophy and management of the Investment Portfolio can be found below.


With effect from 13 November 2020, the AIFM agreed to a reduction in the investment management fee from the previous level of 0.80% of the net asset value (“NAV”) of the Company to 0.75% of the NAV of the Company per annum. This is paid monthly in arrears based on the level of net assets at the end of the month.


The Company’s current investment objective and policy can be found below.


The Company’s comparator benchmark is the MSCI Emerging Markets EMEA Index (net dividends reinvested) (the “Benchmark”).

This Benchmark is considered to be most representative of the Company’s investment mandate, which covers Emerging Europe, the Middle East and Africa.

Financial Highlights

for the year ended 30 September 2021

Annualised NAV Total Return#1
Share price total return#1 Dividend per Ordinary Share#1
+36.6% (2020: -22.3%) +39.7% (2020: -27.5%) 26p (2020: 25p)


For the year ended 30 September 2021    2020    % change
NAV per Ordinary Share1 920.7p 694.7p  +32.5%
Share price 793.0p 587.0p  +35.1%
Share price total return1# +39.7% -27.5% -
Benchmark (annualised )1 +33.3% -22.6% -
Discount to NAV per Ordinary Share1 13.9% 15.5% -
Dividend yield1,2 3.3% 4.3% -
Ongoing charges1 1.62% 1.48% -


Return per Ordinary Share Year ended 30 September 2021 Year ended 30 September 2020
Revenue   Capital   Total Revenue   Capital    Total   
Return per Ordinary Share1 23.86p 225.16p 249.02p 18.40p -220.52p -202.12p

Revenue return (earnings) per Ordinary Share is based on the revenue return for the year of £2,912,000 (2020: £2,281,000). Capital return per Ordinary Share is based on net capital gain for the financial year of £27,476,000 (2020: loss £27,339,000). These calculations are based on the weighted average of 12,202,696 (2020: 12,397,456) Ordinary Shares in issue, excluding treasury shares, during the year.

At 30 September 2021, there were 12,044,780 (2020: 12,276,025) Ordinary Shares of 10 pence each in issue which excludes 3,318,207 (2020: 3,318,207) Ordinary Shares held in treasury. The shares held in treasury are not included when calculating the weighted average of Ordinary Shares in issue during the year. All shares repurchased during the year have been cancelled.

1Alternative Performance Measures (“APMs”) definitions can be found in the Glossary below.

2% based on dividend declared for the full year.

#Key Performance Indicator.

Five Year Financial Record

At 30 September 2021 2020 2019 2018 2017
Shareholders’ funds £111m £85m £116m £108m £123m
NAV per Ordinary Share 920.7p 694.7p 930.8p 824.0p 878.0p
Share price 793.0p 587.0p 846.0p 714.0p 775.0p


3 years 5 years
NAV Total Return 7.7 9.1
Share Price Total Return 8.0 9.1
Benchmark Total Return 6.2 8.1

Source: Barings, Factset.


2017 2018 2019 2020 2021
NAV Total Return 26.9 -2.6 17.8 -22.3 36.6
Share Price Total Return 27.6 -4.0 24.3 -27.5 39.7
Benchmark Total Return 21.4 1.6 15.9 -22.6 33.3

Source: Barings, Factset.

Chairman’s Statement

“Our Investment Manager was not only able to deliver a strong return in absolute terms, but also a significant outperformance relative to the Benchmark. This result was largely attributable to stock selection, whilst the portfolio also benefited from the broadening of the investment mandate and the increased diversification of its investments”.

Frances Daley


I am delighted to present the results for the year ended 30 September 2021. This was a period of significant change for the Company, following Shareholders’ approval of a broadened investment mandate to include the emerging markets of Europe, the Middle East and Africa in November last year. 

A year ago, I wrote at a time of continued global uncertainty over COVID-19 and governments’ responses to it. The twelve months that have passed since have been remarkable. Our region’s equity markets, after being amongst the hardest hit in the earlier stages of the pandemic, rebounded strongly as the successful development of a number of COVID-19 vaccines allowed economies globally to reopen.

Against this backdrop, our Investment Manager was not only able to deliver a strong return in absolute terms, but also significant outperformance relative to the Benchmark. This result was largely attributable to stock selection, based on our Investment Manager’s fundamental bottom-up investment process.

The portfolio has also benefited from the broadening of the investment mandate. The effect has been to increase the diversification of the investment portfolio. The portfolio now comprises investments across eleven different countries and currencies, and enjoys a deeper pool of potential stock picks. The benefit of reduced vulnerability to negative developments in particular countries is exemplified by Turkey. With Turkey now making up just 2.6% of the portfolio compared to 8.1% at the end of the prior financial year, the volatility of the country’s equity market over the period had a negligible impact on the Company’s performance.


The NAV total return over the year was +36.6% compared to the Benchmark return of +33.3%. On a relative basis, this represents an outperformance of +2.4% versus the Benchmark. Over the long term, the Company’s annualised NAV total return was +7.7% over three years and +9.1% over five years. This remains comfortably ahead of the Benchmark, which returned +6.2% and +8.1% respectively. 

Our region also delivered an impressive performance relative to both developed and emerging market peers. By contrast, the total return from developed European equities was 22.0%, whilst global emerging market equities gained 13.3%1. This recovery across emerging EMEA equities is particularly impressive given that the region’s economies and financial markets were among the worst hit in the world by the first shockwaves of the pandemic last year.

As economies tentatively began to recover from the pandemic the share prices of companies whose fortunes are closely aligned to the economic cycle, and had been hardest hit by COVID-19, tended to perform most strongly. This was despite many of these businesses still facing uncertain outlooks and weak profitability. This is not the type of company generally held in the portfolio, as our Manager believes that the most effective way to deliver attractive returns to Shareholders is to invest in structurally growing companies rather than those tied to the economic cycle. It is therefore worthy of note that our portfolio performed significantly better than the Benchmark, driven by the success of our Manager’s stock selection. This was despite the cyclical stocks that benefitted most from the upturn in the economic cycle not being as widely held in the portfolio.

I would like to thank the team at Barings for managing what has been a period of great change for the Company and its portfolio.

1 As defined by the MSCI Europe Net (Developed Europe) and MSCI Emerging Markets Net (Global Emerging Markets) indices.

Environmental, Social and Governance

The Investment Manager continues to incorporate Environmental, Social and Governance (“ESG”) parameters as a key element of the investment process and company analysis, to reflect improving or deteriorating corporate standards that may influence a company’s value. This approach enables the Investment Manager to uncover potential unrecognised investment opportunities, whilst also mitigating risks. The Investment Manager also undertakes active engagement to positively influence ESG practices and improve ESG disclosures.

During the year, the Board discussed with the Investment Manager their approach to ESG, the challenges posed by countries across our region and reviewed some examples of companies they have engaged with. This process included a series of online meetings with the management teams of some of the companies the Company is invested in. We also discussed the opportunities that ESG presents, specifically as it relates to renewable energy sources and a future world less dependent on fossil fuels. One particular area of interest is the transition to greener energy sources. The Investment Manager believes that the portfolio is well positioned to be able to invest in businesses positively exposed to energy transition and renewables themes.

The Board shares the Investment Manager’s view that ESG factors are among some of the most important variables that can impact on investment’s risks and returns over time. Further detail on the Investment Manager’s ESG process and approach to active engagement can be found in the Investment Manager’s Report.

Discount Management

The discount at year-end was 13.9% compared with 15.5% for the end of the prior year. The average discount during the year was 13.1%. During the year, 231,245 Ordinary Shares were bought back and cancelled at an average price of £7.41 per Ordinary Share, for a total cost of £1,715,000. The share buybacks added approximately 2.1 pence per Ordinary Share to NAV, accounting for just under 0.2% of the total return to Shareholders. 


There were no borrowings during the period.  At 30 September 2021, there was net cash of £1.7 million (30 September 2020: £1.7 million). The Company does not currently make use of a loan facility but keeps its borrowing arrangements and gearing policy under review.


In respect of the six-month period ended 31 March 2021, the Company paid an interim dividend of 15 pence per share (2020: 15 pence per share). For the year under review, the Board recommends a final dividend of 11 pence per share (2020: 10 pence per share). This amounts to a total dividend for the year of 26 pence per share (2020: 25 pence per share), equivalent to a yield of around 3.3% on the year end share price of 793p. This payment is not fully covered by the income account, which produced  net revenue per share of 23.86 pence per share (2020: 18.40 pence). However, it reflects our confidence in the ability of the Investment Manager to sustainably grow the underlying revenue generated by the portfolio over the medium term. The Board remains committed to enhancing the appeal of investing in the Company by providing Shareholders with an attractive level of income. 

Promotional Activity and Keeping Shareholders Informed

The Board and Investment Manager have put in place a promotional programme that seeks to raise the Company’s profile and its investment remit, particularly amongst retail investors. The aim is to benefit all shareholders by generating sustained interest in, and demand for, the Company’s shares. As part of the plan, the Company’s website has been refreshed with new themed content, a portfolio and pricing feed, plus detailed information on investing through online investment trading platforms, where many retail investors now buy their shares. We have also put in place an email communications programme to enhance engagement with the Company’s existing shareholders, as well as with other supporters. These email updates provide relevant news and views plus performance updates. I encourage you to sign up for these targeted communications by visiting the Company’s web page at and clicking on ‘Register for email updates’.

Annual General Meeting 

The Board would be delighted to meet Shareholders at the Company’s Annual General Meeting (“AGM”), to be held at the offices of the Investment Manager, 20 Old Bailey, London EC4M 7BF, on Tuesday, 25 January 2022 at 2.30pm. The Investment Manager will give their customary presentation on the markets and the outlook for the year ahead. Details can be found in the Notice of the AGM, which has been circulated separately to this report.

While we hope that you are able to attend, the Directors are aware that government guidance or regulation to contain the spread of COVID-19 might change and if we are obliged to change the arrangements for the AGM after publishing this document, details will be published via RNS and our website.

Articles of Association

The Company’s Annual General Meeting in 2021 could not be held as normal as a result of COVID-19 restrictions. Electronic or hybrid meetings would allow greater Shareholder participation in future Annual General Meetings or other general meetings should similar situations arise. Electronic and hybrid meetings are only permitted if expressly provided for in the Company’s Articles of Association. As currently drafted, the Company’s Articles of Association do not allow for hybrid meetings. The Board is therefore proposing a Special Resolution at the Annual General Meeting to be held on 25 January 2022 that the Articles of Association be amended to allow for hybrid meetings and to capture any significant regulatory changes since the drafting of the current Articles of Association. Whilst the Board is proposing a provision for hybrid meetings, it is the Board's preference, restrictions permitting, for Annual General Meetings to be held in person as the Board welcomes the opportunity to meet and engage with shareholders. 


Since the year-end, equity markets have continued to extend their recovery from the lows of 2020, reflecting optimism that the global economic recovery will continue. After this strong rebound in economic activity, worries now centre around inflationary pressures caused by the release of pent-up of demand and the consequential disruption to global supply lines. In turn, this has led to concerns that the stimulatory monetary policies followed by central banks around the world might be reversed with adverse effects on equity markets.

Despite these global concerns, there are reasons to be optimistic for the emerging EMEA asset class. We have continued to see a recovery in earnings growth across many of the companies in our investment universe. This trend bodes well for the performance of the portfolio and the income generated by the companies in the portfolio. Underpinning this earnings growth is the strength of the consumer. High disposable income growth across most parts of the region, combined with ongoing efficiency gains, will remain a key driver of earnings over the medium term. The case for investment in the region’s equities also comprises a degree of resilience against inflationary pressures. This has been most evident in recent months, where rising energy prices have helped support economic activity and stock market performance across some of region’s markets. This will continue to be important over the coming months as inflationary pressures persist.

Liquidity across the region is improving, underpinned by the increased participation of retail investors. We believe this trend is set to continue, and will help to support portfolio diversification and valuations.

Finally, against a backdrop of monetary tightening, the region will continue to benefit from the flexibility provided by the independent monetary policy framework that has been established in most of the countries (one obvious current exception being Turkey).

The impact of some of these positive trends can be seen in the performance of markets across the region. For example, in U.S. Dollar terms, both Russia and Saudi Arabia are at multi-year highs.

These factors should help contribute to the increasing attractiveness of emerging EMEA equities as an asset class, whilst the Company’s diversified portfolio is well placed to continue to deliver attractive returns for our Shareholders. 

Frances Daley


3 December 2021

Business Model and Strategy

Business Model and Strategy

The Company has no employees and the Board is comprised of Non-Executive Directors. The day-to-day operations and functions of the Company have been delegated to third-party service providers, which are subject to the ongoing oversight of the Board. In line with the stated investment philosophy, the Manager takes a bottom-up approach, founded on research carried out using the Manager’s own internal resources. This research, which has a strong focus on environmental, social and governance issues, enables the Manager to identify what it believes to be the most attractive stocks in EMEA markets. Further information can be found below.

The Company’s Investment Objective and Policy was changed on 13 November 2020, following approval from Shareholders in a general meeting.

Purpose, Values and Strategy

The Company’s primary purpose is to meet its investment objective to deliver capital growth, principally through investment in emerging and frontier equity securities listed or traded on EMEA markets. To achieve this, the Board uses its breadth of skills, experience and knowledge to oversee and work with the Investment Manager, to ensure that it has the appropriate capability, resources and controls in place to actively manage the Company’s assets to meet its investment objective. The Board also select and engage reputable and competent organisations to provide other services on behalf of the Company.

The Company’s values focus on transparency, clarity and constructive challenge. The Directors recognise the importance of sustaining a culture that contributes to achieving the purpose of the Company that is consistent with its values and strategy. Further detail on culture can be found below.

Investment Objective

The Company’s investment objective is to achieve capital growth, principally through investment in emerging and frontier equity securities listed or traded on Eastern European, Middle Eastern and African (EMEA) securities markets. The Company may also invest in securities in which the majority of underlying assets, revenues and/or profits are, or are expected to be, derived from activities in EMEA but are listed or traded elsewhere (EMEA Universe).

Investment Policy

The Company intends to invest for the most part in emerging and frontier equity listed or traded on EMEA securities markets or in securities in which the majority of underlying assets, revenues and/or profits are, or are expected to be, derived from activities in EMEA but are listed or traded elsewhere. To achieve the Company’s investment objective, the Company selects investments through a process of bottom-up fundamental analysis, seeking long-term appreciation through investment in mispriced companies.

Where possible, investments will generally be made directly into public listed or traded equity securities including equity-related instruments such as preference shares, convertible securities, options, warrants and other rights to subscribe or acquire equity securities, or rights relating to equity securities.

It is intended that the Company will generally be invested in equity securities; however, the Company may invest in bonds or other fixed-income securities, including high risk debt securities. These securities may be below investment grade. The number of investments in the portfolio will normally range between 20 and 65.

The Company may invest in unquoted securities, but the amount of such investment is not expected to be material. The maximum exposure to unquoted securities should be restricted to 5% of the Company’s gross assets, at the time of investment, in normal circumstances. The Company may also invest in other investment funds in order to gain exposure to EMEA countries or gain 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 10% of its gross assets in other UK listed closed-ended investment funds, save that, where such UK listed closed ended investment funds have themselves published investment policies to invest no more than 15% of their total assets in other listed closed-ended investment funds, the Company will invest not more than 15% of its gross assets in such UK listed closed ended investment funds.

Whilst there are no specific limits placed on exposure to any one sector or country, the Company seeks to achieve a spread of risk through continual monitoring of the sector and country weightings of the portfolio. The Company’s maximum limit for any single investment at the time of purchase is the higher of 15% of gross assets or the weight of the purchased security in the comparator benchmark plus 5%, with an upper maximum limit of 20% of gross assets (excluding for cash management purposes).

Relative guidelines will be based on the Morgan Stanley Capital International “MSCI” Emerging Markets EMEA Index (net), which will be the index used as the benchmark.

The Company may use borrowed funds to take advantage of investment opportunities. However, it is intended that the

Company would only be geared when the Directors, advised by the Investment Manager, have a high level of confidence that gearing would add significant value to the portfolio. The Investment 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.

The Company may use derivative instruments for the purpose of efficient portfolio management (which includes hedging) and for any investment purposes that are consistent with the investment objective and polices of the Company.

On 13 November 2020, the Company announced it had received Shareholder approval to broaden its investment mandate to focus on investing in emerging equity securities listed or traded on Emerging European, Middle Eastern and African (“EMEA”) securities markets. The previous Investment Objective and Investment Policy of the Company can be found in the Report.


The Company’s comparator benchmark is the MSCI Emerging Markets EMEA Index (net dividends reinvested).

Discount Control Mechanism

The Board is aware of Shareholders’ continued desire for a strong discount control mechanism, though also mindful of the need to provide the Company the opportunity to achieve its goal of outperforming its Benchmark.

With effect from 1 October 2020, the Board approved a tender offer trigger mechanism to provide Shareholders with a tender offer for up to 25% of the Company’s issued ordinary share capital if:

i)  the average daily discount of the Company’s market share capital to its net asset value (‘cum-income’) exceeds 12%, as calculated with reference to the trading of the Company’s shares over the period between 1 October 2020 and 30 September 2025; or

ii) the performance of the Company’s net asset value per share on a total return basis does not exceed the return on the MSCI Emerging Markets EMEA Index (net) by an average of 50 basis points per annum over the Calculation Period.

Please refer to the shareholder circular dated 19 October 2020 for further details.

In addition, and in order to reduce the discount, the Board authorises the Company’s shares to be brought on the market, from time to time, where the share price is quoted at a discount to NAV.

Barings Emerging EMEA Opportunities PLC

  • Focusing on the markets of Emerging Europe, the Middle East and Africa, the Company seeks out attractively valued, quality companies across this diverse and fast-changing region.
  • Large investment region underrepresented in global portfolios, with a portfolio that aims to deliver both attractive levels of income and capital growth over the long-term.
  • Managed by one of the region’s most experienced investment teams with a consistent track record of delivering relative outperformance.
  • A differentiated and innovative investment process driven by fundamental bottom-up analysis – with a strong focus on environmental, social and governance factors.

Principal and Emerging Risks

Principal Risks and Uncertainties

The Company is exposed to a variety of risks and uncertainties. The Board, through delegation to the Audit Committee, has undertaken a robust assessment of both the emerging and principal risks facing the Company, together with a review of any evolving risks which may have arisen during the year, including those risks which would threaten the Company’s business model, future performance, solvency or liquidity. These risks are formalised within the Company’s risk matrix.

The Audit Committee regularly (on a six-monthly basis) reviews the risks facing the Company by maintaining a detailed record of the identified risks against an assessment of the likelihood of such risks occurring and the severity of the potential impact of such risks. A residual risk rating is then calculated for each risk based on the outcome of the assessment. This enables the Board to take action and develop strategies in order to mitigate the effect of such risks to the extent possible. An analysis of financial risks can be found in note 14 to the Financial Statements below.

Information about the Company’s internal control and risk management procedures can be found in the Audit Committee Report below. The principal financial risks and the Company’s policies for managing these risks and the policy and practice with regard to financial instruments are summarised in note 14 to the Financial Statements.

The principal risks and uncertainties faced by the Company during the financial year, together with the potential effects, controls and mitigating factors, are set out in the following table. The Audit Committee will continue to assess these risks on an ongoing basis.

Risk Mitigation
Investment Strategy
There can be no guarantee that the investment objective will be achieved
The Investment Manager has a clear investment strategy, as set out above, which is regularly reviewed by the Board. The Investment Manager has in place a dedicated investment process which is designed to maximise the chances of the investment objective being achieved. The Board reviews regular investment reports from the Investment Manager to monitor performance against its stated objective and regularly reviews the strategy. All of the Company’s investments are listed on recognised stock exchanges and the liquidity of individual investments is monitored by the Investment Manager and the Board.
Adverse market conditions
Emerging markets are subject to volatile geopolitical and socioeconomic movements as well as the possible imposition of selective sanctions. This may have an impact on the liquidity of individual investments. Events such as health pandemics or outbreaks of disease may lead to increased short-term market volatility and may have adverse long-term effects on world economies and markets generally.
The Company is closed-end and, unlike open-ended funds, does not have to sell investments at low valuations in volatile markets.
It can be argued that the most effective method of protecting the Company from the effects of country specific or individual stock risks is to hold a geographically diversified portfolio spread across a diversified portfolio of stocks. As at the date of this report, the Company holds 51 stocks in 11 countries and the AIFM has the ability, where necessary, to diversify the portfolio into other regions. The AIFM has a clear investment strategy as set out below. Whilst recognising there will be periods when this strategy underperforms the Benchmark and peer group, the Board monitors performance at each Board meeting and reviews the investment process throughout the year.
The Investment Manager’s own internal compliance functions provide robust checks that the Investment Manager complies with the investment mandate.
The Board recognises the benefits of a closed-end fund structure in extremely volatile markets such as those affected by the COVID-19 pandemic. Unlike open ended funs, closed-ended funds are not obliged to sell-down portfolio holdings at potentially low valuations to meet liquidity requirements for redemptions. During times of elevated volatility and market stress, the ability of a closed-end fund structure to remain invested for the long term enables the Investment Manager to adhere to the investment management approach and be ready to respond to dislocations in the market as opportunities present themselves.
Size of the Company
The size of the Company could become sub optimal as share buybacks reduce the Company’s market capitalisation.
The Investment Manager discusses and agrees with the Board prior to making any buybacks of the Company’s shares within the agreed parameters. The Investment Manager and Corporate Broker are in regular contact with major institutional investors and report their views to the Board on a regular basis.
Share price volatility and liquidity/marketability risk
The shares of the Company are traded freely and are therefore subject to the influences of supply and demand and investors’ perception to the markets the Company invests in. The share price is therefore subject to fluctuations and like all investment trusts may trade at a discount to the NAV. Market shocks, such as those related to COVID-19, could continue to have a negative impact on the share price.
The Board seeks to narrow the discount by undertaking measured buybacks of the Company’s shares. The Company and Investment Manager work with the Corporate Broker to seek to increase demand for the Company’s shares.
The Board remains committed to an increased focus on dividend yield to further enhance the appeal of investing in the Company and increase demand for its shares. The Board has also put in place a comprehensive range of promotional plans to support existing shareholders and attract new investors.
In addition, as set out above, the Company has performance triggers in place, which may provide Shareholders with the opportunity to realise their investment in the Company at NAV less costs, should the Company not meet targets relating to average discount or performance over a five year period.
Loss of assets
The portfolio includes investments held in a number of jurisdictions and there is a risk of a loss of assets.
The Investment Manager and Administrator have systems in place for executing and settling transactions and for ensuring assets are safe. In addition, the Company uses an internationally recognised Custodian and sub Custodians and receives regular reports of assets held, which the Administrator reconciles. The operation of the Custodian is overseen and reviewed by the Depositary which reports regularly to the Board.
Engagement of third-party service providers
The Company outsources all of its operations to third parties and is therefore reliant on those third parties maintaining robust controls to prevent the Company suffering financial loss or reputation as damage. Further, the emergence of health pandemics, such as COVID-19, may have an impact on the operational robustness of third party service providers and their ability to conduct business as usual. 
The Company operates through a series of contractual relationships with its service providers. In the instance an epidemic and or pandemic develops internationally, the Investment Manager is able to take proactive steps to address the potential impacts on their people, clients, communities and any other stakeholders they come in contact with, directly or through their premises. This includes suspending all international business and domestic travel. Further, the Investment Manager has performed stress-testing on systems and processes, and is able to operate under a 100% remote working model globally without a degradation in their responsibilities.
The Board reviews the performance of all service providers both in Board meetings and in the Management Engagement Committee meeting, where the terms on which the service providers are engaged are also reviewed.
The Audit Committee also receives internal controls reports from key service providers. The Board assesses whether relevant controls have been operating effectively throughout the period.

In addition to the principal risks outlined above, the Board has considered a number of issues that it views as emerging risks. This included a discussion around the continued impact of COVID-19 and the ongoing implications of the United Kingdom’s withdrawal from the European Union. The COVID-19 pandemic has given rise to unprecedented challenges for businesses and economies across the globe and the Board has taken into consideration the risks posed to the Company by the crisis and incorporated these into the Company’s risk matrix.

The Board also considered the impact of climate change, which remains a critical issue as the world seeks to reduce greenhouse gas emissions and help combat global warming. However, a global transition towards a lower carbon world may also provide attractive investment opportunities. Management of the portfolio, including the integration of ESG considerations into portfolio construction, is delegated to the Investment Manager. The Board spent time over the year discussing with the Investment Manager its ESG framework, including how ESG considerations are integrated into the investment decision-making process. Further detail on the Investment Manager’s ESG process and approach to active engagement can be found in the Investment Manger’s Report.

The Audit Committee routinely reviews the principal risks and makes the required updates to the Company’s risk matrix as required. This approach allows the effect of any mitigating factors to be reflected in the assessment of the risk.

The risk register and the operation of the key controls of the Company’s third-party service providers’ systems of internal control are reviewed regularly by the Audit Committee.

Emerging risks are considered by the Board as they come into view, the immediate significance will be evaluated and the potential implications integrated into the existing review of the Company’s risk matrix.

Investment Manager

Management Arrangements and Fees

Baring Fund Managers Limited acts as the AIFM of the Company under an agreement terminable by either party giving not less than six months written notice. During the year under review, and under this agreement, the AIFM received a fee calculated monthly and payable at an annual rate of 0.80% of the NAV of the Company, together with any applicable VAT thereon and any out of pocket expenses incurred by the AIFM. With effect from 13 November 2020, this fee was reduced to 0.75% of the NAV of the Company.

There is no performance fee for the AIFM.

The AIFM has delegated the investment management of the portfolio to Baring Asset Management Limited (the “Investment Manager”).

Details of the Investment Manager

The Investment Manager has a team of fund managers who are responsible for the management of the investment portfolio. Matthias Siller, Head of Europe, Middle East and Africa (“EMEA”) at the Investment Manager, is the lead manager with Maria Szczesna and Adnan El-Araby as supporting managers. Matthias is supported by the wider EMEA Equity Team, which comprises seven experienced investment professionals all of whom have research responsibilities as well as the broader team of emerging equity professionals based in London, Hong Kong and Taiwan, utilising their diverse local knowledge and experience. The team also draws further support from the rest of the broader equity platform at the Investment Manager, especially the knowledge, expertise and coverage of our three global sector teams: Healthcare, Resources and Technology.

Matthias joined the Investment Manager in 2006 and was appointed Head of EMEA Equities Team in 2016. He began his career in fund management at Raiffeisen Zentralbank Austria in 1997 as a Market Maker/Proprietary Trader in Central & Eastern European Equities and Derivatives. He joined Bawag – PSK Invest as an EMEA equity portfolio manager in 2001 and moved to Raiffeisen Capital Management in 2003, where he was a portfolio manager for Central & Eastern European Equities. Matthias has a Masters degree from Vienna University in Economics & Business Administration. Matthias was awarded the CFA designation in 2006 and speaks fluent German.

Maria is an Investment Manager in the EMEA Equity Team. She is responsible for Financials and Consumer Staples in the region. Maria joined Barings in 2006 from the Polish Embassy in London, where she worked for three years as an economist. Prior to this, Maria worked in corporate finance at Ernst & Young and BRE Corporate Finance (part of Commerzbank Group) in Warsaw. She holds an MA in Economics from the Warsaw School of Economics and was awarded the CFA designation in 2008. Maria is fluent in Polish.

Adnan is an Investment Manager in the EMEA Equity Team. He is responsible for the entire Resource Space, Healthcare & Pharmaceuticals, Tech & Media and Autos within the EMEA region. Adnan joined Barings in 2010 from Legg Mason Capital Management, where he was also an investment analyst. He holds a Bachelor of Commerce degree from St. Mary’s University, Canada and was awarded the CFA designation in 2006. Adnan is fluent in Arabic.

Report of the Investment Manager

Our strategy seeks to diversify your portfolio by harnessing the long-term growth and income potential of Emerging EMEA. The portfolio is managed by our team of experienced investment professionals, with a repeatable process that also integrates Environmental, Social and Governance (“ESG”) criteria.

Our strategy
Access First-hand Expertise Process ESG Integration
Experienced investment team helps to foster strong relationships with the companies in which we invest. The investment team conducts hundreds of company meetings per year, building long-term relationships and insight. Extensive primary research and proprietary fundamental analysis, evaluating companies over a 5-year research horizon with macro considerations incorporated through our Cost of Equity approach. Fully integrated dynamic ESG assessment combined with active engagement to positively influence ESG practices.

A detailed description of the investment process, particularly the ESG approach can be found below.

Market Summary 

Global markets rallied significantly over the period, driven by the approval of a number of COVID-19 vaccines. This led to an improving picture for the global economic outlook and the hope for a return to economic normality, supported further by unprecedented stimulus from both the US government and European Union (“EU”).

Against this backdrop, Emerging European, Middle Eastern, and African equities performed strongly. This reflected the continued economic recovery from the lows of 2020, as well as a supportive commodity price backdrop, particularly within the energy sector, where oil and gas prices rose significantly in response to strong demand and tightening global supply. The region comfortably outperformed both broader developed and emerging equity markets, alongside regional peers, which were increasingly unpredictable in the face of rising inflation, monetary policy tightening and weakness in China.

Sterling has been notably strong over the period, drawing support from the last-minute agreement of a post-Brexit trade deal with the EU, and the rapid rollout of COVID-19 vaccines, which buoyed expectations of a swifter economic rebound. This is especially important given the company derives its returns from foreign assets, denominated in a range of currencies, and any material strength in the pound weakens the value of these repatriated investments. Despite these headwinds, over the period the Company achieved a NAV total return of 36.6% (including dividends), whilst the Benchmark returned 33.3% (both in GBP).

12M – Market Performance (%, GBP)

Developed Markets 23.5
Emerging Markets 13.3
EM EMEA 34.8
EM Latin America 22.1
EM Asia 9.2

Source: Barings, Factset, MSCI, September 2021.

Company, Benchmark Returns (Left Hand Side, £, %) and Country Returns (Right Hand Side, £, %)

1 October 2020 to 30 September 2021

Company Share Price Total Return 39.7%
Company NAV Total Return 36.6%
Benchmark 33.3%


Czech Republic 77.6%
Hungary 65.6%
Russia 52.8%
U.A.E 44.4%
Saudi Arabia 41.6%
Greece 25.0%
Poland 24.1%
South Africa 21.9%
Qatar 10.2%
Turkey 0.8%

Source: Barings, Factset, MSCI, September 2021.

Currency Returns (vs GBP returns, %) – 1 October 2020 to 30 September 2021

South African Rand 6.7%
Russian Ruble 2.4%
Czech Koruna 1.4%
Qatari Rial -4.1%
Hungarian Forint -4.1%
Saudi Riyali 4.1%
United Arab
Emirates Dirham
U.S.Dollar 4.1%
Euro -5.3%
Polish Zloty -6.7%
Turkish Lira -16.7%

Source: Barings, Factset, MSCI, September 2021.


The Company’s key objective is to deliver capital growth from a carefully selected portfolio of emerging EMEA companies. However, we are also focused on generating an attractive level of income for investors, from the companies in the portfolio.

In these times of ultra-low interest rates and equity dividend reductions, Emerging EMEA offers UK-based income seekers an attractive and differentiated income opportunity. A combination of the recovery in economic growth, greater capital efficiency and improved regulation is helping to drive dividend growth opportunities across a number of sectors, enabling companies to pay out more of their earnings to shareholders. In addition, many EMEA countries and their local exchanges have adopted accountancy and transparency standards that go beyond minimum requirements and rival their Western counterparts, which in turn, is helping to attract international investors and improve market liquidity.

Likewise, many EMEA companies themselves are striving to be more transparent, more shareholder-focused and generally better run. Russian fintech company TCS is a good example. The company recently cancelled its voting system that gave founder Oleg Tinkoff effective control over the company. In response, the share price rallied significantly upon the announcement as investors applauded this major advance in corporate governance.

TCS is not alone, with examples of emerging EMEA companies choosing to return more cash to shareholders ranging from Turkcell – Turkey’s leading mobile company, to PZU – Poland’s largest and oldest insurer, to X5 – Russia’s biggest supermarket chain. As further improvements in corporate governance lead to greater capital efficiency, we believe dividend payout ratios in these markets can continue to rise. Interestingly, this shift isn’t just happening in companies primarily owned by private investors. The Emerging EMEA region has a sizeable number of state-owned entities that are also looking to improve corporate culture, reign in corruption and incentivise long-term value generation. For example Sberbank, Russia’s largest lender and majority state-controlled, which is successfully transforming into a modern financial platform and e-commerce ecosystem, driving long-term growth and increasing dividend payout ratios. Sberbank is now among the top three banks in Europe by market capitalisation, and continued to pay out 50% of its profits during the pandemic-stricken year 2020.

Furthermore, we are also recognising new income opportunities away from Emerging Europe. In South Africa, First Rand declared an interim dividend, after withholding its final payout last year while the country battled the worst of the COVID-19 pandemic, delivering a sign of confidence in anticipation of the expected rebound in the economy. In the UAE, our investment in First Abu Dhabi Bank (FAB) delivered a resilient and stable 5% yield despite short-term headwinds, which we believe is a strong commitment to minority shareholders.

Monthly Yield (%)

Oct 2020 Nov 2020 Dec 2020 Jan 2021 Feb 2021 Mar 2021 Apr 2021 May 2021 Jun 2021 Jul 2021 Aug 2021 Sep 2021
Developed Markets 2.1 1.8 1.8 1.8 1.8 1.7 1.7 1.7 1.7 1.7 1.7 1.7
Emerging Markets 2.3 2.1 2.0 1.9 1.8 1.8 1.8 1.8 1.8 2.0 2.1 2.2
EM EMEA 4.0 3.6 3.3 3.2 3.2 2.9 2.9 2.9 2.8 2.9 3.1 3.2

12M Average Yield (%)

Developed Markets 1.8%
Emerging Markets 2.0%
EM EMEA 3.2%

Source: Barings, Factset, MSCI. Values based on MSCI regional and asset class indices. September 2021.

Macro Themes

In line with our bottom-up approach, our primary focus is to identify attractive investment opportunities at the company level for our shareholders. Nevertheless, we remain vigilant and mindful of broader macro effects within the region. By utilising the breadth of the region, we believe we are able to diversify the company’s portfolio by reducing concentration risk and lowering political and country-based risk. This in turn helps to support the contribution to performance from our company selection, accessing long-term growth opportunities, while dampening the negative effects  from major macro dislocations.

While the impressive overall performance of emerging EMEA owes much to the region’s economic resilience, the market backdrop remained, at times, unpredictable, reflecting worries about inflation, fluctuations in the price of oil and gas, and in Turkey, disruption at the central bank.

Energy Costs and the Great Transition

Oil and gas prices rose significantly over the year, driven by a recovery in demand from the extreme lows of the pandemic as economies reopened, whilst supply failed to recover at an adequate pace. This drove the performance of the region’s bigger energy exporters higher. In the longer term, the dominance of Russia and the Middle East in fossil fuel production may seem to put them at a disadvantage in a world looking to wean itself off carbon. However, a global transition away from oil and coal towards cleaner ‘bridging’ energy sources such as natural gas, would likely benefit Russia and Qatar—two of the world’s top four gas producers. Recent months have seen historic spikes in global natural gas prices, and could see further price rises as winter approaches. This volatility owes much to rising demand globally as economies looks to decarbonise. It is especially prevalent in the context of the current energy transition sought by the European Commission and China, in which natural gas represents a readily accessible alternative to reduce greenhouse gas emissions and help combat global warming.

Against this backdrop, whilst your Company does continue to selectively invest in the Energy sector, in companies such as Gazprom and Novatek.

What are the Benefits of Natural Gas?

  • Natural gas is a naturally occurring mixture of gases that can be used across a variety of sectors across the global economy to generate electricity, heat homes and fuel the transport of people and goods.
  • In a world rapidly evolving to meet growing global energy demand and limit CO2 emissions, natural gas is the cleanest-burning hydrocarbon, emitting between 45% and 55% lower greenhouse gas emissions than coal when used to generate electricity, according to data from the International Energy Agency (“IEA”).

Supplying the Green Revolution

Climate change and the need to move towards a world less dependent on fossil fuels remains one of the most critical issues globally. While we see an increased demand for electric vehicles as the most common instance of shifting consumption patterns, what is perhaps more pertinent for investors looking ahead is the access to commodities that will support the move to a greener society. This growing focus on the green energy transition has created new investment opportunities across different industries and sectors, For example, the amount of steel required for an offshore wind farm is roughly four to five times greater than that required by an onshore facility with the same gigawatt generation capacity. Electric vehicles are another example, requiring significantly more copper relative to a standard internal combustion engine vehicle.

Given the wealth of minerals and commodities produced in emerging EMEA, we believe your company is in a strong position to be able to invest in businesses positively exposed to the energy transition and renewables themes. Currently, we are invested in Norilsk Nickel in Russia and Anglo American in South Africa—both of which are industry champions in the production of nickel, a key input in the production of electric vehicles (EVs), as well as other energy transition metals. We also hold a position in Koc, a Turkish conglomerate that owns a significant stake in Ford Otosan, a company that runs one of the most efficient car production sites globally, and as a contract manufacturer, can focus investment primarily into EVs.

Evolving Consumption

Emerging EMEA also offers exposure to companies that are riding the wave of innovation or benefiting from major structural shifts in consumer needs and behaviour. These opportunities are particularly exciting as companies across the region are at a much earlier stage of growth than in developed markets, and e-commerce penetration rates are generally lower. Right now, across emerging EMEA, from Russia, the Middle East and down to South Africa, we are seeing seismic shifts in behaviour as consumers pivot from offline to online living, including online banking, food delivery, transport services and gaming.

Another compelling aspect to this story is that the companies benefitting from this growth are not necessarily the ones you might expect, and instead of turning to established global brands, ‘local champions’ are often the preferred providers. This often reflects the understanding that domestic players have of the local market and infrastructure around them. For example, in Poland, local e-commerce platform Allegro has flourished by being better able to serve the country’s largely apartment-living population, via their pick-up boxes/locker delivery system. Elsewhere, Russia’s most popular internet search engine Yandex accounts for 60% of the digital advertising market and, using its dominant position, management has successfully built an offline to online “ecosystem” that offers the Russian consumers a wide selection of choices with unmatched convenience. This allows a user to order a taxi, buy goods online, search the news, or access video on demand without leaving the app, a unique experience they cannot replicate through international competitors.

e-Commerce in ascendancy:

  • In Poland, the proportion of total retail sales accounted for by e-commerce leapt from 5.6% in January 2020 to almost 10% in 2021.
  • Russia’s online penetration rates as a percentage of retail sales has also accelerated after years of meagre growth caused by low consumer awareness and inefficient logistics – and is on course to grow from 10% in 2021 to 16% in 2025.

Turkey – and central bank independence

Elsewhere in the region, the surprising dismissal of Turkey’s central bank Governor Naci Agbal by President Erdogan in March sparked a correction, with the Turkish Lira depreciating and bond and equity markets declining sharply. Frustratingly for investors, the central bank’s interest rate hike earlier in the year preceding this dismissal, was a clear sign of how determined the Governor and his team were in pursuing orthodox policies, communicating transparently with market participants and, crucially, controlling inflationary pressures. The change at the helm of the Turkish central bank represents, in our view, a sharp deterioration of the country’s monetary policy framework and risks the loss of hard-earned credibility in the eyes of international investors.

Due to these events, our Turkish investments have detracted from relative performance. However, because of the broadly diversified nature of your portfolio, the effects have not been overly detrimental. In addition, considering the economic implications of this development, we took the decision to reduce our exposure. We continue to hold select exposure, focusing our investments in well-capitalised, high quality companies with tangible growth prospects, such as BIM, a food retailer and pioneer of this discount store model in Turkey, and Koc, a local conglomerate group of companies.

Portfolio Country Weight (%)

Russia 35.5%
South Africa 24.2%
Saudi Arabia 17.9%
Poland 5.2%
U.A.E 4.5%
Qatar 3.7%
Turkey 2.6%
Hungary 2.6%
Greece 1.7%
Kuwait 1.4%
Czech Republic 0.9%

Source: Barings. September 2021.

Portfolio Sector Weight (%)

Financials 42.0%
Energy 14.5%
Materials 11.7%
Comm. Services 11.1%
Consumer Disc. 10.8%
Consumer Staples 7.1%
Real Estate 1.5%
Industrials 1.4%

Source: Barings. September 2021.

Company Selection

Our team regularly engage with management teams and analyse industry competitors to gain an insight into a company’s business model and sustainable competitive advantages. Based on this analysis, we seek to take advantage of these inefficiencies through our in-depth fundamental research, which includes an integrated Environmental, Social and Governance (ESG) assessment, and active engagement, to identify and unlock mispriced growth opportunities for our shareholders.

Russia’s Gazprom was the strongest contributor to relative returns over the period, as natural gas prices have rallied to multi-year highs caused by a prolonged winter season and strong demand from Asia. Similarly, our positions in Novatek and Lukoil also outperformed in light of the improving prospects for the global economy and tight supply of oil and gas.

Russian fintech disruptor TCS was another significant contributor to relative returns, with the shares rallying in response to the company’s positive corporate governance developments that are noted above. We believe the positive market reaction to be testament to the vast shareholder value potential inherent in the company, which we have championed, and recognised through their improving ESG profile. Elsewhere in Russia, our holding in Russia’s Sberbank was another notable contributor.

Stock selection in the Middle East added to relative performance over the period. Saudi-based Al Rajhi Bank performed well, helped by solid results for 2020 and a positive outlook for this year, as the company experienced a rebound in mortgage growth. Qatar National Bank (QNB) was another strong contributor to relative returns supported by deposit growth and expenditure control in its operations. QNB also has a strong ESG profile, provided by impressive talent retention programmes, robust data privacy and investment in cyber security.

In the Materials sector, metals and mining stocks were generally weaker as markets softened in response to expectations of lower GDP growth in China and reduced global auto production. This negatively impacted our holdings in KGHM, Polyus, and Anglo American Platinum. Despite the weaker performance, we believe the Company’s exposure to these precious metals companies will benefit from the close alignment with the global green energy transition and imposition of stricter emissions standards, particularly in the automotive sector.

Elsewhere, against a backdrop of a strong technology sector in 2020, Sistema outperformed, supported by a consistent track record of asset monetisation. Most recently, this included the successful IPO of Ozon, a company that has compelling exposure to the structural growth of internet shopping, as consumers transition from offline to online. More broadly, performance within the Communications Services sector was mixed, with Russia’s most popular internet search engine, Yandex, outperforming, whilst its peer, Mail.Ru, detracted. This differential was largely a reflection of the execution of Yandex’s business strategy, utilising the recovery in the profitability of business units such as Advertising and Taxi, and reinvesting excess revenues into its e-commerce platform, which has delivered growth in excess of larger peers. Despite the underperformance of Mail.Ru, we continue to see an investment opportunity over the medium term, as the rising penetration of e-commerce helps to accelerate the shift from offline to online and the digitalisation of the economy continues to create new ways to consume.

In Poland, game developer CD Projekt was one of our weaker performing investments over the period. The company has been dealt successive blows from delays in the release of its next major franchise, Cyberpunk 2077, before the eventual release led to a number of complaints from users regarding glitches. Following these announcements, we decided to exit the company until a time that we could see greater visibility on the company’s earning trajectory.

Engagement Case Study: Mail.Ru

Mail.Ru is one of the many companies we have actively engaged with over the period, please see below for a short case study of our interaction:

Overview We engaged with Mail.Ru, an internet company that operates a widely utilised social media and games platform in Russia, following a request from the company for our assessment of their efforts surrounding ESG.
Objective Our aim was to influence the company’s upcoming ESG strategy, and to ensure the company has clear and transparent guidelines, to demonstrate initiative, ownership and a roadmap for improvement.
Outcome Following our feedback, we recommended that for an ESG strategy to be meaningful the company needed to publicise tangible targets, benchmarked historically, to ensure that outcomes are quantifiable, and that investors can clearly ascertain the roadmap of improvement.

In addition, as part of this strategic review, we have evaluated the company’s ESG reporting and transparency, highlighting key areas of focus, which include but are not limited to, shareholder structures, data security, customer privacy, staff turnover and diversity and inclusion.

Following the release of the company’s second ESG report, we noted that while the level of disclosures had been enhanced, there is still room for improvement, particularly as it relates to objectives and actionable targets. This is especially prevalent in light of the company’s expansion into ecommerce and delivery, and the implications for staff, which operate within the gig economy.


In the short term, markets are likely to remain volatile as investors closely monitor progress on containing COVID-19 outbreaks across many EM countries. However, the ongoing trend of improving economic and earnings momentum is encouraging, while the rolling out of vaccination programs gives grounds for optimism.

Supply-side bottlenecks and the reopening of economies have led to higher near-term inflationary pressures that have been exacerbated by the recent significant rise in oil and gas prices. This poses an additional challenge for investors. However, these pressures should start to ease by year-end. In response, the EMEA region has been on the front foot with its approach to monetary tightening, with Russia, Hungary and the Czech Republic all raising interest rates over recent months.

In addition, political risk and the potential for periods of instability remains a risk for our region, as it does across many markets. This is one of the key reasons why we continue to ensure that our portfolio is well diversified across many countries and sectors.

Despite these short-term headwinds, we see reasons to be optimistic across the region’s larger markets. South Africa’s commitment to fiscal prudence increases the country’s long-term growth potential, whilst early stage results of efforts to combat corruption are welcomed. In addition, the country’s access to a broad range of metals of strategic importance to the energy transition has only become more evident in recent years.

In Russia, we see opportunities away from the country’s traditionally dominant Energy sector, in areas such as e-commerce, consumption and technology. The country’s natural gas producers also have an important role to play in the green energy transition. We continue to believe Saudi Arabia’s petro-economy will adapt, diversify and grow its share in global hydrocarbon production. Whilst in central Europe, we see opportunities for economies to benefit from the EU’s Recovery Fund and Green New Deal initiatives.

A weaker USD would provide an additional welcome boost. Furthermore, the relative valuation of the EMEA region versus developed equities remains attractive, suggesting investor expectations for the asset class remain overly depressed. This combination of steadily improving earnings, receding COVID-19 risk and attractive valuations should create a positive backdrop for equity markets as we look to 2022 and beyond.

Investment Process Highlights

We believe that equity markets are inefficient and that consistently applied fundamental bottom-up company analysis can identify mispriced opportunities. To unearth these opportunities, we follow a Growth At a Reasonable Price (“GARP”) approach, and apply this to all companies across our region. GARP investing is focused on identifying companies that are positioned to grow sustainably over the medium to long term, but where growth is not necessarily recognised by the market. We therefore seek to select companies that have the potential to thrive, but also offer good value. We believe that this approach is the most effective way to invest over longer periods as it focuses on company fundamentals, with a focus on sustainable business franchises, strong balance sheets and improving ESG characteristics.


For company research, we use a consistent, analytical and qualitative framework applied through our proprietary Company Scorecard (see Chart A). This focuses on three pillars consistent with our GARP methodology: Growth, Valuation and Quality. By applying a consistent research approach, we can evaluate each company on a like-for-like basis and determine relative attractiveness across countries and sectors within the region.

Portfolio construction

We take the ideas generated through our research process and construct a portfolio that targets sustainable investment returns. Risk management is central to this process, and we employ a range of approaches to fully identify all risks within your portfolio. The ultimate aim of this process is to ensure the businesses in which we invest drive portfolio performance, rather than broader macroeconomic events.

Once invested, our experienced investment team continue to monitor each company to ensure that our conviction remains intact and that an investment remains attractive relative to other opportunities available in the market.

A Focus On ESG

Our proprietary ESG assessment forms a core component of our fundamental bottom-up research. It is guided by our in-depth knowledge and regular interactions with company management teams.

Integrating ESG

As an integral step of our research, our ESG assessment affects both our view of a company’s quality and its valuation. This assessment is dynamic rather than static; we closely monitor the companies we invest in for improvements or deteriorations in their attitudes to ESG and reflect this in our scoring of both the quality of the business and its valuation. For each company under our coverage we complete an ESG scorecard that focuses on three categories as a foundation of our assessment:

  • Sustainability of the Business Model (Franchise)
  • Corporate Governance Credibility (Management)
  • Hidden Risks on the Balance Sheet (Balance Sheet)

Within each of these categories, we identify three further subcategories, which are relevant areas of potential risk or opportunity (see Figure B below).

ESG and its impact on a company’s Quality Score

We conduct a qualitative assessment of the company in order to assess how strong the company’s franchise, management and balance sheet are, and assign a quality score of 1 to 5 (1 strong, 5 weak). If we consider the franchise or balance sheet of the company are under threat due to an ESG issue, or that the company has weak governance structures, the score we assign to the company could deteriorate to a level where the investment becomes unattractive from a quality perspective.

ESG and its impact on the company valuation

Each of the nine subcategories of our ESG assessment as set out below will be rated from Unfavorable to Exemplary:

+2% to COE -1% to COE

The individual scoring of each of the nine subcategories will translate into a premium or a discount that is added to the company’s Barings Cost of Equity (“COE”), which is used to discount our earnings forecasts. A low ESG score would translate into an addition to the discount rate of up to 2 percent, thus penalising the stock and reducing its attractiveness by decreasing its current valuation. The rationale is that a company associated with poor ESG is likely to have higher risks that should be reflected in the discount rate. Conversely, a high ESG score can indicate a company that is lower risk, resulting in a reduction to the COE of up to 1 percent.

Active Engagements with Investee Companies

We undertake engagements to positively influence ESG practices and improve ESG disclosure. Our approach is based on clear objective setting, which strengthens our ability to monitor and steer company progress. We also collaborate with peers and industry groups to enhance and share best practices. We believe that by engaging with companies in this way, rather than blanket exclusions of entire sectors, we have a greater chance of successfully effecting change. This can also result in value creation for our Shareholders.


We undertake to exercise our voting rights whenever possible, and have engaged a dedicated third-party proxy-voting provider. In instances where we disagree with the provider’s recommendations, we have the ability to cast our votes differently.

Figure  A – Fundamental Research: Consistent Company Scorecard

Fundamental Research
Company Meetings Sector / Industry / Macro Dynamics
5 Year Proprietary Financial Forecasts ESG Considerations


Growth Quality Valuation
Historical – How has the company grown its earnings over the last 3-years? Franchise – Does the company have a competitive advantage, efficiency, stability? Barings Valuation Approach – We use our 5-year earnings forecasts, discounted by our Cost of Equity, to set price targets and determine upside.
Near-term – Is the company expected to grow earnings over the next 12-months? Management – Are they competent, committed and aligned with shareholders?
Long-term – How is the company set to grow earnings over the next 5-years based on our forecasts? Balance Sheet – Does the company have the ability to fund its growth?

Figure B – Fundamental Research: ESG Assessment

Key Topics Score/Rationale Data / Issues to Consider

Sustainability of the Business Model (Franchise)
1 Employee Satisfaction Exemplary Staff Turnover; Strikes; Fair Wages; Injuries; Fatalities; Unionised Workforce; Training and Education
2 Resource Intensity Improving Water Usage; GHG Emissions; Energy Usage
3 Traceability/Security in Supply Chain Improving Traceability of Key Inputs; Investments in Protecting the Business From External Threats, e.g. Cyber Security; Backward Integration (Protection of Key Inputs)

Corporate Governance Credibility (Management)
4 Effectiveness of Supervisory/ Management Board Not Improving Separation of Chair & CEO; Size of Board; Independence of Board; Frequency of Meetings; Attendance Record; Voting Structure; Female Participation on Boards
5 Credibility of Auditing Arrangements Not Improving Credible Auditor; Independent Audit Committee; Qualification to Accounts
6 Transparency & Accountability of Management Exemplary Access to Management; Financial Reporting; Tax Disclosure; Appropriate Incentive Structure

Hidden Risks on the Balance Sheet (Balance Sheet)
7 Environmental Footprint Improving GHG Emissions; Carbon Intensity; History of Environmental Fines/Sanctions; Reduction Programs in Place for Water/Waste/Resource Intensity
8 Societal Impact of Products/Services Exemplary Health/Wellness Implications of Consumption of Goods/ Services; Product Safety issues; Community Engagement
9 Business Ethics Improving Anti-competitive practices; Bribery/Corruption; Whistle- Blower Policy; Litigation Risk; Freedom of Speech; Gender and Diversity Considerations

Baring Asset Management Limited

Investment Manager

3 December 2021

Investment Portfolio

Review of Top Ten Holdings

at 30 September 2021

Investee company Sector Market value £’000
% of investment portfolio
Company comment
Gazprom Energy 7,846 7.2 Russia's largest gas producer, currently offering substantial dividend yield.
Sberbank Financials 7,120 6.5 Russia’s largest bank, robust business model supported by successful implementation of digitalization strategy. Currently offers substantial
dividend yield.
Lukoil Holdings Energy 5,782 5.3 Russian oil company with potential for further dividend growth.
Al Rajhi Bank Financials 5,158 4.7 Number one Islamic bank globally. Dominant market share supported by extensive branch network and stable retail deposit franchise. Beneficiary of state sponsored mortgage program.
The Saudi National Bank Financials 4,759 4.4 Largest bank in Saudi Arabia, originated from merger of NCB and Samba with synergies still to be delivered.
Qatar National Bank Financials 4,032 3.7 Largest bank in Qatar, with dominant market share in both lending and deposits. Strong management team with a long history and good track record.
Norilsk Nickel Basic materials 3,642 3.3 Russia’s largest metals and mining stock with diversified portfolio. A beneficiary of the green energy transition.
Yandex Technology 3,547 3.2 Russia’s largest internet search engine, using its dominant market position to expand into areas such as e-commerce and taxi hailing.
Prosus Technology 3,518 3.2 One of the largest technology investors in the world, with an exciting portfolio of businesses across multiple sectors – social media, fintech, food
delivery and classified ads.
Firstrand Financials 3,430 3.1 Leading South African financial
institution offering a diverse
range of services including
transactional, lending, insurance and
investment products.

Investment Portfolio

at 30 September 2021

Investee company
Primary country of listing or investment
Market value £’000 
% of Net assets 
1 Gazprom Russia 7,846 7.08
2 Sberbank Russia 7,120 6.42
3 Lukoil Holdings Russia 5,782 5.21
4 Al Rajhi Bank Saudi Arabia 5,158 4.66
5 The Saudi National Bank Saudi Arabia 4,759 4.29
6 Qatar National Bank Qatar 4,032 3.64
7 Norilsk Nickel Russia 3,642 3.28
8 Ynadex Russia 3,547 3.20
9 Prosus South Africa 3,518 3.17
10 Firstrand South Africa 3,430 3.09
11 MTN Group South Africa 3,370 3.04
12 Saudi Basic Industries Saudi Arabia 3,256 2.94
13 Saudi Telecom Saudi Arabia 3,022 2.73
14 OTP Bank   Hungary 2,795 2.52
15 X5 Retail Group Russia 2,566 2.31
16 Bid Corporation South Africa 2,302 2.08
17 Novatek Russia 2,212 1.99
18 PKO Bank Polski Poland 2,209 1.99
19 Naspers Limited South Africa 2,109 1.90
20 Anglo American South Africa 2,044 1.84
21 Cooperative Insurance Saudi Arabia 1,810 1.63
22 First Abu Dhabi Bank United Arab Emirates 1,804 1.63
23 Capitec South Africa 1,768 1.59
24 Mr Price Group South Africa 1,711 1.54
25 Emaar Properties United Arab Emirates 1,650 1.49
26 PZU Poland 1,638 1.48
27 Anglo American Platinum South Africa 1,626 1.47
28 National Bank of Greece Greece 1,580 1.43
29 Discovery South Africa 1,532 1.38
30 Jarir Marketing Saudi Arabia 1,531 1.38
31 Shoprite Holdings South Africa 1,497 1.35
32 Abu Dhabi Commercial Bank United Arab Emirates 1,438 1.30
33 TCS Russia 1,401 1.26
34 Bim Birlesik Magazalar Turkey 1,345 1.21
35 Mail.RU Russia 1,045 0.94
36 Koc Holding Turkey 1,019 0.92
37 Fix Price Group Russia 1,010 0.91
38 Komercni Banka Czechia 974 0.88
39 Human Soft Kuwait 931 0.84
40 Moscow Exchange Russia 859 0.78
41 KGHM Polska Miedz Poland 841 0.76
42 Impala Platinum South Africa 779 0.70
43 Sanlam Limited South Africa 727 0.66
44 Segezha Group Russia 579 0.52
45 Mobilnye Telesistemy Russia 569 0.51
46 Mobile Telesystems Russia 568 0.51
47 National Bank of Kuwait Kuwait 547 0.49
48 Allegro Poland 532 0.48
49 Inpost Poland 496 0.45
50 D Market Electronic Services Trading Turkey 443 0.39
51 Alpha Services and Holdings Greece 264 0.24
Total investments 109,233 98.50
Net current assets 1,664 1.50
Net assets 110,897 100.00

Corporate Review

The Strategic Report above and the Audited Financial Statements has been prepared in accordance with the requirements of Section 414 of the Companies Act 2006 and best practice. Its purpose is to provide information to the Shareholders of the Company and help them to assess how the Directors have performed their duty to promote the success of the Company, in accordance with Section 172 of the Companies Act 2006.

Company Status

The principal activity of the Company is to carry on business as an investment trust. The Company intends at all times to conduct its affairs so as to enable it to qualify as an investment trust for the purposes of Sections 1158/1159 of the Corporation Tax Act 2010 (“S1158/1159”). The Directors do not envisage any change in this activity in the foreseeable future.

The Company is quoted on the London Stock Exchange under the ticker code BEMO. As an investment trust, the Company has appointed an Alternative Investment Fund Manager, Baring Fund Managers Limited (the “AIFM”), to manage its investments. It has also appointed third-party service providers to manage the day-to-day operations of the Company, whose performance is monitored and challenged by a Board of independent Non-Executive Directors.

The Directors are of the opinion that the Company continues to conduct its affairs so as to be able to continue to qualify as an investment trust.

Key Performance Indicators

Our Key Performance Indicators (“KPIs”) are as follows:

  • Annualised NAV total return1
  • Share price total return1
  • Dividend per Ordinary Share1

The returns for the year are set out under Financial Highlights above.

1APMs. Definitions can be found in the Glossary below

Dividend Policy

The Company seeks to generate an attractive level of income for Shareholders, and will pay income from capital of up to 1% per annum of NAV when considered appropriate by the Board. The Board believes this is a sustainable policy that should improve the Company’s appeal amongst investors.


An interim dividend of 15 pence per Ordinary Share was declared on 18 May 2021 and paid on 28 June 2021.

The Board recommends a final dividend of 11 pence per Ordinary Share. Subject to Shareholder approval at the AGM, the recommended final dividend will be paid on 7 February 2022 to Shareholders on the register at the close of business on 17 December 2021. The Ordinary Shares will be marked ex-dividend on 16 December 2021.

Buyback Programme

During the year under review, the average discount to NAV at which the Company’s Ordinary Shares traded at was 13.07% (2020: 11.04%) and 231,245 Ordinary Shares were repurchased at a cost of £1,715,000 (2020: 163,272 Ordinary Shares at a cost of £1,101,000). All Ordinary Shares repurchased during the year have been cancelled.

Section 172 Statement


Directors have a duty to make decisions that promote the success of a company for the benefit of shareholders as a whole. This responsibility is formally enshrined in section 172 of the Companies Act 2006, which stipulates that board decisions must be made with the long-term consequences of those decisions in mind, including consideration of the interests of a company’s employees, suppliers, customers and other stakeholders, the impact on the community and the environment, and the desirability of maintaining a reputation for high standards of business conduct.


The Board seeks to understand the needs and priorities of the Company’s stakeholders and these are taken into account during discussions and as part of its decision-making. The Board has concluded that, as the Company is an externally managed investment trust and does not have any employees or customers in the traditional sense, its key stakeholders comprise its Shareholders, its Investment Manager, its key service providers including; Corporate Broker, Company Secretary, Registrar, Custodian, Auditor and Administrator and, its Investee Companies. However, the Board also takes account of the Company’s responsibilities to the environment and the wider community. The section below discusses the actions taken by the Company to ensure that the interests of stakeholders are taken into account, particularly in the context of the emerging climate agenda.


Continued shareholder support and engagement are important to the existence of the Company and to the delivery of long-term strategy.

The Board is committed to maintaining open channels of communication and to engage with Shareholders in a manner which they find most helpful, in order to gain an understanding of the views of Shareholders. These include:

  • Annual General Meeting – The Company welcomes and encourages attendance and participation from Shareholders at the AGM and, national restrictions permitting, looks forward to hosting Shareholders again at the 2022 AGM. Shareholders have the opportunity to meet the Directors and the Investment Manager and to address questions to them directly. There is typically a presentation on the Company’s performance and the future outlook, from the Investment Manager.
  • Publications – The Annual Report and Half-Year results are made available on the Company’s website and the Annual Report is circulated to those Shareholders requesting hard copies. These reports provide Shareholders with detailed information on the Company’s portfolio and financial position. This information is supplemented by a quarterly factsheet which is released via the stock exchange.
  • Shareholder Feedback – Shareholders in investment companies often meet with the Investment Manager rather than members of the Board. However, the Board values the feedback and questions that it receives from Shareholders and takes note of individual Shareholders’ views in arriving at decisions which are taken in the best interests of the Company. The Chairman or the Senior Independent Director can be contacted via either the Company Secretary or the Corporate Broker, both of which are independent of the Investment Manager.
  • Investor Relations updates – At every Board meeting, the Directors receive updates from the Corporate Broker on share trading activity, share price performance, the Company’s share register and any Shareholders’ feedback. The Board also review promotional plans, PR activity and analyst’s comments or research reports on the Company.

The Investment Manager

Maintaining a close and constructive working relationship with the Investment Manager is essential for the Board. The Investment Manager aims to achieve capital growth in line with the Company’s investment objective. The Board has a critical role in monitoring the Investment Manager. The Board meets with the Investment Manager at least every quarter, and adopts a tone of constructive challenge. Further details on the management arrangements can be found above.

Third-Party Service Providers

In order for the Company to function as an investment trust, the Board relies on a diverse range of advisors for support. For this reason the Board considers the Company’s third-party service providers to be stakeholders.

The Board maintains regular contact with its key external providers and receives regular reporting from them, both through Board and committee meetings, as well as on an adhoc basis outside of meetings. Their advice and views are routinely taken into account. The Management Engagement Committee formally assesses their performance, fees and continuing appointment annually to ensure that the key service providers continue to function at an acceptable level and are appropriately remunerated to deliver the expected level of service. The Audit Committee also reviews and evaluates the financial reporting control environments in place at the key service providers.

Investee Companies

The Board recognises the importance of good stewardship and communication with investee companies in meeting the Company’s investment objective and strategy.

The Investment Manager engages with the management teams of investee companies on a periodic basis and reports its impressions on the prospects of these investee companies to the Board. The Directors recognise that the Investment Manager can influence an investee company’s approach to ESG matters, and this forms part of the investment process as detailed above. During the year under review, the Board met virtually with six investee companies from different geographical and sector backgrounds to understand how these companies operated, the sustainability of their business models, their approach to ESG and their corporate governance credibility.

Environment and Community

Given the outsourced nature of the Company’s operations, the Company has very little direct impact on the community or the environment. However, the Board recognises that it can influence an investee company’s approach to ESG matters. The Company’s investment approach takes into account the external impact of investee companies’ activities on the environment, their social practices’ social acceptability governance. The Investment Manager discusses ESG matters with investee companies on a regular basis. Further details on the Company’s investment approach to ESG can be found above.

The mechanisms for engaging with stakeholders are kept under review by the Directors and are discussed on a regular basis at Board meetings to ensure that they remain effective.

Board Activities

During the year regular items at Board meetings include the review of the Company’s portfolio, performance and the market, investor relations, marketing activities, key risks, operational matters and governance, and compliance with the AIC Code.

Decision Making

Specific Board decisions that have been made during the year included the following:

  • Investment Policy

A key strategic decision made by the Board was the broadening of the Company’s investment objective and investment policy. It also sought the views of the Company’s largest shareholder on the new investment policy. Proposals were circulated to Shareholders in October 2020 on a change to the investment policy, which was approved by Shareholders at a General Meeting held on 13 November 2020.

  • Discount Control Mechanism

The Board recognises that it is in the long-term interests of Shareholders that shares do not trade at a significant discount to their prevailing NAV. To this end, in conjunction with feedback from its largest shareholder and the Corporate Broker, the Board, mindful of Shareholders’ continued desire for a strong discount control mechanism, agreed tender offer trigger mechanisms for the five year period commencing 1 October 2020.

  • Allocation of discretionary funds

The Board allocated discretionary funds to marketing initiatives by outsourcing marketing and public relations to external service providers, in support of the Investment Manager. These initiatives increased the reach of the Company to potential Shareholders and also supported an improvement in communications with existing Shareholders.

The Board recognises the importance of engaging with its core stakeholders, and of taking account of their interests when taking decisions.

Culture and Values

The Company’s values focus on transparency, clarity and constructive challenge. The Directors recognise the importance of sustaining a culture that contributes to achieving the purpose of the Company that is consistent with its values and strategy.

Continuing Appointment of the Alternative Investment Fund Manager

The Board keeps the performance of the AIFM under continual review. The Management Engagement Committee conducts an annual appraisal of the AIFM’s performance and makes a recommendation to the Board about the continuing appointment of the AIFM. As the AIFM has delegated the portfolio management function to the Investment Manager, the performance of the Investment Manager is also regularly reviewed. The annual review of the performance of the Investment Manager includes consideration of:

  •  overall performance and performance compared with the Benchmark and peer group;
  •  investment resources dedicated to the Company;
  •  investment management fee arrangements compared with the peer group; and
  •  marketing effort and resources provided to the Company.

It is the opinion of the Board that the continuing appointment of the AIFM, on the terms agreed, is in the best interests of Shareholders as a whole. The Board is of the view that the AIFM has managed the portfolio well, particularly the change of mandate, and in accordance with the Board’s expectations and has delivered good returns.

Viability Statement

The Directors consider viability as part of their continuing approach of monitoring risk. The Directors have assessed the prospects of the Company over a longer period than the twelve 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 in the context of the Company’s investment portfolio but also appropriately reflects the limitations forecasting the longer term revenue generation of the portfolio.

The Directors have carried out a robust assessment of the Company’s principal and emerging risks, as well as its current position. The principal risks faced by the Company and the procedures in place to monitor and mitigate them are detailed above. The Company’s long term viability assessment is underpinned by the characteristics below: ­

  • the Company has a long term investment strategy, implemented via a consistently applied investment process which is designed to maximise the chances of the investment objectives being met; ­
  • the Company has a portfolio of shares which are listed on regulated markets, many of which are highly liquid, and can be readily realised to help meet liabilities as they fall due. It has been reported by the Investment Manager that the portfolio has sufficient liquidity to meet all requirements with approximately 88% of the portfolio able to be liquidated within one day and 100% within three days; ­
  • the Company has no long term debt, and restricts the level of short term borrowings;
  • underlying revenue generation of the portfolio is regularly reviewed and monitored. The Investment Manager has seen a recovery in the underlying revenue generation of the companies in the portfolio to levels similar to those seen before the pandemic, whilst longer term forecasts indicate an encouraging upward trend that should help support a sustainable dividend; and
  • the broadening of the investment policy has allowed the Company to further diversify its country and sector risk. The change in investment objective means the Company is now benefiting from a larger opportunity set in high growth areas, whilst further diversifying the portfolio and reducing the risk of idiosyncratic events materially influencing performance.

The Board has also considered the impact on the portfolio of further market shocks, such as those resulting from the COVID-19 pandemic. The Investment Manager performs both market based stress tests and scenario analysis. Stress tests cover a range of sensitivities such as the predicted impact on the portfolio based upon: interest rate movements, commodity price changes, currency appreciation/devaluation and equity market moves. This also includes scenarios based on hypothetical future events and historic points of market stress. In carrying out this assessment, the Board has considered the diversification of the Company’s portfolio, as well as the liquidity profile and dividend coverage of underlying investments. This analysis did not indicate any matters of significant concern.

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 as they fall due over the coming three years.

Modern Slavery Act

As an investment vehicle the Company does not provide goods or services in the normal course of business, and does not have customers. Accordingly, the Directors consider that the Company is not required to make any slavery or human trafficking statement under the Modern Slavery Act 2015. In any event, the Board considers the Company’s supply chain, dealing predominantly with professional advisers and service providers in the financial services industry, to be low risk in relation to this matter.

Environmental, Human Rights, Employee, Social and Community Issues

The Company does not have any employees and all of the Directors are non-executive and it has outsourced its functions to third-party service providers. As an investment trust, the Company has very limited direct impact on the community or the environment, and as such has no environmental, human rights, social or community policies. The Company has therefore not reported further in respect of these provisions.

The Company aims to conduct itself responsibility, ethically and fairly. ESG factors are considered by the Investment Manager as part of its investment process, where appropriate. Further information can be found in the Investment Manager’s Report above, which is supported by the Board. A key consideration in the decision to change the investment policy was the move away from hydrocarbons in the portfolio.

The Board supports the Investment Manager in its belief that good corporate governance will help deliver sustainable long-term shareholder value. It therefore follows that in pursuing shareholder value, the Investment Manager will implement its investment strategy through proxy voting and active engagement with management and Boards. Please see the full Annual Report for further information.

This Strategic Report has been approved by the Board and signed on its behalf by:

Frances Daley


3 December 2021

Board of Directors


VIVIEN GOULD – Non-Executive Director

CHRISTOPHER GRANVILLE – Non-Executive Director

CALUM THOMSON FCA – Non-Executive Director and Audit Committee Chairman

NADYA WELLS – Non-Executive Director and Senior Independent Director (“SID”)


Share Capital

As at 30 September 2021, the Company’s total issued share capital was 15,362,987 Ordinary Shares (30 September 2020: 15,594,232), of which the Company held 3,318,207 Ordinary Shares in treasury. The Ordinary 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 Ordinary Shares repurchased during the year have been cancelled. All of the Company’s Ordinary Shares in circulation are listed on the main market of the London Stock Exchange and each Ordinary Share carries one vote.

The rights attached to the Company’s Ordinary Shares are set out in the Company’s Articles. The Company’s Ordinary Shares are freely transferable. However, the Directors’ may refuse to register a transfer of Ordinary Shares which are not fully paid nor where the instrument of transfer is not duly stamped or shown to be exempt from stamp duty. The Directors may also decline to register a transfer of an uncertificated share in the circumstances set out in the uncertificated securities rules, and where the number of joint holders to whom the uncertificated shares is to be transferred exceeds four. There are no restrictions on the voting rights of the Company’s Ordinary Shares.

Amendments to the Company’s Articles and the granting of authority to issue or buy back the Company’s shares requires an appropriate resolution to be passed by Shareholders.

There are no restrictions on voting for the holders of Ordinary Shares, who are entitled to attend and vote at a Shareholders meeting.

Share Issues

At the Annual General Meeting held on 21 January 2021, the Directors were granted authority to allot Ordinary Shares up to an aggregate nominal amount of £122,439 (being 10% of the issued Ordinary Share Capital as at the date of publication of the Notice).

This authority is due to expire at the Company’s AGM. The Company has not issued any Ordinary Shares under this authority. Proposals for the renewal of this authority are set out in the notice of AGM.

Treasury Shares

Shares brought back by the Company may be held in treasury, from where they could be re-issued at a premium to NAV quickly and cost effectively. This provides the Company with additional flexibility in the management of its capital bases. No shares were purchased for treasury during the year or since the year end. The Company holds 3,318,207 ordinary shares in treasury.

Purchase of Own Shares

At last year’s AGM held on 21 January 2021, the Directors were authorised to make market purchases of up to 14.99% of the Company’s Ordinary Shares in issue at that time, amounting to 1,835,361 shares. Since the AGM held on 21 January 2021 and the year end, the Company bought back 199,125 Ordinary Shares with a nominal value of 0.10 pence per Ordinary Shares, and at a total cost of £1,522,000 under this authority. As at 30 September 2021, the remaining authority for the purchase of own shares is 1,636,236 Ordinary Shares. A total of 3,318,207 Ordinary Shares are held in treasury, representing 21.60% of the issued share capital at 30 September 2021.

This authority is due to expire at the Company’s forthcoming AGM. Proposals for the renewal of this authority are set out in the notice of AGM, which is circulated separately to 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, being a period of at least twelve months from the date of approval of the financial statements. The assets of the Company are well diversified and consist mainly of securities which are readily realisable. For these reasons, the Directors consider that there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Statement of Directors’ Responsibilities in Respect of the Annual Report and the Financial Statements

Directors’ responsibilities

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 the Directors are required 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 they have been prepared in accordance with applicable UK Accounting Standards subject to any material departures disclosed and explained in the financial statements;
  • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business; and
  • prepare a Director’s report, a strategic report and Director’s remuneration report which comply with the requirements of the Companies Act 2006.

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 are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for Shareholders to assess the Company’s performance, business model and strategy.

Website publication

The Financial Statements are published on the Company’s website:, which is maintained by the Investment Manager. The maintenance and integrity of the website maintained by the Investment Manager is, so far as it relates to the Company, the responsibility of the Investment Manager. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ responsibilities pursuant to DTR4

The Directors confirm to the best of their knowledge:

  • the financial statements have been prepared in accordance with applicable UK Accounting Standards and give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
  • the annual report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that they face.

For and on behalf of the Board

Frances Daley


3 December 2021


The financial information set out below does not constitute the Company’s statutory accounts for the year ended 30 September 2021 but is derived from those accounts. Statutory accounts for the year ended 30 September 2021 will be delivered to the Registrar of Companies in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors’ report can be found in the Company’s full Annual Report and Accounts on the Company’s website at

Income Statement

for the year ended 30 September 2021

For the year to 30 September 2021   For the year to 30 September 2020  
Revenue  Capital Total   Revenue   Capital    Total   
Notes £’000   £’000   £’000   £’000   £’000    £’000   
Gains/(losses) on investments held at fair value through profit or loss 9 - 28,381 28,381 - (26,316) (26,316)
Foreign exchange losses - (245) (245) - (382) (382)
Income 2 4,488 - 4,488 3,506 116 3,622
Investment management fee 3 (149) (598) (747) (156) (623) (779)
Other expenses 4 (888) (62) (950) (770) - (770)
Return on ordinary activities 3,451 27,476 30,927 2,580 (27,205) (24,625)
Finance costs 5 - - - (33) (134) (167)
Return on ordinary activities before taxation 3,451 27,476 30,927 2,547 (27,339) (24,792)
Taxation 6 (539) - (539) (266) - (266)
Return for the year 2,912 27,476 30,388 2,281 (27,339) (25,058)
Return per ordinary share 8 23.86p 225.16p 249.02p 18.40p (220.52p) (202.12p)

The total column of this statement is the income statement of the Company.

The supplementary revenue and capital columns are both prepared under the guidance published by the AIC.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.

There is no other comprehensive income and therefore the return for the year is also the total comprehensive income for the year.

The notes below form part of these financial statements.

Statement of Financial Position

as at 30 September 2021

At 30 September 2021  At 30 September 2020 
Notes £’000   £’000  
Fixed assets
Investments at fair value through profit or loss 9 109,233 83,572
Current assets
Debtors 10 667 272
Cash and cash equivalents 1,664 1,825
2,331 2,097
Current liabilities
Creditors: amounts falling due within one year 11 (666) (387)
Net current assets 1,665 1,710
Net assets 110,898 85,282
Capital and reserves
Called-up share capital 12 1,536 1,559
Capital redemption reserve 3,252 3,229
Share premium account 1,411 1,411
Capital reserve 102,479 76,718
Revenue reserve 2,220 2,365
Total equity 110,898 85,282
Net asset value per share 13 920.71p 694.70p

The financial statements above were approved and authorised for issue by the Board of Barings Emerging EMEA Opportunities PLC on 3 December 2021 and were signed on its behalf by:

Frances Daley


Company registration number 04560726

The notes below form part of these financial statements.

Statement of Changes in Equity

for the year ended 30 September 2021

Called-up  Capital Share
share  redemption premium Capital  Revenue 
capital  reserve account reserve  reserve  Total 
£’000  £’000 £’000 £’000  £’000  £’000 
For the year ended 30 September 2021
Opening balance as at 1 October 2020 1,559 3,229 1,411 76,718 2,365 85,282
Return for the year - - - 27,476 2,912 30,388
Contributions by and distributions to Shareholders:
Repurchase of Ordinary Shares (23) 23 - (1,715) - (1,715)
Dividends paid - - - - (3,057) (3,057)
Total contributions by and distributions to Shareholders: (23) 23 - (1,715) (3,057) (4,772)
Balance at 30 September 2021 1,536 3,252 1,411 102,479 2,220 110,898


Called-up  Capital Share
share  Redemption premium Capital  Revenue 
capital  reserve account reserve  reserve  Total 
£’000  £’000 £’000 £’000  £’000  £’000 
For the year ended 30 September 2020
Opening balance as at 1 October 2019 1,576  3,212 1,411 105,158  4,429  115,786
Return for the year - - (27,339) 2,281  (25,058)
Contributions by and distributions to Shareholders:
Repurchase of Ordinary Shares (17) 17 - (1,101) (1,101)
Dividends paid - - (4,345) (4,345)
Total contributions by and distributions to Shareholders: (17) 17 - (1,101)) (4,345) (5,446)
Balance at 30 September 2020 1,559  3,229 1,411 76,718 2,365  85,282

At 30 September 2021, the distributable reserves of the Company were £86,658,000 which comprise of the revenue reserve £2,220,000 and realised capital reserves of £84,438,000. (2020: distributable reserves of £79,083,000 comprising of revenue reserve of £2,365,000 and realised capital reserves of £79,286,000, less capital reserve attributable to unrealised losses of £2,568,000).

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.

The notes below form part of these financial statements.

Notes to the Financial Statements

for the year ended 30 September 2021

1. Accounting policies

Barings Emerging EMEA Opportunities PLC (the “Company”) is a company incorporated and registered in England and Wales. The principal activity of the Company is that of an investment trust company within the meaning of Sections 1158/159 of the Corporation Tax Act 2020 and its investment approach is detailed in the Strategic Report.

Basis of preparation

The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice (‘UK GAAP’), including FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (the ‘SORP’) issued by the Association of Investment Companies, October 2019.

The Company meets the requirements of section 7.1A of FRS 102 and therefore has elected not to present the Statement of Cash Flows for the year ended 30 September 2021.

The policies applied in these financial statements are consistent with those applied in the preceding year.

Going concern

The financial statements have been prepared on a going concern basis and on the basis that approval as an investment trust company will continue to be met.

The Directors have made an assessment of the Company’s ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for a period of at least twelve months from the date when these financial statements were approved.

In making the assessment, the Directors have considered the likely impacts of the current COVID-19 pandemic on the Company’s operations and its investment portfolio.

The Directors noted that the Company’s current cash balance exceeds any short term liabilities, the Company holds a portfolio of liquid listed investments. The Directors are of the view that the Company is able to meet its obligations and when they fall due. The surplus cash enables the Company to meet any funding requirements and finance future additional investments. The Company is a closed-end fund, where assets are not required to be liquidated to meet day-to-day redemptions.

The Board has reviewed stress testing and scenario analysis prepared by the Investment Manager to assist them in assessing the impact of changes in market value and income with associated cash flows. In making this assessment, the Investment Manager have considered plausible downside scenarios. These tests included the possible further effects of the continuation of the COVID-19 pandemic but, as an arithmetic exercise, apply equally to any other set of circumstances in which asset value and income are significantly impaired. It was concluded that in a plausible downside scenario, the Company could continue to meet its liabilities.

Whilst the economic future is uncertain, and the Directors believe that it is possible the Company could experience further reductions in income and/or market value, the opinion of the Directors is that this should not be to a level which would threaten the Company’s ability to continue as a going concern.

The Investment Manager and the Company’s third-party service providers have contingency plans to minimise disruption. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern, having taken into account the liquidity of the Company’s investment portfolio and the Company’s financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance). Therefore, the financial statements have been prepared on the going concern basis.

Segmental reporting

The Directors are of the opinion that the Company is re-engaged in a single segment of business, being the investment business.

Significant accounting judgements and estimates

The preparation of the Company’s financial statements on occasion requires the Board to make judgements, estimates and assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in the current and future periods, depending on the circumstance.

The areas requiring significant judgement and estimation in the preparation of the financial statements are: recognising and classifying unusual or special dividends received as either revenue or capital in nature; recognition of expenses between capital and income; capital expenses and setting of the level of dividends paid and proposed. The policies for these are set out in the notes to the Financial Statements.

The Directors do not believe that any significant accounting judgements or estimates have been applied to this set of financial statements, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.


Upon initial recognition the investments held by the Company are classified ‘at fair value through profit or loss’. All gains and losses are allocated to the capital return within the Income Statement as ‘Gains on investments held at fair value through profit or loss’. Also included within this are transaction costs in relation to the purchase or sale of investments. When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date. Subsequent to initial recognition, investments are valued at fair value through profit or loss. For listed investments this is deemed to be bid market prices. Fair values for unquoted investments, or for investments for which the market is inactive, are established by the Directors after discussion with the AIFM using various valuation techniques in accordance with the International Private Equity and Venture Capital (the “IPEV”) guidelines.

Foreign Currency

The Company is required to identify its functional currency, being the currency of the primary economic environment in which the Company operates. The Board, having regard to the Company’s share capital and the predominant currency in which its Shareholders operate, has determined that Pounds Sterling is the functional currency. Pounds Sterling is also the currency in which the financial statements are presented.

Transactions denominated in currencies other than Pounds Sterling are recorded at the rates of exchange prevailing on the date of the transaction. Items that are denominated in foreign currencies are translated at the rates prevailing on the Balance Sheet date. Any gains or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is capital or revenue in nature.

Cash and Cash Equivalents

Cash comprises cash in hand and demand deposits.

Trade Receivables, Prepayments and Other debtors

Trade receivables, prepayments and other debtors are recognised at amortised cost or estimated fair value.

Trade Payables and Borrowings

Trade payables and short-term borrowings are measured at amortised cost.

Bank borrowings

The interest bearing bank loan is recognised at amortised cost and revalued for exchange rate movements.


Dividends receivable from equity shares are included in revenue return on an ex-dividend basis except where, in the opinion of the Board, the dividend is capital in nature, in which case it is included in capital return.

Overseas dividends are included gross of any withholding tax.

Special dividends are taken to the revenue or capital account depending on their nature. In deciding whether a dividend should be regarded as a capital or revenue receipt, the Board reviews all relevant information as to the sources of the dividend on a case-by case basis.

Expenses and finance costs

All expenses are accounted for on an accruals basis. On the basis of the Board’s expected long-term split of total returns in the form of capital and revenue and are charged as follows:

• the investment management fee is charged 20% to revenue and 80% to capital;

• any investment performance bonus payable to AIFM are charged wholly to capital;

• finance costs are charged 20% to revenue and 80% to capital;

• other expenses are charged wholly to revenue.


Current tax is provided at the amounts expected to be paid or recovered.

Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date. Deferred tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it is more likely than not that taxable profits will be available against which those timing differences can be utilised.

Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates that have been enacted or substantively enacted at the balance sheet date and is measured on an undiscounted basis.

Dividends payable to Shareholders

Dividends are not recognised in the accounts unless there is an obligation to pay or have been paid.

Capital redemption reserve

The capital redemption reserve represents non-distributable reserves that arise from the purchase and cancellation of Ordinary Shares.

Share premium

The share premium account represents the accumulated premium paid for shares issued in previous periods above their nominal value less issue expenses. This is a reserve forming part of the non-distributable reserves. The following items are taken to this reserve:

• costs associated with the issue of equity; and

• premium on the issue of shares.

Capital reserve

The following are taken to capital reserve through the capital column of the Income Statement:

Capital reserve – distributable reserves

• gains and losses on the disposal of investments;

• amortisation of issue of interest bearing bank loans;

• exchange differences of a capital nature;

• expenses, together with the related taxation effect, allocated to this reserve in accordance with the above policies; and

• distribution of dividends

Capital reserve – non-distributable reserves

• increase and decrease in the valuation of investments held at the year end.

Revenue reserve

The revenue reserve represents the surplus of accumulated profits and is distributable by way of dividends.

2. Income

2021 2020
£’000 £’000
Income from investments
Listed Investments* 4,493 3,583
Other income:
Bank interest - 1
Exchange losses on receipt of income (5) (78)
Total income 4,488 3,506

All income stated above is revenue in nature

3. Investment Management Fee

Baring Fund Managers Limited has been appointed as the AIFM under an agreement with six months notice by either party. The annual fee of 0.75% (0.80% prior to 13 November 2020) is calculated, in accordance with the Investment Management Agreement, on the month end NAV excluding current period revenue and payable monthly. The charge is allocated 20% (2020: 20%) to revenue and 80% 2020: 80%) to capital. There is no performance fee chargeable by the AIFM.

The investment management fee comprises:

Year ended 30 September 2021 Year ended 30 September 2020
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Investment management fee 149 598 747 156 623 779

At 30 September 2021, £136,000 (30 September 2020: £116,000) of this fee remained outstanding and are included within other creditors in note 11.

4. Other Expenses

2021 2020
£’000 £’000
Custody and administration expenses 710 596
Auditor’s fee for:
– audit 30 29
Directors’ remuneration 148 145
Total expenses 888 770

5. Finance Costs

Year ended 30 September 2021 Year ended 30 September 2020
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Borrowings under bank loan facility* - - - 33 134 167

* The Company has no loan facility. In the prior year the loan facility was repaid on the 7 April 2020.

6. Taxation

Current tax charge for the year:

2021 2020
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Overseas tax not recoverable 542 - 542 487 - 487
Overseas tax recovered and deemed recoverable – previously expensed (3) - (3) (221) - (221)
539 - 539 266 - 266

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:

2021 2020
Revenue  Capital  Total  Revenue  Capital  Total 
£’000  £’000  £’000  £’000  £’000  £’000 
Return on ordinary activities before taxation 3,451 27,476 30,927 2,547 (27,339) (24,792)
Return on ordinary activities multiplied by the standard rate of corporation tax of 19% (2020: 19%) 656 5,220 5,876 484 (5,194) (4,710)
Effects of:
Overseas withholding tax 542 - 542 487 - 487
Overseas tax recovered and deemed recoverable – previously expensed (3) - (3) (221) - (221)
(Gains)/losses on investments held at fair value through profit and loss not allowable - (5,387) (5,387) - 5,000 5,000
Foreign exchange gain not taxable 1 41 42 - 72 72
Overseas dividends not taxable (854) - (854) (666) (21) (687)
Disallowable expenses - - - - - -
Management expenses not utilised 197 126 323 176 118 294
Non-trade loan relationship debts not utilised - - - 6 25 31
Current tax charge for the year 539 - 539 266 - 266

The Company is not liable to tax on capital gains due to its status as an investment trust.

Factors affecting the current tax charge for the year

At 30 September 2021, the Company has unrelieved management expenses that are available to offset future taxable revenue. On 3 March 2021, the UK Government announced its intention to increase the rate of corporation tax from 19% to 25% from 1 April 2023 and this was subsequently enacted on 24 May 2021. The unrecognised deferred tax asset of £3,894,000 (2020: £2,637,000) is based on the long term prospective corporation tax rate of 25.0% (2020: 19.0%). This asset has accumulated because deductible expenses have exceeded taxable income in past years. No asset has been recognised in the accounts because, all profits are non taxable in the UK due to the entity being an investment trust. It is not likely that this asset will be utilised in the foreseeable future.

7. Dividend on Ordinary Shares

2021 Revenue   2020 Revenue
£’000   £’000 
Amounts recognised as distributions to equity holder in the year:
Final dividend for the year ended 30 September 2020 of 10p (2019: 20p) per Ordinary Share 1,224 2,484
Interim dividend for the year ended 30 September 2021 of 15p (2020: 15p) per Ordinary Share 1,833 1,861
3,057 4,345

Set out below are the interim and final dividends paid or proposed on Ordinary Shares in respect of the financial year, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered.

2021 Revenue   2020 Revenue
£’000   £’000 
Interim dividend for the year ended 30 September 2021 of 15p (2020: 15p) per Ordinary Shares 1,833                      1,861
Proposed final dividend for the year ended 30 September 2021 of 11p (2020: 10p) per Ordinary Share 1,322 1,224  
3,155 3,085                      3,085

The dividend proposed in respect of the year ended 30 September 2021 is subject to shareholder approval at the forthcoming Annual General Meeting.

8. Return per Ordinary Share

Year ended 30 September 2021  Year ended 30 September 2020  
Revenue   Capital   Total  Revenue   Capital    Total   
Return per ordinary share 23.86p 225.16p 249.02p 18.40p (220.52)p (202.12)p

Revenue return (earnings) per Ordinary Share is based on the net revenue on ordinary activities after taxation of £2,912,000 (2020: £2,281,000).

Capital return per Ordinary Share is based on net capital gain for the financial year of £27,476,000 (2020: loss 27,339,000). These calculations are based on the weighted average of 12,202,696 (2020: 12,397,456) Ordinary Shares in issue during the year. At 30 September 2021, there were 12,044,780 Ordinary Shares of 10 pence each in issue (2020: 12,276,025) which excludes 3,318,207 Ordinary Shares held in treasury (2020: 3,318,207). 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. Investments

Financial assets held at fair value

30 September 2021  30 September 2020 
£’000  £’000 
Opening book cost 84,117 104,087
Opening investment holding (losses)/gains (545) 18,004
Opening fair value 83,572 122,091
Movements in year:
Purchases at cost* 99,127 38,847
Sales proceeds* (101,847) (51,050)
Realised gains/(losses) on equity sales 9,795 (7,767)
Increase/(decrease) in investment holding gains 18,586 (18,549)
Closing fair value 109,233 83,572


Closing book cost  91,192 84,117 
Closing investment holding gains/(losses)  18,041 (545)
Closing fair value 109,233 83,572

*Includes transaction costs of £205,000 (2020: £33,000) relating to purchases at cost, £82,000 (2020: £46,000) relating to sales proceeds.

Year ended
30 September 2021
Year ended
30 September 2020
Transaction Cost
Cost on acquisition 205 33
Cost on disposal 82 46
287 79
Analysis of capital gains
Gains on sales of financial assets 9,795 (7,767)
Movement in investment gains for the year 18,586 (18,549)
Net gains on investment 28,381 (26,316)

The Company sold investments in the year with proceeds of £101,847,000 (2020: £51,050,000). The book cost of these investments when purchased was £92,052,000 (2020: £58,817,000). These investments have been revalued over time and until they were sold any unrealised gains or losses were included in the fair value of the investments.

Primary country of investment

30 September
30 September
Russia 38,746 61,437
South Africa 26,413 -
Saudi Arabia 19,536 -
Poland 5,716 10,449
United Arab Emirates 4,892 -
Qatar 4,032 -
Turkey 2,807 6,858
Hungary 2,795 -
Greece 1,844 2,071
Kuwait 1,478 755
Czechia 974 1,380
Romania - 622
Total 109,233 83,572

10. Debtors

2021 2020
£’000 £’000
Overseas tax recoverable 204 201
Prepayments and accrued income 356 32
VAT Recoverable 107 39
667 272

11. Creditors

2021 2020
£’000 £’000
Amounts falling due within one year
Amounts due to brokers 276 294
Other creditors 390 93
666 387

12. Called-up share capital

30 September 2021 30 September 2020
Allotted, issued and fully paid up Ordinary Shares of 10p each
Number £’000 Number £’000
Opening balance 15,594,232 1,559 15,757,504 1,576
Ordinary Shares bought back and cancelled (231,245) (23) (163,272) (17)
Total Ordinary Shares in issue 15,362,987 1,536 15,594,232 1,559
Treasury Shares 3,318,207 3,318,207
Total Ordinary Shares capital excluding Treasury Shares 12,044,780 12,276,025

During the year, 231,245 Ordinary Shares were repurchased for cancellation for £1,715,000 (2020: 163,272 Ordinary Shares were £1,001,000). 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 (2020: 3,318,207). Ordinary Shares held in treasury are non-voting and not eligible for receipt of dividends. Subsequent to the year end, a further 27,399 shares have been repurchased for cancellation for £229,000.

13. Net Asset Value per share

The NAV per ordinary share and the NAV attributable at the year end were as follows:

2021 2020
Total Shareholders’ funds (£’000) 110,898 85,282
Number of shares in issue* 12,044,780 12,276,025
NAV (pence per share) (basic and dilutive) 920.71 694.70

* Excludes 3,318,207 Ordinary Shares held in treasury (2020: 3,318,207).

The NAV per share is based on total Shareholders’ funds above, and on 12,044,780 Ordinary Shares in issue at the year end (2020: 12,276,025 Ordinary Shares in issue) which excludes 3,318,207 Ordinary Shares held in treasury (2020: 3,318,207 Ordinary Shares held in treasury). The Ordinary Shares held in treasury are treated as not being in issue when calculating the NAV per share.

14. Financial Instruments and Capital Disclosures

Investment Objective and Policy

As an investment trust, the Company invests in equities and other investments for the long-term so as to secure its investment objective stated above. 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. With effect from 13 November 2020, the Company changed its investment objective and policy. The Objective and Investment Policy are set out above.


The risks identified arising from the financial instruments are market risk (which comprises market price risk, interest rate risk, and currency risk), liquidity risk and credit and counterparty risk. The Board and AIFM consider and review the risks inherent in managing the Company’s assets which are detailed below.

The objectives, policies and processes for managing the risks, and the methods used to measure the risks, are set out below and have not changed from the previous accounting period.

The AIFM monitors the Company’s exposure to risk and reports to the Board on a regular basis.

Market Risk

Special considerations and risk factors associated with the Company’s investments are discussed above. Market risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s business. It represents the potential loss which the Company might suffer through holding market positions by way of price movements, interest rate movements and exchange rate movements. The Company’s AIFM 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.

Market Price Risk

Market price risk (i.e. changes in market prices other than those arising from currency risk or interest rate risk) may affect the value of investments.

The portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis with the objective of maximising overall returns to Shareholders. The Company has experienced volatility in the fair value of investments during recent years due to COVID-19 and Brexit. If the fair value of the Company’s investments at the year end increased or decreased by 20% then it would have an impact on the Company’s capital return and equity of £21,847,000 (2020: £16,714,000).

The Company has used 20% to demonstrate the impact of a significant reduction/increase in the fair value of the investments and the impact upon the Company that might arise from future significant events.

Currency Risk

The value of the Company’s assets and the total return earned by the Company’s Shareholders can be significantly affected by currency exchange rate movements as most of the Company’s assets are denominated in currencies other than Pounds Sterling, the currency in which the Company’s financial statements are prepared.

Income denominated in other currencies is converted to Pounds Sterling upon receipt. The Company does not use financial instruments to mitigate the currency exposure. The Company’s uninvested cash balances are usually held in US Dollars.

A 10% rise or decline of Pounds Sterling against currency denominated (i.e. non Pounds Sterling) assets and liabilities held at the year end would have increased/decreased the net asset value by £11,110,000 (2020: £8,551,000).

The currency exposure is exposure of the currency values of the investee companies.

Russia South Africa Saudi Arabia Poland UAE Qatar Turkey Hungary Greece Kuwait Czechia United States Netherlands UK Total
2021 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Cash 1 - - - - - - - - - - 1,585 - 78 1,664
Debtor 194 156 39 127 - - - - - - - - 40 111 667
Creditor - - (276) - - - - - - - - - - (390) (666)
Investments 38,746 26,413 19,536 5,716 4,892 4,032 2,807 2,795 1,844 1,478 974 - - - 109,233
Total 38,941 26,569 19,299 5,843 4,892 4,032 2,807 2,795 1,844 1,478 974 1,585 40 (201) 110,898


Russia Poland Turkey Greece Czechia Kuwait Romania United States Netherlands UK Total
2020 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Cash 1 - - - - - - 1,744 - 80 1,825
Debtor 191 - - - - - - - 28 54 272
Creditor - - - - - - - - - (387) (387)
Investments 61,437 10,449 6,858 2,071 1,380 755 622 - - - 83,572
Total 61,628 10,449 6,858 2,071 1,380 755 622 1,744 28 (253) 85,282

Interest Rate Risk

Interest rate movements may affect:

• the level of income receivable /payable on cash deposits

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 making investment and borrowing decisions.

At 30 September 2021, the Company’s exposure to interest rate movements in respect of its financial assets and financial liabilities consist of:

2021  2020 
Total  Total 
(within one year)  (within one year) 
£’000  £’000 
Exposure to floating interest rates:
Cash at bank 1,664 1,825
1,664 1,825

If the above level of cash was maintained for a year, a 1% increase in interest rates would increase the revenue return and net assets by £17,000 (2020: £18,000). The AIFM proactively manages cash balances. If there were a fall of 1% in interest rates, it would potentially impact the Company by turning positive interest to negative interest. The total effect would be a revenue reduction/cost increase of £17,000 (2020: £18,000). The bank loan facility was repaid on 7 April 2020.

Liquidity Risk

The Company’s assets mainly comprise readily realisable securities which can be easily sold to meet funding commitments, if necessary. The risk is taken into account by the Board when arriving at its valuation of these items.

Liquidity risk is mitigated by the fact that the Company has £1,664,000 (2020: £1,825,000) cash at bank and the assets are readily realisable. The Company is a closed-end fund, assets do not need to be liquidated to meet redemptions, and sufficient liquidity is maintained to meet obligations as they fall due.

The remaining contractual payments on the Company’s financial liabilities at 30 September 2021, based on the earliest date on which payment can be required and current exchange rates at the Balance Sheet date, were as follows:

2021 2020
Total Total
(within one year) (within one year)
£’000 £’000
Other creditors and accruals 666 387
666 387

Credit Risk

Credit risk is the risk of financial loss to the Company if the contractual party to a financial instrument fails to meet its

contractual obligations.

The total credit exposure represents the carrying value of cash and receivable balances and totals £111,564,000 (2020: £85,669,000).

The Company’s listed investments are held on its behalf by State Street Bank & Trust Company Limited acting as the Company’s Custodian. Bankruptcy or insolvency may cause the Company’s rights with respect to securities held by the custodian to be delayed. The Board monitors the Company’s risk by reviewing the Custodians internal control reports.

Credit risk is mitigated by diversifying the counterparties through which the AIFM conducts investment transactions. The credit standing of all counterparties is reviewed periodically, with limits set on amounts due from any one counterparty. As at the year end, the cash balances are held with State Street Bank & Trust Company Limited, which holds a Aa1 credit rating. The credit rating is taken from Moody’s.

Fair Values of Financial Assets and Financial Liabilities

Financial assets and financial 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).

Valuation of Financial Instruments

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. 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 assets as follows:

Level 1 – valued using quoted prices unadjusted in active markets for identical assets or liabilities.

Level 2 – valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included within Level 1.

Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liability.

The tables below set out fair value measurements of financial assets and liabilities in accordance with the fair value hierarchy.

Financial assets at fair value through profit or loss at 30 September 2021:
Level 1 Level 2 2021
Equity investments 109,233 - 109,233
109,233 - 109,233
Financial assets at fair value through profit or loss at 30 September 2020:
Level 1 Level 2 2020
£’000 £’000 £’000
Equity investments 85,543 29 83,572
85,543 29 83,572

15. Risk management policies and procedures

Capital Management Policies and Procedures

The structure of the Company’s capital is described above and details of the Company’s reserves are shown in the Statement of Changes in Equity above.

The Company’s capital management objectives are:

• to ensure that it will be able to continue as a going concern;

• to achieve capital growth through a focused portfolio of investments; and

• to maximise the return to Shareholders while maintaining a capital base to allow the Company to operate effectively and meet obligations as they fall due.

The Board, with the assistance of the AIFM, regularly monitors and reviews the broad structure of the Company’s capital on an ongoing basis. These reviews include:

• the level of gearing, which takes account of the Company’s position and the Investment Manager’s views on the market; and

• the extent to which revenue in excess of that which is required to be distributed, should be retained. The Company’s objectives, policies and processes for managing capital are unchanged from last year. The Company is subject to externally imposed capital requirements:

• as a public company, the Company is required to have a minimum share capital of £50,000; and

• in accordance with the provisions of Sections 832 and 833 of the Companies Act 2006, the Company, as an investment company;

• is only able to make a dividend distribution to the extent that the assets of the Company are equal to at least one and a half times its liabilities after the dividend payment has been made; and

• is required to make a dividend distribution each year and to ensure after year that it does not retain more than 15% of the income that it derives from shares and securities.

These policies and procedures are unchanged since last year and the Company has complied with them at all times.

16. Related Party Disclosures and Transactions with the AlFM

Details of the investment management fee charged by the AIFM are set out in note 3. Investment management fees charged in the year were £747,000 (2020: £779,000) of which £136,000 (2020: £116,000) was outstanding at the year end.

The ultimate holding company of the AIFM is Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfeld, MA 01111-0001. Fees paid to the Directors and full details of Directors’ interests are disclosed in the Directors’ Remuneration Report in the full Annual Report and Accounts.

Nadya Wells is a member of the Supervisory Board, Chairman of the Audit Committee, Member of the Strategic Planning Committee and a member of the Risk Management Committee of Sberbank of Russia (“Sberbank”), in which the Company was invested during the year. At 30 September 2021, the Company held 2,050,748 shares in Sberbank at a market value of £7,120,000, representing 6.42% of the Company’s net assets and a holding of 6.42% of Sberbank’s total issued shares.

During the year, the Company purchased 845,178 shares in Sberbank for £2,160,000 and sold 2,504,940 shares for

£6,894,000. These transactions were completed through the open market.

Fees paid to the Company’s Directors are disclosed in the Director’s Remuneration Report. At the year end, there were no outstanding fees payable to the Directors (2020: £nil).

17. Post Balance Sheet Events

Since the year end, the Company has bought back for cancellation 27,399 Ordinary Shares with a nominal value of £2,740 at a total cost of £229,000.

Glossary of Terms


The AIFM, or Alternative Investment Fund Manager, is Baring Fund Manager Limited, which manages the portfolio on behalf of the Company’s Shareholders. The AIFM has delegated the investment management of the portfolio to Baring Asset Management Limited (the “Investment Manager”).

Alternative performance measures (“APM”)

An APM is a numerical measure of the Company’s current, historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial framework. In selecting these APMs, the Directors considered the key objectives and expectations of typical investors in an investment trust such as the Company.


The Company’s Benchmark is the MSCI Emerging Markets EMEA Index. This index is designed to measure the performance of large and midcap companies across 11 Emerging Markets (EM) countries in Europe, the Middle East and Africa (EMEA). This includes, the Czechia, Egypt, Greece, Hungary, Poland, Qatar, Russia, Saudi Arabia, South Africa, Turkey and United Arab Emirates.

The Benchmark is an index against which the performance of the Company may be compared. This is an indicative performance measure as the overall investment objectives of the Company differ to the index and the investments of the Company are not aligned to this index.

For the financial year ending 30 September 2020, the Company’s Benchmark was the MSCI Emerging Europe 10/40 Index. This index measured the performance of large and midcap companies across six Emerging Markets (EM) countries; Czechia, Greece, Hungary, Poland, Russia and Turkey) in Europe.

Discount/Premium (APM)

If the share price is lower than the NAV per share, the shares are trading at a discount. The size of the discount is calculated by subtracting the share price of 793.0p (2020: 587.0p) from the NAV per share of 920.7p (2020: 694.7p) and is usually expressed as a percentage of the NAV per share, 13.9% (2020: 15.5%). If the share price is higher than the NAV per share, the situation is called a premium.

Dividend Pay-out Ratio (APM)

The ratio of the total amount of dividends paid out to Shareholders relative to the net income of the company. Calculated by dividing the Dividends Paid by Net Income.

Dividend Reinvested Basis

Applicable to the calculation of return, this calculates the return by taking any dividends generated over the relevant period and reinvesting the proceeds to purchase new shares and compound returns.

Dividend Yield (APM)

The annual dividend expressed as a percentage of the current market price.


The definition of EMEA is a shorthand designation meaning Europe, the Middle East and Africa. The acronym is used by institutions and governments, as well as in marketing and business when referring to this region: it is a shorthand way of referencing the two continents (Africa and Europe) and the Middle Eastern sub-continent all at once.

Emerging Markets

An emerging market economy is a developing nation that is becoming more engaged with global markets as it grows. Countries classified as emerging market economies are those with some, but not all, of the characteristics of a developed market.

Environmental, Social and Governance (“ESG”)

ESG (environmental, social and governance) is a term used in capital markets and used by investors to evaluate corporate behaviour and to determine the future financial performance of companies. The Company will evaluate investments in investee companies considering:

  • Environmental criteria considering how the company performs as a steward of nature;
  • Social criteria examine how the company manages relationships with employees, suppliers, customers, and communities; and
  • Governance deals with the company’s leadership, executive pay, auditsinternal controls, and shareholder rights.

Frontier Markets

A frontier market is a country that is more established than the least developed countries globally but still less established than the emerging markets because it economy is too small, carries too much inherent risk, or its markets are too illiquid to be considered an emerging market.

Gearing (APM)

Gearing refers to the ratio of the Company’s debt to its equity capital. The Company may borrow money to invest in additional investments for its portfolio. If the Company assets grow, the Shareholders’ assets grow proportionately more because the debt remains the same. But if the value of the Company’s assets fall, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.

The Company repaid the bank loan facility during the prior financial year eliminating gearing at the prior year end. Currently the Company has no gearing.

For the purposes of AIFMD, the Company is required to disclose the leverage. Leverage is any method which increases the Company’s exposure, including the borrowing of cash and use of derivatives. It is expressed as a ratio between the Company’s exposure and its net asset value and is calculated under the Gross and Commitment Methods in accordance with AIFMD.

Under the Gross Method, exposure represents the aggregate of all the Company’s exposures other than cash balances held in base currency and without any offsetting. Investments (A) divided by Total Shareholders’ Funds (B).

Gross method = 98% (A = £109,233,000/ B = £110,898,000) x 100.

The Commitment Method takes into account hedging and other netting arrangements designed to limit risk, offsetting them against the underlying exposure. Investments (A) plus current assets (C) divided by Total Shareholders’ funds (B).

Commitment method = 100% (A = £109,233,000) + (C = Cash £1,664,000 + Debtor £667,000) / B = £85,282,000) x 100.

Gross Assets

Total of all the Company’s investments and current assets.

Growth at a Reasonable Price (“GARP”) Investing

GARP investing incorporates elements of growth and value investing, focusing on companies which have sustainable growth potential but do not demand a high valuation premium.

Idiosyncratic Risk

Idiosyncratic or “Specific risk” is a risk that is particular to a company.

Net Asset Value (“NAV”)

The NAV is shareholders’ funds expressed as an amount per individual Ordinary Share. Shareholders’ funds are the total value of all the Company’s assets, at current market value, having deducted all liabilities revalued for exchange rate movements. The total NAV per Ordinary Share is calculated by dividing the Shareholders’ funds of £110,898,000 by the number of Ordinary Shares in issue excluding Treasury Shares of 12,044,780.

Ongoing Charges Ratio (APM)

The Ongoing Charges Ratio (OCR) is a measure of what it costs to cover the cost of running the fund. The Company’s OCR is its annualised expenses (excluding finance costs and certain non-recurring items) of £1,628,000 being investment management fees of £747,000 and other expenses of £950,000 less non-recurring expenses of £69,000 expressed as a percentage of the average net assets of £100,733,000 during the year as disclosed to the London Stock Exchange. The OCR for 2021 is 1.62%.

Return per Ordinary Share (APM)

The return per Ordinary Share is based on the revenue/capital earned during the year divided by the weighted average number of Ordinary Shares in issue during the year. The calculations are set out in note 8.

Relative Returns

Relative return is the difference between investment return and the return of a benchmark.

Risk-adjusted Returns

Risk-adjusted return refines an investment’s return by measuring how much risk is involved in producing that return.

Return on Equity (APM)

Return on equity (“ROE”) is a measure of financial performance calculated by dividing net income by Shareholders’ equity. Because Shareholders’ equity is equal to a company’s assets minus its debt, ROE could be thought of as the return on net assets. This measure is used to understand how effectively management is using a company’s assets to create profits.

Share Price

The price of a single share of a company. The share price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for.

Systematic Risk

Systematic risk or “Market risk” is the risk inherent to the entire market or market segment, not just a stock or industry.

Total Assets

Total assets include investments, cash, current assets and all other assets. An asset is an economic resource, being anything tangible or intangible that can be owned or controlled to produce positive economic value. The total assets less all liabilities is equivalent to total Shareholders’ funds.

Total Return (APM)

Total return statistics enable the investor to make performance comparisons between investment trusts with different dividend policies. The total return measures the combined effect of any dividends paid, together with the rise or fall in the share price or NAV. This is calculated by the movement in the NAV or share price plus dividend income reinvested by the Company at the prevailing NAV or share price.

NAV Total Return (APM)

NAV Total Return is calculated by assuming that dividends paid out are reinvested into the NAV on the ex-dividend date.

30 September 2021
Closing NAV per share (p) 620.71
Add back total dividends paid in the year ended 30 September 2021 (p) 25.00
Benefits from reinvesting dividend (p) 2.98
Adjusted closing NAV (p) 948.69
Opening NAV per share (p) 694.70
NAV total return (%) 36.56

Share Price Total Return (APM)

Share price total return is calculated by assuming dividends paid out are reinvested into new shares on the ex-dividend date.

30 September 2021
Closing share price (p) 793.00
Add back total dividends paid in the year ended 30 September 2021 (p) 25.00
Benefits from reinvesting dividend (p) 1.99
Adjusted closing share price (p) 819.99
Opening share price (p) 587.00
Share price total return (%) 39.69

Treasury Shares

Treasury shares are issued shares that a company keeps in its own treasury which are not currently issued to the public. These shares do not pay dividends, have no voting rights and are not included in a company’s total issued share capital amount for calculating percentage ownership. Treasury shares have come from the buy back from shareholders, and may be reissued from treasury to meet demand for a company’s shares in certain circumstances.

Directors and Officers

Frances Daley, Chairman
Vivien Gould
Christopher Granville
Calum Thomson
Nadya Wells

Registered Office
Beaufort House
51 New North Road
Exeter EX4 4EP

Company Secretary
Link Company Matters Limited
Beaufort House
51 New North Road
Exeter EX4 4EP

Company number

Alternative Investment Fund Manager
Baring Fund Managers Limited
20 Old Bailey
London EC4M 7BF
Telephone: 020 7628 6000
Facsimile: 020 7638 7928

55 Baker St.
London W1U 7EU

State Street Trustees Limited
20 Churchill Place
Canary Wharf
London E14 5HJ

State Street Bank & Trust Company Limited
20 Churchill Place
Canary Wharf
London E14 5HJ

Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter EX4 4EP

Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL

Corporate Broker
JP Morgan Cazenove
25 Bank Street
Floor 29
Canary Wharf
London E14 5JP


A copy of the Annual Report and Accounts will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at:



Neither the contents of the Company’s website nor the contents of any website accessible from hyperlinks on the website (or any website) is incorporated into, or forms part of, this announcement.

© PRNewswire 2021
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