Final Results

Baring Emerging Europe PLC
Annual Report & Audited

Financial Statements
for the year ended 30 September 2016

Contents

Directors and officers	2
Financial highlights	3
Performance	3
Discount	3
Investment objective	3
Financial calendar	3
The Alternative Investment Fund Manager & AIFMD disclosures	4
Special considerations and risk factors	6
Chairman’s statement	7
Report of the Alternative Investment Fund Manager:	10
Review	10
Investment portfolio	14
Classification of assets	16
Strategic report	17
Report of the Directors	22
Statement of Corporate Governance report	27
Audit Committee report	33
Statement of Directors’ responsibilities in respect of the Annual Report and the financial statements	34
Directors’ remuneration report	35
Independent Auditor’s report	38
Income statement	40
Statement of financial position	41
Statement of changes in equity	42
Notes to the accounts	43
Notice of Annual General Meeting	56
Notes to the Notice of Annual General Meeting	58

Directors and officers

Directors

Steven Bates, Chairman
Jonathan Woollett
Ivo Coulson
Frances Daley
Nadya Wells
Saul Estrin (retired 13 January 2016)

Secretary

M. J. Nokes F.C.A.
Registered office
155 Bishopsgate
London EC2M 3XY
Company number
4560726

Alternative Investment Fund Manager

Baring Fund Managers Limited
155 Bishopsgate
London EC2M 3XY
Telephone: [phone]
Facsimile: 020 7638 7928

Auditor

KPMG LLP
15 Canada Square
London E14 5GL

Custodian & Depositary

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

Administrator

Northern Trust Global Services Limited
50 Bank Street
Canary Wharf
London E14 5NT
Telephone: [phone]

Registrars and transfer office

Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: [phone] Overseas: [phone] (Calls cost 12p per minute plus your phone company’s access charge. Calls outside the United Kingdom will be charged at the applicable international rate.)
Email: [e-mail]

Website

www.bee-plc.com

Financial highlights

	2016	2015
Net asset value per ordinary share (“NAV”)	722.82p	534.87p
Revenue return per ordinary share	21.39p	22.05p
Dividends per ordinary share	23.0p	23.0p
Share price	638.00p	487.00p
Ongoing charges (based on average NAV)	1.49%	1.49%
Gearing Ratio – Gross basis	105%	109%
Gearing Ratio – Commitment basis	110%	112%

Performance (total return basis)

	Year ended 30 September 2016
Net asset value per ordinary share#	+41.0%
Share price#	+37.6%
Benchmark*	+27.1%
*The Benchmark Index is the MSCI EM Europe 10/40 Index.
#Source: AIC.

Discount (at 30 September)

	2016	2015
Discount to net asset value per share*	11.7%	8.9%
*Based on the net asset value including income.

Investment objective

The investment objective is to achieve long-term capital growth, principally through investment in securities listed on or traded on an Emerging European securities market or in securities of companies listed or traded elsewhere, whose revenues and/or profits are, or are expected to be, derived from activities in Emerging Europe.

Financial calendar

	Date
Annual general meeting for 2016	24 January 2017
Announcement of interim results	May
Announcement of final results	December
Interim report posted	May
Annual report posted	December

The Company’s share price is published in the Financial Times.   

The Alternative Investment Fund Manager & AIFMD disclosures

The Alternative Investment Fund Manager

The Alternative Investment Fund Manager (“AIFM”) of Baring Emerging Europe Plc (“the Fund”) is Baring Fund Managers Limited (“BFM”), authorised by the FCA as an Alternative Investment Fund Manager (“AIFM”) under the Alternative Investment Fund Managers Directive (“AIFMD”).

AIFMD disclosures

Pre-Investment Disclosures

BFM and the Company are required to make certain disclosures available to investors in accordance with the Alternative Investment Fund Managers Directive (“AIFMD”). Those disclosures that are required to be made pre-investment can be found on the Company’s website www.bee-plc.com under the prospectus and literature heading, the document is titled “Pre-investment disclosures”, dated September 2016. There have been no material changes to the disclosures contained within the document since publication in July 2015.

Leverage Disclosure

For the purposes of this disclosure, leverage is any method by which the Company’s exposure is increased, whether through borrowing cash or securities, or leverage embedded in contracts for difference or by any other means. The AIFMD requires that each leverage ratio be expressed as the ratio between a Company’s exposure and its NAV, and prescribes two required methodologies, the Gross Methodology and the Commitment Methodology (as set out in AIFMD Level 2 Implementation Guidance), for calculating such exposure. Using the methodologies prescribed under the AIFMD, the leverage ratios of the Company calculated on a Gross Basis was 105% and on a Commitment Basis was 110% as at 30 September 2016.

Remuneration Disclosure

BFM’s Remuneration Policy ensures that the remuneration arrangements of AIFMD remuneration ‘Identified Staff’ as defined in “ESMA’s Guidelines on Sound Remuneration Policy under AIFMD, ESMA 2013/201” (the ‘ESMA Guidelines’), (as amended) are:

(i) consistent with and promote sound and effective risk management and do not encourage risk-taking which is inconsistent with the risk profile, rules or instruments of incorporation of BFM or the Fund; and

(ii)  consistent with BFM’s business strategy, objectives, values and interests and includes measures to avoid conflicts of interest.

BFM is also subject to the FCA’s AIFM Remuneration Code (SYSC 19B). An AIFM firm must comply with the AIFMD remuneration principles in a way and to the extent that is appropriate to its size and business.

Remuneration Committee

Due to the size and nature of BFM the Board considers it appropriate to dis-apply the requirement to appoint a remuneration committee.

Baring Asset Management Limited (“BAML”) employs and remunerates all UK staff within the Barings group (which includes BFM). BAML is also the appointed delegate to carry out Investment Management.

BAML has an HR and Salaries Committee as well as a Remuneration Committee to ensure the fair and proportionate application of the remuneration rules and requirements across the Barings’ group. The Committees ensure that potential conflicts arising from remuneration are managed and mitigated appropriately. All staff are subject to the Barings’ Performance Management Review process, which includes both financial and non-financial criteria as appropriate.

AIFMD Remuneration Identified Staff

BFM must determine its Identified Staff, whose professional activities have a material impact on its risk profile. Identified Staff consists of staff whose professional activities have a material impact on the risk profiles of the AIFM or the Fund, which includes senior managers, controlled functions and risk takers.

a) Senior Managers and controlled functions

BFM has a Board of Directors (the “Board”) which comprises of four directors. The Directors have waived their entitlement to receive a director’s fee from BFM. The Directors are all employees of BAML and accordingly are remunerated by BAML.

b) Risk takers

Risk takers as defined by the BFM Remuneration Policy are as follows:

i. The Permanent Risk Management Function (“PRMF”): BFM’s PRMF comprises of an Organisational Risk team and an Investment Risk team. The individuals who discharge these functions are identified staff and are remunerated by BAML. Their remuneration is not directly linked to the performance of the Fund.

ii. Investment Managers: BFM has delegated investment management to BAML and accordingly the Investment managers are remunerated by BAML under an equivalent remuneration regime (BAML and its subsidiaries are subject to remuneration rules contained in the Capital Requirements Directive (“CRD”) and these are considered to be equally as effective as those contained in the AIFMD).

There are no other controlled functions, senior management or Identified Staff employed by BFM.

Remuneration Disclosure: Baring Emerging Europe Plc

The table below summarises the fixed and variable remuneration paid to Identified Staff as well as other Barings’ staff (remunerated by BAML) that carry out activities for the AIFM, for BFM’s financial year ending 31 December 2015. The disclosures below show remuneration relevant to the Fund, apportioned using total Barings’ Assets Under Management (“AUM”).

	Number of beneficiaries	Total Fixed Remuneration for the period	Total Variable Remuneration for the period	Total Remuneration
AIF Level
AIFM Staff	328	£117,470	£108,852	£226,322
Identified Staff	7	£75,182	£85,167	£160,349

Notes:

1. AIFM staff: this assumes all UK staff employed by BAML carry out some activities on behalf of BFM. Remuneration is apportioned based on the relevant AUM. Other than the Identified Staff noted above, none of the staff are considered to be senior managers or others whose actions may have a material impact on the risk profile of the Fund.

2. Identified Staff: These are as defined in the BFM Remuneration Policy; no direct payments are received by code staff from BFM. Remuneration is paid by BAML and is apportioned on an AUM basis.

3. Variable remuneration consists of cash bonus and deferred awards awarded in the period.

4. The Fund does not pay either performance related fees or carried interests to any person.

Special considerations and risk factors

Shareholders should be aware that the value of the Company’s Shares and the income from them may fluctuate. In addition, there is no guarantee that the market prices of shares in investment trusts will fully reflect their underlying Net Asset Value.

The risks inherent in investments by the Company in Emerging Europe are of a nature and degree not typically encountered in investing in securities of companies listed on the major securities markets. Such risks are both political and economic and in addition to the normal risks inherent in any equity investment.

Investments in the Company should be regarded as long-term in nature. There can be no guarantee that the Company’s investment objectives will be achieved.

Chairman’sstatement

After several poor years in Emerging Europe, where geopolitical influences held sway, markets delivered an excellent return, boosted further, for BEE shareholders, by the devaluation of Sterling. The political scene, which had glowered over stock markets, did not improve significantly – indeed, in the case of Turkey it deteriorated rather sharply, but this inertia was overcome by a combination of improving commodity prices and the sheer exhaustion brought about by sharp falls last year. Everybody who wanted to sell the region had sold and that meant that even the barest glimmer of light had a disproportionate effect. As you will see in Matthias Siller’s report, which follows this, corporate earnings have started to improve and efforts have been made to address some of the failings in corporate governance, which have plagued the region.

It wasn’t all plain sailing of course: Russian markets rose sharply as the fog cleared a little and even Turkey managed a rise for the year to 30th September. Poland, though, fell by 15% in USD terms as a new government acted to implement a socially conservative programme, which includes an intolerance of opposition sadly visible in a growing number of countries around the world. This has included a dismantling of the private pension system and effectively a re-nationalisation and consolidation of the banking sector. At the same time, it introduced measures to put the economy on a sounder trajectory and this has benefitted the smaller private sector companies, which Matthias favours.

Performance

It was a good year. In Sterling terms, the Net Asset Value per share on a total return basis rose by 41%, which compares with a rise of 27% in the Company’s benchmark, the MSCI Emerging Europe 10/40 Index. Part of this was attributable to the decline in Sterling; in Dollar terms the increase in Net Asset Value was around 16%.

Like a broken record, I will repeat the Board’s view that one year’s numbers, while very welcome, are not a good basis on which to measure the success or otherwise of your manager. Over the three years to 30 September 2016 the NAV total return fell by 1.9% and the benchmark by 15.2%. Over five years the NAV total return increased by 3.3% and the benchmark by 0.4%. These are very good numbers in relative terms and a testament to the manager’s skills, even if the absolute numbers leave something to be desired.

As in previous years, we keep an eye on the peer group, not because it is in any way influential in Matthias’s stock selection, but because it represents an approximation of the opportunity set open to an investor interested in this region. Compared to this, we rank 4th out of 43 funds in this universe for the year ended 30 September 2016, over 3 years to 30 September 2016 ranked 14th out of 42 funds and over 5 years it was ranked 5th out of 41 funds.

Matthias has been responsible for the management of your portfolio for 8 years and I think it is fair to point out that in the Board’s view he has done an excellent job over this period. Following a reorganisation of the investment management teams at Barings and in recognition of his track record, Matthias has recently been promoted to a role as head of the EMEA team. Barings are also expanding the team in this area and investing in the research team, he continues to be responsible for the management of your Company and takes the helm of a talented team with the resources required to seek good opportunities in a complex investing environment. We offer him our congratulations. Matthias continues to be ably supported by Maria Szczesna.

Discount Management

Here, the news is not so good. In common with many other investment trusts our discount widened post the Brexit vote as retail investors retrenched. During the year, the discount has averaged 14.4% and has traded in a range between 18.8% and 7.9%. We have repurchased and cancelled 1,364,512 shares over the period, for a net consideration of just under £7.5 million. This has added about 6 pence per share to NAV, accounting for just under 1% of the total return to shareholders.

Despite this effort to control matters, we have failed to meet the target we set in 2013 of keeping the discount to an average of less than 12% over the course of the year.

Looking to the reasons why it has been impossible to meet this goal, we can point to three factors: first, investors have generally been indifferent to the charms of the region – indeed, this is one of the reasons it has done so well as relatively small inflows into the markets have been richly rewarded in the re-rating of stocks; second, trading volumes in BEE shares have been very subdued. A total of 5 million shares were traded during the course of the year, so the buyback accounted for more than a quarter of all the shares traded during the year; lastly, there have been some technical changes as a result of the implementation of the Market Abuse Regime which have limited our flexibility in an unhelpful way.

In any event, because we did not meet the 12% target, the Board has agreed that a tender offer along with certain other proposals to add greater flexibility to our current discount control process will be proposed to shareholders. The Company has in the past indicated that such a tender offer may be for up to 15 per cent. of the issued share capital, priced at 95% of NAV. The Board is reviewing this scale and pricing and will announce its proposals to shareholders in due course.

Governance

Regulation

For once, this has been an uneventful year for regulation. It probably won’t stay that way, but for now we can be grateful.

Dividend and Income Account

The flow of income from investments has remained robust in the current year and reasonable dividends have now established themselves as a regular feature of Emerging European markets. Our income account shows a surplus of 21.39 pence per share as compared with 22.05 pence in 2015. This year, we are proposing a dividend of 23.00 pence, the same as the annual dividend of 23.00 pence paid last year. This equates to a pay out of 104% of our income account. As you will have read, the Board believes that a sustainably attractive dividend is potentially useful in broadening the shareholder base and so helping to keep the discount at reasonable levels. The yield on the current share price of £6.405 implied by this year’s dividend is 3.6% (at 8 December 2016).

Borrowing

We have a borrowing facility of up to $17 million and this has been deployed to the tune of $13 million, which equates to an effective gearing ratio for the Company of 105%. The cost of this borrowing during the year was $250,000 or an interest rate of 1.9%. Clearly, given the return on the portfolio of 41% in sterling (21% in US Dollars), the borrowing has added to the Net Asset Value per share to the tune of 6 pence.

Performance Fee

Earlier this year, we agreed with the manager that the performance fee would be discontinued from 31st March 2016. A settlement of £63,000 was made at that date to discharge an accrued liability for fees earned. I would note that this decision has led to a considerable saving for shareholders in the second half of our fiscal year and we are grateful to the manager for their flexibility and understanding. Our ongoing charges amounted to 1.49%, unchanged from last year.

Directorate

There have been no changes this year, but the Board is mindful of the need to keep refreshing itself and it is likely that there will be some change in the year ahead. It has been three years since the last binding resolution on the Company’s remuneration policy was put to the shareholder vote. Resolution 2 will be put to a binding shareholder vote at this AGM, it is proposed that there is no change to the existing remuneration policy currently in place.

In line with best practice, all the members of the Board will be standing for re-election at the AGM in January.

Shareholder Communication

This annual report is an important part of our communication with you. In addition, my colleagues and I are ready to address any concerns you may have. Please email the Company at [e-mail] with any questions you would like us to answer. At the AGM, despite the quantum of formal material which has to be tackled, Matthias will as usual be giving his presentation on the markets and outlook for the year ahead. We have decided not to post the interim report and accounts for the half year to 31 March 2017, these will be available on the Company’s website www.bee-plc.com.

Outlook

2016 has turned out to be a year of political shock – a feature with which investors in our region are all too familiar. It is a surprise then to see similar disruption visited on the developed world. While changes to the institutional arrangements surrounding trade and foreign relations are inevitable, they are unlikely to dilute the positive case for investing in our region. This is based on an improving economic outlook, recovering profitability and low valuations.

Steven Bates
Chairman
9 December 2016

Report of the Alternative Investment Fund Manager

for the year ended 30 September 2016

How we manage the Company

At Baring Fund Managers Limited, we believe that a sound research process is the starting point of any successful investment approach. In our view, it is most effective to analyse both companies and countries, with the goal of investing in the most attractive companies in the most attractive countries.

Our research focuses on growth at a reasonable price, on sensitivity to currency movements, and to other external factors; on the soundness or otherwise of government policy (in the case of a country), or business plan (in the case of a company); and last but not least, on the level of valuation. This research gives rise to an assessment of the fundamental drivers of return, and to this we add a subjective judgement as to the level of return we expect from each asset in which we might invest. We also check that these rankings are consistent with the broader thematic developments we expect as a firm. These rankings then allow us to construct a disciplined and relatively concentrated portfolio of our most attractive candidates.

Baring Emerging Europe PLC – NAV per share, share price, % discount

[GRAPHIC REMOVED]

Performance

In an environment where Emerging European equity markets stayed volatile but where the overall tone turned substantially more positive over the course of the year the Net Asset value per share of the Company rose by 41%, outperforming the MSCI Emerging Europe 10/40 benchmark by 14%. Crucially, corporate profitability started to improve after enduring year-long headwinds such as falling commodity prices, rising interest rates or hostile regulatory environments. This is testament, in our view, to the growing managerial ability, growing awareness of corporate governance standards and strong underlying growth potential of Emerging European economies.

While the Company’s NAV benefitted from the substantial decline of the £ versus most Emerging European currencies it is noteworthy to highlight that the largest part of earnings (generated from dividend payments) were booked before the sharp correction of the £ over the summer. All things being equal, the lower £ exchange rate will lend extra support to £ earnings generation in the coming year.

The Company continued to benefit from its diversification, delivering healthy returns while being less volatile than, for example, the individual stock markets of Russia or Turkey, the region’s largest countries and economies. In sharp contrast to last year the individual countries’ USD returns were not homogenous and rarely was there a year where Emerging European stock markets delivered a more diverse set of results.

Amongst the larger countries, the Russian stock market fared best rising by more than 20% (in USD terms) over the course of the year. Turkey, plagued by many setbacks, still delivered a positive return of approximately 4%, while Poland, prolonging the sorry trend that started last year, suffered from political interference and shed almost 18% (in USD terms). On the surface the underwhelming performance of the Polish stock market gives little reason for an optimistic assessment of the prevailing situation. A more nuanced picture, however, emerges when the Polish small and midcap sector is taken into consideration. In contrast to Polish blue chips, the largely private sector medium sized companies lived up to their reputation as the backbone of the country’s economy and impressed through business acumen, innovation and flexibility in the face of an increasingly difficult local and European political backdrop. Not surprisingly, these stocks attracted increased attention over the course of the year, delivered outstanding results and successfully de-coupled from the overall down-beat environment on the Warsaw stock exchange. Hungary’s stealthy improvement continued this year and catapulted the small Central European nation’s stock market to the top of the region’s rankings for the second time in a row, with a return of more than 30%. The overall return of stock markets in other smaller new EU member states such as Romania or Czech Republic was more muted, but still offered opportunities at the single stock level, partially mirroring the situation in Poland. The Greek stock market could not sustain the relief rally staged after a successful recapitalisation of the Greek banking sector in December 2015 and suffered particularly after the leave vote in the UK’s EU referendum.

While the Company’s exposure to different markets helped to control risk, it was good stock selection that contributed the lion’s share of the 14% outperformance over the course of the year, most of it stemming from the Company’s holdings in Russian equities. The Company’s two largest holdings (both significant overweight positions relative to the benchmark) Sberbank (the largest bank in Russia) and Lukoil (a leading Russian energy producer) are a case in point. Generating more than 100% and 50% USD total return, respectively, over the course of the year the two largest holdings in the Company’s portfolio did much of “heavy lifting” which, by 30th September, brought the Company’s net asset value per share close to the highs of 2014.

It goes without saying that this is a positive outturn and we deem the underlying reasons to be supportive for our long-standing argument that Baring Emerging Europe plc’s long term performance potential is not defined by oil price fluctuations or geopolitics but is a product of multiple growth avenues present in a geography of more than 300 million inhabitants.

Geographically

Given the impressive results the Russian stock market delivered this year it is relatively easy to forget how jittery the market was when oil prices tested levels of USD 30 and below in January. While it first took a stabilisation of energy prices before Russian equities, bonds and the Rouble found firmer footing it is important to point out that Russian capital markets functioned well throughout the crisis. In our view this is largely due to the successful policies implemented by the Russian Central Bank, which continued its uncompromising inflation targeting policy. Determined to anchor inflation expectations as the Russian economy rebalanced and began to enter an expansion phase, Central Bank governor Elvira Nabiullina kept a hawkish stance and yet again proved her independence from political influence. Further, corporate earnings (of listed companies), measured in US Dollars, started to improve, presaging the broader economy’s move out of recession. This is clearly a very positive development and, in our view, an indication that well managed Russian companies use an environment of tight credit and relatively weak demand to gain market share and successfully consolidate the market. Politically the year was characterised by continued broad-based support for President Putin’s policies, culminating in September’s parliamentary elections, where, contrary to the events in 2011, the ruling United Russia Party’s victory was largely uncontested domestically and internationally. As for foreign policy, Russia’s controversial involvement in Syria has stabilised the Assad regime. While it is very hard to draw conclusions about the success of Russian foreign policy at this stage and the plight of the Syrian people remains, any advancement to an eventual peace process in Syria seems all but impossible without the endorsement of Russia.

The Syrian war theatre, a long simmering issue in Russian – Turkish relations, suddenly turned into a serious international crisis when Turkish fighter jets downed a Russian war plane over alleged infringement of Turkish sovereign airspace. This incident led to a diplomatic ice age in the bilateral relationship and to sanctions affecting the sale of Turkish goods (machinery, food) and services (travel industry, tourism) to Russia. With the Turkish tourism industry already suffering from falling arrivals in the wake of an increase of terrorist activity on Turkish soil the travel ban for Russian tour operators couldn’t have come at a worse time. As the extended election cycle in Turkey finally came to a market-friendly conclusion on 1 November 2015, market participants welcomed the fact that President Erdogan’s AK Party found itself in a position to form a single party government but fell short of a constitutional majority in parliament. This enabled the implementation of a long overdue reform programme without having to compromise on the system of checks and balances. Unperturbed by political campaigning economic agents would finally be able to plan longer term, allowing the full achievement of Turkey’s high trend rate of potential economic growth. While the situation in Syria gave cause for concern, it is also a sharp reminder to EU members about the crucial role Turkey plays in the Union’s plans to get refugee flows under control. The positive attitude of market participants would prove unfounded however: the resurgence of political risk factors on the back of the continuous criticism by the President of prime minister’s Davutoglu’s policies (followed by his dismissal) and ongoing meddling with the Central Banks independence culminated in one of the most extraordinary developments in the last year in the shape of the coup attempt of a junta of generals on the weekend of July 15th. The overwhelming commitment of the Turkish population to democracy saw millions of people disobeying a junta imposed curfew and taking to streets where, in the early hours of the next day, it become clear that democracy had won, sadly at the cost of 256 lives. In our view this powerful statement of Turkish citizens of all backgrounds and walks of life serves as a reminder of the strong uniting elements in Turkish society even in the face of its fractious politics. President Erdogan’s actions seem less concerned with the country’s progress but are focused rather on unravelling the tentacles across Turkish institutions of US-based preacher Abdullah Gulen, who has been accused of fomenting the coup. From the outside perspective the President’s attempt to clear state institutions of Gulenists quickly turned into a broad-based witch hunt, sending thousands to jail. Long term, the erosion of the balancing powers of independent state institutions poses a clear risk to Turkish economic growth and was indirectly referred to as one of the key reasons when rating agency Moody’s downgraded its assessment of Turkish sovereign bonds.

In Poland, market participants saw their worst fears come true when, after the widely expected election victory, the right wing, conservative PiS movement wasted little time and implemented a catalogue of legislative and fiscal measures aimed at raising much needed budget revenues (mostly to finance increased child benefits, a key election promise) and impose a higher degree of control over the country’s financial sector. While clearly inexperienced in communicating with market participants, it is important to highlight that over the course of the year the PiS government toned down its rhetoric markedly and key players, such as the Minister for economic development Morawiecki, came forward with a more balanced approach to important issues such as the pension reform, consolidation in the Polish banking sector, budget policies and long term economic strategy. The willingness of the government to take on board constructive criticism was taken positively by market participants and could open the path to an environment where the positive economic development in the country will finally be reflected in the earnings of large cap companies, and not only smaller and medium sized, privately owned enterprises.

The Greek economy, burdened by ongoing fiscal consolidation, capital controls and the slow implementation of structural reforms, continued to struggle. Nevertheless, supported by a bumper tourist season, the ongoing healing process could well turn into a virtuous circle of economic growth aided by the political willingness to co-operate with the supranational institutions involved, thereby increasing tax revenues, partially lifting capital controls, restructuring external debt, healing loan portfolios and allowing some room for fiscal expansion.

Company weighting versus Benchmark Index by country of operation at 30 September 2016

Country of operation	Company	Benchmark
Czech Republic	3.4%	2.2%
Greece	1.7%	4.7%
Hungary	–	4.2%
Poland	14.4%	16.0%
Russia	58.7%	55.4%
Turkey	18.5%	17.5%
Other	8.4%	–
Net current liabilities	-5.1%	–
	100.0%	100.0%
Source: Barings, MSCI.

Strategy

The Company has made use of a gearing facility of up to 10% of NAV for the entire year, as part of its strategy aimed at enhancing returns and earnings (dividend income) for shareholders. Use of this facility in the future will depend on the opportunity set present on Emerging European Equity markets. Portfolio-wise, over the course of last year, the Company’s strategic exposure to smaller and medium sized companies at the expense of larger capitalised stocks remained, though substantial changes in sector and geographic allocation took place. Most notably, in reaction to a weakening economic and institutional outlook, the exposure to the Turkish banking sector was reduced by selling our holdings in Akbank and Vakif Bank. While a part of these funds was used to build a position in the Turkish conglomerate Sabanci Holding, the largest part was re-invested in stocks in Poland and Russia. Within smaller capitalized stocks in Turkey the Company sold parts of the holdings in the industrials Ford Otosan and Turk Traktor, as price targets were reached, and invested in the VW car retailer Dogus Otomotif.

Stocks in the Russian agricultural sector, a key beneficiary of the local production support measures and falling input costs saw a significant increase in valuation as investors sought to participate in positive operational developments. Taking advantage of this trend Rusagro and Kernel were sold over the course of the year. Moscow Stock Exchange, a stock that was added to the portfolio at an attractive valuation in the volatile period at the beginning of 2016, was subsequently sold as the share’s rapid price increase and the sharp drop in Russian interest rates (a key profit contributor to Moscow Stock Exchange’s main business line) rendered it overvalued relative to other investment opportunities – one of which was the world’s leading diamond miner Alrosa, where a combination of growth potential and a strong dividend payout proposal underscore the company’s attractiveness. Within the Russian internet space we took the decision to rotate a large part of our holdings in Mail.ru, the leading social network operator, into Yandex, the leading search engine as we grew more comfortable that the latter’s margins would eventually stabilise and the revenue line would be supported by a renewal in advertising growth. In Central Europe the company took part in the IPO of GE Capital’s Czech consumer lending business, rebranded as “Moneta”. Its parent’s intention to sell various subsidiaries due to regulatory constraints offers the opportunity, in our view, to participate in a strongly capitalised company operating in one of the healthiest consumer markets globally. In the small and mid-cap space the Polish-German motor industry supplier Uniwheels was sold as the stock went beyond its price target while we invested in extruded product and aluminum packaging producer Kety, also from Poland.

Overall the Company’s portfolio characteristics remain poised towards growth opportunities. We do feel, however, that we need not compromise on potential yield generation pursuing this strategy. This quite unique feature of Emerging European stock markets serves to demonstrate the potential offered by Emerging European equity markets and should contribute to market resilience should global interest rates rise or global growth prospects disappoint.

Performance versus Benchmark Index
for the year ended 30 September 2016

[GRAPHIC REMOVED]

NAV total return (Source: AIC)

Share price total return (Source: AIC)

Benchmark Index† (Source: MSCI)

† The Benchmark Index is the MSCI EM Europe 10/40 Index.

Fund, Benchmark Index and country returns (£)

– 30 September 2015 to 30 September 2016

[GRAPHIC REMOVED]

Benchmark Index	27.1%
Bee PLC	41.0%
Russia	46.9%
Czech Republic	1.7%
Poland	-1.6%
Turkey	23.4%
Hungary	61.0%
Greece	-27.6%

Source: Barings

Outlook

We believe that Emerging European stock markets provide a rich opportunity set for investors given the combination of a solid earnings growth potential, a resilient, improving economic backdrop and low valuations. While the recent increase in earnings expectations on Emerging European equity markets must be treated with some level of caution, it is encouraging to see that fundamentals in the region are firmly in place and have withstood a taxing global backdrop of currency depreciation, generally underwhelming global economic growth and political turbulence of all sorts. A confirmation of the positive trend in Emerging European companies’ earnings potential, which we believe is in the realm of the possible, would underscore the region’s companies’ ability to compete globally, attract investment and deliver growth and shareholder returns. While this year’s events in Turkey once more highlight the political risks involved, we are encouraged by the high level of protection a broadly diversified portfolio of carefully selected equities has offered over the course of the year without having to compromise on performance. This serves as a reminder that there is a wide spectrum of investment and growth opportunities in Emerging European equity markets, a feature, we believe that will prove increasingly attractive to investors globally, given the growing correlation of asset classes all over the world.

Investment portfolio

The Company’s investment portfolio at 30 September 2016, is set out in the following table:

	Holding	Primary country of investment	Market value £000	% of investment portfolio
1	Sberbank	Russia	13,364	11.28
2	Lukoil Holdings	Russia	12,277	10.37
3	PZU	Poland	6,906	5.83
4	Magnit	Russia	6,065	5.12
5	Novatek	Russia	5,987	5.06
6	Halk Bank	Turkey	5,565	4.70
7	Grupa Kety	Poland	4,008	3.38
8	Phosagro	Russia	3,664	3.09
9	Dogus Otomotiv	Turkey	3,581	3.02
10	AO Tatneft	Russia	3,318	2.80
11	Alrosa	Russia	3,095	2.61
12	Gazprom	Russia	3,093	2.61
13	Haci Omer Sabanci Holdings	Turkey	3,032	2.56
14	Yandex	Russia	2,914	2.46
15	M Video	Russia	2,795	2.36
16	Alior Bank	Poland	2,582	2.18
17	Tupras Petrol	Turkey	2,515	2.12
18	Moneta Money Bank	Czech Republic	2,275	1.92
19	CCC	Poland	2,237	1.89
20	LSR	Russia	2,152	1.82
21	Coca Cola Icecek	Turkey	2,133	1.80
22	TCS	Russia	2,126	1.79
23	Electrica	Romania	2,029	1.71
24	BCA Transilvania	Romania	1,972	1.67
25	Wienerberger	Austria	1,882	1.59
26	Megafon	Russia	1,799	1.52
27	Kofola Cekoslovensko	Czech Republic	1,796	1.52
28	MD Medical	Russia	1,590	1.34
29	National Bank of Greece	Greece	1,583	1.34
30	Globaltrans	Russia	1,513	1.28
31	Mail.ru	Russia	1,501	1.27
32	Vostok New Ventures Ltd	Russia	1,359	1.15
33	Cyfrowy Polsat	Poland	1,324	1.12
34	Ford Otomotiv Sanayi	Turkey	1,314	1.11
35	Epam Systems	Belarus	1,212	1.02
36	Turk Traktor	Turkey	1,168	0.99
37	Turk Telekomunikasyon	Turkey	1,116	0.94
38	Brisa Bridgestone Sabanci	Turkey	938	0.79
39	Cineworld	UK	856	0.72
40	MHP	Ukraine	837	0.71
41	Kcell	Kazakhstan	632	0.53
42	Globalworth Real Estate	Romania	626	0.53
43	Migros Ticaret	Turkey	526	0.44
44	Sollers	Russia	417	0.35
45	Global Ports	Russia	409	0.35
46	OPAP	Greece	404	0.34
47	Norilsk Nickel	Russia	40	0.03
	Total investments	124,527	105.13
	Net current liabilities	(6,077)	(5.13)
	Net assets	118,450	100.00

Review of Top Ten Holdings at 30 September 2016

Holding	Sector	Market value £000	% of investment portfolio	End weighting relative to benchmark	Company comment
Sberbank	Financials	13,364	11.28	Overweight	Russia’s largest bank, successful implementation of modernisation strategy offers scope for further improvement of profitability.
Lukoil	Energy	12,277	10.37	Overweight	High yielding Russian oil stock with potential for further dividend growth.
PZU	Financials	6,906	5.83	Overweight	Largest Polish insurer. Its capital base allows for substantial dividend payout ratios. Potential consolidator in the Emerging European financial sector.
Magnit	Consumer Staples	6,065	5.12	Overweight	Russia’s leading supermarket. Benefitting from solid margins and strongly growing sales.
Novatek	Energy	5,987	5.06	Overweight	Largest independent gas producer in Russia. Liquified Natural Gas strategy provides significant growth potential.
Halk Bank	Financials	5,565	4.70	Overweight	Largest listed state-controlled Bank in Turkey. Low cost deposit base supports superior interest margins.
Grupa Kety	Industrials	4,008	3.38	Overweight	Polish manufacturer of aluminum extruded products. Invests in innovative technologies. Benefits from investment cycle in Poland (construction) and recovery in Europe (auto industry).
Phosagro	Materials	3,664	3.09	Overweight	A leading phosphate-based fertiliser and phosphate rock producer from Russia. Its substantial, high grade phosphate rock mines provide cost advantage over peers and allow for growth opportunities.
Dogus Otomotiv	Consumer Discretionary	3,581	3.02	Overweight	Turkish VW-Group car importer and retailer. Outside its core activities, growth in business lines such as second hand car dealerships and spare parts render Dogus' profit margins less cyclical.
AO Tatneft	Energy	3,318	2.80	Overweight	Local energy champion in the Russian independent republic of Tatarstan. Strong cash flows allow for high dividend payout ratios and pursuit of downstream growth strategy.
	64,735	54.65

Classification of assets

The Company’s portfolio as per MSCI at 30 September 2016 was:

Percentage classification of assets based on valuation

	Russia	Poland	Czech Republic	Turkey	Other Countries	Net Current Liabilities	Total 2016	Total 2015
Consumer Discretionary­	2.8	3.0	–	4.9	1.0	–	11.7	7.6
Consumer Staples­	5.2	–	1.5	2.2	0.6	–	9.5	14.7
Energy­	21.0	–	–	2.1	–	–	23.1	22.9
Financials­	13.5	8.0	1.9	7.2	4.0	–	34.6	39.0
Healthcare­	1.5	–	–	–	–	–	1.5	1.1
Industrials­	1.7	3.4	–	1.1	–	–	6.2	4.1
Materials­	5.7	–	–	–	1.4	–	7.1	7.3
Telecommunication Services­	1.6	–	–	1.0	0.4	–	3.0	4.8
Information Technology	3.8	–	–	–	0.9	–	4.7	3.8
Real Estate	1.9	–	–	–	0.4	–	2.3	–
Utilities­	–	–	–	–	1.4	–	1.4	3.9
Total equity investment­	58.7	14.4	3.4­	18.5	10.1	–	105.1	109.2
Net current liabilities	–	–	–	–	–	(5.1)	(5.1)	(9.2)
Total 2016	58.7	14.4	3.4	18.5	10.1	(5.1)	100.0­
Total 2015	56.1	21.7	–	25.1	6.3	(9.2)		100.0

Sector distribution of portfolio (%) at 30 September 2016

	Portfolio weight	Benchmark Index weight
	2016 %	2015
%
Consumer Discretionary	11.7	4.1
Consumer Staples	9.5	7.2
Energy	23.1	34.1
Financials	34.6	33.8
Healthcare	1.5	1.0
Industrials	6.2	1.9
Materials	7.1	0.0
Telecommunication Services	3.0	8.8
Information Technology	4.7	0.7
Real Estate	2.3	5.4
Utilities	1.4	3.0
Total equity investment	105.1	–
Net current liabilities	(5.1)	0.0

Baring Fund Managers Limited
9 December 2016

Strategic report
for the year ended 30 September 2016

The Directors submit to the shareholders their Strategic report, Director’s report and the audited financial statements of the Company for the year ended 30 September 2016.

Business and tax status

In the opinion of the Directors, the Company has conducted its affairs during the period under review, and subsequently, so as to maintain its status as an investment trust for the purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Company has obtained written approval as an investment trust from HM Revenue & Customs for all accounting periods up to the year ended 30 September 2013 and has made a successful application under Regulation 5 of the Investment Trust (Approved Company) (Tax) Regulations 2011 for investment trust status to apply to all accounting periods starting on or after 1 October 2013 subject to the Company continuing to meet the eligibility conditions contained in Section 1158 of the Corporation Tax Act 2010 and the ongoing requirements outlined in Chapter 3 of Part 2 of the Regulations.

The Company is an investment company as defined in Section 833 of the Companies Act 2006. The Company is not a close company for taxation purposes.

Alternative Investment Fund Management Directive (“AIFMD”)

In order to comply with AIFMD, the Company has appointed Baring Fund Managers Limited (“BFM”) to act as its Alternative Investment Fund Manager (“AIFM”) pursuant to an Alternative Investment Fund Management Agreement entered into by the Company and the AIFM on 21 July 2014 (the “AIFM Agreement”). BFM has been approved as an AIFM by the UK’s Financial Conduct Authority. The investment management agreement entered into by the Company and Baring Asset Management Limited (“BAM”) on 12 November 2002 (the “IMA”) has been terminated although BFM has delegated the portfolio management of the Company’s portfolio of assets to BAM. The AIFM Agreement is based on the IMA and differs to the extent necessary to ensure that the relationship between the Company and BFM is compliant with the requirements of AIFMD. The fees payable to BFM and the notice period under the AIFM Agreement are unchanged from the IMA. The Company and BFM have also entered into a Depositary Agreement with State Street Trustees Limited (“State Street”) pursuant to which State Street has been appointed as the Company’s Depositary for the purposes of AIFMD.

The Company is managed by external parties in respect of investment management, custodial services and the day-to-day accounting and company secretarial requirements. As noted above the Alternative Investment Fund Manager is BFM and details of the agreement with BFM are given in note 3 to the accounts. The Depositary and Custodian is State Street Bank & Trust Company Limited. Secretarial services are provided by Northern Trust Global Services Limited. The Company has no employees. The Directors are all non-executive.

Investment objective

The investment objective is to achieve long-term capital growth, principally through investment in securities listed on or traded on an Emerging European securities market or in securities of companies listed or traded elsewhere, whose revenues and/or profits are, or are expected to be, derived from activities in Emerging Europe.

Investment policy

The policy of the Directors is that, in normal market conditions, the portfolio of the Company should consist primarily of diversified securities listed or traded on Emerging European securities markets (including over the counter markets). Equity securities for this purpose include equity-related instruments such as preference shares, convertible securities, options, warrants and other rights to subscribe for or acquire, or relating to, equity securities. The Company may also invest in debt instruments such as bonds, bills, notes, certificates of deposit and other debt instruments issued by private and public sector entities in Emerging Europe.

In addition, Emerging European exposure may be obtained by indirect means. Investments may, for example, be made in securities of companies listed on securities markets outside Emerging Europe that derive, or are expected by the Directors to derive, the majority of their revenues and/or profits and/or growth from activities in Emerging Europe.

The Company may also invest in other funds in order to gain exposure to Emerging Europe where, for example, such funds afford one of the few practicable means of access to a particular market, or where such a fund represents an attractive investment in its own right. The Company will not invest more than 15% of its gross assets in other UK listed investment companies (including investment trusts).

The Company may from time to time invest in unquoted securities, but the amount of such investment is not expected to be material. Furthermore the Board has agreed that the maximum exposure to unquoted securities should be restricted to 5% of the Company’s net assets. At the year end there were no unquoted investments in the portfolio.

For the purposes of this investment policy the Board has defined Emerging Europe as the successor countries of the former Soviet Union, Poland, Hungary, the Czech Republic, Slovakia, Turkey, the States of former Yugoslavia, Romania, Bulgaria, Albania and Greece. There is no restriction on the proportion that may be invested in these countries.

In addition the Board has agreed that up to 5% of the total assets may be invested in other countries provided that any investments made are companies listed on a regulated stock exchange.

The Board has agreed that the maximum value of any one investment should not exceed 12% of the Company’s total portfolio save with the prior written consent of the Board. Where excess occurs due to market movement the manager will notify the Board of this and will reduce the holding to below 12% within six months.

In addition to the above restriction on investment in a single company the Board seeks to achieve a spread of risk in the portfolio through monitoring the country and sector weightings of the portfolio. There will be a minimum of 30 stocks in the portfolio.

The Company’s Articles provide that the Company may borrow an amount equal to its share capital and reserves. At 30 September 2016, the only loan facility in place was a US$17 million loan facility with State Street Bank and Trust Company Limited which can be used as a source of gearing. In order to provide a mechanism to gear the portfolio the Board has authorised the Alternative Investment Fund Manager to invest in long only derivatives in Polish, Russian and Turkish index futures where feasible. The Alternative Investment Fund Manager has discretion to operate with an overall exposure of the portfolio to the market of between 90% and 110%, to include the effect of any derivative positions. Gearing was employed during the year, US$13 million was drawn down on 13 July 2016 and remained at this level up to and including 30 September 2016.

Return per ordinary share

	30 September 2016	30 September 2016	30 September 2016	30 September 2015	30 September 2015	30 September 2015
	Revenue	Capital	Total	Revenue	Capital	Total
Return per ordinary share	21.39p	184.53p	205.92p	22.05p	(168.86)p	(146.81)p

Revenue return (earnings) per ordinary share is based on the net revenue on ordinary activities after taxation of £3,623,000 (2015: £4,057,000). Capital return per ordinary share is based on net capital gains for the financial year of £31,261,000 (2015: net capital losses of £(31,064,000)). These calculations are based on the weighted average of 16,940,616 (2015: 18,395,544) ordinary shares in issue during the year.

At 30 September 2016 there were 16,387,212 ordinary shares of 10 pence each in issue (2015: 17,751,724) which excludes 3,318,207 ordinary shares held in treasury (2015: 3,318,207 shares held in treasury). The shares held in treasury are treated as not being in issue when calculating the weighted average of ordinary shares in issue during the year. All shares repurchased during the year were cancelled.

Dividends

The Board recommends an annual dividend of 23p per share the same as the annual dividend 23p for the previous year. Subject to approval of the Annual General Meeting, the recommended annual dividend will be paid on 16 February 2017 to members on the register at the close of business on 20 January 2017. The shares will be marked ex-dividend on 19 January 2017.

Discount

The Directors have adopted a policy with regard to the market rating of the Company’s shares and seek to limit the discount to NAV at which the Company’s shares trade to a level significantly lower than 10%, using as necessary the Company’s share repurchase authority. During the year ended 30 September 2016, 1,364,512 shares were repurchased at a cost of £7,453,000 (1,152,319 shares were repurchased during the year ended 30 September 2015 at a cost of £6,060,000). Any shares repurchased will either be held in treasury and may be issued at a later date at or above net asset value, or cancelled.

If the average closing mid-market price at which the Company’s shares trade in the market in the 365 day period prior to the publication of the Company’s results for the financial year is greater than a 12% discount, the Company will offer to repurchase, by way of Tender available to all shareholders, up to 15% of the outstanding issued share capital at 95% of NAV (after taking into account of any expenses including the cost of selling investments in order to fund the repurchase). The relevant NAV number for these purposes is the NAV cum income. During the 365 day period prior to the publication of the results for the year ended 30 September 2016 the average discount was 14.8%.

Viability statement

In accordance with provision C.2.2 of the Code, the Directors have assessed the prospects of the Company over a longer period than the 12 months required by the “Going Concern” provision. The Board conducted this review for a period of three years which was selected because it was considered to be a reasonable time horizon given that the Company invests in Emerging markets which may be more volatile than developed markets. The Board also regularly considers the strategic position of the Company including investor demand for the Company’s shares and a three year period is considered to be a reasonable time horizon for this.

The Directors’ have carried out a robust assessment of the Company’s principal risks and its current position. The principal risks faced by the Company and the procedures in place to monitor and mitigate them are detailed below. As the Company’s portfolio consists of shares which are listed on regulated markets, many of which are highly liquid, funds can be raised to meet the Company’s liabilities as they fall due. The Company has no long term debt. At 30 September 2016 the Company had drawn down US$13 million from its loan facility with State Street Bank as a result of which the Company’s portfolio was 5.1% geared. This exposure does increase risk but is carefully monitored by the Board and in any event is limited to 10% of gross assets. The interest cost of the loan is covered 19 times by the revenue surplus. On the basis of the current portfolio yield, the Directors expect the Company to continue to generate a revenue surplus.

Based on the above assessment the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities over the three year period to December 2019.

Performance

At each Board meeting, the Directors consider a number of performance measures to assess the Company’s success in achieving its objectives of which the most important are as follows:

• Performance against the peer group

The Board monitors performance relative to a broad range of competitor funds, as defined by the Morningstar Emerging Europe Universe. In the year ended 30 September 2016 the Company was ranked 4th out of 43 funds in this universe. Over three years to 30 September 2016 it was ranked 14th out of 42 funds and over five years it was ranked 5th out of 41 funds.

• Performance against the Benchmark Index

A chart of NAV performance versus Benchmark Index for the eight years ended 30 September 2016 (total return) is set out in the Directors’ Remuneration report on page 36.

• Discount to NAV

During the 365 day period prior to the publication of the results for the year ended 30 September 2016 the average discount was 14.8%.

• Ongoing charges

The annualised ongoing charges figure for the year was 1.49% (2015: 1.49%). This figure, which has been prepared in accordance with the recommended methodology of the Association of Investment Companies represents the annual percentage reduction in shareholder returns as a result of recurring operational expenses excluding performance fee. The Board reviews each year an analysis of the Company’s ongoing charges figure and a comparison with its peers.

Principal risks

The key risks to the Company fall broadly under the following categories:

• Investment and strategy

The Board regularly reviews the investment mandate and long-term investment strategy in relation to the market and economic conditions. The Board also regularly monitors the Company’s investment performance against the Benchmark Index and the peer group and its compliance with the investment guidelines.

• Accounting, legal and regulatory

In order to qualify as an investment trust, the Company must comply with the provisions contained in Section 1158 of the Corporation Taxes Act 2010. A breach of Section 1158 in an accounting period could lead to the Company being subject to corporation tax on gains realised in that accounting period. Section 1158 qualification criteria are continually monitored by Baring Fund Managers Limited and the results reported to the Board at its regular meetings. The Company must also comply with the Companies Act and the UKLA Listing Rules. The Board relies on the services of the administrator, Northern Trust Global Services Limited and its professional advisers to ensure compliance with the Companies Act and the UKLA Listing Rules.

• Loss of investment team or Alternative Investment Fund Manager

A sudden departure of the Alternative Investment Fund Manager or several members of the investment management team could result in a short-term deterioration in investment performance. The Alternative Investment Fund Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team-based approach, as well as special efforts to retain key personnel.

• Discount

A disproportionate widening of the discount relative to the Company’s peers could result in loss of value for shareholders. The Board regularly discusses discount policy and has set parameters for the Company’s broker to follow with regard to the buy-back of shares.

• Corporate governance and shareholder relations

Details of the Company’s compliance with corporate governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report on pages 27 to 32.

• Operational

Like most other investment trust companies, the Company has no employees. The Board currently consists of five non-executive Directors, two of whom are female and the other three are male and is chaired by Steven Bates. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Alternative Investment Fund Manager and the Company’s service providers. The security of the Company’s assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These are regularly tested and monitored. The Depositary and Custodian and the Alternative Investment Fund Manager also produce annual reports on internal controls which are reviewed by their respective auditors and give assurance regarding the effective operation of controls.

• Financial

The financial risks faced by the Company are disclosed in note 18 on pages 51 to 55.

• Future developments

The future development of the Company is much dependent upon the success of the Company’s investment strategy in the light of economic and equity market developments in the countries in which it invests. The Alternative Investment Fund Manager discusses the outlook in its report on page 13.

• Social, community and human rights

The Company does not have any specific policies on social, community or human rights issues as it is an investment company which does not have any physical assets, property, employees or operations of its own.

For and on behalf of the Board
Steven Bates
Chairman
9 December 2016

Report of the Directors

Directors

The present Directors are listed below and on page 2. They are all non-executive and have served throughout the year apart from Saul Estrin who retired from the Board on 13 January 2016. The Board consists of two females and three males.

Steven Bates spent 18 years with the Fleming group until 2002, latterly as head of emerging markets of JPMorgan Fleming Asset Management. He has extensive experience in both emerging and developed markets. He is a director of GuardCap which is a specialist asset management business and is also the chief investment officer of Salisbury Partners. He is also on the boards of a number of financial companies. He was appointed a Director of Baring Emerging Europe PLC on 27 January 2003 and was appointed Chairman of Baring Emerging Europe PLC on 19 January 2010.

Jonathan Woollett is the founding partner of Acoro Capital Partners LLP, an investment partnership and a director of Thames Capital Holdings Limited, a London property company. He has over 20 years experience in the region as a director at the European Bank for Reconstruction and Development and prior to EBRD, a director at Credit Suisse Asset Management and CS First Boston. Prior to Credit Suisse, he worked for UBS, having started his banking career with Deutsche Bank in 1979. He was appointed a Director of Baring Emerging Europe PLC on 23 July 2008.

Ivo Coulson has over 25 years of experience in the City, first with BZW as a director in their investment management division and then as a director with SG Warburg in their equity trading operation, latterly heading up their closed end fund team. He is currently head of portfolio management at Stanhope Capital LLP, a prominent multi family office based in the West End of London and a non executive director of JPMorgan Smaller Companies Investment Trust PLC. He was appointed a Director of Baring Emerging Europe PLC on 29September 2010.

Frances Daley trained as a Chartered Accountant with a predecessor firm to EY and spent 9 years in Corporate Finance followed by 18 years in various CFO roles. From 2007 to 2012 she was group finance director of the private equity backed Lifeways Group, the UK’s largest provider of specialist support to adults with learning disabilities and mental health needs. She is also Chair of Haven House Children’s Hospice and Chair of James Allen’s Girls’ School and a non-executive director of Henderson Opportunities Trust PLC. She was appointed a Director of Baring Emerging Europe PLC on 29 April 2014.

Nadya Wells is a Non-Executive Director with over 20 years Emerging and frontier markets experience as a long-term investor and governance specialist. Latterly she spent 13 years with the Capital Group until 2015, as a portfolio manager and analyst with a focus on EMEA markets. Prior to that she was a portfolio manager at Invesco Asset Management investing in Eastern Europe in closed end funds until 1999. She started her career with EY in management consulting. She is also an independent non-executive director on the Supervisory Board of Sberbank of Russia where she sits on audit, risk and strategy committees and a non-executive director of ECEX AB in Sweden. She has an MBA from INSEAD. She was appointed to the Board of Baring Emerging Europe PLC on 23 September 2015.

There were no contracts or arrangements subsisting during or at the end of the financial year in which any Director is or was materially interested. No Director held a shareholding in any of the investments in the Company’s portfolio during the year ended 30 September 2016.

Substantial shareholdings

At 8 December 2016, the Company had received notification of the following disclosable interests in the ordinary share capital of the Company:

	Number of shares	%
City of London Investment Management Company Ltd	2,990,964 shares	18.86%
Lazard Asset Management LLC	1,737,404 shares	10.96%
City of Bradford Metropolitan District Council	929,000 shares	5.86%

Corporate governance

The statement of Corporate Governance, as shown on pages 27 to 32, is incorporated by cross reference into this report.

Going concern

The Directors believe that, having considered the Company’s investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, the Company has adequate resources and an appropriate financial structure in place to continue in operational existence for the foreseeable future. The assets of the Company consist mainly of securities which are readily realisable. For these reasons, they consider that there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Performance against the peer group

The Board monitors performance relative to a broad range of competitor funds, as defined by the Morningstar Emerging Europe Universe. In the year ended 30 September 2016 the Company was ranked 4th out of 43 funds in this universe. Over three years to 30 September 2016 it was ranked 14th out of 42 funds and over five years it was ranked 5th out of 41 funds.

Socially responsible investment

The Board has delegated the investment management function to Baring Fund Managers Limited. The Alternative Investment Fund Manager’s primary objective is to produce superior financial returns to investors. It believes that over the long term sound social, environmental and ethical policies make good business sense and takes these issues into account when, in its view, they have a material impact on either the investment risk or the expected return from an investment.

Global greenhouse gas emissions for the year ended 30 September 2016

The Company has no greenhouse gas emissions to report from the operations of the Company, nor does it have responsibility for any other emission producing sources under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.

Annual General Meeting (“AGM”)

THIS SECTION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to any aspect of the proposals referred to in this document or as to the action you should take, you should seek your own advice from a stockbroker, solicitor, accountant, or other professional adviser.

If you have sold or otherwise transferred all of your shares, please pass this document together with the accompanying documents to the purchaser or transferee, or to the person who arranged the sale or transfer so they can pass these documents to the person who now holds the shares.

The AGM will be held on Tuesday, 24 January 2017 at 2.30pm. The formal notice of the AGM is set out on pages 56 and 57. Separate resolutions are proposed for each substantive issue. Resolutions relating to the following items of special business will be proposed at the AGM, for which shareholder approval is required in order to comply with the Companies Act 2006.

Authorities to allot shares and to disapply pre-emption rights (Resolutions 12 and 13)

Approval is sought to give the Board the authority to allot ordinary shares or grant rights to subscribe for or convert any securities into ordinary shares up to an aggregate nominal amount equal to £79,297 (representing 792,970 ordinary shares of 10 pence each). This amount represents approximately 5% of the issued ordinary share capital (excluding treasury shares) of the Company as at 8 December 2016, being the latest practicable date prior to publication of the notice of meeting on pages 56 and 57 (the “Notice”). As at the date of the Notice, 3,318,207 ordinary shares are held by the Company in treasury.

The Directors do not intend to allot ordinary shares pursuant to this power other than to take advantage of opportunities in the market as they arise and only if they believe it is advantageous to the Company’s existing shareholders to do so.

Resolution 13 would, if passed, give the Board the authority to allot shares (or sell any shares held in treasury) for cash on a non pre-emptive basis up to an aggregate amount of £95,888. This amount represents 958,878 shares and is approximately 5% of the total share capital of the Company in issue (including treasury shares) as at 8 December 2016, being the latest practicable date prior to publication of the Notice. This will enable the Company to issue new shares (or to sell treasury shares) to investors when the Directors consider that it is in the best interests of shareholders to do so. This power will not be utilised when it would result in any dilution of the net asset value per ordinary share.

In respect of this amount, the Board confirm their intention to follow the provisions of the Pre-Emption Group’s Statement of Principles regarding cumulative usage of authorities within a rolling three year period. The Principles provide that usage in excess of 7.5% of share capital should not take place without prior consultation with shareholders.

The full text of the resolutions is set out in the Notice.

If Resolutions 12 and 13 are approved, the authorities will expire at the conclusion of the AGM in 2018.

Authority to purchase own shares (Resolution 14)

At the AGM held on 13 January 2016, shareholders renewed the Director’s authority to buyback up to 14.99% of the Company’s ordinary shares. Pursuant to this authority, a total of 598,033 shares were purchased and cancelled during the year under review. This represented 3.65% of the issued share capital at 30 September 2016. The prices paid for these shares ranged from 403.78p to 638.66p and the total cost amounted to £3,430,000. 527,848 further shares have been brought back since the Company’s year end.

The Board proposes that the Company should be given renewed authority to purchase ordinary shares in the market either for cancellation or to be held, sold, transferred or otherwise dealt with as treasury shares in accordance with the Companies Act.

The Directors consider that the renewal of this authority is in the interests of shareholders as a whole as the repurchase of ordinary shares at a discount to their net asset value (“NAV”) would enhance the NAV of the remaining ordinary shares. Accordingly a special resolution will be proposed at the AGM to authorise the Company to make market purchases of up to 14.99% of the ordinary shares in issue, equivalent to 2,377,318 ordinary shares as at 8 December 2016, being the latest practicable date prior to publication of the Notice. Under the Listing Rules of the Financial Conduct Authority, this is the maximum percentage of its equity share capital that a company may purchase through the market pursuant to such authority.

Purchases of shares will be made within guidelines set from time to time by the Board and will only be made in the market at prices below the prevailing NAV and, in any event, not below a minimum price of 10 pence per share.

The authority for the Company to purchase its own ordinary shares will, by virtue of the Treasury Share Regulations 2003 and the Companies (Share Capital and Acquisition by a Company of its Own Shares) Regulations 2009, allow the Company to hold ordinary shares so purchased in treasury, as an alternative to immediate cancellation.

Any exercise by the Company of the authority to purchase shares will occur only when market conditions are appropriate. Purchases will be funded either by using available cash resources, debt or by selling investments.

This authority shall expire at the earlier of the conclusion of the AGM in 2018 or 23 July 2018, unless such authority has been renewed prior to such time.

The Board considers that all the resolutions to be put to the meeting are in the best interests of the Company and its shareholders as a whole. The Board unanimously recommends that you vote in favour of them.

Conflict of interest

Section 175 of the Companies Act 2006, which came in to effect on 1 October 2009, introduced a duty for directors to avoid unauthorised conflicts of interest. The Articles of Association approved by Resolution 2 at the General Meeting held on 15 January 2009 allows the Directors to authorise such conflicts and potential conflicts, where appropriate. The Board has expanded the terms of reference of the Audit Committee to review conflicts and potential conflicts and make recommendations to the Board as to whether any such conflicts should be authorised.

Companies Act 2006 Disclosures

In accordance with Section 992 of the Companies Act 2006 the Directors disclose the following information:

• the Company’s capital structure is summarised on page 49, voting rights are summarised on page 58, and there are no restrictions on voting rights nor any agreement between holders of securities that result in restrictions on the transfer of securities or on voting rights;

• there exist no securities carrying special rights with regard to the control of the Company;

• details of the substantial shareholders in the Company are listed on page 23;

• the Company does not have an employees’ share scheme;

• the rules concerning the appointment and replacement of Directors, amendment of the Articles of Association and powers to issue or buy back the Company’s shares are contained in the Articles of Association of the Company and the Companies Act 2006;

• there exist no agreements to which the Company is party to that may affect its control following a takeover bid; and

• there exist no agreements between the Company and its Directors providing for compensation for loss of office that may occur because of a takeover bid.

The Board recognises the requirement under Section 417(5) of the Act to detail information about environmental matters (including the impact of the Company’s business on the environment), any Company employees and social and community issues; including information about any policies it has in relation to these matters and effectiveness of these policies. As the Company has no employees or policies in these matters this requirement does not apply. Notwithstanding, the Alternative Investment Fund Manager takes into account these considerations when making investment decisions and determines its voting instructions at investee company meetings accordingly.

Auditor

The Company’s Auditor, KPMG LLP, has indicated its willingness to continue in office. Resolutions for the re-appointment of KPMG LLP and to authorise the Board to determine its remuneration will be proposed at the Annual General Meeting.

By order of the Board
M. J. Nokes F.C.A.
Secretary
9 December 2016

Statement of Corporate Governance

Introduction

The Board is accountable to the Company’s shareholders for the governance of the Company’s affairs and this statement describes how the principles of the 2014 UK Corporate Governance Code (“the Code”) issued by the Financial Reporting Council have been applied to the affairs of the Company. In applying the principles of the Code, the Directors have also taken account of the Code of Corporate Governance published by the Association of Investment Companies (“the AIC Code”), which has established a framework of best practice specifically for the boards of investment trust companies. There is some overlap in the principles laid down by the two Codes and there are some areas where the AIC Code is more appropriate for investment trust companies.

Applications of the Code’s principles

The Board is committed to high standards of corporate governance and seeks to observe the principles identified in the Code and in the AIC Code. It should be noted that, as an investment trust, most of the Company’s day-to-day responsibilities are delegated to third parties and the Directors are all non-executive. Thus not all the provisions of the Code are directly applicable to the Company.

The Board

The Board currently consists of five non-executive Directors, two of whom are female and the other three are male and is chaired by Steven Bates. The Chairman has served on the Board for over nine years and under the Code may not be considered to be independent of the Company and the Alternative Investment Fund Manager. The Board however, takes the view that independence is not necessarily compromised by length of tenure on the Board and experience can add significantly to the Board’s strength. It has therefore been determined that in performing the role as a Director, the Chairman remains wholly independent and all the Directors are considered by the Board to be independent of the Company and the Alternative Investment Fund Manager. Their biographies are set out on page 22. Collectively the Board has the requisite range of business and financial experience which enables it to provide clear and effective leadership and proper stewardship of the Company.

The number of meetings of the Board, the Audit Committee and the Nomination Committee held during the financial year and the attendance of individual Directors are shown below:

	Board	Audit Committee	Nomination Committee
Number of meetings in the year	5	2	1
Steven Bates	5	2	1
Jonathan Woollett	5	2	1
Ivo Coulson	5	2	1
Frances Daley	5	2	1
Nadya Wells	5	2	1
Saul Estrin (retired 13 January 2016)	2	1	n/a

All of the Directors attended the Annual General Meeting held in January 2016.

The Board deals with the Company’s affairs, including the consideration of overall strategy, the setting and monitoring of investment policy and the review of investment performance. The Alternative Investment Fund Manager takes decisions as to asset allocation and the purchase and sale of individual investments. The Board papers circulated before each meeting contain full information on the financial condition of the Company. Key representatives of the Alternative Investment Fund Manager attend most of the Board meetings, enabling Directors to probe further or seek clarification on matters of concern.

Matters specifically reserved for discussion by the full Board have been defined and a procedure adopted for the Directors to take independent professional advice if necessary at the Company’s expense.

The Chairman of the Company is a non-executive Director. A senior non-executive Director has not been identified as the Board is comprised entirely of non-executive Directors.

Performance evaluation/re-election of Directors

An appraisal process has been established in order to review the effectiveness of the Board, the Committees and individual Directors. This process involves the Chairman meeting with individual Directors to obtain their views on the performance of the Board and its Committees. In addition, the other Directors meet collectively once a year to evaluate the performance of the Chairman. The Board has also reviewed the Chairman’s and Directors’ other commitments and is satisfied that the Chairman and other Directors are capable of devoting sufficient time to the Company.

The performance of the Company is considered in detail at each Board meeting.

Board Committees

The Board believes that the interests of shareholders in an investment trust company are best served by limiting its size so that all Directors are able to participate fully in all the activities of the Board. It is for this reason that the membership of the Audit and Nomination Committees is the same as that of the Board as a whole. Functions normally carried out by a remuneration committee are dealt with by the whole Board, all Directors are non-executive. Matters which would fall under a management engagement committee are carried out by the Board as a whole.

Audit Committee

The Directors have appointed an Audit Committee consisting of the whole Board, and is chaired by Frances Daley. The Board’s view is that the members of the Committee, taken as a whole, have the necessary recent and relevant financial experience. The Audit Committee reviews audit matters within clearly-defined written terms of reference (copies of which are available upon request from the Company Secretary).

In particular, the Committee shall review and challenge where necessary:

• the consistency of, and any changes to, accounting policies both on a year on year basis and across the Company;

• the methods used to account for significant or unusual transactions where different approaches are possible;

• whether the Company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor;

• the clarity of disclosure in the Company’s financial reports and the context in which statements are made; and

• all material information presented with the financial statements, such as the Strategic Report and the Statement of Corporate Governance (insofar as it relates to the audit and risk management).

The main significant issue that the Committee has considered is around the completeness, valuation and existence of quoted investments at the year ended 30 September 2016. The Committee is satisfied that the investments at the year ended 30 September 2016 exist and are correctly valued at fair value (which is the bid market price for listed investments).

The Committee meets at least twice a year and is responsible for reviewing the annual and interim reports, the nature and scope of the external audit and the findings therefrom, and the terms of appointment of the Auditor, including its remuneration and the provision of any non-audit services. Non audit services provided by the Auditor mainly comprised work on the Company’s taxation affairs. The Committee has considered the independence of the Auditor and the objectivity of the audit process and is satisfied that KPMG LLP has fulfilled its obligations to shareholders. The Audit Committee will meet if required with the Auditor to review the proposed audit programme of work and the findings of the Auditor. The Committee shall also use this as an opportunity to assess the effectiveness of the audit process. KPMG LLP has been the Company’s Auditor for the last fourteen years and there has been no re-tendering of the Audit in that time. To comply with the provision in the Code the Company will review the option to re-tender the external audit on a regular basis.

The Audit Committee regularly reviews the terms of the different service providers to the Company including contracts with the Alternative Investment Fund Manager, the Company Secretary and the Depositary and Custodian. The Audit Committee meets representatives of the Alternative Investment Fund Manager and its Compliance Officer who provides reports on the proper conduct of business in accordance with the regulatory environment in which both the Company and the Alternative Investment Fund Manager operate. The Company’s external Auditor also attends this Committee at its request and report on its findings in relation to the Company’s statutory audit.

As the Company has no employees, section C.3.4 of the Code, which deals with arrangements for staff to raise concerns in confidence about possible improprieties in respect of financial reporting or other matters, is not directly relevant to it. The Audit Committee has however, confirmed with the Alternative Investment Fund Manager and the administrator that they do have “whistle blowing” policies in place for their staff.

The Chairman of the Audit Committee will be present at the AGM to deal with questions relating to the financial statements.

Nomination Committee

The Nomination Committee consists of the whole Board and is chaired by the Chairman. The Committee meets at least annually and terms of reference are in place which include reviewing the Board’s size, structure and diversity, succession planning and training. Possible new Directors are identified against the requirements of the Company’s business and the need to have a balanced Board. External search consultants may be used to ensure that a wide range of candidates can be considered.

A Director who has been appointed during the year is required under the provisions of the Company’s Articles of Association, to retire and seek election by shareholders at the next Annual General Meeting. The Articles also require a Director who has held office at the time of the two preceding Annual General Meetings and who did not retire at either to seek re-election. In addition, a Director who has held office with the Company, other than employment or executive office, for a continuous period of nine years or more at the date of the meeting, shall retire from office and may seek re-election by the members. Notwithstanding the provisions of the Articles of Association, the Board has adopted a policy that Directors will offer themselves for annual re-election except where they intend to retire at an Annual General Meeting.

The Committee recommended to the Board, with the relevant Directors absenting themselves from these discussions, the nominations for re-election of the Chairman, Mr Coulson, Mr Woollett, Frances Daley and Nadya Wells for the following reasons:

• The Chairman, who was appointed a Director in 2003, has significant experience in both emerging and developed markets and has continued to lead the Board well.

• Ivo Coulson, who was appointed a Director in 2010, has significant experience in the investment management industry and has been actively involved with the Boards’ shareholder relations.

• Jonathan Woollett, who was appointed a Director in 2008, has over 20 years experience in the Emerging European region with experience in both private equity and financial services.

• Frances Daley, who was appointed a Director on 29 April 2014, has significant financial and accounting experience.

• Nadya Wells, who was appointed a Director on 23 September 2015, has significant experience in the investment management industry and in the Emerging European region.

Remuneration

Functions normally carried out by a remuneration committee are dealt with by the whole Board, all Directors are non-executive. The Directors’ Remuneration policy and Directors’ fees are detailed in the Directors’ Remuneration report on page 35.

Risk management and internal control

The 2014 UK Corporate Governance Code requires the Directors, at least annually, to review the effectiveness of the Company’s system of risk management and internal control and to report to shareholders that they have done so. This encompasses a review of all controls, which the Board has identified as including business, financial, operational, compliance and risk management.

The Directors are responsible for the Company’s system of risk management and internal control which is designed to safeguard shareholders’ investment and the Company’s assets, maintain proper accounting records and ensure that financial information used within the business, or published, is reliable. However, such a system can only be designed to manage rather than eliminate the risk of failure to achieve business objectives and therefore can only provide reasonable, but not absolute, assurance against fraud, material misstatement or loss

The Board as a whole is primarily responsible for the monitoring and review of risks associated with investment matters and the Audit Committee is primarily responsible for other risks.

As the Board has contractually delegated to external parties the investment management, the depositary and custodial services and the day-to-day accounting and company secretarial requirements, the Company relies significantly upon the internal controls operated by those companies. Therefore the Directors have concluded that the Company should not establish its own internal audit function. The Board continues to monitor its system of internal control in order to ensure it operates as intended and the Directors review annually whether an internal audit function is required. Alternative investment fund management services are provided by BFM and details of the agreement with BFM are given in note 3 to the accounts. The Depositary and Custodian is State Street Bank & Trust Company Limited. Secretarial services are provided by Northern Trust Global Services Limited.

The risk map has been considered at all regular meetings of the Board and Audit Committee. As part of the risk review process, regular reports are received from the Alternative Investment Fund Manager on all investment matters including compliance with the investment mandate, the performance of the portfolio compared with the Benchmark Index and compliance with investment trust status requirements.

The Board also receives and reviews annual reports from the Alternative Investment Fund Manager and the Depositary and Custodian on their internal controls and their operation. These reports are designed to provide details of the internal control procedures operated by the relevant entity and include a report by an independent reporting accountant.

The Board confirms that appropriate procedures to review the effectiveness of the Company’s system of internal control have been in place which cover all controls including financial, operational and compliance controls and risk management. An assessment of internal control, which includes a review of the Company’s risk map, an assessment of the quality of reports on internal control from the service providers and the effectiveness of the Company’s reporting process, is carried out on an annual basis.

Accountability and audit

Set out on page 34 is a Statement by the Directors of their responsibilities in respect of the accounts.

As noted earlier, an Audit Committee has been established consisting of independent Directors.

The Board as a whole regularly reviews the terms of the management and secretarial contracts.

The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s Auditor is unaware; and each Director has taken all the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information.

The Directors were covered by directors’ and officers’ insurance that was in place during the financial year and at the date of this report.

As permitted by the Company’s Articles of Association, the Directors have the benefit of an indemnity which is a qualifying third party indemnity, as defined by Section 234 of the Companies Act 2006. The indemnities were executed on 20 April 2011 and are currently in force.

Relations with shareholders

The Board regularly reviews the Alternative Investment Fund Manager’s contacts with the Company’s shareholders and monitors its shareholder profile. The Board supplements this with some direct contact with shareholders and is available to speak with any shareholder who wishes to do so. The Board supports the principle that the Annual General Meeting be used to communicate with private investors. The full Board attends the Annual General Meeting and the Chairman of the Board chairs the meeting. Details of the proxy votes received in respect of each resolution are made available to shareholders at the meeting. The Alternative Investment Fund Manager attends to give a presentation to the meeting. A quarterly newsletter is produced by the Alternative Investment Fund Manager and is available to shareholders.

If a shareholder would like to contact the Board directly, he or she should write to the Chairman at 155 Bishopsgate, London EC2M 3XY and mark their letter private and confidential.

Corporate Governance and Voting Policy

The Company delegates responsibility for voting to its Alternative Investment Fund Manager, Baring Fund Managers Limited (“BFM”). BFM have in turn delegated this responsibility to Baring Asset Management Limited (“BAM”). The following is a summary of Barings statement on corporate governance and voting policy which has been noted by the Board. The full policy is available from the Barings website (www.barings.com) and is contained within the paper titled “Corporate engagement at Barings” dated June 2015.

“Barings is charged to secure a satisfactory rate of return on capital entrusted to it by its clients. We do this by providing companies with their risk capital, buying stocks and shares which we believe will outperform the broader market and deliver these returns to our clients.

We assess these companies and decide which to invest in through a process of fundamental research. As long-term investors, corporate engagement is at the heart of what we do. It is particularly relevant for equity investing, where we will develop and maintain a purposeful dialogue on strategy, performance and the management of risk, but it is also an integral part of the investment process for sub-investment grade (or “high yield”) credit.

In our assessment of the risk factors, before making an investment in these classes we will take in to account the corporate governance structure of the company; judging whether the structure could inhibit the delivery of good returns and whether the interests of the management are aligned with those of the investors in the company.

We make use of an external agency, Institutional Shareholder Services (ISS) Voting Services to assist on our voting procedures. ISS gives recommendations which we assess and then we vote in accordance with what we believe to be in the best interests of our clients.”

Evaluation of performance of Alternative Investment Fund Manager

Investment performance is reviewed at each regular Board meeting at which representatives of the Alternative Investment Fund Manager are required to provide answers to any questions raised by the Board. The Board conducts an annual formal review of the Alternative Investment Fund Manager which includes consideration of:

• performance compared with Benchmark Index and peer group;

• investment resources dedicated to the Company;

• investment management fee arrangements and notice period compared with the peer group; and

• marketing effort and resources provided to the Company.

The Board believes that Baring Fund Managers Limited has served the Company well both in terms of investment portfolio management and general support and confirms the continuation of its appointment.

Statement of compliance

The Board considers that it has complied with all the material provisions set out in Section 1 of the Code throughout the year. It did not, however, comply with the following provisions as explained above:

• a senior non-executive Director has not been identified;

• the Chairman is a member of the Audit Committee; and

• there is no internal audit function.

By order of the Board

M. J. Nokes F.C.A.
Secretary
9 December 2016

Audit Committee report

The composition and summary terms of reference of the Audit Committee are set out on pages 28 and 29.

The Audit Committee met in April 2016 and considered the form and content of the Company’s half year report to 31 March 2016 which was published on 4 May 2016. The Committee also reviewed the key risks of the Company and the Internal control framework operating to control risk. The Committee also reviewed the terms of engagement of the audit firm and its proposed programme for the year end audit. The Committee met again in November 2016 and reviewed the outcome of the audit work and the final draft of the financial statements for the year ended 30 September 2016. During this review the Audit Committee met with representatives of both the Alternative Investment Fund Manager and the Administrator and sought assurances where necessary.

Significant accounting matters

The Audit Committee in its work consider that the key accounting issue in relation to the financial statements is the valuation and existence of quoted investments.

Valuation and existence of quoted investments

As part of the day to day controls of the Company there are regular reconciliations between the accounting records and the records kept by the custodian of the assets they safeguard which are owned by the Company. During the year and at the year end there were no matters brought to light which call in to question that the key controls in this area were not working, or that the existence of assets recorded in the books of account are not held in safe custody.

As more fully explained in note 1 (b) on page 43 at the year ended 30 September 2016 the Committee agreed that the fair value of quoted investments is the bid market price.

The external Auditor attended the year end Audit Committee meeting on 17 November 2016 and presented a report on the audit findings which did not include any significant issues in relation to the financial statements. During that meeting the Audit Committee satisfied itself that the Auditor was independent and also concluded to keep under review putting the audit out to tender. KPMG LLP have been the Auditor since the launch of the Company in 2002 and during that time the audit has not been put out to tender.

Contracts for non-audit services must be notified to the Audit committee who consider any such engagement in the light of the requirement to maintain audit independence. The Committee believe that all such appointments for non-audit work were appropriate and unlikely to influence the audit independence.

During the year the value of non-audit services provided by KPMG LLP amounted to £7,250 (30 September 2015: £24,000). Whilst non-audit services as a proportion of audit services amount to approximately 23%, the overall quantum of non-audit services is not considered to be material and a significant proportion of the non-audit services provided relate to the following matters:

• the provision of tax compliance work £7,250 (30 September 2015: £7,250);

• the provision of withholding tax recovery work in Russia £nil (30 September 2015: £13,000); and

• the provision of withholding tax recovery work in Poland £nil (30 September 2015: £4,000).

In finalising the financial statements for recommendation to the Board for approval the Committee has considered whether the going concern principle is appropriate, and concluded that it is. The Audit Committee has also satisfied itself that the Annual Report and financial statements taken as a whole are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.

Frances Daley

Chairman of the Audit Committee

9 December 2016

Statement of Directors’ responsibilities in respect of the Annual Report and the financial statements

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors’ report, Directors’ Remuneration report and Corporate Governance statement that comply with that law and those regulations.

The financial statements are published on the www.bee-plc.com website, which is maintained by Baring Asset Management Limited. The maintenance and integrity of the website maintained by Baring Asset Management Limited is, so far as it relates to the Company, the responsibility of Baring Asset Management Limited. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual report

We confirm to the best of our knowledge that:

a) the financial information has been prepared in accordance with applicable UK accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

b) the Annual Report and financial statements, to be published shortly, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face; and

c) the Annual Report and financial statements, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.

For and on behalf of the Board

Steven Bates
Chairman
9 December 2016

Directors’ Remuneration report
for the year ended 30 September 2016

This report is presented in accordance with Section 421 of the Companies Act 2006. As the Board of Directors is comprised solely of non-executive Directors, it is exempt under the Listing Rules from appointing a Remuneration Committee. The determination of the level of fees paid to Directors, which are reviewed on a periodic basis, is dealt with by the whole Board.

The Directors’ and their families’ interests in the Company’s shares are stated below (non-audited):

Beneficial	8 December 2016	30 September 2016	30 September 2015
Steven Bates	3,000	3,000	3,000
Jonathan Woollett	3,000	3,000	3,000
Ivo Coulson	2,000	2,000	2,000
Frances Daley	3,000	3,000	3,000
Nadya Wells	–	–	–

Directors’ remuneration policy (Resolution 2)

The Company’s Articles of Association limit the aggregate fees payable to the Board of Directors. Subject to this overall limit, currently £175,000, it is the Company’s policy to determine the level of Directors’ fees having regard to fees payable to non-executive Directors in the industry generally, the role that individual Directors fulfil, and the time committed to the Company’s affairs.

No Director has a service contract with the Company. A Director may be removed without notice and compensation will not be due on leaving office.

The Company does not provide pension benefits, rights to any bonuses, share options or long-term incentive schemes for Directors.

Directors’ emoluments for the year (audited)

The Directors who served during the year received the following emoluments in the form of fees:

	2016	2015
	£000	£000
Steven Bates	33.0	33.0
Jonathan Woollett	25.0	25.0
Ivo Coulson	25.0	25.0
Frances Daley	27.5	26.8
Nadya Wells	25.0	0.6
Saul Estrin (retired 13 January 2016)	7.0	25.0
Josephine Dixon	–	8.0
Total	142.5	143.4

During the year ended 30 September 2016 the Chairman received a fee of £33,000 per annum, the Chairman of the Audit Committee received a fee of £27,500 per annum and other Directors £25,000 per annum.

Share price performance (not audited)

The following graph compares the share price and net asset value performance against the Benchmark Index†:

[GRAPHIC REMOVED]

Relative importance of spend on pay (audited)

The following table compares the remuneration paid to the Directors with aggregate distributions to shareholders in the year to 30 September 2016 and the prior year. This disclosure is a statutory requirement, however, the Directors consider that comparison of Directors’ remuneration with annual dividends does not provide a meaningful measure relative to the Company’s overall performance as an investment trust with an objective of providing shareholders with long-term capital growth.

	Year ended 30 September 2016 £000	Year ended 30 September 2015 £000	Change £000
Aggregate Directors’ emoluments plus expenses	143	143	–
Aggregate shareholder distributions in respect of the year	3,769	4,083	(314)

Statement of voting at the Annual General Meeting

At the Annual General Meeting of the Company held on 14 January 2014 a binding resolution was put to shareholders to approve the Directors’ Remuneration policy set out in the 2013 annual financial report. This resolution was passed on a show of hands. The proxy votes registered in respect of the binding resolution were:

	For	Against	Withheld
Number of proxy votes	9,570,895	68,943	5,334

Voting at last Annual General Meeting

At the Annual General Meeting of the Company held on 13 January 2016 an advisory resolution was put to shareholders to approve the Directors’ Remuneration report, set out in the 2015 annual financial report. This resolution was passed on a show of hands. The proxy votes registered in respect of the advisory resolution were:

	For	Against	Withheld
Number of proxy votes	8,264,755	80,016	5,308

Approval

Resolutions for the approval of the Directors’ Remuneration Policy and the Directors’ Remuneration report for the year ended 30September 2016 will be proposed at the Annual General Meeting.

By order of the Board

M. J. Nokes F.C.A.
Secretary
9 December 2016

Independent Auditor’s report

to the members of Baring Emerging Europe PLC only

Opinions and conclusions arising from our audit

1 Our opinion on the financial statements is unmodified

We have audited the financial statements of Baring Emerging Europe plc for the year ended 30 September 2016 set out on pages 40 to 55. In our opinion the financial statements:

• give a true and fair view of the state of the Company’s affairs as at 30 September 2016 and of its profit for the year then ended;

• have been properly prepared in accordance with UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

2 Our assessment of risks of material misstatement

In arriving at our audit opinion above on the financial statements the risk of material misstatement that had the greatest effect on our audit was as follows:

Carrying amount of quoted investments £124.5m (2015: £103.7m). Risk vs 2015: 73

Refer to page 33 (Audit Committee Report), page 43 (accounting policy) and pages 47 to 55 (financial disclosures).

The risk:

The Company’s portfolio of quoted investments makes up 95.8% of the Company’s Total Assets (by value) and is the key driver of performance results. We do not consider these investments to be at high risk of material misstatement, or to be subject to a significant level of judgment because they comprise largely liquid and quoted investments. However, due to their materiality in the context of the financial statements as a whole, they are considered to be the area which had the greatest effect on our overall audit strategy and allocation of resources in planning and completing our audit.

Our response:

Our procedures over the completeness, valuation and existence of the Company’s quoted investment portfolio included; but not limited to:

• documenting and assessing the processes in place to record investment transactions and to value the portfolio;

• agreeing the valuation of 100% of investments in the portfolio to externally quoted prices; and

• agreeing 100% of investment holdings in the portfolio to independently received third party confirmations.

3 Our application of materiality and an overview of the scope of our audit

The materiality for the financial statements as a whole was set at £1.12m (2015: £1.07m), determined with reference to a benchmark of Total Assets, of £112.0m (2015: £106.6m), of which it represents 1% reflecting industry consensus levels (2015: 1%).

We report to the Audit Committee any corrected and uncorrected identified misstatements exceeding £56,000, in addition to other identified misstatements that warranted reporting on qualitative grounds.

Our audit of the Company was undertaken to the materiality level specified above and was all performed at the administrator’s head office in London.

4 Our opinion on other matters prescribed by the Companies Act 2006 is unmodified

In our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the information given in the Corporate Governance Statement set out on page 30 with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.

5 We have nothing to report on the disclosures of principal risks

Based on the knowledge we acquired during our audit, we have nothing material to add or draw attention to in relation to:

• the Directors’ Statement of Viability on page 19, concerning the principal risks, their management, and, based on that, the Directors’ assessment and expectations of the Company’s continuing in operation over the 3 years to December 2019; or

• the disclosures in note 1 of the financial statements concerning the use of the going concern basis of accounting.

6 We have nothing to report in respect of the matters on which we are required to report by exception

Under ISAs (UK and Ireland) we are required to report to you if, based on the knowledge we acquired during our audit, we have identified other information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading.

In particular, we are required to report to you if:

• we have identified material inconsistencies between the knowledge we acquired during our audit and the Directors’ Statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy; or

• the Audit Committee Report does not appropriately address matters communicated by us to the audit committee.

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit; or

• a Corporate Governance Statement has not been prepared by the Company.

Under the Listing Rules we are required to review:

• the Directors’ Statement, set out on pages 23 and 19, in relation to going concern and longer term viability; and

• the part of the Corporate Governance Statement on pages 27 to 32 relating to the Company’s compliance with the eleven provisions of the 2014 UK Corporate Governance Code specified for our review.

We have nothing to report in respect of the above responsibilities.

Scope and responsibilities

As explained more fully in the Directors’ Responsibilities Statement set out on page 34, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate. This report is made solely to the Company’s members as a body and is subject to important explanations and disclaimers regarding our responsibilities, published on our website at www.kpmg.com/uk/auditscopeukco2014a, which are incorporated into this report as if set out in full and should be read to provide an understanding of the purpose of this report, the work we have undertaken and the basis of our opinions.

Ravi Lamba (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
9 December 2016

Income statement
(incorporating the Revenue Account*) for the year ended 30 September 2016

		Year ended 30 September 2016	Year ended 30 September 2016	Year ended 30 September 2016	Year ended 30 September 2015	Year ended 30 September 2015	Year ended 30 September 2015
		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	14	–	31,822	31,822	–	(30,590)	(30,590)
Income	2	5,363	–	5,363	5,569	–	5,569
Investment management fee	3	(402)	(465)	(867)	(434)	(434)	(868)
Other expenses	4	(711)	–	(711)	(806)	–	(806)
Return on ordinary activities		4,250	31,357	35,607	4,329	(31,024)	(26,695)
Finance costs	5	(96)	(96)	(192)	(54)	(40)	(94)
Return on ordinary activities before taxation		4,154	31,261	35,415	4,275	(31,064)	(26,789)
Taxation	6	(531)	–	(531)	(218)	–	(218)
Return for the year		3,623	31,261	34,884	4,057	(31,064)	(27,007)
Return per ordinary share	8	21.39p	184.53p	205.92p	22.05p	(168.86)p	(146.81)p

*The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

The annexed notes on pages 43 to 55 form part of these accounts.

The supplementary revenue and capital columns are both prepared under the guidance published by the Association of Investment Companies.

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

Statement of financial position
as at 30 September 2016

		2016	2015
	Notes	£000	£000
Fixed assets
Investments at fair value through profit or loss	9	124,527	103,676
Current assets
Debtors	10	3,473	890
Cash and cash equivalents		1,934	2,080
		5,407	2,970
Current liabilities
Creditors: amounts falling due within one year	11	(11,484)	(11,698)
Net current liabilities		(6,077)	(8,728)
Net assets		118,450	94,948
Capital and reserves
Called-up share capital	12	1,971	2,107
Share premium account		1,411	1,411
Redemption reserve		2,817	2,681
Capital reserve		104,459	80,672
Revenue reserve		7,792	8,077
Total Shareholders’ funds		118,450	94,948
Net asset value per share	13	722.82p	534.87p

The financial statements on pages 40 to 55 were approved by the Board on 9 December 2016 and signed on its behalf by:

Steven Bates
Chairman

The annexed notes on pages 43 to 55 form part of these accounts.

Company registration number 4560726

Statement of changes in equity
for the year ended 30 September 2016

	Called-up	Share
	share	premium	Redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£000	£000	£000	£000	£000	£000
For the year ended 30 September 2016
Beginning of year	2,107	1,411	2,681	80,672	8,077	94,948
Return for the year	–	–	–	31,261	3,623	34,884
Buyback of own shares for cancellation	–	–	–	(7,474)	–	(7,474)
Transfer to capital redemption reserve	(136)	–	136	–	–	–
Dividends paid	–	–	–	–	(3,908)	(3,908)
Balance at 30 September 2016	1,971	1,411	2,817	104,459	7,792	118,450

	Called-up	Share
	share	premium	Redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£000	£000	£000	£000	£000	£000
For the year ended 30 September 2015
Beginning of year	2,222	1,411	2,566	117,796	7,561	131,556
Return for the year	–	–	–	(31,064)	4,057	(27,007)
Buyback of own shares for cancellation	–	–	–	(6,060)	–	(6,060)
Transfer to capital redemption reserve	(115)	–	115	–	–	–
Dividends paid	–	–	–	–	(3,541)	(3,541)
Balance at 30 September 2015	2,107	1,411	2,681	80,672	8,077	94,948

The annexed notes on pages 43 to 55 form part of these accounts.

Distributable reserves comprise: the revenue reserve and capital reserves attributable to realised profits.

All investments are held at fair value through profit or loss. When the Company revalues the investments still held during the period, any gains or losses arising are credited/charged to the capital reserve.

Notes to the accounts

1.    Accounting policies

A summary of the principal policies, all of which have been applied consistently throughout the year, is set out below:

(a) Basis of accounting

The financial statements have been prepared in accordance with the applicable UK Accounting Standards, being FRS102 – The Financial Reporting Standard – and with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (issued in November 2014).

Previously, the financial statements were prepared in accordance with UK Generally Accepted Accounting Practice (“UK GAAP”). The transition to FRS did not result in any significant changes to the accounting policies.

The financial information for the year ended 30 September 2015 included in this report, has been taken from the Company’s full accounts, as restated to comply with FRS from the transition date 1 October 2015. Restatement of opening balances relating to equity values, assets and liabilities and profits and losses of the Company between UK GAAP as previously reported and under FRS as restated have not been presented as there have been no required changes to the reported amounts. Therefore restatement tables have not been prepared for any of the primary statements.

They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis.

(b) Valuation of investments

Upon initial recognition the investments are designated by the Company as “at fair value through profit or loss”. They are included initially at fair value which is taken to be their cost, including expenses incidental to purchase. Subsequently the investments are valued at fair value which is bid market price for listed investments. Unquoted investments are included at a valuation determined by the Directors after discussion with the Alternative Investment Fund Manager on the basis of the latest accounting and other relevant information.

Changes in the fair value of investments held at fair value through profit or loss and gains or losses on disposal are included in the capital column of the income statement within “Gains/(losses) from investments held at fair value through profit or loss”. All purchases and sales are accounted for on a trade date basis.

Year-end exchange rates are used to translate the value of investments which are denominated in foreign currencies.

(c) Foreign currency

Transactions denominated in foreign currencies are translated into sterling at actual exchange rates as at the date of the transaction or, where appropriate, at the rate of exchange in a related forward exchange contract. Monetary assets and liabilities denominated in foreign currencies at the year-end are reported at the rates of exchange prevailing at the year-end or, where appropriate, at the rate of exchange in a related forward exchange contract. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in capital reserve. Foreign exchange movements on fixed asset investments are included in the Income Statement within gains on investments held at fair value through profit or loss.

(d) Income

Investment income, which includes related taxation, has been accounted for on an ex-dividend basis or when the Company’s right to the income is established.

Interest receivable on deposits is accounted for on an accruals basis.

(e) Expenses

All expenses are accounted for on an accruals basis and are charged as follows:

• the basic investment management fee is charged 50% to revenue and 50% to capital;

• any investment performance bonus payable to Baring Fund Managers Limited is charged wholly to capital;

• dealing costs are charged wholly to capital; and

• other expenses are charged wholly to revenue.

(f) Interest payable

Interest payable is accounted for on an accruals basis, and is charged 50% to revenue and 50% to capital.

(g) Capital reserve

Gains or losses on disposal of investments and changes in fair values of investments are transferred to the capital reserve. Any investment performance fee payable to Baring Fund Managers Limited is accounted for in the capital reserve.

(h) Special reserve

Pursuant to a special resolution passed on 8 November 2002, the Company’s application to reduce its share premium account was approved by the High Court and registered with the Registrar of Companies on 18 December 2002. The amount of the reduction was £86,624,982, representing the share premium arising on the issue of shares by the Company on 17 December 2002. This amount was transferred to a special reserve which has been utilised for the repurchase by the Company of its own shares.

(i) Taxation

The charge for taxation is based upon the net revenue for the year. The tax charge is allocated to the revenue and capital accounts according to the marginal basis whereby revenue expenses are first matched against taxable income arising in the revenue account; the effect of this for the year ended 30 September 2016 was that all the deductions for tax purposes went to the revenue account.

Deferred taxation will be recognised as an asset or a liability if transactions have occurred at the balance sheet date that give rise to an obligation to pay more taxation in the future, or a right to pay less taxation in the future. An asset will not be recognised to the extent that the transfer of economic benefit is uncertain.

2. Income

	2016	2015
	£000	£000
Income from investments
Overseas dividends – Quoted	5,363	5,427
Interest received*	–	142
	5,363	5,569

*Interest on withholding tax recovered from the Polish tax authorities.

3.    Investment management fee

Baring Fund Managers Limited (“BFM”) acts as the Alternative Investment Fund Manager (“AIFM”) of the Company under an agreement terminable by either party giving not less than six months’ written notice. Under this agreement BFM receives a basic fee (charged 50% to revenue and 50% to capital) which is calculated monthly and payable at an annual rate of 0.8% of the net asset value of the Company.

In addition under the agreement BFM is entitled to a performance fee (charged to capital) which is payable at the rate of 10% of the amount by which the change in the Company’s net asset value per share (on a total return basis) exceeds the Benchmark Index and any previous underperformance must be recovered before any fee is payable. The performance fee is capped at 0.6% of the net asset value of the Company on the first day of the performance period. The final performance fee was calculated on 31 March 2016. The whole of the performance fee is charged to the capital account as it is deemed to have arisen entirely as a result of the capital performance of the Company. A performance fee of £63,000 was paid for the year ended 30 September 2016 (30 September 2015: £nil). From 1 April 2016 the performance fee has been discontinued.

The investment management fee comprises:

	2016	2015
	£000	£000
Basic fee (50% charged to revenue)	402	434
Basic fee (50% charged to capital)	402	434
Performance fee (100% charged to capital)	63	–
	867	868

At 30 September 2016, £78,000 (30 September 2015: £130,000) of this fee remained outstanding.

4. Other expenses

	2016	2015
	£000	£000
Custody and administration expenses	531	609
Auditor’s remuneration for:
– audit	30	30
– other services*	7	24
Directors’ fees	143	143
	711	806

*KPMG LLP other services are £7,250 for corporation tax compliance work (2015: £13,000 for withholding tax recovery work in Russia, £4,000 for withholding tax recovery work in Poland and £7,250 for corporation tax compliance work).

5. Finance costs

	2016	2015
	£000	£000
On short-term loan and gearing facility with State Street Bank & Trust Company repayable within 5 years, not by installments
Bank committment fee (100% charged to revenue)	–	14
Bank loan interest (50% charged to revenue)	96	40
Bank loan interest (50% charged to capital)	96	40
	192	94

6. Taxation

(a) Current tax charge for the year:

	2016	2016	2016	2015	2015	2015
	Revenue	Capital	Total	Revenue	Capital	Total
	£000	£000	£000	£000	£000	£000
Overseas taxation* (note 6(b))	531	–	531	218	–	218

*For 2015 overseas taxation is shown net of £224,000 which was recovered from the Polish tax authorities and of £20,000 which was recovered from the Russian tax authorities.

(b) Factors affecting the current tax charge for the year

The taxation rate assessed for the year is different from the standard rate of corporation taxation in the UK. The differences are explained below:

	2016	2016	2016	2015	2015	2015
	Revenue	Capital	Total	Revenue	Capital	Total
	£000	£000	£000	£000	£000	£000
Return on ordinary activities before taxation	4,154	31,261	35,415	4,275	(31,064)	(26,789)
Return on ordinary activities multiplied by the standard rate of corporation tax of 20.0% (2015: 20.5%)	831	6,252	7,083	876	(6,368)	(5,492)
Effects of:
Non taxable overseas dividends	(1,068)	–	(1,068)	(1,113)	–	(1,113)
Non taxable UK dividends	(5)	–	(5)	–	–	–
Overseas withholding tax	531	–	531	218	–	218
Capital gains not deductible for tax	–	(6,364)	(6,364)	–	6,271	6,271
Loan relationship deficit not utilised	19	19	38	–	8	8
Management expenses not utilised	223	93	316	237	89	326
Current tax charge for the year	531	–	531	218	–	218

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

The Company has an unrecognised deferred tax asset of £1,570,000 (2015: £1,491,000) based on the long term prospective corporation tax rate of 17% (2015: 20.0%). This asset has accumulated because deductible expenses have exceeded taxable income in past years. No asset has been recognised in the accounts because, given the composition of the Company’s portfolio, it is not likely that this asset will be utilised in the foreseeable future.

7. Dividend

	2016	2016	2015	2015
	Pence per share	£000	Pence per share	£000
Annual dividend per ordinary share	23.00p	3,769	23.00p	4,083

8. Return per ordinary share

			Total			Total
	Revenue	Capital	2016	Revenue	Capital	2015
Return per ordinary share	21.39p	184.53p	205.92p	22.05p	(168.86)p	(146.81)p

Revenue return (earnings) per ordinary share is based on the net revenue on ordinary activities after taxation of £3,623,000 (2015: £4,057,000).

Capital return per ordinary share is based on net capital profit for the financial year of £31,261,000 (2015: net capital losses of £(31,064,000).

These calculations are based on the weighted average of 16,940,616 (2015: 18,395,544) ordinary shares in issue during the year.

At 30 September 2016 there were 16,387,212 ordinary shares of 10 pence each in issue (2015: 17,751,724) which excludes 3,318,207 ordinary shares held in treasury (2015: 3,318,207 shares held in treasury). The shares held in treasury are treated as not being in issue when calculating the weighted average of ordinary shares in issue during the year.

9. (i) Fixed asset investments

	Quoted	Total	Quoted	Total
	overseas	2016	overseas	2015
Primary country of investment	£000	£000	£000	£000
Georgia	–	–	1,379	1,379
Austria	1,882	1,882	–	–
Czech Republic	4,071	4,071	–	–
Poland	17,057	17,057	19,407	19,407
Russia	69,478	69,478	54,978	54,978
Turkey	21,888	21,888	23,747	23,747
Greece	1,987	1,987	–	–
Other	8,164	8,164	4,165	4,165
Total	124,527	124,527	103,676	103,676

9. (ii) Movements in the year

	Quoted	Total	Quoted		Total
	overseas	2016	overseas	Unquoted	2015
	£000	£000	£000	£000	£000
Book cost at beginning of year	134,026	134,026	143,748	26	143,774
Losses on investments held at beginning of year	(30,350)	(30,350)	(13,048)	(26)	(13,074)
Valuation at beginning of year	103,676	103,676	130,700	–	130,700
Movements in year:
Purchases at cost	50,748	50,748	106,921	–	106,921
Sales proceeds	(62,781)	(62,781)	(103,650)	–	(103,650)
Losses on investments sold in year	(4,062)	(4,062)	(13,019)	–	(13,019)
Gains/(losses) on investments held at year end	36,946	36,946	(17,276)	–	(17,276)
Valuation at end of year	124,527	124,527	103,676	–	103,676

Expenses incidental to the purchase or sale of investments are included within the purchase cost or deducted from sales proceeds. Transaction costs on purchases for the year ended 30 September 2016 amounted to £72,000 (2015: £169,000) and on sales for the year they amounted to £100,000 (2015: £143,000).

A list of the Company’s investments by market value is shown on pages 14 and 15, and a geographical classification and industrial classification of the investment portfolio are shown on pages 12 and 16.

10. Debtors

	2016	2015
	£000	£000
Amounts due within one year
Amounts due from brokers	2,663	85
Prepayments and accrued income	775	771
Other debtors	35	34
	3,473	890

11. Creditors

	2016	2015
	£000	£000
Amounts falling due within one year
Bank loans	10,008	11,223
Amounts outstanding to brokers due to the buyback of own shares	1,167	121
Other creditors	309	354
	11,484	11,698

The Company has a US$17 million loan facility with State Street Bank and Trust Company. Under this facility, the Company may draw up to a maximum principal amount of US$17 million in varying proportions and for varying periods at prevailing interest rates. The amount outstanding in relation to this facility at 30 September 2016 was US$13 million (at 30 September 2015: US$17 million), which is repayable on 31 December 2016, interest is charged at the rate of LIBOR plus 1.25%.

12. Called-up share capital

	2016	2015
	£000	£000
Allotted, issued and fully paid up
19,705,419 (2015: 21,069,931) ordinary shares of 10 pence (fully paid)	1,971	2,107

During the year 1,364,512 ordinary shares were repurchased for cancellation for £7,474,000 (2015: 1,152,319 ordinary shares were repurchased for cancellation for £6,060,000). During the year no ordinary shares were repurchased to be held in treasury and no ordinary shares which were held in treasury were cancelled. The Company holds 3,318,207 ordinary shares in treasury which are treated as not being in issue when calculating the number of ordinary shares in issue during the year (2015: 3,318,207 ordinary shares were held in treasury). Shares held in treasury are non-voting and not eligible for receipt of dividends. Subsequent to the year end a further 527,848 shares have been repurchased for cancellation.

13. Net asset value per share

Total shareholders’ funds and the net asset value per share attributable to the ordinary shareholders at the year-end calculated in accordance with the Articles of Association were as follows:

	2016	2015
Total shareholders’ funds (£000)	118,450	94,948
Net asset value (pence per share)	722.82p	534.87p

The net asset value per share is based on total shareholders’ funds above, and on 16,387,212 ordinary shares in issue at the year end (2015: 17,751,724 ordinary shares in issue) which excludes 3,318,207 ordinary shares held in treasury (2015: 3,318,207 ordinary shares held in treasury). The ordinary shares held in treasury are treated as not being in issue when calculating the net asset value per share.

14. Capital reserve

	Capital reserve
	Gains/(losses)	Investment holdings
	on sale of investments	gains/(losses)	Total
	£000	£000	£000
At 1 October 2015	111,023	(30,351)	80,672
Net losses on disposal of investments	(4,062)	–	(4,062)
Repurchase of share costs	(7,474)	–	(7,474)
Net movement in unrealised appreciation of investments	–	36,975	36,975
Losses on foreign exchange	–	(1,091)	(1,091)
Management fees charged to capital	(402)	–	(402)
Performance fees charged to capital	(63)	–	(63)
Finance charges charged to capital	(96)	–	(96)
At 30 September 2016	98,926	5,533	104,459

15.   Financial commitments

At 30 September 2016, there were no outstanding capital commitments (2015: £nil).

16. Custodian’s lien

Under the terms of the Depositary and Custody Agreement with State Street Bank & Trust Company (“State Street”), the Company has granted a lien over its securities and other assets that are deposited with State Street to cover all sums due in connection with the loan facility and the Depositary and Custody Agreement.

17. Related party disclosures and transactions with the Alternative Investment Fund Manager

The Company is required to provide additional information concerning its relationship with the Alternative Investment Fund Manager, BFM, and details of the investment management fee charged by Baring Fund Managers Limited are set out in note 3. The ultimate holding company of BFM is Massachusetts Mutual Life Insurance Company. Fees paid to the Directors and full details of Directors’ interests are disclosed in the Directors’ Remuneration report on page 35.

18. Risk management policies and procedures

As an investment trust the Company invests in equities and other investments for the long-term so as to secure its investment objective stated on page 3. In pursuing its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company’s net assets or a reduction of the profits available for dividends.

These risks, include market risk (comprising currency risk, interest rate risk, and other price risk), liquidity risk, and credit risk, and the Directors’ approach to the management of them are set out below.

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

(a) Market risk

Special considerations and risk factors associated with the Company’s investments are discussed on page 6. The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements – currency risk (see (b) below), interest rate risk (see (c) below) and other price risk (see (d) below). The Board of Directors reviews and agrees policies for managing these risks, which have remained substantially unchanged from those applying in the year ended 30 September 2015. The Company’s Alternative Investment Fund Manager assesses the exposure to market risk when making each investment decision, and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis.

(b) Currency risk

Most of the Company’s assets, liabilities, and income, are denominated in currencies other than sterling (the Company’s functional currency, and in which it reports its results). As a result, movements in the rate of exchange between sterling and the currencies of the countries in which the Company invests, which are identified in the table shown in note 9, may affect the sterling value of those items. In addition the Company’s uninvested cash balances are usually held in US dollars.

Management of the risk

The Alternative Investment Fund Manager monitors the Company’s exposure and reports to the Board on a regular basis.

Income denominated in foreign currencies is converted to sterling on receipt. The Company does not use financial instruments to mitigate the currency exposure in the period between the time that income is included in the financial statements and its receipt.

Foreign currency exposures

At 30 September 2016 monetary assets included cash balances totalling £1,934,000 (2015: £2,080,000) that were held in US dollars.

At 30 September 2016 monetary liabilities included a bank loan totalling £10,008,000 (2015: £11,223,000) that was due in US dollars.

At 30 September 2016 and at 30 September 2015 all of the equity investments were priced in a foreign currency.

Foreign currency sensitivity

The following table illustrates the sensitivity of the revenue return for the year in regard to the Company’s monetary financial assets to changes in the exchange rates for the various currencies to which the Company is exposed.

If sterling had weakened by an average of 10%, this would have had the following effect:

	2016	2015
	£000	£000
Income statement – profit after taxation:
Revenue return – increase	382	419
Capital return – increase	12,453	10,368
Total	12,835	10,787

If sterling had strengthened by an average of 10%, this would have had the following effect:

	2016	2016
	£000	£000
Income statement – profit after taxation:
Revenue return – decrease	(382)	(419)
Capital return – decrease	(12,453)	(10,368)
Total	(12,835)	(10,787)

Impact on capital return is disclosed in note 18 (d).

(c) Interest rate risk

Interest rate movements may affect the level of income receivable on cash deposits.

Cash at bank at 30 September 2016 (and 30 September 2015) was held at floating interesting rates, linked to current short-term market rates.

Interest rate movements may affect the interest payable on the Company’s variable rate borrowings.

Management of the risk

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when borrowing under the bank loan facility.

Interest rate exposure

The exposure at 30 September 2016 of financial assets and financial liabilities to floating interest rates is shown below:

	2016	2015
	Total	Total
	(within one year)	(within one year)
	£000	£000
Exposure to floating interest rates:
Cash at bank	1,934	2,080
Creditors:
Borrowings under bank loan facility	(10,008)	(11,223)
	(8,074)	(9,143)

Interest rate sensitivity

The Company is primarily exposed to interest rate risk through its bank loan facility.

Due to the insignificant impact of fluctuations in interest rates no sensitivity analysis is shown.

(d) Other price risk

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

Management of the risk

The Board of Directors believe that as the Company’s investment objective is to provide exposure to Emerging European Securities its neutral position in respect of this risk is full exposure to the market as represented by its Benchmark Index. The Alternative Investment Fund Manager has been given discretion around the Benchmark Index to enable it to add value. The amount by which the portfolio diverges from the Benchmark Index is closely monitored by the Board with the goal of ensuring that the risk taken is proportionate to the value added.

Concentration of exposure to other price risk

An analysis of the Company weighting versus Benchmark Index and a sector breakdown and geographical allocation of the portfolio is contained in the Alternative Investment Fund Manager’s report on pages 12 and16.

Other price risk sensitivity

The following table illustrates the sensitivity of the profit after taxation for the year and the equity to an increase or decrease of 10% in the fair values of the Company’s equities. This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the Company’s equities at each balance sheet date, with all other variables held constant.

	Increase in	Decrease in	Increase in	Decrease in
	fair value	fair value	fair value	fair value
	2016	2016	2015	2015
	£000	£000	£000	£000
Income statement – profit after taxation:
Capital return – increase/(decrease)	12,453	(12,453)	10,368	(10,368)
Total profit after taxation other than arising from interest rate or currency risk – increase/(decrease)	12,453	(12,453)	10,368	(10,368)
Equity	12,453	(12,453)	10,368	(10,368)

(e) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Management of the risk

Liquidity risk is not significant as the majority of the Company’s assets are investments in quoted equities that are readily realisable.

The Company has a bank loan facility of US$17 million of which £10,008,000 (2015: £11,223,000) was drawn down at 30 September 2016.

Liquidity risk exposure

The contractual maturities of the financial liabilities at 30 September 2016, based on the earliest date on which payment can be required were as follows:

	2016	2015
	Total	Total
	(due within one year)	(due within one year)
	£000	£000
Bank loan	10,008	11,223
Other creditors and accruals	1,476	475
	11,484	11,698

The Board gives guidance to the Alternative Investment Fund Manager as to the maximum amount of the Company’s resources that should be invested in any one holding.

(f) Credit risk

The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss.

Management of the risk

This risk is not significant, and is managed as follows:

• the majority of transactions take place through clearing houses on a delivery versus payment basis;

• investment transactions are carried out with an approved list of brokers, whose credit-standing is reviewed periodically by the Alternative Investment Fund Manager, and limits are set on the amount that may be due from any one broker; and

• cash at bank is held only with reputable banks with high quality external credit ratings.

None of the Company’s financial assets are secured by collateral or other credit enhancements.

(g) Fair values of financial assets and liabilities

Financial assets and liabilities are either carried in the balance sheet at their fair value (investments), or the balance sheet amount if it is a reasonable approximation of fair value (amounts due from brokers, dividends receivable, accrued income, amounts due to brokers, accruals and cash balances).

The table below sets out fair value measurements using the fair value hierarchy.

		Total
Financial assets at fair value through profit or loss at 30 September 2016:	Level 1	2016
	£000	£000
Equity investments	124,527	124,527
Total	124,527	124,527

		Total
Financial assets at fair value through profit or loss at 30 September 2015:	Level 1	2015
	£000	£000
Equity investments	103,676	103,676
Total	103,676	103,676

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:

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

Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1 (there are no Level 2 investments at 30 September 2016).

Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data (there are no Level 3 investments at 30 September 2016).

In preparing these financial statements the Company has adopted “Amendments to FRS102: fair value hierarchy disclosure (March 2016)” published by the FRC.

The valuation techniques used by the Company are explained in the accounting policies note on page 43.

Notice of Annual General Meeting

THIS SECTION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to any aspect of the proposals referred to in this document or as to the action you should take, you should seek your own advice from a stockbroker, solicitor, accountant, or other professional adviser.

If you have sold or otherwise transferred all of your shares, please pass this document together with the accompanying documents to the purchaser or transferee, or to the person who arranged the sale or transfer so they can pass these documents to the person who now holds the shares.

Notice is hereby given that the Annual General Meeting of the Company will be held at 155 Bishopsgate, London EC2M 3XY on Tuesday, 24 January 2017, at 2:30pm to consider and, if thought fit, pass the following resolutions, which will be proposed as to resolutions 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 as ordinary resolutions, and as to resolutions 13 and 14 as special resolutions:

Ordinary business

1. To receive the Directors’ report and statement of accounts for the year ended 30 September 2016.

2. To approve the Directors’ Remuneration policy.

3. To approve the Directors’ Remuneration report for the year ended 30 September 2016.

4. To approve the annual dividend.

5. To re-elect Steven Bates as a Director of the Company.

6. To re-elect Ivo Coulson as a Director of the Company.

7. To re-elect Jonathan Woollett as a Director of the Company.

8. To re-elect Frances Daley as a Director of the Company.

9. To re-elect Nadya Wells as a Director of the Company.

10. To re-appoint KPMG LLP as Auditor of the Company from the conclusion of this meeting until the conclusion of the next general meeting at which the financial statements are laid before members.

11. To authorise the Directors to determine the Auditor’s remuneration.

Special business

12. Authority to allot new ordinary shares – Ordinary Resolution:

That, the Board be and it is hereby generally and unconditionally authorised to exercise all powers of the Company to allot shares and to grant rights to subscribe for or convert any security into shares in the Company (within the meaning of Section 551 of the Companies Act 2006) up to an aggregate nominal amount of £79,297, (being approximately 5% of the issued share capital of the Company as at 8 December 2016 being the latest practicable date prior to the publication of this notice of meeting excluding shares held in treasury at that date) PROVIDED THAT this authority shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution, save that the Company may before such expiry make one or more offers or agreements which would or might require relevant securities to be allotted or rights to subscribe for or convert securities into shares to be granted after such expiry and the Board may allot relevant securities or grant rights to subscribe for or convert securities into shares in pursuance of such offers or agreements as if the authority conferred hereby had not expired.

13. Authority to disapply pre-emption rights on allotment of ordinary shares – Special Resolution:

That if resolution 12 set out in the notice convening the Annual General Meeting of the Company dated 9 December 2016 (the “Notice”) is passed, the Board be given power to allot equity securities (as defined in the Companies Act 2006) for cash under the authority given by that resolution and/or where the allotment is treated as an allotment of equity securities under section 560(3) of the Companies Act 2006, free of the restriction in section 561(1) of the Companies Act 2006, such power to be limited:

(a) to the allotment of equity securities in connection with an offer of equity securities to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings, and so that the Board may impose any limits or restrictions and make any arrangements which it considers necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter; and

(b) in the case of the authority granted under resolution 12 of the Notice and/or in the case of any transfer of treasury shares which is treated as an allotment of equity securities under section 560(3) of the Companies Act 2006, to the allotment or such transfer (otherwise than under paragraph (a) above) of equity securities up to a nominal amount of £95,888;

such power to apply until the earlier of the conclusion of the Annual General Meeting of the Company in 2018, or 23 July 2018, but during this period the Company may make offers, and enter into agreements, which would, or might, require equity securities to be allotted after the power ends and the Board may allot equity securities under any such offer or agreement as if the power had not ended.

14. Authority to repurchase the Company’s shares – Special Resolution:

That, the Company be and is hereby generally and unconditionally authorised in accordance with Section 701 of the Act to make market purchases (within the meaning of Section 693 of the Act) of ordinary shares of 10 pence each in the capital of the Company (the “shares”) provided that:

(a) the maximum number of shares hereby authorised to be purchased shall be 2,377,318 (being approximately 14.99% of the issued share capital of the Company as at 8 December 2016 being the latest practicable date prior to the publication of this notice of meeting, excluding shares held in treasury);

(b) the minimum price (exclusive of any expenses) which may be paid for a share is 10 pence;

(c) the maximum price (exclusive of any expenses) which may be paid for a share is an amount equal to the highest of:

(i) 105% of the average of the middle market quotations for a share taken from the London Stock Exchange Daily Official List for the 5 business days immediately preceding the day on which the share is purchased; or

(ii) the higher of the price of the last independent trade and the highest current independent bid on the trading venues where the purchase is carried out;

(d) the authority hereby conferred shall expire at the earlier of the conclusion of the Annual General Meeting of the Company in 2018, or 23 July 2018, unless such authority is renewed prior to such time;

(e) the Company may make a contract to purchase shares under the authority hereby conferred prior to the expiry of such authority which will be or may be executed wholly or partly after the expiration of such authority and may make a purchase of shares pursuant to any such contract; and

(f) all shares purchased pursuant to the said authority shall be either:

(i) cancelled immediately upon completion of the purchase; or

(ii) held, sold, transferred or otherwise dealt with as treasury shares in accordance with the provisions of the Act.

By order of the Board

M. J. Nokes F.C.A.
Secretary
155 Bishopsgate
London
EC2M 3XY
9 December 2016

Notes to the Notice of Annual General Meeting

1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company. A proxy form which may be used to make such appointment and give proxy instructions accompanies this notice. If you do not have a proxy form and believe that you should have one, or if you require additional forms, please contact the Company’s registrars, Capita Asset Services (contact details can be found on page 2).

2. To be valid any proxy form or other instrument appointing a proxy must be received by post using the enclosed Business Reply Envelope, or (during normal business hours only) by hand at the offices of the Company’s registrars, Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU no later than 2:30pm on Friday, 20 January 2017 (or, in the event of any adjournment, on the date which is two days before the time of the adjourned meeting for the purposes of which no account is to be taken of any part of a day that is not a working day).

3. The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described in paragraph 9 below) will not prevent a shareholder attending the Annual General Meeting and voting in person if he/she wishes to do so.

4. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a “Nominated Person”) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.

5. The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 2 above does not apply to Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company.

6. To be entitled to attend and vote at the Annual General Meeting (and for the purpose of the determination by the Company of the votes they may cast), Shareholders must be registered in the Register of Members of the Company at the close of business on Friday, 20 January 2017 (or, in the event of any adjournment, on the date which is two days before the time of the adjourned meeting for the purposes of which no account is to be taken of any part of a day that is not a working day). Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.

7. As at 8 December 2016 (being the last business day prior to the publication of this Notice) the Company’s issued share capital consisted of 15,859,364 ordinary shares, carrying one vote each (excluding 3,318,207 shares held in treasury by the Company in relation to which voting rights are suspended). Therefore, the total voting rights in the Company as at 8 December 2016 are 15,859,364.

8. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

9. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications, and must contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID RA10) by 2:30pm on Friday, 20 January 2017 (or, in the event of any adjournment, on the date which is two days before the time of the adjourned meeting for the purposes of which no account is to be taken of any part of a day that is not a working day). For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.

10. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

11. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

12. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares.

13. Under section 527 of the Companies Act 2006 members meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstance connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required under section 527 of the Companies Act 2006 to publish on a website.

14. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.

15. A copy of this notice, and other information required by s311A of the Companies Act 2006, can be found at www.bee-plc.com.

Inspection of documents

The following documents will be available for inspection at the Company’s registered office from 9 December 2016 until the time of the AGM and at the AGM location from 15 minutes before the AGM until it ends:

• Copies of letters of appointment of the non-executive Directors

Baring Asset Management Limited
155 Bishopsgate
London EC2M 3XY
Telephone: [phone]

(Authorised and regulated by the Financial Conduct Authority) www.barings.com

Registered in England and Wales no: 02915887

Registered offce as above.