Half-yearly Report

BARING EMERGING EUROPE PLC Preliminary unaudited announcement in respect of the six months ended 31 March 2008 INCOME STATEMENT (Unaudited) Six months ended 31 March 2008 Revenue Capital Total Â£000 Â£000 Â£000 Gains on investments held at fair value through profit or loss - 10,151 10,151 Income 2,150 - 2,150 Investment management fee and performance fee (1,607) (1,544) (3,151) Other expenses (628) - (628) Net return before finance charges and taxation (85) 8,607 8,522 Finance charges (4) - (4) Return on ordinary activities before taxation (89) 8,607 8,518 Taxation (151) - (151) Return attributable to ordinary shareholders (240) 8,607 8,367 Total Return per ordinary share (pence) 20.51 p INCOME STATEMENT (Unaudited) Six months ended 31 March 2007 Revenue Capital Total Â£000 Â£000 Â£000 Gains on investments held at fair value through profit or loss - 66,599 66,599 Income 813 - 813 Investment management fee (1,566) - (1,566) Other expenses (667) - (667) Net return before finance charges and taxation (1,420) 66,599 65,179 Finance charges (5) - (5) Return on ordinary activities before taxation (1,425) 66,599 65,174 Taxation (75) - (75) Return attributable to ordinary shareholders (1,500) 66,599 65,099 Total Return per ordinary share (pence) 150.49 p INCOME STATEMENT (Audited) Year ended 30 September 2007 Revenue Capital Total Â£000 Â£000 Â£000 Gains on investments held at fair value through profit or loss - 104,815 104,815 Income 5,220 - 5,220 Investment management fee (3,222) - (3,222) Other expenses (1,246) - (1,246) Net return before finance charges and taxation 752 104,815 105,567 Finance charges (10) - (10) Return on ordinary activities before taxation 742 104,815 105,557 Taxation (524) - (524) Return attributable to ordinary shareholders 218 104,815 105,033 Total Return per ordinary share (pence) 245.80 p Dividend per ordinary share (pence) 0.50 p BALANCE SHEET (Unaudited) (Unaudited) (Audited) 31 March 31 March 30 September 2008 2007 2007 Â£000 Â£000 Â£000 Non current assets Investments at fair value through the profit or loss 377,640 349,417 370,406 Current assets Debtors 1,183 3,690 7,741 Cash at bank and in hand 11,358 4,752 13,549 12,541 8,442 21,290 Creditors: Amounts falling due within one year (7,014) (2,753) (9,508) Net current assets 5,527 5,689 11,782 Net assets 383,167 355,106 382,188 Capital and reserves Called-up share capital 4,436 4,436 4,436 Share premium account 1,411 1,411 1,411 Special reserve 79,917 79,917 79,917 Redemption reserve 352 352 352 Capital reserve - realised 179,766 111,122 157,723 Capital reserve - unrealised 141,080 162,901 154,516 Revenue reserve 641 (634) 1,084 Own shares held (24,436) (4,399) (17,251) Total shareholders' funds 383,167 355,106 382,188 Net asset value per ordinary share 942.09p 823.15p 921.43p RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS For the six months ended 31 March 2008 (Unaudited) Called-up Share Capital Capital Own share premium Special Redemption reserve reserve Revenue shares capital account reserve reserve realised unrealised reserve held Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Balance at 30 September 2007 4,436 1,411 79,917 352 157,723 154,516 1,084 (17,251) 382,188 Net gain on realisation of investments - - - - 22,043 - - - 22,043 Unrealised movement on investments - - - - - (13,436) - - (13,436) Net revenue retained for the year - - - - - - (240) - (240) Buy back of own shares held in treasury - - - - - - - (7,185) (7,185) Dividends paid - - - - - - (203) - (203) Balance at 31 March 2008 4,436 1,411 79,917 352 179,766 141,080 641 (24,436) 383,167 For the six months ended 31 March 2007 (Unaudited) Called-up Share Capital Capital Own share premium Special Redemption reserve reserve Revenue shares capital account reserve reserve realised unrealised reserve held Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Balance at 30 September 2006 4,436 1,411 79,917 352 84,187 123,237 2,034 (3,538) 292,036 Net gain on realisation of investments - - - - 26,935 - - - 26,935 Unrealised movement on investments - - - - - 39,664 - - 39,664 Buy back of own shares held in treasury - - - - - - - (861) (861) Net revenue retained for the year - - - - - - (1,500) - (1,500) Dividends paid - - - - - - (1,168) - (1,168) Balance at 31 March 2007 4,436 1,411 79,917 352 111,122 162,901 (634) (4,399) 355,106 For the year ended 30 September 2007 (Audited) Called-up Share Capital Capital Own share premium Special Redemption reserve reserve Revenue shares capital account reserve reserve realised unrealised reserve held Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Beginning of year 4,436 1,411 79,917 352 84,187 123,237 2,034 (3,538) 292,036 Net gain on realisation of investments - - - - 73,536 - - - 73,536 Unrealised appreciation on investments (restated) - - - - - 31,279 - - 31,279 Net revenue retained for the year - - - - - - 218 - 218 Buy back of own shares held in treasury - - - - - - - (13,713) (13,713) Dividends paid - - - - - - (1,168) - (1,168) Balance at 30 September 2007 4,436 1,411 79,917 352 157,723 154,516 1,084 (17,251) 382,188 CASHFLOW STATEMENT (Unaudited) (Unaudited) (Audited) Six months Six months Year ended ended ended 31 March 30 31 March September 2008 2007 2007 Â£000 Â£000 Â£000 Operating activities Income received from investment 2,858 1,586 5,541 Interest received 269 68 108 Investment management fees paid (1,636) (1,277) (3,169) Other cash payments (607) (722) (1,237) Net cash inflow/(outflow) from operating activities 884 (345) 1,243 Servicing of finance Interest paid (4) (5) (10) Taxation Overseas tax paid (151) (75) (524) Financial investment Purchases of investments (103,893) (83,516) (178,857) Sales of investments 108,361 84,535 201,252 Net cash inflow from financial investments 4,468 1,019 22,395 Equity dividends paid (203) (1,168) (1,168) Net cash inflow/(outflow) before financing 4,994 (574) 21,936 Financing Buyback of ordinary shares (7,185) - (13,713) Net cash outflow from financing (7,185) - (13,713) (Decrease)/increase in cash (2,191) (574) 8,223 NOTES 1. Accounting Policies These financial statements are prepared under the historical cost convention as modified by the revaluation of fixed asset investments and in accordance with applicable United Kingdom accounting standards and with the Statement of Recommended Practice 2003 (revised 2005) regarding the Financial Statements of Investment Trust Companies. The accounting policies applied to these interim accounts are consistent with those applied in the accounts for the year ended 30 September 2007. 2. Comparative Information The figures and financial information for the year ended 30 September 2007 are an extract from the latest published accounts and do not constitute statutory accounts. Full accounts for that period have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under section 237 of the Companies Act 1985. The accounts for the six months ended 31 March 2008 and for the six months ended 31 March 2007 have been neither audited nor reviewed by the auditors. 3. Share Capital As at 31 March 2008 there were 44,359,906 ordinary shares of 10p each in issue (30 September 2007: 44,359,906 and 31 March 2007: 44,359,966) which includes 3,687,738 ordinary shares held in treasury (30 September 2007: 2,882,199 and 31 March 2007: 1,220,000) and treated as not being in issue when calculating the net asset value per share. Shares held in treasury are non-voting and not eligible for receipt of dividends. During the period 805,539 ordinary shares were bought back to be held in treasury at a cost of Â£7.2 million. 4. Dividend No dividend is payable in respect of the six months to 31 March 2008. Consideration will be given to an annual dividend in respect of the year ended 30 September 2008 at a Board meeting to be held in November. An announcement will be made shortly after that meeting. 5. Taxation The taxation charge of Â£151,000 (30 September 2007: Â£524,000 and 31 March 2007: Â£75,000) relates to irrecoverable overseas taxation. 6. Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow/(outflow) from operating activities (Unaudited) (Unaudited) (Audited) Six months Six months Year ended ended ended 31 March 31 March 30 2008 2007 September 2007 Â£000 Â£000 Â£000 Net revenue before interest payable and taxation (85) (1,420) 752 Increase in accrued income 977 841 429 Increase/(decrease) in sundry creditors 1,490 128 (12) Decrease in debtors 46 106 74 Management fee capitalised (1,544) - - Net cash inflow/ (outflow) from operating activities 884 (345) 1,243 7. Investment Management Fee The investment management fee for the six months to 31 March 2008, which includes a provision for the performance fee for the year ending 30 September 2008, comprises: Â£000 Basic fee (charged to revenue) 1,607 Performance bonus (charged to capital): Provision for the year ending 30 September 2008 1,544 Total 3,151 8. Posting of Interim Report The Interim Report will be posted to shareholders on or around 16 May 2008. It will not be advertised in newspapers, but copies will be available from that date at the Company's Registered Office at 155 Bishopsgate, London, EC2M 3XY. CHAIRMAN'S STATEMENT Performance In the context of the difficult market conditions the first six months of the current financial year were very satisfactory for your Company with the share price increasing by 2.7% and the net asset value by 2.2%. During the period the benchmark (MSCI EM Europe 10/40 Index) fell by 3.0%. The out-performance was driven both by strong stock selection and good asset allocation. Share Capital At the Annual General Meeting held on 15 January 2008 shareholders renewed the Board's power to buy back up to 14.99% of the issued share capital (6,096,757 shares) for cancellation or to be held in treasury. During the six months under review the Company bought back 805,539 of its ordinary shares at an average discount of 9.3% to be held in treasury. This is in line with the Board's policy to constrain the volatility of the discount, which averaged 8.5% during the period. Since 31 March 2008 a further 135,000 shares have been bought back at an average discount of 9.9%. At 31 March 2008 the Company's issued share capital consisted of 40,672,168 ordinary shares (excluding 3,687,738 ordinary shares held in treasury). Gearing During the period the Company renewed its US$10 million unsecured loan and overdraft facility with State Street Bank and Trust Company until 24 March 2009. This facility is used principally to cover timing differences on portfolio transactions. Negotiations for a short term gearing facility for up to US$60 million are continuing. Annual Dividend At the Annual General Meeting held on 15 January 2008 shareholders approved the payment of an annual dividend of 0.5p per share on 6 February 2008 to members on the register at the close of business on 11 January 2008. VAT on Management Fees The Board is in discussions with the Investment Manager about the recovery of VAT on past management fees but a number of procedural matters need first to be resolved. Therefore no amount is, as yet, being recognised in the asset value. Outlook The Board shares the Investment Manager's view that the long term case for Emerging Europe remains positive. Iain Saunders Chairman 1 May 2008 For enquiries please contact: Brian Corris at Baring Asset Management Limited on 020 7628 6000

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