The Baring Korea Feeder Fund

Transcription

1 Annual Report & Audited Financial Statements 8 August 2007

2 Contents Management and Administration... 2 Manager s Report and Portfolio Statement... 3 Independent Auditors Report... 4 Statement of Manager s Responsibilities... 5 Statement of Trustee s Responsibilities... 5 Trustee s Report to Unitholders... 5 Balance Sheet... 6 Statement of Changes in Net Assets Attributable to Redeemable Participating Unitholders... 6 Profit and Loss Account... 7 Notes to the Financial Statements... 8 General Information - Unaudited Enquiries

3 Management and Administration Directors of the Manager William Collins (British) (Resigned 3 August 2007) Anthony Cooney* (Irish) Ian Pascal (British) Paul Savage (British) Mark Thorne* (Irish) Richard Bellis (Appointed 14 August 2007) Manager Baring International Fund Managers (Ireland) Limited Registered Office Georges Court Townsend Street Dublin 2 Ireland Trustee Northern Trust Fiduciary Services (Ireland) Limited Georges Court Townsend Street Dublin 2 Ireland Administrator and Registrar Northern Trust International Fund Administration Services (Ireland) Limited Georges Court Townsend Street Dublin 2 Ireland Independent Auditors Sponsoring Broker PricewaterhouseCoopers NCB Stockbrokers Limited Chartered Accountants and Registered Auditors 3 George s Dock One Spencer Dock, North Wall Quay IFSC Dublin 1 Dublin 1 Ireland Ireland Legal Advisors As to Irish Law As to Hong Kong Law Dillon Eustace Deacons 33 Sir John Rogerson s Quay Alexandra House Dublin Chater Road Ireland Central Hong Kong *Non-executive directors Independent of the Investment Manager 2

4 Manager s Report and Portfolio Statement Manager s Report For the the year ended 8 August 2007 The Baring Korea Feeder Fund (the Trust ) is a feeder fund, which invests solely in the units of the Baring Korea Trust, a United Kingdom authorised unit trust scheme, which has also been authorised by the Securities and Futures Commission in Hong Kong. The performance of the Baring Korea Feeder Fund during the year is summarised below: % Change over the Year Total Return Expressed in US$ Baring Korea Feeder Fund % KOSPI 100 Index* % * Indices calculated on capital return excluding income (Source: Standard & Poor s) All references to a specific index are for comparative purposes only. The Annual Report and Audited Financial Statements of The Baring Korea Trust for the year ended 8 August 2007 are sent to all Unitholders with the accounts of the Baring Korea Feeder Fund. Baring International Fund Managers (Ireland) Limited October 2007 Portfolio Statement As at 8 August 2007 Investment Holding as at Nominal Nominal Holding as at US$ as at % of 08/08/2006 Purchases Sales 08/08/ /08/2007 NAV Unit Trust/Fund The Baring Korea Trust 48,425,725 52,753,058 (20,840,332) 80,338, ,810, Other Net Assets 2,246, Total Net Assets 404,056, As at 8 August 2006 Investment Holding as at Nominal Nominal Holding as at US$ as at % of 09/08/2005 Purchases Sales 08/08/ /08/2006 NAV Unit Trust/Fund The Baring Korea Trust 58,352,188 42,077,662 (52,004,125) 48,425, ,396, Other Net Assets 1,178, Total Net Assets 155,574,

5 Independent Auditor s Report to the Unitholders Independent Auditors Report to the Unitholders of the Baring Korea Feeder Fund (the Trust ) We have audited the Trust s Financial Statements for the year ended 8 August 2007 which comprise the Balance Sheet, the Profit and Loss Account, the Statement of Changes in Net Assets Attributable to Redeemable Participating Unitholders, the Portfolio Statement and the related notes. These Financial Statements have been prepared under the accounting policies set out therein. Respective responsibilities of the Manager and the Auditors The Manager s responsibilities for preparing the Annual Report and the Financial Statements in accordance with applicable Irish law and the accounting standards issued by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland) are set out in the Statement of Manager s Responsibilities. Our responsibility is to audit the Financial Statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the Trust s Unitholders as a body and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. We report to you our opinion as to whether the Financial Statements give a true and fair view in accordance with Generally Accepted Accounting Practice in Ireland, and are properly prepared in accordance with Irish statute comprising the Unit Trusts Act, 1990 and the provisions of the Hong Kong Code on Unit Trusts and Mutual Funds. We state whether we have obtained all the information and explanations we consider necessary for the purposes of our audit, and whether the Financial Statements are in agreement with the books of account. We also report to you our opinion as to whether proper books of account have been kept by the Manager for the Trust. We read the other information contained in the Annual Report, and consider whether it is consistent with the audited Financial Statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Financial Statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Financial Statements. It also includes an assessment of the significant estimates and judgements made by the Manager in the preparation of the Financial Statements, and of whether the accounting policies are appropriate to the Trust's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Financial Statements. Opinion In our opinion the Financial Statements; - give a true and fair view in accordance with Generally Accepted Accounting Practice in Ireland, of the state of the Trust's affairs at 8 August 2007 and of its results for the year then ended; and - have been properly prepared in accordance with the requirements of the Unit Trusts Act, 1990 and the provisions of the Hong Kong Code on Unit Trusts and Mutual Funds. We have obtained all the information and explanations we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the Manager for the Trust. The Trust s Financial Statements are in agreement with the books of account. PricewaterhouseCoopers Chartered Accountants and Registered Auditors Dublin 8 November

6 Statement and Reports Statement of Manager s Responsibilities The Unit Trusts Act, 1990 requires the Manager to prepare the Annual Report and the Financial Statements for each financial year. This Annual Report and the Financial Statements must be prepared in accordance with applicable Irish Law and Generally Accepted Accounting Practice in Ireland including the accounting standards issued by the Accounting Standards Board and published by The Institute of Chartered Accountants in Ireland to give a true and fair view of the state of affairs of the Trust at the year end and of its results for the year then ended. In preparing these Financial Statements, the Manager: ensures the Financial Statements comply with the Trust Deed, generally accepted accounting principles and applicable accounting standards; selects suitable accounting policies and then applies them consistently; makes judgements and estimates that are reasonable and prudent; and prepares the Financial Statements on the going concern basis unless it is inappropriate to assume that the Trust will continue in operation. The Manager is responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Trust and to enable it to ensure that the Financial Statements are prepared in accordance with accounting standards generally accepted in Ireland and comply with the provisions of the Trust Deed and the Unit Trusts Act, 1990 and the provisions of the Hong Kong Code on Unit Trusts and Mutual Funds. The Manager is also responsible for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law or regulations. Under the non-ucits Regulations, the assets of the Trust shall be entrusted to the Trustee for safe-keeping. In carrying out this duty, the Manager has delegated custody of the Trust s assets to Northern Trust Fiduciary Services (Ireland) Limited. Statement of Trustee s Responsibilities The Trustee is required under the Financial Regulator non-ucits Notices ( the Notices ) to ensure that inter alia, it: - i) takes into its custody, or under its control, all the assets of the Trust and holds them in safekeeping for the unitholders in accordance with the Notices and the Trust Deed; ii) enquires into the conduct of the Trust in each accounting period and reports thereon to the unitholders, in a report which shall contain the matters prescribed by the Notices. Trustee s Report to Unitholders For the year ended 8 August 2007 We have enquired into the conduct of the Trust, for the year ended 8 August 2007 in our capacity as Trustee of the Trust. In our opinion the Trust has been managed during the year in all material respects: i) in accordance with the limitations imposed on the investment and borrowing powers of the Trust by the Trust Deed and the Financial Regulator under the powers granted to the Financial Regulator by the Unit Trusts Act 1990; and ii) otherwise in accordance with the provisions of the Trust Deed and the Unit Trusts Act. Northern Trust Fiduciary Services (Ireland) Limited Dublin 8 November

7 Balance Sheet As at 8 August /08/ /08/2006 Assets Notes US$ US$ Financial Assets At Fair Value Through Profit Or Loss 1 401,810, ,396,289 Funds Due From the Baring Korea Trust 1,441,171 47,974,080 Subscriptions Receivable 5,876,351 - Other Debtors 2,643 - Cash 1 1,075,263 1,041,743 Total Assets 410,205, ,412,112 Liabilities Redemptions Payable (993,443) (47,644,919) Funds Due To the Baring Korea Trust (7,219,582) (928,149) Administration Fees Payable 2 (108,089) (56,566) Other Payables (54,483) (48,673) Management Fees Payable 2 (40,033) (20,951) Trustee Fees Payable 2 (16,586) (5,238) Total Liabilities (Excluding Net Assets Attributable to Holders of Redeemable Participating Units) (8,432,216) (48,704,496) Net Assets Attributable To Redeemable Participating Unitholders (At Bid Market Prices) 401,773, ,707,616 Adjustment From Bid Market Prices To Last Traded Market Prices 2,283, ,906 Net Assets Attributable To Holders Of Redeemable Participating Units (At Last Traded Market Prices) 404,056, ,574,522 Redeemable Participating Units In Issue 13,792,853 8,225,631 Net Asset Value Per Redeemable Participating Unit Statement of Changes in Net Assets Attributable to Redeemable Participating Unitholders for the year ended 8 August 2007 Net assets attributable to holders of redeemable participating units at the beginning of the year 08/08/ /08/2006 US$ US$ 155,574,52 139,822, Increase in net assets for the year attributable to holders of redeemable participating units from operations 94,221,701 46,587,647 Issue of redeemable participating units for the year 375,666, ,257,61 2 Redemption of redeemable participating units for the year Net Assets attributable to holders of redeemable participating units at the end of the year (221,406,2 72) 404,056,71 1 (227,093,34 4) 155,574,52 2 The Financial Statements on pages 6 to 13 and the Portfolio Statement on page 3 were approved by the Board of Directors of Baring International Fund Managers (Ireland) Limited on 8 November 2007, and signed on its behalf by: Anthony Cooney } Mark Thorne } Directors The accompanying notes form an integral part of these Financial Statements 6

8 Profit and Loss Account For the year ended 8 August 2007 Notes US$ US$ Income 1 Deposit Interest - 52,944 Net Fair Value Gain/(Loss) On Financial Assets At Fair Value Through Profit Or Loss 1, 13 93,750,426 46,642,217 Total Investment Income 93,750,426 46,695,161 Expenses 1 Administration Fees 2 (552,923) (581,949) Management Fees 2 (204,786) (213,899) General Expenses 2 (57,259) (55,429) Trustee's Fees 2 (93,380) (53,471) Auditor s Fees 2 (17,931) (8,590) Total Operating Expense (926,279) (913,338) Net Operating Income Before Finance Costs 92,824,147 45,781,823 Finance Costs Interest Expense (18,560) (61,082) Total Finance Costs (18,560) (61,082) Adjustments From Bid Market Prices To Last Traded Market Prices 1,416, ,906 Increase In Net Assets Attributable To Holders Of Redeemable Participating Units from Operations 94,221,701 46,587,647 Gains and losses arose solely from continuing operations. There were no gains or losses other then those dealt with in the Profit and Loss Account. The Financial Statements on pages 6 to 13 and the Portfolio Statement on page 3 were approved by the Board of Directors of Baring International Fund Managers (Ireland) Limited on 8 November 2007, and signed on its behalf by: Anthony Cooney } Mark Thorne } Directors The accompanying notes form an integral part of these Financial Statements 7

9 Notes to the Financial Statements 1. Principal Accounting Policies The principal accounting policies applied in the preparation of these Financial Statements under Irish GAAP are set out below. Basis of Preparation These Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets held at fair value through profit or loss. The Financial Statements have been prepared in accordance with accounting standards generally accepted in Ireland and Irish Statute comprising the Unit Trusts Act, 1990 and the provisions of the Hong Kong Code on Unit Trusts and Mutual Funds. Accounting standards generally accepted in Ireland in preparing Financial Statements giving a true and fair view are those published by the Institute of Chartered Accountants in Ireland and issued by the Accounting Standards Board ( ASB ). The Trust is a unit trust scheme constituted under the laws of Ireland and authorised as a feeder fund into the Baring Korea Trust (the Master ) under the Financial Regulator Non-UCITS notices (NU 22). The format and certain wordings of the Financial Statements have been adapted from those contained in FRS 3 Reporting Financial Performance so that, in the opinion of the Managers, they more appropriately reflect the nature of the Trust s business as an investment fund. The Trust has availed of the exemption available to open-ended investment funds under FRS 1 not to prepare a Cash Flow Statement. Historical cost convention The Financial Statements have been prepared under the historical cost convention as modified by the revaluation of financial assets and financial liabilities held at fair value through profit or loss. Foreign exchange translation (a) Functional and presentation currency Items included in the Trust s Financial Statements are presented using the currency of the primary economic environment in which it operates ( the functional currency ). The functional and presentation currency of the Trust is the US dollar, which reflects the fact that all the redeemable participating units have been subscribed and redeemed in US dollars. (b) Transactions and balances Foreign currency transactions are translated into the functional and presentation currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Profit and Loss Account. Investments at fair value through profit or loss (a) Classification The Trust classifies its investments in the Baring Korea Trust, as a financial asset at fair value through profit or loss in accordance with FRS 26. Financial assets or financial liabilities held for trading are those acquired or incurred principally for the purposes of selling or repurchasing in the short term. Financial assets and financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Trust s documented investment strategy. 8

10 Notes to the Financial Statements 1. Principal Accounting Policies (continued) Investments at fair value through profit or loss (continued) (a) Classification (continued) The Trust s policy is for the Investment Manager and the Manager to evaluate the information about these financial assets on a fair value basis together with other related financial information. (b) Recognition/derecognition Regular-way purchases and sales of investments are recognised on the trade date the date on which the Trust commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Trust has transferred substantially all risks and rewards of ownership. (c) Measurement Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed in the Profit and Loss Account. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the financial assets or financial liabilities at fair value through profit or loss category are presented in the Profit and Loss Account in the period in which they arise. Interest income from financial assets at fair value through profit or loss is recognised in the Profit and Loss Account within interest income using an effective interest method. (d) Fair value estimation The fair value of financial instruments traded in active markets (such as publicly traded securities) is based on quoted market prices at the Balance Sheet date. The investment in the Baring Koprea Trust is are valued on a daily basis using the unaudited net asset value price of the Baring Korea Trust. The quoted market price used for financial assets held by the Trust is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price. When the Trust holds derivatives with offsetting market risks, it uses mid-market prices as a basis for establishing fair values for the offsetting risk positions and applies this bid or ask price to the net open position, as appropriate. The fair value of financial instruments that are not traded in an active market (for example, over-the counter derivatives) is determined by using valuation techniques. The Trust uses a variety of methods and makes assumptions that are based on market conditions existing at each Balance Sheet date. Valuation techniques used include the use of comparable recent arm s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. Income from investments Bank interest income is accounted for using the effective interest rate method. Cash and other liquid assets Cash and other liquid assets will be valued at their face value together with interest accrued, where applicable. Receivables Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables are recognised initially at fair value plus transaction costs that are directly attributable to their acquisition origination. They are subsequently measured at amortised cost using an effective interest method, less provision for impairment. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Operating Expenses The Trust s Manager is responsible for all normal operating expenses including audit fees, stamp and other duties and charges incurred on the acquisition and realisation of investments. Baring International Fund Managers (Ireland) Limited (the Manager ) meets all other operating expenses incurred by it in connection with its services. Operating expenses are recognised on an accruals basis 9

11 Notes to the Financial Statements 1. Principal Accounting Policies (continued) Redeemable Participating Units Redeemable participating units are redeemable at the Unitholders option and are classified as financial liabilities. The redeemable participating units can be put back to the Trust at any time for cash equal to a proportionate share of the Trust s net asset value. The redeemable participating unit is carried at the redemption amount that is payable at the Balance Sheet date if the unitholder exercised their right to put the redeemable participating unit back to the Trust. In accordance with the provisions of the Trust Deed, the investment in the Baring Korea Trust is fair valued by reference to the mid trading price of the Baring Korea Trust. However, as stated above the accounting policy of the Trust for the purpose of compliance with FRS 26 and for reporting purposes, is to value its investments at the relevant bid market prices on the Balance Sheet date. As at 8 August 2007, the difference between the valuation stated in the Financial Statements for investments and the valuation methodology indicated in the Trust Deed, is disclosed on the face of the Trust s Balance Sheet. Net assets attributable to holders of redeemable participating units represent a liability in the Balance Sheet, carried at the redemption amount that would be payable at the Balance Sheet date if the Unitholder exercised the right to redeem the redeemable participating unit to the Trust. Consequently, the differences described above adjust the carrying amount of the net assets attributable to redeemable participating unitholders and are recognised in the Profit and Loss Account. The cumulative differences are included as Adjustments from bid market prices to last traded market prices on the Balance Sheet. 2. Fees and Other Expenses Management Fees The Manager is entitled under the Trust Deed to make a management charge at the rate not exceeding 0.5 per cent per annum (or such higher percentage per annum as may be approved by an Extraordinary Resolution of unitholders) of the value of the net assets of the Trust. The management charge is payable monthly in arrears and is calculated by reference to the value of the net assets of the Trust as at each day on which the value of the net assets of the Trust is calculated. The Manager currently makes a charge at the rate of 0.1 per cent per annum which may be increased to an amount not exceeding 0.5 per cent per annum on giving not less than three months notice to the unitholders. Administration Fees Northern Trust International Fund Administration Services (Ireland) Limited (the Administrator ), is entitled to receive fees at the rate of per cent of the net asset value of the Trust, calculated by reference to the daily calculation of asset values and paid monthly in arrears, which are also payable out of the assets of the Trust. The fee is subject to a minimum of 12,000 per annum. Trustee Fees Northern Trust Fiduciary Services (Ireland) Limited (the Trustee ) is entitled under the Trust Deed to receive out of the assets of the Trust a fee at the rate of per cent per annum of the value of the net assets of the Trust, payable monthly in arrears and transaction charges at the rate of 50 per transaction in investments effected for the Trust. The fee is subject to a minimum of US$6,000 per annum. The Trustee is entitled to be reimbursed all fees and charges of custodians and sub-custodians appointed by it and all other expenses incurred by it. Other Expenses The Trustee pays out of the assets of the Trust the above fees and expenses, stamp duties, taxes, brokerage or other expenses of acquiring and disposing of investments, the fees and expenses of the auditors, listing fees and legal expenses of the Manager. The costs of printing and distributing reports, accounts and any prospectus, publishing prices and any costs incurred as a result of a change in law or the introduction of any new law (including any costs incurred as a result of compliance with any code relating to unit trusts, whether or not having the force of law) are also paid out of the assets of the Trust. 3. Related Party Disclosures Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. (a) Management fee The Trust is managed by Baring International Fund Managers (Ireland) Limited (the Manager ). The outstanding amounts payable as at the year end for Management fee were US$40,033 (2006:US$20,951). William Collins (resigned 3 August 2007), Ian Pascal, Richard Bellis and Paul Savage are connected through employment with the Manager. Ian Pascal and Paul Savage are also directors on the Baring Korea Trust Fund. 10

12 Notes to the Financial Statements 3. Related Party Disclosures (continued) (b) Administration fee Anthony Cooney who is a director of the Manager and is also director of the Administrator. The fund pays the manager an administration fee. The Manager pays Northern Trust an Administration fee from their Administration fee. (c) Legal Advisor Mark Thorne is a partner of the Dillon Eustace, the Legal Advisor of the Trust and a director of the Manager. Legal fees for the year to Dillon Eustace were US$2,858 (2006: US$18,678). 4. Units Issued and Redeemed Units Units By Number: Redeemable participating units in issue as at 8 August ,225,631 9,716,370 Redeemable participating units issued 14,637,126 10,843,285 Redeemable participating units redeemed (9,069,904) (12,334,024) Redeemable participating units in issue as at 8 August ,792,853 8,225,631 By Value: US$ US$ Capital Value of redeemable participating units issued 375,666, ,257,612 Capital Value of redeemable participating units redeemed (221,406,27 2) (227,093,34 4) Net value of redeemable participating units issued during the year 154,260,488 (30,835,732) 5. Financial Risk Management FRS 25 requires the Trust to include in its annual reports information on certain types of assets in its investment portfolio and on the risks associated with each type. In accordance with the investment objectives and policies of the Portfolio it may only invest in redeemable participating units in the Baring Korea Trust. The Portfolio may hold ancillary liquid assets in order to cover the ongoing costs and expenses of the Portfolio. Liquid assets in this context include bank deposits, commercial paper and treasury bills. The majority of the Trust s financial assets are equity shares and other investments which neither pay interest nor have a maturity date. A review of the performance for the year is available in the Manager s Report on page 3. The main risks arising from the Trust s financial instruments are market, liquidity, credit and currency risk. The Manager reviews and agrees policies for managing each of these risks and they are summarised below. These policies have remained substantially unchanged since the beginning of the year to which these Financial Statements relate. (a) Market price risk Market risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Trust might suffer through holding market positions in the face of price movements. (b) Liquidity risk The Trust s assets comprise mainly readily realisable securities, which can be sold. The main liability of the Trust is the redemption of any redeemable participating units that investors wish to sell. (c) Credit risk The Trust is exposed to credit risk on parties with whom it trades and also bear the risk of settlement default. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party does not meet their obligation. (d) Currency Risk A substantial portion of the net assets of the Trust are denominated in Sterling rather than US dollar (which is the Trust s functional and presentation currency), with the effect that the Balance Sheet and total return can be significantly affected by currency movements. 11

13 Notes to the Financial Statements 5. Financial Risk Management (continued) The following table sets out the Trust s total exposure to foreign currency risk: 08/08/ /08/2006 US$ US$ Pound Sterling 404,082, ,334,356 (e) Lack of Diversity Since the Trust will invest primarily in redeemable participating units of the Baring Korea Trust, there will be a lack of diversity in the Trust s investments. Adverse performance of the Baring Korea Trust will therefore result in an adverse performance of the Trust. There can be no assurance that either the Trust or the Baring Korea Trust will achieve their objectives. 6. Comparative Statistics Audited Audited Audited US$ US$ US$ Net Asset Value 404,056, ,574, ,822,607 Net Asset Value per Redeemable Participating Unit Past performance is not necessarily a guide to future performance. The value of redeemable participating units and the income from them can go down as well as up and is not guaranteed. The highest issue and lowest redemption prices of the Unit Trust during the year are stated below: US$ US$ US$ US$ US$ US$ Highest Issue Price during the year Lowest Redemption Price during the year US$ US$ US$ US$ Highest Issue Price during the year Lowest Redemption Price during the year Soft Commission The Manager have not entered into any soft commission arrangements with brokers during the year. 8. Exchange Rate The year end exchange rates were as follows: Exchange Rate Exchange Rate to US$ to US$ 08/08/ /08/2006 Euro Pound sterling Statement of Portfolio Movements Portfolio movements during the year are as stated on page 3. 12

14 Notes to the Financial Statements 10. Net Asset Value per Redeemable Participating Unit The net asset value per redeemable participating unit of the Trust at the year end is determined by dividing the value of the net assets of the Trust by the total number of redeemable participating units in issue at the year end. 11. Taxation Under current law and practice the Trust qualifies as an investment undertaking as defined in Section 739B of the Taxes Consolidation Act, 1997, as amended. On that basis, it is not chargeable to Irish tax on its income or gains. However, Irish tax may arise on the happening of a "chargeable event". A chargeable event includes any distribution payments to unitholders or any encashment, redemption, cancellation or transfer of redeemable participating units. No Irish tax will arise on the Trust in respect of chargeable events in respect of: (a) a unitholder who is neither Irish resident nor ordinarily resident in Ireland for tax purposes, at the time of the chargeable event, provided appropriate valid declarations in accordance with the provisions of the Taxes Consolidation Act, 1997, as amended, are held by the Trust; and (b) certain exempted Irish tax resident unitholders who have provided the Trust with the necessary signed statutory declarations. Dividends, interest and capital gains (if any) received on investments made by the Trust may be subject to withholding taxes imposed by the country from which the investment income/gains are received and such taxes may not be recoverable by the Trust or its unitholders. 12. Fair Value gain/loss on investments 08/08/ /08/2006 US$ US$ Net realised gain/(loss) on financial assets at fair value through profit or loss 23,337,804 51,115,305 Movement on unrealized gain/(loss) on financial assets at fair value through profit or loss 70,412,622 (4,473,088) 93,750,426 46,642, Efficient Portfolio Management During the year ended 8 August 2007 the Trust did not engage in any efficient portfolio management techniques. 14. Subsequent Events William Collins resigned from the Board of Directors of the Manager on the 3 August 2007 and Richard Bellis was appointed on the 14 August There have been no events subsequent to the year end, which, in the opinion of the Directors of the Manager, may have had an impact on the Financial Statements for the year ended 8 August Approval of Financial Statements The Financial Statements were approved by the Board of Directors of the Manager on 8 November

15 General Information (Unaudited) The Unit Trust is a unit trust managed by the Manager. The Unit Trust is a feeder fund investing solely in the units of the Baring Korea Trust, a United Kingdom authorised unit trust scheme, which has also been authorised by the Securities and Futures Commission in Hong Kong. Each redeemable participating unit in the Unit Trust represents one undivided share in the property of the Unit Trust. The Unit Trust is valued on each Dealing Day following the initial issue and redeemable participating units may normally be purchased or realised by application to Baring Asset Management Limited ( BAML ) or Baring Asset Management (Asia) Limited ( BAMA ) on a Dealing Day. Dealing Days are every business day and/or such other day or days as the Manager, with the approval of the Trustee, may determine. A business day is any day, other than a Saturday or Sunday, on which banks in both Dublin and London are open for business. The Manager may decline any application for redeemable participating units in whole or in part and will not accept subscriptions for units of an amount (inclusive of the preliminary charge) which is less than US$5,000. A preliminary charge of up to 6 per cent (or such higher amounts as may be approved by an Extraordinary Resolution) of the amount invested may be made and retained by the Managers but it is the intention of the Manager that such charge should not, until further notice, exceed 5 per cent. Redeemable participating units in the Baring Korea Trust, will, however be acquired by the Unit Trust at the creation price, the effect of which is that there will be no initial charge made on the acquisition of units in the Baring Korea Trust. The Unit Trust is constituted under the laws of Ireland by a Trust Deed dated 2 October, 1992 (the Trust Deed ) made between the Manager and Northern Trust Fiduciary Services (Ireland) Limited as Trustee. All Unitholders are entitled to the benefit of, are bound by and are deemed to have notice of, the provisions of the Trust Deed, copies of which are available as mentioned below. Information in this section is selective and should be read in conjunction with the full text of the Prospectus. Risk Factors Potential investors should note that the investments of the Unit Trust are subject to normal market fluctuations and other risks inherent in investing in securities and there can be no assurance that any appreciation in value will occur. The value of investments and the income from them, and therefore the value of, and income from, the units can go down as well as up and an investor may not get back the amount he invests. Changes in exchange rates between currencies may also cause the value of the investment to diminish or increase. An investor who realizes redeemable participating units after a short period, in addition, may not realise the amount originally invested in view of the preliminary charge made on the issue of redeemable participating units. Investors attention is particularly drawn to the fact that, while the objective of the Unit Trust is long-term capital growth, it may be expected to experience above average volatility and its net asset value will be affected accordingly. The risks inherent in investment by the Baring Korea Trust are of a nature and degree not typically encountered in investment in securities of listed companies on the major securities markets. These risks are both political and economic and relate to special considerations which apply to investing in Korea whether directly through the Korea Stock Exchange or otherwise. These special considerations, of which intending investors in the Unit Trust should be aware, include the following:- Reporting Requirements under Korean Securities Laws Any person whose direct or beneficial ownership of common stock with voting rights of a Korean listed or registered company, whether in the form of shares of common stock or depositary receipts, certificates representing the rights to subscribe for shares and equityrelated debt securities including convertible bonds and bonds with warrants (which we refer to collectively as Equity Securities ), together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with the person, accounts for 5 per cent or more of the total outstanding shares (plus Equity Securities of us held by such persons) is required to report the status of the holdings to the Financial Supervisory Commission (the FSC ) and the Korea Stock Exchange (the KSE ) of KOSDAQ within five business days after reaching the 5 per cent ownership interest. In addition, any changes in the ownership interest subsequent to the report that equals or exceeds 1 per cent of the total outstanding Equity Securities of such company is required to be reported to the FSC and the KSE within five business days from the date of change. 14

16 General Information (Unaudited) Risk Factors (continued) Reporting Requirements under Korean Securities Laws (continued) Any person whose direct or beneficial ownership of common stock with voting rights of a Korean listed or registered company, whether in the form of shares of common stock or depositary receipts, certificates representing the rights to subscribe for shares and equityrelated debt securities including convertible bonds and bonds with warrants (which we refer to collectively as Equity Securities ), together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with the person, accounts for 5 per cent or more of the total outstanding shares (plus Equity Securities of us held by such persons) is required to report the status of the holdings to the Financial Supervisory Commission (the FSC ) and the Korea Stock Exchange (the KSE ) or KOSDAQ within five business days after reaching the 5 per cent ownership interest. In addition, any change in the ownership interest subsequent to the report that equals or exceeds 1 per cent of the total outstanding Equity Securities of such company is required to be reported to the FSC and the KSE within five business days from the date of the change. Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment and/or a loss of voting rights with respect to the ownership of Equity Securities exceeding 5 per cent. Furthermore, the FSC may order the disposal of the unreported Equity Securities. In addition to the reporting requirements described above, any person whose direct or beneficial ownership of common stock accounts for 10 per cent or more of the total issued and outstanding stock (which is referred to as a major stockholder ) must report the status of his/her shareholding to the Korea Securities Futures Commission (the KSFC ) and the KSE or KOSDAQ within ten days after he/she becomes a major stockholder. In addition, any change in the ownership interest subsequent to the report must be reported to the KSFC and the KSE within the 10th day of the month following the month in which the change occurred. Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment. Restrictions Applicable to Investment in Shares Issued by Korean Companies As a result of amendments to the Foreign Exchange Transaction Laws and FSC regulations (which is referred to collectively as the Investment Rules ) adopted in connection with the stock market opening from January 1992 and after that date, foreigners may invest, with limited exceptions and subject to procedural requirements, in all shares of Korean companies, whether listed on the KSE or registered on the KOSDAQ, unless prohibited by specific laws. Foreign investors may trade shares listed on the KSE or registered on the KOSDAQ only through the KSE or the KOSDAQ, except in limited circumstances, including: odd-lot trading of shares; acquisition of shares (which is referred to as Converted Shares ) by exercise of warrants, conversion rights or exchange rights under bonds with warrants, convertible bonds or exchangeable bonds or withdrawal rights under depositary receipts issued outside of Korea by a Korean company; acquisition of shares as a result of inheritance, donation, bequest or exercise of stockholders rights, including pre-emptive rights or rights to participate in free distributions and receive dividends; and over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded subject to certain exceptions. For over-the-counter transactions of shares between foreigners outside the KSE or the KOSDAQ for shares with respect to which the limit on aggregate foreign ownership has been reached or exceeded, a securities company licensed in Korea must act as an intermediary. Odd-lot trading of shares outside the KSE or the KOSDAQ must involve a licensed securities company in Korea as the other party. Foreign investors are prohibited from engaging in margin transactions with respect to shares, which are subject to a foreign ownership limit. The Investment Rules require a foreign investor who wishes to invest in shares on the KSE or the KOSDAQ (including Converted Shares and shares being issued for initial listing on the KSE or registration on KOSDAQ) to register its identity with the Financial Supervisory Service (the FSS ) prior to making any such investment; however, the registration requirement does not apply to foreign investors who acquire Converted Shares with the intention of selling such Converted Shares within three months from the date of acquisition of the Converted Shares. Upon registration, the FSS will issue to the foreign investor an investment registration card, which must be presented each time the foreign investor opens a brokerage account with a securities company. Foreigners eligible to obtain an investment registration card include foreign nationals who have not been residing in Korea for a consecutive period of six months or more, foreign governments, foreign municipal authorities, foreign public institutions, international financial institutions or similar international organisations, corporations incorporated under foreign laws and any person in any additional category designated by decree of the Ministry of Finance and Economy (the MOFE ) under the Korean Securities and Exchange Act (the SEA ). 15

17 General Information (Unaudited) Risk Factors (continued) All Korean offices of a foreign corporation as a group are treated as a separate foreigner from the offices of the corporation outside Korea for the purpose of investment registration. However, a foreign corporation may obtain one or more investment registration cards in its name in certain circumstances as described in the relevant regulations. Upon a foreign investor s purchase of shares through the KSE or the KOSDAQ, no separate report by the investor is required because the investment registration card system is designed to control and oversee foreign investment through a computer system. However, a foreign investor s acquisition or sale of shares outside the KSE or the KOSDAQ (as discussed above) must be reported by the foreign investor or his standing proxy to the governor of the FSS at the time of each such acquisition or sale; provided, however, that a foreign investor must ensure that any acquisition or sale by it of shares outside the KSE or the KOSDAQ in the case of trades in connection with a tender offer, odd-lot trading of shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to the governor of the FSS by the securities company engaged to facilitate such transaction. A foreign investor may appoint a standing proxy from among the Korea Securities Depository (the KSD ), foreign exchange banks (including domestic branches of foreign banks), securities companies (including domestic branches of foreign securities companies), investment trust companies, futures trading companies and internationally recognised custodians which will act as a standing proxy to exercise stockholders rights or perform any matters related to the foregoing activities if the foreign investor does not perform these activities himself. Generally, a foreign investor may not permit any person, other than its standing proxy, to exercise rights relating to his shares or perform any tasks related thereto on his behalf. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the governor of the FSS in cases deemed inevitable by reason of conflict between laws of Korea and the home country of the foreign investor. Certificates evidencing shares of Korean companies must be kept in custody with an eligible custodian in Korea. Only foreign exchange banks (including domestic branches of foreign banks), securities companies (including domestic branches of foreign securities companies), the KSD, investment trust companies, futures trading companies and internationally recognised custodians are eligible to act as a custodian of shares for a non-resident or foreign investor. A foreign investor must ensure that his custodian deposits his shares with the KSD. However, a foreign investor may be exempted from complying with this deposit requirement with the approval of the governor of the FSS in circumstances where compliance with that requirement is made impracticable, including cases where compliance would contravene the laws of the home country of such foreign investor. Under the Investment Rules, with certain exceptions, foreign investors may acquire shares of a Korean company without being subject to any foreign investment ceiling. As one such exception, designated public corporations are subject to a 40 per cent ceiling on the acquisition of shares by foreigners in the aggregate. Designated public corporations may set a ceiling on the acquisition of shares by a single person within 3 per cent of the total number of shares. Currently, Korea Electric Power Corporation is the only designated public corporation, which has set such a ceiling. Furthermore, an investment by a foreign investor in 10 per cent or more of the outstanding shares with voting rights of a Korean company is defined as a foreign direct investment under the Foreign Investment Promotion Act of Korea. Generally, a foreign direct investment must be reported to the Ministry of Commerce, Industry and Energy of Korea. The acquisition of shares of a Korean company by a foreign investor may also be subject to certain foreign or other shareholding restrictions in the event that the restrictions are prescribed in a specific law that regulates the business of the Korean company. Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares must designate a foreign exchange bank at which he must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at a securities company. Funds in the foreign currency account may be remitted abroad without any Korean governmental approval. 16

18 General Information (Unaudited) Risk Factors (continued) Dividends on shares of Korean companies are paid in Won. No Korean governmental approval is required for foreign investors to receive dividends on, or the Won proceeds of the sale of, any shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any shares held by a non-resident of Korea must be deposited either in a Won account with the investor s securities company or in his Won account. Funds in the investor s won account may be transferred to his foreign currency account or withdrawn for local living expenses up to certain limitations. Funds in the won account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of pre-emptive rights. Securities companies and investment trust companies are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors stock investments in Korea. Through these accounts, securities companies and investment trust companies may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as counterparty to or on behalf of foreign investors, without the investors having to open their own accounts with foreign exchange banks. The Foreign Exchange Transaction Act of Korea and the Presidential Decree and regulations under that Act and Decree, which we refer to collectively as the Foreign Exchange Transaction Laws, regulate investment in Korean securities by non-residents and issuance of securities outside Korea by Korean companies. Under the Foreign Exchange Transaction Laws, non-residents may invest in Korean securities only to the extent specifically allowed by these laws or otherwise permitted by the MOFE. The FSC has also adopted, pursuant to its authority under the SEA, regulations that restrict investment by foreigners in Korean securities. Under the Foreign Exchange Transaction Laws, (1) if the Korean government deems that it is inevitable due to the outbreak of natural calamities, wars, conflict of arms or grave and sudden changes in domestic or foreign economic circumstances or other situations equivalent thereto, the MOFE may temporarily suspend payment, receipt or the whole or part of transactions to which the Foreign Exchange Transaction Laws apply, or impose an obligation to safekeep, deposit or sell means of payment in or to certain Korean governmental agencies or financial institutions; and (2) if the Korean government deems that international balance of payments and international finance are confronted or are likely to be confronted with serious difficulty or the movement of capital between Korea and abroad brings or is likely to bring about serious obstacles in carrying out its currency policies, exchange rate policies and other macroeconomic policies, the MOFE may take measures to require any person who intends to perform capital transactions to obtain permission or to require any person who performs capital transactions to deposit part of the payments received in such transactions at certain Korean governmental agencies or financial institutions, in each case subject to certain limitations. Investment Objectives and Policies The investment objective of the Manager for the Unit Trust is to achieve long-term growth in the value of assets by investing solely in units of the Baring Korea Trust, a unit trust constituted in the United Kingdom and authorised under the Financial Services and Markets Act The functional and presentation currency of the Unit Trust is US dollars. The objective of the Baring Korea Trust is to achieve capital growth by investing directly or indirectly in securities of Korean companies or other entities or subsidiaries of Korean companies and securities listed or traded on the Korean securities market. The investment objectives and policies described above will not be altered for a period of at least three years following the admission of the redeemable participating units of the Unit Trust to the official list of the Irish Stock Exchange except in exceptional circumstances or in circumstances where the Manager (or, in the case of the Baring Korea Trust, Baring Fund Managers Limited) are satisfied that the change is in the interests of Unitholders and in any circumstances only with the approval of an Extraordinary Resolution of Unitholders. Market Timing Repeatedly purchasing and selling redeemable participating units in the Trust in response to short-term market fluctuations known as market timing can disrupt the Manager s investment strategy and increase the Trusts expenses to the prejudice of all Unitholders. The Trust is not intended for market timing or excessive trading. To deter these activities, the Manager may refuse to accept an application for redeemable participating units from persons that they reasonably believe are engaged in market timing or are otherwise excessive or potentially disruptive to the Trust. The Manager reserves the right to redeem redeemable participating units from a Unitholder, on the basis of the circumstances of the Unitholder concerned, or it has reasonable grounds to believe that the Unitholders engaging in any activity which might result in the Trust or its Unitholders as a whole suffering any legal, regulatory, reputational or other material, disadvantage which the Trust or its Unitholders as a whole might not otherwise have suffered. 17