Barings China A-Share Fund Plc. Interim Report & Unaudited Financial Statements

Transcription

1 Barings China A-Share Fund Plc Interim Report & Unaudited Financial Statements for the half year ended to 31 October 2018

2 Table of Contents Management and administration 1 Introduction 2 Key changes during the period 4 Investment Manager s report 5 Balance sheet 6 Statement of changes in net assets attributable to holders of redeemable participating shares 7 Profit and loss account 8 Notes to the financial statements 9 Portfolio statement 17 Appendix 1 Significant portfolio movements 19 Appendix 2 Securities financing transactions regulation Unaudited 20

3 Management and administration Alternative Investment Fund Manager ( AIFM ) Baring International Fund Managers (Ireland) Limited Registered office 70 Sir John Rogerson s Quay Dublin 2 D02 R296 Ireland Telephone: Facsimile: Investment Managers Baring Asset Management Limited* 20 Old Bailey London EC4M 7BF United Kingdom Baring Asset Management (Asia) Limited** 35th Floor, Gloucester Tower 15 Queen s Road Central Hong Kong Telephone: Facsimile: * The address of the Investment Manager changed on 15 October 2018 as detailed on page 4. ** Baring Asset Management (Asia) Limited is the delegated Sub- Investment Manager and is authorised and regulated by the Financial Conduct Authority. Depositary Northern Trust Fiduciary Services (Ireland) Limited Georges Court Townsend Street Dublin 2 D02 R156 Ireland Administrator, Registrar and Transfer Agent Northern Trust International Fund Administration Services (Ireland) Limited Georges Court Townsend Street Dublin 2 D02 R156 Ireland Independent Auditors PricewaterhouseCoopers One Spencer Dock North Wall Quay Dublin 1 D01 X9R7 Ireland Sponsoring Brokers and Legal Advisers As to Irish Law Matheson 70 Sir John Rogerson s Quay Dublin 2 D02 R296 Ireland As to the impact of the Chinese legal environment Eversheds LLP Unit 501 Platinum Building 233 Taicang Road Shanghai People s Republic of China Sub-custodian The Hong Kong and Shanghai Banking Corporation Limited 35th Floor, HSBC Tower 1000 Lujiazui Ring Road Pudong Shanghai People s Republic of China Directors of Barings China A-Share Fund Plc ( the Company ) Peter Clark (British) James Cleary (Irish) David Conway (Irish) Barbara Healy (Irish) Timothy Schulze (United States) Julian Swayne (British) Non-executive Directors independent of the Investment Manager. 1

4 Introduction Barings China A-Share Fund Plc ( the Company ) is an open-ended investment company with variable capital incorporated in Ireland on 14 December 2009 under the Companies Act 2014 (as amended) with registration number and is designed to give both individual and institutional investors the benefit of experienced and professional portfolio management. The Company has been authorised by the Central Bank of Ireland ( the CBI ) as a designated investment company pursuant to the Companies Act 2014 (as amended). The Company is also listed on the Euronext Dublin (formerly known as the Irish Stock Exchange) Global Exchange Market. The Manager, Baring International Fund Managers (Ireland) Limited, has been authorised by the CBI as an Alternative Investment Fund Manager ( the AIFM ) pursuant to the European Union (AIFM) Regulations The Company is classified as a Retail Investor Alternative Investment Fund ( RIAIF ) in accordance with the Alternative Investment Fund Rulebook ( AIF Rulebook ) issued by the CBI. The Company is structured as a single strategy company. Shares may be divided into different classes with different rights and benefits. The functional currency of the Company is the US dollar. Shares of other classes may be introduced by the Directors from time to time, which shall be notified to and cleared in advance with the CBI. On the introduction of any new class of shares, the Directors will prepare and issue documentation setting out the relevant details relating to each such class of shares. The Company will be valued as at 12:00 p.m. (Irish time) on each valuation day ( valuation point ), and shares may normally be purchased, realised or converted on a dealing day by application to the Company by the dealing deadline. The Company may decline or accept any application for shares in whole or in part and may accept subscriptions for shares of an amount (inclusive of the preliminary charge) which is less than the minimum investment amount stated in the Prospectus. All shareholders are entitled to the benefit of, are bound by, and are deemed to have notice of, the provisions of the Articles of Association. Information in this introduction is selective and should be read in conjunction with the full text of the Prospectus. As at 31 October 2018, the Company has one fund, the Barings China A-Share Fund ( the Fund ), which commenced business on 12 April There are three classes of shares on offer at period-end. The annual accounting reference date of the Company has changed from 31 December to 30 April, and the semiannual accounting date of the Company changed from 30 June to 31 October. Investment objective and policy The principal investment objective of the Fund is to achieve long-term capital growth through investing in companies established or operating in the People s Republic of China. To achieve the Fund s investment objective, at least 70% of the Fund s assets will need to be invested in, quoted or traded equity investments in, A-Shares or other Qualified Foreign Institutional Investor ( QFII ) permitted securities which will be listed on the Shanghai or Shenzhen markets listed in the Prospectus, as permitted under the QFII Regulations. Please refer to the Prospectus for the full investment objective and policy. How the Fund is managed The AIFM of the Fund, Baring International Fund Managers (Ireland) Limited, has appointed Baring Asset Management Limited as the Investment Manager of the Company. In turn, the Investment Manager has appointed Baring Asset Management (Asia) Limited as Sub-Investment Manager to the Fund. The Fund invests in Chinese companies listed on the stock exchanges of Shanghai and Shenzhen using a bottomup investment approach. This means that we focus more on the individual merits of specific companies, rather than taking a stance on the outcome of a sector of the market or macroeconomic developments such as interest rate rises. 2

5 Introduction (continued) Within this, the Fund is managed using a quality Growth at a Reasonable Price ( GARP ) approach. When researching candidates for the portfolio, we look for companies with three characteristics. Firstly, companies with good potential for long-term earnings growth. Secondly, companies with attributes which in our experience are associated with high-quality companies, such as strong balance sheets and good management teams, with experience in delivering value to shareholders. Finally, companies with share price valuations which still have room for upside when compared with history or similar companies in other words, potential for an attractive investment return. Risk profile Please see detailed below the key risks applicable to the Fund: The Fund invests wholly in Chinese companies listed on the stock exchanges of Shanghai and Shenzhen. The Chinese A-Share market is an emerging equity market, and investment in the Fund carries exposure not just to the general volatility which can characterise equity markets from time to time, but to the additional risk factors associated with investing in emerging market companies. These include liquidity risks, the possibility of a lower standard of corporate governance, increased political risk and the likelihood of a high degree of volatility. Returns from overseas equity markets can be subject to fluctuations in exchange rates, which can have the effect of eroding or enhancing the value of the returns for investors. Investors in the Fund should also be aware that the Fund has a number of restrictions in relation to the QFII regime of the People s Republic of China State Administration of Foreign Exchange ( SAFE ), under which it operates. Past performance is not a guide to future performance. There is no guarantee the investment objective will be achieved, and you may get back less than you initially invested. Please refer to the Prospectus for the full risk profile. Investors should read the Prospectus and carefully consider the potential risk factors as well as reward factors before investing. 3

6 Key changes during the period Change of address With effect from 15 October 2018, the registered address for Baring Asset Management Limited changed from: 155 Bishopsgate London EC2M 3XY United Kingdom To: 20 Old Bailey London EC4M 7BF United Kingdom 4

7 Investment Manager s report Performance For the six-month period ended 31 October 2018, the Barings China A-Share Fund ( the Fund") registered an absolute gross return of %* for the Class A USD shares, significantly outperforming the performance comparator with a return of % during the reporting period. The onshore Chinese equity market corrected on the back of bouts of volatility over the six-month time frame, largely driven by the heightened trade tension between the US and China, and recent signs of slowing economic momentum. The stake in China Railway Construction Corporation ended as the Fund s top contributor to relative performance. The share price rallied on expectations of incoming orders in the next twelve months, underpinned by a new wave of infrastructure investment. The good performance was also supported by better-than-expected earnings in the first half of 2018, primarily thanks to the higher sales and improved gross profit margin. Chinese beer distributor Chongqing Brewery outperformed, supported by positive sales volume growth, an improved product selection and enhanced operating efficiency. On the other hand, household electrical appliances manufacturer Wuxi Little Swan dragged relative performance as the share price was dampened by the lower revenue growth guidance as well as tightening regulations on the property market. Video products and services provider Hangzhou Hikvision Digital Technology was a detractor as the company was listed as one of the targets of the trade friction between the US and China. Exposure to the stock was trimmed for risk management purposes, though the negative impact from the escalating trade conflict on fundamentals would potentially be limited. Market outlook In the near term, we believe the market might remain in the doldrums as negative factors such as the escalated trade friction between the US and China and signs of slowing economic momentum show no sign of abating imminently. Given that economic and corporate fundamentals remain at a healthy level, we believe the Chinese government has sufficient monetary and fiscal policy tools on hand to prevent a dramatic growth slowdown. Recently, the income tax cut has injected confidence into the market; however, it is not enough for a turnaround. We believe that more fiscal easing will be in place to help drive the economy early next year, which could be a key supporting factor in the scenario of a bottoming-out of the market. We are positive on the China A-share market over the medium to longer term, driven by bottom-up fundamentals. While near-term headwinds are expected to prevail, we are happy to see the Chinese government stepping up the magnitude of policy measures to provide a buffer in the midst of macro volatility and recent signs of economic weakness. We believe recent measures and the policy trajectory from here should potentially provide structural support to the overall economy and improve the longer-term earnings visibility of selective Chinese companies. We are positive on companies that are well positioned to be the potential beneficiaries of continuing urbanisation, and consumption upgrades. As income growth continues while demand for higher quality goods and services increases in China, we remain positive on leading domestic consumption with strong brand and pricing power, as well as companies that manage to capture market share and benefit from industry consolidation. * The Fund s return uses the midday prices, whereas the return of the comparator is calculated using global close prices. Baring Asset Management (Asia) Limited, appointed as Sub-Investment Manager by Baring Asset Management Limited. November 2018 Baring Asset Management Limited ( the Investment Manager ) gives its portfolio managers full authority to manage their funds as they see fit, within the established guidelines set down. This includes the views that managers may take of the markets and sectors they invest in, which may differ from the views of other Barings portfolio managers. 5

8 Balance sheet As at 31 October 2018 Barings China A-Share Fund Plc 31/10/2018 Barings China A-Share Fund Plc 30/04/2018 Assets Notes Financial assets at fair value through profit or loss 13,288,108 15,733,623 Securities sold receivable 68, ,952 Other assets 3,664 1,615 Management fee rebate due 115,367 78,445 Cash 13 1,162, ,426 Restricted cash , ,035 Total assets 14,912,557 16,545,096 Liabilities Securities purchased payable (250,163) Management fees payable 3 (24,872) (7,523) Administration fees payable 3 (5,716) (6,229) Depositary fees payable 3 (589) (1,144) Accrued expenses (253,652) (260,136) Total liabilities (excluding net assets attributable to holders of redeemable participating shares) (534,992) (275,032) Net assets attributable to holders of redeemable participating shares 14,377,565 16,270,064 Redeemable participating shares in issue (Note 7) 1.1Class A USD Acc 163,154 75, Class X GBP Inc 113, , Class X USD Acc 595, ,374 The accompanying notes form an integral part of these financial statements. 6

9 Statement of changes in net assets attributable to holders of redeemable participating shares For the period ended 31 October 2018 Barings China A-Share Fund Plc 31/10/2018 Barings China A-Share Fund Plc 30/04/2018 Notes Net assets attributable to holders of redeemable participating shares at the beginning of the period/year 16,270,064 16,130,288 Decrease in net assets for the period/year attributable to holders of redeemable participating shares from operations (3,465,737) (927,890) Issue of redeemable participating shares for the period/year 7 1,618,804 1,076,002 Distributions and reinvestments 6 16,664 Total issue of redeemable participating shares for the period/year 1,618,804 1,092,666 Redemption of redeemable participating shares for the period/year 7 (45,566) (25,000) Net assets attributable to holders of redeemable participating shares at the end of the period/year 14,377,565 16,270,064 * For the period 1 January 2018 to 30 April The accompanying notes form an integral part of these financial statements 7

10 Profit and loss account For the period ended 31 October 2018 Barings China A-Share Fund Plc 31/10/2018 Barings China A-Share Fund Plc 30/04/2018 Investment income Notes Bank interest income 3,086 1,356 Dividend income 281,495 7,540 Management fee rebate 3 36,922 29,672 Net fair value loss on financial assets at fair value through profit or loss 5 (3,634,560) (863,425) Total investment (expense)/income (3,313,057) 824,857 Expenses Management fees 3 (17,349) (7,027) Administration fees 3 (36,721) (26,191) Depositary fees 3 (1,918) (2,269) General expenses (71,303) (35,541) Audit fees (14,885) Total operating expenses (127,291) (85,913) Net expense before finance costs and tax (3,440,348) (910,770) Finance costs Distributions 6 (16,308) Bank interest expense (88) (58) Total finance costs (88) (16,366) Loss for the financial period (3,440,436) (927,136) Tax Withholding tax on dividends and other investment income (25,301) (754) Total tax (25,301) (754) Decrease in net assets for the period from operations attributable to holders of redeemable participating shares (3,465,737) (927,890) Gains and losses arose solely from continuing activities. There were no gains or losses other than those dealt with in the profit and loss account. * For the period 1 January 2018 to 30 April The accompanying notes form an integral part of these financial statements. 8

11 Notes to the financial statements 1. Principal accounting policies The principal accounting policies adopted by Barings China A-Share Fund Plc ( the Company ) are as follows: Basis of preparation In preparing the financial statements for the Company for the half year ended 31 October 2018, the Directors have applied Financial Reporting Standard 104 ( FRS 104 ) Interim Financial Reporting and these financial statements comply with that standard. The Company has also adopted FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. The condensed interim financial statements should be read in conjunction with the annual financial statements for the period ended 30 April 2018, which have been prepared in accordance with accounting standards generally accepted in Ireland. Accounting standards generally accepted in Ireland are those issued by the Financial Reporting Council ( FRC ). The format and certain wording of the financial statements have been adapted from that contained in the Companies Act 2014 (as amended) so that, in the opinion of the Directors, it more appropriately reflects the nature of the Company business as an investment company. The accounting policies applied in these condensed interim financial statements are consistent with those of the annual financial statements as at and for the period ended 30 April 2018, as described in those financial statements. The Company meets all the conditions set out in FRS 102, section 7 and consequently has availed of the exemption available to certain funds not to prepare a statement of cash flows. FRS 104 requires that the profit and loss account and the statement of changes in net assets attributable to holders of redeemable participating shares for the current interim period show the comparable interim period of the immediately preceding financial year. The balance sheet as of the end of the current period is required, under FRS 104, to disclose a comparative balance sheet as of the end of the immediately preceding financial year. 2. Fair value information FRS 102 requires the Company to classify financial instruments measured at fair value into the following hierarchy: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgment by Baring International Fund Managers (Ireland) Limited, the Alternative Investment Fund Manager ( the AIFM ). The AIFM considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. 9

12 Notes to the financial statements (continued) 2. Fair value information (continued) The table below sets out fair value measurements using the FRS 102 fair value hierarchies: Financial assets at fair value through profit or loss at 31 October 2018 Financial assets Total Level 1 Level 2 Level 3 Equities 13,288,108 13,288,108 Total 13,288,108 13,288,108 Financial assets at fair value through profit or loss at 30 April 2018 Financial assets Total Level 1 Level 2 Level 3 Equities 15,733,623 15,528, ,143 Total 15,733,623 15,528, , Fees and related party disclosures Management fee The AIFM, is entitled under the Management Agreement to a management fee of up to a rate not exceeding 2.00% per annum (or such higher percentage per annum as may be approved by a Special Resolution of shareholders of the relevant class) of the Net Asset Value of the Company. Currently, the AIFM receives out of the assets of the Fund an annual fee of 1.50% of the net assets attributable to the Class A shares only. There is no management fee charge on the net assets attributable to the Class X shares. Baring Asset Management Limited ( the Investment Manager ) is an investment management company incorporated in London on 6 April The Investment Manager is part of the Barings LLC and is a whollyowned subsidiary of Massachusetts Mutual Life Insurance Company ( MassMutual ). The outstanding amount payable at the period-end for management fees was 24,872 (30 April 2018: 7,523). Peter Clark, Timothy Schulze and Julian Swayne are connected to the Investment Manager through employment with Barings LLC and its subsidaries. The management charge is payable monthly in arrears and will be calculated and accrued by reference to the value of the Net Asset Value of the Fund as at each business day ( valuation day ). The fees of the Investment Manager will be met by the AIFM out of their own fee. The Directors have sole discretion to rebate all or part of the management fee in any particular case or generally. Rebates of the management fee may be applied for certain distributors and placing agents who have entered into an agreement with the Company or their delegates and the terms of such rebate will be determined by the terms of the relevant agreement. The management fee rebate for the period amounted to 36,922 (30 April 2018: 29,672). Where the AIFM, the Company or any duly appointed delegate of the AIFM or the Company successfully negotiates the recapture of a portion of the commissions charged by brokers or dealers in connection with the purchase and/or sale of securities for the Company, the rebated commission shall be paid to the Company. The Company will generally pay brokerage at customary institutional brokerage rates. Transactions of the Company may be entered into through associates of the AIFM. 10

13 Notes to the financial statements (continued) 3. Fees and related party disclosures (continued) Management fee (continued) Administration fees The AIFM has engaged the services of Northern Trust International Fund Administration Services (Ireland) Limited ( the Administrator ) to provide administration services. In respect of each class, the AIFM will been entitled to receive an administration fee out of which the AIFM will pay the Administrator. The administration fee will be 0.45% per annum of the Net Asset Value of each class, subject to a monthly minimum fee of 2,500. The fee accrues daily and is paid monthly in arrears. Depositary fees In consideration of the services performed by Northern Trust Fiduciary Services (Ireland) Limited ( the Depositary ), it is entitled to: % of the Net Asset Value of the Company on the first 500 million; % of the Net Asset Value of the Company on the next 500 million; and % of the Net Asset Value of the Company thereafter. In addition, the Depositary will also charge transaction fees, safekeeping fees and account maintenance charges out of the assets of the Company which shall be at normal commercial rates. The Depositary is entitled to be reimbursed all fees and charges of sub-custodians appointed by it and all other out of pocket expenses incurred by it. Any sub-custodian fees will be charged at normal commercial fees. Out-of-pocket The AIFM, the Administrator and the Depositary are also entitled to be reimbursed all out-of-pocket expenses incurred by them in the course of their respective duties, including all fees and charges of sub-custodians appointed by the Depositary (including the fees and expenses of any sub-custodians), which shall be borne by the Company and which shall be at normal commercial rates. Legal fee Fees paid to Matheson amounted to 32,139 (30 April 2018: 6,416). Eversheds LLP acts as the legal advisor in Shanghai and no fees were charged at the period-end of 31 October 2018 (30 April 2018: Nil). Directors fees Jim Cleary, David Conway and Barbara Healy receive a fee of 4,500 (excluding VAT) each per annum. Peter Clark, Timothy Schulze and Julian Swayne through employment with Barings LLC and its subsidaries are not entitled to fees from the Company. 11

14 Notes to the financial statements (continued) 3. Fees and related party disclosures (continued) Significant shareholders The following table details significant concentrations in shareholdings of the Fund or instances where the shares are beneficially held by other investment funds managed by the Investment Manager or one of its affiliates. As at 31 October 2018, the following had significant shareholdings in the Fund: Number of shareholders with beneficial interest greater than 20% of the shares in issue Total % of shareholders with beneficial interest greater than 20% of the shares in issue Total % of shares held by Investment Funds managed by Baring International Fund Managers (Ireland) Limited or affiliates Fund Name Barings China A- Share Fund plc 2 (30/04/2018: 2) 90.66% (30/04/2018: 44.93%) 2.67% (30/04/2018: 54.24%) 4. Comparative Statistics Total Net Asset Value As at 31/10/2018 As at 30/04/2018 As at 31/12/2017 Barings China A-Share Fund Plc 14,377,565 16,270,064 16,130,288 Net Asset Value per share 1.1Class A USD Acc Class X GBP Inc Class X USD Acc Net losses on investments The following table analyses the realised and unrealised gains and losses on investments and currencies from the profit and loss account on page 8. 10/31/2018 4/30/ /10/ /04/2018 * Realised gains on sale of investments 2,484,486 2,481,549 Realised losses on sale of investments (3,340,580) (709,388) Realised currency gains 22,822 32,568 Realised currency losses (145,318) (82,347) Unrealised gains on investments 630, ,435 Unrealised losses on investments (3,287,621) (2,917,161) Unrealised currency gains 1, Unrealised currency losses (505) (9,092) (3,634,560) (863,425) * For the period 1 January 2018 to 30 April Distributions The Fund has one annual distribution class. A distribution on the Fund is only paid on Class X GBP Inc shares; the other classes of shares are accumulating and therefore do not pay any income distributions. During the period, there were no distributions paid by the Fund. 12

15 Notes to the financial statements (continued) 6. Distributions (continued) Comparative as at 30/04/2018* The table below provides a comparative breakdown of distributions declared to 30 April Barings China A-Share Fund Class X GBP Inc Distribution frequency Income available for distribution Distributed amount paid* Income equalisation** Annually 12,070 12,070 16,308 16,308 * The Distribution has an ex-date of 2 January 2018 which was paid during the current period. These distributions with an ex-date of 2 January 2018 reflect the undistributed income on the Fund as at 31 December 2017 ** Income equalisation relates to the dealing activity of distributing classes for the period from 1 May 2017 to 30 April The income equalisation of the distributing class is disclosed separately in the statement of changes in net assets attributable to holders of redeemable participating shares for the year ended 30 April Shares issued and redeemed The redeemable participating shares entitle the holders to attend and vote at general meetings of the Company and to participate equally on a pro rata basis in the dividends and net assets of the Company, save in the case of dividends declared prior to becoming a shareholder. Shares: Class A USD Acc Class X GBP Inc Class X USD Acc Shares in issue as at 30/04/ , , ,374 Shares issued during the period 87,988 Shares redeemed during the period (2,505) Shares in issue as at 31/10/ , , ,869 Value: Class A USD Acc Class X GBP Inc Class X USD Acc $ $ Capital value of redeemable participating shares issued 1,618,804 Capital value of redeemable participating shares redeemed (45,566) Net value of redeemable participating shares issued/(redeemed) during the period 1,618,804 (45,566) 13

16 Notes to the financial statements (continued) 7. Shares issued and redeemed (continued) Comparative 30/04/2018* Barings China A-Share Fund Shares: Class A USD Acc Class X GBP Inc Class X USD Acc Shares in issue as at 30/04/ , , ,374 Shares issued during the period 52, ** Shares redeemed during the period (1,200) Shares in issue as at 30/04/ , , ,374 Value: Class A USD Acc Class X GBP Inc Class X USD Acc Capital value of redeemable participating shares issued 1,076,002 11,788** Capital value of redeemable participating shares redeemed (25,000) Net value of redeemable participating shares issued during the year 1,051,002 11,788 * For the period 1 January 2018 to 30 April ** These shares related to distributions reinvested during the period. 8. Soft commission arrangements The Investment Manager will pay for research from their own books, as commission paid on trades will be execution only, which is the agreed cost for the broker to settle the trade. 9. Transaction with connected parties The CBI s Alternative Investment Fund ( AIF ) Rulebook requires that any transaction carried out with the Company by a Promoter, the AIFM, Depositary, Investment Manager and/or associated group of companies of these ( connected parties ) are carried out as if negotiated at arm s length and are in the best interests of the shareholders. The Directors of the Company are satisfied that there are arrangements (evidenced by written procedures) in place to ensure that this requirement is applied to transactions with connected parties, and that all transactions with connected parties during the period complied with the requirement. 10. Exchange rates The exchange rates used in the financial statements are as follows: 31 October 2018 Exchange rate to 30 April 2018 Exchange rate to Chinese renminbi Euro Hong Kong dollar Pound sterling Taxation Under current law and practice, the Company qualifies as an investment undertaking as defined in Section 739B of the Taxes Consolidation Act, 1997, as amended ( the TCA ). On that basis, it is not chargeable to Irish tax on its income or gains. 14

17 Notes to the financial statements (continued) 11. Taxation (continued) However, Irish tax may arise on the happening of a "chargeable event" in the Company. A chargeable event includes any distribution payments to shareholders or any encashment, redemption, transfer or cancellation of shares and any deemed disposal of shares for Irish tax purposes arising as a result of holding shares in the Company for a period of eight years or more. No Irish tax will arise on the Company in respect of chargeable events due to: (a) a shareholder 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 TCA are held by the Company or the Company has been authorised by the Irish Revenue to make gross payments in the absence of appropriate declarations; and (b) certain exempted Irish tax resident shareholders who have provided the Company with the necessary signed statutory declarations. Capital gains, dividends and interest received on investments made by the Company may be subject to withholding taxes imposed by the country of origin and such taxes may not be recoverable by the Company or its shareholders. 12. Chinese capital gains tax On 15 November 2014, a circular from the Chinese authorities was published which both announced a temporary tax exemption on any gains realised from 17 November 2014 onwards by non-chinese resident investors on the disposal of China A-Shares and also confirmed that any similar gains realised in the five years prior to 17 November 2014 would potentially be subject to Chinese tax. As an Irish domiciled fund, the Company has made a filing with the Chinese authorities on the basis that the gains realised on the disposal of non-land rich China A-Shares could obtain the benefit of the China/Ireland double tax treaty, and filed all appropriate returns for the period up to 17 November Based on domestic Chinese professional advice in relation to the temporary tax exemption, the Company does not currently have any provision for capital gains tax on non-land rich China A-Shares. It should be noted that at this time there remains no indication as to when the temporary tax exemption referred to above might cease, potentially causing some or all of the gains realised after any cessation of the exemption to become subject to Chinese tax. Therefore, given the residual uncertainty surrounding the eventual tax treatment of historic non-land rich gains referred to above and the potential for future land rich or non-land rich gains to become taxable if the current temporary exemption ceases to apply, provisions may have to be made at any time for taxation which could be levied by China on the Company. Consequently, investors may be advantaged or disadvantaged depending upon the position of the Chinese tax authorities in the future and the level of any provisioning, proving to be either excessive or inadequate when they subscribed for or when they redeemed their shares in the Company. 13. Cash Cash deposits of 1,162,875 (30 April 2018: 260,426) are held with the Northern Trust Company ( TNTC ). Restricted cash of 273,875 (30 April 2018: 301,035) was held with the Central Depositary Shenzhen and the Central Depositary Shanghai. This cash served to pay a minimum clearing reserve payment to the exchange when the Fund started trading. This cash is not available for immediate use. All cash and bank balances were held with TNTC with the exception of restricted cash which was held with the Shenzhen and Shanghai stock exchanges. 15

18 Notes to the financial statements (continued) 14. Directors Remuneration The Articles of Association authorise the Directors to charge a fee for their services at a rate determined by the Directors and may be entitled to special remuneration if called upon to perform any special or extra services to the Company. The Directors shall be reimbursed all reasonable travel, hotel and other expenses properly incurred in connection with the business of the Company or the discharge of their duties. Please refer to Note 3 for details on the Directors management fees. 15. Subsequent events There have been no events subsequent to the period-end which, in the opinion of the Directors, may have had an impact on the financial statements for the period ended 31 October Approval of the financial statements The financial statements were approved by the Board of Directors on 13 December

19 Portfolio statement As at 31 October 2018 Barings China A-Share Fund Plc Financial assets at fair value through profit or loss Currency Nominal holdings Fair value % of NAV Equities: 92.42% (30 Apr 2018: 96.70%) Consumer Discretionary: 16.24% (30 Apr 2018: 24.05%) Haier Electronics HKD 206, , Lao Feng Xiang CNY 57, , Midea CNY 100, , Rainbow Department Store CNY 542, , Wuxi Little Swan CNY 25, , ,335, Consumer Staples: 33.14% (30 Apr 2018: 21.12%) China Resources Beer HKD 96, , Chongqing Brewery CNY 144, , Guangdong Haid CNY 216, , Jiangsu Yanghe Brewery Joint-Stock CNY 40, , Kweichow Moutai CNY 15,800 1,243, Sichuan Swellfun CNY 111, , Sun Art Retail Group HKD 450, , Uni-President China HKD 303, , Wuliangye Yibin CNY 35, , ,764, Energy: 2.82% (30 Apr 2018: 0.00%) China Petroleum & Chemical CNY 448, , , Financials: 22.74% (30 Apr 2018: 16.61%) Bank of Ningbo CNY 60, , China Construction Bank - China CNY 944, , China Construction Bank - Hong Kong HKD 186, , China Merchants Bank CNY 218, , New China Life Insurance HKD 15,500 72, Ping An Insurance Group Co of China - China CNY 104, , Ping An Insurance Group Co of China - Hong Kong HKD 7,500 70, ,268, Health Care: 3.70% (30 Apr 2018: 5.43%) BeiGene HKD 28, , Innovent Biologics HKD 40,000 84, Jiangsu Hengrui Medicine CNY 22, , , Industrials: 9.92% (30 Apr 2018: 10.45%) China Railway Construction Corp CNY 202, , CRRC Corp CNY 270, , Daqin Railway CNY 263, , Jiangsu Hengli Hydraulic CNY 55, , Shenzhen Inovance Technology CNY 34, ,

20 Portfolio statement (continued) As at 31 October 2018 Barings China A-Share Fund Plc Financial assets at fair value through profit or loss (continued) Currency Nominal holdings Fair value % of NAV Equities: 92.42% (30 Apr 2018: 96.70%) (continued) Industrials: 9.92% (30 Apr 2018: 10.45%) (continued) Xuji Electric CNY 163, , ,426, Information Technology: 0.51% (30 Apr 2018: 9.50%) Hangzhou Hikvision Digital Technology CNY 21,150 73, , Materials: 2.79% (30 Apr 2018: 2.05%) Shandong Gold Mining - China CNY 37, , Shandong Gold Mining - Hong Kong HKD 120, , , Real Estate: 0.56% (30 Apr 2018: 7.49%) China Merchants Shekou Industrial Zone CNY 30,100 81, , Total equities 13,288, Total financial assets at fair value through profit or loss 13,288, Cash and cash equivalents 1,436, Other net liabilities (347,293) (2.41) Total net assets attributable to holders of redeemable participating shares 14,377, Comparative figures shown in brackets relate to 30 April

21 Appendix 1 Significant portfolio movements Cost Purchases USD' 000 Sichuan Swellfun (1,504) China Merchants Bank (1,449) Rainbow Department Store (1,422) China Construction Bank - China (1,175) Kweichow Moutai (1,157) Ping An Insurance Group Co of China (1,129) Chongqing Brewery (991) Wuliangye Yibin (957) Guangdong Haid (860) China Railway Construction Corp (749) Bank of Ningbo (696) Jiangsu Yanghe Brewery Joint-Stock (624) China Resources Beer (618) Sun Art Retail Group (600) CRRC Corp (532) Anhui Conch Cement (526) China Petroleum & Chemical (525) Haier Electronics (506) China International Travel Service (485) Corporation Midea (480) Hangzhou Hikvision Digital Technology (437) Luxshare Precision Industry (395) New China Life Insurance (385) Zhejiang Sanhua Intelligent Controls (362) Hangzhou Silan Microelectronics (314) Shenzhen Airport (313) Uni-President China (310) Daqin Railway (309) Lao Feng Xiang (305) China Communications Services Corp (302) Jiangsu Hengrui Medicine (295) Fiberhome Telecommunications (293) Technologies Shenzhen Salubaris Pharmaceuticals (282) Shandong Gold Mining - China (273) Shanghai Jinjiang International Hotels (271) Development Wuxi Little Swan (269) Zhejiang Dahua Technology (265) China Merchants Shekou Industrial Zone (257) Proceeds Sales USD' 000 Sichuan Swellfun 1,494 Wuliangye Yibin 1,406 China Merchants Bank 1,353 Bank of Ningbo 1,170 Jiangsu Hengrui Medicine 866 China Mengniu Dairy 818 Rainbow Department Store 751 Midea 697 China International Travel Service 681 Corporation China Merchants Shekou Industrial Zone 658 Shanghai Jinjiang International Hotels 644 Development Ping An Insurance Group Co of China 644 Kweichow Moutai 622 Shanghai International Airport 573 Luxshare Precision Industry 566 China Resources Beer 540 China Railway Construction Corp 533 Hangzhou Silan Microelectronics 516 Hangzhou Hikvision Digital Technology 512 China Construction Bank - China 508 Anhui Conch Cement 494 Zhejiang Dahua Technology 453 Haier Electronics 416 China Resources Land 400 Tencent 396 Chongqing Brewery 390 Wuxi Little Swan 375 SAIC Motor 374 China Communications Services Corp 374 Guangzhou Baiyun International Airport 371 Beijing Oriental Yuhong Waterproof 300 Technology New China Life Insurance 294 Jiangsu Hengli Hydraulic 290 Zhejiang Sanhua Intelligent Controls 287 Shenzhen Airport 284 China Resources Cement 264 China Vanke 262 Fiberhome Telecommunications 259 Technologies 19

22 Appendix 2 Securities financing transactions regulation Unaudited The securities financing transactions regulation requires Baring International Fund Managers (Ireland) Limited ( the AIFM ) to comply with a series of obligations. In particular, the AIFM is required to provide investors with information on the use of securities financial transactions ( SFTs ) and total return swaps ( TRSs ) by Barings China A-Share Fund Plc ( the Company ) in all interim and annual reports published from 13 January During the period 1 May 2018 to 31 October 2018, the Company did not enter into SFTs and TRSs. 20

23 Registered address: Baring International Fund Managers (Ireland) Limited 70 Sir John Rogerson s Quay Dublin 2 D02 R296 Ireland Contact: Tel: Fax: Important information: This document is approved and issued by Baring International Fund Managers (Ireland) Limited. Disclosure: Baring International Fund Managers (Ireland) Limited Authorised and regulated by the Central Bank of Ireland 70 Sir John Rogerson s Quay, Dublin 2, D02 R296, Ireland