CHAIRMAN MOGG! Controversy over Business Secretary’s funds’ stakes in Putin propaganda giant – and fast food chain run by top Beijing policy adviser

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Star Player: What Jacob Rees-Mogg Would Look Like in Chairman Mao’s Cap

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The investment company, set up by business secretary Jacob Rees-Mogg, owns multimillion-dollar stakes in Russian and Chinese companies, reports The Mail on Sunday.

The stakes held by Somerset Capital Management (SCM) will raise eyebrows at a time of tense relations between the UK government and the Kremlin following Russian President Vladimir Putin’s invasion of Ukraine.

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Tensions are also rising with the communist regime in Beijing.

In his new role as business secretary, Rees-Mogg is responsible for delicate decisions affecting China and Russia, including allowing takeovers of British companies by Beijing-backed predators.

Among the disputed assets is a stake in Moscow-based Internet giant Yandex, often referred to as Russia’s Google and the country’s largest search engine.

According to the latest documents filed this summer, SCM owned two million shares of Yandex, which has been criticized for allegedly promoting the Kremlin’s line on its online news platform.

Imprisoned opposition leader Alexei Navalny called the company the “chief propagandist” of the bloody war against Ukraine.

Since the invasion began on February 24, Western firms have faced enormous pressure to withdraw investment from Russia.

Former Yandex chief executive Arkady Volozh resigned in June after falling under European Union sanctions.

Previously, SCM held stakes in four firms operating in Russia, but now, documents show, their stake has been reduced to two. The other is a recruiting business called Head-Hunter. Rees-Mogg is the co-founder of SCM, which manages an estimated $5bn (£4.5bn) on behalf of clients, and he lists himself as a partner in the firm in parliamentary declarations.

Earlier this month, new Prime Minister Liz Truss promoted him to Secretary of State for Business, Energy and Industrial Strategy.

SCM had just been put up for sale at a price of tens of millions of pounds, which would have given Rees-Mogg a windfall of several million pounds.

The firm maintains that he has no say in its stock selection decisions as he stepped down from direct involvement in the management of the funds when he became an MP in 2010.

However, he worked as a part-time consultant until 2019, receiving a fee of around £180,000 a year from the company for around 30 hours of work per month.

It is assumed that he owns a stake of 10 to 15 percent in SCM.

The investment company owned Yandex shares back in 2018. In March, after Putin’s invasion, she said she would withdraw from her shareholding “in due course in due course.”

Action snippet: Rees-Mogg's firm invests in Yum China, which has a Pizza Hut franchise in China.

Action snippet: Rees-Mogg’s firm invests in Yum China, which has a Pizza Hut franchise in China.

But the company’s most recent documents, seen by the Treasury Department, show that it still owns shares that are likely to be difficult to sell due to sanctions imposed since Putin’s invasion.

Financial data agency Bloomberg estimates the shares have a par value of nearly £50m.

However, like other Russian investments, they may actually be worth little or nothing due to the financial implications of the war. SCM says it has “written down” its two million Yandex shares to zero, implying it does not expect to make a profit on the investment.

Other controversial stakes include Yum China, the country’s largest restaurant group, which is one of SCM’s largest investments. It operates 12,000 restaurants in the country, including many under license such as KFC and Pizza Hut.

The documents show Somerset Capital owns a £160 million stake in the business, which is run by Fred Hu, a senior political adviser to the Communist Party of China.

Key roles: Fred Hu leads Yum China.

Key roles: Fred Hu leads Yum China.

He also owns a £6 million stake in a Taiwanese semiconductor manufacturing plant.

The semiconductor sector is sensitive worldwide and has sparked a scandal around Newport Wafer Fab, Britain’s largest microchip maker.

Rees-Mogg now controls the future of the Welsh firm, which was sold to a Chinese-backed buyer last year. He is soon expected to announce his decision on whether to terminate the deal on national security grounds.

SCM’s stakes are listed in its latest stock market filings and include dozens of shares in China, Hong Kong, Saudi Arabia, India and South America. Other big investments include a £90 million stake in Indian information technology firm Infosys, a company founded by former Chancellor Rishi Sunak’s father-in-law.

Rees-Mogg co-founded SCM in 2007 with Dominic Johnson and Edward Robertson. The firm is named after the county where Rees-Mogg grew up and is the seat of his constituency.

Oliver Crowley, a partner at the firm, said: “As a specialist in global emerging markets, Somerset Capital Management had limited access to listed Russian shares before Russia invaded Ukraine.

“After the invasion, these shares were suspended on their exchanges and Somerset’s policy was not to buy Russian securities.”

The company describes its investment targets as “emerging markets” – countries that promise high returns but carry more risk than Western countries.

Rees-Mogg declined to comment.

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