Final Results
Baring Emerging Europe PLC
Announcement of Final Results
The Directors of Baring Emerging Europe PLC announce the Company's results for
the year ended 30 September 2011.
Chairman's statement
Dear Shareholder,
It has been another year of volatile markets across the world and Emerging
Europe has not escaped. At the half year stage, I commented on how surprising
it was that markets had been so resilient in the teeth of the economic
difficulties the world faces. In the second half of your Company's year, this
resilience cracked and the chickens came home to roost. In the hope of giving
you a full explanation of what has happened in the past year, I have split this
statement into the four key sections on which your Board concentrates and will
close with some comments about the outlook for the investment environment in
our region.
Investment Returns
For the first six months of the year, the NAV of the Company rose by 14.7%.
Markets seemed willing to ignore the trouble brewing in the sovereign debt
markets in the eurozone and were optimistic that something akin to normal
economic growth was established in the developed world. That now feels like a
different era. Since the end of March, the NAV has fallen by 34% to give a
return for the year of -24%. This is disappointing and all the more so as it
represents an underperformance of the Company's benchmark. The decline has come
against a background of waning economic activity in the developed world and
further uncertainty in the state of sovereign debt markets in the eurozone.
Investors have voted with their feet and sold down any assets perceived as
risky. Emerging Europe falls into this category and was one of the victims of
the flight from risk.
The principal reason for the underperformance of the Company against its
benchmark is poor stock selection in Russia. A full explanation is given in the
manager's report which follows. Against the peer group using the Morningstar
Emerging Europe Universe in the year ended 30 September 2011 the Company was
ranked 74th out of 95 funds in this universe. Over three years to 30 September
2011 it was ranked 46th out of 91 funds and over five years it was ranked 16th
out of 85 funds. In the longer term, performance remains good: since the
establishment of the Company in its current form in 2002, the NAV has risen by
16.4% per annum.
The Board continues to have confidence in the Company's fund management team, led by
Matthias Siller. He is an experienced investor in the region with a solid
analytical approach both to the economic environment and to the task of
identifying attractive companies. This has been a difficult year, but we remain
confident that the decision making process is of high quality and that the
level of resource applied to the investment task is more than adequate. These
factors are likely to be rewarded in good relative performance over time.
Discount Management & Tender Offer
As you know, the Board has had a robust approach to the management of the
discount to NAV for many years. We believe that the consistent application of a
discount control mechanism is advantageous to shareholders. For many years, we
have bought stock in to control the discount and the market understands that we
are committed to this approach. Despite the market volatility of the past year,
the discount has averaged 9.0 %, which is slightly less than was the case in
the previous fiscal year and we have bought back 1,492,000 shares for
cancellation for £13,054,000. Subsequent to the year end a further 547,000
shares have been repurchased for cancellation. Despite the success of this
policy in containing the discount, the Board believes that it is an appropriate
time to tighten the discount further and to offer shareholders the opportunity
to receive a return of capital closer to NAV.
Following consultation with its advisers and certain major shareholders, on 12
December 2011, the Board announced that it was proposing, subject to obtaining
necessary shareholder approval, to undertake a tender offer (the "Tender
Offer") to facilitate a return of capital in respect of up to 20% of the
Company's shares in issue. In addition, the board proposes a change to the
Company's discount control mechanism such that it will target an ongoing rating
for the Company narrower than 10%. The details are as follows:
Tender Offer
Under the Tender Offer, shareholders (other than certain excluded overseas
shareholders) will be entitled to tender up to 20% of their holdings for
repurchase by the Company. Shareholders may have the opportunity to tender
additional shares beyond this basic entitlement, subject to the level of
participation in the Tender Offer by other shareholders. The tender price will
be the equivalent of 97% of the Company's prevailing net asset value per share
("NAV"), which in the board's opinion reflects an equivalent value in current
markets close to that which would be achieved upon liquidation of the Company.
Adjustment to discount control mechanism
The Board also proposes to adopt a policy of seeking to limit the price at
which the Company's shares trade to a level significantly lower than a 10%
discount to NAV by making purchases of its shares in the market from time to
time. This will be in place of the current policy of seeking to limit the price
to a level lower than a 12% discount.
This will be in addition to the existing policy that if the average closing
mid-market price at which the Company's shares trade in the market in the
period of ninety days prior to the publication of the Company's results each
year represents a discount to NAV which exceeds the target discount, the
Company will, subject to the conditions outlined below, make a tender offer
available to all shareholders to repurchase up to 15% of the outstanding issued
share capital of the Company at a price equivalent to 95% of NAV or greater
(after taking account of any expenses including the costs of selling
investments in order to fund the repurchase). Any shares repurchased will, at
the discretion of the Company, either be held in treasury and may be issued at
a later date at or above net asset value, or may otherwise be cancelled.
In order to implement this adjusted policy, the Board intends to seek
shareholder authority at the Company's annual general meeting each year to
repurchase up to 15% of its issued share capital. The timing of any tender
offer to repurchase shares under the policy will be at the discretion of the
Company. The making of any offer will be conditional upon the Company having
the required shareholder authority or such shareholder authority being
obtained, the Company having sufficient distributable reserves to effect the
repurchase and, having regard to its continuing financial requirements,
sufficient cash reserves to settle the relevant transactions with shareholders,
and the Company's continuing compliance with the Listing Rules and all other
applicable laws and regulations. The Company may require a minimum level of
participation in any tender offer to be met, failing which the tender offer may
be declared void.
Expected timetable
Further details of the proposals for the Tender Offer will be contained in a
circular which will be sent to the Company's shareholders as soon as
practicable in order to convene the general meeting of shareholders necessary
to approve the implementation of the Tender Offer.
It is intended that the general meeting of shareholders will be convened on the
same day as the Company's annual general meeting.
The Board believes that the proposals enable shareholders wishing to realise
all or part of their investment in the Company to do so at a price close to
realisable value whilst at the same time providing a NAV uplift for continuing
shareholders together with a more robust discount policy. Equally, it is the
view of the board that these proposals maintain the integrity of the investment
portfolio and allow flexibility for investment performance to improve in the
medium term.
Governance
This was a relatively `normal' year from a governance point of view, although
there will be substantial changes over the next couple of years as a result of
new regulation following the crisis in 2008. Your Board reviewed all its
external relationships and focused particularly on custody, following scrutiny
of where the responsibility lies for any problems in this area. While this is
crucial for any investment trust, it bears close examination in Emerging Europe
because of the relative underdevelopment of capital markets in our region.
Following our review, the Board is confident that our custodial arrangements
are as robust as is possible in our investment environment.
VAT
We reported in an interim statement at the end of June that on 24 May 2011 the
Company announced that it had recovered £328,176 of VAT on management fees and
performance fees invoiced since the Company's inception in December 2002 until
31 March 2005, together with interest thereon of £58,129. This recovery had not
previously been recognised as an asset by the Company due to the uncertainty of
the recovery and has resulted in an uplift of 1.15 pence to the net asset
value. The VAT recovered and interest has been credited to the Company's
revenue and capital accounts in accordance with the Board's policy for
allocation of management fees and finance costs. This completes the recovery of
VAT on management and performance fees.
Dividend
The flow of dividend income from the portfolio companies has increased
significantly from £5.4 million in 2010 to £8.4 million in 2011, an increase of
55%. This in particular reflects a significant in the level of dividends from
the Russian portfolio. In addition, 2011 has benefited from the recovery of the
final amount of VAT suffered on management fees of £275,000 together with
interest of £53,000. This has resulted in an increase in the net revenue after
tax from £1.0 million in 2010 to £3.7m million in 2011.
In previous years the Company has paid an annual dividend following shareholder
approval at the annual general meeting. As the annual general meeting will be
held slightly later than usual in 2012 the Board has decided to pay the
dividend for the year ended 30 September 2011 as an interim dividend which will
enable us to maintain a similar dividend timetable as in previous years. The
Board has therefore declared an interim dividend of 10.0p per ordinary share
for the year ended 30 September 2011 out of income available for distribution
of 10.99p per share which will be paid on 1 February 2012 to shareholders on
the register 6 January 2012. The shares will be marked ex-dividend on 4 January
2012.
Directorate
Following the retirement of John Cousins and the election of Ivo Coulson at the
AGM in January, there have been no further changes to the Board and none are
anticipated in the short run. Every year, we conduct a review of the Board to
ensure that we have the appropriate mix of skills and experience. This is an
exercise we take seriously as we recognise that we operate in a complex area
which is in constant flux and we need to remain both current on the issues and
critical of our suppliers.
Each year the Nomination Committee discusses the contribution of those
Directors offering themselves for re-election at the subsequent AGM. This year
Jonathan Woollett and I retire by rotation and being eligible, offer ourselves
for re-election.
Shareholder Communication
I would re-iterate what I said last year: this is your Company and I and my
Board colleagues encourage all shareholders to let us know of any specific
issues of concern at any point.
Outlook
Emerging European markets are being driven more by events in the developed
world than by what is happening domestically. This dependence reflects two
dominant themes which have been determining investor behaviour: the first is
that weak economic activity in the EU and US will dampen demand for products
from the emerging world; the second is that anything which smells of risk is
being sold. As far as the first concern goes, it is true that demand is likely
to slacken, but our region is still growing and has the capacity to orientate
itself more to domestic consumption should export markets fail. As to the
second, it is ironic that investors fleeing solvency risk (in the shape of Euro
sovereigns) also flee perfectly solvent countries which happen to have volatile
stock markets. Whatever one thinks of this stock market logic, the results have
been dramatic.
Where does that leave us? Economic growth is likely to be contained by the
process of balance sheet restructuring going on across the developed world, as
indebted consumers pay down debt. Most current investment practitioners have
not lived through a period like this, so forecasting is more than usually
difficult. Nevertheless, it does not seem unreasonable to expect a long period
of sluggish growth punctuated by frequent slowdowns. Compared to this, the
growth prospects in Emerging Europe look and will continue to look attractive.
On the sovereign debt issue, a consensus is beginning to emerge about both the
scale of the problem and the shape of a solution. Unfortunately, these both
require unanimity amongst European politicians which is unpredictable and will
contribute to market volatility. The longer term problems implied in the huge
increase in sovereign debt which is needed to restore market confidence will
mean a significant increase in inflation in the medium term, although at the
moment this lies beyond the horizon.
In Emerging Europe itself, economic issues are more predictable, with the usual
mix of good and bad. Politics in Russia, our largest market, have taken a
surprising turn with signs of genuine popular opposition to the regime. It is
too early to predict how this will unfold, but moves in the direction of
populism seem likely. Turkey, by comparison, is considered stable compared with
the past. Stock market valuation has fallen sharply across the region, and many
stocks now trade at prices which imply a level of distress which is not
present. The manager is therefore finding individual stock opportunities in
markets which are growing, and he is taking advantage of these. Of course we
can be blown off course by the storms elsewhere, but the general course setting
in our region is positive.
Steven Bates
Chairman
20 December 2011
Report of the Investment Manager
for the year ended 30 September 2011
How we manage the Company
At Baring Asset Management, we believe that a sound research process is the
starting point of any successful investment approach. In our view, it is most
effective to analyse both companies and countries, with the goal of investing
in the most attractive companies in the most attractive countries.
Our research focuses on growth at a reasonable price, on sensitivity to
currency movements, and to other external factors; on the soundness or
otherwise of government policy (in the case of a country), or business plan (in
the case of a company); and last but not least, on the level of valuation. This
research gives rise to an assessment of the fundamental drivers of return, and
to this we add a subjective judgement as to the level of return we expect from
each asset in which we might invest. We also check that these rankings are
consistent with the broader thematic developments we expect as a firm. These
rankings then allow us to construct a disciplined and relatively concentrated
portfolio of our most attractive candidates.
Performance
The Company's year was split into two very distinctive halves. While the
Company's Net Asset Value performed strongly in the first half year of the
review period, the six-month period from 31 March brought a severe market
correction that led to an overall reduction in NAV of 23.79% over the course of
the year.
It was a year of drama: the first half saw the unfolding of events in the Arab
world that significantly increased the risk premium for oil and the disastrous
earthquake in Japan. At the same time an inability to come to terms with the
budgetary crises in the European periphery resulted in a policy vacuum at the
heart of the EU. While these events are not connected, taken together they
seriously affected global economic growth prospects and led to a significant
deterioration in investor sentiment.
Against this challenging backdrop, Baring Emerging Europe PLC underperformed
its benchmark index over the period, ending the 12 months to 30 September in
the fourth quartile of the peer group of Emerging European equity funds.
The main reason for the underperformance was stock selection in Russia, by far
the largest component of the benchmark index, representing 59.6% of the whole.
Within Russia, the portfolio was hurt by stock selection in the materials
sector, where our strategy of focusing on attractively valued companies over
more expensive ones did not work during this time of uncertainty.
Exposure to other markets was either neutral or contributed positively to
performance over the period. One example was Hungary, where our decision to
reduce the portfolio's exposure to the market helped the company avoid a sharp
decline. The Hungarian market ended the year down by more than 37% in US dollar
terms. Another was Turkey, where we successfully added value for investors by
adjusting the portfolio's exposure, often ahead of the consensus view, as
investment conditions changed.
In terms of sector exposure, we were right to reduce exposure to the materials
sector early in the year as economic conditions deteriorated, and investors
benefited from our decision to increase gradually the portfolio's investment in
the energy sector, where elevated oil prices pushed shares up. While these
positives were not sufficient to offset stock selection in the materials sector
in Russia during the reporting period, they did help (in part) to mitigate the
negative effects.
Strategy
The pronounced sell-off in markets in the second half of the year followed a
collapse in global growth expectations and the fully-fledged escalation of the
Euro-crisis. As it became clear that the pace of global growth, and US growth
in particular, was slowing down significantly, investors worried about the
outlook for economic activity and began to anticipate an environment where
growth slows dramatically or fails to materialize for an extended period - a
period of economic stagnation.
Economically sensitive assets were affected much more than the general market
as conditions worsened over the summer and investors started to express a high
degree of concern. Not surprisingly, this development was accompanied by sharp
outflows from so-called "risky assets", emerging markets not being spared.
Here, investors followed the classic pattern of selling equities first and then
turning their attention to emerging market currencies and bonds. September saw
the culmination of selling pressure.
In Emerging Europe, markets followed a similar pattern with the important
exception of the Turkish stock market, where the unorthodox monetary policy
followed by the Turkish Central Bank provoked concerns that inflation might
accelerate and be higher than targeted. Turkish equities moved sideways during
the first half of the year, underperforming Central European markets and Russia
by 21% and 28% respectively.
In the second half of the year, though, the domestically-focused nature of the
Turkish economy, its well-capitalised banking sector - in contrast to much of
developed Europe - and a general improvement in the inflation outlook prompted
a reassessment of investor attitudes towards Turkey. Although the market still
declined, it proved more resilient than most, declining by 29.5% in US dollar
terms. This clearly illustrates the magnitude of the fall in share prices
between 30 April and 30 September even if one considers that, in the case of
Turkey, the major blame lies with the Turkish Lira, which contributed -22.3% to
this negative performance.
The Russian market was the best performer over the course of the year, though
falling by 11% in US dollar terms. This performance lagged developed markets by
only 2% during the same period, something achieved by few other emerging
markets over that time. While Russia also was subject to selling pressures in
the second half of the year, it still managed to outperform Central European
exchanges in both halves. High commodity prices, especially the resilience of
oil prices, further increased Russia's current account surplus. Tax intake is
far above budget plans and company earnings stand at all-time highs.
We continued to favour Russia and the other former Soviet Republics in the
Commonwealth of Independent States during the year to benefit from the
attractive share price valuations and strong earnings growth exhibited by
companies in the region. We actively managed the portfolio's exposure to Turkey
to benefit from the volatility of this market during the reporting period. We
were generally cautious towards the Central European markets throughout the
year, with a particularly low exposure to Hungary.
Market Prospects
With markets being held hostage by global growth fears and the Euro crisis, we
are focused on attractively valued companies with tangible growth exposure in
highly liquid markets with prudent fiscal policies and low political risk.
While affected in very different ways by the ongoing slowdown in global growth
and the uncertain liquidity conditions, Poland, Turkey and Russia generally
score well under these assumptions.
The open Polish economy will be affected by significantly lower growth rates in
the EU and in Germany in particular. On the positive side, the recent election
brought a victory for the centre-right government, the first time a government
has been re-elected in Poland since the end of Communism. While one can sense
an increasingly hostile environment towards foreign portfolio investment in
some parts of Central Europe, particularly Hungary, it was encouraging to see
that the Polish electorate decided against playing the nationalist card.
While next year's European football championship in Ukraine and Poland will
attract the attention of football fans all over the world, the government's
tasks are also quite challenging and will be closely followed by the market.
The fiscal expansion that had successfully supported growth and, importantly,
consumer sentiment, will have to come to an end and austerity measures will
need to be implemented in Poland to keep the bond markets calm and help to
bring the fiscal deficit under control.
In Turkey, the unorthodox monetary policy implemented by the Central Bank
created inflationary pressures and led to volatility on the foreign exchange
markets. Since high currency volatility undermines consumer and investment
sentiment, the policy might very well become much more orthodox in future. In
our view, this means that short-term interest rates are likely to rise from
here, curbing domestic demand and eating into bank profit margins.
Prime Minister Erdogan's efforts to become the first publicly elected President
in Turkey (the presidential vote used to be cast by parliament) won't make the
Central Bank's job any easier, as the ruling AK-Party will try to prevent any
measures which are likely to lead to a deterioration in growth ahead of the
election. Meanwhile, the Turkish banking sector demonstrated once again how
well run the vast majority of Turkish banks are by safely steering through the
storms in global financial markets. Access to external sources of funding
(mainly the syndicated bond market) was available throughout the year.
Next year, the slowdown in loan demand as the Turkish economy cools and
short-term interest rates increase in combination with higher funding costs
bodes ill for the banking sector's profit growth potential, while the export
oriented manufacturing sector might benefit from the significant depreciation
of the Turkish Lira.
Russia's stock market currently trades at multi-year lows in valuation terms,
even though 2011 will be the most profitable year for Russian listed companies
in net income terms ever. This conundrum can be partially explained by the
economically-sensitive nature of the economy and the general skepticism of
stock market investors as to the long term growth outlook and political
environment. Conversely, recent news on foreign direct investment paints a
completely different picture as merger and acquisition activity has recently
picked up significantly across almost all sectors.
In the future, the government's intention to take advantage of Russia's unique
competitive advantage - the abundance of natural resources - to support an ever
increasing social bill and public sector payroll means that the general stance
of the Russian government is likely to remain extremely investor friendly.
This, together with a very favorable liquidity position and a high level of
demand amongst consumers which has yet to be tapped in any significant way will
provide growth opportunities for investors for years to come.
Prime Minister Putin's decision to run again for the Presidency and Finance
Minister Kudrin's decision to resign shortly after have raised questions about
the political direction the new President will lead the nation in, with a
successful economic policy remaining key to the implementation of reforms.
Recently we have seen political protests in Moscow, as support for the ruling
United Russia party slumped to just 49% of the popular vote in parliamentary
elections on 4th December, down from 64% in 2007. Although a source of
uncertainty in the short term, we believe these protests are unlikely to spread
and could actually, over time, hasten the reforms promised by the Kremlin.
The agenda of Prime Minister Putin should not be confused with that of the
United Russia party he leads. Mr Putin stands for President in the elections in
March 2012, and if the political mood has changed, he could well distance
himself from the party and position himself as a "driving force" to hasten
reform. We believe it is a step too far to draw parallels between the protests
in Moscow and the developments of the "Arab Spring" however. Russia remains, at
heart, a conservative country, and United Russia still holds 49% of the popular
vote.
Outlook
We believe the case for investing in the region remains compelling, especially
in the larger economies and highly liquid markets of Poland, Turkey and Russia.
While the effects of the European debt crisis will continue to influence
markets in the short term, we strongly believe that recent developments will
lead international investors to distinguish developed Europe from Emerging
Europe.
The 500 million inhabitants of Emerging Europe will be equally subject to
increasing competition and lower rates of global growth, but benefit from
strong corporate and national balance sheets, low levels of leverage, a
successful history of attracting foreign direct investment and rich resource
base.
With all these advantages, we believe the region will continue to deliver
growth across many sectors while equity markets trade near their lowest
valuation levels ever compared to history.
Baring Asset Management Limited
20 December 2011
Principal risks
The key risks to the Company fall broadly under the following categories:
• Investment and strategy
The Board regularly reviews the investment mandate and long-term investment
strategy in relation to the market and economic conditions. The Board also
regularly monitors the Company's investment performance against the benchmark
and the peer group and its compliance with the investment guidelines.
• Accounting, legal and regulatory
In order to qualify as an investment trust, the Company must comply with the
provisions contained in Section 1158 of the Corporation Taxes Act 2010. A
breach of Section 1158 in an accounting period could lead to the Company being
subject to corporation tax on gains realised in that accounting period. Section
1158 qualification criteria are continually monitored by Baring Asset
Management Limited and the results reported to the Board at its regular
meetings. The Company must also comply with the Companies Act and the UKLA
Listing Rules. The Board relies on the services of the administrator, Northern
Trust Global Services Limited and its professional advisers to ensure
compliance with the Companies Act and the UKLA Listing Rules.
• Loss of investment team or Investment Manager
A sudden departure of the Investment Manager or several members of the
investment management team could result in a short-term deterioration in
investment performance. The Manager takes steps to reduce the likelihood of
such an event by ensuring appropriate succession planning and the adoption of a
team-based approach, as well as special efforts to retain key personnel.
• Discount
A disproportionate widening of the discount relative to the Company's peers
could result in loss of value for shareholders. The Board regularly discusses
discount policy and has set parameters for the Company's broker to follow with
regard to the buy-back of shares.
• Corporate governance and shareholder relations
Details of the Company's compliance with corporate governance best practice,
including information on relations with shareholders, are set out in the
Corporate Governance Report.
• Operational
Like most other investment trust companies, the Company has no employees. The
Company therefore relies upon the services provided by third parties and is
dependent on the control systems of the Investment Manager and the Company's
service providers. The security, for example, of the Company's assets, dealing
procedures, accounting records and maintenance of regulatory and legal
requirements, depend on the effective operation of these systems. These are
regularly tested and monitored. The custodian and the Investment Manager also
produce annual reports on internal controls which are reviewed by their
respective auditors and give assurance regarding the effective operation of
controls.
• Future developments
The future development of the Company is much dependent upon the success of the
Company's investment strategy in the light of economic and equity market
developments in the countries in which it invests. The Investment Manager
discusses the outlook in his report.
• Related Party Transactions
During the financial year, no transactions with related parties have taken
place which have materially affected the financial position or the performance
of the Company during the year.
• Directors' Responsibilities
The Directors each confirm to the best of their knowledge that:
a) the financial information has been prepared in accordance with applicable UK
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
b) the Annual Report and Accounts, to be published shortly, includes a fair
review of the development and performance of the business and the position of
the Company, together with a description of the principal risks and
uncertainties that they face.
For and on behalf of the Board
Steven Bates
Chairman
20 December 2011
Income statement
(incorporating the Revenue Account*) for the year ended 30 September 2011
Year Year Year Year Year Year
ended 30 ended 30 ended 30 ended 30 ended 30 ended 30
September September September September September September
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
Note £000 £000 £000 £000 £000 £000
(Losses)/
gains on
investments
held
at fair - (72,963) (72,963) - 51,798 51,798
value
through
profit or
loss
Income 8,496 - 8,496 5,430 - 5,430
Investment (2,593) - (2,593) (2,422) - (2,422)
management
fee
VAT
recovered
from HMRC
on 275 53 328 - - -
management
fees
Other (1,256) - (1.256) (1,307) - (1,307)
expenses
Net return
before
finance
costs and 4,922 (72,910) (67,988) 1,701 51,798 53,499
taxation
Finance (13) - (13) (17) - (17)
costs
Return on
ordinary
activities
before 4,909 (72,910) (68,001) 1,684 51,798 53,482
taxation
Taxation (1,172) - (1,172) (655) - (655)
Return
attributable
to
ordinary 3,737 (72,910) (69,173) 1,029 51,798 52,827
shareholders
Return per 3 10.99p (214.41)p (203.42)p 2.91p 146.54p 149.45p
ordinary
share
*The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
The supplementary revenue and capital columns are both prepared under the
guidance published by the Association of Investment Companies.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the above statement.
Balance sheet
as at 30 September 2011
2011 2010
Notes £000 £000
Non current assets
Investments at fair 228,153 307,030
value through
profit or loss
Current assets
Debtors 621 6,139
Cash at bank and in 2,980 1,846
hand
3,601 7,985
Creditors: amounts (434) (469)
falling due within
one year
Net current assets 3,167 7,516
Net assets 231,320 314,546
Capital and
reserves
Called-up share 4 3,630 3,779
capital
Share premium 1,411 1,411
account
Special reserve 1,252 14,306
Redemption reserve 1,158 1,009
Capital reserve 218,205 291,115
Revenue reserve 5,664 2,926
Total equity 231,320 314,546
shareholders' funds
Net asset value per 5 701.50p 912.60p
share
Company registration number 4560726
Reconciliation of movement in shareholders' funds
for the year ended 30 September 2011
Called-up Share
share premium Special Redemption Capital Revenue
capital account reserve reserve reserve reserve Total
£000 £000 £000 £000 £000 £000 £000
For the year
ended
30 September
2011
Beginning of 3,779 1,411 14,306 1,009 291,115 2,926 314,546
year
Return for the - - - - (72,910) 3,737 (69,173)
year
Buyback of own
shares
for - - (13,054) - - - (13,054)
cancellation
Transfer to
capital
redemption (149) - - 149 - - -
reserve
Dividends paid - - - - - (999) (999)
Balance at
30 September 3,630 1,411 1,252 1,158 218,205 5,664 231,320
2011
Called-up Share
share premium Special Redemption Capital Revenue
capital account reserve reserve reserve reserve Total
£000 £000 £000 £000 £000 £000 £000
For the year
ended
30 September
2010
Beginning of 3,995 1,411 31,792 793 239,317 4,982 282,290
year
Return for the - - - - 51,798 1,029 52,827
year
Buyback of own
shares
for - - (17,486) - - - (17,486)
cancellation
Transfer to
capital
redemption (216) - - 216 - - -
reserve
Dividends paid - - - - - (3,085) (3,085)
Balance at
30 September 3,779 1,411 14,306 1,009 291,115 2,926 314,546
2010
Cashflow statement
for the year ended 30 September 2011
Year ended Year ended
30 September 30 September
2011 2010
£000 £000
Operating activities
Income received from investments 9,710 5,534
Interest received - 1
Investment management fees and performance fees (2,565) (3,404)
paid
VAT recovered (including interest thereon) 328 -
Other cash payments (1,262) (1,268)
Net cash inflow from operating activities 6,211 863
Servicing of finance
Interest paid (13) (17)
Taxation
Overseas tax paid (1,172) (488)
Financial investment
Purchases of investments (193,474) (84,457)
Sales of investments 203,635 95,391
Net cash inflow from financial investment 10,161 10,934
Equity dividends paid (999) (3,085)
Net cash inflow before financing 14,188 8,207
Financing
Buyback of ordinary shares (13,054) (17,486)
Net cash outflow from financing (13,054) (17,486)
Increase/(decrease) in cash 1,134 (9,279)
Notes to the accounts
for the year ended 30 September 2011
Accounting policies
1. Basis of accounting
This financial information is prepared under accounting policies set out in
accordance with United Kingdom Generally Accepted Accounting Practice (`UK
GAAP') and with the Statement of Recommended Practice `Financial Statements of
Investment Trust Companies and Venture Capital Trusts' (the `SORP') issued by
the AIC in January 2009. This financial information does not constitute the
Company's statutory accounts for the years ended 30 September 2011 or 2010. The
financial information for 2010 is derived from the Annual Report and Accounts
for 2010 which have been delivered to the Registrar of Companies and included
the Report of Independent Auditors which was unqualified and did not contain a
statement under sections 498 (2) or (3) of the Companies Act 2006. The
statutory accounts for 2011 will be finalised on the basis of the financial
information presented by the Directors in this preliminary announcement and
will be delivered to the Registrar of Companies in due course.
All of the Company's operations are of a continuing nature.
This financial information has been prepared under the historical cost
convention, as modified by the revaluation of investments and derivative
financial instruments at fair value through profit or loss.
2. Dividend
2011 2011 2010 2010
Pence per £000 Pence per £000
share share
Annual dividend per ordinary share 10.00p 3,297 2.90p 1,000
- proposed
3. Return per ordinary share
Total Total
Revenue Capital 2011 Revenue Capital 2010)
Return per ordinary share 10.99p (214.41)p (203.42)p 2.91p 146.54p 149.45p
Revenue return (earnings) per ordinary share is based on the net revenue on
ordinary activities after taxation of £3,737,000 (2010: £1,029,000).
Capital return per ordinary share is based on net capital losses for the
financial year of £(72,910,000) (2010: net capital profits of £51,798,000).
These calculations are based on the weighted average of 34,004,143 (2010:
35,346,596 shares) ordinary shares in issue during the year.
At 30 September 2011 there were 32,975,100 ordinary shares of 10 pence each in
issue (2010: 34,467,110) which excludes 3,318,207 ordinary shares held in
treasury (2010: 3,318,207 shares held in treasury). The shares held in treasury
are treated as not being in issue when calculating the weighted average of
ordinary shares in issue during the year.
4. Called-up share capital
2011 2010
£000 £000
Allotted, issued and fully paid up
36,293,317 (2010: 37,785,317) ordinary shares of 10 pence 3,630 3,779
(fully paid)
During the year 1,492,000 ordinary shares were repurchased for cancellation for
£13,054,000 (2010: 2,166,599 ordinary shares were repurchased for cancellation
for £17,486,000). During the year no ordinary shares were repurchased to be
held in treasury and no ordinary shares which were held in treasury were
cancelled. The Company holds 3,318,207 ordinary shares in treasury which are
treated as not being in issue when calculating the number of ordinary shares in
issue during the year (2010: 3,318,207 ordinary shares were held in treasury).
Shares held in treasury are non-voting and not eligible for receipt of
dividends.
5. Net asset value per share
Total shareholders' funds and the net asset value per share attributable to the
ordinary shareholders at the year-end calculated in accordance with the
Articles of Association were as follows:
2011 2010
Total shareholders' funds (£000) 231,320 314,546
Net asset value (pence per share) 701.50p 912.60p
The net asset value per share is based on total shareholders' funds above, and
on 32,975,110 ordinary shares in issue at the year end (2010: 34,467,110
ordinary shares in issue) which excludes 3,318,207 ordinary shares held in
treasury (2010: 3,318,207 ordinary shares held in treasury). The ordinary
shares held in treasury are treated as not being in issue when calculating the
net asset value per share.
END.
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
A copy of the annual report will shortly be submitted to the National Storage
Mechanism and will be available for inspection at www.hemscott.com/nsm.do.
The annual report is also available on the Company's website at www.bee-plc.com
where up to date information on the Company, including daily NAV and share
prices, factsheets and portfolio information can also be found.
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