Final Results
BARING EMERGING EUROPE PLC
Preliminary unaudited announcement
in respect of the year ended 30 September 2006
INCOME STATEMENT
Six months ended 30 September 2006
Revenue Capital Total
£000 £000 £000
Gains on investments - 37,493 37,493
Gains on foreign exchange - - -
Income 5,838 - 5,838
Investment management fee (2,661 ) 21 (2,640 )
Other expenses (1,142 ) - (1,142 )
Net return before interest payable and
taxation 2,035 37,514 39,549
Interest payable (5 ) - (5 )
Net return before taxation 2,030 37,514 39,544
Taxation (731 ) - (731 )
Return attributable to ordinary shareholders 1,299 37,514 38,813
Revenue Capital Total
Return per ordinary share 3.00 p 86.45 p 89.45 p
Dividend per ordinary share 2.70 p - 2.70 p
INCOME STATEMENT
Restated
Year ended 30 September 2005
Revenue Capital Total
£000 £000 £000
Gains on investments - 110,690 110,690
Gains on foreign exchange - 169 169
Income 4,102 - 4,102
Investment management fee (1,593 ) (678 ) (2,271 )
Other expenses (1,016 ) - (1,016 )
Net return before interest payable and
taxation 1,493 110,181 111,674
Interest payable (23 ) - (23 )
Net return before taxation 1,470 110,181 111,651
Taxation (572 ) - (572 )
Return attributable to ordinary
shareholders 898 110,181 111,079
Revenue Capital Total
Return per ordinary share 2.07 p 253.90 p 255.97 p
Dividend per ordinary share 1.50 p - 1.50 p
BALANCE SHEET
Restated
30 September 30 September
2006 2005
£000 £000
Fixed assets
Investments 285,415 253,549
Current assets
Debtors 1,901 656
Cash at bank and in hand 5,326 3,444
7,227 4,100
Creditors: Amounts falling due within
one year (606 ) (3,777 )
Net current assets 6,621 323
Net assets 292,036 253,872
Capital and reserves
Called-up share capital 4,436 4,436
Share premium account 1,411 1,411
Special Reserve 79,917 79,917
Redemption reserve 352 352
Capital reserve-realised 84,187 41,794
Capital reserve-unrealised 123,237 128,116
Revenue reserve 2,034 1,384
Own shares held (3,538 ) (3,538 )
Total equity shareholders' funds 292,036 253,872
Net asset value per share 675.07 p 586.85 p
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
For the year ended 30 September 2006
Called-up Share Capital Capital Own
share premium Special Redemption reserve reserve Revenue shares
capital account reserve reserve realised unrealised reserve held Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at
30 September
2005 as
originally
reported 4,436 1,411 79,917 352 41,794 128,782 735 (3,538) 253,889
Restatements - - - - - (666) 649 - (17)
Balance at
30 September
2005
(restated) 4,436 1,411 79,917 352 41,794 128,116 1,384 (3,538) 253,872
Net gain on
realisation
of
investments - - - - 42,372 - - - 42,372
Unrealised
movement on
investments - - - - - (4,879) - - (4,879)
Capital
management
charges - - - - 21 - - - 21
Net revenue
retained for
the year - - - - - - 1,299 - 1,299
Dividends
paid - - - - - - (649) - (649)
Balance at
30 September
2006 4,436 1,411 79,917 352 84,187 123,237 2,034 (3,538) 292,036
For the year ended 30 September 2005
Called-up Share Capital Capital Own
share premium Special Redemption reserve reserve Revenue shares
capital account reserve reserve realised unrealised reserve held Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Beginning of
year 4,436 1,411 79,917 352 29,904 29,825 464 - 146,309
Net gain on
realisation
of
investments - - - - 12,399 - - - 12,399
Unrealised
appreciation
on
investments
(restated) - - - - - 98,291 - - 98,291
Net gain on
realisation
of foreign
currency - - - - 169 - - - 169
Capital
management
charges - - - - (678) - - - (678)
Dividends
not paid due
to
repurchase
of shares
held in
treasury - - - - - - 22 - 22
Net revenue
retained for
the year - - - - - - 898 - 898
Buy back of
own shares
held in
treasury - - - - - - - (3,538) (3,538)
Balance at
30 September
2005 4,436 1,411 79,917 352 41,794 128,116 1,384 (3,538) 253,872
CASHFLOW STATEMENT
Year Year
ended ended
30 September 30 September
2006 2005
£000 £000
Operating activities
Income received from investment 4,848 4,174
Interest received 53 5
Investment management fees paid (3,288 ) (1,622 )
Other cash payments (1,045 ) (955 )
Net cash inflow from operating activities 568 1,602
Servicing of finance
Interest paid (5 ) (23 )
Taxation
Overseas tax paid (731 ) (572 )
Financial investment
Purchases of investments (101,037 ) (75,649 )
Sales of investments 103,736 82,035
Net cash inflow from financial
investments 2,699 6,386
Equity dividends paid (649 ) (865 )
Financing
Buyback of ordinary shares - (3,538 )
Net cash outflow from financing - (3,538 )
Increase in cash 1,882 2,990
NOTES
1. Current year's information
These accounts are prepared under the historical cost convention as modified by
the revaluation of fixed asset investments and in accordance with applicable
accounting standards and with the Statement of Recommended Practice 2003 (revised 2005)
regarding the Financial Statements of Investment Trust Companies ("SORP"). The
company has adopted FRS 21 "Events after the Balance Sheet Date", FRS 25
"Financial Instruments: Disclosure and Presentation" and FRS 26 "Financial
Instruments: Measurement". The abridged figures for 2006 are an extract from
the latest financial statements and do not constitute statutory financial
statements. The financial statements have not yet been delivered to the
Registrar of Companies, nor have the Auditors yet reported on them.
2. Comparative information
The figures and financial information for the year ended 30 September 2005 are
an extract from the latest published accounts and do not constitute statutory
accounts. Full accounts for that period have been delivered to the Registrar of
Companies and included the report of the auditors which was unqualified and did
not contain a statement under section 237 of the Companies Act 1985.
3. Posting of Annual Report
The Annual Report will be posted to shareholders on or around 12 December 2006.
It will not be advertised in newspapers, but copies will be available from that
date at the Company's Registered Office at 155 Bishopsgate, London, EC2M 3XY.
4. Annual General Meeting
The Annual General Meeting will be held at 155 Bishopsgate, London EC2 on
Tuesday 16 January 2007 at 2.30pm.
5. Dividend
Subject to the approval of the Annual General Meeting, the annual dividend will
be paid on 7 February 2007 to members on the register at the close of business
on 12 January 2007. The shares will be marked ex-dividend on 10 January 2007.
CHAIRMAN'S STATEMENT
Company Performance
The year to 30 September 2006 was another positive year for your Company.
Regional markets performed well and your Company's net asset value rose by
15.0%. This compared favourably with the competition, though it was short of
the 17.4% increase in the benchmark.
For shareholders this return was reduced to 3.1% because the discount as at 30
September 2006 was 11.6% as compared with 0.4% at the 30 September 2005. The
Board has an active discount management policy and it so happens that the
former was close to the upper limit and the latter close to the lower limit
that the Board considers to be satisfactory. For the year as a whole the
discount averaged 5%.
The dividend income from the underlying portfolio rose by over 40% compared to
the previous year so that the income available for distribution increased from
2.07p per share in the year to 30 September 2005 to 3.00p per share out of
which the Directors are recommending a dividend of 2.70p per share.
Investment Manager
On 26 April 2006 we announced that Stuart Richards, the Fund's portfolio
manager would be leaving Baring Asset Management ("Barings") in October 2006.
On 26 September 2006 we announced that Barings had appointed Martin Majdaniuk
as Investment Manager within its Emerging European Equities team. Mr Majdaniuk
joins from Nordea Investment Management in Copenhagen where he has been a
portfolio manager for the last eight years. He will report to Dr Ghadir Abu
Leil-Cooper, Head of Emerging Europe Equities at Barings, and will take
responsibility for the Company's portfolio from January. In the meantime Dr
Ghadir Abu Leil-Cooper has assumed responsibility for the Company's portfolio.
Adoption of New Financial Reporting Standards
UK GAAP is converging with International Reporting Standards and from 1 October
2005 the Company has adopted FRS 25 "Financial Instruments: Disclosure and
Presentation", FRS 26 "Financial Instrument: Measurement" and FRS 21 "Events
after the balance sheet date". The main impacts on the financial statements are
firstly that the portfolio is valued at bid market prices whereas in prior
periods it was valued at middle-market prices and secondly that the provision
for the Company's final dividend is only recognised in the financial statements
when it has been approved by shareholders at the Annual General Meeting.
Benchmark Review
The primary objective of the Company as set by the Board is to outperform the
competition. It is therefore necessary to ensure that the Company's benchmark
remains close to the average asset allocation of competitors' portfolios. A
review of the benchmark was undertaken during the year by the Investment
Manager and changes made from the end of March 2006. The weighting in Russia
was increased to 70% (previously 50%) and in Turkey to 30% (previously 15%) of
actual market weightings and a cap was placed on the largest stocks to restrict
their weight to 10%. The Board will continue to monitor the appropriateness of
the benchmark closely.
Annual General Meeting
The next Annual General Meeting will be held on Tuesday 16 January 2007 at 155
Bishopsgate, London EC2 commencing at 2.30pm. The formal business will be
followed by a presentation from the Investment Manager, after which there will
be an opportunity for shareholders to raise any specific issues with the
Investment Manager or with any member of the Board.
Outlook
Your Board continues to see value in the region and remain enthusiastic by the
longer term opportunities as the markets develop.
Iain Saunders
Chairman
30 November 2006
For enquiries please contact:
Ronald Watt at Baring Asset Management Limited on 020 7628 6000
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