Blue Planet Worldwide Financials Investment Trust plc
Preliminary Announcement
for year ended 31 July 2008
Financial Record and Key Performance Indicators
As at 31 July 2008 2007 2006 2005 2004
Net assets less other
current liabilities (�'000) 25,425 50,850 40,382 23,759 18,163
Loans (�'000) (7,036) (19,884) (13,897)(7,000) (7,000)
Shareholder's funds (�'000) 18,389 30,966 26,485 16,759 11,163
Net asset value per share(p) 129.52 216.76 185.79 117.56 78.31
Share price (p) - (Bid) 107.00 180.00 162.00 86.00 52.00
Discount (%) 17.4 17.0 12.8 26.8 33.6
Gearing (%)* 26.3 63.8 40.7 41.4 49.5
Year to 31 July 2008 2007 2006 2005 2004
Revenue available for
shareholders (�'000)**** 600 (427) 385 202 385
Revenue return per share (p) 4.20 (3.00) 2.70 1.42 2.70
Total return per share (p) (87.45) 32.89 69.33 41.56 (5.30)
Total dividends per share
(net) (p) 3.22 - 2.10 1.40 2.50
Dividend yield on our
shares (%) 3.00 - 1.30 1.63 4.81
Dividend yield on Bloomberg
Worldwide Financial Index 4.00 2.65 2.51 2.49 5.79
Expenses ratio - net basis
(%) ** 1.69 3.69 3.79 3.82 4.06
Expenses ratio - gross
basis (%) *** 1.08 2.19 2.21 2.52 2.54
* Net debt as a percentage of shareholders' funds
** Net basis - Administrative expenses as a percentage of the average net
asset value of the Company
*** Gross basis - Administrative expenses as a percentage of the average gross
asset value of the Company
**** 2008 Includes VAT recovered of �202,500
Portfolio Information
As at 31 July 2008 Valuation 2008
(�) % of Portfolio
Equities
6,847,274 URSA Bank Russia 3,278,437 12.7%
1,251,195 Bank Millennium SA Poland 2,247,980 8.7%
180,000 Ultra Financials ProShares United 1,976,766 7.6%
States
609,000 Bank of India India 1,969,363 7.6%
38,726 BP Global Eire 1,928,380 7.5%
Financials-A class
53,539 Bank Vozrozhdenie Russia 1,200,759 4.6%
957,250 South Indian Bank Ltd. India 1,175,299 4.6%
503,704 Federal bank Ltd. India 1,146,058 4.4%
2,476,307 Bank of Maharashtra India 959,114 3.7%
64,745 EFG Eurobank Ergsias Greece 813,640 3.2%
260,232 Corporation Bank India 795,995 3.1%
600,000 Standard Life Liquidity Eire 600,000 2.3%
Fund
18,290 Erste Bank Der Austria 593,317 2.3%
Osterreichische
380,000 Union Bank Of India India 593,003 2.3%
31,000 Piraeus Bank S.A. Greece 469,534 1.8%
5,380,186 Raiffeisen Bank Aval Ukraine 406,706 1.6%
47,216,801 Ural-Siberian Bank Russia 309,361 1.2%
35,000 Halyk Savings Bank GDR Kazakhstan 226,848 0.9%
24,585 Bank of Georgia-Reg S GDR Georgia 220,182 0.9%
51,158 City Union Bank Ltd India 14,716 0.1%
732 Federal Bank Ltd (P-Notes) India 1,662 0.0%
20,927,120 81.1%
Debt Securities
40,210,000 Vozrozhdenie Bank 8.95% Bonds 03/10 Russia 856,278 3.3%
1,640,000 PSB Finance Russia 773,858 3.0%
(Promsvyazbank) 9.58% Bonds 05/12
30,000,000 Eurokommerz 11.5% Bonds 12/09 Russia 632,937 2.5%
28,200,000 DAL Capital (Rosbank) 8% Russia 595,973 2.3%
Bonds 09/09
27,147,000 Rusfinans Bank 7.55% Bonds 05/09 Russia 569,340 2.2%
19,034,000 Transcreditbank 7.29% Bonds 06/10 Russia 392,752 1.5%
18,240,000 Home Credit and Finance Bank Russia 392,092 1.5%
9.45% Bonds 08/10
14,155,000 Bank Kedr 12.30% Bonds 09/09 Russia 301,433 1.2%
500,000 Renaissance Securities 8.75% Russia 241,255 0.9%
Bonds 11/09
5,533,000 Eurokommerz 16% Bonds 03/11 Russia 118,445 0.5%
4,874,363 18.9%
Total 25,801,483 100%
At 31 July 2008 the portfolio yield, as reported to the Association of
Investment Companies, was 3.85% (2007 - 0.92%). The yield represents the income
from investments as a percentage of the cost of the portfolio.
Classification of Investments
At 31 July 2008
Investment Total Total
Banks Companies Others 2008 2007
% % % % %
Russia 33.5 - 3.9 37.4 26.7
India 25.8 - - 25.8 0.5
Eire - 7.5 2.3 9.8 12.5
Poland 8.7 - - 8.7 22.4
United States - 7.6 - 7.6 -
Greece 5.0 - - 5.0 7.5
Austria 2.3 - - 2.3 8.1
Ukraine 1.6 - - 1.6 0.6
Kazakhstan 0.9 - - 0.9 -
Georgia 0.9 - - 0.9 -
Italy - - - - 8.0
Germany - - - - 7.4
Cyprus - - - - 6.2
Brazil - - - - 0.1
Totals 2008 78.7 15.1 6.2 100.0
Totals 2007 87.5 12.5 - - 100.0
Benchmark* 65.8 3.6 30.6 100.0
* Our benchmark is the Bloomberg World Financials index.
Chairman's Statement
The banking crisis precipitated by the US subprime mortgage collapse and the
subsequent global economic slowdown has made this a very difficult year for
financial stocks worldwide and the NAV and share price of your Fund have
suffered. We are disappointed to report a 40.2% fall in the net asset value per
share ("NAV") of the Fund to 129.52p per share for the year to 31 July 2008.
We believe that our economic analysis has been sound. We predicted the financial
problems in the US, and the global impact they would have, well ahead of other
economists and financial commentators. However our timing has been poor, as we
failed to anticipate how slowly the market would react to the problems during
the summer and autumn of 2007. The performance of the Fund's NAV was very weak
in August 2007, with a double digit fall in the NAV. We repositioned the
portfolio in a more defensive manner and reduced our exposure to equities in
August and September 2007 and for the next seven months your Fund performed in-
line with its defensive positioning - it outperformed the benchmark when the
benchmark was down, but underperformed it when the benchmark was up.
Unfortunately the trend for both the Fund and the benchmark was down, as bank's
worldwide wrote down $510bn in credit-related losses, banks failed and the
global economy was hit with a 94% hike in oil prices from mid 2007 to mid 2008
(in Sterling terms). The banking problems have been widespread in Western
economies, with Northern Rock in the UK being nationalised to stave off its
collapse, in the US Bear Stearns effectively went bust in March 2008 with nine
smaller banks in the US collapsing so far in 2008, in Germany the state is
propping up IKB, WestLB and Sachsen LB and in Denmark the central bank took
control of Roskilde bank, the country's eight largest retail lender to avoid
bankruptcy. Following the fund's year end, Lehman Brothers, Fannie Mae, Freddie
Mac and Halifax Bank of Scotland have all been added to the casualty list.
Emerging market economies and their banks have continued to improve their
profitability. Despite this their share prices have dropped, dramatically in
many cases, and the sharp fall in Ursa bank's share price has had a detrimental
impact on our NAV. The valuations of emerging market banks have fallen, at the
same time as the International Monetary Fund anticipates that on average
developing economies will grow by 6.7% in 2009. In May we began to see signs of
the bottoming of the economic problems and we started to invest back in banking
stocks - unfortunately again too early - as the lack of confidence in western
banks caused financial indices to plunge in May 2008 and we experienced a
second double digit fall in the Fund's NAV in one month.
We began the year with a share price of 180p and ended it with one of 107p per
share. This is a fall of 40.6% over the year. This compares to a -21.6% fall in
the Fund's benchmark index the Bloomberg Worldwide Financial Index in Sterling
terms, or a total return of -19.0% if dividends are included. The fall in the
Fund's share price over the last year has taken its toll on the longer term
performance of the Fund. However the share price return over three years at
26.9% is a long way ahead of the -2.9% return of its benchmark over the same
period.
In an attempt to narrow the valuation gap between the share price and the NAV,
the Fund purchased 88,000 of its own shares to hold as treasury shares in July
2008. This amounts to 0.6% of the total ordinary shares in issue. The Directors
have the ability to repurchase shares in the market where they believe it would
result in an increase in the net asset value per share for the remaining
shareholders.
Historically investment trusts were liable to pay VAT on investment management
services, whereas unit trusts were not. Last year a long running case at the
European Court of Justice was decided in favour of investment trusts and ruled
that they should benefit from the same exemption from VAT as unit trusts and
OIECs. As a consequence, going forward your Trust will be able to reduce this
element of its costs and a one-off payment of �405,000 is due to be made to your
Fund to refund the VAT it has paid for the last seven years. The dividend being
recommended this year has been increased by approximately 0.9p as a result of
the refund.
With effect from 18 June 2008 Blue Planet Investment Management Ltd (BPIM), a
company registered in Malta, replaced Blue Planet Investment Management Ltd, the
UK incorporated company, as the Company's investment manager on the same terms
as the current management agreement. BPIM is registered with the Maltese
Financial Services Authority, which, as an EU member, provides the same level of
financial regulation as enjoyed in the UK. Blue Planet Investment Management Ltd
UK has changed its name to Blue Planet Investment Advisers Ltd (BPIA). Ken
Murray is the Chairman and Executive Director of BPIM and Director and CEO of
BPIA giving continuity to the change. BPIA will provide the Maltese management
company with investment advice. It will also provide administration and
secretarial services to the Company and such fees will remain unchanged.
Portfolio
Over the past year the portfolio of investments has been structured to reduce
the Funds exposure to equities. Figure 1 shows the movement in the security
types and figure 2 shows the geographical movements in the portfolio over the
period. Since the end of the interim period the portfolio has increased its
exposure to both equities and high yielding bonds and has a smaller element of
the portfolio held in liquidity funds. The movements in the portfolio are
explained below.
Figure 1: Portfolio movements 2007 to 2008 - by geography
Country 2008 2007
% %
Russia 37.4 26.7
India 25.8 0.5
Eire 9.8 12.5
Poland 8.7 22.4
USA 7.6 -
Greece 5.0 7.5
Austria 2.3 8.1
Ukraine 1.6 0.6
Georgia 0.9 -
Kazakhstan 0.9 -
Italy - 8.0
Germany - 7.4
Cyprus - 6.2
Figure 2: Portfolio movements 2007 to 2008 - by security type
Security Type 2008 2007
% %
Equities 72.5 99.7
Bonds 17.5 -
Cash 7.9 0.3
Liquidity funds 2.1 -
In July 2007 the portfolio of the Fund was invested almost entirely in equities.
Starting in August 2007, as equity prices, in particular those of financial
stocks, fell, we sold out of holdings and transferred a significant portion of
the portfolio into liquidity funds. Liquidity funds invest in a diverse range of
short-term debt instruments and operate under rigid and transparent guidelines
to offer safety of principal and liquidity. The funds we invested in also all
offered a good level of income return. As the weakness of financial stocks
continued into 2008, and following a fact-finding mission to Russia in January
2008, the Fund built a position in short to medium dated high-yielding Russian
financial company corporate bonds. These bonds trade at values close to par and
have coupons ranging from 7.29% to 16%. From February 2008 we began to reinvest
in a modest way into equities. More significant investments were made,
particularly in Indian stocks, in May 2008, as we began to feel that the upside
potential in good banking stocks from their low levels was far greater than the
downside and we saw positive signs in the capital raisings and reduction in
liquidity problems at banks and anticipated a re-emergence of M&A activity.
With regards to geographic distribution, we have increased our exposure to the
Commonwealth of Independent States (CIS) markets, predominantly Russia.
Investments here are split approximately 50:50 between equities and bonds. The
Investment Manager visited Russia in July 2007 and January 2008. The feedback
from both visits is that retail banking is growing very strongly from a very low
base. Russia's economic growth remains on track, and the high price of
commodities has been of enormous benefit to their finances, although, as
elsewhere, it has pushed up inflation. As events subsequent to the Fund's year-
end have shown, political risk remains a threat to the very positive
macroeconomic story. Russia's foray into Georgia that crushed the Georgian army
has sparked a great deal of negative sentiment globally and, according to the
Russian Central Bank, about $5bn of investors' money was withdrawn from Russia
in August. Analysts put the figure higher than this. The bond prices were
altered only slightly by the conflict. The equity share prices saw sharp falls.
We exited from our smallest equity holding in Russia, Ural-Siberian bank. We
have held on to the remaining investments as we see little benefit in
withdrawing all our equity investments from the country at this low point, as
Russia and Western governments can gain no benefit from further aggravating
their divisions, Russia has much to lose if it isolates itself from the West and
Russia's economic and banking growth stories remain firmly intact. At the end of
the financial year we held equity investments in three Russian banks, which are
now reduced to two, and ten separate holdings in corporate bonds. The bond
holdings are well diversified. The bonds are short or medium dated bonds with
high yields. At the year end we also had a holding in Raiffeisen Bank Aval in
the Ukraine. Ukraine has a population of 47m. It is planning to join the World
Trade Organisation in 2008 and enter into an expanded agreement with the EU,
both of which will facilitate trade. The holding in Bank of Georgia, that
totalled less than 1% of the fund's portfolio, was sold when the Russia/Georgia
conflict began and a loss was incurred on this holding.
Following two visits to the country we have made some significant investments in
India. The country is the second fastest growing major economy in the world
after China. Its growth is moderating; in the quarter to June 2008 it stood at
7.9% year on year. However the increase in personal consumption and robust
levels of corporate investment in India are driving loan expansion of more than
25% per annum. Mortgages as a percentage of GDP is less than 10% in India,
whereas in the UK it is around 90%. In the three months to March 2008 overall
banks profit increased 35% year on year. We believe that India presents a number
of excellent long-term investment opportunities, because of the scope for growth
in banking and because there are ongoing talks to change the foreign ownership
rules in India by 2009, which will lead to banking sector consolidation and
foreign acquisitions. At the year end we held investments in seven banks in
India.
The investments in the Republic of Ireland consist of a holding in the Blue
Planet Global Financials Fund, listed in Dublin. The size of this holding was
reduced during the latter part of 2007. The remaining Irish investment is a
money market liquidity fund holding.
The Company reduced its investments in Poland during 2008. Poland's economic
situation remains strong, with GDP growth standing at 5.8% in the second quarter
of 2008 but its stock market has suffered over the last year and as we have
reduced our exposure to equities, we reduced our holdings in Poland from three
banks at the start of the financial year to one, Bank Millennium, by the end of
the financial year.
Your Company sold out of many of its central and southern European investments
to remove gearing in the Fund and in anticipation of further falls in stock
markets. In 2008 the Fund has reinvested in holdings in Greece and Austria.
Banking penetration is low in Greece versus other EMU countries and credit was
expanding at a rate of over 20% in the first half of 2008. Erste Bank in Austria
has a broad coverage of Emerging European markets, as well as a leading presence
in its home country. In addition the Fund has a short-term holding in a US
financial exchange-traded fund that tracks the Dow Jones US Financials index.
This position was in place to capture a rebound in US financial stocks as the
second quarter bank results exceeded the markets expectations. The position has
subsequently been sold.
A fuller analysis of the portfolio movements is provided in the Investment
Manager's Report.
Independent Rating of Your Fund
This time last year we reported high Trustnet ranking figures. Despite the
disappointing performance of the Fund over the past year and its poor ranking
for this period, it remains in the top third of all the conventional trusts in
the UK for share price performance over three years. Trustnet is an independent
company providing factual, unbiased assessments of funds performance to private
investors and Independent Financial Advisers.
Dividend
The board has recommended that a dividend of 3.22p per share is paid this year.
In the interim accounts we were hopeful that sufficient income would be received
to support paying a dividend. This has indeed been the case. Income from
investments is more than double that in 2007. In addition the expenses set
against that income have been reduced by about 50% as administrative expenses
were curtailed and interest payments were substantially lower as a consequence
of the lower use of gearing. The dividend payout has also been boosted by
approximately 0.9p by the VAT refund due to the investment trust for VAT paid on
investment management fees. Last year no dividend was paid. This year the
dividend has been reinstated and is 53% higher than the level in 2006, thanks in
part to the VAT refund.
Borrowings and gearing
A year ago on the 31 July 2007 the Fund's gearing stood at 63.8%. This level of
gearing was inflated by the sharp fall in the stock markets in July 2007. All
gearing was eliminated in August 2007 and the Fund remained ungeared for the
next eight months, through to May 2008, due to the weak economic environment and
volatility in the stock markets. As discussed above, in May 2008 some equity
investments were reinstated in the portfolio. The Fund ended the period with
gearing of 26.3%. A �15m multi-currency revolving unsecured loan facility, in
place until May 2009, provides the capability for gearing the Fund.
Generally, gearing beneficially affects the Company's NAV when the value of its
investments is rising, but adversely affects it in periods when the value of
investments is falling.
Blue Planet Services and Price Information Sources
Shareholders can view the Company's share price and additional information about
the Fund on the website of Blue Planet Investment Management Ltd
(www.blueplanet.eu) and the London Stock Exchange (www.londonstockexchange.com).
To find the Company's share price on the London Stock Exchange website go to the
Home page and type "BPW" in the "Price Search" field. Our share price is also
published in the Financial Times.
Blue Planet Investment Management offers a Blue Planet Savings Plan via Equiniti
(formerly known as Lloyds TSB) to enable lump sum investments or regular
savings. A request form for the savings plan application pack is enclosed with
these accounts.
Outlook
The global economic slowdown that we anticipated is well underway and global
equity markets have fallen sharply. The Federal Reserve's policy of reducing
interest rates in the hope of boosting consumer spending in the US is not for
the moment stimulating demand. Inflation has become a worldwide problem and bad
debts are rising swiftly. The UK economy is heading rapidly into recession and
the house price correction and burgeoning current account deficit, which stood
at 4.2% of GDP for the whole of 2007, will further strain the UK economy. We
would expect sterling to weaken considerably over the next 12 months.
Banks are increasingly becoming split into two groups, those investment and
retail banks located in the Western economies, and particularly the US and the
UK, which are highly over-leveraged and are high risk. In September 2008 we have
seen further failures and bailouts of major banks in both of these countries. In
contrast, in markets where banking penetration is low, the banks remain robust
and growth is strong. We are focusing on this second group of banks, and whilst
we remain very cautious about reinvesting in the market we have been selectively
adding good quality, undervalued banking stocks in economies where there is
ample scope to grow earnings. Our particular focus has been on the world's
second fastest growing economy, India. This reinvesting process was triggered by
the first indicators that the US housing market was bottoming in May 2008. Sales
of existing homes in the US were no longer falling.
The remainder of 2008 will be a testing time for banks and we expect further
volatility in equity markets. We have begun to see some rallies in financial
stocks share prices and we believe that good quality banking stocks have far
more upside potential from these levels than downside risk. The extreme
turbulence in financial stocks in September 2008 indicates that confidence in US
and UK banks has hit new lows, but the solutions being proposed, particularly in
the US, are now addressing the core of the problem rather than the consequences.
We anticipate an improvement in the Fund's performance for its next financial
year.
I thank you for your continuing support and look forward to welcoming you to the
Annual General Meeting on the 13th November 2008.
Philip Court
Chairman
25th September 2008
Investment Manager's Report
Portfolio Performance Analysis
As has already been highlighted in the Chairman's Statement, the Fund's NAV made
a total return of -40.2% over the year, compared to a fall of 21.6% by the
Fund's benchmark index in Sterling terms. The Trust's share price fell 40.6%
over the same period. This past year has been one of disappointing performance
by the Fund and our substantial outperformance of the previous two years has
been reversed this year. We believe that our economic analysis has been
accurate, however our investment timing has been at fault, in particular in
August 2007 when we sold stocks at a low point in the market, and in May 2008
when we bought stocks before a further sharp decline in their values. Those
stocks that we bought in May, in particular the Indian stocks, are recovering
now.
Asset Allocation
Blue Planet Investment Management's investment process is top down. First, we
identify countries with good economic prospects and acceptable levels of risk.
The economic backdrops in these countries are assessed in detail and ranked
accordingly. The listed banks and other financial institutions in the highest
ranked countries are then investigated. Capital is allocated to those banks and
other financial institutions which we believe are likely to offer the best total
returns over the long term. This process involves meeting with the senior
management of companies we are contemplating investing in. Where possible, we
also like to meet with local Central Banks to discuss the economic policies
being pursued in the countries concerned. Once we are invested in a company, we
aim to meet regularly with its senior management to monitor its progress. Since
the last year end we have visited financial institutions in the Czech Republic,
Greece, Hungary, India, Poland, Romania and Russia. In addition, we had
meetings in the UK with the management of many overseas financial institutions.
In 2008 we continued to invest in Russia and diversified our holdings into the
corporate bond market. We also made a substantial investment in India. Our focus
has remained on investing in retail banks in strong, soundly run, emerging
economies, but our exposure to equities has been lower this year than last year
as the financial sector has underperformed the already weak global equity
markets.
The CIS has been our key market with Russia being our largest geographic
holding. Investments are split almost equally between corporate bonds and
equities. The Russian economy and the Russian banking sector continue to grow
strongly. The Investment Manager visited Russia in July 2007 and January 2008.
In both visits the banks all reported that business was excellent. Russian banks
are not tainted by the US sub-prime related mortgages and securities. They have
also been affected very little by the liquidity problems experienced by the
Western European banks and in the event of problems have strong support from the
Finance Ministry of Russia, which in March 2008 confirmed its intention to
support the banking system by placing around 600bln roubles (�12.5bn) of federal
budget temporary surplus funds with commercial banks. The central bank has also
promised 1 trillion roubles (�20bn) for repo (repurchase agreements). The
economy is on a very firm footing. Consumer demand is strong and is fuelled by
the increase in real disposable income, despite rising inflation. In 2007
Russia's investment level rose by more than 20%, providing a much needed boost
to its infrastructure development. Russia is currently underbanked. According to
the Association of Regional Banks in Russia, in 2007 there were 14 bank units
per hundred thousand people, compared to 23 in the UK and almost 60 in Germany.
The political risks have re-emerged in August 2008 as Russia and Georgia
clashed. Whilst this is a concern, and has had a negative impact on equity
prices in Russia, we do not see it outweighing the economic and banking growth
potential in the country.
At the year end our Fund was invested in URSA Bank, Bank Vozrozhdenie and Ural-
Siberian Bank in Russia. The latter of these investments has subsequently been
sold. Ursa and Vozrozhdenie are well-managed banks that have been growing
profits rapidly and continue to have enormous growth potential. Unfortunately
their share prices have suffered in the global financial sell-off and more
recently due to the political tensions. A situation that we anticipate will
reverse in due course. Corporate Bonds from ten Russian financial companies have
been added to the portfolio. These are all short to medium dated, high yielding
bonds, and have coupons ranging from 7.29% to 16% and an average yield of over
11%. The prices of the bonds were impacted only slightly by the Georgian
conflict.
Elsewhere in the CIS the small investment in Raiffeisen Bank Aval in the Ukraine
has been increased and an investment made in Halyk Savings Bank in Kazakhstan.
Both are in countries where banks have seen a sharp rise in profitability as
banking services increase from current low levels of penetration and as
economies of scale are realised. The holding in Bank of Georgia that totalled
less than 1% of the fund's portfolio, was sold when the Russia/Georgia conflict
began and a loss was incurred on this holding.
The investment manager visited India in March 2007 and again in August 2008.
India has significant growth potential. GDP growth in the country's fiscal year
to the end of March 2008 was 9.0%. In the quarter to June 2008 it had moderated
to 7.9%, as the government raised interest rates 4 times since the start of 2008
to tackle a sharp increase in inflation. Growth is expected to remain above 7%
over the medium term. Personal consumption is strong, increasing 8.3% in the
year to March 2008 and Foreign Direct Investment inflow has accelerated in
recent years. India's economy does also face challenges, in terms of decreasing
its fiscal deficit, at which it is making progress, and with elections looming.
India has both private sector banks and government-owned banks that on average
increased profits by 35% year on year in the quarter to March 2008. The banking
sector is growing rapidly from a low base, as 70% of the rural population in
India is still unbanked. Following share price falls at the start of 2008, the
banks valuations are very modest. At the year end we held investments in seven
banks in India.
We reduced our exposure to Poland to a single holding - Bank Millennium.
Poland's GDP growth was 6.5% in 2007 and has slowed to 5.8% in the second
quarter of 2008. In the light of the global slowdown this is an excellent growth
rate and domestic demand remains very strong. However the strength of the
currency, whilst benefiting our investments, is less helpful to the countries
exports and industrial activity has been slowing. We believe that Poland remains
a good country to invest in, but its stock market has suffered over the last
year and, as we have reduced our exposure to equities and invested elsewhere, we
have sold investments in Poland.
Your Company sold out of many of its central and southern European investments
during the year to remove gearing in the Fund and in anticipation of further
falls in stock markets. In 2008 the Fund began to reinvest in some strongly
performing retail banks. At the Fund's year end we held EFG Eurobank and Piraeus
Bank in Greece and Erste Bank der Osterreichische in Austria. The Greek banking
sector is gradually being deregulated, and banking penetration is low versus
other EMU countries. Erste Bank has a broad coverage of Emerging European
markets, as well as a leading presence in its home country. In addition the Fund
has twice made short-term investments in the US financial exchange-traded fund
that is calibrated to correspond to twice the daily performance of the Dow Jones
US Financials index. Both a "short" and a "long" ETF are available and provide a
means of gaining from sharp rises and falls in US banking stocks. This position
was in place to capture a rebound in US financial stocks as the second quarter
bank results exceeded the markets expectations. The position has subsequently
been sold. The Fund's investment in Blue Planet's Global Financials Fund listed
in Dublin, has been reduced during the year. The performance of this Fund was
weak in 2007, but for the past six months, as it has moved into bonds, its
performance has become very stable. During the year from time to time hedging
has been utilised using index futures on both general European indices and
country-specific indices.
Over the Fund's financial year its largest unrealised gain is of 4% on the
Rusfinance Bank 3rd series 2009 dated bond. Its most profitable realised
investment was Erste Bank that made a total return of 25% when it was held from
February to April 2008. Its least successful investment was Barclays Bank that
was sold at a loss of 35% in Sterling terms.
Currency
The fund is exposed to a range of currencies, with the greatest exposure being
to the US dollar, primarily through Russian holdings. The table below shows the
percentage of the portfolio holdings in each currency at the end of the fund's
financial year and how those currencies have performed against the British pound
over the period of the year in which the investments have been held in the
Trust.
Currency % of Appreciation/
equity/bond depreciation
portfolio in against � for
currency the length of
time the
currency has
been held in
the portfolio
US Dollar 30.9% 2.3%
Indian Rupee 25.8% -4.9%
Euro 17.1% 14.3%
Rouble 15.9% -0.5%
Polish Zloty 8.7% 27.4%
Ukrainian Hryvnia 1.6% 9.8%
The positive currency movements had a beneficial impact on our performance. The
negative currency movements reduced the performance of the shares denominated in
that currency when translated into sterling. The Company's assets are almost
exclusively held in securities denominated in foreign currencies. The Polish
zloty has been particularly strong against sterling over the past year, as has
the Euro. The Indian Rupee has been weak in the couple of months we have held
Indian stocks denominated in Rupees, however as the oil price retreats and
inflation moderates in India we anticipate this trend will reverse.
Risk
Market risk arises mainly from the uncertainty regarding the future price
performance of the equities held by your Company. This risk is magnified by
gearing that is used from time to time to bolster performance and the fact that
the Company is invested in a single industry sector. Being invested in a single
sector exposes the Fund to the risk that the Financial Sector will under perform
relative to other sectors of the market. Interest-rate risks arise through the
loans that the company uses to gear the Fund.
In mitigation the specialist expertise of Blue Planet Investment Management Ltd
reduces risk. The financials sector in which we are invested is the largest
sector of the market and constitutes approximately a quarter of the Bloomberg
World Index. This sector has indeed underperformed relative to other sectors of
the market this year, and we have held substantial amounts of the Fund's assets
in cash or near-cash entities through the year to reduce our exposure to the
sector. Banks play a crucial and central role in free market economies; a role
that will ensure the prosperity of the banking sector as a whole over time. The
prices of the individual securities invested in are monitored on a daily basis
and the Board, which meets quarterly, imposes borrowing limits to ensure gearing
levels are appropriate to market conditions. The securities dealt in are all
listed on recognised exchanges.
The Fund is exposed to currency risk, due to the range of currencies in which
investments are held. The majority of the Company's assets are held in
securities denominated in foreign currencies and movements in these currencies
can significantly affect the total return and net assets. The fund manager
tracks currency movements on a regular basis and hedging is considered on a case-
by-case basis. At the year end the investment exposure to the US dollar was
hedged by an appropriate level of borrowings in US dollars.
Credit risk arises from the exposure to non-delivery of an investment that has
been purchased. The Company only buys and sells investment through Blue Planet
Investment Management's approved list of brokers.
Top 10 Holdings at year end (Excl. Cash)
1. URSA Bank OJSC.
URSA Bank ("URSA") was established in 1990 as Sibacadembank and has rapidly
expanded through organic growth and acquisition over the past 16 years and is
now one of the top 15 banks in Russia. It is a universal bank and its loan book
is split evenly between retail and corporate loans. It is partly owned by
international financial institutions (such as the European Bank of
Reconstruction and Development) and partly owned by the founders of the bank and
management. It is the strongest regional bank in Siberia and the Urals which
comprises 40% of Russian territory and has 34 million inhabitants.
The Russian banking sector has huge growth potential. The ratio of mortgage
loans to GDP stood at 1% in Russia versus 84% in the UK at the start of 2007.
Siberia and the Urals each have a low population density with few large cities.
The banking market is even less penetrated here than other region in Russia and
competition is fairly low, with only Sberbank and VTB as significant
competitors.
URSA has been growing very rapidly. Its 2007 results show that its net income
has grown by 163% (or 103% on a pro forma basis). The bank followed its total
loan growth of 133% year-on-year in 2006 with an increase of 102% in 2007, with
retail loans doubling. In the final quarter of 2007 the bank was focusing on
increasing deposits and reduced its loan-to-deposit ratio, which stood at 270%
after nine months in 2007, to 235% by the end of the year.
URSA's most recently reported results were for the first quarter of 2008. They
reported net income of $66m an increase of 171% over the same period in 2007 as
loans grew by 50%.
We have held this stock in the portfolio throughout the Fund's financial year
and the shares total return was -53% in sterling terms. There are two company
specific issues that are adversely affecting its share price. One is the stock
being preferred shares, which have limited voting rights, and the other is
URSA's high loan-to-deposit ratio. The high dependence on external funding makes
the bank more vulnerable to tighter credit conditions overseas. Given the huge
increase in profits at the bank and its excellent prospects, we anticipate that
its share price will increase again when the markets settle down and political
tensions abate.
Key statistics relating to this investment are given below:
For the year 2007 2006 Change
ended
31 December:
Total Assets Rouble Rouble +48.6%
165.8bn 111.6bn
Cost : Income 45.1% 49.5% -4.4pp
Ratio
Net Profit after Rouble Rouble +163.1%
Taxation 3,771m 1,433m
Earnings per Rouble Rouble +125.8%
Share 2.80 1.24
Dividends per $0.081 $0.081 0%
Share (Prefered
shares)
Dividend Cover n/a n/a -
Return on Equity 26.9% 29.9% -3.0pp
2. Bank Millennium SA.
Bank Millennium SA was founded in Poland in 1989. It is principally a commercial
bank, but has four separate business lines, Millennium for retail customers,
Millennium Biznes for small businesses, Millennium PRESTIGE for affluent
customers and Bankowosc Predsiebiorstw for medium and large sized businesses. It
offers core banking services, brokerage, investment funds, leasing services and
pension and savings plans. Millennium bcp of Portugal owns 65.51% of Bank
Millennium SA.
Millennium is operating in a strong economy that has so far weathered the global
economic slowdown well. Millennium is expanding organically and is particularly
focused on the retail sector. It is investing in a branch expansion and
upgrading programme, which is now more than half way through. The programme that
began in 2006 is expected to continue through to 2009. In 2007 the bank opened
75 new outlets, bringing their branch network up to 410. It plans to add a
further 65 branches in 2008. The company is growing its market share of the
mortgage market. Its mortgage loan book increased 72% in 2007, which has led its
market share of the Polish mortgage market to increase from 9.7% at the end of
2006 to 11.2% at the end of 2007.
Millennium's 2007 results showed an impressive 54% increase in net earnings per
share in 2007. Business growth was very good in 2007, with loans growing by 48%
and deposits by 36% for the year. Costs rose 23%, as a result of the branch
expansion and remodelling programme.
In 2008 the weakness of the Polish stock markets had a negative impact on the
fee and commission income earned by the bank, as customers withdrew money from
mutual funds. Its mid-year results showed net income falling 2% from the first
half of 2007 as fee and commission income fell 19% and costs increased 22%.
However loan and deposit growth remained strong, up 34% and 49% respectively and
the bank remains well capitalised. The bank forecasts a fairly modest growth in
net income for 2008 given the additional costs of the branch expansion
programme.
We have held Millennium in the investment portfolio throughout the year,
although the amount of stock held has fluctuated through the year as the holding
in the stock has been reduced at times to reduce the overall exposure of the
fund to equities. The total return for the portion of the investment held for
the entire year is -20% in sterling terms. Share prices of all stocks in Poland
have been hit by the global slowdown, but this has been mitigated in part by the
strength of the Polish currency.
Key statistics relating to this investment are given below:
For the year ended 2007 2006 Change
31 December:
Total Assets PLN 30.5bn PLN 24.7bn +23.5%
Cost : Income 61.9% 67.7% -5.8pp
Ratio
Net Profit after PLN 461.6m PLN 300.8m +53.5%
Taxation
Earnings per Share PLN 0.54 PLN 0.35 +54.3%
Dividends per PLN 0.19 PLN 0.17 +11.8%
Share
Dividend Cover 2.8x 2.1x
Return on Equity 19.9% 13.6% +6.3pp
3. Ultra Financials ProShares
Ultra Financials ProShares is an exchange-traded fund provided by ProShares
which is part of the ProFunds Group. ProShares are a US-based company that has
been providing ETFs for over 2 years. It is the fifth largest ETF provider in
the US and its assets under management in June 2008 exceeded $20bn.
The Ultra Financials ETF seeks to provide a return that is double the return on
the Dow Jones U.S, Financials Index. The index comprises 282 companies.
Currently the largest companies in the index, each with a weighting of over 3%,
are JP Morgan Chase & Co, Bank of America Corp, Citigroup Inc, Wells Fargo & Co,
Goldman Sachs Group Inc and American International Group Inc. The index is split
34% banks, 28% general financials, 24% insurance and the remainder real estate
related companies. This ETF provides an easy way of gaining a geared exposure to
rallies in the US financial stock share prices and has been used in a tactical
manner around significant events for US banks.
Your Fund purchased this stock on the 30th July 2008 and held it for just over a
week. A loss of just over 1% was made on the holding. A second reinvestment in
this stock at the start of September yielded a return of over 5%.
4. Bank of India
Bank of India was founded in 1906 in Mumbai. Although initially a privately
owned bank, it was nationalised in 1969. It made a public share issue in 1997
and in 2008 carried out a qualified institutions placement. The government
continues to hold 64.5% of the bank's share capital. The bank has almost 3,000
branches nationwide across India. In the last year it acquired 76% of PT Bank
Swadesi Tbk in Indonesia.
Credit growth in India continues to be strong, despite high interest rates. In
the middle of 2008 loan growth was 26% and deposit growth was 22%.
In Bank of India's full year results to April 2008 they reported a net profit
increase of 79%, as both its loan and deposit growth rates were well ahead of
the industry, at 31% and 32% respectively. Non-performing loans are declining at
the bank. Gross non performing loans were 1.7% in April 2008.
Bank of India reported NI up 78% for the quarter ended June 2008 as loan and
deposit growth remain above 30% and cost growth was contained to 4%.
We purchased this holding in May 2008, in its 2 months in the portfolio it has
made a total return of -7% in the portfolio in sterling terms. Indian stock
markets, as elsewhere have been weak, but as inflation moderates in India its
banks are seeing a recovery in their share prices.
Key statistics relating to this investment are given below:
For the year 2008 2007 Change
ended 30 April:
Total Assets INR 1.8bn INR 1.4bn +28.6%
Cost : Income 41.7% 52.1% -10.4pp
Ratio
Net Profit after
Taxation INR 20.09bn INR 11.23bn +78.9%
Earnings per INR 40.83 INR 23.04 +77.2%
Share
Dividends per INR 4.0 INR 3.5 +14.3%
Share
Dividend Cover 10.2x 6.6x
Return on Equity 28.4% 20.7% +7.7pp
5. Blue Planet Global Financials
The Blue Planet Global Financials Fund is an open-ended Cayman Islands exempted
company. The Company listed on the Irish Stock Exchange on 31 March 2006. Its
objective is to achieve a high level of capital growth by taking long and/or
short positions in securities issued by or relating to banks and other financial
institutions on a worldwide basis. Shares are available denominated in Euros and
US Dollars. Your Company is invested in the Class A Euro shares.
The Blue Planet Global Financials Fund full year 2007 results reported a 35.5%
fall in the fund's NAV. The NAV ended the period at Euro69.7. The interim results
for 2008 have not yet been issued. The most recently available NAV is Euro62.9 for
the 30 June 2008. The NAV has fallen 9.8% over the first half of 2008, but has
been very stable for the past three months as the fund is now predominantly
invested in high yield bonds.
Your Company has been invested in this fund throughout the financial year. The
size of its holding was reduced during the year. Its total return over the 12
month period is -21.5% in sterling terms.
Key statistics relating to this investment are given below:
For the year ended 2007 2006 Change
31 December:
Total Assets Euro 9.2m Euro 36.0m -74.4%
Cost : Income Ratio n/a n/a -
Net Profit after Euro -10.4m Euro 2.8m -471.4%
Taxation
Net Asset Value per Euro 69.705 Euro 108.059 -35.5%
Share (Class A Euro
shares)
Dividends per Share Euro 0 Euro 0 -
Dividend Cover n/a n/a -
Return on Equity n/a n/a -
6. Vozrozhdenie
Vozrozhdenie Bank is one of the top-25 banks in Russia in terms of assets. It
has approximately a million clients and announced the opening of its 170th
branch in February 2008. It is a privately owned business based primarily in the
Moscow region. The bank's initial focus was on corporate banking and it is
currently concentrating its efforts on the SME segment, which is booming in
Russia. It has been very successfully expanding its retail business - growing
much faster than the general banking market in Russia. The bank has issued
shares 20 times since its inception in 1991, a considerable portion of which are
controlled by the bank's management.
In the bank's 2007 financial results the bank reported assets exceeding $4.5bn
(Rouble 111bn). Net income more than doubled in 2007, as overall loans increased
49% and retail loans grew by 87%. Mortgages made up just over half of the banks
retail loan portfolio and were the most rapidly growing area within retail
lending. The banks loan-to-deposit ratio was 96% and deposits were split 60%
retail and 40% corporate.
Its strong business and financial performance continued through the first half
of 2008. Its 2008 IFRS results reported net income up 131% for the first half of
the year as net loans increased 32%, retail deposits grew 29% and corporate
deposits grew 72% year on year.
We invested in this stock in August 2007 and sold it again in January 2008 after
the stock had provided a 12% return. We repurchased stock, starting in March
2008, after the share price had fallen back. Unfortunately the share price has
subsequently fallen further and the total return since we began repurchasing the
stock is -21% in sterling terms.
Key statistics relating to this investment are given below:
For the year 2007 2006 Change
ended
31 December:
Total Assets Rouble Rouble 73bn +52.1%
111bn
Cost : Income n/a n/a -
Ratio
Net Profit after Rouble 1.9m Rouble 0.8m +137.5%
Taxation
Earnings per Rouble 80 Rouble 39 +105.1%
Share
Dividends per 0.5 0.5 +0%
Share
Dividend Cover 160x 78x
Return on Equity 21% 19% +2.0pp
7. South Indian Bank
South Indian Bank is one of the "old" privately-owned banks that began
operations in the southern state of Kerala in 1946 and now has over 500
branches. Kerala has a strong non-resident Indian community. More than half of
the bank's branches are in Kerala, but it is growing fast in other regions. In
terms of deposits, 75% are in the South of India, 16% in the West, 7% in the
North and 2% in the East.
South Indian Bank is emerging from a major restructuring exercise that began
when a new Chairman took over in 2005. The bank has invested in an advanced
technology platform which has resulted in the bank having a better operating
efficiency than many other Indian banks. It has a strong deposit franchise, with
around 44% of its deposits being low-cost current account, savings account and
non-resident external deposits. The bank is operating in a strongly growing,
under-penetrated banking market and is a prime acquisition target, with its
attractive deposit base, modernised processing capabilities and private
ownership structure.
In the banks full year results to April 2008 the bank reported net income growth
of 46% with its loan book growing 29% year on year and deposits growing 24%. A
higher cost of funding was a drag on net interest income during the year, and is
one of the bank's focuses for improvement in 2009. The bank's balance sheet grew
by 23%.
Profits are forecast to grow by around 22% in the year to April 2009 as the bank
opens a further 25 branches. Its quarter's results to 30th June 2008 reported a
net income growth of 27%, with loan growth moderating to a 25% year on year
growth and deposits to 20%. The bank has just announced a 1 for 4 share bonus
issue.
We began purchasing this stock in our portfolio 2 months ago. The share price
total return since the stocks initial purchase has been -37%, but the initial
holding was small and further share purchases have been made as the price was
reducing. Indian banks saw sharp falls in their share prices as interest rates
in the country rose as the surging oil prices fuelled inflation. Inflation is
already starting to moderate in India and we are beginning to see a rise in the
share prices of Indian banks.
Key statistics relating to this investment are given below:
For the year 2008 2007 Change
ended 30 April:
Total Assets INR 168.5bn INR 136.5bn +23.4%
Cost : Income 47.2% 47.0% +0.2pp
Ratio
Net Profit after INR 1,516m INR1,041m +45.6%
Taxation
Earnings per INR 16.8 INR 14.8 +13.5%
Share
Dividends per INR 3.0 INR 2.5 +20.0%
Share
Dividend Cover 5.6x 5.9x
Return on Equity 16.0% 15.3% +0.7pp
8. Federal Bank
Federal bank is an "old" private bank that was founded in 1931. "Old" private
banks represent 8% of the banking sector in India, with about 20 medium-scale
banks fitting into this bracket including South Indian Bank and Federal Bank.
Federal Bank is the second largest old private sector bank and is concentrated
in the region of Kerala. It has over 600 branches. It has been modernising
itself and underwent a capital raising in January 2008, boosting its Tier 1
ratio to 19.09%, to support the ambitious future growth plans of the bank. The
bank has added 100 new branches in eighteen months through 2007 and in the first
half of 2008 and plans to add a further 50 in the remainder of 2008.
For the full year to April 2008 the bank reported net income up 26%. The bank is
targeting profit growth of a further 25% in the year to April 2009. Its
quarter's results to the end of June 2008 were muted by a mark-to-market loss on
government bonds due to the rising interest rates in India. Its net profit
increased 2%. However, its underlying operating performance was strong as loans
grew 38% and deposits by 29% year on year. As inflation and subsequently
interest rates fall, the mark-to-market losses should be reversed.
We initially held a small investment in Federal Bank via P-notes, but since
April 2008 have invested directly through the Indian stock market. The current
holding has made a return of -15% in the portfolio in sterling terms. We expect
this loss to be reversed as the bank continues to grow its profits and equity
markets settle down.
Key statistics relating to this investment are given below:
For the year 2008 2007 Change
ended 31 April:
Total Assets INR 325.1bn INR 250.9bn +29.6%
Cost : Income 37.1% 39.9% -2.8pp
Ratio
Net Profit after INR 3,680m INR 2,927m +25.7%
Taxation
Earnings per INR 32.4 INR 28.7 12.9%
Share
Dividends per INR 4.0 INR 4.0 0%
Share
Dividend Cover 8.1x 7.2x
Return on Equity 13.6% 21.3% -7.7pp
9. Bank of Maharashta
Bank of Maharashta commenced business operations in 1936. It now has 1375
branches in 22 states in India. Its home state, Maharashta is the richest state
in India with the highest per capita income. The bank is one of the countries
smaller, but more dynamic, Public Sector Undertaking (PSU) banks. The bank is
expanding, with the prime focus on organic growth. It plans to add 67 branches
in the year to April 2009.
Bank of Maharashta grew profits by 21% in the year to April 2008, as total
income grew 28%. The bank has a low cost of funding as it has over 42% of its
deposits in low interest current and savings accounts.
The bank expects profits to increase 20% to 22% in the year to April 2009. Its
first quarter 2009 results (to June 2008) were affected by mark to market losses
on bonds, with net income falling, despite total income for the quarter
increasing 19%. With inflation moderating and interest rates likely to fall over
time, the losses on the bonds will be reversed in future quarters.
We have held this stock since March 2008 and in this time it has made a return
of -31%.
Key statistics relating to this investment are given below:
For the year 2008 2007 Change
ended 30 April:
Total Assets INR 481bn INR 390bn 29.6%
Cost:Income 55.4% 54.9% +0.5pp
Ratio
Net Profit after INR 3,284m INR 2,718m +20.8%
Taxation
Earnings per INR 7.63 INR 6.31 +20.9%
Share
Dividends per INR 2.0 INR 2.0 0%
Share
Dividend Cover 3.8x 3.2x
Return on Equity N/A N/A -
10. Vozrozhdenie Bank 8.95% Bonds 03/10
Your Fund is invested in Vozrozhdenie Bank's ordinary shares. The bank has
issued one corporate bond, placed locally in Russia in March 2007. The bond
matures in 2010 and has a coupon of 8.95%. In January 2008 your Fund invested
for the first time in the bond. As the bond trades below par value it offers a
very attractive yield to maturity of over 9%. The bond is Rouble denominated, so
also provides the opportunity to benefit from any appreciation in the Russian
Rouble relative to sterling.
In its four months in the portfolio the bond price has appreciated by 3% in
sterling terms, providing a capital gain in addition to its high yield.
Transactions
Over the year, sales of investments realised �96.4m and purchases totalled
�81.5m
Blue Planet Investment Management Limited
25th September 2008
Income Statement
(incorporating the revenue account)
for the year ended 31 July 2008
2008 2007
Revenue Capital Total Revenue Capital Total
Notes (�) (�) (�) (�) (�) (�)
Capital(losses)/
gains on investments
Net realised - (4,174,546) (4,174,546) - 12,453,739 12,453,739
(losses)/gains
Unrealised(losses) - (8,888,559) (8,888,559) - (6,014,942) (6,014,942)
on investment
Exchange (losses)/gains - 36,487 36,487 - (588,140) (588,140)
Net capital (losses) / - (13,026,618) (13,026,618) - 5,850,657 5,850,657
gains on investments
Income from 956,405 - 956,405 433,521 - 433,521
investments
Bank interest 63,585 - 63,585 153,485 - 153,485 receivable
Gross revenue
and capital (losses) /
gains 1,019,990 (13,026,618)(12,006,628) 587,006 5,850,657 6,437,663
Administrative expenses (302,198) (2,926) (305,124) (662,446) (416,100) (1,078,546)
Net return before 717,792 (13,029,544) (12,311,752) (75,440) 5,434,557 5,359,117
interest payable
and taxation
Interest payable (58,133) (58,133) (116,266) (313,576) (313,576) (627,152)
Return on 659,659 (13,087,677) (12,428,018) (389,016) 5,120,981 4,731,965
ordinary
activities
before taxation
Taxation on (59,418) - (59,418) (38,421) - (38,421)
ordinary activities
Return on 600,241 (13,087,677) (12,487,436) (427,437) 5,120,981 4,693,544
ordinary
activities
after
taxation
Return per 2 4.20p (91.65)p (87.45)p (3.00)p 35.89p 32.89p
ordinary
share
The total columns of the statement represent the profit & loss accounts of the
Company. All revenue and capital items in the above statement derive from
continuing operations. There were no recognised gains and losses other than
those disclosed above. Accordingly a statement of total recognised gains and
losses is not required.
Balance Sheet
2008 2007
As at 31 July 2008 Notes (�) (�) (�) (�)
Fixed assets
Listed equity investments 20,927,120 49,276,546
Listed non-equity investments 4,874,363 -
25,801,483 49,276,546
Current assets
Debtors 644,043 1,591,067
Cash at bank 2,199,519 130,896
2,843,562 1,721,963
Creditors: amounts (10,255,579) (20,032,647)
falling due within
one year
Net current (7,412,017) (18,310,684)
liabilities
Net assets 18,389,466 30,965,862
Capital and
reserves
Called-up share capital 7,142,859 7,142,859
Share premium account 6,021,360 6,021,360
Other reserves
Capital reserve - realised 11,496,847 15,732,209
Capital reserve - unrealised (6,822,879) 2,029,436
Revenue reserve 551,279 39,998
Shareholders funds 18,389,466 30,965,862
Net asset value per
ordinary share 2 129.52p 216.76p
Reconciliation of Movements in Shareholders' Funds
Share Share Capital Capital Revenue Total
for the year capital premium reserve - reserve - reserve shareholders
ended 31 July 2008 realised unrealised funds
(�) (�) (�) (�) (�) (�)
Shareholders'
funds at 1 7,142,859 6,021,360 15,732,209 2,029,436 39,998 30,965,862
August 2007
Purchase of - - - - (88,960) (88,960)
treasury
shares
Return on - - (4,235,362) (8,852,315) 600,241 (12,487,436)
ordinary
activities
after
taxation
Shareholders' 7,142,859 6,021,360 11,496847 (6,822,879) 551,279 18,389,466
funds at 31
July 2008
Share Capital Capital Revenue Total
for the year Share premium reserve reserve reserve shareholders
ended 31 July capital realised unrealised funds
2007 (�) (�) (�) (�) (�) (�)
Shareholders' 7,127,576 5,950,010 4,828,524 7,812,140 766,793 26,485,043
funds at
August 2006
Return on - - 10,903,685 (5,782,704) (427,437) 4,693,544
ordinary
activities
after
taxation
Proceeds of 15,283 71,350 - - - 86,633
share issues
Dividend paid - - - - (299,358) (299,358)
during the
period
Shareholders' 7,142,859 6,021,360 15,732,209 2,029,436 39,998 30,965,862
funds at 31
July 2007
Cash Flow Statement
2008 2007
for the year Notes (�) (�) (�) (�)
ended 31 July
2008
Operating activities
Investment income 930,582 390,921
received
Interest recieved 63,585 153,485
Investment management (502,665) (760,187)
and administration
fees paid
Cash paid to (44,000) (44,000)
and on behalf
of directors
Other cash (200,968) (251,408)
payments
Net cash 15 246,534 (511,189)
inflow/(outflow)
from operating
activities
Servicing of
finance
Interest paid (127,102) (602,043)
Taxation
Taxation recovered 4,858 9,237
Capital expenditure
and financial
investment
Purchase of (81,537,951) (84,571,951)
investments
Sale of 96,382,659 77,505,704
investments
14,844,708 (7,066,247)
Cash
inflow/(outflow)
before financing 14,968,998 (8,170,242)
Equity - (299,358)
dividend paid
Management of
liquid
resources
Cash placed (5,829,537) (191,902,960)
on deposits
Cash 4,836,925 195,017,651
withdrawn
from deposit
(992,612) 3,114,691
Financing
Proceeds from - 86,633
share issue
Loans - 6,519,638
advanced
Repayment of Loan (12,999,832) -
Purchase of (88,960) -
treasury
shares
(13,088,792) 6,606,271
Increase in cash 887,594 (1,251,362)
Notes
1.The financial information set out in this announcement does not constitute
the Company's statutory accounts for the years ended 31 July 2008 or 31 July
2007 but is derived from those accounts. Statutory accounts for 2007 have
been delivered to the Registrar of Companies and those for 2008 will be
delivered following the Company's Annual General Meeting. The auditors have
reported on those accounts; their reports were unqualified and did not
contain a statement under s237 (2) or (3) Companies Act 1985.
2. Return and Net Assets Per ordinary share
2008 2007
The return per ordinary share is based upon
the following figures:
Revenue return �600,241 �(427,437)
Capital return �(13,087,677) �5,120,981
Weighted average number of ordinary shares 14,280,756 14,268,753
in issue during the year
The net asset value per ordinary share is calculated on 14,197,718 (2007 -
14,285,718) being the number of ordinary shares in issue at the year end after
deducting treasury shares.
3.The board have proposed the final dividend of 3.22p for this year (2007 -
Nil)
4.The financial information set out in this announcement has been prepared on
the basis of the accounting policies as stated in the previous year's
financials statements, and are consistent with the current year's full
financial statements which are yet to be published.
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