SR EUROPE INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS (unaudited)
Chairman's Statement
Background
SR Europe Investment Trust Plc was established on 15 August 2001 as the
successor Company to SR Pan European Investment Trust Plc. At meetings held in
April 2007 shareholders voted to continue the life of the Company in its
current form and to approve a bonus issue on a one for five basis of a new
class of Subscription shares (similar to warrants). These give holders the
right to subscribe for new Ordinary shares on a one for one basis at 244p in
the month preceding the Annual General Meeting in any year up to and including
2012. The Articles of the Company were amended to postpone the next
continuation vote until 2012, to give the Company a more certain life in line
with the duration of the new Subscription shares.
The Company invests in the UK and continental Europe (to include Eastern Europe
and Russia) mainly in equities but various debt instruments may be included
from time to time. The objective is to achieve capital growth rather than hold
a portfolio of shares to outperform the European Equity Indices. If prospects
for markets are unfavourable the Company is prepared to reduce its exposure to
equities by any combination of increasing the cash position, investing in short
term bonds and hedging.
It is a new requirement of the UK Listing Authority's Listing Rules that
companies should provide more details on the investment policies and strategies
that are put in place to facilitate achievement of their stated investment
objectives. The investment policies established by the Board to guide the
Investment Manager in constructing the portfolio of investments will be set out
in the Annual Report.
Review of Investment Performance
The undiluted NAV of our portfolio rose by 17.1% in the year under review. This
excellent return was also well ahead of the MSCI Europe (including UK) Index,
which rose by 12.91% on a total return basis. The overweight position in both
Energy and Telecoms combined with I.T. contributed to this result.
Almost all the rise in the market and the outperformance of our portfolio took
place in the first half of 2007, with rising oil and metal prices helping boost
share prices in the energy and commodity sectors. The second half of the year
proved to be harder going with both the Index and our portfolio rising barely
2% as concerns over US sub prime loans and the health of the banking system
weighed on investors' minds.
Our Investment Managers adopted a pragmatic approach throughout most of the
year, utilising only part of our borrowing facility and offsetting the
resulting gearing in various degrees by index hedges. By the end of the year
they had grown more bearish and at 31 December our borrowings were just 5% of
shareholders' funds offset by a hedge of 12.1%, giving net exposure to equity
markets of 92.1% of net assets.
The price of our Ordinary shares rose 11.2% from 207.25p at the beginning of
the year to 230.50p on 31 December. The new Subscription shares started trading
at the end of April 2007 at 77.5p, but had declined at the year end to 34.5p as
market sentiment deteriorated. At 31 December a package of five Ordinary shares
and one Subscription share stood at a discount of 5.9% to the underlying net
asset value.
Earnings and dividend
The Board is recommending a final dividend of 1.20p per share which will be
payable on 14 May 2008 to those Ordinary shareholders on the register at 25
April 2008. This will make total dividends paid in respect of 2007 of 1.60p
against 1.40p paid in respect of the previous year.
The net revenue return after taxation in the year was �609,000 against �250,000
in 2006, and basic earnings increased from 0.95p to 2.05p per share.
Prospects
Our Investment Managers believe that outlook for equity markets both in the USA
and UK is particularly clouded by the crisis within the major banks and the
slowdown in the economies. They anticipate that the direct effect of these
influences on European markets will not be as severe, but that they are
unlikely to escape unscathed. With this in mind our net exposure to equities to
shareholders funds has been reduced since the year end and at the middle of
March stood at approximately 50%. At the year end the stocks quoted in the UK
accounted for 23.3% of the portfolio, but many of the companies earn their
profits overseas, and the Investment Managers will be wary of businesses
primarily reliant on the domestic UK economy.
Our portfolio has always had a mix between growth and value stocks, but the
Investment Managers currently favour the former on the grounds of their low
historical ratings.
With UK oil production in decline and mounting internal and external financial
imbalances, the Investment Manager is bearish about the prospects for Sterling.
Since December we have been running a Sterling overdraft and corresponding Euro
deposit with our custodian bankers, Morgan Stanley, to offset our Sterling
denominated investments. This position was opened at roughly 0.718 Pounds to
the Euro, against levels of around 0.78 seen recently.
Annual General Meeting
We hope to see as many shareholders as possible at the Annual General Meeting,
which will be held at One, St. Paul's Churchyard, London EC4M 8SH starting at
12 noon on Wednesday 7 May 2008.
The website, www.sreit.co.uk includes historical data and the Investment
Manager's monthly reports.
Martin Riley, Chairman
28 March 2008
The Directors announce the unaudited statement of results for the year ended 31
December 2007 as follows:-
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
2007 2006
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Investments
Gains on investments - 11,757 11,757 - 10,945 10,945
Foreign exchange gains/ - 466 466 - (2) (2)
(losses)
on capital items
Net investment result - 12,223 12,223 - 10,943 10,943
Income
Dividends 1,362 - 1,362 1,013 - 1,013
Dividends reinvested 97 - 97 28 - 28
Interest 147 - 147 58 - 58
Dealing gains/(losses) of 140 - 140 (35) - (35)
subsidiary
Total income 1,746 - 1,746 1,064 - 1,064
Expenses
Investment Manager's Fee (299) (299) (598) (214) (214) (428)
Investment Manager's - (781) (781) - (478) (478)
performance fee provision
Other expenses (183) - (183) (214) - (214)
Interest payable and (331) (331) (662) (167) (166) (333)
similar charges
Total expenses (813) (1,411) (2,224) (595) (858) (1,453)
Net return before 933 10,812 11,745 469 10,085 10,554
taxation
Taxation (324) 165 (159) (219) 136 (83)
Net return after taxation 609 10,977 11,586 250 10,221 10,471
for the financial period
pence pence pence pence pence pence
Return per Ordinary share
Basic 2.05 36.97 39.02 0.95 38.90 39.85
Diluted 1.71 30.81 32.52 0.89 36.50 37.39
The total column of this statement is the income statement of the Group which
incorporates the trading subsidiary Frankrate Ltd. The supplementary revenue
and capital return columns are presented under guidance issued by the
Association of Investment Companies ("AIC").
All revenue and capital items derive from continuing operations.
These accounts have been prepared under International Financial Reporting
standards ("IFRS").
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2007
Share Share Capital Retained Total
capital premium reserve earnings
�'000 �'000 �'000 �'000 �'000
For the year ended 31
December 2007 (unaudited)
31 December 2006 (audited) 2,969 26,373 32,899 1,742 63,983
Net increase in net assets - - 10,977 609 11,586
from operations
Bonus issue of 59 (59) - - -
Subscription shares
Subscription shares issue - (189) - - (189)
costs
Dividends paid:
Final dividend for the - - - (341) (341)
year ended 31 December
2006 (1.15p)
Interim dividend for the - - - (119) (119)
year ended 31 December
2007 (0.40p)
31 December 2007 3,028 26,125 43,876 1,891 74,920
For the year ended 31
December 2006
31 December 2005 2,478 21,960 22,678 1,827 48,943
Net increase in net assets - - 10,221 250 10,471
from operations
Net proceeds of warrant 491 4,413 - - 4,904
conversion
Dividends paid:
Final dividend for the - - - (273) (273)
year ended 31 December
2005 (1.10p)
Interim dividend for the - - - (62) (62)
year ended 31 December
2006 (0.25p)
31 December 2006 2,969 26,373 32,899 1,742 63,983
CONSOLIDATED BALANCE SHEET
as at 31 December 2007
2007 2006
(unaudited) (audited)
�'000 �'000
Non-current assets
Investments
Fair value through profit or loss 78,977 73,941
Current assets
Trade and other receivables 1,001 666
Cash and cash equivalents 21,479 1,378
22,480 2,044
Total assets 101,457 75,985
Current liabilities
Bank overdraft (25,083) (10,509)
Other payables (765) (1,493)
(25,848) (12,002)
Total assets less current liabilities 75,609 63,983
Non-current liabilities
Investment Manager's performance fee (689) -
(689) -
Total liabilities (26,537) (12,002)
Net assets 74,920 63,983
Shareholders' equity
Share capital 3,028 2,969
Share premium 26,125 26,373
Capital reserves 43,876 32,899
Retained earnings 1,891 1,742
Total Shareholders' equity 74,920 63,983
pence pence
Net asset value per share
- Basic 252.30 215.47
- Fully diluted 250.92 215.47
Shares in issue:
Ordinary shares 29,694,372 29,694,372
Subscription shares 5,938,789 -
The consolidated balance sheet incorporates the trading subsidiary Frankrate
Ltd. These accounts have been prepared under International Financial Reporting
Standards ("IFRS").
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2007
2007 2006
(unaudited) (audited)
�'000 �'000
Cash flows from operating activities
Net return before taxation 11,745 10,554
Adjustments to reconcile:
Less: gains on investments (11,757) (10,945)
Less: dividends reinvested (97) (28)
Realised exchange (gains)/losses (466) 2
Plus: finance costs 662 333
(Increase)/decrease in trade and other (88) 1
receivables
(Decrease)/increase in trade and other (422) 478
payables
Tax deducted from unfranked income (72) (103)
Cash (expended)/generated from operations (495) 292
Loan and overdraft interest paid (586) (357)
Tax credits recovered on unfranked 28 23
investment
income
Corporation tax paid - (35)
Corporation tax recovered - 7
Net cash flows used in operating activities (1,053) (70)
Cash flows from investing activities
Purchases of investments (95,174) (78,210)
Sales of investments 103,028 73,259
Exchange losses on settlement (17) (46)
Exchange losses on currency (27) (24)
Exchange gains on loan revaluation - 73
Exchange gains/(losses) on future contracts 40 (10)
Losses on Index futures contracts (440) (965)
Open futures and option contracts deposits (191) (100)
Net cash flow from/(used in) investing 7,219 (6,023)
activities
Cash flows from financing activities
Loans repaid - (7,000)
Cash received from the conversion of - 4,904
warrants
Equity dividends paid (460) (335)
Subscription share issue costs (179) -
Net cash flows used in financing activities (639) (2,431)
Increase/(decrease) in cash and equivalents 5,527 (8,524)
during the year
Cash and cash equivalents at the start of (9,131) (607)
the year
Cash and cash equivalents at the end of the (3,604) (9,131)
year
Notes
1. This preliminary statement is not the Company's statutory accounts. The
statutory accounts for the financial year ended 31 December 2006 have been
delivered to the Registrar of Companies and received an audit report which
was unqualified, did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying the report,
and did not contain statements under section 237(2) and (3) of the Companies
Act 1985. The statutory accounts for the financial year ended 31 December
2007 have not yet been approved, audited or filed.
2. The basic return per Ordinary share is based on the revenue return of �
609,000 (2006: �250,000) and on 29,694,372 (2006: 26,274,865) Ordinary
shares, being the weighted average number of shares in issue throughout the
year. The diluted return per Ordinary share is based on the revenue return
of �609,000 (2006: �250,000) and on 35,633,161 (2006: 28,003,806) Ordinary
shares,including Subscription shares (2006: including warrants), being the
weighted average number of shares in issue throughout the year.
3. The basic capital return per Ordinary share is based on the capital return
of �10,977,000 (2006: �10,221,000) and on 29,694,372 (2006: 26,274,865)
Ordinary shares being the weighted average number of shares in issue
throughout the year. The diluted capital return per Ordinary share is based
on the capital return of �10,977,000 (2006: �10,221,000) and on 35,633,161
(2006: 28,003,806) Ordinary shares, including Subscription shares (2006:
including warrants), being the weighted average number of shares in issue
throughout the year.
4. The NAV per Ordinary share is based on net assets attributable to Ordinary
shareholders of �74,920,000 (2006: �63,983,000) and on 29,694,372 (2006:
29,694,372) shares, being the number of shares in issue at the year end.
Notwithstanding the average market value of an Ordinary share was lower than
244p, the diluted NAV per Ordinary share is based on the average of five
times the NAV per Ordinary share plus the Subscription price of 244p.
5. It is the intention of the Directors to conduct the affairs of the Company
so that it satisfies the conditions for approval as an investment trust
company as set out in section 842 of the Income and Corporation Tax Act
1988.
For further information, please contact:
Rupert Dyson
Sloane Robinson LLP
Tel: 020 7929 2771
END
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