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SR Euro Inv Trust (SR.)

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Wednesday 06 April, 2011

SR Euro Inv Trust

Annual Financial Report


SR EUROPE INVESTMENT TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2010

The full Annual Report and Accounts can be accessed via the Company's website
at www.sreit.co.uk or by contacting the Company Secretary on telephone 01392
412122.

Investment Objective

SR Europe Investment Trust plc invests in an actively managed portfolio of
quoted companies and debt instruments in the United Kingdom and continental
Europe, including emerging Europe, Russia and Turkey with the objective of
generating capital growth without neglecting income.

Capital structure

Issued share capital at 31 December 2010                                      £
                                                                               
         29,327,234 Ordinary shares of 10 pence each                  2,932,723
                                                                               
          5,937,927 Subscription shares of 1 pence each                  59,379

The Articles of Association of SR Europe Investment Trust plc (the `Company' or
`SREIT') provide that at the Annual General Meeting (`AGM') of the Company held
to approve the Company's financial statements in respect of the financial year
ending 31 December 2011, the Directors will propose an Ordinary Resolution for
the continuation of the Company in its current form. If this resolution is
passed, a similar resolution will be proposed at every third AGM thereafter.

If such a resolution is not passed, a General Meeting of the Company will be
convened within the following four months to consider proposals for the
liquidation, reorganisation or reconstruction of the Company.

Subscription shares

Registered holders of Subscription shares will have the opportunity to convert
their Subscription shares at a rate of 1 Ordinary share per Subscription share
and a conversion price of 244p in the thirty days preceding the AGMs in both
2011 and 2012.

FINANCIAL SUMMARY

for the year ended 31 December 2010

                                                  Year ended      Year ended    
                                                                               
                                                 31 December     31 December    
                                                                               
                                                        2010            2009    
                                                                               
Revenue:                                                                       
                                                                               
Net return after taxation                           £842,000       £1,503,000   
                                                                               
Return per Ordinary share - basic and fully             2.86p            5.06p 
diluted                                                                        
                                                                               
Dividends declared and proposed in respect of           2.40p            4.25p 
year                                                                           
                                                                               
Capital:                                                                       
                                                                               
Net return after taxation                        £(2,442,000)    £19,599,000   
                                                                               
Return per Ordinary share - basic and fully            (8.29)p          66.00p 
diluted                                                                        
                                                                               

                                                      As at            As at    
                                                                                
                                                31 December      31 December    
                                                                               
                                                       2010             2009    
                                                                               
Assets:                                                                        
                                                                               
Net assets                                      £68,362,000      £72,003,000   
                                                                               
Net asset value per Ordinary share (`NAV')                                     
                                                                               
- basic and fully diluted                            233.10p          242.47p  
                                                                               
Middle market quotation:                                                       
                                                                               
Ordinary shares                                      194.50p          208.00p  
                                                                               
Subscription shares                                     9.0p           23.50p  
                                                                               
Discount to basic NAV:                                                         
                                                                               
Ordinary shares                                       16.56%           14.22%
                                                                               
SR Europe Total Return*                               (2.21)%          41.31% 
                                                                               
MSCI Europe (including UK) Total Return Index          8.22%           23.48% 
                                                                               

* Includes dividends reinvested as at the ex-dividend date.

INVESTMENT POLICY

SR Europe Investment Trust plc invests in an actively managed portfolio of
quoted companies and, occasionally, debt instruments in the United Kingdom and
continental Europe, including emerging Europe, Russia and Turkey.

The objective is to generate capital growth without neglecting income rather
than holding a portfolio of shares to try to outperform the European equity
indices.

The portfolio will be made up of stocks priced mainly in Euros and Sterling,
but also in a variety of other currencies. The Investment Managers are
authorised to hedge against anticipated weakness in any of these currencies,
including Sterling, the currency in which we report.

Asset allocation and risk diversification

The Company's investment policy is to concentrate on sectors, investment themes
and individual companies that have a pan-European perspective, but including
companies operating outside Europe. The Investment Managers' initial
consideration is to identify reasonable absolute upside on any individual
investment, whilst also paying particular attention to possible absolute
downside risks, irrespective of potential return relative to an index.

Limited attention is paid to geographical weightings of the portfolio, either
in absolute terms or relative to the MSCI Europe (including UK) Total Return
Index. However, for risk purposes, the Investment Managers monitor individual
country allocations to ensure that these do not become unreasonably high.
Whilst there is no prescribed single country limit, outside of the core markets
of the UK, Germany and France, exposure to any single country would normally
not exceed 30% of the portfolio at the time of investment. In the case of
emerging markets, the comparable figure would be 20%.

Up to 5% of Shareholders' funds at the time of investment may be committed to
companies quoted outside of Europe, as defined above. Some of the companies
selected in this category may not have substantial interests in Europe.

The Investment Managers' aim is to capture the upside in European equity
markets over longer time periods, whilst trying to avoid major loss of value
when medium-term market prospects are poor. They believe that risk reduction
and the delivery of attractive absolute returns over time are best achieved by
finding several independent and uncorrelated investment themes where valuations
look attractive. Whilst not specifically proscribed, it is unlikely that
exposure to any single investment sector will exceed 30% of the portfolio at
the time of acquisition.

The portfolio is invested across the full spectrum size of individual
companies, from small, higher risk emerging businesses up to the largest quoted
European multinationals. Maximum exposure to any single share is capped at 15%
of gross assets at the time of investment, though in practice it would not
normally exceed 7%.

Gearing

The Investment Managers enjoy a high degree of flexibility in balance sheet
deployment, individual stock choices and size of positions in the Company's
portfolio. They may reduce the exposure to equities, if they believe that
prospects for equity markets are unfavourable, by one or more of: increasing
the cash position, investing in bonds and using appropriate hedging strategies.
Investors should note that hedging activities may not be perfectly correlated
to the underlying portfolio's equity positions; hence undertaking hedging
positions is not a `risk free' exercise and can result in further losses if
both positions were to move in opposite directions. This ought to be a rare
event as the Investment Managers seek to use hedging instruments that
realistically match the portfolio and generally hedging positions are used only
at irregular intervals.

The Investment Managers try to be pragmatic in their balance sheet positioning,
taking into account the general global outlook and liquidity environment. The
Company has authority to borrow up to a maximum of 50% of shareholders' funds,
but the Directors and Investment Managers have for the time being agreed a
maximum figure of 22% at the time the borrowings are made (though any cash
margin held may be offset against borrowings).

Even in negative market conditions a minimum gross level of equity exposure of
at least 40% is likely to be maintained, although the net exposure could be
reduced by, for example, hedging in extreme circumstances. Shareholders will
not be immune to weak markets and currencies, or to poor stock selection, but
the overall aim is to cushion the worst effects.

CHAIRMAN'S STATEMENT

Background

SR Europe Investment Trust Plc (the Company) was established on 15 August 2001
as the successor Company to SR Pan European Investment Trust Plc. The Company
invests in the UK and Continental Europe including emerging Europe, Turkey and
Russia. The portfolio consists mainly of equities but may also, from time to
time, include various debt instruments. In addition shareholders gave their
approval at the last Annual General Meeting to allow up to 5% of net assets at
the time of investment to be committed to companies quoted outside of Europe as
defined above.

The objective is to achieve absolute returns 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
increasing the cash position, investing in bonds or hedging. However, the
Company is likely to maintain significant exposure to equities and our assets
therefore will not be immune to falling markets.

Change of Portfolio Manager

In August 2010 Sloane Robinson LLP informed your Directors that Rupert Dyson
had decided to take a break from the investment industry and that his
resignation had been accepted. Rupert was the named manager of our portfolio
since the Company's inception in 2001 and the Board are grateful for his
successful results over nine years.

Michael Hufton was appointed the new named portfolio manager of the Company,
assisted by Nathan Wong. Michael is a linguist and worked in European equities
both with Cazenove & Co and Bruce Nelson Capital before joining Sloane Robinson
in 2008.

Review of Investment Performance

The NAV of our Ordinary shares fell by 2.2% on a total return basis in the year
under review, substantially underperforming the MSCI Europe (including UK)
index, (the Index) which rose by 8.2% on the same basis. 2010 was a volatile
year in Europe for both the equity indices and the value of the Euro against
Sterling and our Managers were wrong footed in the five months from May to
September.

At the end of April we were 85% committed to equities at a net level and our
NAV per share was up 2.5% in the year to date, ahead of the Index. The bailout
of Greece in April failed to quell wider uncertainties about sovereign debt in
other parts of the Eurozone and during May European equity markets fell,
recovered and fell again with the Index down 7.4% in the month. Our Managers
sold equities and hedged reducing net exposure to 45% at the end of May, but
this did not prevent our NAV per share underperforming a falling market in May
and June and left the Company poorly positioned for the rally in the third
quarter of the year.

Since his appointment in August, our new portfolio manager has rebuilt exposure
to equities to 92.5% at the year end with a further 3.2% in bonds and no
derivative overlay. Performance in the final quarter of the year was stable
with a recovery in our NAV per share equalling the rise in the Index despite
the under exposure to equities. There has been no change of policy but the
current portfolio has a greater emphasis on larger companies, many with markets
in the faster expanding economies in the Far East and South America. As a
result the portfolio as a whole is more liquid than previously.

At 31 December 2010 the Ordinary share price was 194.5p, a discount of 16.6% to
the NAV. This compares with a price of 208.0p on 31 December 2009 when the
discount was 14.2%. With the discount widening marginally the Ordinary shares
fell by 6.5% over the year.

Earnings and Dividend

Net revenue after tax in 2010 was £842,000 (£1,503,000 in 2009) equating to
earnings of 2.86p (5.06p in 2009) per Ordinary share. The Company paid an
interim dividend of 1p per Ordinary share on 30 September 2010 and your
Directors are recommending a final dividend of 1.4p in respect of the year
2010. If approved by shareholders this final dividend will be paid on 31 May to
those Ordinary shareholders on the register at 15 April 2011.

Revenues in 2009 were boosted by both the reimbursement of VAT on past
management and performance fees and by substantial interest received on
holdings of corporate bonds. This latter element diminished in 2010 as
corporate bonds were sold and is likely to be lower again in 2011. Generating a
net income and paying dividends remains part of our investment objective, but
the main aim is to invest for capital growth.

Prospects

Our Investment Manager in his review points to the modest valuation of the
European equity markets in relation to their longer term averages. The current
emphasis in the portfolio has moved towards larger more liquid companies with
prospects of earnings growth from both domestic and overseas markets.

At the Annual General Meeting ("AGM") in 2006, Shareholders voted in favour of
a resolution to continue the life of the Company and on that occasion extended
the period to the next such vote to six years to give the Company a more
certain life in line with the duration of the Subscription shares. At the AGM
to be held in 2012 to approve the 2011 financial statements, your Directors
will propose an Ordinary Resolution for the continuation of the Company in its
current form. If this resolution is passed, a similar resolution will be
proposed at every third AGM thereafter and on a rolling three year renewal
basis.

Shareholders will be asked at the AGM to renew the authority of the Directors
to buy back shares, and your Directors intend to use these powers if they
consider this to be in the interests of the Company. Over the course of 2010
the Company bought back a total of 368,000 Ordinary shares for cancellation.

Child Health Research Appeal Trust

In 1980 Leolin Price CBE, QC, Chairman of the Institute of Great Ormond Street
Hospital for Sick Children and responsible for this charity, helped launch the
Child Health Research Investment Trust plc with an innovative tax structure
that enabled the charity to earn extraordinary interest over a period of seven
years on the loan capital it invested. The founding shareholders also prospered
and have seen a number of changes in the share structure, culminating in the
present SR Europe Investment Trust. This year Leo thinks it no longer necessary
to repeat his customary appeal which for many years has appeared on the last
page of our Annual Report. I am very grateful to Leo for the support he has
given to the Company and its predecessors over so many years and I would like
to remind Shareholders of this deserving cause which furthers the work of the
Great Ormond Street Hospital for Sick Children.

Annual General Meeting

We hope to see as many shareholders as possible at the AGM, which will be held
at the offices of J.P. Morgan Cazenove, 20 Moorgate, London EC2R 6DA at 2.30pm
on Tuesday 24 May 2011. In addition to the formal business of the meeting, the
fund manager, Michael Hufton, will make a presentation reviewing the past year
and commenting on the outlook.

Martin Riley

Chairman

6 April 2011

INVESTMENT MANAGER'S REVIEW

The net asset value per share ('NAV') of the Company on a total return basis fell
by 2.2% in 2010 compared with an 8.2% increase in the MSCI Europe (including
UK) Total Return Index in Sterling terms over the same period. Clearly this was
a very disappointing performance and a large contributor related to FX
translation losses. We simply did not anticipate that the crisis in the
Eurozone would cause such a precipitous decline in the Euro/Sterling rate and
so did not adequately hedge the large Euro exposure back into the Sterling base
currency of the Company.

2010 was a year of two halves which included a change in the named manager
running the Company in August. Over the first period the NAV declined by 13.2%
against a 3.3% decline in the index. In the second period the index rallied
11.9% and NAV increased by 10.8%, on a net equity exposure which started at 47%
and ended the year at 93%. This performance was encouraging in light of a
change to the portfolio mix which was de-risked, exiting the majority of our
smaller cap positions and refocusing on a group of core large and mid cap
holdings where we have high conviction and feel we can hold large positions on
a long term time horizon.

Looking forward we feel cautiously positive as to the outlook in 2011. Caution
is necessary as the macro concerns which took centre stage in 2010 have not
gone away. Sovereign debt in Europe's periphery and a shortage of bank funding
remain major problems to which convincing and politically acceptable solutions
have not yet been found. But on the other hand there is much cause for
optimism. At a macro level, Germany, Scandinavia & Switzerland, are positively
booming, with confidence levels (German IFO) at 20 year highs and bond yields
near 20 year lows. GDP growth is strong and unemployment is falling, absorbing
spare capacity. This group represents a third of European GDP, in contrast to
Greece, Ireland & Portugal which account for just 5% combined. At a micro
level, companies appear in good shape. They have made use of the crisis to
restructure, cut costs aggressively and repay debt. As a result balance sheets
are strong, profitability and cash flow generation is high and growth prospects
are good. Many of the world's leading businesses with strong positions in the
growth economies of the Emerging world are European quoted and in addition they
are also now benefitting from an improvement in their home markets. However,
these contrasting risks and opportunities will likely lead to another year of
volatility as newsflow and market concerns ebb and flow. As a result we will
need to be pragmatic and willing to move our balance sheet in response to
events.

As to stocks, we have several core holdings where we feel excited as to
prospects in the year ahead. Examples would include:

Edenred in France, the global market leader in payment vouchers, a rapid growth
business benefitting from formalisation of the economies and trends to
urbanisation in Asia & Latin America.

International Power in the UK, which, post merger with GDF Suez International,
will be the world's leading independent power producer, with strong growth
prospects, high visibility of earnings and potential for substantial synergy
benefits to come through from the merger.

Amadeus in Spain, a software company which is the world's leading ticketing
distribution system and IT software supplier to the aviation industry. The
excitement here is from their Altea software business which provides leading
edge ERP-type solutions to airlines enabling them to cut costs and increase
topline.

Alcatel Lucent in France, the market leading supplier of fixed line & wireless
telecommunications equipment, benefitting from both a resurgent equipment
market, (driven by the US as networks are upgraded to cope with higher data
demand as smartphone penetration increases), and from internal restructuring as
costs are cut.

Roche in Switzerland, a global leading pharmaceutical & biotech company with a
number one position in oncology, trading at a multi-year low in valuation
terms. Things look likely to turn for the better in 2011, with modest topline
growth augmented by a new cost-cutting plan scheduled to deliver CHF 2.4bn of
savings, a new CFO as of March & the first signs of good news from the
late-stage R&D pipeline with strong phase 3 trial results in malignant
melanoma.

The European equity market currently trades on a fwd PE of 9.0x, a 40% discount
to the long run average 15x multiple, and offers a dividend yield of 4.5%. In a
world where earnings are growing and interest rates are at 1%, this is a
compelling proposition.

Sloane Robinson LLP

6 April 2011

PORTFOLIO OF INVESTMENTS

at 31 December 2010*

                                Market                                          
                                                                                
 Rank   Rank                     Value      % of Country of                     
                                                                                
(2010) (2009) Company            £'000 Portfolio Listing      Sector            
                                                                                
  1     (-)   Edenred            3,316      5.07 France       Industrials       
                                                                                
  2     (-)   International      3,256      4.98 UK           Utilities         
              Power                                                             
                                                                                
  3     (-)   Swatch Group       2,794      4.27 Switzerland  Consumer          
                                                              Discretionary     
                                                                                
  4     (4)   Heidelbergcement   2,693      4.12 Germany      Materials         
                                                                                
  5     (1)   Fresenius          2,585      3.95 Germany      Healthcare        
                                                                                
  6     (2)   Roche Holdings     2,575      3.94 Switzerland  Healthcare        
                                                                                
  7     (-)   Lanxess            2,412      3.69 Germany      Materials         
                                                                                
  8     (-)   Michelin           2,402      3.67 France       Industrials       
                                                                                
  9     (68)  Telefonica         2,272      3.48 Spain        Telecommunications
                                                                                
  10    (12)  Compass Group      2,187      3.34 UK           Consumer          
                                                              Discretionary     
                                                                                
  11    (5)   Man Group 11%      2,179      3.33 UK           Fixed income      
                                                                                
  12    (-)   Volkswagen         2,101      3.21 Germany      Industrials       
                                                                                
  13    (-)   Nokia              2,098      3.21 Finland      Consumer          
                                                              Discretionary     
                                                                                
  14    (-)   Publicis Groupe    2,077      3.18 France       Media             
                                                                                
  15    (-)   Amadeus Global     2,062      3.15 Spain        Information       
                                                              Technology        
                                                                                
  16    (-)   Adidas             2,050      3.14 Germany      Consumer          
                                                              Discretionary     
                                                                                
  17    (-)   Assa Abloy         2,047      3.13 Sweden       Industrials       
                                                                                
  18    (6)   Vodafone           2,012      3.08 UK           Telecommunications
                                                                                
  19    (-)   Alcatel            1,999      3.06 France       Information       
                                                              Technology        
                                                                                
  20    (-)   Anheuser-Busch     1,995      3.05 Belgium      Consumer Staples  
                                                                                
Top Twenty investments          47,112     72.05                                
                                                                                
  21    (13)  Novo-Nordisk       1,985      3.04 Denmark      Healthcare        
                                                                                
  22    (23)  Temenos Group      1,971      3.01 Switzerland  Information       
                                                              Technology        
                                                                                
  23    (-)   Antofagasta        1,814      2.77 UK           Materials         
                                                                                
  24    (-)   Tullow Oil         1,753      2.68 UK           Energy            
                                                                                
  25    (-)   Svenska            1,574      2.41 Sweden       Financials        
                                                                                
  26    (7)   Wirecard           1,563      2.39 Germany      Information       
                                                              Technology        
                                                                                
  27    (-)   Richemont          1,410      2.16 Switzerland  Consumer          
                                                              Discretionary     
                                                                                
  28    (-)   Rio Tinto          1,395      2.13 UK           Materials         
                                                                                
  29    (-)   BNP Paribas        1,391      2.13 France       Financials        
                                                                                
  30    (-)   Kuehne & Nagel     1,371      2.10 Switzerland  Industrials       
                                                                                
  31    (-)   Prudential         1,353      2.07 UK           Financials        
                                                                                
  32    (49)  Premier Oil          617      0.94 UK           Energy            
                                                                                
  33    (50)  Poweo                 76      0.12 France       Utilities         
                                                                                
Total company portfolio         65,385    100.00                                
                                                                                
Frankrate (Subsidiary Company)                                                  
                                                                                
Total Subsidiary portfolio           -         -                                
                                                                                
Fixed and current asset         65,385    100.00                                
investments                                                                     
                                                                                

* Based on country of quotation.

Futures and options are not included in this classification

Included in the above are fixed interest holdings of £2,179,000 (2009: £
6,729,000).

PORTFOLIO ANALYSIS

at 31 December 2010

Geographical breakdown*

Country                                  % of portfolio
                                                       
UK & Ireland                                         25
                                                       
Germany                                              21
                                                       
France                                               17
                                                       
Switzerland                                          15
                                                       
Spain                                                 7
                                                       
Sweden                                                6
                                                       
Belgium                                               3
                                                       
Finland                                               3
                                                       
Denmark                                               3
                                                       
                                                    100

* Based on country of quotation.

Sector breakdown

Sector                                   % of portfolio
                                                       
Industrials                                          17
                                                       
Consumer Discretionary                               16
                                                       
Materials                                            13
                                                       
Information Technology                               12
                                                       
Healthcare                                           11
                                                       
Financials                                            7
                                                       
Telecommunication Services                            6
                                                       
Utilities                                             5
                                                       
Energy                                                4
                                                       
Media                                                 3
                                                       
Consumer Staples                                      3
                                                       
Fixed Income                                          3
                                                       
                                                    100

BUSINESS REVIEW

The business review is intended to enhance shareholders' understanding of the
development, performance and position of the Company through a combination of
narrative and financial performance measures. It should be read in conjunction
with the Chairman's statement, Investment Manager's review, Portfolio of
investments, Portfolio analysis and historical record.

Principal activity and status

The principal activity of the Company is to carry on business as an investment
trust. Frankrate Limited is a wholly owned subsidiary undertaking of the
Company whose principal activity is to carry on business as an investment
dealing company. The Directors do not envisage any changes in these activities
in the foreseeable future.

The Company was incorporated and registered in England and Wales on 29 May 2001
with registration number 04223875. It is registered as a public limited company
and is currently an investment company in accordance with the provisions of
Section 833 of the Companies Act 2006. The Company is a member of the
Association of Investment Companies (`AIC').

The Company has received written approval from HM Revenue & Customs as an
authorised investment trust under Sections 1158/9 of the Corporation Tax Act
2010 (`Sections 1158/9'), formerly Section 842 of the Income and Corporation 
Taxes Act 1988 (`Section 842'), for the year ended 31 December 2009. This
approval is subject to there being no subsequent enquiry under corporation tax
self-assessment. The Company has been approved as an investment trust for all
previous years. On 1 April 2010 Section 842 was superseded by Sections 1158/9
following the modernisation of the investment trust tax rules. There was no
change to the substance of the wording. It is the opinion of the Directors that
the Company has subsequently directed its affairs so as to enable it to
continue to qualify for such approval and the Company will continue to seek
approval under Sections 1158/9 each year.

The Company's status as an investment trust allows it to obtain an exemption
from paying capital gain taxes on the profits made from the sale of its
investments. Investment trusts offer a number of advantages for investors,
including access to investment opportunities that might not be open to private
investors and to professional stock selection skills at low cost.

The Company's Ordinary shares and Subscription shares are eligible investments
for inclusion in Individual Savings Accounts.

The Company's investment objective is to generate capital growth, without
neglecting income, from an actively managed portfolio of quoted companies and
debt instruments in the United Kingdom and continental Europe, including
emerging Europe, Russia and Turkey. When conditions are favourable, the Company
seeks to enhance capital returns for shareholders by utilising gearing in the
form of a flexible credit facility. Up to 5% of Shareholders' funds at the time
of investment may be committed to companies quoted outside of Europe, as
defined above. Some of the companies selected in this category may not have
substantial interests in Europe. Full details of the current investment policy
can be found above.

The Company's Articles of Association provide that at the AGM of the Company to
be held to approve the Company's financial statements in respect of the
financial year ending 31 December 2011, the Directors will propose an Ordinary
Resolution for the continuation of the Company in its current form. If this
resolution is passed, a similar resolution will be proposed at every third AGM
thereafter. If such a resolution is not passed, a General Meeting of the
Company will be convened within the following four months to consider proposals
for the liquidation, reorganisation or reconstruction of the Company.

Net asset valuation

The basic net asset value (`NAV') per Ordinary share at 31 December 2010 was
233.10p (2009: 242.47p).

Results and dividend

The Chairman's statement and the Investment Manager's review above give details
of the Company's activities, performance and position during the period under
review.

The results for the year and the proposed transfer to the revenue reserve are
set out in the consolidated income statement below.

The following net dividends have been paid/proposed by the Directors:

                                        Pence (net)
                                                   
                             Payment   per Ordinary
                                                   
                                date          share
                                                   
First interim             30/09/2010          1.00p
dividend                                           
                                                   
Final dividend            31/05/2011          1.40p
                                                   
                                              2.40p

The Directors recommend that a final dividend in respect of the year ended 31
December 2010 of 1.4p per Ordinary share be paid on 31 May 2011 (2009: second
interim 3.25p).

Total expense ratio

The Company's total expense ratio to average Shareholders' funds (`TER') was
1.27% (2009: 1.26%).

Share capital

As at 31 December 2010, the Company's issued share capital comprised 29,327,234
Ordinary shares of 10p each and 5,937,927 Subscription shares of 1p each. Both
classes of share are listed and traded on the London Stock Exchange. During the
year the Company has bought back 368,000 Ordinary shares for cancellation, with
a nominal value of £36,800 and representing 1.24% of issued Ordinary shares, at
a total cost of £783,000. No shares were held in Treasury during the year or at
the year end.

Subsequent to the year end and up to the date of this report, a further 28,301
Ordinary 10p shares were purchased by the Company for cancellation, with a
nominal value of £2,830 and representing 0.1% of issued Ordinary shares at a
total cost of £58,000.

Further details of the rights attaching to each class of share can be found in
note 13 to the financial statements.

Key performance indicators ('KPIs')

The Directors use the following key performance indicators to measure the
progress of the Company:

• NAV.

• The movement in the Company's share price and the resultant discount/premium
of the share price in relation to the NAV.

• Despite the Company's aim for capital growth irrespective of the movement of
indices, the Directors also monitor the Company's NAV performance against
relevant indices.

Shareholders can compare the KPIs as at 31 December 2010 and 2009 above.

Principal risks faced by the Company

Risks faced by the Company include, but are not limited to, liquidity/
marketability risk, interest rate risk, gearing risk, currency risk, maturity
risk, market price risk, risks associated with non-compliance with Section 1158
/9, risks associated with hedging, credit risk and risks associated with the
engagement of third parties.

Liquidity/marketability risk

The Company's portfolio consists mainly of quoted equity securities. However,
the Company does from time to time invest in debt instruments and other
investment vehicles which, by their very nature, are less readily marketable
than, for example, blue-chip UK equities. The Board closely monitors the
performance of the Company through quarterly Board meetings and the review of
monthly investment management reports. The Investment Manager monitors the
value of the Company's underlying securities on a daily basis.

Gearing risk

As at 31 December 2010 and as at the date of this report, the Company has the
potential to borrow in the form of an overdraft facility with Morgan Stanley
based upon a percentage of assets, which the Company utilises primarily for the
purpose of purchasing securities. The use of gearing can cause both gains and
losses in the asset value of the Company to be magnified.

Currency risk

The Company makes significant investments in currencies outside the Company's
base currency of Sterling. The Company from time to time also hedges its
currency exposure, including its exposure to Sterling. This means that any
significant fluctuations in exchange rates between currencies can have a
detrimental impact on the Company's value. The most important exchange rate is
Sterling relative to the Euro.

Market price and discount volatility risk

Since the Company invests in financial instruments, market price risk is
inherent in these investments.

Being a closed-ended fund, the Company's shares generally trade at a discount
to net asset value. The magnitude of this discount fluctuates daily and can
vary significantly. Thus, for a given period of time, it is possible that the
market price could decrease despite an increase in the Company's net asset
value. The Directors review the Company's discount levels regularly and can use
the Company's powers to buy back shares should it be thought appropriate to do
so.

Compliance with Sections 1158/9

If the Company did not comply with the provisions of Sections 1158/9, it would
lose its investment trust status. In order to minimise this risk, the
Investment Manager and the Company Secretary monitor the Company's compliance
with the key criteria of Sections 1158/9 on a monthly basis. On a quarterly
basis, compliance with these provisions is discussed in detail between the
Board and the Investment Manager and, furthermore, the Investment Manager
provides the Board with a quarterly assurance that, to the best of its
knowledge, the provisions of Sections 1158/9 relating to investments have been
adhered to during the period.

Risks associated with the engagement of thirdparties

Like most investment trust companies, the Company has no employees and the
Directors are all non-executive. Accordingly, the Company relies upon the
services and performance of Sloane Robinson LLP as Investment Manager, Capita
Sinclair Henderson Limited, who provide company secretarial and accounting
services, and Morgan Stanley & Co. International plc (`Morgan Stanley'), the
Company's Custodian. Details of the terms of the Investment Management
Agreement are set out below.

There are a number of potential operational risks associated with the fact that
third parties undertake the Company's administration and custody of assets,
such as the risk that they could fail to ensure that statutory requirements,
such as the Companies Act, Tax legislation and the Listing Rules, are complied
with.

Morgan Stanley uses a number of sub-custodians to hold the non-UK assets of the
Company, some of which are not affiliated to Morgan Stanley, and there is a
potential risk associated with this. Under FSA rules, Morgan Stanley is
required to exercise due skill, care and diligence in the selection and
monitoring of sub-custodians and to maintain an appropriate level of
supervision over them. Morgan Stanley also has arrangements in place to ensure
that client securities are segregated from the sub-custodians' assets.

Under the terms of the agreement with Morgan Stanley, Morgan Stanley may
borrow, lend or otherwise use the Company's investments for its own purposes
(rehypothecation) and may take such investments as collateral. Such investments
then become the property of Morgan Stanley and, in the event of an insolvency
of Morgan Stanley, may be available to its creditors. In such an instance, the
Company would become an unsecured creditor in relation to any assets which are
rehypothecated and may not be able to recover such investments in full. The
ability of Morgan Stanley to use the Company's investments in this way is
limited to 120% of the Company's liabilities (which includes debit cash
balances together with any other obligation owed to Morgan Stanley) outstanding
with them at any time, an enhancement of the existing prime brokerage terms
with Morgan Stanley which was reduced in May 2010 from the previous level of
140%.

As at 31 December 2010, although the Company had £0.4 million held in positive
cash balances with Morgan Stanley and no overdraft.

Further information on risk

Further information regarding the principal risks that the Company faces in its
portfolio management activities and the policies for managing these risks and
the policy and practice with regard to financial instruments is included in
note 18 to the financial statements: Analysis of financial assets and
liabilities. Information regarding the Company's risk review procedures may
also be found under `Internal control assessment process' in the Directors'
report included in the Annual Report and Financial Statements.

Future developments

A review of the year to 31 December 2010 and the prospects for the coming year
can be found in the Chairman's statement and the Investment Manager's review
above.

Corporate social responsibility

The Company has no employees and the Board is comprised entirely of
non-executive Directors. As an investment trust, the Company has no direct
impact on the community or environment, and as such has no policies in this
area. In carrying out its activities and in relationships with suppliers, the
Company aims to conduct itself responsibly, ethically and fairly.

EXTRACTS FROM THE DIRECTORS' REPORT

Management agreements

The Group's investments are managed by Sloane Robinson LLP under an agreement
dated 15 March 2007.

The base investment management fee is 0.8% per annum of total assets less
current liabilities and current period revenue, payable quarterly in arrears.
The performance fee arrangement is set over a 5¼ year period. The performance
fee is 15% of the amount by which the fully diluted NAV per Ordinary share at
29 June 2012 exceeds the NAV at 8 March 2007 increased by 5% per annum
compound, multiplied by a maximum of the number of Ordinary shares in issue at
8 March 2007. The performance fee payable will be less than 4.8% of the net
assets of the Company at the date of the calculation set for 29 June 2012.

There are no specific provisions contained within the Investment Management
Agreement relating to compensation payable in the event of termination of the
agreement other than the entitlement to fees, including performance fees, which
would be payable within any notice period. The agreement is terminable by three
months' written notice.

The Board keeps under review the performance of the Investment Manager. In view
of the satisfactory longer-term performance of the assets, the Board believes
that it is in the interests of shareholders to retain Sloane Robinson LLP as
Investment Manager and that providing an appropriate incentive to Sloane
Robinson LLP for the future is in the interests of all shareholders.

Under an agreement dated 11 July 2001, company secretarial and administrative
services are provided by Capita Sinclair Henderson Limited. The administration
agreement may be terminated by six months written notice.

The full Annual Report contains the following statements regarding
responsibility for the financial statements and management report/ business
review included therein (references in the following statements are to pages in
the Annual Report).

Management Report and Statement of Directors' responsibilities in respect of
the financial statements

Management Report

Listed companies are required by the FSA's Disclosure and Transparency Rules,
(the "Rules") to include a management report within their Annual Report and
Financial Statements.

The information required to be included in the management report for the
purpose of these Rules is included in the Chairman's statement, the Investment
Manager's review, the Portfolio analysis and the Business review above. 
Therefore no separate management report has been included.

Statement of Directors' responsibilities in respect of financial statements

The Directors are responsible for preparing this report and the financial
statements in accordance with applicable United Kingdom law and those
International Financial Reporting Standards (`IFRS') adopted by the European
Union.

Company law requires the Directors to prepare financial statements for each
financial period which present fairly the financial position of the Company and
of the Group and the financial performance and cash flows of the Company and of
the Group for that period.

In preparing those financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;

• state whether applicable IFRS have been followed, subject to any material
departures disclosed and explained in the financial statements;

• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group and Company will continue in business;
and

• provide additional disclosures when compliance with the specific requirements
in IFRS is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the Company`s financial position
and financial performance.

The Directors are responsible for keeping adequate accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and of the Group and to enable them to ensure that the financial
statements comply with the Companies Act 2006 and Article 4 of the IAS
Regulations. The Directors are responsible for ensuring that the Directors'
report and other information in the annual report is prepared in accordance
with Company law in the United Kingdom. They are also responsible for ensuring
that the annual report includes information required by the Listing Rules of
the Financial Services Authority. They also have responsibility for
safeguarding the assets of the Group and for taking such steps as are
reasonably open to them to prevent and detect fraud and other irregularities.
Under Company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs and profit or loss of the Company and Group.

The Directors, to the best of their knowledge, state that:

• the financial statements, prepared in accordance with International Financial
Reporting Standards as adopted by the European Union, give a true and fair view
of the assets, liabilities, financial position and return of the Company and
the subsidiary undertaking included in the consolidation taken as a whole; and

• the Chairman's statement, Investment Manager's review and Directors' report
include a fair review of the development and performance of the business and
the position of the Company and the subsidiary undertaking included in the
consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face.

The Directors confirm that, so far as they are each aware, there is no relevant
audit information of which the Group's Auditor is unaware; and each Director
has taken all the steps that ought to have been taken as a Director to make
himself aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.

The financial statements will be published on the Company's website,
www.sreit.co.uk. The work carried out by the Auditor does not involve
consideration of the maintenance and integrity of this website and accordingly,
the Auditor accepts no responsibility for any changes that have occurred to the
financial statements when they are presented on the website. Visitors to the
website need to be aware that legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ from
legislation in other jurisdictions.

On behalf of the Board

M R Riley

Chairman

6 April 2011


NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's
statutory accounts for the years ended 31 December 2010 and 2009 but is derived
from those accounts. Statutory accounts for 2009 have been delivered to the
Registrar of Companies, and those for 2010 will be delivered in due course. The
Auditors have reported on those accounts; their report was (i) unqualified,
(ii) did not include a reference to any matters to which the Auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The
text of the Auditor's report can be found in the Company's full Annual Report
and Accounts at www.sreit.co.uk.


Consolidated income statement

for the year ended 31 December 2010

                                     2010                       2009           
                                                                               
                           Revenue  Capital   Total   Revenue  Capital   Total 
                                                                               
                     Note    £'000    £'000   £'000     £'000    £'000   £'000 
                                                                               
Investments                                                                    
                                                                               
(Losses)/gains on     9          -   (2,020) (2,020)        -   22,226  22,226 
investments at fair                                                            
value through                                                                  
profit or loss                                                                 
                                                                               
Foreign exchange                 -    1,586   1,586         -   (1,652) (1,652)
gains/(losses) on                                                              
capital items                                                                  
                                                                               
Losses on forward                -   (1,719) (1,719)        -   (1,073) (1,073)
foreign exchange                                                               
contracts                                                                      
                                                                               
Net investment                   -   (2,153) (2,153)        -   19,501  19,501 
result                                                                         
                                                                               
Income                                                                         
                                                                               
Income from                  1,588        -   1,588     2,003        -   2,003 
investments                                                                    
                                                                               
Other income                   (19)       -     (19)      141        -     141 
                                                                               
Total income          2      1,569        -   1,569     2,144        -   2,144 
                                                                               
Expenses                                                                       
                                                                               
Investment            3       (272)    (272)   (544)     (251)    (251)   (502)
Manager's fee                                                                  
                                                                               
VAT refund on                    -        -       -       181      181     362 
Investment                                                                     
Manager's fees                                                                 
                                                                               
Other expenses        4       (307)       -    (307)     (243)       -    (243)
                                                                               
Interest payable      5        (26)     (26)    (52)      (40)     (40)    (80)
and similar charges                                                            
                                                                               
Total expenses                (605)    (298)   (903)     (353)    (110)   (463)
                                                                               
Net return before              964   (2,451) (1,487)    1,791   19,391  21,182 
taxation                                                                       
                                                                               
Taxation              6       (122)       9    (113)     (288)     208     (80)
                                                                               
Net return after                                                               
taxation                                                                       
                                                                               
for the year                   842   (2,442) (1,600)    1,503   19,599  21,102 
                                                                               
                             pence    pence   pence     pence    pence   pence
                                                                               
Return per Ordinary   7                                                        
share                                                                          
                                                                               
- Basic                       2.86    (8.29)  (5.43)     5.06    66.00   71.06 
                                                                               
- Diluted                     2.86    (8.29)  (5.43)     5.06    66.00   71.06 
                                                                               

The Group does not have any income or expenses that are not included in net
return for the year, and therefore the `Net return after taxation for the year'
is also the `Total comprehensive income for the year', as defined in
International Accounting Standard (`IAS') 1 (revised). All of the net return
for the year and the total comprehensive income for the year is attributed to
the Shareholders of the Group.

The total column of this statement is the statement of comprehensive income of
the Group which incorporates the trading subsidiary, Frankrate Limited. The
supplementary revenue and capital return columns are presented under guidance
issued by the Association of Investment Companies (`AIC').

All revenue and capital items in the above statement derive from continuing
operations.

These financial statements have been prepared under International Financial
Reporting Standards (`IFRS').

The notes are an integral part of these financial statements.


Company income statement

for the year ended 31 December 2010

                                     2010                       2009           
                                                                               
                          Revenue  Capital    Total   Revenue  Capital   Total 
                                                                               
                    Note    £'000    £'000    £'000     £'000    £'000   £'000 
                                                                               
Investments                                                                    
                                                                               
(Losses)/gains on     9         -   (2,020)  (2,020)        -   22,126  22,126 
investments at fair                                                            
value through                                                                  
profit or loss                                                                 
                                                                               
Foreign exchange                -    1,586    1,586         -   (1,652) (1,652)
gains/(losses)on                                                               
capital items                                                                  
                                                                               
Losses on forward               -   (1,719)  (1,719)        -   (1,073) (1,073)
foreign exchange                                                               
contracts                                                                      
                                                                               
Net investment                  -   (2,153)  (2,153)        -   19,401  19,401 
result                                                                         
                                                                               
Income                                                                         
                                                                               
Income from                 1,588        -    1,588     1,976        -   1,976 
investments                                                                    
                                                                               
Other income                   19        -       19        92        -      92 
                                                                               
Total income          2     1,607        -    1,607     2,068        -   2,068 
                                                                               
Expenses                                                                       
                                                                               
Investment            3      (272)    (272)    (544)     (251)    (251)   (502)
Manager's fee                                                                  
                                                                               
VAT refund on                   -        -        -       181      181     362 
Investment                                                                     
Manager's fees                                                                 
                                                                               
Other expenses        4      (306)       -     (306)     (241)       -    (241)
                                                                               
Interest payable      5       (26)     (26)     (52)      (40)     (40)    (80)
and similar charges                                                            
                                                                               
Total expenses               (604)    (298)    (902)     (351)    (110)   (461)
                                                                               
Net return before           1,003   (2,451)  (1,448)    1,717   19,291  21,008 
taxation                                                                       
                                                                               
Taxation              6      (116)       9     (107)     (242)     166     (76)
                                                                               
Net return after                                                               
taxation                                                                       
                                                                               
for the year                  887   (2,442)  (1,555)    1,475   19,457  20,932 
                                                                               

The Company does not have any income or expenses that are not included in net
return for the year, and therefore the `Net return after taxation for the year'
is also the `Total comprehensive income for the year', as defined in IAS 1
(revised).

The total column of this statement is the statement of comprehensive income of
the Company. The supplementary revenue and capital return columns are presented
under guidance issued by the AIC.

All revenue and capital items in the above statement derive from continuing
operations.

The notes are an integral part of these financial statements.


Consolidated statement of changes in equity

for the year ended 31 December 2010

                          Share    Share     Capital Capital  Retained   Total 
                        capital  premium  redemption reserve  earnings         
                                             reserve                           
                                                                               
                          £'000    £'000      £'000    £'000     £'000   £'000 
                                                                               
For the year ended                                                             
                                                                               
31 December 2010                                                               
                                                                               
31 December 2009          3,028   26,127          -   40,441     2,407  72,003 
                                                                               
Total comprehensive           -        -          -   (2,442)      842  (1,600)
income for the year                                                            
                                                                               
Shares purchased for        (36)       -         36     (783)        -    (783)
cancellation                                                                   
                                                                               
Dividends paid:                                                                
                                                                               
Second Interim dividend       -        -          -        -      (965)   (965)
for the year ended 31                                                          
December 2009 (3.25p)                                                          
                                                                               
First interim dividend        -        -          -        -      (293)   (293)
for the year ended 31                                                          
December 2010 (1.00p)                                                          
                                                                               
31 December 2010          2,992   26,127         36   37,216     1,991  68,362 
 
                                                                              
                          Share    Share     Capital Capital  Retained   Total 
                        capital  premium  redemption reserve  earnings         
                                             reserve                           
                                                                               
                          £'000    £'000      £'000    £'000     £'000   £'000 
                                                                               
For the year ended                                                             
                                                                               
31 December 2009                                                               
                                                                               
31 December 2008          3,028   26,127          -   20,842     2,730  52,727 
                                                                               
Total comprehensive           -        -          -   19,599     1,503  21,102 
income for the year                                                            
                                                                               
Dividends paid:                                                                
                                                                               
Final dividend for the        -        -          -        -    (1,529) (1,529)
year ended 31 December                                                         
2008 (5.15p)                                                                   
                                                                               
Interim dividend for          -        -          -        -      (297)   (297)
the year ended 31                                                              
December 2009 (1.00p)                                                          
                                                                               
31 December 2009          3,028   26,127          -   40,441     2,407  72,003 
                                                                               

The notes are an integral part of these financial statements.


Company statement of changes in equity

for the year ended 31 December 2010

                          Share    Share     Capital Capital  Retained   Total 
                        capital  premium  redemption reserve  earnings         
                                             reserve                           
                                                                               
                          £'000    £'000      £'000    £'000     £'000   £'000 
                                                                               
For the year ended                                                             
                                                                               
31 December 2010                                                               
                                                                               
31 December 2009          3,028   26,127          -   40,298     1,539  70,992 
                                                                               
Total comprehensive           -        -          -   (2,442)      887  (1,555)
income for the year                                                            
                                                                               
Shares purchased for        (36)       -         36     (783)        -    (783)
cancellation                                                                   
                                                                               
Dividends paid:                                                                
                                                                               
Second Interim dividend       -        -          -        -      (965)   (965)
for the year ended 31                                                          
December 2009 (3.25p)                                                          
                                                                               
First interim dividend        -        -          -        -      (293)   (293)
for the year ended 31                                                          
December 2010 (1.00p)                                                          
                                                                               
31 December 2010          2,992   26,127         36   37,073     1,168  67,396 
    
                                                                           
                          Share    Share     Capital Capital  Retained   Total 
                        capital  premium  redemption reserve  earnings         
                                             reserve                           
                                                                               
                          £'000    £'000      £'000    £'000     £'000   £'000 
                                                                               
For the year ended                                                             
                                                                               
31 December 2009                                                               
                                                                               
31 December 2008          3,028   26,127          -   20,841     1,890  51,886 
                                                                               
Total comprehensive           -        -          -   19,457     1,475  20,932 
income for the year                                                            
                                                                               
Dividends paid:                                                                
                                                                               
Final dividend for the        -        -          -        -    (1,529) (1,529)
year ended 31 December                                                         
2008 (5.15p)                                                                   
                                                                               
First interim dividend        -        -          -        -      (297)   (297)
for the year ended 31                                                          
December 2009 (1.00p)                                                          
                                                                               
31 December 2009          3,028   26,127          -   40,298     1,539  70,992 
                                                                               

The notes are an integral part of these financial statements.


Consolidated balance sheet

as at 31 December 2010

                                                        2010         2009 
                                                                          
                                           Note        £'000        £'000 
                                                                          
Non-current assets                                                        
                                                                          
Investments                                                               
                                                                          
Fair value through profit or loss            9        65,385       84,120 
                                                                          
Current assets                                                            
                                                                          
Amounts due on derivative financial                      435        1,028 
instruments                                                               
                                                                          
Other receivables                           11         2,764        1,365 
                                                                          
Cash and cash equivalents                                391        2,106 
                                                                          
                                                       3,590        4,499 
                                                                          
Total assets                                          68,975       88,619 
                                                                          
Current liabilities                                                       
                                                                          
Amounts due on derivative financial                     (424)        (417)
instruments                                                               
                                                                          
Other payables                              12          (189)     (16,199)
                                                                          
Current and total liabilities                           (613)     (16,616)
                                                                          
Net assets                                            68,362       72,003 
                                                                          
Shareholders' equity                                                      
                                                                          
Share capital                               13         2,992        3,028 
                                                                          
Share premium                                         26,127       26,127 
                                                                          
Capital redemption reserve                                36            - 
                                                                          
Capital reserves                                      37,216       40,441 
                                                                          
Retained earnings                                      1,991        2,407 
                                                                          
Total Shareholders' equity                            68,362       72,003 
                                                                          
                                                        pence        pence
                                                                          
Net asset value per Ordinary share                                        
                                                                          
- Basic                                     14        233.10       242.47 
                                                                          
- Fully diluted                             14        233.10       242.47 
                                                                          
Shares in issue:                                                          
                                                                          
Ordinary shares                             14    29,327,234   29,695,234 
                                                                          
Subscription shares                         14     5,937,927    5,937,927 
                                                                          

The consolidated balance sheet incorporates the trading subsidiary, Frankrate
Limited.

These financial statements were approved by the Board of Directors on 6 April
2011.

M R Riley, Chairman

SR Europe Investment Trust plc

Company Number: 04223875

The notes are an integral part of these financial statements.


Company balance sheet

as at 31 December 2010

                                                        2010          2009 
                                                                           
                                           Note        £'000         £'000 
                                                                           
Non-current assets                                                         
                                                                           
Investments                                                                
                                                                           
Fair value through profit or loss            9        65,385        84,120 
                                                                           
Investment in subsidiary undertaking        10           907           907 
                                                                           
                                                      66,292        85,027 
                                                                           
Current assets                                                             
                                                                           
Amounts due on derivative financial                      435         1,028 
instruments                                                                
                                                                           
Other receivables                           11         2,762         1,364 
                                                                           
Cash and cash equivalents                                383         2,098 
                                                                           
                                                       3,580         4,490 
                                                                           
Total assets                                          69,872        89,517 
                                                                           
Current liabilities                                                        
                                                                           
Amounts due on derivative financial                     (424)         (417)
instruments                                                                
                                                                           
Other payables                              12        (2,052)      (18,108)
                                                                           
Current and total liabilities                         (2,476)      (18,525)
                                                                           
Net assets                                            67,396        70,992 
                                                                           
Shareholders' equity                                                       
                                                                           
Share capital                               13         2,992         3,028 
                                                                           
Share premium                                         26,127        26,127 
                                                                           
Capital redemption reserve                                36             - 
                                                                           
Capital reserves                                      37,073        40,298 
                                                                           
Retained earnings                                      1,168         1,539 
                                                                           
Total Shareholders' equity                            67,396        70,992 
                                                                           

These financial statements were approved by the Board of Directors on 6 April
2011.

M R Riley, Chairman

The notes are an integral part of these financial statements.


Consolidated statement of cash flows

for the year ended 31 December 2010

                                                           2010           2009 
                                                                               
                                                          £'000          £'000 
                                                                               
Cash flows from operating activities                                           
                                                                               
Net return before taxation                               (1,487)        21,182 
                                                                               
Adjustments to reconcile:                                                      
                                                                               
Less: losses/(gains) on investments                       2,020        (22,226)
                                                                               
Less: dividends reinvested                                  (35)          (312)
                                                                               
Realised exchange (gains)/losses                         (1,586)         1,652 
                                                                               
Losses on forward foreign exchange                        1,719          1,073 
contracts                                                                      
                                                                               
Unrealised exchange losses on income                          2              5 
                                                                               
Plus: finance costs                                          52             80 
                                                                               
Decrease/(increase) in other receivables                    214           (122)
                                                                               
Increase in other payables                                    2             29 
                                                                               
Tax deducted from unfranked income                         (227)          (123)
                                                                               
Cash generated from operations                              674          1,238 
                                                                               
Overdraft interest paid                                     (62)           (72)
                                                                               
Tax credits recovered on unfranked                            8              - 
investment income                                                              
                                                                               
Corporation tax paid                                         (6)             - 
                                                                               
Net cash flows generated from operating                     614          1,166 
activities                                                                     
                                                                               
Cash flows from/(used in) investing                                            
activities                                                                     
                                                                               
Purchases of investments                               (126,555)      (144,302)
                                                                               
Sales of investments                                    142,751        116,874 
                                                                               
Exchange gains/(losses) on settlement                         6            (64)
                                                                               
Exchange losses on currency                                (375)        (1,897)
                                                                               
Exchange losses on futures contracts                        (54)          (108)
                                                                               
Losses on index futures contracts                        (1,081)          (198)
                                                                               
Open futures and option contracts deposits                  540           (423)
                                                                               
Net cash flows from/(used in) investing                  15,232        (30,118)
activities                                                                     
                                                                               
Cash flows from financing activities                                           
                                                                               
Equity dividends paid                                    (1,258)        (1,826)
                                                                               
Shares purchased for cancellation                          (783)             - 
                                                                               
Net cash flows used in financing activities              (2,041)        (1,826)
                                                                               
Net increase/(decrease) in cash and                      13,805        (30,778)
equivalents                                                                    
                                                                               
Cash and cash equivalents at the start of               (13,414)        17,364 
the year                                                                       
                                                                               
Cash and cash equivalents at the end of the                 391        (13,414)
year                                                                           
                                                                               
Cash and cash equivalents at 31 December                                       
comprise:                                                                      
                                                                               
Cash at bank                                                391          2,106 
                                                                               
Bank overdraft                                                -        (15,520)
                                                                               
                                                            391        (13,414)

The notes are an integral part of these financial statements.


Company statement of cash flows

for the year ended 31 December 2010

                                                           2010           2009 
                                                                               
                                                          £'000          £'000 
                                                                               
Cash flows from operating activities                                           
                                                                               
Net return before taxation                               (1,448)        21,008 
                                                                               
Adjustments to reconcile:                                                      
                                                                               
Less: losses/(gains) on investments                       2,020        (22,126)
                                                                               
Less: dividends reinvested                                  (35)          (312)
                                                                               
Realised exchange (gains)/losses                         (1,586)         1,652 
                                                                               
Losses on forward foreign exchange                        1,719          1,073 
contracts                                                                      
                                                                               
Unrealised exchange losses on income                          2              5 
                                                                               
Plus: finance costs                                          52             80 
                                                                               
Decrease/(increase) in other receivables                    214           (122)
                                                                               
Increase in other payables                                    2             29 
                                                                               
Tax deducted from unfranked income                         (227)          (116)
                                                                               
Cash generated from operations                              713          1,171 
                                                                               
Overdraft interest paid                                     (62)           (72)
                                                                               
Tax credits recovered on unfranked                            8              - 
investment income                                                              
                                                                               
Net cash flows generated from operating 
activities                                                  659          1,099 
                                                                               
Cash flows from/(used in) investing                                            
activities                                                                     
                                                                               
Purchases of investments                               (126,555)      (144,402)
                                                                               
Sales of investments                                    142,751        116,874 
                                                                               
Exchange gains/(losses) on settlement                         6            (64)
                                                                               
Exchange losses on currency                                (375)        (1,897)
                                                                               
Exchange losses on futures contracts                        (54)          (108)
                                                                               
Losses on index futures contracts                        (1,081)          (198)
                                                                               
Open futures and option contracts deposits                  540           (423)
                                                                               
Net cash flows from/(used in) investing                  15,232        (30,218)
activities                                                                     
                                                                               
Cash flows from financing activities                                           
                                                                               
Movement in amounts due from subsidiary                     (45)           167 
                                                                               
Equity dividends paid                                    (1,258)        (1,826)
                                                                               
Shares purchased for cancellation                          (783)             - 
                                                                               
Net cash flows used in financing activities              (2,086)        (1,659)
                                                                               
Net increase/(decrease)in cash and                       13,805        (30,778)
equivalents                                                                    
                                                                               
Cash and cash equivalents at the start of               (13,422)        17,356 
the year                                                                       
                                                                               
Cash and cash equivalents at the end of the                 383        (13,422)
year                                                                           
                                                                               
Cash and cash equivalents at 31 December                                       
comprise:                                                                      
                                                                               
Cash at bank                                                383          2,098 
                                                                               
Bank overdraft                                                -        (15,520)
                                                                               
                                                            383        (13,422)

The notes are an integral part of these financial statements.


Notes to the financial statements

at 31 December 2010

1. Accounting policies

Basis of preparation/statement of compliance

The financial statements of the Company and the Group have been prepared in
conformity with International Financial Reporting Standards (`IFRS'), which
comprise standards and interpretations approved by the International Accounting
Standards Board (`IASB'), and International Accounting Standards and Standing
Interpretations Committee interpretations approved by the International
Accounting Standards Committee (`IASC') that remain in effect, and to the
extent that they have been adopted by the European Union. They have also been
prepared in conformity with the applicable requirements of United Kingdom
company law and reflect the following policies which have been adopted and
applied consistently. All accounting policies are consistent with the policies
used in the previous financial statements.

Accounting convention

The financial statements are presented in Sterling, being the functional
currency of the primary environment in which the Group operates, rounded to the
nearest £'000.

The financial statements have been prepared on a going concern basis under the
historical cost convention except for the measurement at fair value of
investments classified as `fair value through profit or loss' and derivative
financial instruments and in accordance with applicable accounting standards
and the Statement of Recommended Practice regarding the Financial Statements of
Investment Trust Companies and Venture Capital Trusts (as issued in January
2009) (`SORP'), to the extent it is not in conflict with IFRS.

Basis of consolidation

The consolidated financial statements incorporate the results, assets and
liabilities of the Company and its subsidiary, drawn up to 31 December 2010.

Accounting estimates and judgements

The preparation of accounts in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects both current and future periods.
There were no accounting estimates in the current period.

Standards, amendments and interpretations that are not yet effective and are
relevant for the Group's operations

The IASB and IFRIC have issued a number of standards and interpretations which
are not effective for the year ended 31 December 2010 but are relevant for the
Group's operations. The Directors have therefore chosen not to early adopt
these standards and interpretations as they do not anticipate that they would
have a material impact on the Group's financial statements.

• IFRS 9 Financial Instruments (effective 1 January 2013);

• IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011);

• Amendment to IAS 32 Classification of Rights Issues (effective 1 February
2010);

• Improvements to IFRS issued May 2010 (some changes effective 1 July 2010,
others effective 1 January 2011);

• Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income
Taxes (effective 1 January 2012).

InvestmentsAll investments held by the Company are designated as `fair value through
profit or loss', on initial recognition. Investments are initially recognised
at the fair value of the consideration given.

After initial recognition, investments are measured at fair value, with holding
gains and losses on investments recognised in the income statement and
allocated to capital. Gains and losses on the disposal of investments are
calculated as the difference between sales proceeds and the fair value on
initial recognition.

For investments actively traded in organised financial markets, fair value is
generally determined by reference to stock exchange quoted market bid prices at
the close of business on the balance sheet date, without adjustment for
transaction costs necessary to realise the asset.

Investments are derecognised when the Company loses control over the
contractual rights.

Investments held as current assets by the subsidiary undertaking are classified
as `held for trading' and are shown at fair value. There are no investments
held by the subsidiary at either 31 December 2010 or 31 December 2009.

The Company's investment in the subsidiary undertaking is valued at cost.

Fair value of derivative financial instruments

The Group's activities expose it primarily to the financial risks of changes in
market prices, foreign currency exchange rates and interest rates. Derivative
transactions which the Company may enter into comprise forward foreign exchange
contracts (the purpose of which is to manage currency risks arising from the
Company's investing activities), quoted options on shares held within the
portfolio, or on indices appropriate to sections of the portfolio (the purpose
of which is to provide protection against falls in the capital values of the
holdings) and futures contracts on indices appropriate to sections of the
portfolio (one purpose for which may be to provide protection against falls in
the capital values of the holdings). The Group does not use derivative
financial instruments for speculative purposes.

The use of financial derivatives is governed by the Group's policies as
approved by the Board, which has set written principles for the use of
financial derivatives.

Changes in the fair value of derivative financial instruments that do not
qualify for hedge accounting are recognised in the income statement as they
arise. If capital in nature, the associated change in value is presented as a
capital item in the income statement.

Foreign currency

Transactions denominated in foreign currencies are converted to Sterling at the
actual exchange rate as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are
reported at the rate of exchange ruling at that date. Any gain or loss arising
from a change in exchange rate subsequent to the date of the transaction is
included as an exchange gain or loss in the income statement and depending on
the nature of the gain or loss, is allocated to either revenue or capital.

Trade date accounting

All `regular way' purchases and sales of financial assets are recognised on the
`trade date' i.e. the day that the Company commits to purchase or sell the
asset. Regular way purchases, or sales, are purchases or sales of financial
assets that require delivery of the asset within a timeframe generally
established by regulation or convention in the market place.

Income recognition

Dividends receivable on quoted equity shares are taken into account on the
ex-dividend date. Where no ex-dividend date is quoted, they are brought into
account when the Company's right to receive payment is established. Income
arising on fixed-interest securities is recognised on an effective interest
rate basis. Other investment income and interest receivable are included in the
financial statements on an accruals basis. Dividends received from UK
registered companies are accounted for net of imputed tax credits.

Expenses

All expenses are accounted for on an accruals basis. Transaction costs incurred
on the acquisition or disposal of an investment classified as fair value
through profit or loss are charged through the income statement and allocated
to capital. Transaction costs are included within gains/(losses) on investments
at fair value. The Company's investment management and administration fees,
finance costs and all other expenses are charged through the income statement.
These expenses are allocated to revenue with the exception of 50% of the
Investment Manager's fee, 50% of finance costs and 100% of the provision for
the Investment Manager's performance fee, all of which are allocated to
capital.

Cash and cash equivalents

Cash in hand and in banks and short-term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as cash in hand,
demand deposits and short-term, highly liquid investments readily convertible
to known amounts of cash and subject to insignificant risk of changes in value.
Bank overdrafts that are repayable on demand, which form an integral part of
the Group's cash management, are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.

Taxation

Taxation on the net return for the period comprises current tax and
deferred tax. Tax is recognised in the income statement except to the extent
that it relates to items recognised directly in equity, in which case it is
recognised in equity.

Current tax is the expected tax payable on the taxable income for the period,
using tax rates enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years. The tax effect of
different items of expenditure is allocated between revenue and capital on the
same basis as the particular item to which it relates, using the Company's
effective rate of tax, as applied to those items allocated to revenue, for the
accounting period.

Deferred corporation tax is provided, using the liability method, on all
temporary differences at the balance sheet date between the tax basis of assets
and liabilities and their carrying amount for financial reporting purposes.
Deferred corporation tax liabilities are measured at the tax rates that are
expected to apply to the period when the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted at the
balance sheet date.

Capital redemption reserve

The nominal value of ordinary share capital purchased and cancelled is
transferred out of called-up share capital and into the capital redemption
reserve, which is a non-distributable reserve, on the trade date.

Capital reserves

Capital reserve - arising on investments sold

The following are accounted for in this reserve:

• 50% of management fees and finance costs as set out in notes 3 and 5;

• performance fees as set out in note 3;

• gains and losses on the disposal of fixed asset investments and derivative
financial instruments;

• realised foreign exchange differences of a capital nature;

• costs of professional advice, including related irrecoverable VAT, relating
to the capital structure of the Company;

• dividends receivable which are capital in nature;

• other capital charges and credits charged or credited to this account in
accordance with the above policies; and

• costs of purchasing ordinary share capital.

Capital reserve - arising on investments held

The following are accounted for in this reserve:

• increases and decreases in the valuation of fixed asset investments and
derivative financial instruments held at the year end; and

• unrealised foreign exchange differences of a capital nature.

Dividends payable to Shareholders

Dividends to Shareholders are accounted for in the period in which they are
paid or approved in general meetings. Dividends payable to Shareholders are
recognised in the statement of changes in equity when they are paid, or have
been approved by Shareholders in the case of a final dividend and become a
liability of the Company.

Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment
of business, being investment business. The Group invests in companies listed
in the United Kingdom and continental Europe, including emerging Europe, Russia
and Turkey.

2. Income

                                           Group                 Company       
                                                                               
                                        2010        2009        2010      2009 
                                                                               
                                       £'000       £'000       £'000     £'000 
                                                                               
Income from listed fixed asset                                                 
investments is analysed as                                                     
follows:                                                                       
                                                                               
UK dividend income                       322         366         322       366 
                                                                               
UK dividends reinvested                   35         234          35       234 
                                                                               
European dividends reinvested              -          78           -        78 
                                                                               
Dividends from other European                                                  
equity and                                                                     
                                                                               
preference shares                        865         472         865       445 
                                                                               
Fixed interest                           366         853         366       853 
                                                                               
                                                                               
                                       1,588       2,003       1,588     1,976 
                                                                               
Other income                                                                   
                                                                               
Bank interest receivable                  21          28          21        28 
                                                                               
Exchange losses on income                 (9)        (21)         (2)       (9)
                                                                               
Dealing (losses)/gains of                (31)         61           -         - 
subsidiary                                                                     
                                                                               
Interest on VAT refund on                                                      
Investment                                                                     
                                                                               
Manager's fees                             -          38           -        38 
                                                                               
Other income                               -          35           -        35 
                                                                               
Total income                           1,569       2,144       1,607     2,068 
                                                                               
Total income comprises:                                                        
                                                                               
Dividends                              1,222       1,150       1,222     1,123 
                                                                               
Interest                                 387         919         387       919 
                                                                               
Other income                             (40)         75          (2)       26 
                                                                               
                                       1,569       2,144       1,607     2,068 
                                                                               

3. Investment Manager's fee & performance fee

                                    2010                         2009         
                                                                              
Group and Company     Revenue   Capital    Total    Revenue  Capital    Total 
                                                                              
                        £'000     £'000    £'000      £'000    £'000    £'000 
                                                                              
Investment Manager's      272       272      544        251      251      502 
fee                                                                           
                                                                              
                          272       272      544        251      251      502 
                                                                              

The base investment management fee is 0.8% per annum of total assets less
current liabilities and current period revenue, payable quarterly in arrears.
The performance fee arrangement is set over a 5¼ year period. The performance
fee is 15% of the amount by which the fully diluted NAV per Ordinary share
exceeds the NAV at 8 March 2007 increased by 5% per annum compound, multiplied
by a maximum of the number of Ordinary shares in issue at 8 March 2007. The
performance fee payable will be less than 4.8% of the net assets of the Company
at the date of the calculation set for 29 June 2012.

4. Other expenses

                                           Group                 Company       
                                                                               
                                        2010        2009        2010      2009 
                                                                               
                                       £'000       £'000       £'000     £'000 
                                                                               
Revenue                                                                        
                                                                               
Administration and secretarial            67          60          67        60 
fees                                                                           
                                                                               
Auditor's remuneration (see               22          29          21        28 
below)                                                                         
                                                                               
Directors' remuneration                   80          71          80        71 
                                                                               
Legal and professional fees               13           4          13         4 
                                                                               
Custodian services                        20          21          20        21 
                                                                               
Other                                    105          58         105        57 
                                                                               
                                         307         243         306       241 

                                                Group          
                                                               
                                             2010         2009 
                                                               
                                            £'000        £'000 
                                                               
Auditor's remuneration                                         
                                                               
Fees payable to the Company's Auditor          21           20 
for the audit of the annual financial                          
statements                                                     
                                                               
Fees payable to the Company's Auditor                          
and its associates for other                                   
services:                                                      
                                                               
- audit of the financial statements             1            1 
of the Company's subsidiary pursuant                           
to legislation                                                 
                                                               
- taxation services                             -            5 
                                                               
- other non-audit services                      -            3 
                                                               
                                                            29 

Fees payable to the Company's Auditor, Grant Thornton UK LLP, and its
associates for non-audit services to the Company itself are not disclosed in
the individual financial statements of the Company because the Company's Group
financial statements are required by the Companies (Disclosure of Auditor
Remuneration and Liability Limitation Agreements) Regulations 2008, regulation
6(1), to disclose such fees on a consolidated basis. All fees disclosed above
are exclusive of VAT.

5. Interest payable

                                   2010                         2009          
                                                                              
Group and Company     Revenue   Capital    Total    Revenue  Capital    Total 
                                                                              
                        £'000     £'000    £'000      £'000    £'000    £'000 
                                                                              
Interest payable on        26        26       52         40       40       80 
overdraft                                                                     
                                                                              
                           26        26       52         40       40       80 
                                                                              

6. Taxation

a) Analysis of the charge for the year

                                   2010                         2009          
                                                                              
Group                 Revenue   Capital    Total    Revenue  Capital    Total 
                                                                              
                        £'000     £'000    £'000      £'000    £'000    £'000 
                                                                              
UK Corporation Tax          9        (9)       -        321     (208)     113 
                                                                              
Overseas taxation         107         -      107         80        -       80 
                                                                              
Prior year adjustment       6         -        6          -        -        - 
                                                                              
Double taxation             -         -        -        (58)       -      (58)
relief                                                                        
                                                                              
Brought forward             -         -        -        (55)       -      (55)
overseas tax utilised                                                         
                                                                              
                          122        (9)     113        288     (208)      80 
                                                                              

                                   2010                         2009          
                                                                              
Company               Revenue   Capital    Total    Revenue  Capital    Total 
                                                                              
                        £'000     £'000    £'000      £'000    £'000    £'000 
                                                                              
UK Corporation Tax          9        (9)       -        272     (166)     106 
                                                                              
Overseas taxation         107         -      107         76        -       76 
                                                                              
Double taxation             -         -        -        (54)       -      (54)
relief                                                                        
                                                                              
Brought forward             -         -        -        (52)       -      (52)
overseas tax utilised                                                         
                                                                              
                          116        (9)     107        242     (166)      76 
                                                                              

b) Factors affecting the current tax charge for the year

The tax charge for the period is higher than the standard rate of Corporation
Tax in the UK. The differences are explained below:

                                   2010                         2009          
                                                                              
Group                 Revenue   Capital    Total    Revenue  Capital    Total 
                                                                              
                        £'000     £'000    £'000      £'000    £'000    £'000 
                                                                              
Net return before         964    (2,451)  (1,487)     1,791   19,391   21,182 
taxation                                                                      
                                                                              
Theoretical tax at UK     270      (686)    (416)       501    5,429    5,930 
Corporation Tax rate                                                          
of 28% (2009: 28%)                                                            
                                                                              
Effects of:                                                                   
                                                                              
UK dividends that are    (100)        -     (100)      (168)       -     (168)
not taxable                                                                   
                                                                              
Post 1 July 2009         (152)        -     (152)       (41)       -      (41)
foreign dividends                                                             
that are not taxable                                                          
                                                                              
Other income                -         -        -         29        -       29 
                                                                              
Non-taxable                 -       677      677          -   (5,460)  (5,460)
investment losses/                                                            
(gains)                                                                       
                                                                              
Overseas taxation not     107         -      107         22        -       22 
recovered                                                                     
                                                                              
Utilisation of losses       -         -        -          -     (177)    (177)
bought forward                                                                
                                                                              
Unrelieved excess          (9)        -       (9)         -        -        - 
expenses                                                                      
                                                                              
Brought forward             -         -        -        (55)       -      (55)
unrelieved overseas                                                           
taxation now                                                                  
recovered                                                                     
                                                                              
Adjustment in respect       6         -        6          -        -        - 
of prior period                                                               
                                                                              
                          122        (9)     113        288     (208)      80 
                                                                              

                                   2010                         2009          
                                                                              
Company               Revenue   Capital    Total    Revenue  Capital    Total 
                                                                              
                        £'000     £'000    £'000      £'000    £'000    £'000 
                                                                              
Net return before       1,003    (2,451)  (1,448)     1,717   19,291   21,008 
taxation                                                                      
                                                                              
Theoretical tax at UK     281      (686)    (405)       481    5,401    5,882 
Corporation Tax rate                                                          
of 28% (2009: 28%)                                                            
                                                                              
Effects of:                                                                   
                                                                              
UK dividends that are    (100)        -     (100)      (168)       -     (168)
not taxable                                                                   
                                                                              
Post 1 July 2009         (152)        -     (152)       (41)       -      (41)
foreign dividends                                                             
that are not taxable                                                          
                                                                              
Non-taxable                 -       677      677          -   (5,432)  (5,432)
investment losses/                                                            
(gains)                                                                       
                                                                              
Overseas taxation not     107         -      107         22        -       22 
recovered                                                                     
                                                                              
Brought forward             -         -        -        (52)       -      (52)
unrelieved overseas                                                           
taxation now                                                                  
recovered                                                                     
                                                                              
Utilisation of losses       -         -        -          -     (135)    (135)
brought forward                                                               
                                                                              
Excess management         (20)        -      (20)         -        -        - 
expenses of current                                                           
period                                                                        
                                                                              
                          116        (9)     107        242     (166)      76 
                                                                              

C) Factors that may affect future tax charges

Investment trust companies are exempt from taxation on capital gains if they
meet the HM Revenue & Customs criteria set out in Sections 1158-1165 of the
Corporation Tax Act 2010.

The Company has unrelieved excess expenses of £264,000 (2009: £nil) and
unrelieved loan relationship expenses of £319,000 (2009: £319,000). It is
unlikely that the company will generate sufficient taxable profits in the
future to utilise these amounts and therefore no deferred tax asset has been
recognised.

7. Return per Ordinary share

Basic and diluted                  2010                          2009          
                                                                               
                                Weighted                      Weighted         
                                                                               
                                 average                       average         
                                                                               
                               number of                     number of         
                                                                               
                        Net    Ordinary      Per      Net    Ordinary      Per 
                                                                               
                     return      shares    share   return      shares    share 
                                                                               
Group                 £'000                pence    £'000                pence 
                                                                               
Revenue                                                                        
                                                                               
Return per share        842  29,443,221     2.86    1,503  29,695,234     5.06 
                                                                               
Capital                                                                        
                                                                               
Return per share     (2,442) 29,443,221    (8.29)  19,599  29,695,234    66.00 
                                                                               
Total                (1,600) 29,443,221    (5.43)  21,102  29,695,234    71.06 
                                                                               

There is no dilution for either the year ended 31 December 2010 or 31 December
2009, due to the 5,937,927 Subscription shares in issue being `out of the
money' (the average market value of an Ordinary share was lower than the
conversion price of 244p). The dilutive effect on the return per share from the
Subscription shares is also disclosed on the face of the income statement.

8. Dividends on Ordinary shares

                                                               2010        2009
                                                                               
                                                              £'000       £'000
                                                                               
Amounts recognised as distributions to Ordinary                          
Shareholders in the year                                                            
                                                                               
Second dividend for the year ended 31 December 2009 of         965        1,529
3.25p (2008: 5.15p) per Ordinary share                                         
                                                                               
First interim dividend for the year ended 31 December          293          297
2010 of 1.00p (2009: 1.00p) per Ordinary share                                 
                                                                               
                                                             1,258        1,826

Distribution to Ordinary Shareholders after the period end

The Directors have proposed a final dividend for the year ended 31 December
2010 of 1.40p (2009: second interim dividend of 3.25p) which, if approved, will
be paid on 31 May 2011 at a total cost of £410,000.

9. Investments

                              2010                  2009         
                                                                 
                          Group     Company      Group    Company
                                                                 
                         £'000       £'000      £'000      £'000 
                                                                 
Fair value             
investments - listed                                             
in Europe, including                                             
emerging Europe,                                                 
Russia and Turkey       65,385      65,385     84,120     84,120                                         
                                                                 

Analysis of                                                      
investment portfolio                                             
movements                                                        
                                                                 
                              2010                  2009         
                                                                 
                         Group     Company      Group    Company 
                                                                 
                         £'000       £'000      £'000      £'000 
                                                                 
Opening book cost       75,911      76,011     49,501     49,501 
                                                                 
Opening investment       
holding gains/                                                   
(losses)                 8,209       8,109    (14,977)   (14,977)                          
                                                                 
Opening valuation       84,120      84,120     34,524     34,524 
                                                                 
Movements in the                                                 
period:                                                          
                                                                 
Purchases at cost      126,109     126,109    144,817    144,917 
                                                                 
Sales - proceeds      (144,244)   (144,244)  (117,688)  (117,688)
                                                                 
Sales - gains/              
(losses) on sales           99          (1)      (719)      (719)               
                                                                 
Movement in               
investment holding                                               
(losses)/gains            (699)       (599)    23,186     23,086                       
                                                                 
Closing valuation       65,385      65,385     84,120     84,120 
                                                                 
Closing book cost       57,875      57,875     75,911     76,011 
                                                                 
Closing investment       
holding gains            7,510       7,510      8,209      8,109                   
                                                         
                                                                 
                        65,385      65,385     84,120     84,120 
                                                                 


Analysis of capital gains and              2010                  2009         
losses                                                                        
                                                                              
                                        Group   Company       Group   Company 
                                                                              
                                        £'000     £'000       £'000     £'000 
                                                                              
Gains/(losses) on sales of 
investments                                99        (1)       (719)     (719)
                                                                              
Movement in fair value of                
investments                              (699)     (599)     23,186    23,086                      
                                                                              
Losses on derivatives contracts        (1,420)   (1,420)       (241)     (241)
                                                                              
(Losses)/gains on investments          (2,020)   (2,020)     22,226    22,126 
                                                                              

Further analysis of the investment portfolio is given in the portfolio of
investments above.

Transaction costs

During the year, the Company incurred transaction costs of £366,000 (2009: £
327,000) and £251,000 (2009: £118,000) on purchases and sales of investments
respectively totalling £617,000 (2009: £445,000). These amounts are included in
(losses)/gains on investments at fair value, as disclosed in the income
statement.

10. Investment in subsidiary undertaking

The subsidiary undertaking, Frankrate Limited, is valued at cost and is engaged
in investment dealing and underwriting. It is wholly owned, incorporated in
England and operates in the United Kingdom.

                                 2010         2009 
                                                                            
                                £'000        £'000 
                                                                            
Cost of subsidiary                907          907 
                                                                            

11. Other receivables

                              2010                   2009          
                                                                   
                          Group    Company     Group     Company   
                                                                   
                          £'000      £'000     £'000       £'000   
                                                                   
Due from brokers          2,307      2,307       809         809   
                                                                   
Prepayments and              90         90       304         304   
accrued income                                                     
                                                                   
Other debtors               367        365       252         251   
                                                                   
                          2,764      2,762     1,365       1,364   
                                                                   

12. Other payables

                              2010                   2009          
                                                                   
                          Group     Company      Group     Company 
                                                                   
                          £'000       £'000      £'000       £'000 
                                                                   
Bank overdraft (see           -           -     15,520      15,520 
note 16)                                                           
                                                                   
Due to brokers                -           -        481         481 
                                                                   
Due to subsidiary             -       1,864          -       1,909 
undertaking                                                        
                                                                   
Other creditors and         189         188        198         198 
accruals                                                           
                                                                   
                            189       2,052     16,199      18,108 
                                                                   

13. Share Capital

                                                          2010         2009 
                                                                            
                                                         £'000        £'000 
                                                                            
Issued, allotted and fully paid                                             
                                                                            
29,327,234 Ordinary shares of 10p each                   2,933        2,969 
(2009: 29,695,234)                                                                 
                                                                            
5,937,927 Subscription shares of 1p each                    59           59 
(2009: 5,937,927)                                                                  
                                                                            
                                                         2,992        3,028 

During the year, the Company purchased 368,000 Ordinary shares for cancellation
at a cost of £783,000, and representing 1.24% of the Company's Ordinary Share
Capital.

Since the year end the Company has purchased 28,301 Ordinary shares for
cancellation at a cost of £58,000 and representing 0.1% of the Company's issued
Ordinary share capital.

The balance of Ordinary shares that can be bought back under the current
shareholder authority is 4,055,014 shares.

Subscription shares

Registered holders of Subscription shares will have the opportunity to convert
their Subscription shares at a rate of 1 Ordinary share per Subscription share
and a conversion price of 244p in the thirty days preceding the Annual General
Meeting in any of the years between 2011 and 2012 (inclusive).

Subscription shares carry no right to any dividend or other distributions by
the Company and have no right to be redeemed.

Except in certain circumstances as set out in the Articles of Association of
the Company, the Subscription shares carry no right to receive any payment out
of the assets of the Company on a return of capital on liquidation (whether for
the purpose of reorganisation, amalgamation or dissolution) or otherwise.

Voting rights

Ordinary shareholders have unrestricted voting rights at all general meetings
of the Company. Subscription shareholders are not entitled to attend or vote at
general meetings of the Company.

Duration of the Company

The Articles of Association of the Company provide that at the Annual General
Meeting of the Company held to approve the Company's financial statements in
respect of the financial year ending 31 December 2011, the Directors will
propose an Ordinary Resolution for the continuation of the Company in its
current form. If this resolution is passed, a similar resolution will be
proposed at every third Annual General Meeting thereafter.

If such a resolution is not passed, a General Meeting of the Company will be
convened within the following four months to consider proposals for the
liquidation, reorganisation or reconstruction of the Company.

14. Net asset value (`NAV') per share

                                                        2010         2009 
                                                                          
                                                       pence        pence 
                                                                          
Ordinary share                                                            
                                                                          
- Basic                                               233.10       242.47 
                                                                          
- Fully diluted                                       233.10       242.47 

The NAVs per share have been calculated in accordance with the Articles of
Association and are based on:

                                                        2010         2009 
                                                                          
                                                       £'000        £'000 
                                                                          
Net assets attributable to Ordinary Shareholders      68,362       72,003 
                                                                          
Number of Ordinary shares in issue at the year    29,327,234   29,695,234 
end                                                                       
                                                                          
Subscription shares outstanding at the year end    5,937,927    5,937,927 

The fully diluted NAVs for 2010 and 2009 are shown as the same figure as the
basic NAV because the conversion price of the Subscription shares of 244p is
above the basic NAV per Ordinary share.

15. Commitments and contingent liabilities

There were no capital commitments or contingent liabilities at 31 December
2010.

16. Secured debt

The Company has a secured overdraft with the Custodian, Morgan Stanley & Co.
International plc. At 31 December 2010, the amount drawn down was £nil (2009: 
£15.5 million).

The undrawn amount available to the Company was £46.0 million (2009: £9.7
million). The overdraft facility is secured against investments held with
Morgan Stanley & Co. International plc.

17. Related party transactions

The compensation payable to key management personnel in respect of short term
employment benefits was £80,000 (2009: £71,000). In practice this disclosure
relates wholly to the fees payable to the Directors in respect of the year; the
Directors are all non-executive and receive no other compensation. The
Directors' Remuneration Report in the Annual Report and Financial Statements
for the year ended 31 December 2011 provides details. The Company has no
employees.

The Investment Manager, Sloane Robinson LLP, is regarded as a related party of
the Company. The amounts paid to the Investment Manager are disclosed in note
3.

Amounts payable to the Investment Manager as at 31 December 2010 for Investment
Manager's fees totalled £139,000 (2009: £146,000). Amounts payable in respect
of the performance fee totalled £nil (2009: £nil).

The Company's wholly owned UK subsidiary, Frankrate Limited, is also regarded
as a related party. During the year there were no purchases or sales of
investments between the Company and Frankrate Limited (2009: £1,418,000).

At 31 December 2010 the amount the Company owed to its subsidiary was 
£1,864,000 (2009: £1,909,000).

18. Financial instruments

This note focuses on the significant risks of the Group, however the Board does
not consider that the risks associated with the subsidiary are significant. The
subsidiary realised £31,000 in dealing losses solely from trading equities
during the period, with no substantial amounts due or payable at the end of the
period. For that reason this note outlines significant risks that are found
within the Company.

Background

The investment objective of the Company is to generate capital growth without
neglecting income by investing in an actively managed portfolio of quoted
companies and debt instruments in the United Kingdom and continental Europe,
including emerging Europe, Russia and Turkey. The Company's financial
instruments may comprise investments, derivative instruments used for hedging
and investment purposes, foreign exchange contracts used to manage the foreign
exchange risk of the portfolio against Sterling, borrowings for investment
purposes or for settlement purposes, cash balances and debtors and creditors
that arise directly from its operations.

The principal risks the Company faces in its portfolio management activities
are:

● Market risk - arising from fluctuations in the fair value or future cash
flows of a financial instrument used by the Company because of changes in
market prices. Market risk comprises three types of risk: currency risk,
interest rate risk and other price risk:

● Currency risk - arising from the value of future transactions, recognised
monetary assets and liabilities denominated in other currencies fluctuating due
to changes in foreign exchange rates;

● Interest rate risk - arising from fluctuations in the fair value or future
cash flows of a financial instrument because of changes in market interest
rates;

● Other price risk - arising from fluctuations in the fair value of its equity
investments due to changes in market prices;

● Liquidity risk - arising from any difficulties in meeting obligations
associated with financial liabilities; and

● Credit risk - arising from financial loss for the Company where the other
party to a financial instrument fails to discharge an obligation.

Policy

The Company's investment policy is to concentrate on sectors, investment themes
and individual companies with a pan-European perspective. Limited attention is
paid to consequent geographical weightings of the portfolio either in absolute
terms or relative to the MSCI Europe (including UK) Total Return Index. The
Investment Manager believes that the best way to put these strategies into real
equity investments is to find several independent and uncorrelated investment
themes where valuations look attractive. This diversification is designed for
risk to be reduced whilst delivering attractive absolute returns over time.

As required by IFRS 7, `Financial Instruments: Disclosures', an analysis of
financial assets and liabilities, which identifies the risk of the Group of
holding such items, is given below.

1. Currency risk

The Company's monetary assets may be invested in securities and other
investments that are denominated in currencies other than the functional
currency which is Sterling. Accordingly, the value of an investment may be
affected favourably or unfavourably by fluctuations in exchange rates,
notwithstanding any efforts made to hedge such fluctuations. The Company may
utilise foreign exchange contracts to hedge against currency fluctuations, but
there can be no assurance that such hedging transactions will be effective or
beneficial. The Investment Manager monitors currency positions on a daily basis
and currency exposure on a regular basis and reports to the Board on a regular
basis. The Investment Manager measures the risk to the Company of the foreign
currency exposure by considering the effect on the Company's net asset value
and income of a movement in exchange rates to which the Company's assets,
liabilities, income and expenses are exposed.

Currency exposure

The base currency (Sterling) equivalents of the financial assets and
liabilities held in currencies other than Sterling at 31 December 2010 and 2009
were as follows:

                                           2010                    2009          
                                                                                 
Currency                          Investments      Other  Investments      Other 
                                                                                 
                                        £'000      £'000        £'000      £'000 
                                                                                 
Euro (EUR)                             33,093      1,512       34,978      1,260 
                                                                                 
Norwegian Krone (NOK)                       -         31        7,785        495 
                                                                                 
Swiss Franc (CHF)                      10,120         61       10,271     (1,543)
                                                                                 
US Dollar (USD)                         2,179         35        4,770     (6,842)
                                                                                 
Swedish Krona (SEK)                     3,621         10        2,197          9 
                                                                                 
Danish Krone (DKK)                      1,985          5        1,904      1,199 

At 31 December 2010, if Sterling had strengthened/weakened by 10% against the
currencies listed above, with all other variables held constant, the net return
after taxation for the year would have increased or decreased by the amounts
shown below:

                                         2010                      2009           
                                                                                  
Currency                       Strengthening  Weakening  Strengthening  Weakening 
                                                                                  
                                       £'000      £'000          £'000      £'000 
                                                                                  
Euro (EUR)                            (3,147)     3,846         (3,294)     4,026 
                                                                                  
Norwegian Krone (NOK)                     (3)         3           (753)       920 
                                                                                  
Swiss Franc (CHF)                       (926)     1,131            140       (171)
                                                                                  
US Dollar (USD)                         (201)       246            188       (230)
                                                                                  
Swedish Krona (SEK)                     (330)       403           (201)       245 
                                                                                  
Danish Krone (DKK)                      (181)       221           (282)       345 
                                                                                  
                                      (4,788)     5,850         (4,202)     5,135 

2. Interest rate risk

The Company finances its operations through Shareholders' funds and overdraft
facilities which are reviewed annually. It may hold interest bearing securities
and cash. Interest rate movements may affect the level of income receivable on
cash deposits and cash equivalents and interest payable on borrowing as they
are subject to fluctuating rates of interest.

Derivative contracts are not used to hedge against the exposure to interest
rate risk.

The following table shows the effect of a change in bank interest rates with
all other variables held constant. The calculations are based on funds invested
in cash deposits, bank overdrafts and debt securities held as at 31 December
2010 and 2009:

                                                                    Sensitivity
                                                                            of 
                                                       Sensitivity   changes in 
                                                       of interest    fair value
                                                                            of 
                                                           income  investments 
                                                %       increase/    increase/ 
                                         increase      (decrease)   (decrease) 
                                                            £'000        £'000 
31 December 2010                                                               
                                                                               
Sterling (GBP)                               0.5                1            - 
                                                                               
Euro (EUR)                                   0.5                1            - 
                                                                               
Norwegian Krone (NOK)                        0.5                -            - 
                                                                               
Swiss Franc (CHF)                            0.5                -            - 
                                                                               
US Dollar (USD)                              0.5                -           11 
                                                                               
Swedish Krona (SEK)                          0.5                -            - 
                                                                               
Danish Krone (DKK)                           0.5                -            - 
                                                                               
31 December 2009                                                               
                                                                               
Sterling (GBP)                               0.5              (33)           - 
                                                                               
Euro (EUR)                                   0.5                2           10 
                                                                               
Norwegian Krone (NOK)                        0.5                2            - 
                                                                               
Swiss Franc (CHF)                            0.5              (10)           - 
                                                                               
US Dollar (USD)                              0.5              (34)          24 
                                                                               
Swedish Krona (SEK)                          0.5                -            - 
                                                                               
Danish Krone (DKK)                           0.5                6            - 

If interest rates had been lower throughout the year by 0.5% (2009: 0.5%) there
would have been an equal and opposite effect in the interest income and in the
changes in fair value of investments.

Interest exposure

An analysis of the Company's interest rate risk at 31 December 2010 and 2009 is
shown below:

31 December 2010                                                        
                                    No             1 month                 Non-
                              maturity Less than      to 1        1-5  interest            
                       Total      date   1 month      year      years   bearing 
 Assets                 £'000     £'000     £'000     £'000     £'000     £'000 
                                                                               
Designated at fair                                                             
value through profit                                                           
or loss upon initial                                                           
recognition                                                                    
                                                                               
Equity shares         63,206         -         -         -         -    63,206 
including warrants                                                             
                                                                               
Debt securities        2,179     2,179         -         -         -         - 
                                                                               
Held for trading                                                               
                                                                               
Derivative financial     435         -         -       435         -         - 
instruments                                                                    
                                                                               
Loans and                                                                      
receivables                                                                    
                                                                               
Balances due from      2,307         -         -         -         -     2,307 
brokers                                                                        
                                                                               
Cash and cash            383         -       383         -         -         - 
equivalents                                                                    
                                                                               
Interest, dividends      455         -         -         -         -       455 
and other                                                                      
receivables                                                                    
                                                                               
Total assets          68,965     2,179       383       435         -    65,968 
                                                                               

31 December 2010                                                        
                                     No             1 month                Non- 
                               maturity Less than      to 1       1-5  interest                
                        Total      date   1 month      year     years   bearing 
Liabilities             £'000     £'000     £'000     £'000     £'000     £'000 
                                                                               
Held for trading                                                               
                                                                               
Derivative financial    (424)        -         -      (424)        -         - 
instruments                                                                    
                                                                               
Financial                                                                      
liabilities measured                                                           
at amortised cost                                                              
                                                                               
Balance due to        (1,864)        -         -         -         -    (1,864)
subsidiary                                                                     
undertaking                                                                    
                                                                               
Accrued expenses and    (188)        -         -         -         -      (188)
other creditors                                                                
                                                                               
Total liabilities     (2,476)        -         -      (424)        -    (2,052)
                                                                               
Total interest                   2,179       383        11         -           
sensitivity gap                                                                
                                                                               

31 December 2009                                                                                                   
                                     
                                    No             1 month                Non-   
                              maturity Less than      to 1       1-5  interest                                
                       Total      date   1 month      year     years   bearing                  
Assets                 £'000     £'000     £'000     £'000     £'000     £'000 
                                                                               
Designated at fair                                                             
value through profit                                                           
or loss upon initial                                                           
recognition                                                                    
                                                                               
Equity shares         77,391         -         -         -         -    77,391 
including warrants                                                             
                                                                               
Debt securities        6,729     4,702         -         -     2,027         - 
                                                                               
Held for trading                                                               
                                                                               
Derivative financial   1,028         -         -     1,028         -         - 
instruments                                                                    
                                                                               
Loans and                                                                      
receivables                                                                    
                                                                               
Balances due from        809         -         -         -         -       809 
brokers                                                                        
                                                                               
Cash and cash          2,098         -     2,098         -         -         - 
equivalents                                                                    
                                                                               
Interest, dividends      555         -         -         -         -       555 
and other                                                                      
receivables                                                                    
                                                                               
Total assets          88,610     4,702     2,098     1,028     2,027    78,755 

31 December 2009                    
                                                                               
                                                   1 month                Non-                             
                              maturity Less than      to 1       1-5  interset                            
                       Total      date   1 month      year     years   bearing 
Liabilities            £'000     £'000     £'000     £'000     £'000     £'000 
                                                                               
Designated at fair                                                             
value through profit                                                           
or loss upon initial                                                           
recognition                                                                    
                                                                               
Derivative financial    (417)        -      (278)     (139)        -         - 
instruments                                                                    
                                                                               
Financial                                                                      
liabilities measured                                                           
at amortised cost                                                              
                                                                               
Balances due to         (481)        -         -         -         -      (481)
brokers                                                                        
                                                                               
Balance due to        (1,909)        -         -         -         -    (1,909)
subsidiary                                                                     
undertaking                                                                    
                                                                               
Bank overdraft       (15,520)        -   (15,520)        -         -         - 
                                                                               
Accrued expenses        (198)        -         -         -         -      (198)
                                                                               
Total liabilities    (18,525)        -   (15,798)     (139)        -    (2,588)
                                                                               
Total interest                   4,702   (13,700)      889     2,027           
sensitivity gap                                                                

3. Other price risk

All securities investments present a risk of loss of capital. Market price risk
can be moderated in a number of ways by the Investment Manager through:

● careful selection of securities and other financial instruments and
assessment of the exposure to market risk when making each investment decision;

● the Investment Manager's investment strategy, which is designed to help
identify uncorrelated themes which can be used as the basis of a suitably
diversified portfolio; and

● the use of derivatives to hedge exposure. However, perfect correlation may
not be obtained between the hedging instrument and portfolio holdings being
hedged. This imperfect correlation may prevent the intended hedge or expose the
Company to risk of loss.

The Investment Manager monitors the prices of financial instruments held by the
Company on a daily basis and reviews target prices on equity positions, which
are set as part of the investment decision process, macro economic viewpoint,
size of positions, hedging policy, derivatives, exposure to main thematic risks
and overall balance sheet exposure on a regular basis.

The Board reviews the values of the portfolios' holdings and investment
performance at its quarterly meetings. Further information on the portfolio of
investments is set out above.

The portfolio of investments is valued at bid price, which represents fair
value. If the value of investments fell by 10% at 31 December 2010 the impact
on net return after taxation for the year and net assets would have been
negative £6,539,000. If the value of investments rose by 10% at 31 December
2010 the impact on net return after taxation for the year and net assets would
have been positive £6,539,000.

4. Liquidity risk

Market illiquidity or disruption could result in losses to the Company.
Liquidity risk also arises because assets may be invested in equities in
emerging markets which may be less liquid and volatile but such positions are
not significant. The Company may periodically invest in derivatives contracts
and debt securities that are traded over the counter. The Company is exposed to
the daily settlement of margin calls on derivatives. Accordingly, liquidity
risk is not significant as the Company's assets mainly comprise readily
realisable quoted securities that can be sold to meet funding commitments if
necessary. Short-term flexibility is achieved through the use of overdraft
facilities. The liquidity of positions is reviewed on a regular basis by the
Investment Manager; the Board of Directors review it on a quarterly basis

5. Credit risk

The Company is subject to the risk of the inability of the bankers and
custodians to perform with respect to transactions, whether due to insolvency,
bankruptcy, rehypothecation of the Company's assets or other cause and the
credit worthiness of any counterparties it deals with from time to time. The
main concentration to which the Company is exposed arises from its investment
in debt securities. The Company is also exposed to counterparty credit risk on
trading derivative products.

The Company seeks to manage credit risk by adhering to the limits on position
size in the Prospectus and only undertaking transactions with reputable and
approved counterparties and by ensuring that the majority of transactions are
settled on delivery. The Company assesses the credit worthiness of its debtors
from time to time to ensure they are neither past, due or impaired.

Derivative positions are marked to market and exposure to counterparties is
monitored on a daily basis by the Investment Manager; the Board of Directors
review it on a quarterly basis.

At the reporting date, the Company's financial assets exposed to credit risk
amount to the following:

                                                              2010        2009 
                                                                               
                                                             £'000       £'000 
                                                                               
Debt securities                                              2,179       6,729 
                                                                               
Cash and cash equivalents                                      383       2,098 
                                                                               
Derivative assets                                              435       1,028 
                                                                               
Other assets                                                 2,341         868 
                                                                               
                                                             5,338      10,723 

None of the Company's financial assets are past due or impaired.

Fair value hierarchy

All financial assets and financial liabilities of the Group and Company are
carried in the balance sheet at fair value or as a reasonable approximation of
fair value. The Company has adopted the amendment to IFRS 7, effective 1
January 2009. This requires the Company to classify fair value measurements
using a fair value hierarchy that reflects the significance of the inputs used
in making the measurements.

Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset as follows:

Level 1 - valued using quoted prices in active markets for identical assets.

Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted prices included within Level 1, either directly (that is, as
prices) or indirectly (that is, derived from prices).

Level 3 - valued by reference to valuation techniques using inputs that are not
based on observable market data.

The valuation techniques used by the Group and Company are explained in note 1.

There have been no transfers during the year between Levels 1 and 2. The Level
2 financial

instruments refer to open B-Class call options in a variety of stocks. These
are tradeable securities.

The table below sets out fair value measurements using the IFRS 7 fair value
hierarchy:

31 December 2010                           Total     Level 1     Level 2
                                                                         
Assets                                     £'000       £'000       £'000 
                                                                         
Financial assets designated at fair                                      
value                                                                    
                                                                         
through profit or loss                                                   
                                                                         
Equity securities                         63,206      63,206           - 
                                                                         
Debt securities                            2,179       2,179           - 
                                                                         
Financial assets held for trading                                        
                                                                         
Derivatives                                  435           -         435 
                                                                         
Total assets                              65,820      65,385         435 
                                                                         

                                           Total     Level 1     Level 2
                                                                        
Liabilities                                £'000       £'000       £'000 
                                                                        
Financial liabilities held for                                          
trading                                                                 
                                                                        
Derivatives                                (424)          -        (424)
                                                                        
Total liabilities                          (424)          -        (424)
                                                                        

31 December 2009                           Total     Level 1     Level 2
                                                                         
Assets                                     £'000       £'000       £'000 
                                                                         
Financial assets designated at fair                                      
value                                                                    
                                                                         
through profit or loss                                                   
                                                                         
Equity securities                         77,391      77,391           - 
                                                                         
Debt securities                            6,729       6,729           - 
                                                                         
Financial assets held for trading                                        
                                                                         
Derivatives                                1,028       1,028           - 
                                                                         
Total assets                              85,148      85,148           - 
                                                                         

                                          Total     Level 1     Level 2
                                                                        
Liabilities                               £'000       £'000       £'000 
                                                                        
Financial liabilities held for                                          
trading                                                                 
                                                                        
Derivatives                                (139)       (139)          - 
                                                                        
Forward currency contracts                 (278)       (278)          - 
                                                                        
Total liabilities                          (417)       (417)          - 
                                                                        

Capital management policies

The Company's capital management objectives are:

● to ensure that it will be able to continue as a going concern; and

● to maximise the income and capital return to its equity Shareholders through
an appropriate balance of equity capital and `debt'.

As stated in the investment policy, the Company has authority to borrow up to
50% of Shareholders funds, but the Directors and Investment Manager have for
the time being agreed a maximum figure of 22%. There were no borrowings as at
31 December 2010.

The Company's capital at 31 December comprises:

                                                              2010        2009 
                                                                               
                                                             £'000       £'000 
                                                                               
Shareholders' funds                                                            
                                                                               
Share capital                                                2,992       3,028 
                                                                               
Share premium                                               26,127      26,127 
                                                                               
Capital redemption reserve                                      36           - 
                                                                               
Capital reserves                                            37,073      40,298 
                                                                               
Retained earnings                                            1,168       1,539 
                                                                               
Total Shareholders' funds                                   67,396      70,992 

The Board with the assistance of the Investment Manager monitors and reviews
the broad structure of the Company's capital on an ongoing basis. This review
includes:

● the planned level of gearing, which takes into account the Investment
Manager's view of the market;

● the need to buy back shares for cancellation or treasury, which takes account
of the difference between the net asset value per share and the share price
(i.e. the level of share price discount or premium);

● the need for new issues of equity shares; and

● the extent to which revenue in excess of that which is required to be
distributed should be retained.

The Company's objectives, policies and processes for managing capital are
unchanged from the preceding accounting period.

ANNUAL GENERAL MEETING

The Company's AGM will be held at the offices of J.P. Morgan Cazenove Limited,
20 Moorgate, London EC2R 6DA, on Tuesday, 24 May 2011 at 2.30pm.

The notice of this meeting can be found in the Annual Report and Accounts at 
www.sreit.co.uk.

National Storage Mechanism

A copy of the Annual Report and Financial Statements will be submitted shortly
to the National Storage Mechanism ("NSM") and will be available for inspection
at the NSM, which is situated at: www.hemscott.com/nsm.do.

Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.