31 March Directors Report and Accounts

Transcription

1 31 March Directors Report and Accounts

2 Contents Page Board Directors and Secretary 1 Committees for / 1 Directors and Senior Management Biographies 2 Panel Reporting Companies 4 Chairman s Statement 5 Chief Executive s Report 7 Directors Report 9 Report on Directors Remuneration 12 Directors Responsibilities Statement 13 Independent Auditor s Report 14 Consolidated Profit and Loss Account 15 Consolidated Balance Sheet 16 Consolidated Cash Flow Statement 17 Notes on the Accounts 18 Company Balance Sheet 26 Notes on the Company Balance Sheet 27 Notice of Meeting 28 The Baltic Exchange Limited Registered Number 64795

3 Board Directors and Secretary Committees for / Directors The Baltic Exchange Limited M R Jackson (Chairman) Q B Soanes (Vice-Chairman) S C Baldey MICS* G M Campbell FICS D C Dragazis FICS D L Dunn H J Fafalios C A Fowle* A J Francis FICS C J Nolan P C Over W M Robson L C Varnavides A J Westbrook* A R Wooldridge *Ballot Director Baltic Exchange Derivatives Trading Limited P C Over (Chairman) D W T Bain J Foyle (Independent Non-Executive) A J Francis J Penn P Stuart-Smith N Tipple (Independent Non-Executive) Baltic Exchange Information Services Limited P C Over (Chairman) S C Baldey G M Campbell D L Dunn H J Fafalios W M Robson Q B Soanes Chief Executive and Secretary J Penn (Chief Executive) D W T Bain FCA (Company Secretary) Up to twelve Directors of the Exchange are elected by the shareholders and up to three are elected by representatives of member companies. All Directors are non-executive and direct the work of the Exchange through the committees (which are set out opposite) and the staff of the Exchange. The Board had 6 meetings with an average attendance for / of 81%. Committees / Finance and Corporate Affairs and Charities Q B Soanes (Chairman) D C Dragazis A J Francis L C Varnavides Secretary: D W T Bain 4 meetings Average attendance by Directors: 81% Freight Indices and Futures G M Campbell (Chairman) D L Dunn H J Fafalios C A Fowle W M Robson Ex-officio and by invitation: Chairman FMIUG-Tankers Chairman FMIUG-Dry Chairman FFABA-Dry Chairman FFABA-Tankers Secretary: R King 7 meetings Average attendance by Directors: 77% Membership and Member Services S C Baldey (Chairman) C J Nolan A J Westbrook A R Wooldridge By invitation: R H Goodall E B Mavroleon Secretary: J A Harrison 11 meetings Average attendance by Directors: 98% Remuneration M R Jackson (Chairman) S C Baldey G M Campbell P C Over Q B Soanes 1 meeting Attendance: 100% 1

4 Directors and Senior Management Biographies 2 Directors Stephen Baldey (58) He joined the Board in 2005 having become a member of the Baltic Exchange in He is a partner in O.P. Secretan LLP, whose business is ship and chartering brokers to various ship owners and trade houses. He is a member of the Institute of Chartered Shipbrokers. Guy Campbell (45) He is managing director of Dry Cargo Chartering at Clarkson PLC. Prior to joining Clarkson he was director of ocean freight at Koch Carbon LLC, responsible for dry cargo chartering, operations and freight trading activities. He began his shipping career in 1990 as a dry cargo broker for JE Hyde and Co Ltd. He chaired the Freight Market Information Users Group in 2005 and joined the Baltic Board in Demetrius Dragazis (65) He joined the Board in He joined the Latsis Group in Athens in 1964, and was transferred to John S Latsis in London in He was managing director of John S. Latsis (London) Ltd until 2005 and is now managing director of Latsco (London) Ltd a British Tonnage Tax company specialising in product tankers and LPG vessels. He is a Fellow of the Institute of Chartered Shipbrokers. He is a Vice-Chairman of the Greek Shipping Cooperation Committee and serves on other industry committees. Duncan Dunn (48) He was elected a Shareholder Director of the Baltic in He joined SSY Futures Ltd in 2004 and is now a Senior Director, responsible for business development and marketing. He has worked principally in the derivatives industry since 1986 in both broking and fund management roles at companies including Rudolf Wolff Fund Management, Union PLC and Man Financial. Haralambos Fafalios (51) He joined the Board in He has worked with his family company as a Baltic shipbroker for 25 years and is actively engaged in chartering on a daily basis. He has worked in marine insurance, banking and all aspects of shipbroking (dry, wet, sale and purchase, research). He has also served at sea. He presently sits on various industry committees and is Chairman of the Greek Shipping Cooperation Committee. Charles Fowle (56) He joined Galbraiths in 1973, where he has always worked in the Tanker Department. He is Chairman of the company. He is also a director of Worldscale Association London and the London Tanker Brokers Panel. He joined the Baltic board as a Ballot Director in. Andrew Francis (66) He joined the Board in He is a shipbroker and maritime consultant. He has been a member of the Baltic Exchange since Experienced in both the dry cargo and tanker freight markets, he was managing director of Eastern Mediterranean Maritime (London) Ltd, the London agents for Thenamaris (Ships Management) Inc, Greece, between 1979 and He is a Fellow of the Institute of Chartered Shipbrokers. Mark Jackson (51) He is a director of AM Nomikos & Son (UK) Ltd and the Commercial Officer for the Athens based AM Nomikos group. He started his shipping career in 1980 in Sydney, Australia. He joined the Baltic Exchange in 1984 as a representative for Brown Jenkinson (Chartering) Ltd. He co-founded Mercury London Ltd in 1986, Mercury HK in 1988 and Mercury USA in In 1998 he joined AM Nomikos. He joined the Board in 2004 and served as Chairman of the Freight Indices and Futures Committee from 2005 to Colm Nolan (62) He joined the board in He has been a member of the Baltic Exchange since 1974 primarily as an owners' broker. He has been the Dry Cargo chartering manager of Agelef Shipping London for the past 20 years. He presently shares his time between Agelef London and Anangel Shipping in Athens. Paul Over (56) He joined the Board in He started his career with Eggar Forrester in 1978 before moving to Howe Robinson in 1978 and then to the ship owning division of their parent company Jardine Matheson in Hong Kong in In 1984 he joined Continental Grain in Hong Kong before joining Pacific Basin as co-founder in He stepped down from the board of Pacific Basin in March He is a director of Asia Maritime Pacific Ltd and a non-executive director of Carisbrooke Ltd.

5 Michael Robson (54) He has been a member of the Baltic Exchange since He was reelected to the Board as a Shareholder Director in 2008 having previously served as a Ballot Director between 2003 and He is sole proprietor of Brown Jenkinson, a dry cargo shipbroker and is an expert witness. Quentin Soanes (57) He joined the Board in He has worked in the shipbroking and shipping services industry since 1977 and currently specialises in sale and purchase. He was a founder shareholder and is a main board director of Braemar Seascope PLC where he is head of business development. He is also Managing Director of Braemar Seascope Ltd. Lambros Varnavides (62) He was elected to the Baltic Board as a Shareholder Director in He has worked for The Royal Bank of Scotland Group since 1974, having previously studied at University College, London and then the London School of Economics. He has a BSc(Econ), MSc(Econ) and M.Phil in Economics. Apart from a short interval in Credit Control, he has stayed in the Shipping Division of the Bank for his entire career. In 1998 he was appointed Director of Shipping with responsibility for all of the Bank s shipping business. Since the merger with ABN in 2007 he has been managing director and Global Head of Shipping. He is a member of the Court of the Worshipful Company of Shipwrights and on the Board of Trustees of Lloyds Register of Shipping. He also lectures on ship finance to postgraduate students of the Massachusetts Institute of Technology in Boston and the City University Business School in London. Tony Westbrook (61) He was first elected as a member of the Baltic Exchange in 1972, representing Howard Houlder and Partners until 1976 when he joined Simpson, Spence and Young. He has been with Maersk Broker since 1981, until mid 2010 in London and since then heading the bulk carriers chartering team at Maersk Broker Hellas in Athens. He was elected to the Board as a Ballot Director in 2007 and was re-elected in. Adrian Wooldridge (41) He is the Chief Commercial Officer of Navios Maritime Acquisition Corporation. Prior to joining Navios he was the Freight Trading Manager for Shell Trading, Barbados, having also worked for Shell Trading in London engaged in tanker chartering and derivative trading. He started his career in 1989 with the G P Livanos group. He is a Fellow of the Institute of Chartered Shipbrokers and holds an MBA from Warwick Business School. He joined the board in. Senior Management Jeremy Penn (53) He joined the Baltic in 2003 as Chief Executive elect. He has over 30 years experience of general management, marketing and product development relating to financial information and associated technology products. He spent 20 years with Reuters Group PLC, during which time he lived and worked in Zimbabwe, Morocco, Hong Kong, Australia, Singapore and the USA as well as the UK. He was appointed to Reuters executive committee in He is a Director of Maritime London and Vice-Chairman of Maritime UK. Duncan Bain (60) He joined the Baltic in 2006 as Company Secretary. He qualified as a chartered accountant in 1976 and spent 14 years in corporate finance at Lloyds Merchant Bank before becoming finance director of Bourne End Properties PLC a quoted property investment company. Prior to joining the Baltic he held a similar position at The Iveagh Trustees Limited, the Guinness family s financial services business. 3

6 Panel Reporting Companies 4 CAPESIZE INDEX PANELLISTS Arrow Chartering (UK) Ltd Banchero-Costa & C s.p.a. Barry Rogliano Salles (London) Chinica Shipbrokers Ltd Clarksons Fearnleys A/S E A Gibson Shipbrokers Ltd Howe Robinson & Co Ltd Ifchor SA Ildo Chartering Corporation LSS SA, Antwerp Neo Chartering Simpson Spence & Young Ltd Thurlestone Shipping Ltd PANAMAX INDEX PANELLISTS Acropolis Chartering & Shipping Inc Arrow Chartering (UK) Ltd Banchero-Costa & C s.p.a. Chinica Shipbrokers Ltd Clarksons Fearnleys A/S G F I Brokers Ltd E A Gibson Shipbrokers Ltd Hai Young International Co Ltd Howard Houlder (Dry Cargo) Ltd Howe Robinson & Co Ltd ICAP Shipping Ltd Ifchor SA John F Dillon & Co Lawrence (Chartering) Ltd LSS SA, Geneva Maersk Broker (UK) Ltd Neo Chartering Optima Chartering Thurlestone Shipping Ltd Simpson Spence & Young Ltd Yamamizu Shipping Co Ltd SUPRAMAX INDEX PANELLISTS ACM Shipping Ltd Barry Rogliano Salles (France) Beijing Ausea Shipping Clarksons L Dens (Shipbrokers) Ltd Lightship Chartering A/S Howe Robinson & Co Ltd HSBC Shipping Services ICAP Shipping Ltd John F Dillon & Co Maersk Broker (UK) Ltd PC Li Shipbrokers Ltd Rigel Shipping Ltd Simpson Spence & Young Ltd Yamamizu Shipping Co Ltd BALTIC SUPRAMAX ASIA PANELLISTS Beijing Ausea Barry Rogliano Salles (Singapore) Clarksons Asia (Singapore) Galbraith s Ltd (Shanghai) BALTIC SUPRAMAX ASIA PANELLISTS CONTINUED Howe Robinson (Tokyo) ICAP Shipping Ltd (Singapore) Ildo Chartering Corporation Interocean New Delhi Lightship Chartering A/S (Singapore) PC Li Shipbrokers Ltd Simpson Spence & Young (Singapore) Yamamizu Shipping Co Ltd BALTIC EXCHANGE HANDYSIZE INDEX PANELLISTS Barry Rogliano Salles (France) Beijing Ausea Shipping Braemar Seascope (Melbourne) Clarksons Clarksons Asia (Singapore) Doric Shipbrokers S.A. Lawrence Chartering Ltd Lightship Chartering A/S Howe Robinson & Co Ltd HSBC Shipping Services PC Li Shipbrokers Ltd Rigel Shipping Ltd Simpson Spence & Young Ltd H. Vogemann Gmbh Yamamizu Shipping Co Ltd BALTIC INTERNATIONAL TANKER ROUTES PANELLISTS A C M Shipping Ltd Barry Rogliano Salles (France) Bassoe (P.F.) A/S & Co Braemar Seascope Ltd Bravo Tankers s.r.l. Charles R Weber Company Inc Clarksons Clarksons Asia (Singapore) Clarksons Geneve Eastport Chartering Pte Ltd Fearnleys A/S Galbraith s Ltd E A Gibson Shipbrokers Ltd ICAP Shipping Ltd Island Shipbrokers Pte Ltd Mallory Jones Lynch Flynn & Assoc. Inc McQuilling Brokerage Partners Inc (New York) McQuilling Brokerage Partners Asia Odin Marine (Singapore) Pte Ltd Simpson Spence & Young Ltd Simpson Spence & Young Ltd (Singapore) SSY Tankers New York LLC True North Chartering NY BITRA ASIA PANELLISTS ACM Shipping Asia Pte Ltd Eastport Chartering Pte Ltd Clarksons Asia (Singapore) Island Shipbrokers McQuilling Brokerage Partners Asia Odin Marine (Singapore) Pte Ltd Simpson Spence & Young Ltd (Singapore) Taipan Shipbrokers Pte Ltd BALTIC LIQUIFIED PETROLEUM GAS ROUTE PANELLISTS ACM Shipping Ltd Braemar Seascope Ltd Clarksons Fearnleys A/S E A Gibson Shipbrokers Ltd Lorentzen & Stemoco AS Poten & Partners (UK) Ltd Inge Steensland AS BALTIC SALE AND PURCHASE ASSESSMENT PANELLISTS Arrow Chartering (UK) Ltd Banchero-Costa & C. s.p.a. Barry Rogliano Salles (France) Compass Maritime Services LLC Fearnleys A/S Lorentzen & Stemoco AS Mallory Jones Lynch Flynn & Assoc. Inc Optima Chartering Ltd R S Platou Shipbrokers AS Simpson Spence & Young Ltd Yamamizu Shipping Co Ltd BALTIC DEMOLITION PANELLISTS Clarksons Compass Maritime Services J V Shipping Optima Chartering Ltd Simpson Spence & Young Ltd BALTIC FORWARD ASSESSMENT PANELLISTS Banchero-Costa & C s.p.a. BRS Futures Ltd Clarkson Securities Ltd Freight Investor Services Ltd GFI Brokers Ltd ICAP Shipping Derivatives Ltd Marex Spectron Pasternak, Baum & Company Inc SSY Futures Ltd BALTIC OPTIONS ASSESSMENT PANELLISTS Banchero-Costa & C s.p.a. Clarkson Securities Ltd Freight Investor Services Ltd GFI Brokers Ltd SSY Futures Ltd

7 Chairman s Statement This has been a busy year for many of us in the shipping business and that is certainly also true for the Baltic. We launched Baltex, our on-line trading system for FFAs, in June and have made steady progress since then, though without achieving the rapid success many may have expected. We have maintained our financial discipline, while funding the Baltex start-up, and benefited from an extraordinary receipt as a result of a Rights of Light payment related to the development of a site adjacent to 38 St. Mary Axe. We have also devoted much time to ensuring that our benchmark freight market data moves with the rapidly-changing times. Financial performance Revenue for the year of 5,470,028 was 175,078 better than last year. Income from membership activities, including the sale of data to information vendors and clearing houses, rose marginally to 4,286,187. Income from Property rose by 119,592, an increase of 11% compared to last year, benefiting from an increase on review of the Balls Brothers lease now assigned to Novus Leisure and the letting of the 5th floor to Marisec, offsetting the reduction from the new lease terms with H W Wood. The rights of light settlement of 853,751 was received from the developer of the new building at 6 Bevis Marks. This is more fully analysed in the Chief Executive s Report. Costs are higher than last year at 5,399,610, compared to 4,867,682, and reflect the continuing commitment to the Baltex project. This leads to an overall profit after investment gains and before taxation of 1,601,416, compared with 1,266,813 in the prior year. After absorbing Baltex costs the membership activities (i.e. excluding property and investments) area of the business slipped into a loss of 95,989 with property and investments showing profits of 299,371 and 253,032 respectively. Without the effect of Baltex the profit in membership activities would have been 608,177 (: 839,960). Dividend Last year your Board proposed to maintain the dividend despite the short-term expenditures on Baltex. While the financial performance of that project has been disappointing so far, the Board considers it appropriate still to maintain the dividend at last year s level and recommends a final payment of 1.75 per share, making a total for the year of 2.15 per share. Assisted by the rights of light payment, the cost of dividends this year will be more than covered by the profit for the year, although under the accounting rules now in force the final payment will be shown in next year s Accounts. Although your current Board has no desire to see the reserves of the Company increase, it clearly cannot bind future boards with regard to dividend policy. Baltex Both financially and strategically our FFA trading system, Baltex, is one of the most important initiatives we have launched in recent years. The system opened for trading on 8 June with just 8 principals on board and the main FFA brokers. At the time of writing we continue to run at a monthly loss, but now have over 30 principals as members, including the majority of key names in the dry bulk FFA market. Although the evolution of volumes in these early stages continues to be erratic, we have seen upward movement in the moving average of volumes since the autumn and have set new peaks for the day, week and month. Although this does not guarantee success by any means, it does give us good reason to continue to support the project in the expectation of a profitable outcome in the medium term. Convincing the FFA broking members that this project is not damaging for their businesses continues to be a challenge and we have worked hard both in routine communication and by modifications to the price discount structure to convince them. However, we firmly believe the project is right for the Baltic. It is an appropriate response to the demands of the marketplace and the changing regulatory environment and will help hold off other exchanges from entering our market. The main obstacle to success is the need to change the everyday working habits of traders, and this inevitably takes time. Your board is confident that the project is well managed and the costs well controlled and is therefore minded to support the project until it is successful or until such time as it becomes clear that it will not be successful. More details of the progress of the project are contained in the Chief Executive s report and I will be able to give a further update at the AGM. Marketplace developments The shipping market, especially in dry bulk, is developing and changing at a speed not seen for generations. New tonnage delivered has doubled the capacity of the Capesize fleet, and there have been substantial additions to tonnage in all the other sectors. Authority has followed cargo to the East and we now see active fixing of ships of all sizes during the normal Asian working day. 5

8 Chairman s Statement 6 In addition, historically high bunker prices, in parallel with low freight rates, have led to demand for ships which perform well at slow speeds, encouraging new hull and engine design. All of this has presented the Baltic, its staff and the Freight Indices and Futures Committee considerable challenges and there are many issues to resolve in the coming year in partnership with our members who have made increasingly heavy use of our index rates and route assessments in recent years in the physical market, in derivatives and in internal risk management. Member relationships I once again thank all of the panellist brokers who contribute their market knowledge to the process of index production. This has been an especially demanding period for reporting, requiring careful thought and great expertise from panellists and we are most grateful to them. We place great demands on panellists not just in terms of daily inputs of rates, but also by our frequent calls on them to help us understand their thinking and market view. We also consult them seemingly continuously regarding possible changes to route and vessel descriptions and are grateful for their patience and engagement. My thanks go to Philippe Van den Abeele of Castalia Fund Management for his leadership of the vital Freight Market Information Users Group (FMIUG) (Dry) and to Janet Sykes of Clarksons Securities who has now handed over the Chairmanship of the FFA Brokers Association (Dry) to Emily Driver of SSY Futures. Unfortunately the year has seen a number of changes at the top of the tanker FMIUG with Matthew Holme of Trafigura handing over to Jeremy Harris of Shell who in turn was forced by a change of location to hand over to Susan Glover of BP Shipping. Despite the changes we have enjoyed excellent teamwork with the FMIUG (wet) in the last 12 months. Andrew Jamieson of GFI Brokers completed his extended spell as Chairman of the FFABA (wet) and we welcome Nils Arnesen of Marex-Spectron in his place. We once again thank all these leaders for their support and their help in ensuring the Baltic remains engaged with the market and responsive to its needs. We have placed more emphasis in the last 12 months on providing services to members which go beyond the simple provision of benchmark data. We have provided a number of briefings on matters such as sanctions against Iran and Syria and the UK Bribery Act which have the potential to cause great difficulty in the shipping industry. We expect to continue to develop this side of our member services. The Membership Committee, ably led by Stephen Baldey, has been busy and effective with our dispute resolution service. Although sadly the market turmoil of recent years has led to a substantial increase in the number of companies posted on the Baltic, the Committee have proved most effective in collecting debt on behalf of members and I commend this service to all. External relationships We have worked hard this year in representing the shipping industry to the UK government, particularly highlighting the importance of a stable Tonnage Tax regime, though we were unsuccessful in achieving a rethink of further proposed changes to the nondomiciled tax regime. However, in conjunction with our partners in Maritime UK we feel there has been a much improved level of recognition of the vital role of our industry and the importance of the maritime business conducted in London. We have also continued to support Maritime London in its trade promotion activity, including coordinating a dinner with Lord Green to promote the UK as a capital market for international shipping. Directors and staff At the AGM Paul Over and I will step down from the Board. Our positions will be filled, no doubt very ably, by Stefan Albertijn of Toepfer and Tony Carroll of Grey Page. Quentin Soanes has been elected by your Board as Chairman and Guy Campbell as Vice- Chairman and I offer them both my very best wishes. This follows Paul Over s decision last autumn that his other business interests would prevent him from committing to the chairmanship of the Baltic. Paul has agreed however to continue for the time being as Chairman of Baltic Exchange Derivatives Trading Ltd, the subsidiary which operates Baltex, and we are grateful to him for that. I would like to thank the Chief Executive and each of the Directors who have served during my 3 year tenure as Chairman for their time, commitment and wise counsel. Once again I must highlight the work of our loyal and hard-working staff and their commitment to the success of the Baltic. M R Jackson Chairman 1 June

9 Chief Executive s Report Key performance measures At the end of March corporate memberships stood at 600, compared with 593 at the same time last year. The theme this year in membership recruitment has been one of volatility. We have seen a number of resignations as firms have changed their business or ceased trading. However, we have also seen a number of new entrants and Baltex has led to the addition of eight new members. Progress in recruiting members in China has been disappointing but we continue to target this vital market. In Greece, despite the difficult economic environment, we have added three new corporate members in the last year. Revenue from membership subscriptions and members access to freight market information grew to 2,165,014 (: 2,127,674). Although we are not directly affected by lower freight rates, business failures have an impact and the overall environment makes growth more difficult. Revenue from information vendors was slightly better at 1,023,613 (: 1,003,304). We should expect the picture in this area to be, at best, stable now that shipping has lost its allure for many in the financial markets. Income from clearing houses to cover licence fees for the use of our data in their FFA settlement and margin calculations has held up well at 416,145 (: 419,870) despite sometimes soft FFA volumes and often fierce price competition between the clearers. Subscriptions from non-members to our freight market information, sold online via our website, have also remained surprisingly steady at 342,224 (: 342,457). Sales in this area are sensitive to media coverage of shipping, especially BDI, so a slowdown would be expected as shipping has become lower profile from a financial markets point of view. The average monthly number of logons to our website was 32,820 (: 29,435), which shows that the information we provide continues to be of vital interest to the marketplace. The same can be said of the number of members accessing our information via an automated xml feed, which has risen from 42 to 47. Baltex Direct costs attributable to Baltex were 761,181 against income of 57,015, giving rise to a loss of 704,166 which forms part of the membership activity results. We have capitalised the sum of 173,355, related to certain bespoke development activity, which is being depreciated over four years. Staff and technology costs represent the main elements, with little room for reduction because of the important role played by the staff in monitoring the system and building member relationships. We currently have five full-time staff, which is the minimum to provide appropriate operational cover. After a slow start in our list of 30 principal members (up from 8 at the outset) now covers nearly all of the main market participants, a position which has inevitably taken some time to achieve. Since the start of the year we have set new highs in trading volume terms for day, week and month and are optimistic of developing real momentum. Nonetheless we still have considerable distance to go before we reach operating breakeven on a monthly basis. We are dependent not only on changing work habits, but on good volumes in the underlying FFA market which have been poor in the last few weeks. The system is currently authorised throughout the European Economic Area and in Switzerland and is made available with the agreement of the regulators in Singapore and in Monaco. We will extend the geographic coverage as necessary in response to customer interest. A number of major market players show and execute significant business on Baltex, but some have been less committed than we had expected. We are working to remedy this by continuously encouraging usage, maintaining regular dialogue with traders and their management. We have also continued to work with the FFA brokers with the aim of making the system as attractive to them as possible, and have experimented with a number of price schemes, which are approved by the FSA. Other market developments and member services Dry FFAs averaged a weekly volume of 20,109 lots (: 19,947) where one lot is one day of timecharter or 1,000 MT of voyage transportation, while tankers were 24,454 per month (: 29,870). Despite occasional periods of volatility, the generally low and flat rates in the physical market have discouraged growth in FFAs. Countering this 7

10 Chief Executive s Report 8 has been continued expansion in the use of Baltic rates in establishing floating rates for period business. In dry we spent considerable time during the year considering the vessel specification for both the Cape and Panamax TC routes. After much discussion with users and panellists we did not implement a change, however the issue remains on the near-term agenda for Capes at least. We have also come under pressure to find ways to respond both to the use of (usually un-warranted) ecospeed specifications and to the very substantial shift of business to the Pacific, which has arguably unbalanced our traditional TC averages. It is vital that we find a response to this to ensure the Baltic rates, which have become essential tools for both physical and derivative markets, maintain their worldwide position. In a further change to the marketplace, we have seen a distinct shift of market activity to Asia, especially to Singapore, and we have moved our daily reporting of certain Pacific Supramax routes to 1300 Singapore time. We will look over the next 12 months at what changes may be needed for other vessel types and will work to resolve the many implementation issues this generates. We remain determined both to stay in line with market developments and to minimise the disruption caused when we make changes. We have continued to speak at a number of conferences around the world in order to explain the Baltic information production process and to publicise the benefits of membership and engagement with the Baltic. This is in addition to our now very successful dry and wet FFA forums, which this year we ran in London and Shanghai. The Membership Committee, ably supported by Barrie Wooderson, has been instrumental in recovering almost $700,000 owed to members during the financial year. Our help was also enlisted with regard to an unpaid arbitration award of almost $4.0 million which was subsequently paid. These results reflect the standing of the Baltic in the global shipping marketplace. Building and investments The building at 38 St Mary Axe is once more fully let with a rental yield of 7.4% (: 6.9%). We completed the assignment of the Balls Brothers lease to Novus Leisure, securing an increase to the rent on the related rent review. We also negotiated a new contract with Novus Leisure for the provision of catering services. This has so far had a series of setbacks, in many cases linked to their staff turnover. However, we are working with Novus Leisure to ensure that the service offered to members and to customers of our conference facilities is of the required standard. In view of the relatively weak rental market for a building such as ours and the insistence of some tenants on a capped service charge when negotiating new leases, we have set ourselves a target of reducing the service charge costs below the caps we have negotiated. During the year we obtained a payment of 853,751 from the developer of the new building at 6 Bevis Marks as compensation for the loss of light which is expected to result from the previous building, which has been demolished, being replaced by a taller development. The investment portfolio has continued to perform well with a total return for the period of 7.0% (: 8.1%). Fixed income has offered gains as yields have continued to come down. However, at the beginning of March we felt that the fixed income side of the investment portfolio has played itself out and either side of the year end we realised substantial gains, selling all the fixed interest and index linked bonds in the Charles Stanley portfolio. We are considering how best to redeploy the funds for an environment in which interest rates start to rise in the next year or two. Sports and social The Baltic remains enthusiastic about supporting sports clubs and social activities among members, especially those under 35 who are able to participate in the Young Baltic Association (YBA). The YBA held events in London and Singapore. The Sailing Association (BESA) and the Golf Society (BEGS) continue to run an active programme throughout the summer, with financial assistance from the Baltic. The Sub-Aqua Club and the Cricket Club continue too to be active, while competition is fierce for the David Bradley trophy in which member firms compete in sailing, golf, tennis and a quiz night. J Penn Chief Executive 1 June

11 Directors Report The Directors of the Company have pleasure in presenting their one hundred and eleventh Annual Report and the audited accounts for the year ended 31 March. This Directors Report has been prepared in accordance with the special provisions relating to small companies under section 415A of the Companies Act Directors The Directors of the Company at 31 March are shown on page 1. All of them have been Directors for the whole year ended on that date, with the exception of Mr C A Fowle and Mr A R Wooldridge who took office on 6 July. In accordance with the Articles of Association Mr M R Jackson and Mr P C Over will retire at the Annual General Meeting on 5 July creating two vacancies for two Shareholder Directors. Mr S Albertijn of Alfred C Toepfer International GmbH and Mr A C Carroll of Gray Page Limited have been elected unopposed as Shareholder Directors and they will take up office at the conclusion of the AGM. Activities The principal activities of the Group are to provide a self-regulated market, freight market information and facilities for its members who together constitute the principal world marketplace for bulk freight and who trade derivatives and commodities. Results and future prospects Revenue for the year of 5,470,028 was 175,078 better than last year. Income from membership activities, including the sale of data to information Holdings of the Directors in the Shares of the Company The interests of the Directors of the Company in the ordinary shares of the Company at 1 April (or if later the date of appointment as a Director) and at 31 March were: Shareholdings At 1 April, or date of appointment as a Director Ordinary 50p Shares At 31 March Ordinary 50p Shares S C Baldey G M Campbell D C Dragazis D L Dunn H J Fafalios 1,030 1,500 C A Fowle 100 A J Francis 3,000 3,000 M R Jackson C J Nolan P C Over W M Robson Q B Soanes L C Varnavides A J Westbrook A R Wooldridge 50 9

12 Directors Report vendors and clearing houses, rose marginally to 4,286,187. Income from Property rose by 119,592, an increase of 11% compared to last year, benefiting from an increase on review of the Balls Brothers lease, assigned to Novus Leisure last year, and the letting of the 5th floor to Marisec, offsetting the reduction from the new, lower, lease terms with H W Wood. A rights of light settlement of 853,751 was received arising from the redevelopment of a neighbouring building at 6 Bevis Marks. Investment income rose by 33,695 to 385,997. Profits from the sale of investments offset by increases in provisions to write the book value of certain investments to market value at 31 March, where market value is below cost, totalled 291,250 (: 487,243). Overall, profits on ordinary activities before taxation rose to 1,601,416 (: 1,266,813). There is a tax credit of 13,597 (: tax charge of 446,388). Dividends An interim dividend of 0.40 per ordinary share was paid to shareholders on 25 January. The Directors now recommend that a final dividend of 1.75 per ordinary share is paid on 19 July to shareholders on the Company s Register of Members at the close of business on 4 July. In accordance with the requirements of Financial Reporting Standard 21, dividends are now accounted for in the year of payment. Dividends paid during the year totalled 1,040,299 (: 1,040,299). The table below shows how this year s profits are being distributed by way of dividend. It is your Directors policy that the services which are provided to members should, over the long-term, continue to be profitable. Directors are committed to the long-term future of the Exchange and are very conscious of its role as a membership organisation and the social facilities it provides. Profits per accounts Profits available for dividend Profit after taxation for year 1,615,013 1,615,013 Less: Net profit on investments (291,250) Distributable profits 1,615,013 1,323,763 Final dividend for of 1.75 per ordinary share paid on 21 July (846,755) Interim dividend for of 0.40 per ordinary share paid on 25 January (193,544) (193,544) Final dividend for of 1.75 per ordinary share of 50p (846,755) 10 Profit after dividends 574, ,464

13 Directors Report Membership At the end of March there were 600 organisations in membership of the Exchange compared with 593 last year. The total number of people representing those organisations at the end of March was 2,454 as compared with 2,449 at the end of March. Donations During the year the Group made charitable donations of 25,660 principally to maritime or City of London organisations. Going concern The Directors of The Baltic Exchange Limited, having made appropriate enquiries, consider that adequate resources exist to continue in operational existence for the foreseeable future and, therefore, it is appropriate to adopt the going concern basis in preparing the financial statements for the year ended 31 March. Fixed assets In the opinion of the Directors, the current open market value of the interest in land and buildings exceeds the book value of 10.2 million. At 31 March 2010 the freehold property was valued at 14.8 million by CB Richard Ellis Ltd, Chartered Surveyors. The valuation was carried out on the basis of market value as defined in the Royal Institution of Chartered Surveyors Valuation Standards (6th edition). If the accounts reflected the increase, there would be a revaluation adjustment of 4.6 million. Financial risk management The Group does not use derivatives to manage its financial risks. The most important components of financial risk are interest rate risk, currency risk, credit risk, liquidity risk, cash flow risk and price risk. Due to the nature of the Group s business and the assets and liabilities contained within the Group s balance sheet the financial risk the Directors consider most relevant to the Group is interest rate risk in relation to the investment portfolio which is mitigated by the Group s investment strategy. Auditors A resolution to re-appoint Deloitte LLP will be proposed at the forthcoming Annual General Meeting. Statement as to disclosure of information to auditors Each of the persons who is a Director of the Company at the date of approval of this annual report confirms that: So far as the Director is aware, there is no relevant audit information of which the Company s auditors are unaware, and: The Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company s auditors are aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act By Order of the Board D W T Bain Company Secretary The Baltic Exchange St. Mary Axe London EC3A 8BH 1 June 11

14 Report on Directors Remuneration At the Extraordinary General Meeting of the Company held on 19 April 2007, shareholders approved a resolution establishing the requirement to present a report on Directors remuneration to the Annual General Meeting each year for adoption by shareholders. The total remuneration of the Board of Directors of The Baltic Exchange Limited is fixed by the Articles and was last increased to 47,000 per year in Directors may also receive remuneration for additional services provided to the Baltic as in the case of the service by Mr P C Over and Mr A J Francis as Directors of Baltic Exchange Derivatives Trading Limited. This report has been approved by the Board and signed on its behalf by M R Jackson. A resolution to approve this report will be proposed at the Company s Annual General Meeting to be held on 5 July. For the year ended 31 March, the remuneration of the Directors was as follows: S C Baldey 1,500 G M Campbell 1,500 D C Dragazis 1,500 D L Dunn 1,500 H J Fafalios 1,500 C A Fowle 1,125 A J Francis 1,500 R H Goodall 375 M R Jackson 20,000 C J Nolan 1,500 P C Over * 19,500 W M Robson 1,500 Q B Soanes 4,500 J Tsatsas 375 L C Varnavides 1,500 A J Westbrook 1,500 A R Wooldridge 1,125 Total 62, *Mr P C Over received 15,000 as remuneration for his services as a Director of Baltic Exchange Derivatives Trading Limited. Mr A J Francis waived his entitlement as a Director of Baltic Exchange Derivatives Trading Limited. Baltic Exchange Derivatives Trading Limited made a donation of 15,000 to the Baltic Charitable Fund.

15 Directors Responsibilities Statement The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: a) select suitable accounting policies and then apply them consistently; b) make judgements and estimates that are reasonable and prudent; c) state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and d) prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. M R Jackson Q B Soanes Directors 1 June 13

16 Independent Auditor s Report to the Members of The Baltic Exchange Limited 14 We have audited the financial statements of The Baltic Exchange Limited for the year ended 31 March which comprise the Consolidated Profit and Loss Account, the Consolidated and Company Balance Sheets, the Consolidated Cash Flow Statement and the related notes 1 to 21. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Company s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act Our audit work has been undertaken so that we might state to the Company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditor As explained more fully in the Directors Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group s and the Parent Company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the Group s and the Parent Company s affairs as at 31 March and of the Group s profit for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of Directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit; or the Directors were not entitled to take advantage of the small companies exemption in preparing the Directors Report. Georgina Robb FCA (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London 1 June

17 Consolidated Profit and Loss Account for the year ended 31 March Note Turnover 2 5,470,028 5,294,950 Total cost of sales and administrative expenses 5,399,610 4,867,682 Operating profit 3 70, ,268 Income from investments 4 385, ,302 Rights of light settlement 2 853,751 Profit after other income 1,310, ,570 Amounts (provided)/released against investments (39,756) (117,546) Profit from sale of investments 331, ,789 Net profit from investments 291, ,243 Profit on ordinary activities before taxation 2 1,601,416 1,266,813 Tax on profit on ordinary activities 6 13,597 (446,388) Profit on ordinary activities after taxation 14 1,615, ,425 Profit on ordinary activities after taxation includes all recognised gains or losses, therefore no statement of total recognised gains and losses has been prepared. There are no discontinued or acquired operations as defined by Financial Reporting Standard 3. There is no difference between the profit on ordinary activities before taxation stated above and the historical cost equivalent. 15

18 Consolidated Balance Sheet as at 31 March Note Fixed assets Tangible fixed assets 8 10,506,103 10,775,722 Investments 9 14,365,419 14,037,012 24,871,522 24,812,734 Current assets Debtors , ,322 Cash at bank and in hand 1,195,068 1,415,558 2,061,971 2,060,880 Creditors Amounts falling due within one year 11 (1,299,585) (1,814,420) Net current assets 762, ,460 Net assets 25,633,908 25,059,194 Capital and reserves Called up share capital , ,930 Share premium account 14 5,030 5,030 Capital redemption reserve 14 28,070 28,070 Profit and loss account 14 25,358,878 24,784,164 Shareholders funds 25,633,908 25,059,194 The financial statements of The Baltic Exchange Limited (Company registration number 64795) were approved by the Board of Directors and authorised for issue on 1 June. Signed on behalf of the Board of Directors. M R Jackson Q B Soanes Directors 16

19 Consolidated Cash Flow Statement for the year ended 31 March Note Net cash inflow from operating activities , ,335 Returns on investment and servicing of finance Interest received 207, ,698 Dividends received 209, ,630 Net cash inflow from returns on investment and servicing of finance 417, ,328 Rights of light settlement 853,751 Taxation (437,087) (572,184) Capital expenditure and financial investment Payments to acquire tangible fixed assets (82,455) (171,504) Payments to acquire fixed asset investments (5,628,592) (10,118,750) Receipts from sales of fixed asset investments 5,591,435 10,040,321 Net cash outflow from capital expenditure and financial investment (119,612) (249,933) Equity dividends paid 7 (1,040,299) (1,040,299) Net cash (outflow)/inflow before use of liquid resources (220,490) (592,753) Decrease in cash 16 (220,490) (592,753) 17

20 Notes on the Accounts for the year ended 31 March 1. Accounting policies The accounts have been prepared in accordance with applicable Accounting Standards in the United Kingdom and in accordance with the Companies Act on a going concern basis. These have been applied consistently in the current and preceding year. The particular accounting policies adopted are described below. a) The accounts are prepared under the historical cost convention. b) Basis of consolidation. The consolidated profit and loss account and balance sheet include the financial statements of the Company and its subsidiary undertakings made up to 31 March. Intra-group transactions are eliminated fully on consolidation. c) Fixed asset investments are stated at cost less provision for any permanent diminution in value. Premiums paid on the acquisition of securities that are held to maturity are amortised over the remaining life of the investments. Included in fixed asset investments are short-term deposits held for future investment. d) Tangible fixed assets are stated at cost net of depreciation and any provision for impairment. Depreciation is calculated to write off the assets to their residual value on a straight line basis during their expected normal lives at varying rates depending on the type of asset. The principal annual rates of depreciation used for this purpose are freehold buildings 2%, building plant 4%, other plant and equipment 25%, fittings 10% and furniture 25%. An annual rate of depreciation of 25% is applied on the Baltex platform assets with effect from the year of launch. No depreciation is provided on freehold land. e) Taxation is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted. f) Pensions. The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company. The pension cost charge represents contributions payable by the Company under the rules of the scheme and contributions made in the alternative to the private pension plans of certain members of staff. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the Balance Sheet. 18

21 2. Analysis of turnover and profit on ordinary activities before taxation Turnover comprises amounts receivable excluding Value Added Tax by the Group for services provided. All the amounts below were earned in the United Kingdom. Property income represents income receivable from rents and service charges. The contributions to turnover and profit before taxation are set out below: Turnover Profit before taxation Membership activities 4,286,187 4,230,701 (95,989) 330,173 Property 1,183,841 1,064, , ,422 Investment income 253, ,975 5,470,028 5,294, , ,570 Net profit from investments 291, ,243 Rights of light settlement 853,751 5,470,028 5,294,950 1,601,415 1,266, Operating profit Operating profit is stated after charging: Depreciation of tangible fixed assets 352, ,713 Fees payable to the Company s auditors for the audit of the Company s annual accounts 20,000 19,000 Fees payable to the Company s auditors and their associates for other services to the Group Tax 27,900 16,990 Other services 8,800 1,300 Directors fees 62,000 63, Income from investments Income from fixed asset investments 385, ,618 Other interest receivable and similar income 925 5, , ,302 19

22 Notes on the Accounts 5. Employee information a) The average number of people employed by the Company during the year was 29 (: 24). At the year end there were 29 staff (: 28). b) Employment costs of all employees included above, but excluding Directors, comprised: Gross wages and salaries 1,814,014 1,627,548 Employer s national insurance and state pension contributions 224, ,302 Employer s pension contributions 124, ,535 2,162,570 1,927, Tax on profit on ordinary activities The tax charge on ordinary activities is calculated as follows: Current tax Corporation tax (48,183) (529,784) Adjustment in respect of prior years 44, ,030 (3,434) (428,755) Deferred tax Current year 17,031 (12,808) Prior year adjustments (4,825) 13,597 (446,388) 20

23 Factors affecting the tax charge for the current period: The tax assessed for the period is lower than the standard rate of corporation tax in the UK 26% (: 28%) and this is due to the factors set out below: Notional charge at standard rate of tax 416, ,708 Expenses not deductible for tax purposes 17,567 82,399 Depreciation in excess of capital allowances 24,391 12,594 Movement in short term timing differences 10, Capital losses utilised (221,975) (59,981) Marginal relief (2,001) Non-taxable income (65,944) 346 Double tax relief (1,234) Pre-trading expenditure (132,545) 142,740 Prior year adjustments (44,759) (101,030) Current tax charge for period 3, ,755 The Company has approximately 214,000 of capital losses remaining as at 31 March. 7. Dividends Amounts recognised as distributions during the year: Final dividend for year ended 31 March of 1.75 per ordinary share paid on 20 July (2010: 1.75 per ordinary share) 846, ,755 Interim dividend for the year ended 31 March of 0.40 per ordinary share paid on 25 January (: 0.40 per ordinary share) 193, ,544 1,040,299 1,040,299 Proposed final dividend for year ended 31 March of 1.75 per ordinary share (: 1.75 per ordinary share) 846, ,755 The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements, in line with FRS 21 Events after the Balance Sheet date. 21

24 Notes on the Accounts 8. Tangible fixed assets Freehold Other land and Building plant and Furniture Baltex buildings plant equipment and fittings platform Total Cost At 31 March 9,953,269 4,344, , ,170 90,900 15,677,822 Additions 82,455 82,455 At 31 March 9,953,269 4,344, , , ,355 15,760,277 Depreciation At 31 March 1,369,580 2,547, , ,248 4,902,100 Charged to profit and loss account 84, ,026 14,623 38,057 36, ,074 At 31 March 1,454,480 2,725, , ,305 36,468 5,254,174 Net Book Value At 31 March 8,498,789 1,619,324 74, , ,887 10,506,103 At 31 March 8,583,689 1,797,350 88, ,922 90,900 10,775,722 At 31 March 2010 the freehold property was valued at 14.8 million by external valuers, CB Richard Ellis Ltd, St. Martins Court, 10 Paternoster Row, London EC4M 7HP, Chartered Surveyors. The valuation was carried out on the basis of market value as defined in the Royal Institution of Chartered Surveyors Valuation Standards (6th edition). If the accounts reflected the increase, there would be a revaluation adjustment of 4.6 million. 22

25 9. Investments held as fixed assets Cost At 31 March 14,180,597 Additions 5,628,592 Disposals (5,260,429) At 31 March 14,548,760 Provisions At 31 March 143,585 Provided in year 39,756 At 31 March 183,341 Net book value At 31 March 14,365,419 At 31 March 14,365,419 Cost Investments quoted on a recognised investment exchange 10,108,954 12,079,226 Investments quoted on other exchanges 1,643,176 1,731,687 Short-term deposits 2,613, ,099 14,365,419 14,037,012 Market value Investments quoted on a recognised investment exchange 11,436,757 13,093,457 Investments quoted on other exchanges 2,069,399 2,176,897 Short-term deposits 2,667, ,876 16,173,436 15,472, Debtors Trade debtors 246, ,815 Other debtors 517, ,350 Prepayments and accrued income 102, , , ,322 23

26 Notes on the Accounts 11. Creditors: Amounts falling due within one year Trade creditors 92,353 62,421 Other creditors: Taxation and social security 225, ,630 Accruals and deferred income 981, ,369 1,299,585 1,814,420 The creditor for taxation and social security includes UK corporation tax payable amounting to 44,779 (: 428,755). 12. Deferred taxation Movement on deferred taxation balance in the period: Opening balance 78,155 95,788 (Credit)/charge to profit and loss account (17,031) (17,633) Closing balance 61,124 78,155 Analysis of deferred tax balance: Fixed assets 135, ,097 Trading losses (58,005) (65,255) Short term timing differences (15,980) (7,687) Provision for deferred tax 61,124 78,155 A deferred tax asset of 51,343 (: 132,520) has not been recognised in relation to capital losses as there is insufficient evidence that the capital losses can be used in the foreseeable future as they can only be offset against future capital gains. 13. Called up share capital Number Authorised ordinary shares of 50p each At 1 April and at 31 March 540, ,000 Allotted and fully paid ordinary shares of 50p each At 1 April and at 31 March 483, ,930 24

27 14. Capital and reserves Capital Share Share redemption Profit capital premium reserve fund and loss Total At 31 March 241,930 5,030 28,070 24,784,164 25,059,194 Profit on ordinary activities after taxation 1,615,013 1,615,013 Dividends paid (Note 7) (1,040,299) (1,040,299) At 31 March 241,930 5,030 28,070 25,358,878 25,633, Reconciliation of operating profit to net cash inflow from operating activities Operating profit 70, ,268 Depreciation charge 352, ,713 (Increase)/decrease in debtors (253,025) 37,065 (Decrease)/increase in creditors and deferred income (64,151) 85,289 Net cash inflow from operating activities 105, , Reconciliation of net cash flow to movements in net funds Note (Decrease) in cash in the year (220,490) (592,753) Net funds at 31 March 1,415,558 2,008,311 Net funds at 31 March 17 1,195,068 1,415, Analysis of net funds Note Cash at bank and in hand and net funds 16 1,195,068 1,415,558 25

28 Company Balance Sheet as at 31 March Note Fixed assets Tangible fixed assets 8 10,369,218 10,684,822 Investments 9 14,365,419 14,037,012 Investment in subsidiaries 18 1,314, ,049,062 24,721,836 Current assets Debtors , ,892 Amount due from subsidiaries 400, ,742 Cash at bank and in hand 397, ,665 1,408,740 1,747,299 Creditors Amounts falling due within one year 20 1,409,075 1,449,874 Net current (liabilities)/assets (335) 297,425 Net assets 26,048,727 25,019,261 Capital and reserves Called up share capital , ,930 Share premium account 14 5,030 5,030 Capital redemption reserve 14 28,070 28,070 Profit and loss account 21 25,773,697 24,744,231 Shareholders funds 26,048,727 25,019,261 The Company has taken the exemption from preparing a company only profit and loss account under the provisions of s408 of the Companies Act The financial statements of The Baltic Exchange Limited (Company registration number 64795) were approved by the Board of Directors and authorised for issue on 1 June. Signed on behalf of the Board of Directors. M R Jackson Q B Soanes Directors 26

29 Notes on the Company Balance Sheet for the year ended 31 March 18. Investment in subsidiaries Particulars of subsidiary undertakings are as follows: Name of company Baltic Exchange Derivatives Trading Limited 1,314,424 1 Baltic Exchange Information Services Limited 1 1 Both companies were incorporated in England and Wales on 17 September 2008 and are wholly owned by The Baltic Exchange Limited. Baltic Exchange Derivatives Trading Limited operates a multi-lateral trading facility, regulated by The Financial Services Authority, to allow users to trade freight derivatives. Baltic Exchange Information Services Limited produces and distributes bulk freight market information. 19. Debtors Trade debtors 94,615 24,385 Other debtors 414, ,010 Prepayments and accrued income 102,162 44, , , Creditors: Amounts falling due within one year Trade creditors 92,355 62,421 Amounts due to subsidiaries 403,713 Other creditors: Taxation and social security 225, ,642 Accruals and deferred income 687,368 1,006,811 1,409,075 1,449, Profit and loss account At 31 March 24,744,231 Profit on ordinary activities after taxation 1,669,765 Dividends received 400,000 Dividends paid (Note 7) (1,040,299) 27 At 31 March 25,773,697

30 Notice of Meeting NOTICE IS HEREBY GIVEN that the one hundred and eleventh Annual General Meeting of The Baltic Exchange Limited will be held at The Baltic Exchange, St. Mary Axe, London EC3A 8BH on 5 July at 1200 for the following purposes: ORDINARY BUSINESS 1. To report the retirement and election of Directors. 2. Ordinary Resolution 1 To receive the Directors Report and Independent Auditors Report and Accounts for the year ended 31 March and to declare a dividend. 3. Ordinary Resolution 2 To approve the Report on Directors Remuneration (as set out on page 12 of the Directors Report and Accounts) for the year ended 31 March. 4. Ordinary Resolution 3 To re-appoint Deloitte LLP as auditors and to authorise the Directors to fix their remuneration. By Order of the Board D W T Bain Company Secretary The Baltic Exchange St. Mary Axe London EC3A 8BH 1 June A shareholder entitled to attend and vote at the Meeting may appoint one or more proxies (in the alternative) to attend in his or her stead and to vote on his or her behalf only in the event of a poll. A proxy need not be a shareholder of the Company. The proxy form must be deposited at the registered office of the Company at St. Mary Axe, London EC3A 8BH by midnight on Tuesday 3 July. 28 Any Corporation which is a shareholder may, by resolution of its Directors or other governing body, authorise such person as it thinks fit to act as its representative at the Meeting.

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