Report of the Chairman - March 2011

It is a pleasure to be able to continue to say “I have pleasure in presenting the Report and Accounts of the CAMRA Members’ Investment Club for the year ending 31st March 2011”!

In a turbulent year, the total value of the fund has risen by just under £1 million to £9.90 million and the Unit price has risen slightly to £3.14. March was a particularly difficult month for the sector and all the recent Chairman’s statements have highlighted the uncertain future for our industry.

Contributions were ca 2.5% below last year’s level which is a smaller fall than last year. However, unlike last year, withdrawals were up on the previous year by no less than 66%. This is discussed further below. With Marstons and Greene King increasing their dividends again, dividend income showed an increase of 9% on last year, another improvement. The net result of all these factors is that total funds available for investment fell by 17%. Mitchells & Butler has hinted that dividends may be restored soon and the Committee expects that dividend income will continue to hold up well.

Your larger additional investments during the year included Adnams, Black Sheep, Greene King, Marstons, Mitchell & Butlers, Shepherd Neame, J D Wetherspoon and Youngs. Several smaller purchases were also made. The Club also continues to buy small parcels of shares from CAMRA branches and CAMRA members at mid-market price which is to the benefit of both parties. Fuller, Smith and Turner is your largest holding. It represents over 16% of your fund. The Committee will continue to invest in Fullers but feels that no company should represent more than about this percentage of the fund. The whole purpose of this type of Club is to spread the investments.

The Committee is continuing to investigate investment in suitable microbreweries. Two further opportunities have been investigated but, regrettably, have not come to fruition. I can only repeat what I said last year: “It is already clear that agreeing the valuation of the microbrewery is going to be challenging. Whilst the Committee remains committed to the principle of microbrewery investment, we will only proceed if we believe that the investment is secure and the valuation is reasonable. Our prime interest is to protect your money.” The huge price paid by Molson Coors for Sharps has, if anything, inflated brewery owners’ valuations of their own companies.

As reported in the January Administration Report, the Annual General Meeting will be held at the Victoria Hotel in Beeston, Nottingham on Saturday 18th June. The AGM will be followed by a Members’ Lunch at which the guest speaker will be Paul Theakston of Black Sheep Brewery. In accordance with Rule 4, as amended at the 2005 Annual General Meeting, Dave Goodwin, John Hattersley, Steve Williams and I all retire by rotation. They are standing for re-election with the full support of the Committee. No further nominations were received at the Club’s Administrative Office by 31st March, so no election is necessary.

The Committee has discussed thoroughly a suggestion raised at last year’s AGM to raise the maximum contribution. This was mentioned in my half-year report last October when I requested comments from you all. We have received 55 responses of which 54 were in favour. Accordingly the Committee is proposing at the AGM an amendment to the Rules of the Club to increase the maximum investment level to £2,000 p.a. or £166 per month. The one member, one vote principle remains, of course, and no one should feel under any pressure to increase their own contribution.

As mentioned above the level of withdrawals has increased this year. The Committee believes that this is not of major concern and, indeed, that it was to be expected, particularly since the Club does not offer the option of a dividend and the Unit Price has recovered a little from the 2008/9 levels. We have examined the dividend option but it is administratively very expensive. The best way to take a dividend is to cash in some units which some members are doing.

Leavers are always asked why they are leaving and no leaver has indicated in the last year that they were dissatisfied with the Club’s performance. Rather too many, unfortunately, were the result of difficult personal financial circumstances - a further reflection of more general economic position.

As always, I would like to thank Neil Harding and his team at Brewin Dolphin, the Club’s main stockbrokers, and the team at James Sharp, who both unearth parcels of the untraded securities in which we are interested, for their professional services throughout the year. Neil Harding attends a number of our Committee Meetings during the year and often attends the Annual General Meeting in June. Brewin Dolphin also makes its Manchester offices available to the Committee for its meetings when we are in Manchester which is much appreciated. This year he has also advised on the contribution increase discussed above.

I visited the Howarth Associates office again to meet with Mark’s team. Committee members continue to receive monthly management accounts within a few days of the month end every month without fail and Mark’s team deal with all member questions and queries in a similar timely manner. This year we received the year end accounts at 10.19 on 1st April which I believe to be an all time record! I am running out of new ways to record my appreciation of this service on behalf of the Committee and all the members. I just record it with pleasure and admiration.

Although the sector has improved slightly in the last year and dividend income has improved a little, as mentioned above, the outlook remains very difficult particularly with the continuing assault on the licensed trade by above inflation increases in excise duty, even after a change in Government. As just one recent example, Adnams’ results which came out in the last week in March showed a fall in pre-tax profits of ca 10% over the previous year.

The Committee continues to meet regularly. Various smaller groups have met with the micro brewers with whom we have been negotiating and several members have attended brewery AGMs representing the Club. I thank all the members of the Committee for the additional commitment which they are, therefore, making. The attendance at Committee meeting remains very high and we are in touch via email between meetings when parcels of the less freely available shares do become available. As always I thank Neil Kellett for his ramblings through the archives which accompany this report. Please remember that all Committee members give their time unselfishly, without remuneration or expenses, in the interests of Real Ale.

Finally I would like to thank you all for continuing to support your Club by making further contributions and also attending the various meetings, brewery visits etc. I am delighted to be able to repeat that real cask ale continues to be the only growth sector in the licensed trade. I am sure that our activities continue to support the cause of Real Ale and contribute to that fact.

Chris Bruton — CAMRA Members’ Investment Club Chairman