Half-yearly Report
BlackRock Greater Europe Investment Trust plc
Half Yearly Financial Report 29 February 2012
For further information please contact:
Simon White, Managing Director, Investment Company Division,
BlackRock Investment Management (UK) Limited - 020 7743 5284
Vincent Devlin, Fund Manager,
BlackRock Investment Management (UK) Limited - 0131 472 7376
Emma Phillips, Media & Communications,
BlackRock Investment Management (UK) Limited - 020 7743 2922
Chairman's Statement
Overview
The period under review was again dominated by the central concern of recent
years: how best to confront the over-indebtedness of the southern EU countries
and the ramifications of this.
Markets were volatile at the start of the financial period but risk appetite
returned to the region at the beginning of 2012. In particular, more favourable
economic data from the US, and a bold initiative from the European Central Bank
to provide liquidity to the banking system, on an unprecedented scale, through
the long term refinancing operation ("LTRO") steadied nerves and allowed
markets to progress.
Against this improving background, the Company's net asset value per share
("NAV") increased by 3.2% in the six months ended 29 February 2012, compared
with a rise of 4.2% in the FTSE World Europe ex UK Index. The Company's share
price rose by 5.0% over the same period (all percentages calculated in sterling
terms with income reinvested).
Since the period end, the Company's NAV has declined by 1.0% compared with
a fall in the FTSE World Europe ex UK Index of 5.8% over the same period.
Charter European Trust plc
In January, I wrote to shareholders to advise of the proposed acquisition of
assets of Charter European Trust plc ("Charter") through a scheme of
reconstruction and winding up of Charter and to seek approval for those
proposals. I am pleased to report that, at a General Meeting held on 23
February 2012, the proposals received the necessary approvals and a total of
26,890,598 new ordinary shares and 5,196,398 new subscription shares were
issued by the Company on 27 February 2012 in consideration for the transfer to
the Company of the assets of Charter, valued at approximately £50.5 million in
accordance with the scheme.
I extend a warm welcome to our new shareholders.
Tender offers
The Directors exercised their discretion to operate the half yearly tender
offer on 30 November 2011, which in common with previous tender offers was for
up to 20% of the shares in issue at the prevailing NAV less 2%. Valid tenders
for 1,495,164 shares were received at a price of 166.11p per share,
representing 1.55% of the shares in issue, excluding treasury shares. All
shares tendered in November were placed in treasury.
The Prospectus dated 26 January 2012, in respect of the Charter proposals,
confirmed that the next semi-annual tender offer would take place on
31 May 2012, for up to 20% of the shares in issue at the prevailing NAV per
share subject to a discount of 2%. A Circular relating to the tender offer
will be sent to shareholders at the end of April or will be available either
on the BlackRock Investment Management website at www.blackrock.co.uk/brge
or in hard copy on request from the Company's registered office c/o The
Secretary, BlackRock Greater Europe Investment Trust plc, 12 Throgmorton
Avenue, London EC2N 2DL.
Subscription shares
During the period and up to the date of this report, the Company has issued a
total of 14,952 ordinary shares following exercises. Total proceeds amounted to
£27,300.
Subscription shareholders have three further opportunities to subscribe for all
or any of the ordinary shares to which their subscription shares relate on each
of 30 April, 31 July and 31 October 2012 at a price of 183p per share.
Following the issue of new ordinary and subscription shares pursuant to the
reconstruction and winding up of Charter, the Company now has 121,769,700
ordinary shares and 23,533,121 subscription shares in issue (excluding
2,734,952 ordinary shares held in treasury).
Board of Directors
Following the Annual General Meeting on 30 November 2011, Béatrice Philippe
retired as a Director having joined the Board at the formation of the Company.
The Board was pleased to announce the appointment of Davina Curling as a
non-executive Director with effect from 1 December 2011. Davina has over 20
years' experience of investment management.
Outlook
2012 started on a positive note. In the US, the economy seems to have
gained some momentum and the actions of the European Central Bank in providing
liquidity to the banking system have so far averted a major dislocation of the
European financial sector. Fostering the conditions for economic growth in
Europe has proved much more elusive, and achieving the right balance between
restoring solvency in the peripheral EU countries, without choking off the
growth which will be ultimately necessary to pay down governments' debts, is
likely to dominate the political debate for years to come. As continues to be
seen, this background will also be likely to lead to continuing stock market
volatility. Your Fund Managers will continue to focus on companies which they
believe are, and will be, successful, which in many cases operate globally and
have products or services which exhibit enduring growth characteristics.
John Walker-Haworth
17 April 2012
Interim Management Report and Responsibility Statement
The Chairman's Statement and the Investment Manager's Report give details of
the important events which have occurred during the period and their impact on
the financial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as
follows:
- Performance;
- Income/dividend;
- Regulatory;
- Operational;
- Market; and
- Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Accounts for the year ended 31 August 2011. A
detailed explanation can be found in the Directors' Report on pages 13 and 14
and in note 18 on pages 41 to 46 of the Annual Report and Financial Statements
which is available on the website maintained by the Investment Manager,
BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/brge.
In the view of the Board, there have not been any changes to the fundamental
nature of these risks since the previous report and these principal risks and
uncertainties are equally applicable to the remaining six months of the
financial year as they were to the six months under review.
Related party transactions
The Investment Manager is regarded as a related party and details of the
management fees payable are set out in note 4 and note 10. The related party
transactions with the Directors are set out in note 10.
Directors' responsibility statement
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Management Report and Financial
Statements.
The Directors confirm to the best of their knowledge that:
- the condensed set of financial statements contained within the half yearly
financial report has been prepared in accordance with the Accounting Standards
Board's Statement 'Half Yearly Financial Reports'; and
- the Interim Management Report, together with the Chairman's Statement and
Investment Manager's Report, include a fair review of the information required
by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.
The half yearly financial report was approved by the Board on 17 April 2012 and
the above responsibility statement was signed on its behalf by the Chairman.
John Walker-Haworth
For and on behalf of the Board
17 April 2012
Investment Manager's Report
Overview
Over the six month period ended 29 February 2012, the Company's NAV increased
by 3.2% and the share price rose by 5.0%. By way of comparison, the FTSE World
Europe ex UK Index gained 4.2%. (All percentages are calculated in sterling
terms with income reinvested.)
European equity markets experienced an extremely weak period during the third
quarter of 2011, due mostly to the toxic combination of political uncertainty
and economic growth downgrades in the Eurozone. However, markets recovered in
the final quarter of 2011 as investors began to gain confidence in the various
proposals resulting from frequent political summits. These proposals, most
notably, focused on finding a solution for a managed reduction of Greek debt
and vital support for the banking system in Europe. Political change,
particularly in Italy and Spain, also signalled to the markets that targets for
the reduction of government spending in the periphery were more likely to be
met. During the six month period, markets were heavily influenced by sentiment
surrounding the crisis, with heightened levels of volatility and significant
movements in share prices as investors sought to either avoid risk or take on
risk depending on the interpretation of the various political developments.
This improved sentiment was supported towards the end of 2011 by improving
economic data in the US, and globally-exposed cyclical sectors such as oil &
gas, basic materials and parts of the industrials sector led the subsequent
market gains. Equity markets in Europe also delivered positive returns in
January and February of 2012, as markets continued to support riskier cyclical
companies including the financials sector. The European Central Bank's long
term refinancing operation ("LTRO") led to the purchasing of peripheral
sovereign bonds, primarily by the domestic banking system, thereby supporting
sovereign bond yields in key nations such as Italy and Spain. Global leading
indicators rebounded in January and Eurozone flash Purchasing Manager Indices,
which are a lead indicator for economic expansion or contraction, indicated
signs of tentative expansion.
Portfolio activity
In general, the allocation of capital at a sector level was more successful
than stock selection. The portfolio had a small average net cash position
during the period, which harmed returns when compared with the broader market.
Stock selection in the oil & gas and industrials sectors detracted from returns
when compared to the broader market. A holding in Galp Energia, a Portuguese
company, produced negative returns towards the end of 2011. Although we felt
that the core business remained resilient with attractive production growth
rates in the coming years, the company's share price fell as the price achieved
for the disposal of strategically-valuable assets in Brazil did not meet the
market's expectations. In addition, the decision not to own a holding in oil
major Total for the majority of the period, instead favouring oil services
companies, hurt returns as the company benefited from a rising oil price.
Positions in Russian oil pipeline operator, Transneft, and Italian energy
producer, Eni, also underperformed the broader market during the period.
Elsewhere within the portfolio, the Company's performance was hindered by
holdings in higher-quality defensive companies in the food producers industry,
including Nestlé and Danone, which underperformed as investors aggressively
re-allocated towards more cyclical names at the beginning of 2012. On the same
theme, the decision not to own positions in chemicals companies Bayer and BASF
at the end of 2011 and beginning of 2012 harmed the Company's performance as
the sector rallied strongly.
On a more positive note, many of the most successful individual stock positions
proved to be, in general, relatively stable businesses with a high degree of
exposure to international growth markets. This included Danish pharmaceutical
company, Novo Nordisk, which we believe continues to offer one of the highest
growth rates in its sector with attractive exposure to structural growth in
insulin demand, both within developed and emerging markets, and market-leading
products. Elsewhere, a position in Dutch food retailer, Ahold, benefited from
its exposure to the US markets which showed encouraging signs for 2012 growth
at the end of 2011.
Stock selection within the consumer services sector also proved successful,
with a holding in Irish airline, Ryanair, being one of the best performing
stocks in the portfolio during the period. Positions in software services
company, SAP, and semiconductor manufacturer, Infineon Technologies, both
performed well for the Company. SAP continued to outperform during the period,
benefiting from strong new products and attractive growth in both the US and
emerging markets. Infineon's share price rose as its cost cutting plan allowed
the potential for strong margin expansion; the stock also benefited from the
continuation of strong automotive demand, with close to 50% of Infineon's sales
coming from its automotive division.
The portfolio's sector allocation, lower weightings in telecoms and utilities,
strongly contributed to relative returns as the sectors significantly
underperformed the market. Our stance on the telecoms sector is based on the
view that many of the companies do not offer attractive growth potential and
may be exposed to dividend cuts given the relatively high yield offered by the
sector. We have also avoided the utilities sector which offers relatively low
growth in the domestic European markets. Often labelled 'defensive' areas of
the market, both the telecoms and utilities sectors also suffered on a relative
basis from a significant increase in investor risk appetite at the beginning
of 2012.
The weighting in Russia fell during the period. This reflected our view that,
despite a high oil price, the local market in late 2011 was not fully reflecting
the increased political and economic risks that Russia is facing. That said,
with several companies currently trading at close to distressed valuations,
significant opportunities are presenting themselves once again.
At the end of the period, the portfolio was particularly weighted towards
positions in the consumer goods and consumer services sectors. Within these
sectors, the portfolio had a focus on higher quality, globally exposed
companies with a stronger brand and generally higher growth rates than the rest
of the sector. The portfolio has lower exposure to the financials sector, which
we continue to view as subject to negative loan growth in parts of Europe,
higher demands from regulators and higher exposure to the sovereign debt issues
in the periphery of Europe. The portfolio also had higher weightings in
the oil & gas, basic materials and health care sectors, was neutral
industrials when compared with the broader market, and had lower weightings in
the telecoms and utilities sectors.
Outlook
Our outlook for the region remains positive in the long term. Following
February's second LTRO, we maintain that progress towards a resolution of the
European sovereign debt issues will continue to shape investor sentiment and
markets are likely to remain volatile. However, investors are pricing in a
significant risk premium for the current political and economic uncertainties
and we believe our strategy of building positions in the long term winners -
companies with highly differentiated business models, strong balance sheets and
structural growth driven largely by international demand - will deliver
attractive returns over the medium term.
Vincent Devlin and Sam Vecht
BlackRock Investment Management (UK) Limited
17 April 2012
Ten Largest Investments
29 February 2012
Novo Nordisk - 5.3% (2011: 4.6%) is a Danish pharmaceuticals company and the
dominant global franchise in diabetes treatment. The company has high levels of
market share in Asia ex-Japan, which is a rapidly growing market for insulin
demand, and we believe that the company has the most attractive pipeline of
short and long term acting insulin products on the market.
Nestlé - 5.0% (2011: 5.6%) is a Swiss company engaged in the nutrition, health
and wellness sectors. Nestlé has one of the world's leading product and brand
portfolios offering consistent, structural growth. The company has achieved
organic sales growth of more than 4% per year in 20 of the last 22 years and is
a high quality stable growth company. Nestlé also offers strong free cash flow
generation and has maintained or increased dividend payments every year since
1959.
Roche - 4.2% (2011: nil) is a Swiss pharmaceuticals and diagnostics company
with global exposure. Roche has gone through a strong period of growth but has
now transitioned to focusing on profitability and improving shareholder
returns. The company has the ability to improve productivity and cut costs
whilst trading on an attractive valuation given its double-digit earnings
growth profile.
Allianz - 4.1% (2011: nil) is a German based financial services provider, which
predominantly provides insurance services. Allianz commands strong market
positions and is relatively well capitalised to mitigate the risk of any asset
write-downs. The operational performance in the company's non-life division is
improving and the company offers relatively strong cash generation, supporting
its attractive dividend yield.
LVMH Moet Hennessy Louis Vuitton - 3.8% (2011: 4.6%) is a French luxury goods
company with exposure to the global high-end consumer. The company owns a
number of highly regarded luxury brands in five main areas: wines and spirits,
perfumes and cosmetics, watches and jewellery, fashion and leather goods and
selective retailing. The company offers attractive exposure to consumption
growth in some of the fastest growing markets in the world and enjoys strong
profitability due to the strength of its branding and the quality of its
product line-up.
Ahold - 3.8% (2011: nil) is a Dutch listed supermarket retailer. The company
has some exposure in the Netherlands but also has a significant franchise in
the US. Ahold is very cash-flow generative, which offers the ability for the
company to perform share buybacks and offer a high dividend yield. The company
is also cheaper than many of its peers with higher earnings growth potential
and may benefit from a strengthening US dollar.
Syngenta - 3.7% (2011: 2.9%) is a Swiss agribusiness company operating in the
crop protection and seeds businesses. The company's crop protection division,
in which it has high market share, benefits from farmers looking to maximise
yields and is a high quality, cash-generative business operating in an industry
with high barriers to entry. We believe the company will continue to benefit
from rising volumes and increasing margin expansion ahead of market
expectations.
Eni - 3.6% (2011: nil) is an Italian oil & gas exploration and production
company. The company is set to benefit from strong demand for exploration and
production in emerging markets as well as a corporate restructuring programme.
The company also offers the highest dividend yield in the European large-cap
oil & gas sector and is likely to benefit from its strong balance sheet in
uncertain conditions.
Anheuser-Busch - 3.1% (2011: 1.9%) is a Belgian beverage company. The company
owns, produces and distributes over 200 beer brands across the world, with a
high degree of strategic emerging market exposure and a quality management
team. The company offers an attractive growth profile, especially through its
Brazilian business and may benefit from efficiency improvements in the US.
Pernod Ricard - 3.1% (2011: 2.6%) is a French listed global producer and
distributor of wine and spirit brands. The company offers a significant level
of sales exposure to higher growth emerging markets, with high double-digit
growth in these markets during 2011. The company's brand portfolio is very
strong and offers the ability to benefit from wealth creation in these high
growth markets and it has recently successfully refinanced its debt to lower
rates.
All percentages reflect the value of the holding as a percentage of total
investments. Percentages in brackets represent the value of the holding as at
31 August 2011.
Investments
29 February 2012
Market
Country of value % of
operation £'000 investments
Consumer Goods
Nestlé Switzerland 11,231 5.0
LVMH Moet Hennessy Louis Vuitton France 8,679 3.8
Anheuser-Busch Belgium 7,087 3.1
Pernod Ricard France 6,929 3.1
Swatch Switzerland 6,189 2.7
Daimler Germany 4,926 2.2
Continental Germany 4,746 2.1
Danone France 1,796 0.8
Michelin France 1,051 0.5
------ ----
52,634 23.3
------ ----
Industrials
Kone Finland 6,248 2.7
Vopak Netherlands 5,464 2.4
Legrand France 5,189 2.3
Sandvik Sweden 4,023 1.8
Amadeus Spain 3,584 1.6
Abertis Infraestructuras Spain 3,150 1.4
Geberit Switzerland 3,039 1.3
GEA Germany 2,412 1.1
Siemens Germany 1,118 0.5
------ ----
34,227 15.1
------ ----
Financials
Allianz Germany 9,267 4.1
GAM Switzerland 4,398 2.0
Svenska Handelsbanken Sweden 3,254 1.4
Julius Baer Switzerland 2,801 1.3
OTP Bank Hungary 1,864 0.8
DnB NOR Norway 1,772 0.8
Credit Suisse Switzerland 1,579 0.7
Sberbank Russia 1,413 0.6
ING Netherlands 1,278 0.6
Powszechny Zakład Ubezpieczeń Poland 1,003 0.4
PKO Bank Polski Poland 742 0.3
------ ----
29,371 13.0
------ ----
Health Care
Novo Nordisk Denmark 12,025 5.3
Roche Switzerland 9,420 4.2
Sanofi France 2,134 1.0
Novartis Switzerland 1,839 0.8
Fresenius Germany 1,681 0.7
Teva Israel 1,559 0.7
------ ----
28,658 12.7
------ ----
Basic Materials
Syngenta Switzerland 8,378 3.7
ArcelorMittal Luxembourg 6,012 2.7
Koninklijke Netherlands 2,073 0.9
Bayer Germany 2,053 0.9
BASF Germany 1,873 0.8
Yara Norway 1,762 0.8
Lanxess Germany 1,594 0.7
------ ----
23,745 10.5
------ ----
Oil & Gas
Eni Italy 8,120 3.6
Galp Energia Portugal 4,147 1.8
Saipem Italy 3,759 1.7
Technip France 3,329 1.5
KazMunaiGas Kazakhstan 2,623 1.1
Total France 781 0.3
------ ----
22,759 10.0
------ ----
Consumer Services
Ahold Netherlands 8,592 3.8
Ryanair Ireland 6,427 2.8
Reed Elsevier Netherlands 4,922 2.2
Jerónimo Martins Portugal 1,158 0.5
------ ---
21,099 9.3
------ ---
Technology
SAP Germany 4,118 1.8
Infineon Technologies Germany 3,950 1.8
----- ---
8,068 3.6
----- ---
Telecommunications
Magyar Telekom Hungary 2,853 1.3
Sistema Russia 1,909 0.8
----- ---
4,762 2.1
----- ---
Utilities
EDP Renováveis Portugal 880 0.4
--- ---
880 0.4
------- -----
Total investments 226,203 100.0
======= =====
All investments are in ordinary shares unless otherwise stated. The total
number of investments held at 29 February 2012 was 57 (31 August 2011: 53).
Income Statement
for the six months ended 29 February 2012
Revenue £'000 Capital £'000 Total £'000
Six Six Six Six Six Six
months months Year months months Year months months Year
ended ended ended ended ended ended ended ended ended
29.02.12 28.02.11 31.08.11 29.02.12 28.02.11 31.08.11 29.02.12 28.02.11 31.08.11
Notes (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Gains on
investments
held at
fair value
through
profit or
loss - - - 6,067 42,256 9,345 6,067 42,256 9,345
Income from
investments
held at
fair value
through
profit or
loss 3 328 960 8,115 - - - 328 960 8,115
Other
income 3 10 7 68 - - - 10 7 68
Investment
management
and
performance
fees 4 (116) (132) (268) (1,238) (1,404) (1,649) (1,354) (1,536) (1,917)
Operating
expenses 5 (255) (218) (453) - - (4) (255) (218) (457)
--- --- --- ----- ----- ----- ----- --- ---
Net return
before
finance
costs and
taxation (33) 617 7,462 4,829 40,852 7,692 4,796 41,469 15,154
Finance
costs (2) (16) (41) (7) (67) (162) (9) (83) (203)
--- --- ----- ----- ------ ----- ----- ------ ------
Net return
on ordinary
activities
before
taxation (35) 601 7,421 4,822 40,785 7,530 4,787 41,386 14,951
Taxation on
ordinary
activities (49) (70) (840) - - - (49) (70) (840)
--- --- ----- ----- ------ ----- ----- ------ ------
Return on
ordinary
activities
after
taxation 8 (84) 531 6,581 4,822 40,785 7,530 4,738 41,316 14,111
=== === ===== ===== ====== ===== ===== ====== ======
Return per
ordinary
share -
undiluted 8 (0.09p) 0.54p 6.77p 5.03p 41.55p 7.74p 4.94p 42.09p 14.51p
====== ===== ===== ===== ====== ===== ===== ====== ======
Return per
ordinary
share -
diluted 8 (0.09p) 0.54p 6.69p 5.03p 41.25p 7.66p 4.94p 41.79p 14.35p
====== ===== ===== ===== ====== ===== ===== ====== ======
The total column of this statement represents the profit or loss of the
Company. The supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies ("AIC"). The
Company had no recognised gains or losses other than those disclosed in the
Income Statement and the Reconciliation of Movements in Shareholders' Funds.
All items in the above statement derive from continuing operations. No
business operations were acquired or discontinued during the period.
Reconciliation of Movements in Shareholders' Funds
Share Capital
Share premium redemption Special Capital Revenue
capital account reserve reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
For the six months ended
29 February 2012
(unaudited)
At 31 August 2011 116 2,813 68 60,284 105,230 10,024 178,535
Return for the period - - - - 4,822 (84) 4,738
Shares issued # 32 50,491 - - - - 50,523
Ordinary shares
purchased - - - (2,484) - - (2,484)
Exercise of subscription
shares - 27 - - - - 27
Sale of shares out of
treasury - - - 825 - - 825
Share purchase costs - - - (78) - - (78)
Dividend paid * - - - - - (5,782) (5,782)
--- ------ --- ------ ------- ------ --------
At 29 February 2012 148 53,331 68 58,547 110,052 4,158 226,304
--- ------ --- ------ ------- ------ --------
For the six months ended
28 February 2011
(unaudited)
At 31 August 2010 122 151 62 69,648 97,681 6,711 174,375
Return for the period - - - - 40,785 531 41,316
Ordinary shares
purchased (3) - 3 (5,405) - - (5,405)
Exercise of subscription
shares - 1,947 - - - - 1,947
Issue costs on
subscription shares - - - - 12 - 12
Share purchase costs - - - (28) - - (28)
Dividend paid * - - - - - (3,268) (3,268)
--- ----- --- ------ ------- ------ -------
At 28 February 2011 119 2,098 65 64,215 138,478 3,974 208,949
--- ----- --- ------ ------- ------ -------
For the year ended
31 August 2011
(audited)
At 31 August 2010 122 151 62 69,648 97,681 6,711 174,375
Return for the year - - - - 7,530 6,581 14,111
Ordinary shares
purchased (6) - 6 (10,298) - - (10,298)
Exercise of subscription
shares - 2,662 - - - - 2,662
Write back of prior
years' tender and
subscription share costs - - - 218 19 - 237
Sale of shares out of
treasury - - - 898 - - 898
Share purchase costs - - - (182) - - (182)
Dividend paid ** (3,268) (3,268)
--- ----- --- ------ ------- ------ -------
At 31 August 2011 116 2,813 68 60,284 105,230 10,024 178,535
--- ----- --- ------ ------- ------ -------
* In respect of the year ended 31 August 2011 a final dividend of 3.50p per
share and a special dividend of 2.50p per share were declared on
12 October 2011 and paid on 8 December 2011.
** Final dividend in respect of the year ended 31 August 2010 of 3.30p per
share declared on 14 October 2010 and paid on 9 December 2010.
# Shares issued following the acquisition of assets of Charter European Trust
plc ("Charter") as part of the reconstruction and winding-up of Charter.
The transaction costs incurred on the acquisition and disposal of investments
are included within the capital reserves and amounted to £346,000 for the six
months ended 29 February 2012 (six months ended 28 February 2011: £429,000;
year ended 31 August 2011: £1,008,000).
Balance Sheet
as at 29 February 2012
29 February 28 February 31 August
2012 2011 2011
£'000 £'000 £'000
Notes (unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value
through profit or loss 226,203 208,365 176,514
======= ======= =======
Current assets
Debtors 933 8,560 3,192
Cash at bank and in hand 3,134 2 841
------- ------ ------
4,067 8,562 4,033
------- ------ ------
Creditors - amounts falling due
within one year
Bank overdraft - (5,319) -
Other creditors (3,966) (2,659) (2,012)
------- ------ ------
(3,966) (7,978) (2,012)
------- ------ ------
Net current assets 101 584 2,021
------- ------- -------
Net assets 226,304 208,949 178,535
======= ======= =======
Capital and reserves
Share capital 9 148 119 116
Share premium account 53,331 2,098 2,813
Capital redemption reserve 68 65 68
Special reserve 58,547 64,215 60,284
Capital reserves 110,052 138,478 105,230
Revenue reserve 4,158 3,974 10,024
------- ------- -------
Total equity shareholders' funds 226,304 208,949 178,535
======= ======= =======
Net asset value per share -
undiluted 8 185.85p 214.95p 186.25p
======= ======= =======
Net asset value per share -
diluted 8 185.39p 209.79p 185.73p
======= ======= =======
Summarised Cash Flow Statement
for the six months ended 29 February 2012
Six months Six months
ended ended Year ended
29 February 28 February 31 August
2012 2011 2011
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net cash (outflow)/inflow from
operating activities (536) 147 4,926
Servicing of finance (21) (72) (191)
Taxation refunded 292 652 1,198
==== ==== =====
Capital expenditure and financial
investment
Purchase of investments (185,249) (136,458) (344,498)
Proceeds from sale of investments 144,227 150,003 363,378
Realised losses on foreign currency
transactions (399) (345) (392)
-------- -------- --------
Net cash (outflow)/inflow from
capital expenditure and financial
investment (41,421) 13,200 18,488
-------- -------- --------
Equity dividends paid (5,782) (3,268) (3,268)
-------- -------- --------
Net cash (outflow)/inflow before
financing (47,468) 10,659 21,153
-------- -------- --------
Financing
Purchase of ordinary shares (2,484) (5,405) (10,298)
Exercise of subscription shares 27 1,947 -
Proceeds from issue of ordinary
shares out of treasury 1,538 - 2,847
Proceeds from issue of ordinary
shares to acquire Charter
European Trust plc investment
portfolio 50,700 - -
Share purchase costs (20) (62) (405)
-------- -------- --------
Net cash inflow/(outflow) from
financing 49,761 (3,520) (7,856)
-------- -------- --------
Increase in cash 2,293 7,139 13,297
======== ======== ========
Reconciliation of Net Return before Finance Costs and Taxation to Net Cash Flow
from Operating Activities
Six months Six months
ended ended Year ended
29 February 28 February 31 August
2012 2011 2011
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net return before finance costs and
taxation 4,796 41,469 15,154
Gains on investments held at fair value
through profit or loss (6,067) (42,256) (9,345)
(Increase)/decrease in accrued income (88) (17) 1
Increase in other creditors 895 1,045 253
Tax on investment income included within
gross income (72) (94) (1,137)
---- ---- ------
Net cash (outflow)/inflow from operating
activities (536) 147 4,926
==== === =====
Notes to the Financial Statements
1. Principal activity
The principal activity of the Company is that of an investment trust company
within the meaning of section 1158 of the Corporation Tax Act 2010.
2. Basis of preparation
The half yearly financial statements have been prepared on the basis of the
accounting policies set out in the Company's financial statements at
31 August 2011.
The financial statements have been prepared on a going concern basis on the
historical cost basis of accounting, modified to include the revaluation of
fixed asset investments in accordance with the Companies Act 2006, UK Generally
Accepted Accounting Practice ("UK GAAP") and with the Statement of Recommended
Practice ("SORP") for investment trusts and venture capital trusts issued by
the Association of Investment Companies, revised in January 2009.
3. Income
Six months Six months Year
ended ended ended
29 February 28 February 31 August
2012 2011 2011
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment income:
Overseas dividends 328 960 8,115
--- --- -----
Other income:
Deposit interest 10 7 68
--- --- -----
Total 338 967 8,183
=== === =====
4. Investment management and performance fees
Six months ended Six months ended Year ended
29 February 2012 28 February 2011 31 August 2011
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment
management fees 116 464 580 132 528 660 268 1,072 1,340
Performance fees - 774 774 - 876 876 - 577 577
--- ----- ----- --- ----- ----- --- ----- -----
Total 116 1,238 1,354 132 1,404 1,536 268 1,649 1,917
=== ===== ===== === ===== ===== === ===== =====
The investment management fee is levied quarterly, based on the value of the
market capitalisation of the Company on the last day of each month. The
investment management fee is allocated 80% to the capital reserves and 20% to
the revenue reserve.
A performance fee has been accrued of £774,000 for the six months ended
29 February 2012 (six months ended 28 February 2011: £876,000; year ended
31 August 2011: £577,000). The performance fee accrued at 29 February 2012 is
based on the outperformance of the Company's share price relative to the FTSE
World Europe ex UK Index for a three year rolling period.
5. Operating expenses
Six months Six months Year
ended ended ended
29 February 28 February 31 August
2012 2011 2011
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Custody fee 16 36 40
Other administration costs 239 182 413
-------- -------- --------
255 218 453
===== ===== =====
6. Dividend
The Board has not declared an interim dividend, as dividends are considered and
paid annually in respect of each financial year.
7. Significant Transaction - Charter European Trust plc investment portfolio
Charter European Trust plc ("Charter") shareholders were issued with 1.2171 new
ordinary shares for every existing Charter share held and one new subscription
share for every 5.1742670705 new ordinary shares. In total, 26,890,598 new
ordinary shares and 5,196,398 new subscription shares were issued by the
Company and admitted to trading on 27 February 2012 as consideration for the
purchase by the Company of the investment portfolio of Charter valued at
approximately £50.5 million.
8. Return and net asset value per ordinary share
29 February 28 February 31 August
2012 2011 2011
(unaudited) (unaudited) (audited)
Net revenue return attributable to
ordinary shareholders (£'000) (84) 531 6,581
Net capital return attributable to
ordinary shareholders (£'000) 4,822 40,785 7,530
----- ------- -------
Total return (£'000) 4,738 41,316 14,111
===== ======= =======
Equity shareholders' funds (£'000) 226,304 208,949 178,535
------- ------- -------
The weighted average number of
ordinary shares in issue during the
period on which the undiluted
return per ordinary share was
calculated, was: 95,828,373 98,162,966 97,224,326
---------- ---------- ----------
The actual number of ordinary
shares in issue at the end of each
period on which the undiluted net
asset value was calculated, was: 121,769,700 97,208,326 95,859,314
----------- ---------- ----------
Return per share
Undiluted
Calculated on weighted average
number of shares
Revenue return (0.09p) 0.54p 6.77p
Capital return 5.03p 41.55p 7.74p
------ ------ ------
Total 4.94p 42.09p 14.51p
====== ====== ======
Net asset value per share -
undiluted 185.85p 214.95p 186.25p
======= ======= =======
Calculated on actual number of
shares
Revenue return (0.07p) 0.55p 6.87p
Capital return 3.96p 41.95p 7.85p
------ ------ ------
Total 3.89p 42.50p 14.72p
====== ====== ======
Return per share
Diluted
The weighted average number of
ordinary shares in issue during the
period on which the diluted return
per ordinary share was calculated,
was: 95,828,373 98,861,075 98,364,252
---------- ---------- ----------
The actual number of ordinary
shares in issue, including
subscription shares, at the end of
each period on which the fully
diluted net asset value was
calculated, was: 145,302,821 115,950,777 114,210,989
----------- ----------- -----------
Diluted
Revenue return (0.09p) 0.54p 6.69p
Capital return 5.03p 41.25p 7.66p
------- ------- -------
Total 4.94p 41.79p 14.35p
======= ======= =======
Net asset value per share - diluted 185.39p 209.79p 185.73p
======= ======= =======
The diluted NAV per share at 29 February 2012 is calculated by adjusting equity
shareholders' funds for consideration receivable on the exercise of 23,533,121
subscription shares, at the exercise price of 183p per share, and dividing by
the total number of shares that would have been in issue at 29 February 2012
had all the subscription shares been exercised.
At 29 February 2012, the Company had 2,734,952 shares held in treasury. The
treasury shares do not have a dilutive effect.
9. Share capital and shares held in treasury
Number of Number of Number of
ordinary treasury subscription Nominal
shares shares shares value
in issue in issue in issue Total £
Allotted, called up
and fully paid share
capital comprised:
Ordinary shares of
0.1p each:
At 31 August 2011 95,859,314 1,739,788 - 97,599,102 97,599
Sale of shares out of
treasury 500,000 (500,000) - - -
Shares transferred
into treasury pursuant
to tender offer on
1 December 2011 (1,495,164) 1,495,164 - - -
Ordinary shares issued* 26,890,598 - - 26,890,598 26,891
----------- --------- ---------- ----------- -------
121,754,748 2,734,952 - 124,489,700 124,490
Subscription shares of
0.1p each:
At 31 August 2011 - - 18,351,675 18,351,675 18,352
Subscription shares
exercised 14,952 - (14,952) - -
Subscription shares
issued* - - 5,196,398 5,196,398 5,196
----------- --------- ---------- ----------- -------
At 29 February 2012 121,769,700 2,734,952 23,533,121 148,037,773 148,038
=========== ========= ========== =========== =======
* Following the acquisition of assets of Charter European Trust plc.
10. Related party disclosure
BlackRock Investment Management (UK) Limited ("BlackRock") provides management
and administration services to the Company under a contract which is terminable
on six months' notice. BlackRock receives an annual fee in relation to these
services of 0.70% of market value plus a performance fee of 15% of any
outperformance of the FTSE World Europe ex UK Index, up to a maximum total
investment management fee of 1.15%. Where the Company invests in other
investment or cash funds managed by BlackRock, any underlying fee charged is
rebated.
The investment management and performance fees for the six months ended
29 February 2012 were £1,354,000 (six months ended 28 February 2011:
£1,536,000; year ended 31 August 2011: £1,917,000). At the period end,
an amount of £1,642,000 was outstanding in respect of the investment
management and performance fees (six months ended 28 February 2011:
£1,567,000; year ended 31 August 2011: £903,000).
The Board consists of four non-executive Directors, all of whom are considered
to be independent by the Board. None of the Directors has a service contract
with the Company. The Chairman receives an annual fee of £30,000, the Chairman
of the Audit and Management Engagement Committee receives an annual fee of
£25,000 and each other Director receives an annual fee of £21,000.
Three members of the Board hold shares in the Company. John Walker-Haworth
holds 33,932 ordinary shares and 6,786 subscription shares, Carol Ferguson
holds 40,000 ordinary shares and 8,000 subscription shares and Gerald Holtham
holds 11,100 ordinary shares and 1,620 subscription shares. Davina Curling does
not hold any shares in the Company.
11. Contingent liabilities
There were no contingent liabilities at 29 February 2012 (2011: nil).
12. Publication of non statutory accounts
The financial information contained in this half yearly report does not
constitute statutory accounts as defined in section 435 of the Companies Act
2006. The financial information for the six months ended 29 February 2012 and
28 February 2011 has not been audited.
The information for the year ended 31 August 2011 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies. The report of the auditor on those accounts contained
no qualification or statement under sections 498(2) or (3) of the Companies Act
2006.
13. Annual Results
The Company expects to announce the results for the year ending 31 August 2012
in October 2012. The annual report should be available by the end of
October 2012, with the Annual General Meeting being held on Thursday,
29 November 2012.
12 Throgmorton Avenue
London
EC2N 2DL
ilable on the BlackRock
Investment Management website at www.blackrock.co.uk/brge. Neither the contents
of the Manager's website nor the contents of any website accessible from
hyperlinks on the Manager's website (or any other website) is incorporated
into, or forms part of, this announcement.
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