Half-yearly Report
BlackRock Greater Europe Investment Trust plc
Half Yearly Financial Report 28 February 2013
For further information please contact:
Simon White, Head of Investment Trusts, BlackRock Investment Management (UK)
Limited - 020 7743 5284
Vincent Devlin, Fund Manager, BlackRock Investment Management (UK) Limited -
020 7743 3000
Emma Phillips, Media & Communications, BlackRock Investment Management (UK)
Limited - 020 7743 2922
Chairman's Statement
Overview
The six months to 28 February 2013 witnessed a remarkable turnaround in
sentiment towards European equities, largely driven by the forceful, and now
famous, commitment in July 2012 from the president of the European Central
Bank (ECB), Mario Draghi, that the ECB would, within its mandate, do 'whatever
it takes' to defend the integrity of the Euro.
Against this backdrop, we are pleased to report that in the six months ended
28 February 2013, the Company's undiluted net asset value (NAV) per share
increased by 26.3%, compared with a rise of 21.9% in the FTSE World Europe ex
UK Index. The Company's share price rose by 30.7% over the same period (all
percentages calculated in sterling terms with income reinvested).
Since the period end, the Company's NAV has declined by 3.5% compared with a
fall in the FTSE World Europe ex UK Index of 1.7% over the same period.
Tender offers
The Directors exercised their discretion to operate the half yearly tender
offer on 30 November 2012, 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 4,661,723 shares were received at a price of 194.76p per share,
representing 3.85% of the shares in issue, excluding treasury shares. Of these
shares, 3,370,061 were cancelled and 1,291,662 were placed in treasury, in
line with the Directors' current policy to limit the number of treasury shares
to 5% of the ordinary shares in issue at such time.
It was announced on 25 March 2013 that the next semi-annual tender offer will
take place on 31 May 2013. A circular relating to the tender offer 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 Company Secretary, BlackRock Greater Europe
Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.
Subscription shares
At a General Meeting held on 18 April 2013, shareholders approved the proposal
to make a bonus issue of subscription shares. A total of 23,254,813 subscription
shares were allotted to ordinary shareholders on the Company's register on
16 April 2013 by way of a bonus issue on the basis of one subscription share for
every five ordinary shares held at that date.
The subscription share rights conferred by the subscription shares are
exercisable quarterly on the last business day of January, April, July and
October between and including the last business day in July 2013 and the last
business day in April 2016, after which the subscription share rights will lapse.
Between July 2013 and April 2014 the subscription share price will be 233p per
ordinary share and thereafter until April 2016, 248p per ordinary share. The
detailed terms and conditions of the subscription shares are set out in the
combined Prospectus and Circular dated 25 March 2013.
Board of Directors
We were very pleased to welcome Eric Sanderson, a chartered accountant and
banker with extensive business experience, to the Board with effect from
1 April 2013.
Retail Distribution Review
From 1 January 2013, the implementation of the Financial Services Authority's
(with effect from 1 April 2013 known as the Financial Conduct Authority
(FCA)) Retail Distribution Review (RDR) means that advisers will have to
charge directly rather than receiving commissions from the funds in which
their clients invest. Investment trusts should now be on a level playing field
with their open ended counterparts such as unit trusts. We hope that, over
time, more investors will see the attraction of investing in investment trusts
which have the ability to borrow to enhance overall returns and which, unlike
open ended funds, are a quoted security which can be readily traded on the
stock market.
In the context of the implementation of RDR, it is worth noting that the
shares of the Company are designed for private investors in the UK, including
retail investors, professionally-advised private clients and institutional
investors who seek income and the potential for capital growth from investment
in global markets and who understand and are willing to accept the risks of
exposure to equities. When assessing the suitability of the shares, private
investors should also consider consulting an independent financial adviser who
specialises in advising on the acquisition of shares and other securities
before acquiring shares. Naturally, investors should also be capable of
evaluating the risks and merits of an investment in the Company and should
always have sufficient resources to bear any loss that may result.
Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive (the Directive) seeks to
reduce potential systemic risk by regulating the managers of alternative
investment funds (AIFMs). The Company falls within the category of alternative
investment funds. The Directive focuses on how alternative investment funds
conduct business, how they disclose and use borrowings, and how they appoint key
service providers. The implementation of the Directive will require all
investment trusts to appoint an AIFM or become an AIFM themselves and also to
appoint an independent depositary. The latter will fulfil a broader role
than that currently performed by the custodian, and will be obliged to ensure that
companies comply with the relevant rules on portfolio composition and
diversification. We expect the implementation of the Directive to be effective
from 22 July 2013 although it is currently anticipated that the FCA will
permit a transitional period of one year within which UK AIFMs must seek
authorisation. The Board is currently taking independent advice from Dickson
Minto W.S. on the consequences for the Company and will inform shareholders
when we have decided on the most appropriate course of action.
Outlook
It is difficult at this stage to determine whether recent market strength
reflects the abundant liquidity currently being provided by central banks or
is correctly anticipating a return to economic growth. Although the evidence
from the US suggests that the world economic recovery has gained
some momentum, signs of growth in the Eurozone are less conclusive. Our
Investment Manager continues to focus primarily on individual companies, and has
been able to identify many examples of enterprises which are well placed to benefit
from the improving global outlook. We also draw some comfort from the fact that
European shares generally remain at a lower rating relative to their earnings than
companies elsewhere in the world.
John Walker-Haworth
22 April 2013
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 Financial Statements for the year ended
31 August 2012. 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 are 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 disclosure and transactions with Investment Manager
The Investment Manager is regarded under the Listing Rules 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 9.
Going concern
The Directors are satisfied that the Company has adequate resources to continue
in operational existence for the foreseeable future and is financially sound.
For this reason, they continue to adopt the going concern basis in preparing the
financial statements. The Company has a portfolio of investments which are
considered to be readily realisable and is able to meet all of its liabilities
from its assets and income generated from these assets.
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 applicable UK Accounting
Standards and 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 FCA's Disclosure and Transparency Rules.
This half yearly financial report has been reviewed by the Company's auditor.
The half yearly financial report was approved by the Board on 22 April 2013
and the above responsibility statement was signed on its behalf by the
Chairman.
John Walker-Haworth
For and on behalf of the Board
22 April 2013
Investment Manager's Report
Overview
Both the Company's share price and underlying NAV increased over the six months
to 28 February 2013, with the share price increasing by 30.7% and the underlying
NAV rising by 26.3%. By way of comparison, the FTSE World Europe ex UK Index
increased by 21.9% during the same period (all percentages calculated in sterling
terms with income reinvested).
Europe made strong progress during the second half of 2012. Mario Draghi made
it clear that the European Central Bank would support the Euro, 'whatever it
takes', and this alleviated the potential break-up risk of the single
currency. German attitudes towards European support of the weaker nations
softened, and the German Constitutional Court ratified the European Stability
Mechanism, an important (if broadly expected) step. European equities rose
sharply and the Euro appreciated. While we still lacked a fundamental turning
point in the economy, the risk of a meltdown in the Eurozone had been removed
for the time being and European equities began to look increasingly
attractive. Investor allocation to the region rose as a consequence.
Consequently, markets performed strongly in response to the continued progress
at the European political level, with improving prospects for global growth
driving a rally into the end of the year. In October we saw stronger data from
the US, and in November the German IFO business confidence indicator rebounded
and purchasing manager indices began to reflect an increase in business
expectations for the coming period both in the Eurozone and abroad. This mood
of optimism continued throughout January, as investors looked through a muted
beginning to the corporate earnings season and instead focused on the
potential for an economic re-bound in the second half of 2013. The end of the
six month period, however, reminded us of the fragility of the situation in
southern Europe as the Italian electorate voted against the established
parties and consequently against additional austerity, causing further
volatility in the market.
Stock selection was the significant driver of the Company's strong performance
during the period, especially within consumer services and consumer goods. The
portfolio also benefited from the use of gearing. The allocation of capital at
a sector level was also beneficial to returns, especially through the decision
to avoid telecoms and utilities, both of which continued to underperform the
broader market.
Within consumer services, two positions in short-haul airline businesses
gave the best returns over the period. A holding in Irish airline Ryanair
performed strongly as yields proved better than expected during the second half
of the year and a position in German airline Deutsche Lufthansa benefited from
a new cost-cutting programme put in place by the management team and the report
of very strong performance for the third quarter of 2012. Also, within consumer
goods, a holding in Swiss luxury goods company Richemont rose after reporting a
continuation of strong organic growth trends, even in domestic Europe and
despite concerns over a slow-down in Chinese economic growth over the summer
of 2012.
Within technology, Dutch semiconductor company ASML also aided performance. It
appeared that the semiconductor equipment order cycle was bottoming and ASML
could report improved performance as we entered 2013. Also, in January, the
company gave more clarity on its next generation semiconductor tool which is
the foundation for ASML's next significant up-cycle. Within industrials, a
long-held position in Finnish elevator and escalator company Kone performed
strongly after the company reported strong new equipment sales in its Chinese
business and the prospects for increased margin expansion in its servicing
business in key new markets.
Stock selection within the oil & gas sector was the greatest cause of
disappointment within the portfolio over the period. Specifically, positions
in CGG Veritas, a French geophysical services company, and Technip, a French
based project management, engineering and construction company for the energy
industry, underperformed, especially in December as the former suffered from a
delay in a deal with Fugro. A position in Italian energy services stock Saipem
also underperformed as the management team resigned over an enquiry into
contracts previously won by the company in North Africa.
At the end of the period, the portfolio was particularly weighted towards
holdings in the basic materials, consumer goods and consumer services sectors.
Within materials, the portfolio was focused on higher quality global companies
in the chemicals and crop protection industries. In the consumer-related areas
of the portfolio, we favoured globally branded businesses with sustainable
pricing power and higher barriers to entry. The portfolio had lower exposure
to the utilities and financials sectors as neither offered sufficient growth
prospects in our view and both remained subject to high regulatory burdens.
The portfolio also had broadly higher weightings in the technology and health
care sectors and lower weightings in telecoms, oil & gas and industrials.
The Company's weighting in Emerging Europe marginally increased during the
period from 6.0% to 7.6% as the MSCI Emerging Europe 10/40 benchmark returned
16% (in sterling terms). The holdings in Emerging Europe that contributed to
performance included positions in Hungarian bank, OTP, and Russian
telecommunication provider, Mobile TeleSystems. OTP returned 37% as the shares
benefited from the general improvement in sentiment towards European risk, as
well as a company specific improvement in non-performing loan formation. Mobile
TeleSystems rallied, with the shares benefiting from strong growth in data usage
in Russia. The Company's holding in Russian internet company, Mail.Ru,
detracted from performance over the period. Reported results from Mail.Ru were
strong but the shares were held back by a large placement of stock by one of the
major shareholders.
Outlook
Following a trough in activity in the summer of 2012, some global leading economic
indicators have been improving from their lows and we believe that the outlook for
2013 appears brighter than it was for 2012. The earnings growth profile for
European companies remains supportive, although the recent currency moves could
put some pressure on the ability of European exporters to deliver very strong
earnings growth. Exposure to the region amongst global investors remains low
compared to historic norms, even though flows recently have been increasing.
Valuations of European equities are undemanding and the market should continue
to be supportive in the mid-term, underpinned by attractive dividend yields
relative to bonds and corporate earnings growth.
Vincent Devlin and Sam Vecht
BlackRock Investment Management (UK) Limited
22 April 2013
Ten Largest Investments
28 February 2013
Roche - 5.6% (2012: 4.9%) 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. Continued cost control, combined with a growing and attractive
dividend yield and robust earnings growth, make this an attractive investment
case.
Novo Nordisk - 4.9% (2012: 4.8%) 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 significant potential to
continue its strong track record of delivering double-digit earnings growth
per year for the foreseeable future.
BASF - 4.0% (2012: 3.7%) is a global diversified chemicals company, with
product ranges including plastics, coatings, chemicals, agricultural products
and oil and gas. The company is a key beneficiary of global growth trends and
we initially bought into the stock at a cheap valuation following a period of
strong downgrades in the market. We remain positive about the stock given its
attractive valuation and exposure to growth in the global economy.
Zurich Insurance Group - 3.9% (2012: 3.8%) is a Swiss-based insurance company.
The company is relatively defensive compared to the broad insurance sector due
to its exposure to non-life products and has a resilient balance sheet in our
view. The company also offers a high and stable dividend yield and has a solid
management team.
Sanofi - 3.7% (2012: nil) is a French-based pharmaceuticals company. Sanofi
discovers, develops and distributes therapeutic solutions focused on patients'
needs. The company has attractive exposures through its emerging market
business and offers further potential for cost cutting. The stock is currently
priced attractively relative to its solid earnings growth profile and dividend
yield.
Swiss Re - 3.7% (2012: 3.2%) is a Swiss re-insurance business. The attraction
of the company lies within its strong underwriting skills, defensive asset
allocation, high dividend yield and more active management of spare capital.
The company's solvency ratios, based on the Swiss Solvency Test, remain strong
and it has very little exposure to the peripheral European countries in its
investment portfolio. We view the stock as a resilient business with an
attractive and sustainable dividend yield.
Compagnie Financière Richemont - 3.6% (2012: nil) is a Swiss luxury goods
company and the owner of Mont Blanc, Jaeger LeCoultre, Cartier, Alfred Dunhill
and a number of other well-known brands. Richemont offers attractive exposure
to consumption growth, especially in Asia and other high-growth global
markets, and is currently priced at a very attractive valuation relative to
its growth potential.
Schneider Electric - 3.5% (2012: 2.2%) is a global electrical engineering
business domiciled in France. The company's businesses are increasingly
focused around the energy efficiency requirements of industries and buildings.
The company has a strong management team and relatively stable margins, and
offers attractive exposure to improving industrial end markets around the
world.
Continental - 3.2% (2012: 1.9%) is a German auto supplier. We believe it is
one of the highest quality large cap auto-related stocks in Europe and is able
to benefit from the 'mega trends' of CO2 emissions reduction and active safety
in the global car market. The company's premium tyre division also currently
offers strong pricing power. The company is priced at a very attractive
valuation and at a discount to the broader sector.
Pernod Ricard - 3.2% (2012: 3.1%) is a global spirit and beverage company. The
company possesses a strong portfolio of wines and spirits and offers a higher
exposure to emerging market growth with high barriers to entry. It currently
trades as one of the attractively-valued spirits stocks in Europe and is
enjoying strong earnings growth in its cognac business through higher pricing
power. We believe the stock offers attractive double digit growth over a
number of years.
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 2012. Together the ten largest investments represent 39.3% of the
Company's portfolio (ten largest investments at 31 August 2012: 36.1%).
Investments
28 February 2013
Country Market
of value % of
incorporation £'000 investments
Consumer Goods
Compagnie Financière Richemont Switzerland 9,791 3.6
Continental Germany 8,666 3.2
Pernod Ricard France 8,555 3.2
Volkswagen Germany 8,209 3.0
Renault France 7,444 2.7
Rémy Cointreau France 6,932 2.6
Anheuser-Busch Belgium 6,041 2.2
MHP Ukraine 1,563 0.6
------ ----
57,201 21.1
------ ----
Health Care
Roche Switzerland 15,234 5.6
Novo Nordisk Denmark 13,188 4.9
Sanofi France 10,049 3.7
Chr. Hansen Denmark 2,941 1.1
Gedeon Richter Hungary 1,713 0.6
------ ----
43,125 15.9
------ ----
Financials
Zurich Insurance Group Switzerland 10,632 3.9
Swiss Re Switzerland 9,961 3.7
KBC Belgium 7,043 2.6
Partners Group Switzerland 3,942 1.5
Sberbank Russia 3,638 1.3
GAM Switzerland 2,982 1.1
OTP Bank Hungary 2,688 1.0
------ ----
40,886 15.1
------ ----
Basic Materials
BASF Germany 10,839 4.0
Lanxess Germany 8,112 3.0
Syngenta Switzerland 7,811 2.9
Bayer Germany 7,193 2.6
Linde Germany 6,379 2.4
------ ----
40,334 14.9
------ ----
Industrials
Schneider Electric France 9,668 3.5
EADS Netherlands 7,611 2.8
Hexagon Sweden 4,142 1.5
Wartsila Finland 3,612 1.3
Kone Finland 3,300 1.2
Geberit Switzerland 3,169 1.2
Rieter Switzerland 2,656 1.0
Novorossiysk Commercial Sea Port Russia 697 0.3
------ ----
34,855 12.8
------ ----
Consumer Services
Ryanair Ireland 6,259 2.3
Jerónimo Martins Portugal 6,157 2.3
Deutsche Lufthansa Germany 5,784 2.1
PPR France 3,912 1.4
------ ---
22,112 8.1
------ ---
Technology
SAP Germany 6,328 2.3
ASML Netherlands 5,418 2.0
Mail.Ru Russia 4,098 1.5
------ ---
15,844 5.8
------ ---
Oil & Gas
Technip France 6,866 2.5
Gazprom Russia 3,771 1.4
------ ---
10,637 3.9
------ ---
Telecommunications
Telefónica Deutschland Germany 3,815 1.4
Mobile TeleSystems Russia 2,798 1.0
------- ---
6,613 2.4
------- -----
Total investments 271,607 100.0
======= =====
All investments are in ordinary shares unless otherwise stated. The total
number of investments held at 28 February 2013 was 44 (31 August 2012: 46).
Income Statement
for the six months ended 28 February 2013
Revenue £'000 Capital £'000 Total £'000
Year Year Year
Six months ended ended Six months ended ended Six months ended ended
28.02.13 29.02.12 31.08.12 28.02.13 29.02.12 31.08.12 28.02.13 29.02.12 31.08.12
Notes (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Gains on
investments
held at fair
value
through
profit or
loss - - - 57,784 6,067 1,121 57,784 6,067 1,121
Income from
investments
held at fair
value
through
profit or
loss 3 1,220 328 7,411 - - - 1,220 328 7,411
Other income 3 - 10 19 - - - - 10 19
Investment
management
and
performance
fees 4 (164) (116) (262) (1,816) (1,238) (2,264) (1,980) (1,354) (2,526)
Operating
expenses 5 (350) (255) (504) - - (6) (350) (255) (510)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net
return/(loss)
before
finance costs
and taxation 706 (33) 6,664 55,968 4,829 (1,149) 56,674 4,796 5,515
Finance costs (10) (2) (7) (39) (7) (26) (49) (9) (33)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net
return/(loss)
on ordinary
activities
before
taxation 696 (35) 6,657 55,929 4,822 (1,175) 56,625 4,787 5,482
Taxation on
ordinary
activities (60) (49) (673) - - - (60) (49) (673)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Return/(loss)
on
ordinary
activities
after
taxation 7 636 (84) 5,984 55,929 4,822 (1,175) 56,565 4,738 4,809
======= ======= ======= ======= ======= ======= ======= ======= =======
Return/(loss)
per ordinary
share
- basic and
diluted 7 0.54p (0.09p) 5.52p 47.29p 5.03p (1.08p) 47.83p 4.94p 4.44p
======= ======= ======= ======= ======= ======= ======= ======= =======
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.
There is no material difference between the profit on ordinary activities
before taxation and the profit for the financial year stated above and their
historical cost equivalents.
Reconciliation of Movements in Shareholders' Funds
Called-up 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 28 February 2013
(unaudited)
At 31 August 2012 148 53,420 68 55,124 104,055 10,226 223,041
Return for the period - - - - 55,929 636 56,565
Exercise of subscription shares - 2,111 - - - - 2,111
Cancellation of subscription shares (22) - - - 22 - -
Ordinary shares purchased into treasury - - - (9,080) - - (9,080)
Cancellation of treasury shares (4) - 4 - - - -
Share purchase costs - - - (132) - - (132)
Dividend paid* - - - - - (5,031) (5,031)
--- ------ --- ------ ------- ------ -------
At 28 February 2013 122 55,531 72 45,912 160,006 5,831 267,474
--- ------ --- ------ ------- ------ -------
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 year ended 31 August 2012 (audited)
At 31 August 2011 116 2,813 68 60,284 105,230 10,024 178,535
(Loss)/return for the year - - - - (1,175) 5,984 4,809
Ordinary and subscription shares issued# 32 50,490 - - - - 50,522
Ordinary shares purchased - - - (5,855) - - (5,855)
Exercise of subscription shares - 117 - - - - 117
Sale of shares out of treasury - - - 825 - - 825
Share purchase costs - - - (130) - - (130)
Dividend paid** - - - - - (5,782) (5,782)
--- ------ --- ------ ------- ------ -------
At 31 August 2012 148 53,420 68 55,124 104,055 10,226 223,041
--- ------ --- ------ ------- ------ -------
* In respect of the year ended 31 August 2012 a final dividend of 4.20p per share was declared on
10 October 2012 and paid on 7 December 2012.
** Final dividend in respect of the year ended 31 August 2011 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.
# 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 £352,000 for the six
months ended 28 February 2013 (six months ended 29 February 2012: £346,000;
year ended 31 August 2012: £715,000).
Balance Sheet
as at 28 February 2013
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
Notes (unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value through profit or loss 271,607 226,203 245,575
======== ======== ========
Current assets
Debtors 748 933 3,032
Cash at bank and in hand - 3,134 -
----- ------ ------
748 4,067 3,032
----- ------ ------
Creditors - amounts falling due within one year
Bank overdraft (1,455) - (21,909)
Other creditors (3,426) (3,966) (3,657)
------ ------- --------
(4,881) (3,966) (25,566)
------ ------- --------
Net current (liabilities)/assets (4,133) 101 (22,534)
------ -------- --------
Net assets 267,474 226,304 223,041
======== ======== ========
Capital and reserves
Called-up share capital 8 122 148 148
Share premium account 55,531 53,331 53,420
Capital redemption reserve 72 68 68
Special reserve 45,912 58,547 55,124
Capital reserves 160,006 110,052 104,055
Revenue reserve 5,831 4,158 10,226
-------- -------- --------
Total equity shareholders' funds 267,474 226,304 223,041
======== ======== ========
Net asset value per share - undiluted 7 230.02p 185.85p 186.19p
======== ======== ========
Net asset value per share - diluted 7 230.02p 185.39p 185.67p
======== ======== ========
Summarised Cash Flow Statement
for the six months ended 28 February 2013
Six months Six months Year
ended ended ended
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net cash (outflow)/inflow from operating activities (672) (536) 4,474
Servicing of finance (64) (21) (30)
Taxation refunded - 292 718
-------- -------- --------
Capital expenditure and financial investment
Purchase of investments (127,774) (185,249) (395,537)
Proceeds from sale of investments 161,291 144,227 327,727
Realised losses on foreign currency transactions (197) (399) (571)
-------- -------- --------
Net cash inflow/(outflow) from capital expenditure and
financial investment 33,320 (41,421) (68,381)
------- -------- --------
Equity dividends paid (5,031) (5,782) (5,782)
------- -------- --------
Net cash inflow/(outflow) before financing 27,553 (47,468) (69,001)
------- -------- --------
Financing
Purchase of ordinary shares (9,080) (2,484) (5,855)
Exercise of subscription shares 2,111 27 117
Proceeds from issue of ordinary shares out of treasury - 1,538 1,538
Net proceeds from issue of ordinary shares to acquire
Charter European Trust plc's investment portfolio (75) 50,700 50,565
Share purchase costs (55) (20) (114)
------- ------- -------
Net cash (outflow)/inflow from financing (7,099) 49,761 46,251
------- ------- -------
Increase/(decrease) in cash 20,454 2,293 (22,750)
======= ======= =======
Reconciliation of Net Return before Finance Costs and Taxation to Net Cash
Flow from Operating Activities
Six months Six months Year
ended ended ended
28 February 29 February 31 August
2013 2012 2012
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net return before finance costs and taxation 56,674 4,796 5,515
Gains on investments held at fair value through
profit or loss (57,784) (6,067) (1,121)
Decrease/(increase) in accrued income 114 (88) (74)
Decrease in other debtors 3 - 8
Increase in other creditors 381 895 1,208
Tax on investment income included within gross income (60) (72) (1,062)
----- ----- ------
Net cash (outflow)/inflow from operating activities (672) (536) 4,474
===== ===== ======
Notes to the Financial Statements
for the six months ended 28 February 2013
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 2012.
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
28 February 29 February 31 August
2013 2012 2012
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment income:
Overseas dividends 1,220 328 7,411
Other income:
Deposit interest - 10 19
----- ---- -----
Total 1,220 338 7,430
===== ==== =====
4. Investment management and performance fees
Six months ended Six months ended Year ended
28 February 2013 29 February 2012 31 August 2012
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment management fees 164 656 820 116 464 580 262 1,049 1,311
Performance fees - 1,160 1,160 - 774 774 - 1,215 1,215
--- ----- ----- --- ----- ----- --- ----- -----
Total 164 1,816 1,980 116 1,238 1,354 262 2,264 2,526
=== ===== ===== === ===== ===== === ===== =====
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 £1,160,000 for the six months ended
28 February 2013 (six months ended 29 February 2012: £774,000; year ended
31 August 2012: £1,215,000). The performance fee accrued at 28 February 2013 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
28 February 29 February 31 August
2013 2012 2012
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Custody fee 18 16 32
Other administration costs 332 239 472
--- --- ---
350 255 504
=== === ===
6. Dividend
The Board has not declared an interim dividend, as dividends are considered
and paid annually in respect of each financial year.
7. Return and net asset value per ordinary share
28 February 29 February 31 August
2013 2012 2012
(unaudited) (unaudited) (audited)
Net revenue return attributable to ordinary shareholders (£'000) 636 (84) 5,984
Net capital return attributable to ordinary shareholders (£'000) 55,929 4,822 (1,175)
------ ----- ------
Total return (£'000) 56,565 4,738 4,809
====== ===== =====
Equity shareholders' funds (£'000) 267,474 226,304 223,041
------- ------- -------
The weighted average number of ordinary shares in issue during
the period on which the undiluted return per ordinary share
was calculated was: 118,266,456 95,828,373 108,410,736
----------- ---------- -----------
The actual number of ordinary shares in issue at the end of
each period on which the undiluted net asset value was
calculated was: 116,285,355 121,769,700 119,793,123
----------- ----------- -----------
Return per share
Undiluted
Calculated on weighted average number of shares
Revenue return 0.54p (0.09p) 5.52p
Capital return 47.29p 5.03p (1.08p)
------ ----- ------
Total 47.83p 4.94p 4.44p
====== ======= =======
Net asset value per share - undiluted 230.02p 185.85p 186.19p
======= ======= =======
Calculated on actual number of shares
Revenue return 0.55p (0.07p) 4.99p
Capital return 48.09p 3.96p (0.98p)
------ ----- ------
Total 48.64p 3.89p 4.01p
====== ===== =====
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: 118,266,456 95,828,373 108,410,736
----------- ---------- ------------
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: 116,285,355 145,302,821 143,277,136
----------- ----------- -------------
Calculated on weighted average number of shares
Revenue return 0.54p (0.09p) 5.52p
Capital return 47.29p 5.03p (1.08p)
------ ----- ------
Total 47.83p 4.94p 4.44p
======= ======= =======
Net asset value per share - diluted 230.02p 185.39p 185.67p
======= ======= =======
Dilution for subscription shares is assessed at the reporting date and over
the duration of the reporting period. A diluted NAV is calculated to the
extent that the period end NAV and the mid-market closing share price are both
above the exercise price for the subscription shares. Diluted returns are
calculated where, over the reporting period, the average NAV and mid-market
closing share price are both above the subscription share exercise price.
The diluted NAV per share at 29 February 2012 and 31 August 2012 is calculated
by adjusting equity shareholders' funds for the consideration receivable on
the exercise of the subscription shares (six months ended 29 February 2012:
23,533,122; year ended 31 August 2012: 23,484,013) at the exercise price of
183p per share, and dividing by the total number of shares that would have
been in issue at those dates had all the subscription shares been exercised.
There were no subscription shares in issue at the period end and therefore
there was no dilution at 28 February 2013.
Diluted returns per share for a reporting period are calculated using the
weighted average number of subscription shares in issue and the notional
equivalent number of ordinary shares based on the average mid-market closing
prices during the reporting period. There was no dilution for any of the
represented reporting periods.
At 28 February 2013, the Company had 6,052,299 shares held in treasury. The
treasury shares will not have a dilutive effect if they are cancelled. The
Company's policy on issuing treasury shares, set out on page 17 of the Annual
Report for the year ended 31 August 2012, permits the Board of Directors to
sell treasury shares at a price below NAV in certain circumstances. As a
result this would have a dilutive effect.
8. Share capital and shares held in treasury
Number Number Number
of of of
ordinary treasury subscription
shares shares shares Nominal
in in in value
issue issue issue Total £
Allotted, called up and fully paid share
capital comprised:
Ordinary shares of 0.1p each:
At 1 September 2012 119,793,123 4,760,637 - 124,553,760 124,554
Shares repurchased and cancelled
pursuant to tender offer on
3 December 2012 (3,370,061) - - (3,370,061) (3,370)
Shares transferred into treasury
pursuant to tender offer on
3 December 2012 (1,291,662) 1,291,662 - - -
----------- --------- ----------- ----------- -------
115,131,400 6,052,299 - 121,183,699 121,184
Subscription shares of 0.1p each:
At 1 September 2012 - - 23,484,013 23,484,013 23,484
Conversion of subscription shares
into ordinary shares 1,153,955 - (1,153,955) - -
Subscription shares cancelled - - (22,330,058) (22,330,058) (22,330)
----------- --------- ----------- ----------- -------
At 28 February 2013 116,285,355 6,052,299 - 122,337,654 122,338
=========== ========= =========== =========== =======
9. Related party disclosure
The Board consists of five 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 £32,000, the Chairman
of the Audit and Management Engagement Committee receives an annual fee of
£26,500 and each other Director receives an annual fee of £22,000.
Three members of the Board hold shares in the Company. John Walker-Haworth
holds 40,718 ordinary shares, Carol Ferguson holds 48,000 ordinary shares and
Gerald Holtham holds 11,100 ordinary shares. Davina Curling and Eric Sanderson
do not hold any shares in the Company.
Subsequent to the period end and following the allotment of subscription shares
on 19 April 2013, John Walker-Haworth, Carol Ferguson and Gerald Holtham also
now hold 8,143, 9,600 and 2,220 subscription shares respectively.
10. Transactions with Investment Manager
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
28 February 2013 were £1,980,000 (six months ended 29 February 2012: £1,354,000;
year ended 31 August 2012: £2,526,000). At the period end, an amount of
£2,341,000 was outstanding in respect of the investment management and
performance fees (six months ended 29 February 2012: £1,642,000; year ended
31 August 2012: £2,237,000).
11. Contingent liabilities
There were no contingent liabilities at 28 February 2013 (29 February 2012: nil;
31 August 2012: 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 28 February 2013 and
29 February 2012 has not been audited.
The information for the year ended 31 August 2012 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. Events after the Balance Sheet date
On 19 April 2013, the Company issued and allotted 23,254,813 subscription
shares to shareholders of the Company by way of a bonus issue.
14. Annual Results
The Company expects to announce the results for the year ending 31 August 2013
in October 2013. The annual report should be available by the end of
October 2013, with the Annual General Meeting being held on Wednesday,
4 December 2013.
12 Throgmorton Avenue
London
EC2N 2DL
Independent Review Report
to BlackRock Greater Europe Investment Trust plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half yearly financial report for the six month period ended
28 February 2013 which comprises the Income Statement, Reconciliation of
Movements in Shareholders' Funds, Balance Sheet, Summarised Cash Flow
Statement, Reconciliation of Net Return before Finance Costs and Taxation to
Net Cash Flow from Operating Activities and the related notes. We have read
the other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance
contained in International Standard on Review Engagements (UK and Ireland)
2410 "Review of Interim Financial Information Performed by the Independent
Auditor of the Entity" issued by the Auditing Practices Board. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company, for our work, for this report, or for the conclusions
we have formed.
Directors' responsibilities
The half yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half yearly financial report in accordance with the Listing Rules of the
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Company are
prepared in accordance with United Kingdom Generally Accepted Accounting
Practice. The condensed set of financial statements included in this half
yearly financial report has been prepared in accordance with the Accounting
Standards Board Statement "Half Yearly Financial Reports".
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half yearly
financial report for the six month period ended 28 February 2013 is not
prepared, in all material respects, in accordance with the Accounting
Standards Board Statement "Half Yearly Financial Reports" and the Disclosure
and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
22 April 2013
on the Manager's website (or any other website) is
incorporated into, or forms part of, this announcement.
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