Half-yearly Report
BLACKROCK GREATER EUROPE INVESTMENT TRUST plc
Half yearly financial results for the six months ended 28 February 2009
For further information please contact:
Jonathan Ruck Keene, Managing Director, Investment Company Division, BlackRock
Investment Management (UK) Limited - 020 7743 2178
Vincent Devlin, Fund Manager, BlackRock Investment Management (UK) Limited -
0131 472 7376
Emma Phillips, Media & Communications, BlackRock Investment Management (UK)
Limited - 020 7743 2922
OR
William Clutterbuck, The Maitland Consultancy - 020 7379 5151
Chairman's Statement
Overview
During the six months ended 28 February 2009, European equity markets, in
common with markets across the globe, were severely impacted as a result of the
turmoil in the global financial system and despite governments and the European
Central Bank having taken a number of unprecedented measures to help stabilise
markets.
Against this difficult background, over the six month period, the Company's net
asset value fell by 30.5% (compared with a fall of 34.2% in the FTSE World
Europe ex UK Index) and the share price fell by 28.4% (all figures in sterling
terms with income reinvested).
Tender offer and discount
As part of their discount control policy, the Directors have the discretion to
make half yearly tender offers. The Directors exercised their discretion to
operate the half yearly tender offer on 1 December 2008 (being the succeeding
business day to 30 November 2008) which, in common with previous tender offers,
was for up to a maximum 20% of the shares in issue at the prevailing net asset
value less 2%. Valid tenders for 5,568,268 shares were received at a price of
122.38p per share, representing 4.95% of the shares in issue, excluding
treasury shares. All shares tendered were placed in treasury and the 2,728,833
shares previously held in treasury have been cancelled in line with the
Directors' policy.
It was announced on 9 March 2009 that the Directors will implement the May
tender offer, which on this occasion will have a calculation date of 1 June
2009, being the first business day following 31 May 2009. A circular relating
to the tender offer will be posted on 28 April 2009.
During a volatile six month period when investment trust discounts to net asset
values have averaged 14.0%, the Company's discount averaged 6.0% reflecting, in
the Directors' opinion, the benefits to shareholders of these regular tender
offers.
Corporate broker
I am pleased to report that Collins Stewart Europe Limited was appointed as the
Company's broker in January. This appointment follows the withdrawal of UBS
Investment Bank from the UK and European Listed Investment Funds business.
Outlook
With no obvious signs that the concerted efforts of governments and central
banks are yet achieving their intended goals, the immediate outlook for
European equity markets looks set to remain uncertain. However, on a more
positive note, with valuations at twenty year lows, and with interest
rates at minimal levels, European equities may now have real support.
John Walker-Haworth
15 April 2009
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; 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 2008. A
detailed explanation can be found on pages 13 and 14 of the Annual Report and
Accounts which is available on the website maintained by the Investment Manager,
BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/its.
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.
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 14 April 2009 and
the above responsibility statement was signed on its behalf by the Chairman.
John Walker-Haworth
By order of the Board
15 April 2009
Investment Manager's Report
Overview
The six month period to 28 February 2009 was one of extreme volatility which
saw most major indices decline severely. The Company was not immune to this
deterioration in global markets; however, by favouring high quality companies
with balance sheet strength, strong cash flow and strong management, was able
to mitigate some of the declines.
Whilst we are disappointed to report that the Company's share price and
underlying net asset value declined by 28.4% and 30.5% respectively over the
six months, the Company fared better than the reference index, the FTSE World
Europe ex UK Index, which fell by 34.2% over the same period.
Further financial turmoil stifled any recovery in global equity markets during
the six months under review. The autumn of 2008 will be remembered for being
one of the most volatile periods in market history, as global economic activity
collapsed against a backdrop of ongoing fragility in the financial system. Risk
aversion picked up and investors switched out of economically sensitive areas
of the market, notably oil & gas, industrials and materials, and into the more
defensive sectors, including health care, telecoms, utilities and consumer
staples. Most economic data released in recent months showed declines,
reflecting significant retrenchment by consumers and corporations. A positive
consequence has been the collapse in commodity prices and the elimination of
the inflation threat. Oil prices peaked in July 2008, falling to US$30 per
barrel in December 2008, before recovering to over US$45 per barrel at the end
of February 2009.
Governments and central banks switched their focus to shoring up confidence in
the financial system and the avoidance of an economic depression, through
significant interest rates cuts, injection of capital into failing banks and
announcements of coordinated fiscal stimulus packages.
The Company's performance reflected relatively successful stock selection
across a range of sectors, predominantly within the developed European portion
of the portfolio. Within emerging markets, the Company benefited from its
holding in the BlackRock Eurasian Frontiers Hedge Fund which delivered a
positive return over the period. On average, over the six months, the Company
was not geared and a small residual cash position had a positive effect in
declining markets.
The best performing stocks in the period under review were mainly large
capitalisation names with defensive characteristics. Within the telecoms
sector, the Company's holdings in Telefonica, KPN and Belgacom all outperformed
the market as investors favoured strong balance sheets, high dividend yields
and a resilient earnings profile in volatile markets. In addition, the
Company's exposure to the health care and consumer staples sectors, through
holdings in food manufacturer Nestlé, pharmaceutical company Roche, and
dialysis manufacturer Fresenius, also outperformed due to their defensive
business models. Other stocks which outperformed the market included Italian
defence contractor Finmeccanica, Greek gaming company OPAP, and media
conglomerate Vivendi.
The Company benefited from being significantly underweight in the financial
sector in general, and banks in particular, as the turmoil following the
collapse of the US investment bank Lehman Brothers unfolded. Stock selection
was critical during the period, with the avoidance of some of the worst
affected by the credit crisis, such as Fortis and ING Groep, in favour of banks
such as Spain's Banco Santander and Banca Intesa (which had one of the
strongest balance sheets in the sector) proving beneficial.
Portfolio holdings which detracted from performance were mainly found in the
more cyclical areas of the market which struggled against a backdrop of slowing
global growth and increased risk aversion. Within the energy sector, the
Company's holdings in Russian oil companies Integra and Transneft depreciated
due to the sharp fall in oil prices and the heightened political risk in Russia.
Other stocks to affect negatively the Company's performance included steel
producer ArcelorMittal, industrial engineer GEA, and Vestas Wind Systems, a wind
turbine manufacturer.
Fund activity
During the early part of the period a number of changes to the portfolio were
implemented, which included a reduction in material and industrial holdings and
additions to the more defensive areas of the market, such as health care,
telecoms and consumer staples. The timing of these moves proved to be
beneficial, as risk aversion picked up and investors' rapidly unwound positions
within oil & gas and commodity plays. Towards the end of the six months, the
Company started to add selectively to the more cyclical areas of the market,
such as the industrials and media sectors, where we found a number of high
quality companies which were trading at a significant discount to valuation and
where earnings had already been significantly downgraded; examples of such
companies include Schneider Electric and Reed Elsevier. The weighting in
emerging Europe declined during the six months to finish at 7.4%, with the
majority of exposure having been through the BlackRock Eurasian Frontiers Hedge
Fund which provides diversified exposure to the region. The Company's net
market exposure, which had fallen below 95%, finished at 101% at the end of the
period.
At 28 February 2009, the Company maintained a bias toward the defensive
sectors, such as health care and telecoms, but also exposure to more market
sensitive sectors such as media and energy. Within the financial sector, the
Company remained significantly underweight relative to the reference index and
maintained a preference for insurance companies over banks.
Outlook
While we expect further volatility in the coming months, as weak economic data
and poor company earnings create uncertainty, we believe that the benefits from
global fiscal and monetary stimuli and lower oil prices could lead to
resumption in economic growth towards the end of 2009.
We believe European equities currently provide significant long term investment
potential and the compelling valuations and high levels of cash on the
sidelines, combined with the strong financial and market positions of many
European companies, could provide scope for a powerful bounce in Europe.
Valuations are currently relatively very low, and the market is trading on
a price to earnings multiple of less than 10 times. At the same time, European
stock markets (excluding financials) provide an attractive dividend yield;
we are anticipating a 4% yield on the index in 2009, exceeding the returns of
both government bonds and cash.
The outlook for emerging Europe remains challenging in the short term. However,
given the depth of falls in the stock market, which in most cases have fallen
more than 70%, we feel that value opportunities, particularly in Russia, are
beginning to emerge.
We continue to find a number of attractive investment opportunities and favour
high quality companies with robust balance sheets, strong cash flow, and solid
management with the ability to control cash flow within a slowing economic
environment. In the current market setting, a number of compelling
opportunities at the stock level are emerging and we are optimistic we can make
good returns on a medium term view.
Vincent Devlin & Sam Vecht
BlackRock Investment Management (UK) Limited
15 April 2009
Ten Largest Investments
28 February 2009
Nestlé - 8.1% (2008: 3.8%) is a Swiss based food producer, focusing on milk,
chocolate, confectionary and coffee products. It has a broad geographic reach
and a diversified stream of income. The company offers defensive
characteristics which we find attractive in the current market environment and
the valuation is also undemanding at the moment.
BlackRock Eurasian Frontiers Hedge Fund - 6.8% (2008: 4.3%) is a hedge fund
generating its returns from Eastern European, Middle Eastern and "frontier"
markets through a variety of strategies. The fund has returned 2.0% during the
review period.
Telefónica - 5.7% (2008: 2.5%) is a Spanish telecom company with a large
exposure to Latin America. Telefónica has an excellent growth profile and has
recently increased its dividend, making it one of the few companies globally
that has the confidence to do this. The dividend yield is now almost 8% and is
well covered. The company's valuation is attractive and management are arguably
the best in the sector.
Sanofi-Aventis - 5.5% (2008: nil) is a French pharmaceuticals company operating
on a worldwide basis. The company is facing major patent challenges; however,
these are more than fully reflected in the current share price. A new CEO,
brought in externally, is currently looking into research and development
savings, cost cuttings and potential for external in-licensing agreements to
offset the patent expiries. We believe upside potential from the current level
will be driven by the CEO's initiatives on those fronts.
Total - 4.8% (2008: nil) is our preferred name among the large European
integrated oil and gas companies, as it has one of the most resilient balance
sheets in the sector. The group's financial flexibility is increased as Total
continues to dispose of its 11% stake in Sanofi and has identified a series of
cost saving measures. Operating mostly in low cost regions, Total is very
favourably positioned on the global cost curve. In 2009, the company is
planning to ramp up five major oil and gas projects which should lead to
superior volume growth versus peers. We believe Total shares are attractively
valued and its dividend yield of over 6% is secure even if oil prices remain at
current levels over the next two years.
Vivendi - 4.4% (2008: 2.8%) is a French media conglomerate. The firms telecom
division has performed well and the music division is improving. The synergies
gained from pay-TV and growth from the games division leaves Vivendi with small
predicted earnings growth in 2009 and a 7% yield. The valuation is attractive
on a price earnings ratio of 8 times.
KPN - 4.2% (2008: 2.2%) is one of the most defensive telecom stocks with
operations in Holland and Germany. An excellent management team continue to
deliver cost cuts to mitigate the weak revenue outlook. KPN is attractively
valued and offers a dividend yield of 6%.
Novo Nordisk - 4.1% (2008: nil) is a Danish pharmaceutical company with a
leading global franchise in the diabetes space. It gives us exposure to a
disease incidence that is likely to grow rapidly in the next few decades, in
particular in emerging markets. The company offers a good mix of defensive
characteristics and offers the best growth profile in the European
pharmaceuticals sector. The valuation is attractive at the moment, with the
share price currently affected by the uncertainty surrounding approval of one
of their novel diabetes drugs.
E.On - 3.9% (2008: 3.4%) is a Germany based integrated utilities company which
generates electricity from nuclear, coal and hydro sources, then sells it to
residential and industrial customers. We have generally stayed away from
integrated utilities due to the earnings risk of falling power prices, but E.On
is an exception given its attractive valuation. As well as trading on a price
earnings ratio discount to the sector, it has a high dividend yield which is
well covered by earnings and we believe sustainable. Stress testing earnings
suggests the stock is cheap, even under a depression scenario.
Zurich Financial Services - 3.8% (2008: 3.1%) is a Swiss-based insurance
company offering general and life insurance products to corporates and
individuals. The business mix is skewed towards non-life insurance which we
currently prefer over life insurance due to its good operational outlook for
premium growth and price increases. The company enjoys above-average returns
compared to its peers.
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 2008.
Investments
as at 28 February 2009
Country Book Market
of cost value % of
operation £'000 £'000 investments
------------------------------------------------------------------------------
Health Care
Sanofi-Aventis France 7,141 6,775 5.5
Novo Nordisk Denmark 5,286 5,072 4.1
Fresenius Medical Care Germany 3,933 3,685 3.0
Novartis Switzerland 3,976 3,447 2.8
Roche Switzerland 3,359 2,747 2.2
Fresenius Germany 1,813 2,707 2.2
------ ------ ----
25,508 24,433 19.8
------ ------ ----
Consumer Services
Vivendi France 6,114 5,465 4.4
Reed Elsevier Netherlands 3,024 2,898 2.3
Lagardère France 2,489 2,386 1.9
Ahold Netherlands 2,008 2,251 1.8
PPR France 1,533 1,615 1.3
OPAP Greece 106 98 0.1
------ ------ ----
15,274 14,713 11.8
------ ------ ----
Financials
Zurich Financial Services Switzerland 7,150 4,754 3.8
Banco Santander Spain 5,730 4,591 3.7
Credit Suisse Switzerland 6,955 4,513 3.6
AXA France 895 457 0.4
------ ------ ----
20,730 14,315 11.5
------ ------ ----
Telecommunications
Telefónica Spain 7,699 7,106 5.7
KPN Netherlands 4,884 5,274 4.2
Belgacom Belgium 1,508 1,580 1.3
------ ------ ----
14,091 13,960 11.2
------ ------ ----
Utilities
E.On Germany 6,778 4,808 3.9
GDF Suez France 4,464 3,038 2.4
Energias de Portugal Portugal 2,642 2,620 2.1
Red Eléctrica Spain 2,483 2,308 1.9
------ ------ ----
16,367 12,774 10.3
------ ------ ----
Industrials
Finmeccanica Italy 3,131 3,224 2.6
Bouygues France 4,852 3,138 2.5
MAN Germany 2,276 2,186 1.8
Schneider Electric France 2,094 1,830 1.5
Vossloh Germany 283 269 0.2
------ ------ ---
12,636 10,647 8.6
------ ------ ---
Oil & Gas
Total France 6,157 6,000 4.8
Eni Italy 3,804 3,975 3.2
Transneft Russia 1,812 299 0.2
Integra Russia 2,328 147 0.1
------ ------ ---
14,101 10,421 8.3
------ ------ ---
Consumer Goods
Nestlé Switzerland 10,875 10,023 8.1
------ ------ ---
10,875 10,023 8.1
------ ------ ---
Basic Materials
Bayer Germany 4,628 4,043 3.3
----- ----- ---
4,628 4,043 3.3
----- ----- ---
Technology
Ness Technologies Israel 933 417 0.3
--- --- ---
933 417 0.3
--- --- ---
Other
BlackRock Eurasian Frontiers Emerging
Hedge Fund Europe 6,026 8,412 6.8
----- ----- ---
6,026 8,412 6.8
----- ----- ---
Total investments 141,169 124,158 100.0
======= ======= =====
All investments are in ordinary shares unless otherwise stated. The total
number of investments held at 28 February 2009 was 36 (31 August 2008: 47).
INCOME STATEMENT
for the six months ended 28 February 2009
Revenue £'000 Capital £'000 Total £'000
----------------------------------------------------------------------------------------------------
Six months Six months Year Six months Six months Year Six months Six months Year
ended ended ended ended ended ended ended ended ended
28 29 31 28 29 31 28 29 31
February February August February February August February February August
2009 2008 2008 2009 2008 2008 2009 2008 2008
Notes(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
----------------------------------------------------------------------------------------------------------------------
Losses on
investments
held at
fair value
through
profit or
loss - - - (57,869) (10,396) (16,847) (57,869) (10,396) (16,847)
Income from
investments
held at fair
value through
profit or
loss 3 1,118 1,037 6,998 - - - 1,118 1,037 6,998
Other
income 3 55 17 26 - - - 55 17 26
Investment
management
and
performance
fees 4 (71) (105) (202) (283) (565) (754) (354) (670) (956)
Operating
expenses 5 (285) (346) (667) - - - (285) (346) (667)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net return
before
finance
costs and
taxation 817 603 6,155 (58,152) (10,961) (17,601) (57,335) (10,358) (11,446)
Finance
costs - (70) (101) - (280) (402) - (350) (503)
----- ----- ----- ------ ------ ------ ------ ------ ------
Return on
ordinary
activities
before
taxation 817 533 6,054 (58,152) (11,241) (18,003) (57,335) (10,708) (11,949)
Taxation on
ordinary
activities (234) (143) (1,746) (12) (152) 153 (246) (295) (1,593)
----- ----- ------ ------ ------ ------ ------- ------ ------
Return on
ordinary
activities
after
taxation 7 583 390 4,308 (58,164) (11,393) (17,850) (57,581) (11,003) (13,542)
=== === ===== ======= ======= ======= ======= ======= =======
Return per
ordinary
share -
basic
and diluted 7 0.53p 0.33p 3.73p (53.01p) (9.70p) (15.44p) (52.48p) (9.37p) (11.71p)
===== ===== ===== ======= ====== ======= ======= ====== =======
The total column of this statement represents the Income Statement of the
Company. The supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies. 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 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
28 February 2009
(unaudited)
At 31 August 2008 115 151 49 89,340 94,704 6,681 191,040
Return for the
period - - - - (58,164) 583 (57,581)
Shares purchased (3) - 3 (6,814) - - (6,814)
Share purchase costs - - - (154) - - (154)
Dividends paid * - - - - - (3,372) (3,372)
--- --- --- ------ ------ ----- -------
At 28 February 2009 112 151 52 82,372 36,540 3,892 123,119
=== === === ====== ====== ===== =======
For the six months
ended
29 February 2008
(unaudited)
At 31 August 2007 125 151 39 103,213 112,554 5,249 221,331
Return for the
period - - - - (11,393) 390 (11,003)
Shares purchased (5) - 5 (8,802) - - (8,802)
Share purchase costs - - - (143) - - (143)
Dividends paid ** - - - - - (2,876) (2,876)
--- --- --- ------ ------- ----- -------
At 29 February 2008 120 151 44 94,268 101,161 2,763 198,507
=== === === ====== ======= ===== =======
For the year ended
31 August 2008
(audited)
At 31 August 2007 125 151 39 103,213 112,554 5,249 221,331
Return for the year - - - - (17,850) 4,308 (13,542)
Shares purchased (10) - 10 (13,705) - - (13,705)
Share purchase costs - - - (168) - - (168)
Dividends paid ** - - - - - (2,876) (2,876)
--- --- --- ------ ------ ----- -------
At 31 August 2008 115 151 49 89,340 94,704 6,681 191,040
=== === === ====== ====== ===== =======
* Final dividend in respect of the year ended 31 August 2008 of 3.00p per share
declared on 16 October 2008 and paid on 3 December 2008.
** Final dividend in respect of the year ended 31 August 2007 of 2.40p per
share declared on 16 October 2007 and paid on 6 December 2007.
The transaction costs incurred on the acquisition and disposal of investments
are included within the capital reserves and amounted to £491,000 for the six
months ended 28 February 2009 (six months ended 29 February 2008: £554,000;
year ended 31 August 2008: £607,000).
BALANCE SHEET
as at 28 February 2009
28 February 29 February 31 August
2009 2008 2008
£'000 £'000 £'000
Notes (unaudited) (unaudited) (audited)
Non current assets
Investments held at fair value
through profit or loss 124,158 214,197 189,684
------- ------- -------
Current assets
Debtors 4,041 10,277 1,059
Cash 106 259 1,735
------- ------- ------
4,147 10,536 2,794
------- ------- ------
Creditors - amounts falling due
within one year
Bank overdrafts (3,507) (12,997) -
Other creditors (1,011) (12,622) (843)
------ ------- -------
(4,518) (25,619) (843)
------ ------- -------
Net current (liabilities)/assets (371) (15,083) 1,951
------ ------- -------
Total assets less current
liabilities 123,787 199,114 191,635
Provision for liabilities and
charges (668) (607) (595)
------- ------- -------
Net assets 123,119 198,507 191,040
======= ======= =======
Capital and reserves
Share capital 8 112 120 115
Share premium account 151 151 151
Capital redemption reserve 52 44 49
Special reserve 82,372 94,268 89,340
Capital reserves 36,540 101,161 94,704
Revenue reserve 3,892 2,763 6,681
------- ------- -------
Total equity shareholders' funds 123,119 198,507 191,040
======= ======= =======
Net asset value per share 7 115.26p 172.44p 169.98p
======= ======= =======
SUMMARISED CASH FLOW STATEMENT
for the six months ended 28 February 2009
Six months Six months Year
ended ended ended
28 February 29 February 31 August
2009 2008 2008
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net cash inflow/(outflow) from operating
activities 535 (283) 3,736
Returns on investment and servicing of
finance (7) (290) (503)
Taxation paid (338) (127) (305)
Capital expenditure and financial
investment
Purchase of investments (164,944) (92,297) (200,542)
Proceeds from sale of investments 169,422 112,101 236,004
Realised gains/(losses) on foreign
currency transactions 470 (339) (158)
-------- ------- -------
Net cash inflow from capital expenditure
and financial investment 4,948 19,465 35,304
----- ------ ------
Equity dividends paid (3,372) (2,876) (2,876)
------ ------ ------
Net cash inflow before financing 1,766 15,889 35,356
----- ------ ------
Financing
Purchase of ordinary shares (6,814) (8,802) (13,705)
Share purchase costs (88) (91) (182)
------ ------ -------
Net cash outflow from financing (6,902) (8,893) (13,887)
------ ------ -------
(Decrease)/increase in cash (5,136) 6,996 21,469
====== ===== ======
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
2009 2008 2008
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net loss before finance costs and taxation (57,335) (10,358) (11,446)
Losses on investments held at fair value 57,869 10,396 16,847
Decrease in accrued income 76 128 87
Decrease in other debtors - 57 31
Increase/(decrease) in creditors 109 (331) (607)
Tax on investment income included within
gross income (184) (175) (1,176)
---- ---- ------
Net cash inflow/(outflow) from operating
activities 535 (283) 3,736
=== ==== =====
NOTES TO THE HALF YEARLY FINANCIAL ANNOUNCEMENT
1. Principal activity
The principal activity of the Company is that of an investment trust company
within the meaning of section 842 of the Income and Corporation Taxes Act 1988.
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 as at 31
August 2008.
The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of investments and in
accordance with applicable Accounting Standards, pronouncements on half yearly
reporting issued by the Accounting Standards Board and the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies"
("SORP" dated January 2003 and revised in December 2005 and January 2009).
3. Income
Six months Six months Year
ended ended ended
28 February 29 February 31 August
2009 2008 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment income:
- UK dividends - 57 57
- Overseas dividends 1,118 980 6,941
----- ----- -----
1,118 1,037 6,998
Other income:
- Deposit interest 55 17 26
----- ----- -----
Total income 1,173 1,054 7,024
===== ===== =====
4. Investment management and performance fees
Six months ended Six months ended Year ended
28 February 2009 29 February 2008 31 August 2008
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
-------------------------------------------------------------------------------------------
Investment
management fees 71 283 354 105 417 522 202 807 1,009
Performance fees - - - - 201 201 - - -
VAT written back - - - - (53) (53) - (53) (53)
--- --- --- --- --- --- --- --- ---
Total 71 283 354 105 565 670 202 754 956
=== === === === === === === === ===
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 reserve and 20% to
the revenue reserve. A performance fee has not been accrued (six months ended
29 February 2008: £201,000; year ended 31 August 2008: nil). The performance
fee accrued at 29 February 2008 was based on 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
2009 2008 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Administration fee 102 149 296
Custody fee 25 48 79
Other administration costs 158 149 292
--- --- ---
285 346 667
=== === ===
6. Dividend
The Board has not declared an interim dividend, as dividends are considered and
paid annually in respect of each accounting year.
7. Return and net asset value per ordinary share
Six months Six months Year
ended ended ended
28 February 29 February 31 August
2009 2008 2008
(unaudited) (unaudited) (audited)
Net revenue return attributable
to ordinary shareholders (£'000) 583 390 4,308
Net capital return attributable
to ordinary shareholders (£'000) (58,164) (11,393) (17,850)
------- ------- -------
Net total return (£'000) (57,581) (11,003) (13,542)
------- ------- -------
Equity shareholders' funds (£'000) 123,119 198,507 191,040
------- ------- -------
The weighted average number of
ordinary shares in issue during the
period, on which the return per
ordinary share was calculated, was: 109,712,498 117,480,880 115,644,222
----------- ----------- -----------
The actual number of ordinary
shares in issue at the end of each
period, on which the net asset
value was calculated, was: 106,820,690 115,117,791 112,388,958
----------- ----------- -----------
The number of ordinary shares in
issue, including treasury shares,
on which the fully diluted net
asset value was calculated, was: 112,388,958 119,843,969 115,117,791
----------- ----------- -----------
Net asset value per share 115.26p 172.44p 169.98p
======= ======= =======
Return per share
Calculated on weighted average shares:
Revenue return 0.53p 0.33p 3.73p
Capital return (53.01p) (9.70p) (15.44p)
------- ------ -------
Total (52.48p) (9.37p) (11.71p)
======= ====== =======
Calculated on actual shares:
Revenue return 0.55p 0.34p 3.83p
Capital return (54.45p) (9.90p) (15.88p)
------- ------ -------
Total (53.90p) (9.56p) (12.05p)
======= ====== =======
At 28 February 2009, the Company had 5,568,268 shares held in treasury. As the
Company's share price at this date stood at a discount of greater than 2%,
shares could not be sold out of treasury and consequently there was no dilution
to the Company's net asset value or return per share.
No fully diluted return per share has been disclosed as the calculations for
all periods indicate that the treasury shares do not have a dilutive effect.
8. Share capital and shares held in treasury
Number of Number of
ordinary treasury Nominal
shares shares Total value
in issue in issue shares £
Authorised share
capital comprised:
Ordinary shares of 0.1p
each 900,000,000 - 900,000,000 900,000
----------- --------- ----------- -------
At 31 August 2008 112,388,958 2,728,833 115,117,791 115,118
Shares transferred into
treasury pursuant to
tender offer on
1 December 2008 (5,568,268) 5,568,268 - -
Shares cancelled from
treasury on
3 December 2008 - (2,728,833) (2,728,833) (2,729)
----------- --------- ----------- -------
At 28 February 2009 106,820,690 5,568,268 112,388,958 112,389
=========== ========= =========== =======
9. Distributable status of capital reserves
Under the terms of the Company's Articles of Association, sums standing to the
credit of the capital reserves are distributable only by way of redemption or
purchase of any of the Company's own shares, for so long as the Company carries
on business as an investment company. Company law states that investment
companies may only distribute accumulated "realised" profits.
The Institute of Chartered Accountants in England and Wales in its technical
guidance TECH 01/08, states that profits arising out of a change in fair value
of assets, recognised in accordance with accounting standards, may be
distributed, provided the change recognised can be readily converted into cash.
Securities listed on a recognised stock exchange are generally regarded as
being readily convertible into cash and hence unrealised profits in respect of
such securities, currently included within the unrealised capital reserve, may
be regarded as distributable under company law.
The technical interpretation of the meaning of distributable reserves would, as
a consequence, give rise at 28 February 2009 to capital reserves available for
distribution of approximately £36,540,000 after adjusting for net unrealised
capital losses of £17,011,000.
10. Publication of non statutory accounts
The financial information contained in this half yearly financial 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 2009
and 29 February 2008 has not been audited.
The information for the year ended 31 August 2008 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies. The report of the auditors on those accounts contained
no qualification or statement under sections 498(2) or (3) of the Companies Act
2006.
11. Annual Results
The Company expects to announce the results for the year ending 31 August 2009
in October 2009. The annual report should be available by the end of October
2009, with the Annual General Meeting being held on 1 December 2009.
33 King William Street
London
EC4R 9AS
15 April 2009
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 2009 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 information in 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 2410 (UK and Ireland) "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 Services 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 performed 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 2009 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 Services Authority.
Ernst & Young LLP
London
15 April 2009
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