Half-yearly Report
BLACKROCK GREATER EUROPE INVESTMENT TRUST plc
Half yearly financial results for the six months ended 28 February 2011
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
Chairman's Statement
Overview
I am pleased to report that for the six months ended 28 February 2011 the
Company's undiluted net asset value ("NAV") grew by 24.1%, compared with a rise
of 19.3% in the FTSE World Europe ex UK Index. During the same period, the
share price increased by 28.4% (all figures calculated in sterling terms with
income reinvested).
During the six month period, European equity markets experienced a number of
distinctly different phases. Following a weak August, markets rallied in
September, as the region's economic environment began to settle and investors
were satisfied that fears over a double-dip recession would not be realised.
However, the rally appeared to be short-lived, when a spell of volatility
returned to markets during November as sovereign debt concerns in peripheral
Europe once again dominated the headlines. December saw strong gains, as
worries over European sovereign debt once more diminished. Despite growing
concerns over emerging market economic policy tightening and the political
instability in North Africa and the Middle East, the final two months of the
period were positive for the Company and the region's equity markets.
Since the end of February, the Company's NAV has increased by 2.5% and the
share price has risen by 3.0% (both with income reinvested).
Tender offer
The Directors exercised their discretion to operate the half yearly tender
offer on 30 November 2010 which, in common with previous tender offers, was for
up to a maximum 20% of the shares in issue (excluding treasury shares) at the
prevailing net asset value less 2%. Valid tenders for 2,898,166 shares were
received at a price of 186.49p per share, representing 2.9% of the Company's
shares in issue, excluding treasury shares. All shares tendered have been
placed in treasury and the 2,642,046 shares previously held in treasury were
cancelled in line with the Directors' policy.
It was announced on 28 March 2011 that the next semi-annual tender offer will
take place on 31 May 2011, for up to 20% of shares in issue (excluding treasury
shares) at the prevailing NAV per share subject to a discount of 2%. A circular
relating to the tender offer is enclosed with this half yearly financial
report.
Subscription shares
During the period and up to the date of this report, the Company has issued
1,064,069 ordinary shares following the conversion of 828,618 subscription
shares at the end of October and 235,451 subscription shares at the end of
January. Total proceeds amounted to £1,947,000. The Company now has 100,106,492
ordinary shares (including treasury shares) and 18,742,451 subscription shares
in issue.
Subscription shareholders have further opportunities to subscribe for all or
any of the ordinary shares to which their subscription shares relate on each of
31 January, 30 April, 31 July and 31 October until 31 October 2012 at a price
of 183p per share.
Outlook
It is particularly difficult to predict the short term outlook for the region
given the growing concerns over events in North Africa and the Middle East and
the impact of the devastating earthquake in Japan. However, improving sentiment
towards sustainable recovery in Europe gives reason for a positive outlook in
the longer term.
John Walker-Haworth
12 April 2011
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 Financial Statements for the year ended
31 August 2010. A detailed explanation can be found in the Directors'
Report on page 13 and in note 19 on pages 39 to 44 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 are set
out in note 4 and note 9. The related party transactions with the Directors
are set out in note 9.
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 12 April 2011 and
the above responsibility statement was signed on its behalf by the Chairman.
John Walker-Haworth
By order of the Board
12 April 2011
Investment Manager's Report
Overview
We are pleased to report that both the Company's share price and underlying NAV
saw strong gains over the six months to 28 February 2011. In this period, the
Company's share price increased by 28.4% and its underlying undiluted NAV
gained by 24.1%. By way of comparison, the FTSE World Europe ex UK Index rose
by 19.3%. All figures are calculated in sterling terms with income reinvested.
European equity markets have been highly variable over the last six months,
with a number of macroeconomic concerns heavily influencing equity returns.
Towards the beginning of the period, Ireland's €85 billion bail-out through the
European Financial Stability Facility caused returns in the peripheral European
region to decline as investors feared further countries would be forced to do
the same. In addition, January 2011 saw a shift away from companies with
exposure to emerging markets and towards companies in peripheral Europe, as
optimism over a resolution to the sovereign debt issues in the region increased.
Finally, political unrest in North Africa and the Middle East
caused the oil price to temporarily reach US$120 per barrel during February
2011, which proved positive for oil-related companies but negative for those
companies which depend on oil as a significant portion of their cost base.
However, throughout this period of uncertainty, economic data in northern
Europe continued to be strong with both consumer confidence and industrial
production significantly healthier in this region than in the periphery.
Moreover, corporate profitability remained strong with aggregate earnings
generally beating expectations, and optimistic outlook statements from company
management teams signalled a continuation of recovery in the region.
Positive returns were derived from both strong stock selection and sector
allocation during the period. Higher weightings in the industrials and basic
materials sectors benefited the portfolio, as did relatively low weightings in
financials and consumer goods. In addition, the portfolio's average gearing of
4.4% over the six months aided returns, especially during the fourth quarter of
2010 as the market rallied strongly.
The Company's highest weighting throughout the period was in the industrials
sector. Holdings within the sector were highly diverse in nature, but positions
within the electrical engineering industry performed best. In particular, a
holding in French electrical engineering company Schneider Electric generated
strong returns. Schneider's products offer the ability to achieve significant
energy efficiencies in new building projects and we believe the company is set
to benefit from a rise in global non-residential construction. The company
continues to offer high profitability and strong cash generation potential.
Given the steep rise in the oil price towards the end of the period, it is
perhaps unsurprising to note that positions in the oil & gas sector were
prominent during the period. However, our investments in this sector focused
more on the oil services sector than the oil majors. This was due to our view
that companies such as CGG Veritas, which conducts seismic surveys for oil and
gas exploration, and Technip, which operates within the onshore and offshore
platform engineering and construction business, are key beneficiaries of rising
capital expenditure within the oil & gas sector. CGG Veritas performed
particularly well for the portfolio in February 2011, as the company reported
very strong earnings for the fourth quarter of 2010. We expect the recent rise
in oil prices, as well as high levels of cash on the balance sheets of oil
majors, to continue to benefit these companies in the coming period.
Although the portfolio had a lower weighting to consumer goods during the six
months under review, the positions we did hold performed especially well.
Holdings in the automotive industry continued to perform for the Company. Nokian
Renkaat, the Finnish winter tyre company, enjoyed further growth in the Russian
market, and German car manufacturer Daimler performed very well in the fourth
quarter before we sold the position at the end of the year due to regulatory
changes in China, where the company has found much of its growth in recent
months.
Elsewhere in the portfolio, selected positions with a focus on emerging Europe
also contributed to the Company's returns. A position in Portuguese listed food
retailer Jeronimo Martins benefited, as its discount franchise based in Poland
continued to grow. In addition, a holding in Russian chemical company Uralkali
produced positive returns.
At the end of the period, the portfolio was particularly weighted towards
industrial companies, especially those based in northern Europe, and in oil and
gas companies, with a focus on oil services companies. The portfolio has a lower
weighting than the market in the financials sector, reflecting our broadly
cautious outlook for the sector given the current situation in peripheral Europe.
Elsewhere, we have lower weightings in the utilities and telecoms sectors,
which in our view offer fewer growth opportunities than other areas of the
European equity market.
Outlook
Subsequent to the period end, we have experienced a continuation of
macroeconomic volatility in European equity markets. The political situation in
the Middle East remains unstable and supply-side concerns have caused oil
prices to remain high. In addition, the recent earthquake in Japan has had
significant implications for global markets, causing short-term share price
losses as well as having a major impact on the global nuclear energy market.
Closer to home, the situation in the periphery remains unresolved, although
recent developments regarding political commitments to the reduction of budget
deficits have proved a positive for the stability of the region in general. In
terms of company fundamentals, earnings for the fourth quarter of 2010 have
proved broadly positive, with encouraging levels of demand highlighting the
continuation of economic recovery in Europe.
Looking towards the future, our outlook for European equities remains broadly
positive. Whilst the peripheral debt concerns within the region have not yet
subsided, we believe that much of the potential downside associated with a
peripheral default is reflected in valuations and that European policy makers
will remain committed to the Euro project.
In contrast with the periphery, we believe that the predominant core and
northern European region is one of the healthiest parts of the developed world,
as reflected by both rising consumer confidence and strong momentum in the
industrial cycle. Core Europe is less indebted than many other economies and
has exceptional access to emerging market growth. As such, we view the impact
of further problems in the periphery on corporate earnings as limited.
Europe remains an under-owned region and valuations continue to look
compelling. On a price-to-earnings basis, Europe is currently trading at a
material discount to its historical average. The region offers a broad
selection of well managed companies that are able to access the strongest areas
of global growth through high quality products and services, and we continue
to favour these types of companies within the portfolio.
Vincent Devlin and Sam Vecht
BlackRock Investment Management (UK) Limited
12 April 2011
Ten Largest Investments
28 February 2011
Novo Nordisk - 4.4% (2010: 3.4%) 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.
Banco Santander - 3.9% (2010: 3.0%) is a Spanish global banking conglomerate
with very attractive assets in Latin America and the UK. We believe that
current valuations are unduly reflecting concerns over the Spanish economy and
do not indicate the healthier parts of the business. Spain now accounts for
less than a third of the group and we believe that it will emerge from the
Spanish economic downturn in a stronger position. The stock also offers a very
attractive dividend yield at present.
Schneider Electric - 3.7% (2010: 2.5%) is a French electrical engineering
company specialising in medium voltage electrical components. Schneider's
products offer the ability to achieve significant energy efficiencies in new
building projects and we believe the company is set to benefit from a rise in
global non-residential construction. In addition, the company has grown its
presence in emerging markets and is able to benefit from the attractive growth
trends in the non-residential construction market on a global scale. The
company continues to offer high profitability and strong cash generation and
has an excellent track record of execution from its management team.
Technip - 3.3% (2010: 2.0%) is a French energy services company, which builds
high-technology equipment for both onshore and offshore platforms and
complexes. We believe that the company offers the potential for increasing
profitability in an attractive industry. In addition, Technip is set to benefit
from increasing capital expenditure within the energy sector and itself has
high levels of cash on its balance sheet, giving the potential for future value
enhancing acquisitions. We view the stock as attractively valued given its
future earnings growth potential.
Legrand - 3.1% (2010: 1.3%) is a French electrical engineering company that
designs, manufactures and distributes electrical components for information
networks. The company is now benefiting from restructuring actions taken during
the recession, structurally improving its cash generation and working capital
efficiency. High market share in key areas offers the company strong pricing
power and increasing exposure to the emerging markets.
Syngenta - 3.1% (2010: 1.9%) 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.
Intesa Sanpaolo - 3.0% (2010: nil) is the largest high quality bank in Italy.
The company has remained solidly profitable throughout the recent financial
crisis and we believe it is attractive due to its strong management team, good
market share and a high dividend yield. We bought a holding in the company when
it was trading at a discount to its peers and we currently believe that the
company is set to benefit both from rising interest rates in Europe and a new
strategic plan for the business.
Swatch - 2.9% (2010: 1.8%) is a Swiss watch maker and a global leader in luxury
watch production, owning brands such as Omega, Longines and Breguet. Swatch
makes well over a third of its sales in the Asia ex Japan region and is a key
beneficiary of rising consumption trends in the emerging market consumer. In
addition, the company has a strong management team and is currently trading at
a significant discount to what we feel is the appropriate valuation. The
company continues to report earnings higher than expected and we foresee
continued earnings growth for the company.
Vopak - 2.7% (2010: 2.0%) is a Dutch company which operates in the oil,
chemical and gas storage industry. This industry has very high barriers to
entry and Vopak has strategically valuable operations in deep water jetty
locations. The company continues to add projects to its expansion pipeline,
providing attractive growth prospects in the medium to long term; in the short
term, the company also benefits from the rising oil price. We believe the
company warrants a significantly higher price than its valuation would
currently suggest.
Eutelsat - 2.7% (2010: 1.6%) is a French media company specialising in
satellite operations. The company offers high quality growth with a quality
management team in an industry with very high barriers to entry due to the
strategic positioning of satellites. The company is set to benefit from both
emerging market growth trends and the structural trend towards demand for HD
and 3D television, which are significantly more volume intensive than standard
television. Recent capital expenditure is set to deliver capacity growth for
the company both this year and next, and we believe that the market continues
to underestimate the growth potential of the company over the next three 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 2010.
Investments
28 February 2011
Book Market
Country of cost value % of
operation £'000 £'000 investments
Financials
Banco Santander Spain 7,877 8,206 3.9
Intesa Sanpaolo Italy 5,929 6,340 3.0
Credit Suisse Switzerland 5,397 5,594 2.7
DnB Norway 4,871 5,551 2.7
AXA France 5,002 5,135 2.5
Julius Baer Switzerland 3,633 4,468 2.1
Euler Hermes France 2,322 3,624 1.7
Société Générale France 2,786 3,396 1.6
BNP Paribas France 2,598 2,812 1.4
KBC Belgium 1,858 1,993 1.0
------ ------ ----
42,273 47,119 22.6
------ ------ ----
Industrials
Schneider Electric France 5,632 7,673 3.7
Legrand France 4,637 6,481 3.1
Vopak Netherlands 4,174 5,685 2.7
SKF Sweden 4,211 4,564 2.2
KCI Konecranes Finland 2,878 4,560 2.2
Kone Finland 3,853 4,463 2.1
USG People Netherlands 2,328 2,392 1.2
Geberit Switzerland 2,377 2,369 1.1
TNT Netherlands 2,105 1,940 0.9
Amadeus Spain 1,523 1,907 0.9
Imtech Netherlands 1,517 1,811 0.9
Mostotrest Russia 652 616 0.3
------ ------ ----
35,887 44,461 21.3
------ ------ ----
Consumer Goods
Swatch Switzerland 3,805 5,970 2.9
Nokian Renkaat Finland 3,612 5,418 2.6
LVMH Moet Hennessy France 5,346 5,251 2.5
Carlsberg Denmark 2,610 3,632 1.7
Chr. Hansen Denmark 2,470 3,425 1.6
Compagnie Financière
Richemont Switzerland 3,272 3,247 1.6
Elringklinger Germany 2,528 3,215 1.6
Continental Germany 1,945 2,073 1.0
------ ------ ----
25,588 32,231 15.5
------ ------ ----
Oil & Gas
Technip France 5,237 6,916 3.3
CGG Veritas France 2,999 4,540 2.2
KazMunaiGas Kazakhstan 3,180 3,317 1.6
Saipem Italy 2,461 2,437 1.2
DNO Norway 1,975 2,354 1.1
Galp Energia Portugal 2,024 2,231 1.1
------ ------ ----
17,876 21,795 10.5
------ ------ ----
Basic Materials
Syngenta Switzerland 4,940 6,450 3.1
Bayer Germany 4,589 5,092 2.5
K & S Germany 3,759 4,663 2.2
Air Liquide France 3,532 4,048 1.9
------ ------ ---
16,820 20,253 9.7
------ ------ ---
Health Care
Novo Nordisk Denmark 6,757 9,175 4.4
Fresenius Germany 2,111 2,242 1.1
Teva Israel 1,785 1,692 0.8
------ ------ ---
10,653 13,109 6.3
------ ------ ---
Consumer Services
Eutelsat France 4,985 5,669 2.7
Metro Germany 2,621 3,279 1.6
Ryanair Ireland 3,441 3,151 1.5
------ ------ ---
11,047 12,099 5.8
------ ------ ---
Utilities
Fortum Finland 3,725 4,389 2.1
České Energetické Závody Czech Republic 2,043 1,917 0.9
----- ----- ---
5,768 6,306 3.0
----- ----- ---
Technology
Neopost France 3,467 3,709 1.8
Wincor Nixdorf Germany 1,825 2,431 1.2
----- ----- ---
5,292 6,140 3.0
----- ----- ---
Telecommunications
Vimpelcom Russia 3,198 3,079 1.5
Millicom International
Cellular Sweden 1,486 1,773 0.8
----- ----- ---
4,684 4,852 2.3
------- ------- -----
Total investments 175,888 208,365 100.0
======= ======= =====
All investments are in ordinary shares. The total number of investments held at
28 February 2011 was 52 (31 August 2010: 64).
INCOME STATEMENT
for the six months ended 28 February 2011
Revenue £'000 Capital £'000 Total £'000
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
Notes 28.02.11 28.02.10 31.08.10 28.02.11 28.02.10 31.08.10 28.02.11 28.02.10 31.08.10
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Gains on
investments
held at
fair value
through
profit
or loss - - - 42,256 16,095 13,828 42,256 16,095 13,828
Income from
investments
held at
fair value
through
profit
or loss 3 960 674 4,518 - - - 960 674 4,518
Other
income 3 7 23 40 - - - 7 23 40
Investment
management
and
performance
fees 4 (132) (108) (224) (1,404) (430) (1,249) (1,536) (538) (1,473)
Operating
expenses 5 (218) (256) (514) - - - (218) (256) (514)
---- ---- ---- ------ ---- ------ ------ ----- ------
Net return
before
finance
costs and
taxation 617 333 3,820 40,852 15,665 12,579 41,469 15,998 16,399
Finance
costs (16) (4) (23) (67) (19) (91) (83) (23) (114)
---- ---- ---- ------ ------ ------ ------- ------ ------
Net return
on
ordinary
activities
before
taxation 601 329 3,797 40,785 15,646 12,488 41,386 15,975 16,285
Taxation
on ordinary
activities (70) (101) (603) - - - (70) (101) (603)
---- ---- ----- ------ ------ ------ ------ ------ ------
Return on
ordinary
activities
after
taxation 7 531 228 3,194 40,785 15,646 12,488 41,316 15,874 15,682
==== ==== ====== ====== ====== ====== ====== ====== ======
Return per
ordinary
share -
basic 7 0.54p 0.22p 3.13p 41.55p 15.13p 12.26p 42.09p 15.35p 15.39p
===== ===== ===== ====== ====== ====== ====== ====== ======
Return per
ordinary
share -
diluted 7 0.54p 0.22p 3.13p 41.25p 15.13p 12.26p 41.79p 15.35p 15.39p
===== ===== ====== ====== ====== ====== ====== ====== ======
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 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
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 six
months ended
28 February 2010
(unaudited)
At 31 August 2009 107 151 57 80,079 85,491 6,828 172,713
Return for the
period - - - - 15,646 228 15,874
Shares purchased (2) - 2 (5,843) - - (5,843)
Share purchase
costs - - - (98) - - (98)
Dividend paid** - - - - - (3,311) (3,311)
---- ------ --- ------ ------- ------ -------
At
28 February 2010 105 151 59 74,138 101,137 3,745 179,335
---- ------ --- ------ ------- ------ -------
For the year
ended
31 August 2010
(audited)
At 31 August 2009 107 151 57 80,079 85,491 6,828 172,713
Return for the
year - - - - 12,488 3,194 15,682
Shares purchased (5) - 5 (10,245) - - (10,245)
Issue of
subscription shares 20 - - - (20) - -
Issue costs on
subscription shares - - - - (278) - (278)
Share purchase
costs - - - (186) - - (186)
Dividend paid** - - - - - (3,311) (3,311)
---- ------ --- ------ ------ ------ -------
At
31 August 2010 122 151 62 69,648 97,681 6,711 174,375
---- ------ --- ------ ------ ------ -------
* 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.
** Final dividend in respect of the year ended 31 August 2009 of 3.15p per
share declared on 15 October 2009 and paid on 9 December 2009.
# Share purchase costs of £63,000 were written back to the special reserve in
the six months ended 28 February 2011. The costs represented over accruals
relating to share purchases in prior years.
The transaction costs incurred on the acquisition and disposal of investments
are included within the capital reserves and amounted to £429,000 for the six
months ended 28 February 2011 (six months ended 28 February 2010: £583,000;
year ended 31 August 2010: £1,108,000).
BALANCE SHEET
as at 28 February 2011
Notes 28 February 28 February 31 August
2011 2010 2010
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value
through profit or loss 208,365 186,363 182,631
-------- -------- --------
Current assets
Debtors 8,560 4,231 6,014
Cash 2 8 869
-------- -------- --------
8,562 4,239 6,883
-------- -------- --------
Creditors - amounts falling due
within one year
Bank overdrafts (5,319) (2,780) (13,325)
Other creditors (2,659) (8,487) (1,814)
-------- -------- --------
(7,978) (11,267) (15,139)
-------- -------- --------
Net current assets/(liabilities) 584 (7,028) (8,256)
-------- -------- --------
Net assets 208,949 179,335 174,375
======== ======== ========
Capital and reserves
Share capital 8 119 105 122
Share premium account 2,098 151 151
Capital redemption reserve 65 59 62
Special reserve 64,215 74,138 69,648
Capital reserves 138,478 101,137 97,681
Revenue reserve 3,974 3,745 6,711
-------- -------- --------
Total equity shareholders' funds 208,949 179,335 174,375
======== ======== ========
Net asset value per share - basic 7 214.95p 176.36p 176.06p
======== ======== ========
Net asset value per share -
diluted 7 209.79p - -
======== ======== ========
SUMMARISED CASH FLOW STATEMENT
for the six months ended 28 February 2011
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2011 2010 2010
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net cash inflow/(outflow) from operating
activities 147 (276) 1,890
Servicing of finance (72) (23) (114)
Taxation refunded/(paid) 652 (726) (747)
------ ------- -------
Capital expenditure and financial
investment
Purchase of investments (136,458) (240,886) (413,696)
Proceeds from sale of investments 150,003 249,998 414,555
Realised (losses)/gains on foreign
currency transactions (345) (336) 682
------ ------- -------
Net cash inflow from capital expenditure
and financial investment 13,200 8,776 1,541
------ ------- -------
Equity dividends paid (3,268) (3,311) (3,311)
------ ------- -------
Net cash inflow/(outflow) before financing 10,659 4,440 (741)
------ ------- -------
Financing
Purchase of ordinary shares (5,405) (5,843) (10,245)
Exercise of subscription shares 1,947 - -
Share purchase costs (62) (69) (170)
------ ------- -------
Net cash outflow from financing (3,520) (5,912) (10,415)
------ ------- -------
Increase/(decrease) in cash 7,139 (1,472) (11,156)
====== ======= =======
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 28 February 31 August
2011 2010 2010
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net return before finance costs and
taxation 41,469 15,998 16,399
Gains on investments held at fair value (42,256) (16,095) (13,828)
(Increase)/decrease in accrued income (17) 5 5
Increase/(decrease) in other creditors 1,045 (68) 228
Tax on investment income included within
gross income (94) (116) (914)
----- ----- ------
Net cash inflow/(outflow) from operating
activities 147 (276) 1,890
==== ===== ======
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 2010.
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 28 February 31 August
2011 2010 2010
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment income:
Overseas dividends 485 674 4,325
Special dividends 475 - 193
---- ---- ------
960 674 4,518
---- ---- ------
Other income:
Deposit interest 7 23 40
---- ---- ------
Total 967 697 4,558
==== ==== ======
4. Investment management and performance fees
Six months ended Six months ended Year ended
28 February 2011 28 February 2010 31 August 2010
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment
management
fees 132 528 660 108 430 538 224 896 1,120
Performance
fees - 876 876 - - - - 353 353
--- ----- ----- --- --- --- --- ----- -----
Total 132 1,404 1,536 108 430 538 224 1,249 1,473
=== ===== ===== === === === === ===== =====
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 £876,000 for the six
months ended 28 February 2011 (six months ended 28 February 2010: nil; year
ended 31 August 2010: £353,000). The performance fee accrued at
28 February 2011 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 28 February 31 August
2011 2010 2010
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Administration fee - 65 65
Custody fee 36 23 88
Other administration costs 182 168 361
--- --- ---
218 256 514
=== === ===
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 28 February 31 August
2011 2010 2010
(unaudited) (unaudited) (audited)
Net revenue return attributable to
ordinary shareholders (£'000) 531 228 3,194
Net capital return attributable to
ordinary shareholders (£'000) 40,785 15,646 12,488
------- ------- -------
Total return (£'000) 41,316 15,874 15,682
======= ======= =======
Equity shareholders' funds (£'000) 208,949 179,335 174,375
------- ------- -------
The weighted average number of
ordinary shares in issue
during the period, on which the
undiluted return per
ordinary share was calculated, was: 98,162,966 103,433,043 101,902,293
---------- ----------- -----------
The actual number of ordinary shares
in issue at the end
of each period, on which the
undiluted net asset value
was calculated, was: 97,208,326 101,684,469 99,042,423
---------- ----------- ----------
Return per share
Undiluted
Calculated on weighted average
number of shares
Revenue return 0.54p 0.22p 3.13p
Capital return 41.55p 15.13p 12.26p
------- ------- -------
Total 42.09p 15.35p 15.39p
======= ======= =======
Net asset value per share -
undiluted 214.95p 176.36p 176.06p
======= ======= =======
Calculated on actual number of
shares
Revenue return 0.55p 0.22p 3.22p
Capital return 41.95p 15.39p 12.61p
------ ------ ------
Total 42.50p 15.61p 15.83p
====== ====== ======
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: 98,861,075 - -
---------- ---- ---
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: 115,950,777 - -
----------- ---- ---
Diluted
Revenue return 0.54p - -
Capital return 41.25p - -
------- ---- ---
Total 41.79p - -
======= ==== ===
Net asset value per share 209.79p - -
======= ==== ===
The diluted NAV per share at 28 February 2011 is calculated by adjusting equity
shareholders' funds for consideration receivable on the exercise of 18,742,451
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 28 February 2011
had all the subscription shares been exercised. There was no dilution for the
period ended 28 February 2010 and the year ended 31 August 2010.
At 28 February 2011, the Company had 2,898,166 shares held in treasury. The
treasury shares do not have a dilutive effect.
8. 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 2010 99,042,423 2,642,046 - 101,684,469 101,684
Shares transferred
into treasury
pursuant to tender
offer on
30 November 2010 (2,898,166) 2,898,166 - - -
Shares cancelled from
treasury on
1 December 2010 - (2,642,046) - (2,642,046) (2,642)
Ordinary shares
issued 1,064,069 - - 1,064,069 1,064
---------- --------- ---------- ----------- -------
97,208,326 2,898,166 - 100,106,492 100,106
Subscription shares
of 0.1p each:
At 31 August 2010 - - 19,806,520 29,806,520 19,807
Subscription shares
exercised - - (1,064,069) (1,064,069) (1,064)
---------- --------- ---------- ----------- -------
At 28 February 2011 97,208,326 2,898,166 18,742,451 118,848,943 118,849
========== ========= ========== =========== =======
9. 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%. 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 2011 were £1,536,000 (six months ended 28 February 2010: £538,000;
year ended 31 August 2010: £1,473,000). At the period end, an amount of
£1,567,000 was outstanding in respect of the investment management and
performance fees (six months ended 28 February 2010: £362,000; year ended
31 August 2010: £629,000).
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 £26,000, the Chairman
of the Audit and Management Engagement Committee receives an annual fee of
£23,500 and each other Director receives an annual fee of £20,000.
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. Béatrice Philippe does
not hold any shares in the Company.
10. Contingent liabilities
There were no contingent liabilities at 28 February 2011 (2010: nil).
11. Publication of non statutory accounts
The financial information for the six months ended 28 February 2011 and
28 February 2010 has not been audited. The information for the year ended
31 August 2010 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.
12. Annual Results
The Company expects to announce the results for the year ending 31 August 2011
in October 2011. The annual report should be available by the end of October 2011,
with the Annual General Meeting being held on Wednesday, 30 November 2011.
33 King William Street
London
EC4R 9AS
12 April 2011
t 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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