Final Results

BLACKROCK GREATER EUROPE INVESTMENT TRUST plc Annual results announcement for the year ended 31 August 2013 Chairman's Statement Overview Equity markets performed well for most of the year under review. In the Eurozone, the provision of additional liquidity from the European Central Bank and the two Long-Term Refinancing Operations helped to calm markets. In addition, the European Central Bank's Outright Monetary Transactions programme, announced by Mario Draghi in September 2012 against the backdrop of renewed concerns over a possible disintegration of the Euro, has also been effective in stabilising financial markets. Against this background, I am pleased to report that in the year ended 31 August 2013 the Company's undiluted net asset value (NAV) per share returned 28.7%, compared with a return of 26.3% in the FTSE World Europe ex UK Index. The Company's share price returned 33.7% over the same period. All percentages are calculated in Sterling terms with income reinvested. Since the year end, the Company's undiluted NAV per share has increased by 7.2% compared with a rise in the FTSE World Europe ex UK Index of 7.8% over the same period. Revenue return and dividends The Company's revenue return for the year amounted to 6.32p per share compared with 5.52p for the previous year. The Directors are recommending the payment of a final dividend of 4.50p per share (2012: 4.20p) and have declared a special dividend of 1.00p per share (2012: nil). The dividends will be paid on 13 December 2013 to shareholders on the Company's register on 1 November 2013; the ex dividend date is 30 October 2013. Tender offers The Directors exercised their discretion to operate the half yearly tender offer on 31 May 2013. The offer was for up to 20% of the shares in issue (excluding treasury shares) at the prevailing NAV less 2%. Valid tenders for 7,636,639 shares were received at a price of 232.56p per share, representing 6.56% of the shares in issue, excluding treasury shares. All shares tendered in May were repurchased by the Company and cancelled. In addition, 333,946 shares previously held in treasury were cancelled to maintain the 5% limit on treasury shares which has been determined by the Board. It was announced on 23 September 2013 that the next semi-annual tender offer will take place on 2 December 2013 being the succeeding business day to 30 November 2013, for up to 20% of the shares in issue (excluding treasury shares) at the prevailing fully diluted NAV per share subject to a discount of 2%. A Circular relating to the tender offer will be posted with the Annual Report or will be available on the BlackRock Investment Management website at www.blackrock.co.uk/brge and in hard copy on request from the Company's registered office c/o The Secretary, BlackRock Greater Europe Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL. A resolution for the renewal of the Company's semi-annual tender authority will be put to shareholders at the forthcoming Annual General Meeting. Subscription shares The subscription share rights in respect of the remaining 22,330,058 subscription shares issued in 2010 lapsed on 14 November 2012. The Company has issued a total of 70,495 ordinary shares following the first conversion of the 2013 subscription shares. Total proceeds amounted to £164,000. The Company currently has 108,719,211 ordinary shares (excluding treasury shares) and 23,184,318 subscription shares in issue. 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 price is 233p per ordinary share and thereafter until April 2016, 248p per ordinary share. Board of Directors After serving as Chairman since the incorporation of the Company in 2004, I will step down from the Board following the forthcoming Annual General Meeting. Carol Ferguson, who is currently Chairman of the Audit & Management Engagement Committee, will replace me as Chairman, and Eric Sanderson will become Chairman of the Audit & Management Engagement Committee. Alternative Investment Fund Managers' Directive The Alternative Investment Fund Managers' Directive (the Directive) is a European directive which seeks to reduce potential systemic risk by regulating alternative investment fund managers (AIFMs). AIFMs are responsible for investment products that fall within the category of Alternative Investment Funds (AIFs) and investment trusts are included in this. The Directive was implemented with effect from 22 July 2013 although it has been confirmed that the Financial Conduct Authority will permit a transitional period of one year within which UK AIFMs must seek authorisation. The Board is currently taking independent advice on the consequences for the Company and has decided in principle that BlackRock will be appointed as it's AIFM in advance of the end of the transitional period on 22 July 2014. Annual General Meeting The Annual General Meeting of the Company will be held at 12.00 noon at the offices of BlackRock at 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 4 December 2013. We hope that as many shareholders as possible will attend. The Portfolio Managers will make a presentation to shareholders on the Company's performance and the outlook for the year ahead. Outlook The outlook for global economic growth currently appears patchy with the possibility of a slowdown in some emerging markets. However, there has also been growing evidence that the Eurozone economy, taken as a whole, is no longer contracting. There is some optimism that the new approach, providing forward guidance on the likely course of future interest rates adopted by both the European Central Bank and the Bank of England, may eventually encourage more corporate investment. Accordingly, we believe that many of the headwinds evident in recent years are subsiding and that European equities will see further support from the continuing shift in investors' allocations towards Europe. John Walker-Haworth 21 October 2013 Key risks The key risks faced by the Company are set out below. The Board regularly reviews and agrees policies for managing each risk, as summarised below. - Performance risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objective and monitoring the performance of the Investment Manager. An inappropriate strategy may lead to underperformance against the reference index and the Company's peer group. To manage this risk the Investment Manager provides an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio. The Board monitors and mandates an adequate spread of investments, in order to minimise the risks associated with particular countries or factors specific to particular sectors, based on the diversification requirements inherent in the Company's investment policy. The Board also receives and reviews regular reports showing an analysis of the Company's performance against the FTSE World Europe ex UK Index and other similar indices. Past performance is not necessarily a guide to future performance and the value of your investment in the Company and the income from it can fluctuate as the value of the underlying investments fluctuate. - Income/dividend risk - The amount of dividends and future dividend growth will depend on the Company's underlying portfolio. Any change in the tax treatment of the dividends or interest received by the Company (including as a result of withholding taxes or exchange controls imposed by jurisdictions in which the Company invests) may reduce the level of dividends received by shareholders. The Board monitors this risk through the receipt of detailed income forecasts and considers the level of income at each meeting. - Regulatory risk - The Company operates as an investment trust in accordance with the requirements of Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company is exempt from capital gains tax on the sale of its investments. The Investment Manager monitors investment movements, the level of forecast income and expenditure and the amount of proposed dividends to ensure that the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not breached and the results are reported to the Board. The Company must also comply with the provisions of the Companies Act 2006 and, as its shares are admitted to the Official List, the UKLA Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules. A breach of the Companies Act 2006 could result in the Company and/or the Directors being fined or the subject of criminal proceedings. A breach of the UKLA Listing Rules could result in the Company's shares being suspended from listing, which in turn would breach the requirements of Chapter 4 of Part 24 of the Corporation Tax Act 2010. The Board relies on the services of its professional advisers and its Company Secretary to ensure compliance with all relevant regulations. The Company Secretary has stringent compliance procedures in place and monitors regulatory developments and changes. - Operational risk - In common with most other investment trust companies, the Company has no employees. The Company therefore relies upon the services provided by third parties and is dependent on the control systems of the Investment Manager and the Company's service providers. The security, for example, of the Company's assets, dealing procedures, accounting records and maintenance of regulatory and legal requirements, depend on the effective operation of these systems. These have been regularly tested and monitored and an internal controls report, which includes an assessment of risks together with procedures to mitigate such risks, is prepared by the Investment Manager and reviewed by the Audit and Management Engagement Committee at least twice a year. The custodian (the Bank of New York Mellon (International) Limited (BNYM), a subsidiary of the Bank of New York Mellon), BNP Paribas Securities Services (the Fund Accountant) and the Investment Manager also produce regular Service Organisation Reports (SOC1) or AAF 01/06 Reports which are reviewed by their reporting accountants and give assurance regarding the effective operation of controls and are also reviewed by the Audit and Management Engagement Committee. - Market risk - Market risk arises from volatility in the prices of the Company's investments. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. In addition, it should be noted that emerging markets tend to be more volatile than more established stock markets and therefore present a greater degree of risk. Changes in general economic and market conditions in certain countries, such as interest rates, exchange rates, rates of inflation, industry conditions, competition, political events and trends, tax laws, national and international conflicts, economic sanctions and other factors can also substantially and adversely affect the securities and, as a consequence, the Company's prospects and share price. The Board considers asset allocation, stock selection, unquoted investments and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Investment Manager. The Board monitors the implementation and results of the investment process with the Investment Manager. - Financial risks - The Company's investment activities expose it to a variety of financial risks that include market price risk, foreign currency risk, interest rate risk, liquidity risk and credit risk. - Gearing risk - The Company has the power to borrow money (gearing) and does so when the Investment Manager is confident that market conditions and opportunities exist to enhance investment returns. However, if the investments fall in value, any borrowings will magnify the extent of this loss. All borrowings require the approval of the Board and gearing levels are discussed by the Board and the Investment Manager at each meeting. - Third party risk - The Company has no employees and the Directors have all been appointed on a non-executive basis. The Company must therefore rely upon the performance of third party service providers to perform its executive functions. In particular, the Investment Manager, the Administrator, the Registrar, the Custodian and their respective delegates, if any, will perform services that are integral to the Company's operations and financial performance. The Company, and where appropriate the Investment Manager, undertake extensive due diligence prior to the appointment of any third party service provider in order to mitigate this risk. Terms of appointment are agreed in advance and service level agreements are put in place with providers to ensure that a high level of service is provided. Failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment, to exercise due care and skill, or to perform its obligations to the Company at all as a result of insolvency, bankruptcy or other causes could have a material adverse effect on the Company's performance and returns to holders of ordinary shares. The termination of the Company's relationship with any third party service provider or any delay in appointing a replacement for such service provider, could materially disrupt the business of the Company and could have a material adverse effect on the Company's performance and returns to holders of ordinary shares. Related party transactions The Investment Manager is regarded as a related party and details of the investment management fees payable are set out in note 4. Statement of Directors' Responsibilities In accordance with Disclosure and Transparency Rule 4.1.12, each of the Directors confirm to the best of their knowledge that: - the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and - the annual report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. For and on behalf of the Board John Walker-Haworth Chairman 21 October 2013 Investment Manager's Report Overview The Company's share price and underlying NAV both saw strong returns over the twelve months to 31 August 2013. The Company's share price returned 33.7% and the undiluted NAV returned 28.7%. By way of comparison, the FTSE World Europe ex UK Index returned 26.3% during the same period. All percentages are calculated in sterling terms with income reinvested. The period saw ten continuous months of positive returns before a reversal in June 2013. At the beginning of the year, Mario Draghi had made it clear that the European Central Bank (ECB) would, within its mandate, do, 'whatever it takes' to save the Euro, and this squarely addressed the potential break-up risk of the single currency. German attitudes towards European support for the weaker nations softened and the German Constitutional Court ratified further support measures to assist any ailing Eurozone country, an important (if broadly expected) step. This led the way for the market to rally through the remainder of 2012 and into 2013. Nonetheless, a number of risks remained on the horizon including the prospect of political stalemate after the Italian election and worries surrounding a bailout for Cyprus. As these were generally resolved in the second quarter, European equities advanced as investors decided that the risk of financial dislocation had subsided. However, a speech by US Federal Reserve Chairman Ben Bernanke caused further market jitters in June as he floated the possibility that central bank support for the U.S. economy via its bond purchasing programme could start to 'taper off' which led to a sharp, albeit temporary, retrenchment in markets. The market rebounded quickly as it anticipated a potential recovery and the Eurozone Purchasing Managers' Index, a measure of economic activity, moved above 50 for the first time in two years, signalling expansion. Despite the equity market gains, corporate earnings were on the whole disappointing in Europe but investors chose to ignore the recent past, opting instead to look forward to potential improvement towards the end of 2013. Portfolio activity During the year the Company benefited from both good sector allocation and stock selection. At a sector level the decision to have lower weightings in the telecommunications and utilities sectors proved successful. However, a lower weighting in the financial sector hindered performance as it was one of the best performing sectors in the market, rallying strongly throughout the period and benefiting especially from the policy support delivered by the ECB. At the stock level, positions within consumer services accounted for the largest positive contribution to portfolio performance. In particular, two positions in the short-haul airline sector both delivered strong returns: Irish airline Ryanair enjoyed strong growth, especially in ancillary passenger charges, and the holding in German airline Deutsche Lufthansa also performed well benefiting from a new cost-cutting programme put in place by the management team. Within consumer goods, Swiss luxury goods company Compagnie Financière Richemont performed well after reporting further strong organic growth despite fears of a slowdown in consumption growth in key emerging markets. Another area of strong performance was the auto sector where tyre and auto part manufacturer Continental and French car manufacturer Renault added to returns. The latter benefited from the pick-up in domestic European economies, with the former continuing to innovate and grow ahead of the competition within its auto parts business. The largest detractor from performance was chemical company Lanxess. After several quarters of low volumes in tyre sales which led to pressure on pricing they downgraded their profit outlook causing a significant sell-off. Another negative contributor was insulin manufacturer Novo Nordisk whose share price fell after one of their key drugs had to undergo further trials before being approved in the U.S. Although this was a significant setback to the company, we still have strong conviction in their ability to grow earnings in the medium to long term. The oil & gas sector was the largest detractor from returns. Specifically, positions in oil services companies Technip and Saipem underperformed. At the end of the year, the portfolio was particularly weighted towards the technology, consumer services and health care sectors. Within technology the portfolio is focused on companies with unique products in markets with high barriers to entry and the potential to dominate their chosen market. Within consumer services the focus has moved more towards companies with exposure to the domestic European economy where we see a significant potential for growth. Within health care the portfolio's focus continues to be on the larger pharmaceutical companies that have strong product offerings, good pricing power and the ability to grow earnings over the coming years. The portfolio continues to have lower market exposure to the utilities, telecoms and oil & gas sectors. Emerging Europe underperformed developed Europe during the period as developed Europe began to recover from the challenges presented by both political and economic problems in the region. In light of this, we took a selective approach to investing in Emerging Europe during the year. The Company had an average allocation of 7% of NAV to companies in Emerging Europe, with positions in Russia, Hungary and Ukraine. Holdings in Russian internet search leader Yandex and telecom Mobile Telesystems added value whilst the position in Russian financial, Sberbank, was a notable detractor. Looking forward, we expect the region to benefit from a wider European recovery and believe that valuations are attractive with the region trading at a discount to developed Europe. Outlook The outlook in our view remains positive for the remainder of 2013 and into 2014. Supportive monetary policies, recovering economic momentum and a relatively stable political backdrop all provide a reassuring environment for European equities. This should also help create an environment in which further reforms in the Eurozone can take place. We expect that European Equities will continue to be supported by additional allocations from international investors as the evidence of an improving macroeconomic environment gathers pace. Vincent Devlin and Sam Vecht BlackRock Investment Management (UK) Limited 21 October 2013 Ten Largest Investments 31 August 2013 Roche - 6.1% (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 a strong pipeline of drugs coming to market make this an attractive investment case. Anheuser-Busch InBev - 3.5% (2012: 2.2%) is the largest brewer in the world. The company offers strong free cash flow generation and best-in-class profitability, especially following its recent acquisition of Grupo Modelo. The company also benefits from its scale and has the potential to improve its market share position in key markets moving into 2014/2015. Continental - 3.4% (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 emission reduction and active safety in the global car market. The company is priced at a very attractive valuation given the potential growth rate and could benefit from a rebound in the depressed European car market. Novo Nordisk - 3.4% (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. Bayer - 3.3% (2012: nil) is a German company with divisions in health care, nutrition and high-tech materials. The company offers strong growth over the next 3 to 5 years, especially within its pharmaceuticals and crop science businesses fuelled by new products coming to market. The company also trades at a discount to the sector average and offers an attractive free cash flow profile. SAP - 3.2% (2012: 3.2%) is a German software services business, mainly selling licenses to and providing software solutions for customers. The company offers an attractive growth profile through its new products which can greatly increase the speed of data retrieval and reduce the need for databases, but also offers resilience in more challenging environments through its licensing model. Sanofi - 3.1% (2012: nil) is a French-based pharmaceutical company. Sanofi discovers, develops and distributes therapeutic solutions focused on patients' needs. Sanofi 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 healthy dividend yield. Zurich Insurance Group - 3.0% (2012: 3.8%) is a Swiss-based insurance company. The company is relatively defensive when 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 paid net of withholding tax and has a solid management team. Swiss Re - 2.9% (2012: 3.2%) is a Swiss re-insurance business. The attraction of Swiss Re lies in 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 Swiss Re has very little exposure to the peripheral European countries in its investment portfolio. We view Swiss Re as a resilient business with an attractive and sustainable dividend yield. Reed Elsevier - 2.8% (2012: 2.3%) is a provider of professional information solutions, mostly in the scientific and legal fields. Within the media sector, it offers a structurally sound, defensive business model when compared with its peers as well as a solid growth profile and an attractive dividend yield. 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 34.7% of the Company's portfolio (31 August 2012: 36.1%). Investments 31 August 2013 Market Country of value % of operation £'000 investments Financials Zurich Insurance Group Switzerland 8,009 3.0 Swiss Re Switzerland 7,912 2.9 KBC Belgium 6,949 2.6 Nordea Bank Sweden 5,748 2.1 Société Générale France 5,289 2.0 AXA France 5,200 1.9 ING Netherlands 5,048 1.9 Unibail-Rodamco France 4,102 1.5 Partners Group Switzerland 3,618 1.3 Commerzbank Germany 3,388 1.3 Sberbank Russia 2,850 1.1 GAM Switzerland 2,559 1.0 OTP Bank Hungary 2,157 0.8 -------- -------- 62,829 23.4 -------- -------- Consumer Goods Anheuser-Busch InBev Belgium 9,323 3.5 Continental Germany 9,235 3.4 Compagnie Financière Richemont Switzerland 6,115 2.3 Rémy Cointreau France 4,788 1.8 LVMH Möet Hennessy Louis Vuitton France 4,665 1.7 Pernod-Ricard France 3,948 1.5 Renault France 2,996 1.1 MHP Ukraine 1,704 0.6 -------- -------- 42,774 15.9 -------- -------- Health Care Roche Switzerland 16,315 6.1 Novo Nordisk Denmark 9,009 3.4 Sanofi France 8,463 3.1 Grifols Spain 3,419 1.3 Chr. Hansen Denmark 2,238 0.8 -------- -------- 39,444 14.7 -------- -------- Industrials EADS Netherlands 7,130 2.7 Rexel France 6,383 2.4 Deutsche Post Germany 5,311 2.0 SKF Sweden 4,635 1.7 Schneider Electric France 4,153 1.5 Assa Abloy Sweden 4,031 1.5 Kone Finland 2,770 1.0 Geberit Switzerland 2,643 1.0 -------- -------- 37,056 13.8 -------- -------- Consumer Services Reed Elsevier Netherlands 7,501 2.8 Ryanair Ireland 6,146 2.3 Kering France 3,469 1.3 Koninklijke Ahold Netherlands 3,445 1.3 Paddy Power Ireland 3,078 1.1 Jerónimo Martins Portugal 2,549 0.9 Inditex Spain 2,293 0.9 Kuoni Reisen Switzerland 1,915 0.7 -------- -------- 30,396 11.3 -------- -------- Technology SAP Germany 8,555 3.2 ASML Netherlands 5,540 2.1 Infineon Technologies Germany 4,518 1.7 Mail.Ru Russia 4,017 1.5 Yandex Netherlands 3,237 1.2 Capgemini France 2,742 1.0 -------- -------- 28,609 10.7 -------- -------- Basic Materials Bayer Germany 8,956 3.3 Linde Germany 5,636 2.1 -------- -------- 14,592 5.4 -------- -------- Telecommunications Ziggo Netherlands 7,156 2.7 VimpelCom Netherlands 2,650 1.0 -------- -------- 9,806 3.7 -------- -------- Oil & Gas Gazprom Russia 2,870 1.1 -------- -------- 2,870 1.1 -------- -------- Total investments 268,376 100.0 ======== ======== All investments are in ordinary shares. The total number of investments held at 31 August 2013 was 53 (31 August 2012: 46). Investment Exposure Investment Size as at 31 August 2013 Number of Investments % of Portfolio less than £1m 0.0 0.0 £1m to £3m 14.0 13.0 £3m to £5m 16.0 23.2 £5m to £10m 22.0 57.7 more than £10m 1.0 6.1 Market Capitalisation as at 31 August 2013 % of Portfolio % of Index less than €1bn 0.0 0.0 €1bn to €10bn 28.7 19.3 €10bn to €20bn 11.3 14.6 €20bn to €50bn 33.8 30.7 more than €50bn 26.2 35.4 Distribution of Investments as at 31 August 2013 % of Portfolio Financials 23.4 Consumer Goods 15.9 Health Care 14.7 Industrials 13.8 Consumer Services 11.3 Technology 10.7 Basic Materials 5.4 Telecommunications 3.7 Oil & Gas 1.1 Source: BlackRock. Income Statement for the year ended 31 August 2013 Revenue Revenue Capital Capital Total Total 2013 2012 2013 2012 2013 2012 Notes £'000 £'000 £'000 £'000 £'000 £'000 Gains on investments held at fair value through profit or loss - - 57,436 1,121 57,436 1,121 Income from investments held at fair value through profit or loss 3 9,181 7,411 - - 9,181 7,411 Other income 3 - 19 - - - 19 Investment management and performance fees 4 (339) (262) (2,492) (2,264) (2,831) (2,526) Operating expenses 5 (688) (504) - (6) (688) (510) -------- -------- -------- -------- -------- -------- Net return/(loss) before finance costs and taxation 8,154 6,664 54,944 (1,149) 63,098 5,515 Finance costs (26) (7) (105) (26) (131) (33) -------- -------- -------- -------- -------- -------- Return/(loss) on ordinary activities before taxation 8,128 6,657 54,839 (1,175) 62,967 5,482 Taxation on ordinary activities (833) (673) (15) - (848) (673) -------- -------- -------- -------- -------- -------- Return/(loss) on ordinary activities after taxation 7 7,295 5,984 54,824 (1,175) 62,119 4,809 ======== ======== ======== ======== ======== ======== Return/(loss) perordinary share - basic and diluted 7 6.32p 5.52p 47.50p (1.08p) 53.82p 4.44p ======== ======== ======== ======== ======== ======== The total column of this statement represents the profit and loss account 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 profits 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 year. 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 equivalents. Reconciliation of Movements in Shareholders' Funds Share Capital Share premium redemption Capital Special Revenue capital account reserve reserves reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 For the year ended 31 August 2013 At 31 August 2012 148 53,420 68 104,055 55,124 10,226 223,041 Return for the year - - - 54,824 - 7,295 62,119 Ordinary shares purchased - - - - (26,839) - (26,839) Exercise of 2010 and 2013 subscription shares - 2,276 - - - - 2,276 Bonus issue of 2013 subscription shares 24 (24) - - - - - Cancellation of treasury shares (12) - 12 - - - - 2010 subscription shares expired (22) - 22 - - - - Share purchase costs - - - - (625) - (625) Dividend paid* - - - - - (5,031) (5,031) -------- -------- -------- -------- -------- -------- -------- At 31 August 2013 138 55,672 102 158,879 27,660 12,490 254,941 -------- -------- -------- -------- -------- -------- -------- For the year ended 31 August 2012 At 31 August 2011 116 2,813 68 105,230 60,284 10,024 178,535 (Loss)/return for the year - - - (1,175) - 5,984 4,809 Ordinary shares and 2010 subscription shares issued*** 32 50,490 - - - - 50,522 Ordinary shares purchased - - - - (5,855) - (5,855) Exercise of 2010 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 68 104,055 55,124 10,226 223,041 -------- -------- -------- -------- -------- -------- -------- * Final dividend paid in respect of the year ended 31 August 2012 of 4.20p per share declared on 10 October 2012 and paid on 7 December 2012. ** Final dividend paid in respect of the year ended 31 August 2011 of 3.50p per share and a special dividend of 2.50p per share 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. Balance Sheet as at 31 August 2013 2013 2012 Notes £'000 £'000 Fixed assets Investments held at fair value through profit or loss 268,376 245,575 -------- -------- Current assets Debtors 1,226 3,032 -------- -------- 1,226 3,032 Creditors - amounts falling due within one year -------- -------- Bank overdraft (10,840) (21,909) Other creditors (3,821) (3,657) -------- -------- (14,661) (25,566) -------- -------- Net current liabilities (13,435) (22,534) -------- -------- Net assets 254,941 223,041 ======== ======== Capital and reserves Called-up share capital 8 138 148 Share premium account 55,672 53,420 Capital redemption reserve 102 68 Capital reserves 158,879 104,055 Special reserve 27,660 55,124 Revenue reserve 12,490 10,226 -------- -------- Total equity shareholders' funds 254,941 223,041 ======== ======== Net asset value per ordinary share - undiluted 7 234.49p 186.19p ======== ======== Net asset value per ordinary share - diluted 7 234.23p 185.67p ======== ======== Cash Flow Statement for the year ended 31 August 2013 2013 2012 Notes £'000 £'000 Net cash inflow from operating activities 5(b) 4,725 4,474 Servicing of finance (131) (30) Taxation recovered 218 718 -------- -------- Capital expenditure and financial investment Purchase of investments (287,717) (395,537) Proceeds from sale of investments 324,588 327,727 Realised losses on foreign currency transactions (801) (571) -------- -------- Net cash inflow/(outflow) from capital expenditure and financial investment 36,070 (68,381) -------- -------- Equity dividends paid (5,031) (5,782) -------- -------- Net cash inflow/(outflow) before financing 35,851 (69,001) -------- -------- Financing Purchase of ordinary shares (26,839) (5,855) Share purchase costs (144) (114) Proceeds from issue of ordinary shares out of treasury 2,276 1,538 Proceeds from issue of 2012 subscription shares - 117 (Costs)/proceeds from issue of ordinary shares to acquire Charter European Trust plc portfolio (75) 50,565 -------- -------- Net cash (outflow)/inflow from financing (24,782) 46,251 ======== ======== Increase/(decrease) in cash in the year 11,069 (22,750) ======== ======== 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. Accounting policies (a) Basis of preparation The Company's financial statements have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP) and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (SORP) revised in January 2009. The principal accounting policies adopted by the Company are set out below. All of the Company's operations are of a continuing nature. The Company's financial statements are presented in Sterling, which is the currency of the primary economic environment in which the Company operates. All values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated. (b) Presentation of Income Statement In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the Association of Investment Companies (AIC), supplementary information which analyses the Income Statement between items of a revenue and a capital nature has been presented alongside the Income Statement. (c) Segmental reporting The Directors are of the opinion that the Company is engaged in a single segment of business being investment business. (d) Income Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provisions are made for dividends not expected to be received. Fixed returns on debt securities are recognised on a time apportionment basis. Interest income and expenses are accounted for on an accruals basis. (e) Expenses All expenses are accounted for on an accruals basis. Expenses have been treated as revenue except as follows: - expenses which are incidental to the acquisition or disposal of an investment are included within the cost of the investment; - the investment management fee has been allocated 80% to capital reserves and 20% to the revenue account in line with the Board's expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio; - performance fees have been allocated 100% to capital reserves, as performance has been predominantly generated through capital returns of the investment portfolio. (f) Finance costs Finance costs are accounted for on an accruals basis. Finance costs are allocated, insofar as they relate to the financing of the Company's investments, 80% to capital and 20% to the revenue account, in line with the Board's expected long term split of returns, in the form of capital gains and income respectively, from the investment portfolio. (g) Taxation Deferred taxation is recognised in respect of all timing differences at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred taxation assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the timing differences can be deducted. (h) Investments held at fair value through profit or loss The Company's investments are classified as held at fair value through profit or loss in accordance with FRS 26 - 'Financial Instruments: Recognition and Measurement' and are managed and evaluated on a fair value basis in accordance with its investment strategy. All investments are designated upon initial recognition as held at fair value through profit or loss. These sales of assets are recognised at the trade date of the disposal. Disposals will be measured at fair value which will be regarded as the proceeds of sale less any transaction costs. The fair value of the financial instruments is based on their quoted bid price at the balance sheet date, without deduction for the estimated future selling costs. Unquoted investments are valued by the Directors at fair value using International Private Equity and Venture Capital Association Guidelines. This policy applies to all current and fixed asset investments of the Company. Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as "Gains or losses on investments held at fair value through profit or loss". Also included within this heading are transaction costs in relation to the purchase or sale of investments. (i) Dividends payable Under FRS 21, final dividends should not be accrued in the financial statements unless they have been approved by shareholders before the balance sheet date. Dividends payable to equity shareholders are recognised in the Reconciliation of Movements in Shareholders' Funds when they have been approved by shareholders and become a liability of the Company. (j) Foreign currency translation All transactions in foreign currencies are translated into Sterling at the rates of exchange ruling on the dates of such transactions. Foreign currency assets and liabilities at the balance sheet date are translated into Sterling at the exchange rates ruling at that date. Exchange differences arising on the revaluation of investments held as fixed assets are included in capital reserves. Exchange differences arising on the translation of foreign currency assets and liabilities are taken to capital reserves. 3. Income 2013 2012 £'000 £'000 Investment income: Overseas dividends 9,181 7,411 -------- -------- 9,181 7,411 Other income: Deposit interest - 19 -------- -------- Total 9,181 7,430 ======== ======== 4. Investment management and performance fees 2013 2012 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Investment management fee 339 1,355 1,694 262 1,049 1,311 Performance fee - 1,137 1,137 - 1,215 1,215 -------- -------- -------- -------- -------- -------- Total 339 2,492 2,831 262 2,264 2,526 ======== ======== ======== ======== ======== ======== The investment management fee is levied quarterly, based on the market capitalisation of the Company's ordinary shares on the last day of each month. The investment management fee for the year amounted to £1,694,000 (2012: £1,311,000). A performance fee of £1,137,000 was accrued for the year ended 31 August 2013 (2012: £1,215,000) based on the outperformance of the Company's share price relative to the FTSE World Europe ex UK Index. The performance fee is based on the outperformance of the Index over a three year rolling period. 5. Operating activities 2013 2012 £'000 £'000 (a) Operating expenses Custody fee 37 32 Auditor's remuneration: - statutory audit 26 25 - other audit services* 5 5 Directors' emoluments 112 97 Registrar's fees and other operating expenses 508 345 -------- -------- 688 504 ======== ======== The Company's ongoing charges, calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs, after relief for any taxation were: 0.9% 0.9% ======== ======== * Other audit services relate to the review of the half yearly financial statements. 2013 2012 £'000 £'000 (b) Reconciliation of net return before finance costs and taxation to net cash flow from operating activities Net return before finance costs and taxation 63,098 5,515 (Less)/add: capital (return)/loss before finance costs and taxation (54,944) 1,149 -------- -------- Net revenue return before finance costs and taxation 8,154 6,664 Expenses charged to capital (2,507) (2,270) Increase in accrued income (24) (74) Decrease in debtors 4 8 Increase in accrued expenditure 468 1,208 Tax on investment income included within gross income (1,370) (1,062) -------- -------- Net cash inflow from operating activities 4,725 4,474 ======== ======== 6. Dividends The Directors have proposed a final dividend of 4.50p per share and have declared a special dividend of 1.00p per share in respect of the year ended 31 August 2013. The dividends will be paid on 13 December 2013, subject to shareholders' approval on 4 December 2013, to shareholders on the Company's register on 1 November 2013. The proposed final dividend has not been included as a liability in these financial statements, as final dividends are only recognised in the financial statements when they have been approved by shareholders, or in the case of special dividends not recognised until they are paid. The dividends disclosed in the note below have been considered in view of the requirements of section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies Act 2006, and the amount proposed for the year ended 31 August 2013 meets the relevant requirements as set out in this legislation. 2013 2012 £'000 £'000 Dividend payable on equity shares: Special declared of 1.00p* per ordinary share (2012: nil) 1,087 - Final proposed of 4.50p* per ordinary share (2012: 4.20p) 4,893 5,031 -------- -------- 5,980 5,031 ======== ======== * Based on 108,719,211 ordinary shares in issue on 21 October 2013. 7. Return and net asset value per ordinary share Revenue and capital returns per share are shown below and have been calculated using the following: Undiluted 2013 2012 Net revenue return attributable to ordinary shareholders (£'000) 7,295 5,984 Net capital return/(loss) attributable to ordinary shareholders (£'000) 54,824 (1,175) -------- -------- Total return (£'000) 62,119 4,809 -------- -------- Equity shareholders' funds (£'000) 254,941 223,041 -------- -------- The weighted average number of ordinary shares in issue during the year, on which the return per ordinary share was calculated, was: 115,410,120 108,410,736 ----------- ----------- The actual number of ordinary shares in issue at the year end, on which the net asset value was calculated, was: 108,719,211 119,793,123 ----------- ----------- The number of ordinary shares in issue, including treasury shares, at the year end, was: 114,437,564 124,553,760 =========== =========== 2013 2012 Revenue Capital Total Revenue Capital Total p p p p p p Return per share Calculated on weighted average number of shares 6.32 47.50 53.82 5.52 (1.08) 4.44 Calculated on actual number of shares in issue at year end 6.71 50.43 57.14 4.99 (0.98) 4.01 -------- -------- -------- -------- -------- -------- Net asset value per share 234.49 186.19 Ordinary share price 228.75 175.00 Subscription share price 23.38 2.00 ======== ======== ======== ======== ======== ======== Diluted 2013 2012 Net revenue return attributable to ordinary shareholders (£'000) 7,295 5,984 Net capital return attributable to ordinary shareholders (£'000) 54,824 (1,175) -------- -------- Total return (£'000) 62,119 4,809 ======== ======== Equity shareholders' funds* (£'000) 308,960 266,017 -------- -------- The weighted average number of ordinary shares in issue during the year, on which the diluted return per ordinary share was calculated, was: 115,410,120 108,410,736 ----------- ----------- The actual number of ordinary shares and 2013 subscription shares (2012: 2010 subscription shares), at the year end on which the fully diluted net asset value was calculated, was: 131,903,529 143,277,136 =========== =========== 2013 2012 Revenue Capital Total Revenue Capital Total p p p p p p Return per share Calculated on weighted average number of shares** 6.32 47.50 53.82 5.52 (1.08) 4.44 -------- -------- -------- -------- -------- -------- Net asset value per share* 234.23 185.67 ======== ======== ======== ======== ======== ======== * In accordance with the AIC SORP, to the extent that the Company's NAV is in excess of the exercise price, the subscription shares are considered to be dilutive for the calculation of the NAV per share. The diluted NAV per share at 31 August 2013 is calculated by adjusting equity shareholders' funds for consideration receivable on the exercise of 23,184,318 subscription shares, at the exercise price of 233 pence per share, and dividing by the total number of shares that would have been in issue at 31 August 2013 had all the subscription shares been exercised. ** In accordance with FRS 22 "Earnings per share", there is no dilutive impact on the return per share for the year ended 31 August 2013 as the average mid-market price of the ordinary shares for the year of 228.75p is below the exercise price of the subscription shares of 233 pence per share. 8. Share capital Ordinary Treasury Subscription shares shares shares Total number number number shares £ Allotted, called up and fully paid share capital comprised: Ordinary shares of 0.1p each At 31 August 2012 119,793,123 4,760,637 - 124,553,760 124,554 Shares cancelled or transferred into treasury pursuant to tender offer on 4 December 2012 (4,661,723) 1,291,662 - - - Shares cancelled pursuant to tender offer on 10 June 2013 (7,636,639) - - - - Cancellation of treasury shares - (333,946) - (11,340,646) (11,341) ----------- ---------- ------ ----------- ------- 107,494,761 5,718,353 - 113,213,114 113,213 Subscription shares of 0.1p each: At 31 August 2012 - - 23,484,013 23,484,013 23,484 Conversion of 2010 subscription shares into ordinary shares 1,153,955 - (1,153,955) - - 2010 subscription shares expired - - (22,330,058) (22,330,058) (22,330) Bonus issue of 2013 subscription shares - - 23,254,813 23,254,813 23,255 Conversion of 2013 subscription shares into ordinary shares 70,495 - (70,495) - - ----------- --------- ---------- ----------- -------- At 31 August 2013 108,719,211 5,718,353 23,184,318 137,621,882 137,622 =========== ========= ========== =========== ======== During the year, 12,298,362 ordinary shares were purchased (2012: 3,520,849) for a total consideration, including expenses, of £27,464,000 (2012: £5,985,000). The number of ordinary shares in issue at the year end was 114,437,564 (2012: 124,553,760) of which 5,718,353 were held in treasury (2012: 4,760,637) and the number of 2013 subscription shares in issue was 23,184,318 (2012: 23,484,013 2010 subscription shares). The number of shares cancelled out of treasury during the year was 333,946 (2012: nil). As a result of the conversion of 1,153,955 2010 subscription shares and 70,495 2013 subscription shares (2012: 64,060 2010 subscription shares), new ordinary shares were issued for a total consideration of £2,276,000 (2012: £117,000). 9. Related party disclosure The investment management fee for the year was £1,694,000 (2012: £1,311,000) and the performance fee for the year was £1,137,000 (2012: £1,215,000). At the year end, the following amounts were outstanding in respect of the investment management fee: £874,000 (2012: £1,022,000) and performance fee: £1,137,000 (2012: £1,215,000). 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. With effect from 1 September 2013 the Chairman receives an annual fee of £33,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £27,500, and each other Director receives an annual fee of £23,000. Three members of the Board hold shares in the Company. Mr Walker-Haworth holds 40,718 ordinary shares and 8,143 subscription shares, Ms Ferguson 48,000 ordinary shares and 9,600 subscription shares and Mr Holtham 11,100 ordinary shares and 2,220 subscription shares. Ms Curling and Mr Sanderson do not hold any shares in the Company. 10. Contingent liabilities There were no contingent liabilities at 31 August 2013 (2012: nil). 11. Publication of non-statutory accounts The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The annual report and financial statements for the year ended 31 August 2013 will be filed with the Registrar of Companies after the Annual General Meeting. The figures set out above have been reported upon by the Auditor, whose report for the year ended 31 August 2012 contains no qualification or statement under section 498(2) or (3) of the Companies Act 2006. The comparative figures are extracts from the audited financial statements of BlackRock Greater Europe Investment Trust plc for the year ended 31 August 2012, which have been filed with the Registrar of Companies. The report of the Auditor on those financial statements contained no qualification or statement under section 498 of the Companies Act. 12. Annual Report Copies of the annual report will be published shortly and will be available from the registered office, c/o The Company Secretary, BlackRock Greater Europe Investment Trust plc, 12 Throgmorton Avenue, London EC2N 2DL. 13. Annual General Meeting The Annual General Meeting of the Company will be held at the offices of BlackRock Investment Management (UK) Limited, 12 Throgmorton Avenue, London EC2N 2DL on Wednesday, 4 December 2013 at 12.00 noon. ENDS The Annual Report will also be available on the BlackRock Investment Management website at www.blackrock.co.uk/brge. Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on the Manager's website (or any other website) is incorporated into, or forms part of, this announcement. For further information please contact: Simon White, Managing Director, Investment Company Division - 020 7743 5284 Vincent Devlin, Fund Manager - 020 7743 3000 Emma Phillips, Media & Communications - 020 7743 2922 BlackRock Investment Management (UK) Ltd 12 Throgmorton Avenue London EC2N 2DL 21 October 2013
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