Half-yearly Report
BLACKROCK GREATER EUROPE INVESTMENT TRUST plc
Half yearly financial results for the six months ended 28 February 2010
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 to 28 February 2010, European equity markets experienced
mixed fortunes. The market rally which had continued into September 2009
succumbed to periods of unsettled conditions, with a marked reduction in
valuations during October when investors took profits in companies recovering
from the credit crisis. Also, investors became increasingly concerned about the
possible consequences of a number of countries in the Eurozone running
unsustainable levels of debt and budget deficits, in particular Greece.
European equities recovered in the final month of the period. Against this
backdrop, during the six month period, the Company's net asset value ("NAV")
grew by 9.4% (compared with a rise of 4.7% in the FTSE World Europe ex UK
Index) and the share price increased by 8.7% (all figures calculated in
sterling terms with income reinvested).
Since the period end, the Company's NAV has increased by 10.8% and the share
price has risen by 11.1% (both with income reinvested).
Tender offer
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 30 November 2009 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%. The tender offer was undersubscribed
with 3,440,129 shares in issue being tendered at a price of 169.84p per share,
which represented 3.27% of the Company's shares in issue, excluding treasury
shares. All shares tendered were placed in treasury and the 1,696,092 shares
previously held in treasury were cancelled in line with the Directors' policy.
The Company announced on 29 March 2010 that the Directors will be implementing
the May tender offer with a calculation date of 1 June 2010, being the
succeeding business day to 31 May 2010. A circular relating to the tender offer
will be enclosed with the half yearly financial report.
Subscription shares
The Company is considering proposals for a bonus issue of subscription shares
to existing shareholders. Following a number of years of tender offers every six
months, the number of the Company's shares in issue has decreased and this has
reduced the market capitalisation of the Company. The Board considers that an
issue of subscription shares, which should in due course increase the number of
shares in issue, should improve the liquidity of the Company's shares in the
market to the advantage of shareholders.
It is expected that a general meeting will be convened in late June to
consider such a proposal.
Outlook
The weak economic and financial condition of a number of European countries is
set to continue for a period of time. However, these issues are not a concern
for most major European countries in the Eurozone and with interest rates
unchanged and a pledge to maintain record low borrowing costs for an extended
period, European equities have recently risen to their highest level for
eighteen months. The Company will continue to invest in selected companies
which should benefit from these trends.
John Walker-Haworth
14 April 2010
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 2009. A
detailed explanation can be found on page 13 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 notes 4 and 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 13 April 2010 and
the above responsibility statement was signed on its behalf by the Chairman.
John Walker-Haworth
By order of the Board
14 April 2010
Investment Manager's Report
Overview
We are pleased to report that the Company's underlying NAV and share price
gained 9.4% and 8.7% respectively, over the six months to 28 February 2010.
This constitutes a strong outperformance of the reference index at both the NAV
and the share price levels, with the FTSE World Europe ex UK Index returning
4.7% in the same period. The Euro strengthened against Sterling over the period
and, consequently, we have benefited from some small translation gains as
positions were converted back to base currency.
European equity markets continued to experience significant gains in September
2009, during which the FTSE World Europe ex UK Index gained 9.5%. This initial
rally was fuelled by both a marginally improving economic backdrop and by the
sheer extent of the recession, during which valuations were discounted to
historically low levels. Indeed, central banks and governments continued to
stimulate the market via 'quantitative easing' and low interest rates, and the
situation for corporate earnings ceased to deteriorate.
However, the remainder of the period saw both monthly gains and losses in the
markets as economic data to support the recovery was not forthcoming. European
equity markets fell in October as investors sought to bank their profits from
the unprecedented gains in their investments, and fell again in January as
concerns over Greece's high levels of debt and significant budget deficit hit
the headlines. In addition, President Obama's speech in January 2010 concerning
the potential restriction of investment bank 'proprietary trading' caused
financials to fall to lower levels after they had led the recovery from March
2009 onwards.
Positive performance was largely driven by holdings in the developed Europe
portion of the portfolio, although positions from the emerging Europe portion
did, in places, make a positive contribution. Within this region, the Company's
positions in Russian utility company, Rushydro, and Hungarian bank, OTP Bank,
performed particularly well. On average, the Company was moderately geared as
we continued to maintain higher levels of conviction.
The strongest performance over the period came from the Company's positions in
industrial companies. Within this sector, the Company benefited both from
having a higher weighting relative to the reference index and from strong stock
selection. A holding in Swiss freight company, Kuehne + Nagel, performed
particularly well and gained from the bottoming out of inventory levels and the
subsequent pick-up in industrial trade. In addition, the Company's position in
Dutch oil storage company, Vopak, proved particularly fruitful. Vopak is a high
quality company with `defensive' earnings characteristics and high barriers to
entry. The stock price benefited from strong earnings reports and December's
announcement of a joint venture in the Middle East that was well received by
the market, as it offered the company additional exposure to emerging market
growth.
A key theme for the Company during the period has been exposure to the emerging
market consumer. A holding in Swiss watch manufacturer, Swatch, outperformed
over the period. Swatch offers significant exposure to the increasingly wealthy
Asian consumer with particular prestige and pricing power in its Omega brand.
Additionally, a position in Portuguese food retailer, Jeronimo Martins,
performed well, as its business offered strong branding in Poland and has the
potential to gain significant market share in the region.
Holdings which performed less well in the period included selected financials
which suffered as market sentiment within the sector worsened towards the end
of the period. In particular, the portfolio suffered from positions in Greek
Bank, EFG Eurobank Ergasias, which was sold off as concerns over Greece's debt
situation came to the fore, and life insurance companies, Irish Life &
Permanent and ING.
Portfolio activity
The Company began the period with relatively high exposure to 'cyclical'
companies that were most likely to benefit from the market recovery. In
particular, the portfolio had significant exposure to financial and industrial
companies, with some exposure to companies within the autos and cement
industries. However, from September, the Company rotated into companies with
more 'defensive' characteristics and sought investment opportunities which
presented strong earnings growth and the potential for positive earnings
surprise over the coming months. Towards the end of the period, the Company
increased its exposure to consumer goods, consumer services and technology,
had a lower exposure to financials and had a bias towards the beneficiaries
of increased corporate investment. In addition, the Company sought to avoid
positions with exposure to Greece, Portugal and Spain given the significant
negative sentiment surrounding their associated economies. The Company also
took up more positions in Europe's emerging regions at the end of the period
as a reflection of our positive stance on the region. Approximately 11.5% of
the Company's portfolio is currently invested in emerging Europe.
Outlook
Despite recent market volatility, we remain positive on the outlook for
European equity markets. However, there are clear structural issues in some of
Europe's peripheral countries, especially regarding government budget deficits
and the strict austerity plans that are liable to follow. This is likely to
depress the economies in these countries over the longer term, although it is
important to note that much of core Europe does not share the same issues;
indeed, the Eurozone as a whole has far healthier levels of household debt than
either the UK or the US.
Positive earnings surprises in 2009 were mainly a result of aggressive cost
cutting and, looking ahead, equity markets will need to see a sales pick up to
drive earnings growth. It is our expectation that as the global recovery
continues this growth will be driven by a combination of increased corporate
spending and continued strong demand from emerging markets, including economies
within emerging Europe. Within the developed world, Europe offers the greatest
exposure to emerging market growth within the most attractive industries and
the ability to choose from high quality, global leading franchises with a high
level of exposure to this growth is an exciting prospect.
Vincent Devlin and Sam Vecht
BlackRock Investment Management (UK) Limited
14 April 2010
Ten Largest Investments
28 February 2010
Roche - 4.3% (2009: 1.0%) is a Swiss based pharmaceuticals and diagnostics
company. Roche develops and produces diagnostic and therapeutic products and
services from detection to treatment of diseases. We believe that Roche is the
strongest long term stock in the health care sector due to its potential for
high margins and specialised product lines, meaning that the impact of generic
drugs is lower than with other companies.
Novartis - 3.7% (2009: nil) is a Swiss based company engaged in the research,
development and marketing of health care products. Novartis' recent decision to
buy the remaining 52% of Alcon from Nestlé presents significant synergy
benefits for the company, which offers a relatively strong earnings growth
profile within the sector and which we believe is one of the cheapest
pharmaceutical companies in Europe given this growth potential.
Nestlé - 3.7% (2009: 4.1%) is a Swiss based company and the world's leading
food manufacturer with activities in coffee, bottled water, milk products and
dietetics, prepared dishes and pet food, chocolate and confectionary and
pharmaceuticals. Nestlé offers an attractive dividend yield of around 3% and,
with high levels of free cash flow, provides an opportunity for structural
growth in the near future.
Credit Suisse - 3.1% (2009: 2.7%) is a Swiss based leading global investment and
private bank. Credit Suisse managed its business well throughout the recent
downturn and therefore did not require any form of government bail out. The
company has a strong private banking division that is continuing to gain assets
and outperform expectations and we feel that the investment banking arm is set
to benefit from an increase in activity at the beginning of 2010.
AXA - 2.8% (2009: nil) is a French insurance company focused on financial
protection. AXA is currently trading at attractive valuations, provides a
strong dividend yield and offers leverage to rising asset prices. The price has
recently weakened due to concerns over the potential for punitive insurance
regulation, but we believe these concerns are overdone and view the stock as a
quality business trading at cheap valuations.
Swatch - 2.8% (2009: 2.0%) is a Swiss based company engaged in the manufacture
of watches, jewellery and accessories as its core business. Swatch offers
significant levels of exposure to the emerging market consumer in Asia, which
we feel will be a strong source of growth in the near future. Swatch's Omega
brand, in particular, enjoys positive pricing power in the region and we feel
that the market is currently underestimating the growth potential for the
company over the coming period.
Société Générale - 2.8% (2009: nil) is a French based banking group. It is
currently trading at very cheap valuations following a profit warning in
January 2010 and we expect that 2010 will be a turnaround year for them. The
first quarter of 2010 has been surprisingly good for investment banks and the
company's exposure to fixed income provides potential for future positive
earnings surprise this year.
BNP Paribas - 2.6% (2009: 2.1%) is a French based banking group. BNP Paribas has
significant exposure to fixed income and a steepening yield curve presents a
strong opportunity for earnings growth. Business is currently surprisingly
strong for BNP and the business has performed better than 2009 in the first
quarter of the year due to a significant increase in debt issuance. Given the
recent looming regulatory issues over investment banking, the company is
trading at very attractive valuations relative to its earnings potential.
Kuehne + Nagel - 2.4% (2009: 1.1%) is a Swiss based company and a strong global
player in the freight and freight forwarding market. Operating on a global
scale, the company is gaining market share against more traditional transport
options and offers a seamless end-to-end guarantee service to its customers.
The company is trading at reasonably attractive valuations given the growth
that the business model offers.
Kone - 2.3% (2009: nil) is a high quality company that manufactures and services
elevators globally. The company offers a high degree of recurring income and
the potential for strong margin growth with little capital employed and strong
cash generation. Kone is set to benefit from exposure to China in particular
and we expect them to continue to increase market share over the coming year
with near double digit earnings growth.
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 2009.
Investments
28 February 2010
Country Book Market
of cost value % of
operation £'000 £'000 investments
Financials
Credit Suisse Switzerland 5,562 5,772 3.1
AXA France 5,292 5,264 2.8
Société Générale France 5,276 5,120 2.8
BNP Paribas France 4,112 4,767 2.6
KBC Belgium 3,122 3,868 2.1
Euler Hermes France 2,823 3,557 1.9
VTB Bank Russia 2,703 2,701 1.4
Banco Santander Spain 2,727 2,581 1.4
Banco Bilbao Vizcaya Spain 1,956 1,884 1.0
OTP Bank Hungary 1,044 1,699 0.9
ING Netherlands 1,637 1,675 0.9
Globe Trade Centre Poland 1,840 1,588 0.8
Azimut Italy 914 939 0.5
Julius Baer Switzerland 715 736 0.4
Erste* Austria - - -
------ ------ ----
39,723 42,151 22.6
------ ------ ----
Consumer Goods
Nestlé Switzerland 5,655 6,908 3.7
Swatch Switzerland 3,785 5,202 2.8
Nokian Renkaat Finland 3,773 4,061 2.2
Carlsberg Denmark 3,667 3,838 2.1
Heineken Netherlands 3,394 3,679 2.0
Danone France 2,525 2,566 1.4
Central European Distribution Poland 1,885 2,097 1.1
Valeo France 1,711 1,640 0.9
Bulgari Italy 1,552 1,404 0.7
Elringklinger Germany 565 984 0.5
------ ------ ----
28,512 32,379 17.4
------ ------ ----
Industrials
Kuehne + Nagel Switzerland 3,868 4,504 2.4
Kone Finland 3,785 4,235 2.3
Legrand France 3,382 4,153 2.2
Vopak Netherlands 2,853 4,088 2.2
KCI Konecranes Finland 2,315 2,545 1.4
CFAO France 2,206 2,357 1.3
Técnicas Reunidas Spain 1,971 2,285 1.2
Adecco Switzerland 1,452 1,681 0.9
Bilfinger Berger Germany 1,256 1,541 0.8
------ ------ ----
23,088 27,389 14.7
------ ------ ----
Health Care
Roche Switzerland 7,279 7,930 4.3
Novartis Switzerland 5,987 6,962 3.7
Intercell Austria 2,693 2,042 1.1
Nobel Biocare Switzerland 1,973 1,839 1.0
Elekta Sweden 1,241 1,306 0.7
------ ------ ----
19,173 20,079 10.8
------ ------ ----
Oil & Gas
Total France 4,272 4,179 2.2
Technip France 3,769 3,913 2.1
CGG Veritas France 3,685 3,586 1.9
Gazprom Russia 2,502 2,563 1.4
Statoil Hydro Norway 1,760 1,783 1.0
Rosneft Ojsc Russia 861 926 0.5
------ ------ ---
16,849 16,950 9.1
------ ------ ---
Consumer Services
PPR France 3,558 3,708 2.0
Jerónimo Martins Portugal 2,526 3,150 1.7
Eutelsat France 2,002 2,162 1.2
Metro Germany 2,081 2,021 1.1
Central European Media Czech Republic 1,879 1,968 1.1
X5 Retail Russia 942 1,044 0.5
Betandwin.com Interactive Austria 721 1,012 0.5
------ ------ ---
13,709 15,065 8.1
------ ------ ---
Telecommunications
Teliasonera Sweden 3,814 4,038 2.2
KPN Netherlands 3,464 3,628 2.0
Millicom International Cellular Luxembourg 1,883 2,311 1.2
Comstar United Telesys Russia 1,679 1,741 0.9
------ ------ ---
10,840 11,718 6.3
------ ------ ---
Technology
SAP Germany 3,295 3,305 1.8
Wincor Nixdorf Germany 2,842 3,270 1.7
Aixtron Germany 2,687 2,632 1.4
ASML Netherlands 1,727 2,041 1.1
------ ------ ---
10,551 11,248 6.0
------ ------ ---
Basic Materials
Syngenta Switzerland 2,685 2,973 1.5
K & S Germany 1,763 1,785 1.0
----- ----- ---
4,448 4,758 2.5
----- ----- ---
Utilities
Rushydro Russia 2,496 2,879 1.6
Ceske Energeticke Zavody Czech Republic 1,842 1,747 0.9
----- ----- ---
4,338 4,626 2.5
------- ------- -----
Total investments 171,231 186,363 100.0
======= ======= =====
* This holding was valued at £24 as at 28 February 2010.
All investments are in ordinary shares unless otherwise stated. The total
number of investments held at 28 February 2010 was 64 (31 August 2009: 53).
INCOME STATEMENT
for the six months ended 28 February 2010
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 28 31 28 28 31 28 28 31
February February August February February August February February August
2010 2009 2009 2010 2009 2009 2010 2009 2009
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Notes
Gains/
(losses) on
investments
held at
fair value
through
profit or
loss - - - 16,095 (57,869) (8,914) 16,095 (57,869) (8,914)
Income from
investments
held at
fair value
through
profit or
loss 3 674 1,118 5,514 - - - 674 1,118 5,514
Other
income 3 23 55 55 - - - 23 55 55
Investment
management
and
performance
fees 4 (108) (71) (142) (430) (283) (568) (538) (354) (710)
Write back
of prior
years' VAT 4 - - 75 - - 299 - - 374
Operating
expenses 5 (256) (285) (668) - - - (256) (285) (668)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net return
before
finance
costs and
taxation 333 817 4,834 15,665 (58,152) (9,183) 15,998 (57,335) (4,349)
Finance
costs (4) - (4) (19) - (14) (23) - (18)
----- ----- ----- ------ ------- ------- ------- ------- ------
Return on
ordinary
activities
before
taxation 329 817 4,830 15,646 (58,152) (9,197) 15,975 (57,335) (4,367)
Taxation on
ordinary
activities (101) (234) (1,311) - (12) (16) (101) (246) (1,327)
----- ----- ------ ------- ------- ------ ------- ------- ------
Return on
ordinary
activities
after
taxation 7 228 583 3,519 15,646 (58,164) (9,213) 15,874 (57,581) (5,694)
=== === ===== ====== ======= ====== ====== ======= ======
Return per
ordinary
share -
basic and
diluted 7 0.22p 0.53p 3.26p 15.13p (53.01p) (8.54p) 15.35p (52.48p) (5.28p)
===== ===== ===== ====== ======= ====== ====== ======= ======
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 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 - - - (5,843) - - (5,843)
Shares cancelled (2) - 2 - - - -
Share purchase costs - - - (98) - - (98)
Dividends paid * - - - - - (3,311) (3,311)
--- --- --- ------ ------- ----- -------
At 28 February 2010 105 151 59 74,138 101,137 3,745 179,335
=== === === ====== ======= ===== =======
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 ** - - - (6,814) - - (6,814)
Shares cancelled (3) - 3 - - - -
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 year ended
31 August 2009
(audited)
At 31 August 2008 115 151 49 89,340 94,704 6,681 191,040
Return for the year - - - - (9,213) 3,519 (5,694)
Shares purchased ** - - - (9,114) - - (9,114)
Shares cancelled (8) - 8 - - - -
Share purchase costs - - - (147) - - (147)
Dividends paid *** - - - - - (3,372) (3,372)
--- --- --- ------ ------ ----- -------
At 31 August 2009 107 151 57 80,079 85,491 6,828 172,713
=== === === ====== ====== ===== =======
* 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.
** Restated to clarify that shares repurchased had been cancelled during the
period.
*** 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.
The transaction costs incurred on the acquisition and disposal of investments
are included within the capital reserves and amounted to £583,000 for the six
months ended 28 February 2010 (six months ended 28 February 2009: £491,000;
year ended 31 August 2009: £1,230,000).
BALANCE SHEET
as at 28 February 2010
28 February 28 February 31 August
2010 2009 2009
£'000 £'000 £'000
Notes (unaudited) (unaudited) (audited)
Non current assets
Investments held at fair value
through profit or loss 186,363 124,158 170,983
------- ------- -------
Current assets
Debtors 4,231 4,041 5,142
Cash 8 106 6,010
----- ----- ------
4,239 4,147 11,152
----- ----- ------
Creditors - amounts falling due
within one year
Bank overdrafts (2,780) (3,507) (7,310)
Other creditors (8,487) (1,011) (2,112)
------- ------ ------
(11,267) (4,518) (9,422)
------- ------ ------
Net current (liabilities)/assets (7,028) (371) 1,730
------- ------ ------
Total assets less current
liabilities 179,335 123,787 172,713
Provision for liabilities and
charges - (668) -
------- ------- -------
Net assets 179,335 123,119 172,713
======= ======= =======
Capital and reserves
Share capital 8 105 112 107
Share premium account 151 151 151
Capital redemption reserve 59 52 57
Special reserve 74,138 82,372 80,079
Capital reserves 101,137 36,540 85,491
Revenue reserve 3,745 3,892 6,828
------- ------- -------
Total equity shareholders' funds 179,335 123,119 172,713
======= ======= =======
Net asset value per share 7 176.36p 115.26p 164.29p
======= ======= =======
SUMMARISED CASH FLOW STATEMENT
for the six months ended 28 February 2010
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net cash (outflow)/inflow from operating
activities (276) 535 3,852
Returns on investment and servicing of
finance (23) (7) (25)
Taxation paid (726) (338) (644)
Capital expenditure and financial
investment
Purchase of investments (240,886) (164,944) (423,640)
Proceeds from sale of investments 249,998 169,422 429,976
Realised (losses)/gains on foreign
currency transactions (336) 470 23
-------- -------- --------
Net cash inflow from capital expenditure
and financial investment 8,776 4,948 6,359
-------- -------- --------
Equity dividends paid (3,311) (3,372) (3,372)
-------- -------- --------
Net cash inflow before financing 4,440 1,766 6,170
-------- -------- --------
Financing
Purchase of ordinary shares (5,843) (6,814) (9,114)
Share purchase costs (69) (88) (91)
-------- -------- --------
Net cash outflow from financing (5,912) (6,902) (9,205)
-------- -------- --------
Decrease in cash (1,472) (5,136) (3,035)
====== ====== ======
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
2010 2009 2009
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net gain/(loss) before finance costs
and taxation 15,998 (57,335) (4,349)
(Gains)/losses on investments held at
fair value (16,095) 57,869 8,914
Decrease in prepayments and accrued
income 5 76 97
(Decrease)/increase in other creditors (68) 109 235
Tax on investment income included within
gross income (116) (184) (1,045)
----- ----- ------
Net cash (outflow)/inflow from operating
activities (276) 535 3,852
==== ==== =====
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 at 31 August
2009.
The financial statements have been prepared under UK Generally Accepted
Accounting Practice pronouncements on half yearly reporting issued by the
Accounting Standards Board and the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies" ("SORP") revised in January 2009.
3. Income
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment income:
Overseas dividends 674 1,118 5,514
--- ----- -----
674 1,118 5,514
Other income:
Deposit interest 23 55 55
--- ----- -----
Total 697 1,173 5,569
=== ===== =====
4. Investment management and performance fees
Six months ended Six months ended Year ended
28 February 2010 28 February 2009 31 August 2009
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment
management fees 108 430 538 71 283 354 142 568 710
VAT written back - - - - - - (75) (299) (374)
--- --- --- --- --- --- --- --- ---
Total 108 430 538 71 283 354 67 269 336
=== === === === === === === === ===
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 is not due and has not been accrued (six months
ended 28 February 2009: nil; year ended 31 August 2009: nil).
5. Operating expenses
Six months Six months Year
ended ended ended
28 February 28 February 31 August
2010 2009 2009
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Administration fee 65 102 203
Custody fee 23 25 41
Other administration costs 168 158 424
--- --- ---
256 285 668
=== === ===
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
2010 2009 2009
(unaudited) (unaudited) (audited)
Net revenue attributable to
ordinary shareholders (£'000) 228 583 3,519
Net capital return attributable
to ordinary shareholders (£'000) 15,646 (58,164) (9,213)
------- ------- -------
Net total return (£'000) 15,874 (57,581) (5,694)
------- ------- -------
Equity shareholders' funds (£'000) 179,335 123,119 172,713
------- ------- -------
The weighted average number of
ordinary shares in issue during
the period, on which the return
per ordinary share was calculated,
was: 103,433,043 109,712,498 107,841,142
----------- ----------- -----------
The actual number of ordinary
shares in issue at the end of
each period, on which the net
asset value was calculated, was: 101,684,469 106,820,690 105,124,598
----------- ----------- -----------
Net asset value per share 176.36p 115.26p 164.29p
======= ======= =======
Return per share
Calculated on weighted average shares:
Revenue return 0.22p 0.53p 3.26p
Capital return 15.13p (53.01p) (8.54p)
------ ------- ------
Total 15.35p (52.48p) (5.28p)
====== ====== ======
Calculated on actual shares:
Revenue return 0.22p 0.55p 3.35p
Capital return 15.39p (54.45p) (8.77p)
------ ------- ------
Total 15.61p (53.90p) (5.42p)
====== ====== ======
At 28 February 2010, the Company had 3,440,129 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 value
in issue in issue Total £
Authorised share
capital comprised:
Ordinary shares of
0.1p each 900,000,000 - 900,000,000 900,000
----------- --------- ----------- -------
At 31 August 2009 105,124,598 1,696,092 106,820,690 106,821
Shares transferred
into treasury
pursuant to tender
offer on
30 November 2009 (3,440,129) 3,440,129 - -
Shares cancelled from
treasury on
1 December 2009 - (1,696,092) (1,696,092) (1,696)
----------- ---------- ----------- -------
At 28 February 2010 101,684,469 3,440,129 105,124,598 105,125
=========== ========= =========== =======
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 fee for the six months ended 28 February 2010 was
£538,000 (six months to 28 February 2009: £354,000; year to 31 August 2009:
£710,000). At the period end, an amount of £362,000 was outstanding in respect
of the investment management fee (2009: £457,000).
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 2010
and 28 February 2009 has not been audited.
The information for the year ended 31 August 2009 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 2010
in October 2010. The annual report should be available by the end of October
2010, with the Annual General Meeting being held on Wednesday, 1 December 2010.
33 King William Street
London
EC4R 9AS
14 April 2010
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 2010 which comprises the Income Statement, Reconciliation of
Movements in Shareholders' Funds, Balance Sheet, Summarised Cash Flow
Statement, Reconciliation of Net Return before Finance Costs and Taxation to
Net Cash Flow from Operating Activities, and the related notes. We have read
the other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained
in International Standard on Review Engagements 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 conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half yearly
financial report for the six month period ended 28 February 2010 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
14 April 2010
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