BEEP.L Regulatory News (BEEP)

BlackRock Emerging Europe plc The Company's objective is to achieve long term capital growth, principally byinvesting in companies that do business primarily in Eastern Europe, Russia,Central Asia and Turkey. Financial Highlights 31 31 July January 2013 2013 %Attributable to ordinary shareholders (unaudited) (audited) changeUS dollarNet assets (US$'000)* 161,658 197,954 -18.3 Net asset value per ordinary share 446.04c 504.17c -11.5(undiluted)- with income reinvested -10.3 Net asset value per ordinary share (diluted)# 446.04c 491.43c -9.2- with income reinvested -8.0 MSCI Emerging Europe 10-40 Index 526.72 598.18 -11.9 Ordinary share price (mid-market)† 410.11c 439.16c -6.6- with income reinvested -5.2 -------- -------- --------Sterling Net Assets (£'000)*, † 106,628 124,861 -14.6 Net asset value per ordinary share 294.20p 318.01p -7.5(undiluted)#, †- with income reinvested -6.3 Net asset value per ordinary share 294.20p 309.97p -5.1(diluted)#, †- with income reinvested -3.8 MSCI Emerging Europe 10-40 Index 347.42 377.29 -7.9 Ordinary share price (mid-market) 270.50p 277.00p -2.3- with income reinvested -0.9 -------- -------- --------Discount to net asset value (diluted) 8.1% 10.6% - -------- -------- --------Gross market exposure ‡ 110.3% 110.9% - -------- -------- -------- For For the the period period ended ended 31 31 July July 2013 2012 % (unaudited) (audited) change RevenueNet revenue after taxation (US$'000) 2,796 3,765 -25.7Revenue return per ordinary share (cents) 7.16 8.19 -12.6 -------- -------- --------Total loss per ordinary share (cents) (52.51) (20.23) -159.6 ======== ======== ======== * The change in net assets reflects market movements during the year, thetender offers and the conversion of subscription shares. # There is no dilution as at 31 July 2013. † Based on an exchange rate of 1.5161 (31 January 2013: 1.5854). ‡ Long positions plus short positions as a percentage of net assets. Chairman's Statement Background The first half of the year has been challenging for Emerging European equitymarkets. Over the six month period under review the MSCI Emerging Europe 10-40Index fell by 11.9% and the MSCI Emerging Europe Index declined by 12.2%. (Allfigures are on a US dollar total return basis.) Global equity markets, including developed European exchanges, enjoyed a strongstart to the year and this continued for most of the period under review,buoyed by the liquidity being provided by central banks and the flight ofinvestors from a market of record low bond yields. However, markets correctedin the second quarter due to fears that the Federal Reserve could start"tapering" quantitative easing, thereby removing some of the liquiditysupporting investment markets. Combined with renewed concerns over theslow pace of economic growth in China, this undermined investor confidence. Performance In the six months to 31 July 2013 the Company's undiluted net asset value("NAV") returned -10.3% and the share price returned -5.2%. Since theappointment of BlackRock as investment manager on 1 May 2009 the Company'sundiluted NAV has returned 82.0% outperforming the benchmark index by 6.6%(All figures are on a US dollar total return basis.) The outperformance relative to the benchmark in the six month period was due principallyto stock selection in Russia, where the internet sector was the best performing sector.Further details of the factors which have contributed to performance are set out in theInvestment Manager's Report. Since the period end the Company's NAV has increased by 8.3% compared with an increasein the benchmark of 7.3%. (All figures are on a US dollar total return basis.) Investment policy and change of name Following approval from Shareholders for a new investment objective and policyat the General Meeting held on 21 June 2013, I am pleased to report that theimplementation of a focused portfolio approach was substantially completed by late July. Details of the changes which have been made to the Company's portfolio aregiven in the Investment Manager's Report. Following approval of the revised investment policy the Company's name waschanged to BlackRock Emerging Europe plc on 21 June 2013. Discount Control Mechanism The Board has introduced a performance triggered tender offer whereby it will put forwardproposals for a tender offer for up to 25%. of the Company's ordinary shares in issue(excluding trasury shares), if, after 3 years, the Company has underperformed its benchmarkindex by in excess of 3%. on a cumulative basis (measured on a NAV per share totalreturn basis over the 3 year period to 20 June 2016). In addition, prior to the fifth anniversary of the passing of the resolutions at the GeneralMeeting on 21 June 2013, the Board will formulate and submit to shareholders proposals (whichmay constitute a tender offer and/or other method of distribution) to provide shareholders withan opportunity to realise the value of their investment in the Company at net asset value lessapplicable cost. If the first such return of capital is not undertaken in conjunction with aliquidation of the Company, the Board intends to offer further opportunities to realise the valueof their investment in the Company at net asset value less applicable costs at subsequent five yearintervals. Tender offer At the General Meeting of the Company held on 21 June 2013, shareholdersapproved a tender offer whereby up to 7.5% of the Company's ordinary shares inissue (excluding treasury shares) on 28 June 2013 were repurchased by theCompany at a price of 283.32p per share (NAV on 28 June less the costs of thetender offer and a further deduction of 1%). The tender offer was oversubscribed with 59.7%.of the ordinary shares in issue(excluding treasury shares) being tendered. Following scaling back, 2,938,349ordinary shares were repurchased and held in treasury. Shareholders whotendered had their basic entitlement (7.5% of their shares) satisfied in fulland their election for further shares was scaled back with each shareholderreceiving 2.4% of their election. 3,338,349 ordinary shares previously held in treasury were cancelled. There arenow 36,242,928 ordinary shares in issue excluding the remaining 5,400,000 shares held intreasury. Subscription shares During the period the Company issued a total of 67,850 ordinary sharesfollowing the conversion of 2012 subscription shares into ordinary shares for atotal consideration of £185,000 (US$283,000). The subscription share rights inrespect of the remaining 8,465,178 subscription shares lapsed on 1 July 2013and the remaining subscription shares were converted into deferred shares andsubsequently cancelled. Alternative Investment Fund Manager's Directive The Alternative Investment Fund Managers' Directive ("the Directive") is aEuropean directive which seeks to reduce potential systemic risk by regulatingalternative investment fund managers ("AIFMs"). AIFMs are responsible forinvestment products that fall within the category of Alternative InvestmentFunds ("AIFs") and investment trusts are included in this. The Directive wasimplemented on 22 July 2013 although it has been confirmed that the FinancialConduct Authority ("FCA") will permit a transitional period of one year withinwhich UK AIFMs must seek authorisation. The Board has taken, and will continue to take,independent advice on the consequences for the Company and has decided inprinciple that BlackRock will be appointed as its AIFM in advance of the end ofthe transitional period on 22 July 2014. Outlook The factors that have been a drag on markets in recent months remain aconcern, and this may produce further volatility in global markets in the nearterm. However, we remain optimistic about the growth prospects for our portfolio companiesin Emerging Europe generally and Russia in particular and that this will in due course bereflected in valuations. The Board shares our Investment Manager's confidence that the Companywill benefit from the new focused portfolio approach. Our Managers have already identifiedinteresting opportunities in sectors not necessarily well represented in the benchmark,including in the technology sector. Neil England 17 September 2013 Interim Management Report and Responsibility Statement The Chairman's statement and the Investment Manager's Report give details of important eventswhich 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 asfollows: - Performance;- Regulatory;- Operational;- Market;- Financial; and- Third party service providers. The Board reported on the principal risks and uncertainties faced by theCompany in the Annual Report and Financial Statements for the year ended 31January 2013. A detailed explanation can be found in the Directors' Report onpage 17 and 18 in note 20 on pages 50 to 55 of the Annual Report and FinancialStatements which are available on the website maintained by the InvestmentManager, BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/beep. In the view of the Board, there have not been any changes to the fundamentalnature of these risks since the previous report and these principal risks anduncertainties are equally applicable to the remaining six months of thefinancial year as they were to the six months under review. Going concern The Directors are satisfied that the Company has adequate resources to continuein operational existence for the foreseeable future and is financially sound.For this reason they continue to adopt the going concern basis in preparing thefinancial statements. The Company has a portfolio of investments which areconsidered to be readily realisable and is able to meet all of its liabilitiesfrom its assets. Related party disclosure and transactions with the Investment Manager The Investment Manager is regarded as a related party under the Listing Rulesand details of the management fees payable are set out in note 3 and note 8. Therelated party transactions with the Directors are set out in note 8. Directors' responsibility statement The Disclosure and Transparency Rules ("DTR") of the UK Listing Authorityrequire the Directors to confirm their responsibilities in relation to thepreparation and publication of the Interim Management Report and FinancialStatements. The Directors confirm to the best of their knowledge that: - the condensed set of financial statements contained within the half yearlyfinancial report has been prepared in accordance with applicable UK accountingstandards and the accounting standards Board's statement `Half Yearly FinancialReport'; and - the Interim Management Report together with the Chairman's Statement andInvestment Manager's Report, include a fair review of the information requiredby 4.2.7R and 4.2.8R of the FCA's Disclosure and Transparency Rules. The half yearly financial report has not been audited or reviewed by theCompany's Auditor. The half yearly financial report was approved by the Board on 17 September 2013and the above responsibility statement was signed on its behalf by theChairman. Neil England For and on behalf of the Board 17 September 2013 Investment Manager's Report Performance Statistics 3 6 1 3 May months months Year Years 2009* to to to to to 31 31 31 31 31 July July July July July 2013 2013 2013 2013 2013 % % % % % NAV -3.7 -10.3 +6.1 -3.0 +82.0 -------- -------- -------- -------- -------- Share price +2.5 -5.2 +10.8 -1.8 +88.7 -------- -------- -------- -------- -------- Benchmark -6.2 -11.9 +5.3 +1.9 +75.4 -------- -------- -------- -------- -------- Morningstar Emerging EuropePeer Group Average** -3.5 -6.0 +6.8 -6.2 +58.4 -------- -------- -------- -------- -------- *Date that BlackRock was appointed as Investment Manager. **Source: Morningstar. Performance is on a US dollar total return basis. In the six months to 31 July 2013 the MSCI Emerging Europe 10-40 Index fell by11.9%, retracing some of the gains seen in the second half of 2012. This disappointing market performance was in contrast to the returns seen inWestern European markets, which rose over the period. While the Eurozoneproblems are not behind us, the worst of the crisis appears to have abated anddeveloped markets were supported by a better growth outlook and a moreconfident financial system. Despite the inter-relationships of the economies across the European continent,over the last six months Emerging European markets have tended to follow themainly negative market moves seen across Global Emerging Markets, rather thanmove in tandem with their Western European peers. The performance of emergingmarket equities was heavily influenced by external factors, in particular theprospect of the US tapering its quantitative easing program. The resultis that many companies in Emerging Europe are positioned to benefit from theimproving economic environment yet trade on attractive valuations. Turkey underperformed as political challenges came into focus following theGezi Park protests. However, in our opinion, this was not the most significantchallenge for Turkey's bond and stock markets - far more important was theincrease in global yields which has resulted in increasing challenges insourcing external financing for the country's current account deficit. We haveconsistently reminded investors of the difficulties Turkey faces as a result ofthis imbalance, and the recent 40% fall in the share prices of leading Turkishbanks underlines our caution. Hungary was the best performing market in the region as recovery progressed inboth the banking sector and in government finances. This improved stabilitypermitted the country to repay its outstanding obligations to the IMF early.Concerns arose in the market regarding the potential for unconventionalmonetary policies to be implemented by the new head of the central bank, butthe immediate actions were to continue modest easing at a pace acceptable tothe markets. Russia underperformed during the period. Economic growth continued todecelerate, to below 2%, despite supportive oil prices and bank lending growth.There were also concerns that the country's close financial ties with Cypruswould affect businesses and individuals following the "bail-in" of the bankingsystem. However, the vast majority of listed companies confirmed zero ornegligible exposure, with Cyprus being used more for transaction than depositpurposes. Portfolio In the six months to 31 July 2013, the NAV returned -10.3%, outperforming thebenchmark by 1.6% on a US dollar total return basis. Outperformance was particularly driven by stock selection in Russia. The strongest performers over the period were in the Russian internet sector,including search engine, Yandex and social media pioneer, Mail.Ru. Russiaenjoys some of the highest internet engagement rates globally and Russiancompanies lead the domestic market in search and social media. For example,Yandex eclipses Google with a 60% share of the Russian search market. Webelieve that several technology stocks can provide better value access to thegrowth of the Russian consumer when compared with many staples stocks. The Company also benefited from an overweight position in Russian hospitaloperator, MD Medical Group. The stock continued its run of strong performance as the newLapino hospital generated increasing utilisation rates following its successfulopening. Amongst the positions which detracted from performance was Russian energycompany, TNK-BP, resulting from uncertainty surrounding the corporategovernance approach of its new parent company, Rosneft, to minorityshareholders. The shares recovered some lost ground towards the end of theperiod as the media reported on the improved prospects of a resolution beingnegotiated, but this process is likely to take a significant amount of time. Investment strategy Following approval from Shareholders for a new investment objective and policyat the General Meeting held on 21 June 2013, the transition was made to afocused portfolio approach. The portfolio has been reduced from45 to 28 holdings, with the weighting of positions driven purely by the returnopportunity, conviction and liquidity, without reference to the weighting inthe benchmark. This focused approach allows us to look beyond the large companies whichdominate the benchmark in favour of the best ideas in the investment universe.This wider perspective provides the potential to uncover "hidden gems" acrossEmerging Europe and deploy capital where it is best placed to generate returnsover the long term. We note that MSCI have confirmed that they plan to categorise Greeceas an Emerging Market in November 2013. Greece is a market which we have coveredpreviously when it held Emerging status and we are evaluating investment opportunitiesin the country in preparation for the change. Outlook The macroeconomic environment in Russia, one of sluggish growth, looks set tocontinue. That said, the market is trading at extremely low valuations.Companies are increasingly returning capital to shareholders as they look toattract international capital inflows. The implementation of more favourabledividend policies has seen dividend yields rise above Global Emerging Marketsaverages for the first time in recent history, underlining the growingappreciation of the objective of shareholder value. In Turkey, interest rate pressures remain as inflation continues to pick up andthe current account deficit continues to be a concern. A recent weakening ofthe currency may go some way to correcting imbalances but it has been anuncomfortable episode for both the economy and the markets. The market is nowat a crossroads; if capital outflows from Turkey are too rapid, negative overshootis possible in the short term. But the recent correction in the market has putvaluations at a more rational level, which boosts the outlook for long-term returnsand makes the market relatively more attractive than it has been previously. If marketconcerns over tapering of the US quantitative easing program prove to be overly pessimistic,then a good deal of pressure will be taken off the Turkish market. The recovery in the Eurozone will help the countries in Central Europe toaccelerate during the second half of the year. That said, in Poland valuationsremain relatively expensive and uncertainties exist over upcoming reforms tothe pension system that may weigh on the market. In Hungary, the positivedirection of the economy has been hindered rather than helped by unorthodoxpolicies. With an election on the horizon, we expect an increase in populistrhetoric. Government solutions to the foreign currency mortgage burden that hasbeen a drag on the economy since the crisis may well involve significantone-off costs on Hungarian banks. Russian and Eastern European markets benefit from flexible and dynamiceconomies with undervalued currencies and educated and skilled workforces,allowing the countries of the region to remain competitive in a globalisedmarket. Despite the attendant risks, valuations are still attractive and many of theserisks remain reflected (and more) in the price. The long-term outlook forEmerging Europe is bright. Sam Vecht & David Reid BlackRock Investment Management (UK) Limited 17 September 2013 Portfolio Analysis 31 July 2013 MSCI Emerging Net % % Europe current net net 10-40 Czech assets/ assets assets Index Republic Russia Poland Hungary Kazakhstan Turkey Other (liabilities) 31.07.13 31.01.13 31.07.13 Consumer - - - - - (1.1) - - (1.1) 0.5 1.4Discretionary Consumer Staples - 5.0 2.9 - - - 4.6 - 12.5 6.4 8.2 Energy - 16.2 - - 0.6 1.9 5.6 - 24.3 31.4 35.3 Financials - 16.5 4.7 4.7 - 8.5 3.3 - 37.7 36.2 32.5 Health Care - 2.2 - - - (1.2) - - 1.0 4.0 - Industrials - 3.3 - - - - - - 3.3 4.0 2.4 InformationTechnology - 14.3 - - - - - - 14.3 3.6 - Materials - - - - - 5.5 - - 5.5 7.4 7.2 TelecommunicationsServices - 3.3 - - - 4.8 - - 8.1 11.0 9.0 Utilities - - - - - - - - - 1.5 4.0 Other - - - - - - - (5.6) (5.6) (6.0) - % Net assets31.07.13 - 60.8 7.6 4.7 0.6 18.4 13.5 (5.6) 100.0 % Net assets31.01.13 5.8 64.8 6.6 7.0 2.4 18.4 4.0 (9.0) 100.0 MSCI EmergingEurope 10-40Index31.07.13 2.6 57.3 17.9 2.4 - 19.8 - - 100.0 The table above shows the analysis of the net assets as at 31 July 2013 bysector and region, compared with the net assets as at 31 January 2013 and theMSCI Emerging Europe 10-40 Index breakdown as at 31 July 2013. 15 Largest Investments Sberbank - 11.4% (2013: 11.7%) is Russia's largest bank and is state-owned.Sberbank has branches throughout the country and a 50% share in the retaildeposit market. Sberbank continues to build on the results of its restructuringstrategy that has driven much of its success over the past few years, improvingits services and the efficiency with which they are delivered. Gazprom - 7.5% (2013: 9.0%) is Russia's largest gas producer and transporterwith an export monopoly. The company has experienced mixed fortunes as spotEuropean gas prices have fallen, but over recent months there has been animprovement in the balance of the gas market in Europe. Most of its contractualpricing issues have been resolved with customers or through arbitration,putting sales on a more stable footing. Yandex - 7.1% (2013: nil) is the dominant search engine in the Russian speakingworld, with over 60% market share. The company has continued to grow rapidly,attracting greater numbers of advertisers and a higher share of advertisingbudgets. The company is also seeking to expand its e-commerce capabilitieswhich should become a further growth driver. Garanti Bankasi - 6.7% (2013: 5.4%) is Turkey's second largest private bank. Incommon with other Turkish banks, it benefitted from declining interest ratesfor the earlier part of the period but the hike in global yields towards theend of the period will be a short-term headwind for earnings. Surgutneftegaz (preference shares) - 6.6% (2013: 4.0%) is a Russian oil and gasproducer which accounts for almost 13% of the country's crude oil output and25% of gas produced by domestic oil companies. Surgutneftegaz is the most cashgenerative of the major Russian oil producers and the preference shares, inwhich the Company invests, pay a higher dividend than ordinary shares. Dragon Oil - 5.6% (2013: 1.4%) is an energy company primarily developingproduction offshore in the Caspian Sea off Turkmenistan. The company has atrack record of steady double digit percentage growth rate in production andthe recent period has been no exception. The company has an exceptionallystrong balance sheet and generates significant free cash flow. Koza Altin - 5.5% (2013: 1.5%) is Turkey's leading gold mining company. Withlow cash costs and a strong balance sheet, the company has fared better thanmany other gold miners as the gold price has fallen. Koza Atlin has a number ofgrowth projects in the pipeline, building on its extensive exploration acreage,and is planning to bring its Himmetdede heap leach facility online later thisyear. Moscow Exchange - 5.1% (2013: nil) is the company that owns the primaryexchange platform in Russia. As well as equities, it is a platform for tradingfixed income, currency and derivative instruments. The company completed itsIPO in February 2013 and is set to benefit from a number of reforms over thenext few years that should bring Russian capital markets more into line withinternational systems. The company, like many exchanges, is a cash generativebusiness and plans to raise its dividend pay-out ratio substantially. Magnit - 5.0% (2013: 2.6%) is Russia's largest supermarket chain and has beenvery successful at growing rapidly and organically. The company has been ableto increase its margins substantially over recent quarters due to efficienciesof scale and better procurement terms, as well as less intense competition fromsome of its competitors. In the period under consideration Magnit was able tosustain its growth and margin achievements to deliver good operatingperformance. Turkcell - 4.8% (2013: 3.0%) is the leading mobile phone operator in Turkey,with circa 35 million subscribers. The company has a very strong balance sheet,stands on a low valuation and there is substantial scope for growth throughincreasing data usage and broadband. The company has competed well in a toughmarket environment in the first quarter of the calendar year and pricing trendshave subsequently improved. Mail.Ru - 4.8% (2013: 3.6%) is the largest internet company in the Russianspeaking world, focusing on social networks. It also holds stakes in variousinternet companies such as Facebook, which it has been in the process ofdivesting, returning the proceeds to shareholders. During the period thecompany has continued to grow its advertising revenue rapidly and has madeparticular advances in monetising its social networks through developingvalue-added services. OTP Bank - 4.7% (2013: 2.9%) is the largest bank in Hungary. The bank sufferedfrom the weaker Forint during the Eurozone crisis as many Hungarian borrowershad exposure to Swiss Franc loans. Since then, Hungary has significantlyimproved its fiscal position and recently managed to fulfil all of its IMFobligations. OTP Bank has continued to grow its Russian consumer lendingbusiness and as provisioning requirements in Hungary have fallen, the bank hasbeen able to show more of its high core profitability. PKO Bank Polski - 4.7% (2013: 3.0%) is Poland's largest bank. Loan growth inPoland has been subdued as the country struggled to grow from last year's highbase. Net interest margins have also slightly eroded as interest rates havebeen reduced. However, the company has delivered steady results and the economylooks set to pick up in the second half of the year in response to improvingdemand from Germany and the rest of the Eurozone. MHP - 4.6% (2013: 1.1%) is the leading poultry company in Ukraine. It is alow-cost producer, vertically integrated into grain production and processing.Over the period, the company has continued to successfully ramp up its large newfacility at Vinnytsia and has made progress in opening up EU markets for itsproducts. BRD - 3.3% (2013: nil) is part of the Société Généralé Group and the secondbank in Romania. The banking sector in Romania has begun to pick up rapidlyfrom the post-crisis turbulence and BRD has delivered on cost control andimproving asset quality. All investments reflect the value of the holding as a percentage of net assets.Percentage in brackets represents the value of the holding at 31 January 2013.Together, the fifteen largest investments represents 87.4% of net assets (31January 2013: 49.2%). Investments as at 31 July 2013 % Country Long Short Net of of Exposure Exposure Exposure net operation US$'000 US$'000 US$'000 assets Financials Sberbank Russia 18,409 - 18,409 11.4Garanti Bankasi Turkey 10,742 - 10,742 6.7Moscow Exchange Russia 8,299 - 8,299 5.1OTP Bank Hungary 7,638 - 7,638 4.7PKO Bank Polski Poland 7,614 - 7,614 4.7TSKB Turkey 2,850 - 2,850 1.8BRD - long CFD position Romania 5,415 - 5,415 3.3 -------- -------- -------- -------- 60,967 - 60,967 37.7 -------- -------- -------- --------EnergyGazprom Russia 12,196 - 12,196 7.5Surgutneftegaz Russia 10,699 - 10,699 6.6(preference shares)Dragon Oil Turkmenistan 8,999 - 8,999 5.6Volga Gas Russia 3,396 - 3,396 2.1Dogan Holding Turkey 3,057 - 3,057 1.9KazMunaiGas EP Kazakhstan 1,036 - 1,036 0.6 -------- -------- -------- -------- 39,383 - 39,383 24.3 -------- -------- -------- --------Information TechnologyYandex Russia 11,453 - 11,453 7.1Mail.Ru Russia 7,700 - 7,700 4.8Luxoft Russia 3,850 - 3,850 2.4 -------- -------- -------- -------- 23,003 - 23,003 14.3 -------- -------- -------- --------Consumer StaplesMagnit Russia 8,134 - 8,134 5.0MHP Ukraine 7,452 - 7,452 4.6Jeronimo Martins Poland 4,713 - 4,713 2.9 -------- -------- -------- -------- 20,299 - 20,299 12.5 -------- -------- -------- --------TelecommunicationsTurkcell Turkey 7,754 - 7,754 4.8Vimpelcom Russia 5,343 - 5,343 3.3 -------- -------- -------- -------- 13,097 - 13,097 8.1 -------- -------- -------- --------MaterialsKoza Altin Turkey 8,959 - 8,959 5.5 -------- -------- -------- -------- 8,959 - 8,959 5.5 -------- -------- -------- --------IndustrialsNCSP Russia 3,955 - 3,955 2.5HMS Group Russia 1,358 - 1,358 0.8 -------- -------- -------- -------- 5,313 - 5,313 3.3 -------- -------- -------- --------Health CareMD Medical Group Russia 3,490 - 3,490 2.2Short CFD position Turkey - (2,029) (2,029) (1.2) -------- -------- -------- -------- 3,490 (2,029) 1,461 1.0 -------- -------- -------- --------Consumer DiscretionaryShort CFD position Turkey - (1,823) (1,823) (1.1) -------- -------- -------- -------- - (1,823) (1,823) (1.1) -------- -------- -------- -------- Total investments - 174,511 (3,852) 170,659 105.6gross exposure ======== ======== ======== ======== Add back: gross exposure (5,415) 3,852 (1,563) (1.0)on CFDs ======== ======== ======== ======== Equity investments held 169,096 - 169,096 104.6at fair value Net current liabilities (7,419) - (7,419) (4.6) Preference shares (19) - (19) (0.0) -------- -------- -------- -------- 161,658 - 161,658 100.0 ======== ======== ======== ======== Long positions 174,511 107.9Short positions 3,852 2.4 -------- --------Gross positions 178,363 110.3 ======== ======== The total number of investments (excluding CFD positions) held at 31 July 2013was 24 (31 January 2013: 48). All investments are in equity shares unlessotherwise stated. At 31 July 2013, the Company did not hold any equityinterests comprising more than 3% of any company's capital other than Volga GasPLC in which the Company had an interest of 3.35%. During the period, the Company entered into CFDs to gain long and short exposure onindividual securities. At the period end, 2 short CFDs were outstanding (31January 2013: 1) with a net fair value loss of US$475,000 (31 January 2013: netfair value profit of US$21,000); and an underlying market value of US$3,852,000(31 January 2013: US$1,866,000). In addition, 1 long CFD position was held(31 January 2013: 2) with a net fair value profit of US$274,000 (31 January2013: net fair value profit of US$492,000) and an underlying market value ofUS$5,415,000 (31 January 2013: US$6,253,000). Income Statement for the six months ended 31 July 2013 Revenue US$'000 Capital US$'000 Total US$'000 Six months ended Year Six months ended Year Six months ended Year ended ended ended 31.07.13 31.07.12 31.01.13 31.07.13 31.07.12 31.01.13 31.07.13 31.07.12 31.01.13 Notes (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (Losses)/gains oninvestmentsheld atfair valuethrough profit orloss - - - (22,817) (13,270) 19,113 (22,817) (13,270) 19,113 Exchangegains/(losses) - - - 10 (194) (260) 10 (194) (260) Income frominvestmentsheld atfair valuethroughprofit orloss 2 4,778 6,262 7,425 - - - 4,778 6,262 7,425 Net returnsoncontractsfordifference (281) (225) (389) (511) 467 1,002 (792) 242 613 Interestreceived 2 - - 1 - - - - - 1 Investmentmanagementandperformancefees 3 (655) (726) (1,423) 24 - - (631) (726) (1,423) Otheroperatingexpenses 4 (531) (613) (1,076) (11) (68) (76) (542) (681) (1,152) -------- -------- -------- -------- -------- -------- -------- -------- -------- Net return/(loss)beforefinancecosts andtaxation 3,311 4,698 4,538 (23,305) (13,065) 19,779 (19,994) (8,367) 24,317 Financecosts (40) (58) (107) - - - (40) (58) (107) -------- -------- -------- -------- -------- -------- -------- -------- -------- Net return/(loss) onordinaryactivitiesbeforetaxation 3,271 4,640 4,431 (23,305) (13,065) 19,779 (20,034) (8,425) 24,210 Taxationcharge (475) (875) (998) - - - (475) (875) (998) -------- -------- -------- -------- -------- -------- -------- -------- --------Net return/(loss) onordinaryactivitiesaftertaxation 2,796 3,765 3,433 (23,305) (13,065) 19,779 (20,509) (9,300) 23,212 -------- -------- -------- -------- -------- -------- -------- -------- --------Net return/ 6(loss) perordinaryshare(cents)basic anddiluted 7.16 8.19 7.77 (59.67) (28.42) 44.75 (52.51) (20.23) 52.52 -------- -------- -------- -------- -------- -------- -------- -------- -------- The total column of this statement represents the Profit and Loss Account ofthe Company. The supplementary revenue and capital columns are both preparedunder guidance published by the Association of Investment Companies ("AIC").The Company had no recognised gains or losses other than those disclosed in theIncome Statement and the Reconciliation of Movements in Shareholders' Funds.All items in the above statement derive from continuing operations. All incomeis attributable to the equity holders of BlackRock Emerging Europe plc(formerly The Eastern European Trust PLC). There is no material difference between the profit and ordinary activitiesbefore taxation and the profit for the financial year stated above and theirhistorical cost equivalents. Reconciliation of Movements in Shareholders' Funds for the six months ended 31 July 2013 Called up Share Capital share premium redemption Capital Revenue capital account reserve reserves reserve Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000For the six monthsended 31 July 2013(unaudited) At 31 January 2013 4,692 41,406 5,324 165,956 (19,424) 197,954 Net (loss)/return forthe period - - - (23,305) 2,796 (20,509) Dividends paid - - - - (2,542) (2,542) Tender offer - - - (12,887) - (12,887) Cancellation oftreasury shares (334) - 334 - - - Shares purchased andheld in treasury (15) - 15 (641) - (641) Subscription shareslapsed (185) - 185 - - - Conversion ofsubscription shares 6 277 - - - 283 -------- -------- -------- -------- -------- --------At 31 July 2013 4,164 41,683 5,858 129,123 (19,170) 161,658 -------- -------- -------- -------- -------- -------- For the six monthsended 31 July 2012(unaudited) At 31 January 2012 5,409 41,259 4,519 177,190 (22,857) 205,520 Net (loss)/return forthe period - - - (13,065) 3,765 (9,300) Tender offer - - - (14,131) - (14,131) Cancellation oftreasury shares (435) - 435 - - - Subscription sharesissue costs 85 - - (338) - (253) Conversion ofsubscription shares - 90 - - - 90 -------- -------- -------- -------- -------- --------At 31 July 2012 5,059 41,349 4,954 149,656 (19,092) 181,926 -------- -------- -------- -------- -------- -------- For the year ended 31January 2013 (audited) At 31 January 2012 5,409 41,259 4,519 177,190 (22,857) 205,520 Net return for theyear - - - 19,779 3,433 23,212 Tender offer - - - (29,458) - (29,458) Cancellationof treasury shares (775) - 775 - - - Shares purchased andcancelled (30) - 30 (1,206) - (1,206) Subscription sharesissue costs 85 - - (349) - (264) Conversion ofsubscription shares 3 147 - - - 150 -------- -------- -------- -------- -------- --------At 31 January 2013 4,692 41,406 5,324 165,956 (19,424) 197,954 -------- -------- -------- -------- -------- -------- During the period the Company incurred purchase transaction costs of US$227,000(six months ended 31 July 2012: US$219,000, year ended 31 January 2013: US$389,000)and sales transaction costs of US$207,000 (six months ended 31 July2012: US$245,000; year ended 31 January 2013: US$423,000). All transaction costs have beenincluded within the capital reserves. Balance Sheet as at 31 July 2013 31 31 31 July July January 2013 2012 2013 US$'000 US$'000 US$'000 Notes (unaudited) (unaudited) (audited) Fixed assets Investments held at fair value 169,096 191,900 211,467through profit or loss ======== ======== ======== Current assetsDebtors 3,764 8,180 2,668Amounts due in respect ofcontracts for difference 274 90 530Cash at bank and in hand 464 337 1 -------- -------- -------- 4,502 8,607 3,199 -------- -------- -------- Creditors: amounts falling due (11,446) (18,488) (16,676)within one year Amounts due in respect of (475) (74) (17)contracts for difference -------- -------- -------- (11,921) (18,562) (16,693) -------- -------- --------Net current liabilities (7,419) (9,955) (13,494) -------- -------- -------- Total assets less current 161,677 181,945 197,973liabilities Creditors: amounts falling dueafter more than one yearPreference shares of £1.00 each (19) (19) (19)(one quarter paid) -------- -------- --------Net assets 161,658 181,926 197,954 ======== ======== ======== Capital and reservesCalled up share capital 5 4,164 5,059 4,692Share premium account 41,683 41,349 41,406Capital redemption reserve 5,858 4,954 5,324Capital reserves 129,123 149,656 165,956Revenue reserve (19,170) (19,092) (19,424) -------- -------- --------Total equity shareholders' funds 161,658 181,926 197,954 ======== ======== ========Net asset value per share (cents) 6 446.04 425.73 504.17- basic ======== ======== ======== Net asset value per share (cents) 6 446.04 425.73 491.43- diluted ======== ======== ======== Cash Flow Statement for the six months ended 31 July 2013 Six Six months months Year ended ended ended 31 31 31 July July January 2013 2012 2013 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Net cash inflow from operating activities 2,343 1,906 5,552 Servicing of finance: Overdraft interest (40) (58) (107) CFD financing interest (241) (123) (193) -------- -------- -------- (281) (181) (300) -------- -------- -------- Taxation paid (549) (868) (1,072) Capital expenditure and financialinvestment: Purchase of investments (111,820) (120,639) (218,622) Proceeds from sale of investments 130,815 121,355 236,078 -------- -------- -------- Net cash inflow from capital expenditure 18,995 716 17,456and financial investment -------- -------- --------Net cash inflow before financing 20,508 1,573 21,636 -------- -------- -------- Financing: Equity dividends paid (2,542) - - Repurchase of shares (13,539) (14,153) (30,596) Proceeds from conversion of subscription 283 90 150shares -------- -------- --------Net cash outflow from financing (15,798) (14,063) (30,446) -------- -------- -------- Increase/(decrease) in cash in the period 4,710 (12,490) (8,810) ======== ======== ======== Reconciliation of Net Return before Finance Costs and Taxation to Net Cash Flowfrom Operating Activities Six Six months months Year ended ended ended 31 31 31 July July January 2013 2012 2013 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Net (loss)/gains before finance costs and (19,994) (8,367) 24,317taxation Add/(less): capital loss/(gains) before 23,305 13,065 (19,779)finance costs and taxation -------- -------- -------- Net revenue return before finance costs 3,311 4,698 4,538and taxation Contracts for difference financing 241 123 193payable Expenses credited/(charged) to capital 13 (68) (76) (Increase)/decrease in accrued income (1,289) (3,136) 68 (Increase)/decrease in debtors (1) 20 10 Increase in creditors 68 269 819 -------- -------- --------Net cash inflow from operating activities 2,343 1,906 5,552 ======== ======== ======== Notes to the Half Yearly Financial Report for the six months ended 31 July 2013 1. Principal activity and basis of preparation The Company conducts its business so as to qualify as an investment trustcompany within the meaning of sub-sections 1158-1165 of the Corporation Tax Act2010. The half yearly financial statements have been prepared on the basis ofthe accounting policies set out in the Company's financial statements at 31January 2013. Under FRS26 "Financial instruments: Recognition and Measurements" the Companyhas designated its assets and liabilities as being measured at "fair valuethrough profit or loss". The fair value of fixed asset investments is deemed tobe bid market value at the close of business on the balance sheet date. Thetaxation charge has been calculated by applying an estimate of the annualeffective tax rate to any profit for the period. The Company's financial statements have been prepared using the accountingpolicies set out in the Company's annual report and financial statements forthe year ended 31 January 2013 and in accordance with UK Generally AcceptedAccounting Practice ("UK GAAP") and with the Statement of Recommended Practice"Financial Statement of Investment Companies" ("SORP") revised in January 2009. 2. Income Six Six months months Year ended ended ended 31 31 31 July July January 2013 2012 2013 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited)Investment income: UK dividends - 38 60 Overseas dividends 4,778 6,224 7,365 -------- -------- -------- 4,778 6,262 7,425 -------- -------- --------Interest receivable: Deposit interest - - 1 -------- -------- --------Total 4,778 6,262 7,426 ======== ======== ======== 3. Investment management and performance fees Six months ended Six months ended Year ended 31 July 2013 31 July 2012 31 January 2013 (unaudited) (unaudited) (audited) Revenue Capital Total Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Investmentmanagementfees 655 - 655 726 - 726 1,423 - 1,423 Performancefees - (24) (24) - - - - - - ======== ======= ======= ======== ======= ======= ======== ======= =======Total 655 (24) 631 726 - 726 1,423 - 1,423 ======== ======= ======= ======== ======= ======= ======== ======= ======= Until 1 July 2013 BlackRock received an annual management fee of 0.8% of theCompany's market capitalisation plus a performance fee equal to 10.0% of thegeometric outperformance of the net asset value ("NAV") per share annualised ona three year rolling basis (on a US dollar total return basis) over the MSCIEmerging Europe 10-40 Index (on a US dollar total return basis) subject to ahigh watermark relative to the benchmark. The amount of performance fee payablein any one year was capped at 0.95%. Any performance fee provision was subjectto write-back in the case of subsequent underperformance. Any charges inrespect of BlackRock managed funds were deducted from the investment managementfee. Since 1 July 2013 the Investment Manager receives a fixed base fee of 1% perannum of the value of the Company's average daily market capitalisation. Aperformance related fee is no longer charged. Performance fees were wholly allocated to the capital column in the IncomeStatement as the performance has been predominantly generated through capitalreturns from the investment portfolio. As at 31 July 2013, there was awrite-back of performance fee due to the Investment Manager of US$24,000 (31July 2012: US$ nil; 31 January 2012: US$ nil). 4. Other operating expenses Six Six months months Year ended ended ended 31 31 31 July July January 2013 2012 2013 US$'000 US$'000 US$'000 (unaudited) (unaudited) (audited) Custody fee 103 197 300 Directors' fees 110 134 281 Other administration costs 318 282 495 -------- -------- -------- 531 613 1,076 -------- -------- -------- Transaction charges - capital 11 68 76 -------- -------- -------- 542 681 1,152 ======== ======== ======== 5. Called up share capital Number Number Number Number of of of of 2011 2012 ordinary treasury subscription subscription shares shares shares shares Nominal in in in in Total value issue issue issue issue shares US$'000 Allotted, called up andfully paid sharecapital comprised: Ordinary shares of 10cents each andsubscription shares of1 cent each -------- -------- -------- -------- -------- --------At 31 January 2013 39,263,427 5,800,000 10,023,846 8,533,028 63,620,301 4,692 Shares repurchased andcancelled (150,000) - - - (150,000) (15) Shares repurchased andheld in treasury inrespect of sharestendered on 23 July2013 (2,938,349) 2,938,349 - - - - Shares cancelled fromtreasury - ( 3,338,349) - - (3,338,349) (334) Subscription shareslapsed - - (10,023,846) (8,465,178) (18,489,024) (185) Exercise of 2012subscription shares at273p per share 67,850 - - (67,850) - 6 283,000 ---------- -------- -------- -------- -------- --------At 31 July 2013 36,242,928 5,400,000 - - 41,642,928 4,164 ========== ======== ======== ======== ======== ======== During the period the Company bought back 150,000 ordinary shares forcancellation, other than by way of the tender offer. On 23 July 2013, 2,938,349 ordinary shares were repurchased via the periodictender offer and held in treasury for a total consideration of US$12,959,000.On 23 July 2013, 3,338,349 shares held in treasury were cancelled. The Companyalso issued 67,850 ordinary shares following the exercise of subscriptionshares for a total consideration of US$283,000. The subscription rights inrespect of the remaining 10,023,846 2011 subscription shares and the 8,465,1782012 subscription shares lapsed on 16 July 2012 and 15 July 2013, respectively.The remaining subscription shares were converted into deferred shares andsubsequently cancelled. At 31 July 2013, the Company had 36,242,928 ordinary shares in issue (excluding5,400,000 ordinary shares held in treasury). 6. Returns and net asset value per ordinary share Six months Six months Year ended ended ended 31 31 31 July July January 2013 2012 2013 (unaudited) (unaudited) (audited) Net revenue return attributable toordinary shareholders (US$'000) 2,796 3,765 3,433 Net capital (loss)/return attributable toordinary shareholders (US$'000) (23,305) (13,065) 19,779 -------- -------- --------Net total (loss)/return attributable to (20,509) (9,300) 23,212ordinary shareholders (US$'000) ======== ======== ======== Equity shareholders' funds (US$'000) 161,658 181,926 197,954 -------- -------- --------The weighted average number of ordinaryshares in issue during the period onwhich the return per ordinary share wascalculated was: 39,053,398 45,975,131 44,195,647 -------- -------- -------- The actual number of ordinary shares inissue at the end of each period on whichthe net asset value was calculated was: 36,242,928 42,732,819 39,263,427 -------- -------- --------The number of ordinary shares on whichthe diluted net asset value wascalculated was: 36,242,928 42,732,819 47,796,455 -------- -------- -------- Basic and diluted* Revenue return per share - (cents) 7.16 8.19 7.77 Capital (loss)/return per share - (cents) (59.67) (28.42) 44.75 -------- -------- --------Total (loss)/return per share - (cents) (52.51) (20.23) 52.52 -------- -------- --------Net asset value per share basic - (cents) 446.04 425.73 504.17 Net asset value per share diluted for 446.04 425.73 491.43subscription shares - (cents)** -------- -------- --------Share price*** 410.11 376.03 439.16 ======== ======== ======== * No diluted earnings per share have been calculated for 31 July 2013, 31 January 2013or 31 July 2012 due to the conversion price of 273p (2012: 357p) being in excess of theaverage share price for each of the periods. ** As the undiluted NAV and share price as at 31 January 2013 were both abovethe subscription share conversion price of 273p there was dilution as at31 January 2013. In contrast, as the undiluted NAV and share price as at 31 July2012 were both below the subscription share conversion price of 357p,there was no dilution. At 31 July 2013 the subscription share rights had lapsed and theshares had been converted into difered shares and subsequently cancelled. *** The Company's ordinary share price is quoted in sterling and the aboverepresents the US dollar equivalent. 7. Interim dividend The Board has not declared an interim dividend. 8. Transactions with the Investment Manager The related party transaction with BlackRock Investment Management (UK) Limitedis set out in note 3. The investment management fees for the six months ended 31 July 2013 amountedto US$655,000 (six months ended 31 July 2012: US$726,000 and the year ended 31January 2013: US$1,423,000). A performance fee of US$24,000 has been written back in the period (six monthsended 31 July 2012: US$ nil; year ended 31 January 2012: US$ nil). At the periodend no performance fees were outstanding (six months ended 31 July 2012 and yearended 31 January 2013: US$297,000). At the period end, an amount of US$1,005,000 was outstanding in respect ofinvestment management fees (six months ended 31 July 2012: US$336,000; year ended31 January 2013: US$1,033,000). 9. Related party disclosure The Board consists of six non-executive Directors, all of whom are consideredto be independent by the Board. None of the Directors has a service contractwith the Company. The Chairman receives an annual fee of £37,000, the Chairmanof the Audit Committee receives an annual fee of £27,000 and each of the otherDirectors receives an annual fee of £23,500. At the period end members of the Board held ordinary shares in the Company asset out below: Ordinary shares Rachel Beagles 10,096Mark Bridgeman 3,650Philippe Delpal 12,000Neil England 124,133Rory Landman 52,000Robert Sheppard 10,000 ======== 10. Publication of non statutory accounts The financial information contained in this half yearly financial report doesnot constitute statutory accounts as defined in section 435 of the CompaniesAct 2006. The financial information for the six months ended 31 July 2013 and31 July 2012 has not been audited or reviewed. The information for the year ended 31 January 2013 has been extracted from thelatest published audited financial statements, which have been filed with theRegistrar of Companies. The report of the auditor on those accounts containedno qualification or statement under sections 498(2) or (3) of the Companies Act2006. 11. Contingent liabilities There were no contingent liabilities at 31 July 2013, 31 July 2012 or 31January 2013. 12. Annual results The Board expects to announce the annual results for the year ending 31 January2014, in April 2014. Copies of the annual results announcement can be obtainedfrom the Company Secretary on 020 7743 3000. The annual report should beavailable by early April 2014, with the Annual General Meeting being held inJune 2014. For further information please contact: Simon White, Managing Director, Investment Company Division 020 7743 5284Emma Phillips, Media & Communications 020 7743 2922BlackRock Investment Management (UK) Limited ENDS The Half Yearly Financial Report will also be available on the website atwww.blackrock.co.uk/beep. Neither the contents of the Manager's website northe 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.