RNS Number : 3344Y
Charter European Trust plc
04 July 2008
For Immediate Release 4th July 2008
CHARTER EUROPEAN TRUST plc
HALF-YEARLY FINANCIAL REPORT
For the six months ended 31st May 2008
Highlights
* NAV return for six month period of 2.4% compared to benchmark return of -2.9%
* Increase in interim dividend of 16.7% to 1.40p per share
Interim Management Report
Net Asset Value
The net asset value per Ordinary Share at 31st May 2008 was 266.4p, representing a capital return of 2.4% for the six months since 30th
November 2007 compared with a return of -2.9% on the Company's benchmark, the FTSE World Europe (ex UK) Index (�). Since the end of May
there has been further weakness in European equity markets, falling a further 12.3% (1st June-2nd July), whilst our Company continued to
fare better, falling by 9.1%.
Interim Dividend
The Board recommends an interim dividend of 1.40p per Ordinary Share (2007: 1.20p per Ordinary Share), payable on 26th August 2008 to
shareholders on the Register at 25th July 2008.
Investment Review
Stock markets around the world have been highly volatile in the period under review; weakness at the beginning of the year was offset by
a strong rally in April and May. European markets mirrored the global experience despite some strong performances from key industrial
segments in the region.
The year started with investors in downbeat mood following the rapid deterioration in financial markets as the impact of sub-prime
mortgage defaults in the US spread into a severe liquidity and credit crisis. The nadir in sentiment was reached as Bear Stearns, the US
broking house, collapsed and was subsequently rescued by JP Morgan with the explicit support of the Federal Reserve. This event marked a
short term bottom in markets which rallied through to the end of the period under review as an element of confidence returned, assisted by
the additional easing of monetary policy in the US.
In terms of the Trust's portfolio, it is encouraging to note that a number of key holdings performed well relative to the market in this
period. This outperformance occurred across a range of different sectors and reflected the emphasis on individual stock selection and the
relatively concentrated number of holdings in the investment portfolio. Syngenta, a leading global provider of crop protection products and
seeds, made a strong contribution to performance as its clients benefited from higher agricultural product prices. Another of the Trust's
investments, SGS Group, delivered excellent returns as the company's testing related services saw strong demand. We see the global testing
market having attractive structural growth characteristics, particularly in the emerging economies, as quality and standards regulation
increases the need for third party independent testing and review. Other investments which have made a positive contribution include
Tandberg (global video conferencing products and services), International Personal Finance (Eastern European consumer credit provider) and Dassault Systes (French IT software group).
At the sector level, we retain our underweight position in banks which has benefited the Trust in both 2007 and 2008. Our concerns have
centred on the high levels of leverage and the unsustainable level of activity in particular business segments. Despite the heavy share
price falls and the recapitalisation of certain individual organisations, we remain concerned by the overall operating environment and the
lack of visibility on balance sheet exposures.
Outlook
European stock markets continue to be driven by global factors, particularly around credit availability and economic growth. We are
anticipating a moderation in global economic growth and while we expect Europe to hold up better than other regions, the variance between
different countries in Europe could be significant. In Northern Europe, the critical manufacturing sector has continued to see strong demand
from Asia and the Middle East. We are much more concerned about the medium term outlook for certain Southern European economies, such as
Spain and Italy, where key industries are experiencing a tough backdrop. The Eastern European economies should continue to grow strongly,
although perhaps not at the levels recently reported.
The most pressing issue in Europe is inflation and although we are comfortable that it will not escalate into a serious problem, it is
likely to be reflected in a more cautious stance on monetary policy from the ECB even as economic growth decelerates.
We have modelled the Trust's holdings' likely profit performance in a less robust economic environment and we are confident they can
continue to deliver good relative results over the medium term. In our view the focus on quality of management and strong business
franchises should provide continuing positive support for the Trust's investment portfolio.
Principal Risks and Uncertainties
The principal risks facing the Company were outlined in the Directors' Report on page 22 of the Annual Financial Report of the Company
for the year ended 30th November 2007. These risks fall broadly under the following categories: Investment and Strategy, Market, Accounting,
Legal and Regulatory, Corporate Governance and Shareholder Relations, Operational and Financial. In the opinion of the Board these principal
risks have not changed. However, a number of key financial markets, in particular those related to credit, remain under stress. A further
contraction in the credit available from the banking system could exacerbate the current slowdown anticipated in economic activity and
adversely affect the profitability of the companies held in the Trust's portfolio over the forthcoming six months. Given the concentrated
nature of the portfolio we would expect returns to be very different from the benchmark over short periods of time.
Material Events and Transactions
In the six month period ended 31st May 2008 the following material events and transactions have taken place.
At the Annual General Meeting of the Company held on 18th March 2008, all the resolutions put to shareholders were passed.
The final dividend of 2.00p per share was paid on 4th April 2008 to shareholders on the register on 29th February 2008. The total
dividend payment for the year ended 30th November 2007 was 3.20p per share.
There were no related party transactions in the period.
Share Buy Backs and Treasury Share Transactions
During the period under review the Company purchased 894,500 Ordinary Shares for cancellation and a further 273,000 Ordinary Shares into
treasury. In the period from 31st May to 4th July 2008, a further 209,000 Ordinary Shares have been purchased for cancellation.
Responsibility Statement
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 includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R, of
important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
� the interim management report includes a fair review of the information concerning related parties transactions as required by
Disclosure and Transparency Rule 4.2.8R.
The half-yearly financial report was approved by the Board on 4th July 2008 and the above responsibility statement was signed on its behalf
by the Chairman.
By Order of the Board
C G H Weaver
Chairman
155 Bishopsgate
London EC2M 3AD
4th July 2008
CHARTER EUROPEAN TRUST plc
TOP 20 HOLDINGS AS AT 31st MAY 2008
Valuation % of
31st May Total
2008 Assets*
�'000s Principal Activities
E.ON 4,572 6.90 Gas, Water and Multi
Utilities
Novartis 3,619 5.46 Pharmaceuticals and
Biotechnology
Syngenta 3,229 4.88 Chemicals
Veolia Environnement 2,843 4.29 Gas, Water and Multi
Utilities
Total 2,826 4.26 Oil and Gas Producers
Swatch Group 2,770 4.18 Personal Goods
Dassault Systmes 2,593 3.91 Software and Computer
Services
International Personal Finance 2,482 3.74 Financial Services
Tandberg 2,315 3.49 Technology Hardware and
Equipment
Deutsche Bank 2,205 3.33 Banks
Vinci 2,133 3.22 Construction and
Materials
Fresenius Medical Care 2,123 3.20 Healthcare Equipment and
Services
SAP 2,103 3.17 Software and Computer
Services
GFK 2,037 3.07 Media
Groupe Danone 1,972 2.98 Food Producers
Informa 1,955 2.95 Media
Wacker Chemie 1,925 2.90 Chemicals
Man Group 1,902 2.87 Financial Services
Intermediate Capital Group 1,833 2.77 Financial Services
SGS 1,818 2.74 Support Services
49,255 74.31
* Total assets are stated net of current liabilities
PORTFOLIO ANALYSIS AS AT 31st MAY 2008
Valuation % of
31st May Total
2008 Assets*
�'000s
Basic Materials 5,154 7.78
Consumer Goods 7,728 11.66
Consumer Services 5,274 7.96
Financials 16,162 24.38
Healthcare 5,742 8.66
Industrials 3,951 5.96
Oil and Gas 2,826 4.26
Technology 8,629 13.02
Telecommunications 1,123 1.69
Utilities 7,415 11.19
Net Current Assets 2,282 3.44
66,286 100.00
* Total assets are stated net of current liabilities
SUMMARY OF UNAUDITED RESULTS
INCOME STATEMENT
for the six months ended 31st May 2008
Revenue Capital Total Return
�'000s �'000s �'000s
(Note 2)
Net gains on investments at fair value - 752 752
Net gains on foreign currency loan - - -
Other capital charges - (2) (2)
Income 1,576 - 1,576
Investment management fee (65) (169) (234)
Administration expenses (145) - (145)
Net return before finance costs and taxation 1,366 581 1,947
Finance costs: interest payable and similar (13) - (13)
charges
Net return on ordinary activities before 1,353 581 1,934
taxation
Overseas taxation (194) - (194)
UK taxation (159) 159 -
Net return attributable to Ordinary
Shareholders 1,000 740 1,740
Net return per Ordinary Share (Note 1) 3.96p 2.93p 6.89p
BALANCE SHEET
as at 31st May 2008
�'000s
Investments held at fair value through profit or loss 64,004
Net Current Assets 2,282
Total Assets less Current Liabilities 66,286
Creditors-Amounts falling due after one year -
Total Net Assets 66,286
Called up Share Capital 266
Capital Redemption Reserve 270
Special Reserve 37,099
Capital Reserves: Realised 18,017
Unrealised 8,626
Revenue Reserve 2,008
Shareholders' Funds 66,286
Net Asset Value per Ordinary Share 266.4p
The net asset value is based on 24,883,317 Ordinary Shares in
issue
As at 31st May 2008 there were an additional 1,758,000 Ordinary
Shares held in treasury
SUMMARY OF UNAUDITED RESULTS
INCOME STATEMENT
for the six months ended 31st May 2007
Revenue Capital Total Return
�'000s �'000s �'000s
(Note 2)
Net gains on investments at fair value - 9,730 9,730
Net gains on foreign currency loan - 49 49
Other capital charges - (2) (2)
Income 1,266 - 1,266
Investment management fee (81) (471) (552)
Administration expenses (146) - (146)
Net return before finance costs and taxation 1,039 9,306 10,345
Finance costs: interest payable and similar (39) (111) (150)
charges
Net return on ordinary activities before 1,000 9,195 10,195
taxation
Overseas taxation (165) - (165)
UK taxation (132) 132 -
Net return attributable to Ordinary
Shareholders 703 9,327 10,030
Net return per Ordinary Share (Note 1) 2.55p 33.78p 36.33p
BALANCE SHEET
as at 31st May 2007
�'000s
Investments held at fair value through profit or loss 72,100
Net Current Assets 3,354
Total Assets less Current Liabilities 75,454
Creditors-Amounts falling due after one year (6,335)
Total Net Assets 69,119
Called up Share Capital 286
Capital Redemption Reserve 250
Special Reserve 42,249
Capital Reserves: Realised 8,344
Unrealised 16,477
Revenue Reserve 1,513
Shareholders' Funds 69,119
Net Asset Value per Ordinary Share 255.0p
The net asset value is based on 27,102,088 Ordinary Shares in issue
As at 31st May 2007 there were an additional 1,485,000 Ordinary
Shares held in treasury
SUMMARY OF UNAUDITED RESULTS
INCOME STATEMENT
for the year ended 30th November 2007
Revenue Capital Total Return
�'000s �'000s �'000s
(Note 2)
Net gains on investments at fair value - 11,287 11,287
Net losses on foreign currency loan - (88) (88)
Other capital charges - (4) (4)
Income 1,918 - 1,918
Investment management fee (152) (705) (857)
Administration expenses (285) - (285)
Net return before finance costs and taxation 1,481 10,490 11,971
Finance costs: interest payable and similar (84) (246) (330)
charges
Net return on ordinary activities before 1,397 10,244 11,641
taxation
Overseas taxation (212) - (212)
UK taxation (165) 165 -
Net return attributable to Ordinary
Shareholders 1,020 10,409 11,429
Net return per Ordinary Share (Note 1) 3.77p 38.47p 42.24p
BALANCE SHEET
as at 30th November 2007
�'000s
Investments held at fair value through profit or loss 64,735
Net Current Assets 3,042
Total Assets less Current Liabilities 67,777
Creditors-Amounts falling due after one year -
Total Net Assets 67,777
Called up Share Capital 275
Capital Redemption Reserve 261
Special Reserve 39,827
Capital Reserves: Realised 16,395
Unrealised 9,508
Revenue Reserve 1,511
Shareholders' Funds 67,777
Net Asset Value per Ordinary Share 260.2p
The net asset value is based on 26,050,817 Ordinary Shares in issue
As at 30th November 2007 there were an additional 1,485,000 Ordinary
Shares held in treasury
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the six months ended 31st May 2008 and comparative periods
Called up Capital Redemption Special Reserve Capital Capital Revenue Reserve Total
Share Reserve Reserve Reserve
Capital �'000s Realised Unrealised
�'000s �'000s �'000s �'000s �'000s
�'000s
Six months ended 31st May 2008
Net Assets at 30th November 275 261 39,827 16,395 9,508 1,511 67,777
2007
Revenue Return - - - - - 1,000 1,000
Shares repurchased during the
period (9) 9 (2,728) - - - (2,728)
Dividends on Ordinary Shares - - - - - (503) (503)
Capital Return - - - 1,622 (882) - 740
Net Assets at 31st May 2008 266 270 37,099 18,017 8,626 2,008 66,286
Six months ended 31st May 2007
Net Assets at 30th November 296 240 44,439 1,925 13,569 1,443 61,912
2006
Revenue Return - - - - - 703 703
Shares repurchased during the
period (10) 10 (2,190) - - - (2,190)
Dividends on Ordinary Shares - - - - - (633) (633)
Capital Return - - - 6,419 2,908 - 9,327
Net Assets at 31st May 2007 286 250 42,249 8,344 16,477 1,513 69,119
Year ended 30th November 2007
Net Assets at 30th November 296 240 44,439 1,925 13,569 1,443 61,912
2006
Revenue Return - - - - - 1,020 1,020
Shares repurchased during the
year (21) 21 (4,612) - - - (4,612)
Dividends on Ordinary Shares - - - - - (952) (952)
Capital Return - - - 14,470 (4,061) - 10,409
Net Assets at 30th November 275 261 39,827 16,395 9,508 1,511 67,777
2007
SUMMARY OF UNAUDITED RESULTS
CASH FLOW STATEMENT
For the six months ended 31st May 2008 and comparative periods
Six months ended Six months ended Year ended
31st May 31st May 30th
2008 2007 November
2007
�'000s �'000s �'000s
Net cash inflow from operating 1,064 441 473
activities
Return on investment and
servicing of finance
Interest paid (13) (136) (337)
Capital expenditure and
financial investment
Purchases of fixed asset (19,508) (29,581) (44,421)
investments
Sales of fixed asset 19,677 28,333 53,180
investments
Net cash inflow (outflow) from
capital expenditure and 169 (1,248) 8,759
financial investment
Equity dividends paid (503) (633) (952)
Net cash inflow (outflow) 717 (1,576) 7,943
before financing
Financing
Purchase of Ordinary Shares
for cancellation and held in (2,726) (2,192) (4,613)
treasury
Drawdown of Euro Loan - 3,257 3,214
Repayment of Euro Loan - - (6,335)
Net cash (outflow) inflow from (2,726) 1,065 (7,734)
financing
(Decrease) Increase in cash (2,009) (511) 209
Reconciliation of Return on
Ordinary Activities before
Taxation to Net Cash Flow from
Operating Activities
Total Return before taxation 1,934 10,195 11,641
Add: Finance costs: interest 13
payable and similar charges 150 330
Less: Special dividends (175) - -
credited to capital
Less: Net gains on investments (577) (9,730) (11,153)
at fair value
Less: Net gains (losses) on - (49) 88
foreign currency loan
Less: Overseas tax suffered (194) (165) (212)
1,001 401 694
Decrease (Increase) in debtors 437 (67) (448)
(Decrease) Increase in (374) 107 227
creditors
Net cash inflow from operating 1,064 441 473
activities
Reconciliation of net cash
flow to movement in net debt
Net cash (outflow) inflow (2,009) (511) 209
Drawdown of Euro loan - (3,257) (3,214)
Repayment of Euro loan - - 6,335
Exchange movement on Euro loan - (44) (88)
Movement in net funds (2,009) (3,812) 3,242
Net funds brought forward 4,383 1,141 1,141
Net funds (debt) carried 2,374 (2,671) 4,383
forward
Notes
Note 1
The return per Ordinary Share is based on a weighted average number of shares in issue of 25,249,898 (31st May 2007: 27,610,206; 30th
November 2007: 27,055,002).
Note 2
The total return column of this statement is the profit and loss account of the Company.
All revenue and capital items derive from continuing operations. No operations were acquired or discontinued in the period.
A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the
Income Statement.
Included in the cost of investments are transaction costs on purchases which amounted to �19,378 (31st May 2007 - �36,948; 30th November
2007 - �83,371) and transaction costs on sales which amounted to �23,941 (31st May 2007 - �21,236; 30th November 2007 - �47,687).
Note 3
Investments are designated as held at fair value through profit or loss in accordance with FRS 26 'Financial Instruments: Recognition
and Measurement'. Listed investments are valued at bid market prices.
Note 4
In accordance with FRS 21 'Events after the Balance Sheet Date', the final dividend payable on Ordinary Shares is recognised as a
liability when approved by shareholders. Interim dividends are recognised only when paid.
Dividends paid on Ordinary Shares in respect of earnings for each period are as follows:
Six months to Six months to Year to
31st May 2008 31st May 2007 30th November 2007
�'000s �'000s �'000s
Interim dividend 1.20p paid - - 319
23rd August 2007
Final dividend 2.00p paid 4th 503 495 495
April 2008 (2007 - 1.80p)
Special dividend Nil paid - 138 138
(2007 - 0.50p)
503 633 952
The above dividends are after adjusting for dividends proposed but not paid, due to share buy backs.
Dividends payable at the period end are not recognised as a liability under FRS 21 'Events after the Balance Sheet Date'. Details of
these dividends are set out below.
Six months to Six months to Year to
31st May 31st May 2007 30th November 2007
2008 �'000s �'000s
�'000s
Interim dividend 1.40p payable
25th August 2008 (2007: 348 325 -
1.20p)
Final dividend 2.00p - - 521
348 325 521
The interim and final dividends above are based on the number of shares in issue at the period end. However, the dividends payable will
be based on the number of shares in issue on the record date and will reflect any purchases and cancellations of shares by the Company
settled subsequent to the period end.
Note 5
The half-yearly financial report has neither been audited nor reviewed by the Company's auditors. The financial information for the year
ended 30th November 2007 has been extracted from the statutory accounts for that year which have been delivered to the Registrar of
Companies. The accounting policies and presentation are consistent with those applied in the latest published financial statements. The
auditors' report on those accounts was unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the
Companies Act 1985.
In accordance with recently introduced changes to the UK's disclosure requirements for listed companies, the Company is now required to
make limited additional and updated disclosures, mainly relating to the first and third quarters of the financial year. These Interim
Management Statements will be released via the Regulatory News Service and posted on the Company's website www.chartereuropean.co.uk on or
shortly before 19th April and 19th October each year.
The half-yearly financial report will be sent to shareholders in mid July 2008 and will be available to members of the public from the
Company's registered office at 155 Bishopsgate, London EC2M 3AD.
For further information, please contact:-
Peter Ingram
Company Secretary
Tel: 020 7065 1467
or
Simon White
Head of Investment Trusts, RCM (UK) Limited
Tel: 020 7065 1539
This information is provided by RNS
The company news service from the London Stock Exchange
END
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