BLACKROCK
GREATER EUROPE INVESTMENT TRUST
PLC
LEI:
5493003R8FJ6I76ZUW55
Half Yearly Financial Report
28 February 2019
(Article 5 Transparency Directive, DTR 4.2)
PERFORMANCE RECORD
FINANCIAL HIGHLIGHTS
|
As
at
28 February 2019 |
As
at
31 August 2018 |
Change
% |
Assets |
|
|
|
Net asset value per ordinary share
(pence) |
346.20 |
382.17 |
-9.4 |
– with dividends reinvested* |
– |
– |
-8.4 |
Net assets (£’000)** |
295,562 |
330,419 |
-10.5 |
Ordinary share price (mid-market)
(pence) |
333.00 |
363.00 |
-8.3 |
– with dividends reinvested* |
– |
– |
-7.1 |
FTSE World Europe ex UK Index (total
return) |
1,298.50 |
1,390.67 |
-6.6 |
|
For
the six
months ended
28 February 2019 |
For
the six
months ended
28 February 2018 |
Change
% |
Revenue |
|
|
|
Net profit after taxation
(£’000) |
356 |
1,091 |
-67.4 |
Revenue profit per ordinary share
(pence) |
0.41 |
1.18 |
-65.3 |
* Net asset value and share price performance
include the dividend reinvestments.
** The change in net assets reflects the tender offer
implemented in the period, buyback of shares into treasury and
market movements.
CHAIRMAN’S STATEMENT FOR THE SIX
MONTHS TO 28 FEBRUARY 2019
MARKET OVERVIEW
2018 was a very challenging year for European equities and, over
the final quarter, there was higher global volatility leading to
disappointing negative returns across most regions. Markets were
vulnerable to fears of a deepening economic slowdown, whilst trade
frictions between the US and China
also loomed over markets. Sentiment to European equities was low,
given Brexit and the UK’s future relationship with the European
Union, Italian budget deficit concerns, and the progressive
withdrawal of quantitative easing. In the market sell-off towards
the end of the year, investors favoured defensive assets, those
with less exposure to the economic cycle.
European markets started on a stronger note in 2019. Investor
sentiment was supported by a slightly better than expected earnings
season, the resumption of US-China trade negotiations and the
European Central Bank’s accommodative monetary policy stance.
PERFORMANCE
During the six months ended 28 February
2019, the Company’s net asset value per share (NAV)
decreased by 8.4%, underperforming the FTSE World Europe ex UK
Index which fell by 6.6%. Over the same period, the Company’s share
price decreased by 7.1% (all percentages calculated in sterling
terms with dividends reinvested). Nonetheless, performance over the
12 months ended 28 February 2019 was
positive with the Company’s NAV outperforming the reference index
by 5.0%. Further information on investment performance is given in
the Investment Manager’s Report.
Since the period end to 30 April 2019, the Company’s NAV
has increased by 7.9% compared with a rise in the FTSE World Europe
ex UK Index of 6.7% over the same period.
EARNINGS AND DIVIDENDS
The Company’s revenue return per share for the six month period
ended 28 February 2019 amounted to
0.41p compared with 1.18p for the corresponding period in 2018, a
decrease of 65.3%. This in part reflects the absence this year of
the one-off receipt of French withholding tax reclaims which was a
feature of earnings in the first half of 2018.
The Board has declared an interim dividend of 1.75p (2018:
1.75p) per share. The dividend will be paid on 31 May 2019 to shareholders on the Company’s
register on 10 May 2019, the ex-dividend date being 9 May
2019.
TENDER OFFERS/SHARE REPURCHASES
The Board has the option to implement a tender offer in order to
assist in controlling the discount to NAV at which shares are
traded. In addition, it will consider buying back shares in the
market between tenders when it is considered to be in the interests
of shareholders to do so.
The Directors exercised their discretion to operate the half
yearly tender offer in November which, in common with previous
tender offers, was for up to 20% of the ordinary shares in issue at
the prevailing NAV less 2%. Valid tenders for 1,036,590 ordinary
shares were received at a price of 335.38p per share, representing
1.2% of the ordinary shares in issue excluding treasury shares. All
shares repurchased by the Company following the tender offer have
been placed in treasury.
On 25 March 2019, the Board
announced that it would not be implementing the May semi-annual
tender offer. Over the six months to 28
February 2019, the average discount to NAV (cum income) was
4.6% and the discount to NAV on a cum income basis (diluted for
treasury shares) as at close of business on 22 March 2019 was 3.7%. The Board therefore
concluded that it was not in the interests of shareholders as a
whole to implement a semi-annual tender offer. The Board will
continue to monitor the Company’s discount to NAV and will look to
buyback shares and/or operate six monthly tender offers if it is
deemed to be in the interests of shareholders as a whole.
During the six month period under review, the Company
repurchased 50,000 ordinary shares under the share buyback
authority. Since the period end, and up to the date of this report,
the Company has repurchased a further 355,000 ordinary shares.
OUTLOOK
In the months ahead we are likely to get a clearer picture of
Europe’s growth trajectory. Whilst economic indicators in
Europe disappointed through the
second half of 2018, and many economists have cut their growth
expectations for 2019, fears about a global slowdown leading to
potential recession may have been overplayed. Most indicators
suggest that Europe is in a low,
but positive, growth environment.
While headwinds and uncertainties remain, should key issues be
resolved there is scope for positive upside as we move through
2019. A de-escalation in global trade tensions would be positive
for sentiment, as would resolution on trade tariffs between the EU
and the US, a Brexit deal and the Italian debt crisis. Falling
unemployment, renewed consumer confidence and increased corporate
profits are also reasons for optimism.
The current political uncertainties in Europe do present opportunities to invest in
specific stocks at attractive levels. The Portfolio Managers will
continue to identify stocks that can deliver meaningful uplift in
the general market environment, with a preference for
higher-quality, globally-oriented names.
ERIC SANDERSON
1 May 2019
INVESTMENT MANAGER’S REPORT
OVERVIEW
Markets were gripped by fears of a global growth slowdown towards
the end of 2018 which led to a sharp sell-off in equities. As well
as the fall in share prices, we witnessed a change in the
composition of the market, with assets which were considered
defensive (those that are less dependent on the economic cycle)
rallying at the expense of more cyclical assets. However, much of
this rotation was not founded on fundamentals, but instead
sentiment, and thus we saw some reversal of these trends as we
moved into 2019.
The full year earnings season for European corporates, reported
from January 2019 onwards, proved
more supportive for markets. Expectations have now been reset
lower, whilst valuation for the market looks attractive on
aggregate.
Headwinds continue to face the European market in the guise of
political disruption which continues to weigh on sentiment towards
the region. However, policy is easing and we expect supportive
fiscal policy across most European countries. Monetary policy also
remains loose by historical standards, although the European
Central Bank ceased its Quantitative Easing programme of bond
buying at the onset of 2019.
PORTFOLIO ACTIVITY
After a strong period of performance, the Company underperformed
the broader market in the six months to 28
February 2019. This was primarily driven by negative returns
to sector allocation, whilst stock selection was neutral. Our
process is driven by fundamentals, looking to understand the
underlying cash flows and earnings of the businesses in which we
invest. In a period where the market is responding less to
fundamental signals, we can experience underperformance. However,
we believe that fundamentals drive markets in the long run and thus
a focus on fundamental analysis can generate attractive
returns.
Performance was negatively impacted by the higher weighting to
industrials relative to the reference index. This area of the
market came under pressure in the fourth quarter of 2018 as
cyclical shares underperformed. Our exposure within the industrials
sector is diversified across end markets and geographies with a
bias towards higher quality companies with a strong installed base
which allows for their earnings to remain resilient in a downturn.
Thus, over the period, stock selection within this sector was
additive.
The Company’s lower allocation to the utilities sector when
compared with the reference index also detracted. These assets saw
strong share price performance as investors looked for a ‘safe
haven’. Given these companies typically have a high visibility on
revenues due to their regulated nature and long contract
structures, they are often seen as attractive assets in downturns.
However, we have a lower allocation to this sector given high
levels of leverage, relatively low levels of profitability and
structural headwinds evident in certain markets. The Company
benefited from the lower weight to basic materials and higher
weighting to health care when compared with the reference
index.
Looking to individual holdings, Lonza Group, a biotechnology and
speciality chemicals company, was the largest detractor during the
period, having performed strongly in the portfolio since purchase.
The shares came under pressure towards the end of 2018, both due to
market rotation but also the departure of the CEO. The results
released in January 2019 were
disappointing, as their vitamins and wood preservatives businesses’
performance was poorer than expected; however, the core
pharmaceutical and biotechnology business continued to execute
well.
A position in Danske Bank also detracted from performance.
Danske shares came under pressure both before and after the
publication of its report into alleged money laundering at its
Estonian unit given uncertainty over the extent of the issue and
potential impacts of it, both financially and reputationally.
Positively, a position in aerospace manufacturer Safran aided
returns. The company reported strong results throughout 2018
exhibiting robust operational trends across divisions. Their
aftermarket sales business grew 12.5% through 2018 and the
company’s confidence in this area shows, with guidance given out to
2025. The aerospace component manufacturer it acquired last year,
Zodiac, has showed improving trends which is particularly
encouraging given the company’s history of poor execution.
The performance of Emerging European assets, Sberbank and
Gazprom, also aided returns over the period, with share prices
moving off depressed levels in August
2018. In August 2018 the US
introduced the DASKA bill* to Congress which threatened more
sanctions, then later in the month the US issued actual sanctions
against Russia under the chemical
warfare provisions related to the UK poisonings. The initial
downward moves were overreactions and the market has bounced up
strongly over the period. On the underlying fundamental story,
Sberbank delivered full year results in line with expectations,
whilst Gazprom managed to beat expectations and has seen its
recommended dividend per share increase by more than 25%.
While many market participants were moving aggressively towards
defensive assets at the end of 2018, we made few changes to the
composition of the portfolio holdings. Where shares fell but we
could not identify fundamental changes in the underlying earnings
and cash flows of the businesses, we held on to positions and
subsequently saw many of these rebound strongly at the start of
2019. In transitory markets, we feel it is important to be
selective. We wish to be good owners of businesses, identifying
potential winners, sizing them appropriately and running them for
appropriate durations.
Over the period we marginally reduced exposure to cyclical
assets, such as Volvo and retailer Inditex, driven by a
deterioration we saw in the outlook for these businesses. We
increased capital allocations to those positions for which we have
high conviction. This included a position in FinecoBank which we
added to over the period. In a challenging environment for Italian
asset gatherers, FinecoBank has performed strongly and increased
their market share. With this, they have also seen their fee
revenue increase by 16% year-on-year. We think due to the strong
management team and capital allocation, this business is well
positioned to continue to grow at attractive rates and improve
margins.
A position was also purchased in Amadeus IT Group, a major
Spanish IT provider for the global travel and tourism industry. We
have always rated the business model but found the valuation
challenging. However, following a pullback in the share price, and
with accelerating organic growth as new airlines come on to the
platform, we have added the company to the portfolio. We also see
additional potential upside via further deployment of their IT
expertise into the Hotels segment.
At the end of the period, the Company had a higher weighting
relative to the reference index towards industrials, health care,
technology and consumer services and a lower weight to financials,
consumer goods, oil & gas, utilities, basic materials and
telecommunications. The Company continues to favour companies with
strong management teams, high and predictable return on capital
with strong free cash flow conversion, an ability to invest in
growth and a unique aspect which can allow returns to be
sustainable.
OUTLOOK
Looking to markets, global political uncertainty remains high and
continues to impact markets adversely. The European market is set
to face a number of issues this year, not least the impending
Brexit date. However, we believe much has been priced into equity
markets, including a greater potential of recession than
fundamentals currently point to. We see opportunity for a gentle
increase in European growth as we move through the year. This could
be driven by fiscal stimulus, abating headwinds and resilience of
the consumer. Given the significantly bearish sentiment and
positioning towards European equities, we could be nearing the
point of maximum pain for the European market, particularly if
fundamentals stabilise and improve from here. Where optimism for
growth is low, optimism for earnings seems slightly overeager in
our view and we see risks of earnings downgrades across the market,
particularly in companies which have high debt burdens. We believe
a selective, stock-focused approach could provide meaningful uplift
to investors’ portfolios in this higher volatility environment.
STEFAN GRIES AND SAM VECHT
BlackRock Investment Management (UK) Limited
1 May 2019
*Defending American Security from Kremlin Aggression Act of
2019.
PORTFOLIO
PORTFOLIO ANALYSIS 28 FEBRUARY 2019
|
%
France |
%
Switzerland |
%
Ireland |
%
Germany |
%
Sweden |
%
Netherlands |
%
Denmark |
%
Belgium |
%
Finland |
%
Spain |
%
Italy |
%
Central Eastern
Europe & other |
Basic Materials |
– |
– |
– |
– |
– |
2.4 |
– |
– |
– |
– |
– |
1.8 |
Consumer Goods |
1.8 |
– |
– |
1.6 |
– |
3.3 |
– |
– |
– |
– |
2.9 |
– |
Consumer Services |
2.7 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
4.1 |
Financials |
– |
1.9 |
– |
– |
– |
– |
1.4 |
1.9 |
– |
– |
2.4 |
3.3 |
Health Care |
– |
7.3 |
– |
4.0 |
– |
– |
7.5 |
– |
– |
2.1 |
1.8 |
– |
Industrials |
12.4 |
7.6 |
2.2 |
– |
2.1 |
– |
2.9 |
– |
2.2 |
– |
– |
– |
Oil & Gas |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
Technology |
– |
– |
– |
7.0 |
1.7 |
3.5 |
– |
– |
– |
1.9 |
– |
– |
Telecommunications |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
2.3 |
Utilities |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
% Portfolio 28.02.19 |
16.9 |
16.8 |
2.2 |
12.6 |
3.8 |
9.2 |
11.8 |
1.9 |
2.2 |
4.0 |
7.1 |
11.5 |
% Portfolio 31.08.18 |
15.5 |
18.8 |
2.1 |
12.7 |
7.1 |
11.0 |
11.0 |
1.7 |
2.9 |
4.9 |
3.9 |
8.4 |
FTSE World Europe ex UK
28.02.19 |
22.6 |
19.0 |
0.5 |
18.8 |
5.6 |
7.5 |
3.8 |
2.2 |
2.9 |
6.7 |
4.8 |
5.6 |
|
%
Portfolio
28.02.19 |
%
Portfolio
31.08.18 |
FTSE World
Europe ex UK
28.02.19 |
Basic Materials |
4.2 |
3.6 |
5.5 |
Consumer Goods |
9.6 |
11.5 |
19.2 |
Consumer Services |
6.8 |
6.2 |
4.5 |
Financials |
10.9 |
10.0 |
21.3 |
Health Care |
22.7 |
20.9 |
14.9 |
Industrials |
29.4 |
35.0 |
15.2 |
Oil & Gas |
– |
1.7 |
5.3 |
Technology |
14.1 |
9.3 |
6.3 |
Telecommunications |
2.3 |
1.8 |
3.3 |
Utilities |
– |
– |
4.5 |
% Portfolio 28.02.19 |
100.0 |
– |
– |
% Portfolio 31.08.18 |
– |
100.0 |
– |
FTSE World Europe ex UK
28.02.19 |
– |
– |
100.0 |
TEN LARGEST INVESTMENTS AS AT
28 FEBRUARY 2019
Safran: 6.7% (2018: 4.7%) is a French multinational
supplier of systems and equipment for aerospace, defence and
security. We believe Safran is a structural winner within the
European aerospace sector, with strong execution in its new LEAP
engine and growing after-market servicing for previous engine
models. The recent acquisition of the underperforming Zodiac
business provides further optionality for earnings growth.
Novo Nordisk: 5.8% (2018: 4.7%) is a Danish multinational
pharmaceutical company which is a leader in diabetes care. The
stock suffered underperformance in 2016 as drug pricing
deteriorated, particularly in the US. Recent results have
re-instilled confidence as pricing pressure has abated and there is
now significantly enhanced visibility over the further trajectory
in earnings and cash flows. We believe the company offers
attractive long-term growth potential at high returns and sector
leading cash flow conversion with any excess cash being returned to
shareholders.
SAP: 5.4% (2018: 4.6%) is one of the leading global
enterprise software providers. Its recently launched S4/Hana
software and database solution appears a ‘must own’ product for a
large existing client base in need of enhanced data analytics
capabilities. We believe this has created a platform for
profitable, multi-year growth at high returns. With the balance
sheet turning net cash, we also see potential for a further
enhanced shareholder return policy.
Sika: 5.0% (2018: 4.6%) is a speciality chemical company
with a leading position in both the building sector and automotive
industry. Sika has proprietary technology within adhesives, which
has an increasing array of applications as technology advances. The
company has a growing addressable market, which helps drive
attractive organic growth rates. They further support growth via
M&A across regions and markets and have a strong balance sheet
to facilitate this, as well as a strong track record of integrating
these acquired businesses.
Lonza Group: 5.0% (2018: 5.8%) is a Swiss biotechnology
and speciality chemicals company. Through its Pharma & Biotech
division, Lonza is one of the leading players in contract
development and manufacturing of high-end drugs. We believe the
company offers attractive growth, which should ultimately be less
dependent upon the general economic cycle, given their large and
diversified biopharma and speciality chemicals client base. The
acquisition of Capsugel, which adds 25% to revenues, adds valuable
technologies to the existing group offering and thereby further
enhances barriers to entry, as well as the competitive position for
the group.
RELX: 4.1% (2018: 2.5%) is a multinational information
and analytics company which has high barriers to entry in most of
its divisions, including scientific publishing. The capital light
business model allows for a high rate of cash flow conversion with
repeatable revenues built on subscription models. The business also
benefits from the structurally increasing usage of data globally,
which supports their data and analysis business.
ASML: 3.5% (2018: 2.8%) is a Dutch company which
specialises in the supply of photolithography systems for the
semiconductor industry. The company is at the forefront of
technological change and invests in leading research and
development to capture the structural growth opportunity supported
by growth in mobile devices and microchip components. The high
barriers to entry within the industry give ASML a protected
position which allows growth in margins whilst they continue to
innovate. The company has strong management who aim to create
long-term value for the business whilst returning excess cash to
shareholders.
Unilever: 3.3% (2018: 3.7%) is a transnational consumer
goods company with more than 400 brands. Management have set out
clear targets to 2020 to improve margins, returns and cash flow
conversion, which we believe has the potential to create
significant value for shareholders. In addition, the measures taken
should translate into sector leading earnings growth and will allow
the company to return significant amounts of capital via share
buybacks and dividends.
Thales: 3.1% (2018: 3.2%) is a French multinational
company which designs and builds tools servicing aerospace, defence
and transportation. In addition to defence, Thales is a leader in
digital technology and recently acquired Gemalto, making them the
world’s largest digital security business. Thales generates a high
return on capital and has a very strong net cash balance sheet,
which gives the company significant flexibility and the possibility
to pursue acquisitions. We believe the company has an excellent
management team who have executed on turnaround, driving organic
growth and repairing margins.
Fresenius Medical Care: 3.0% (2018: 3.6%) is the global
leader in providing dialysis care and related services to patients
suffering from end-stage renal disease. FMC’s most important market
is North America where volumes are
growing 3% to 4% per annum, which in combination with positive
pricing should allow for attractive growth in earnings and cash
flows, as well as continued improvement in returns in coming years.
Through its Care Coordination business, FMC also benefits from the
long-term structural shift towards value based care to aid cost
savings in the US healthcare system.
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 2018.
Together, the ten largest investments represent 44.9% of the
Company’s portfolio (31 August 2018:
41.1%).
INVESTMENTS AS AT 28 FEBRUARY 2019
|
Country of
operation |
Market
value
£’000 |
% of
investments |
Industrials |
|
|
|
Safran |
France |
20,518 |
6.7 |
Sika |
Switzerland |
15,210 |
5.0 |
Thales |
France |
9,360 |
3.1 |
DSV |
Denmark |
8,925 |
2.9 |
Schindler Holding |
Switzerland |
7,991 |
2.6 |
Vinci |
France |
7,976 |
2.6 |
Wartsila |
Finland |
6,651 |
2.2 |
Kingspan |
Ireland |
6,609 |
2.2 |
Assa Abloy |
Sweden |
6,402 |
2.1 |
|
|
--------------- |
--------------- |
|
|
89,642 |
29.4 |
|
|
========= |
========= |
Health Care |
|
|
|
Novo Nordisk |
Denmark |
17,599 |
5.8 |
Lonza Group |
Switzerland |
15,135 |
5.0 |
Fresenius Medical Care |
Germany |
9,294 |
3.0 |
Straumann Holding |
Switzerland |
7,090 |
2.3 |
Grifols |
Spain |
6,322 |
2.1 |
DiaSorin |
Italy |
5,444 |
1.8 |
Chr. Hansen |
Denmark |
5,260 |
1.7 |
Stratec Biomedical Systems |
Germany |
3,043 |
1.0 |
|
|
--------------- |
--------------- |
|
|
69,187 |
22.7 |
|
|
========= |
========= |
Technology |
|
|
|
SAP |
Germany |
16,550 |
5.4 |
ASML |
Netherlands |
10,677 |
3.5 |
Amadeus IT Group |
Spain |
5,776 |
1.9 |
Hexagon |
Sweden |
5,137 |
1.7 |
Infineon Technologies |
Germany |
4,852 |
1.6 |
|
|
--------------- |
--------------- |
|
|
42,992 |
14.1 |
|
|
========= |
========= |
Financials |
|
|
|
FinecoBank |
Italy |
7,426 |
2.4 |
Sberbank |
Russia |
7,079 |
2.3 |
KBC Groep |
Belgium |
5,778 |
1.9 |
Partners Group |
Switzerland |
5,778 |
1.9 |
Danske Bank |
Denmark |
4,476 |
1.4 |
Alpha Bank |
Greece |
2,978 |
1.0 |
|
|
--------------- |
--------------- |
|
|
33,515 |
10.9 |
|
|
========= |
========= |
Consumer Goods |
|
|
|
Unilever |
Netherlands |
9,974 |
3.3 |
Ferrari |
Italy |
8,817 |
2.9 |
Rémy Cointreau |
France |
5,548 |
1.8 |
Adidas |
Germany |
4,890 |
1.6 |
|
|
--------------- |
--------------- |
|
|
29,229 |
9.6 |
|
|
========= |
========= |
Consumer Services |
|
|
|
RELX |
United
Kingdom |
12,396 |
4.1 |
Kering |
France |
8,273 |
2.7 |
|
|
--------------- |
--------------- |
|
|
20,669 |
6.8 |
|
|
========= |
========= |
Basic Materials |
|
|
|
IMCD |
Netherlands |
7,265 |
2.4 |
Israel Chemicals |
Israel |
5,517 |
1.8 |
|
|
--------------- |
--------------- |
|
|
12,782 |
4.2 |
|
|
========= |
========= |
Telecommunications |
|
|
|
Bezeq – Israeli
Telecommunication |
Israel |
6,967 |
2.3 |
|
|
--------------- |
--------------- |
|
|
6,967 |
2.3 |
|
|
========= |
========= |
Total investments |
|
304,983 |
100.0 |
|
|
========= |
========= |
All investments are in ordinary shares unless otherwise stated.
The total number of investments held at 28
February 2019 was 37 (31 August
2018: 41).
As at 28 February 2019, the
Company did not hold any equity interests comprising more than 3%
of any company’s share capital.
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:
· Counterparty;
· Investment
performance;
· Legal &
Compliance;
· Market;
· Operational;
· Financial; and
· Marketing.
The Board reported on the principal risks and uncertainties
faced by the Company in the Annual Report and Financial Statements
for the year ended 31 August 2018. A
detailed explanation can be found in the Strategic Report on pages
8 to 10 and in note 15 on pages 56 to 62 of the Annual Report and
Financial Statements which are available on the website maintained
by BlackRock at blackrock.co.uk/brge.
In the view of the Board, there have not been any changes to the
fundamental nature of these risks since the previous report and
these principal risks and uncertainties are equally applicable to
the remaining six months of the financial year as they were to the
six months under review.
GOING CONCERN
The Directors, having considered the nature and liquidity of the
portfolio, the Company’s investment objective and the Company’s
projected income and expenditure, are satisfied that the Company
has adequate resources to continue in operational existence for the
foreseeable future and is financially sound. For this reason, they
continue to adopt the going concern basis in preparing the
financial statements. The Company has a portfolio of investments
which are considered to be readily realisable and is able to meet
all of its liabilities from its assets and income generated from
these assets. Ongoing charges for the year ended 31 August 2018 were 1.09% of net assets and it is
expected that this is unlikely to change significantly going
forward.
RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE
MANAGER
BlackRock Fund Managers Limited (BFM) was appointed as the
Company’s Alternative Investment Fund Manager (AIFM) with effect
from 2 July 2014. BFM has (with the
Company’s consent) delegated certain portfolio and risk management
services, and other ancillary services, to BlackRock Investment
Management (UK) Limited (BIM (UK)).
Both BFM and BIM (UK) are regarded
as related parties under the Listing Rules. Details of the fees
payable are set out in note 4 and note 11. The related party
transactions with the Directors are set out in note 10.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure Guidance and Transparency Rules 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 applicable UK
Accounting Standards and 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 FCA’s Disclosure
Guidance and Transparency Rules.
This half yearly financial report has not been audited or
reviewed by the Company’s auditor.
The half yearly financial report was approved by the Board on
1 May 2019 and the above
responsibility statement was signed on its behalf by the
Chairman.
ERIC SANDERSON
For and on behalf of the Board
1 May 2019
FINANCIAL STATEMENTS
INCOME STATEMENT FOR THE SIX MONTHS
ENDED 28 FEBRUARY 2019
|
Notes |
Revenue £’000 |
Capital £’000 |
Total
£’000 |
Six
months ended |
Year
ended |
Six
months ended |
Year
ended |
Six
months ended |
Year
ended |
28.02.19
(unaudited) |
28.02.18
(unaudited) |
31.08.18
(audited) |
28.02.19
(unaudited) |
28.02.18
(unaudited) |
31.08.18
(audited) |
28.02.19
(unaudited) |
28.02.18
(unaudited) |
31.08.18
(audited) |
(Losses)/gains on investments held
at fair value through profit or loss |
|
– |
– |
– |
(27,059) |
2,078 |
31,646 |
(27,059) |
2,078 |
31,646 |
(Losses)/gains on foreign
exchange |
|
– |
– |
– |
(8) |
(191) |
100 |
(8) |
(191) |
100 |
Income from investments held at fair
value through profit or loss |
3 |
1,056 |
1,472 |
6,948 |
– |
– |
– |
1,056 |
1,472 |
6,948 |
Other income |
3 |
– |
39 |
41 |
– |
– |
– |
– |
39 |
41 |
|
|
--------------- |
--------------- |
----------------- |
--------------- |
--------------- |
----------------- |
--------------- |
--------------- |
----------------- |
Total income |
|
1,056 |
1,511 |
6,989 |
(27,067) |
1,887 |
31,746 |
(26,011) |
3,398 |
38,735 |
|
|
--------------- |
--------------- |
----------------- |
--------------- |
--------------- |
----------------- |
--------------- |
--------------- |
----------------- |
Expenses |
|
|
|
|
|
|
|
|
|
|
Investment management fee |
4 |
(251) |
(267) |
(537) |
(1,002) |
(1,069) |
(2,147) |
(1,253) |
(1,336) |
(2,684) |
Other operating expenses |
5 |
(362) |
(416) |
(779) |
(6) |
(11) |
(44) |
(368) |
(427) |
(823) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Total operating expenses |
|
(613) |
(683) |
(1,316) |
(1,008) |
(1,080) |
(2,191) |
(1,621) |
(1,763) |
(3,507) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Net profit/(loss) on ordinary
activities before finance costs and taxation |
|
443 |
828 |
5,673 |
(28,075) |
807 |
29,555 |
(27,632) |
1,635 |
35,228 |
Finance costs |
|
(14) |
(15) |
(51) |
(6) |
(34) |
(118) |
(20) |
(49) |
(169) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Net profit/(loss) on ordinary
activities before taxation |
|
429 |
813 |
5,622 |
(28,081) |
773 |
29,437 |
(27,652) |
1,586 |
35,059 |
Taxation (charge)/credit |
|
(73) |
278 |
(275) |
– |
– |
– |
(73) |
278 |
(275) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Net profit/(loss) on ordinary
activities after taxation |
7 |
356 |
1,091 |
5,347 |
(28,081) |
773 |
29,437 |
(27,725) |
1,864 |
34,784 |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Earnings/(loss) per ordinary
share (pence) |
7 |
0.41 |
1.18 |
5.95 |
(32.67) |
0.84 |
32.76 |
(32.26) |
2.02 |
38.71 |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
The total column of this statement represents the Company’s
profit and loss account. The supplementary revenue and capital
columns are both prepared under guidance published by the
Association of Investment Companies (AIC). All items in the above
statement derive from continuing operations. No operations were
acquired or discontinued during the period. All income is
attributable to the equity holders of the Company.
The net profit/(loss) on ordinary activities for the period
disclosed above represents the Company’s total comprehensive
income/(loss).
STATEMENT OF CHANGES IN EQUITY FOR THE
SIX MONTHS ENDED 28 FEBRUARY 2019
|
Called up
share capital
£’000 |
Share
premium
account
£’000 |
Capital
redemption
reserve
£’000 |
Special
reserve
£’000 |
Capital
reserves
£’000 |
Revenue
reserve
£’000 |
Total
£’000 |
For the six months ended 28
February 2019 (unaudited) |
|
|
|
|
|
|
|
At 31 August 2018 |
110 |
– |
130 |
54,869 |
264,422 |
10,888 |
330,419 |
Total comprehensive income: |
|
|
|
|
|
|
|
(Loss)/profit for the period |
– |
– |
– |
– |
(28,081) |
356 |
(27,725) |
Transactions with owners, recorded
directly to equity: |
|
|
|
|
|
|
|
Ordinary shares purchased into
treasury |
– |
– |
– |
(162) |
– |
– |
(162) |
Tender offer into treasury |
– |
– |
– |
(3,477) |
– |
– |
(3,477) |
Share purchase and tender costs |
– |
– |
– |
(35) |
– |
– |
(35) |
Dividend paid(a) |
– |
– |
– |
– |
– |
(3,458) |
(3,458) |
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
At 28 February 2019 |
110 |
– |
130 |
51,195 |
236,341 |
7,786 |
295,562 |
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
For the six months ended 28
February 2018 (unaudited) |
|
|
|
|
|
|
|
At 31 August 2017 |
110 |
63,214 |
130 |
– |
256,652 |
10,621 |
330,727 |
Total comprehensive income: |
|
|
|
|
|
|
|
Profit for the period |
– |
– |
– |
– |
773 |
1,091 |
1,864 |
Transactions with owners, recorded
directly to equity: |
|
|
|
|
|
|
|
Cancellation of share premium
account(b) |
– |
(63,214) |
– |
63,214 |
– |
– |
– |
Tender offer into treasury |
– |
– |
– |
– |
(21,675) |
– |
(21,675) |
Tender costs |
– |
– |
– |
– |
(203) |
– |
(203) |
Tender cost accrual written
back |
– |
– |
– |
– |
211 |
– |
211 |
Dividend paid(c) |
– |
– |
– |
– |
– |
(3,526) |
(3,526) |
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
At 28 February 2018 |
110 |
– |
130 |
63,214 |
235,758 |
8,186 |
307,398 |
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
For the year ended 31 August 2018
(audited) |
|
|
|
|
|
|
|
At 31 August 2017 |
110 |
63,214 |
130 |
– |
256,652 |
10,621 |
330,727 |
Total comprehensive income: |
|
|
|
|
|
|
|
Profit for the year |
– |
– |
– |
– |
29,437 |
5,347 |
34,784 |
Transactions with owners, recorded
directly to equity: |
|
|
|
|
|
|
|
Cancellation of share premium
account(b) |
– |
(63,214) |
– |
63,214 |
– |
– |
– |
Ordinary shares purchased into
treasury |
– |
– |
– |
(78) |
– |
– |
(78) |
Tender offer into treasury |
– |
– |
– |
(8,143) |
(21,675) |
– |
(29,818) |
Share purchase and tender costs |
– |
– |
– |
(124) |
(203) |
– |
(327) |
Tender cost accruals written
back |
– |
– |
– |
– |
211 |
– |
211 |
Dividend paid(d) |
– |
– |
– |
– |
– |
(5,080) |
(5,080) |
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
At 31 August 2018 |
110 |
– |
130 |
54,869 |
264,422 |
10,888 |
330,419 |
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
(a) Final dividend paid
in respect of the year ended 31 August
2018 of 4.00p per share, declared on 24 October 2018 and paid on 10 December 2018.
(b) Share premium account
was cancelled pursuant to Court approval on 13 February 2018 and £63,214,000 was transferred
to a special reserve.
(c) Final dividend paid in
respect of the year ended 31 August 2017 of 3.70p per share,
declared on 23 October 2017 and paid on 8 December 2017.
(d) Interim dividend paid
in respect of the year ended 31 August
2018 of 1.75p per share, declared on 25 April 2018 and paid on 31 May 2018. Final dividend paid in respect of
the year ended 31 August 2017 of
3.70p per share, declared on 23 October
2017 and paid on 8 December
2017.
The transaction costs incurred on the acquisition of investments
amounted to £75,000 for the six months ended 28 February 2019 (six months ended 28 February 2018: £97,000; year ended
31 August 2018: £228,000). Costs
relating to the disposal of investments amounted to £20,000 for the
six months ended 28 February 2019
(six months ended 28 February 2018:
£67,000; year ended 31 August 2018:
£102,000). All transaction costs have been included within capital
reserves.
The share premium account and capital redemption reserve are not
distributable profits under the Companies Act 2006. The special
reserve may be used as distributable profits for all purposes and,
in particular, for the repurchase by the Company of its ordinary
shares and for payment as dividends. In accordance with the
Company’s articles, net capital reserves may be distributed by way
of the repurchase by the Company of its ordinary shares and for
payment as dividends.
BALANCE SHEET AS AT 28 FEBRUARY 2019
|
Notes |
28
February 2019
£’000
(unaudited) |
28
February 2018
£’000
(unaudited) |
31
August 2018
£’000
(audited) |
Fixed assets |
|
|
|
|
Investments held at fair value
through profit or loss |
|
304,983 |
322,652 |
336,832 |
|
|
--------------- |
--------------- |
--------------- |
Current assets |
|
|
|
|
Debtors |
|
1,383 |
2,359 |
1,635 |
|
|
--------------- |
--------------- |
--------------- |
|
|
1,383 |
2,359 |
1,635 |
|
|
--------------- |
--------------- |
--------------- |
Creditors – amounts falling due
within one year |
|
|
|
|
Bank overdraft |
|
(7,682) |
(14,545) |
(5,589) |
Other creditors |
|
(3,122) |
(3,068) |
(2,459) |
|
|
--------------- |
--------------- |
--------------- |
|
|
(10,804) |
(17,613) |
(8,048) |
|
|
--------------- |
--------------- |
--------------- |
Net current liabilities |
|
(9,421) |
(15,254) |
(6,413) |
|
|
--------------- |
--------------- |
--------------- |
Net assets |
|
295,562 |
307,398 |
330,419 |
|
|
========= |
========= |
========= |
Capital and reserves |
|
|
|
|
Called up share capital |
8 |
110 |
110 |
110 |
Capital redemption reserve |
|
130 |
130 |
130 |
Special reserve |
|
51,195 |
63,214 |
54,869 |
Capital reserves |
|
236,341 |
235,758 |
264,422 |
Revenue reserve |
|
7,786 |
8,186 |
10,888 |
|
|
--------------- |
--------------- |
--------------- |
Total shareholders’
funds |
|
295,562 |
307,398 |
330,419 |
|
|
========= |
========= |
========= |
Net asset value per ordinary
share (pence) |
7 |
346.20 |
346.16 |
382.17 |
|
|
========= |
========= |
========= |
STATEMENT OF CASH FLOWS FOR THE SIX
MONTHS ENDED 28 FEBRUARY 2019
|
Six
months ended
28 February 2019
(unaudited)
£’000 |
Six
months ended
28 February 2018
(unaudited)
£’000 |
Year ended
31 August 2018
(audited)
£’000 |
|
|
|
|
Operating activities |
|
|
|
Net (loss)/profit before
taxation |
(27,652) |
1,586 |
35,059 |
Add back: Finance costs expense |
20 |
49 |
169 |
Losses/(gains) on investments held
at fair value through profit or loss |
27,059 |
(2,078) |
(31,646) |
Net losses/(gains) on foreign
exchange |
8 |
191 |
(100) |
Sales of investments |
65,829 |
144,707 |
228,091 |
Purchases of investments |
(61,092) |
(128,016) |
(195,027) |
Decrease in debtors |
82 |
45 |
16 |
Increase/(decrease) in other
creditors |
717 |
(78) |
(556) |
Interest paid |
(21) |
(49) |
(169) |
Tax on investment income |
(162) |
(369) |
(1,349) |
Refund of withholding tax
reclaims |
258 |
760 |
804 |
|
------------------- |
------------------- |
------------------- |
Net cash generated from operating
activities |
5,046 |
16,748 |
35,292 |
|
------------------- |
------------------- |
------------------- |
Financing activities |
|
|
|
Ordinary shares purchased into
treasury |
(162) |
– |
(78) |
Tender offer into treasury |
(3,477) |
(21,675) |
(29,818) |
Share purchase and tender costs
paid |
(34) |
(153) |
(257) |
Dividends paid |
(3,458) |
(3,526) |
(5,080) |
|
------------------- |
------------------- |
------------------- |
Net cash used in financing
activities |
(7,131) |
(25,354) |
(35,233) |
|
------------------- |
------------------- |
------------------- |
(Decrease)/increase in cash and
cash equivalents |
(2,085) |
(8,606) |
59 |
|
------------------- |
------------------- |
------------------- |
Cash and cash equivalents at the
beginning of the period/year |
(5,589) |
(5,748) |
(5,748) |
Effect of foreign exchange rate
changes |
(8) |
(191) |
100 |
|
------------------- |
------------------- |
------------------- |
Cash and cash equivalents at the
end of the period/year |
(7,682) |
(14,545) |
(5,589) |
|
------------------- |
------------------- |
------------------- |
Comprised of: |
|
|
|
Bank overdraft |
(7,682) |
(14,545) |
(5,589) |
|
------------------- |
------------------- |
------------------- |
|
(7,682) |
(14,545) |
(5,589) |
|
=========== |
=========== |
=========== |
NOTES TO THE FINANCIAL STATEMENTS FOR
THE SIX MONTHS ENDED 28 FEBRUARY
2019
1. PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment
trust company within the meaning of section 1158 of the Corporation
Tax Act 2010.
2. BASIS OF PREPARATION
The Company presents its results and positions under FRS 102, ‘The
Financial Reporting Standard applicable in the UK and Republic of
Ireland’ (FRS 102), which forms part of revised Generally Accepted
Accounting Practice (New UK GAAP) issued by the Financial Reporting
Council (FRC) in 2013.
The condensed set of financial statements has been prepared on a
going concern basis in accordance with FRS 102 and FRS 104,
‘Interim Financial Reporting’ issued by the FRC in March 2015 and the revised Statement of
Recommended Practice – ‘Financial Statements of Investment Trust
Companies and Venture Capital Trusts’ (SORP) issued by the
Association of Investment Companies (AIC) in November 2014 and updated in January 2017 and February
2018.
The accounting policies applied for the condensed set of
financial statements are as set out in the Company’s Annual Report
and Financial Statements for the year ended 31 August 2018.
3. INCOME
|
Six
months ended
28 February 2019
(unaudited)
£’000 |
Six
months ended
28 February 2018
(unaudited)
£’000 |
Year ended
31 August 2018
(audited)
£’000 |
|
|
|
|
Investment income: |
|
|
|
Overseas listed dividends |
959 |
1,402 |
6,836 |
Overseas listed special
dividends |
97 |
70 |
112 |
|
------------------- |
------------------- |
------------------- |
|
1,056 |
1,472 |
6,948 |
|
------------------- |
------------------- |
------------------- |
Other income: |
|
|
|
Bank interest |
– |
– |
2 |
Interest on withholding tax
reclaims |
– |
39 |
39 |
|
------------------- |
------------------- |
------------------- |
|
– |
39 |
41 |
|
------------------- |
------------------- |
------------------- |
Total income |
1,056 |
1,511 |
6,989 |
|
=========== |
=========== |
=========== |
Dividends and interest received in cash during the period
amounted to £1,155,000 and £nil (six months ended 28 February 2018: £1,523,000 and £39,000; year
ended 31 August 2018: £6,999,000 and
£41,000) respectively.
4. INVESTMENT MANAGEMENT FEE
|
Six
months ended
28 February 2019
(unaudited) |
Six
months ended
28 February 2018
(unaudited) |
Year
ended
31 August 2018
(audited) |
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Investment management fee |
251 |
1,002 |
1,253 |
267 |
1,069 |
1,336 |
537 |
2,147 |
2,684 |
The investment management fee is levied quarterly, based on
0.85% per annum of net asset value on the last day of each month.
The investment management fee is allocated 80% to capital reserves
and 20% to the revenue reserve.
5. OTHER OPERATING EXPENSES
|
Six
months ended
28 February 2019
(unaudited)
£’000 |
Six
months ended
28 February 2018
(unaudited)
£’000 |
Year ended
31 August 2018
(audited)
£’000 |
|
|
|
|
Broker fees |
24 |
24 |
48 |
Custody fees |
23 |
19 |
42 |
Depositary fees |
20 |
22 |
44 |
Audit fees |
14 |
12 |
26 |
Legal fees |
19 |
72 |
84 |
Registrar’s fees |
40 |
38 |
81 |
Directors’ emoluments |
61 |
65 |
131 |
Marketing fees |
55 |
46 |
99 |
Printing and postage fees |
32 |
32 |
64 |
Tax agent fees |
18 |
11 |
33 |
Other administration costs |
56 |
75 |
127 |
|
------------------- |
------------------- |
------------------- |
|
362 |
416 |
779 |
Taken to capital: |
|
|
|
Transaction costs |
6 |
11 |
44 |
|
------------------- |
------------------- |
------------------- |
|
368 |
427 |
823 |
|
=========== |
=========== |
=========== |
6. DIVIDEND
The Directors have declared an interim dividend of 1.75p per share
for the period ended 28 February
2019, payable on 31 May 2019
to shareholders on the register on 10 May
2019. The total cost of the dividend based on 85,018,101
ordinary shares in issue at 30 April
2019 was £1,488,000 (28 February
2018: £1,554,000).
In accordance with FRS 102, Section 32 ‘Events After the End of
the Reporting Period’, the interim dividend payable on the ordinary
shares has not been included as a liability in the financial
statements, as interim dividends are only recognised when they have
been paid.
7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Revenue and capital returns per share and net asset value per share
are shown below and have been calculated using the following:
|
Six
months ended
28 February 2019
(unaudited)
£’000 |
Six
months ended
28 February 2018
(unaudited)
£’000 |
Year ended
31 August 2018
(audited)
£’000 |
|
|
|
|
Net revenue profit attributable to
ordinary shareholders (£’000) |
356 |
1,091 |
5,347 |
Net capital (loss)/profit
attributable to ordinary shareholders (£’000) |
(28,081) |
773 |
29,437 |
|
------------------- |
------------------- |
------------------- |
Total (loss)/profit (£’000) |
(27,725) |
1,864 |
34,784 |
|
------------------- |
------------------- |
------------------- |
Equity shareholders’ funds
(£’000) |
295,562 |
307,398 |
330,419 |
|
------------------- |
------------------- |
------------------- |
Earnings per share |
|
|
|
The weighted average number of
ordinary shares in issue during the period, on which the return per
ordinary share was calculated was: |
85,931,606 |
92,102,726 |
89,850,956 |
|
------------------- |
------------------- |
------------------- |
The actual number of ordinary shares
in issue at the period end, on which the net asset value per
ordinary share was calculated was: |
85,373,101 |
88,801,863 |
86,459,691 |
|
------------------- |
------------------- |
------------------- |
The number of ordinary shares in
issue, including treasury shares at the period end was: |
110,328,938 |
110,328,938 |
110,328,938 |
|
------------------- |
------------------- |
------------------- |
Calculated on weighted average
number of ordinary shares: |
|
|
|
Revenue profit (pence) |
0.41 |
1.18 |
5.95 |
Capital (loss)/profit (pence) |
(32.67) |
0.84 |
32.76 |
|
------------------- |
------------------- |
------------------- |
Total (loss)/profit (pence) |
(32.26) |
2.02 |
38.71 |
|
=========== |
=========== |
=========== |
|
Six
months ended
28 February 2019
(unaudited) |
Six
months ended
28 February 2018
(unaudited) |
Year ended
31 August 2018
(audited) |
|
|
|
|
Net asset value (pence) |
346.20 |
346.16 |
382.17 |
|
------------------- |
------------------- |
------------------- |
Ordinary share price (pence) |
333.00 |
329.00 |
363.00 |
|
=========== |
=========== |
=========== |
There are no dilutive securities at 28
February 2019 (28 February
2018: nil; 31 August 2018:
nil).
8. SHARE CAPITAL
|
Number of
ordinary
shares in
issue |
Number
of treasury
shares in
issue |
Total |
Nominal
value
£’000 |
(unaudited) |
|
|
|
|
Allotted, called up and fully
paid share capital comprised: |
|
|
|
|
Ordinary shares of 0.1p
each: |
|
|
|
|
At 31 August 2018 |
86,459,691 |
23,869,247 |
110,328,938 |
110 |
Shares repurchased and held in
treasury |
(50,000) |
50,000 |
– |
– |
Shares repurchased and held in
treasury pursuant to tender offer |
(1,036,590) |
1,036,590 |
– |
– |
|
------------------- |
------------------- |
------------------- |
------------------- |
At 28 February 2019 |
85,373,101 |
24,955,837 |
110,328,938 |
110 |
|
=========== |
=========== |
=========== |
=========== |
9. VALUATION OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are either carried in
the Balance Sheet at their fair value (investments) or at an amount
which is a reasonable approximation of fair value (due from
brokers, dividends and interest receivable, due to brokers,
accruals, cash and cash equivalents and overdrafts). Section 11 of
FRS 102 requires the Company to classify fair value measurements
using a fair value hierarchy that reflects the significance of
inputs used in making the measurements. The valuation techniques
used by the Company are explained in the accounting policies note
on page 49 of the Annual Report and Financial Statements for the
year ended 31 August 2018.
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted prices for identical instruments in active
markets
A financial instrument is regarded as quoted in an active market if
quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service or regulatory
agency and those prices represent actual and regularly occurring
market transactions on an arm’s length basis. The Company does not
adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable
inputs
This category includes instruments valued using quoted prices for
similar instruments in markets that are considered less than
active, or other valuation techniques where all significant inputs
are directly or indirectly observable from market data.
Level 3 – Valuation techniques using significant unobservable
inputs
This category includes all instruments where the valuation
technique includes inputs not based on observable data and these
inputs could have a significant impact on the instrument’s
valuation.
This category also includes instruments that are valued based on
quoted prices for similar instruments where significant entity
determined adjustments or assumptions are required to reflect
differences between the instruments and instruments for which there
is no active market. The Investment Manager considers observable
data to be that market data that is readily available, regularly
distributed or updated, reliable and verifiable, not proprietary,
and provided by independent sources that are actively involved in
the relevant market.
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement. If a fair value measurement uses observable
inputs that require significant adjustment based on unobservable
inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair
value measurement in its entirety requires judgement, considering
factors specific to the asset or liability.
The table below is the analysis of the Company’s financial
instruments measured at fair value at the balance sheet date.
Financial assets at fair value
through profit or loss at 28 February 2019 |
Level
1 |
Level
2 |
Level
3 |
Total |
(unaudited) |
£’000 |
£’000 |
£’000 |
£’000 |
Equity investments |
304,983 |
– |
– |
304,983 |
|
=========== |
=========== |
=========== |
=========== |
|
|
|
|
|
Financial assets at fair value
through profit or loss at 28 February 2018 |
Level
1 |
Level
2 |
Level
3 |
Total |
(unaudited) |
£’000 |
£’000 |
£’000 |
£’000 |
Equity investments |
322,652 |
– |
– |
322,652 |
|
=========== |
=========== |
=========== |
=========== |
|
|
|
|
|
Financial assets at fair value
through profit or loss at 31 August 2018 |
Level
1 |
Level
2 |
Level
3 |
Total |
(audited) |
£’000 |
£’000 |
£’000 |
£’000 |
Equity investments |
336,832 |
– |
– |
336,832 |
|
=========== |
=========== |
=========== |
=========== |
There were no transfers between levels for financial assets and
financial liabilities during the period/year recorded at fair value
as at 28 February 2019, 28 February 2018 and 31
August 2018. The Company did not hold any Level 3 securities
throughout the six month period ended 28
February 2019 (six month period ended 28 February 2018: none; year ended 31 August 2018: none).
10. RELATED PARTY DISCLOSURE
The Board consists of four non-executive Directors, all of whom are
considered to be independent by the Board. None of the Directors
has a service contract with the Company. With effect from
1 September 2018, the Chairman
receives an annual fee of £38,000, the Chairman of the Audit and
Management Engagement Committee receives an annual fee of £31,000
and each other Director receives an annual fee of £27,000.
As at 28 February 2019, the
following members of the Board held shares in the Company:
Eric Sanderson held 4,000 ordinary
shares, Peter Baxter held 5,000
ordinary shares, and Paola Subacchi held 590 ordinary shares.
Since the period end and up to the date of this report there
have been no changes in Directors’ holdings.
The transactions with the AIFM and Investment Manager are stated
in note 11.
11. TRANSACTIONS WITH THE AIFM AND THE INVESTMENT
MANAGER
BlackRock Fund Managers Limited (BFM) provides management and
administration services to the Company under a contract which is
terminable on six months’ notice. BFM has (with the Company’s
consent) delegated certain portfolio and risk management services,
and other ancillary services, to BlackRock Investment Management
(UK) Limited (BIM (UK)). Further
details of the investment management contract are disclosed on
pages 19 and 20 in the Annual Report and Financial Statements for
the year ended 31 August 2018.
The investment management fee due for the six months ended
28 February 2019 amounted to
£1,253,000 (six months ended 28 February
2018: £1,336,000; year ended 31
August 2018: £2,684,000).
At 28 February 2019, £1,249,000
was outstanding in respect of the investment management fee (six
months ended 28 February 2018:
£1,351,000; year ended 31 August
2018: £687,000).
In addition to the above services, BlackRock provided the
Company with marketing services. The total fees paid or payable for
these services for the six months ended 28
February 2019 amounted to £55,000 excluding VAT (six months
ended 28 February 2018: £46,000; year
ended 31 August 2018: £99,000).
Marketing fees of £128,000 excluding VAT were outstanding at
28 February 2019 (28 February 2018: £102,000; 31 August 2018: £74,000).
12. CONTINGENT LIABILITIES
There were no contingent liabilities at 28
February 2019 (28 February
2018: £nil; 31 August 2018:
£nil).
13. PUBLICATION OF NON STATUTORY ACCOUNTS
The financial information contained in this half yearly 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 2019 and
28 February 2018 has not been
audited.
The information for the year ended 31
August 2018 has been extracted from the latest published
audited financial statements, which have been filed with the
Registrar of Companies. The report of the auditor on those accounts
contained no qualification or statement under sections 498 (2) or
(3) of the Companies Act 2006.
14. ANNUAL RESULTS
The Board expects to announce the annual results for the year
ending 31 August 2019 in late
October 2019. Copies of the results
announcement can be obtained from the Secretary on 020 7743 3000 or
cosec@blackrock.com. The Annual Report should be available by the
end of October 2019, with the Annual
General Meeting being held in December
2019.
12 Throgmorton Avenue
London
EC2N 2DL
1 May 2019
For further information please contact:
Melissa Gallagher, Co-Head, Closed
End Funds, BlackRock Investment Management (UK) Limited – 020 7743
3893
Stefan Gries, Fund Manager,
BlackRock Investment Management (UK) Limited – 020 7743 3000
Press enquiries:
Lucy Horne, Lansons Communications –
Tel: 020 7294 3689
E-mail: lucyh@lansons.com
END
The Half Yearly Financial Report will also be available on the
BlackRock website at www.blackrock.co.uk/brge. Neither the contents
of the Manager’s website nor the contents of any website accessible
from hyperlinks on the Manager’s website (or any other website) is
incorporated into, or forms part of, this announcement.