BlackRock Greater
Europe Investment Trust plc
Half Yearly
Financial Report 29 February 2016
Chairman’s statement
Performance overview
The first six months of the financial year was a turbulent
period for equity markets, dominated by concerns over global
economic growth. It is therefore pleasing to report that the
Company’s undiluted net asset value (NAV) per share increased by
2.1%, compared with a decrease of 0.8% in the FTSE World Europe ex
UK Index. Over the same period, the Company’s share price rose by
3.2% (all percentages calculated in sterling terms with income
reinvested).
Since the period end to 18 April
2016, the Company’s undiluted NAV has increased by 5.3%
compared with a rise in the FTSE World Europe ex UK Index of 6.6%
over the same period.
Earnings and dividend
The Company’s revenue earnings per share for the six months to
29 February 2016 amounted to 0.86p
compared with 0.64p in 2015. The Board has declared an interim
dividend of 1.65p (2015: 1.65p) per share. This dividend will be
paid on 27 May 2016 to shareholders
on the Company’s register on 29 April
2016, the ex-dividend date being 28
April 2016.
Tender offers
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 shares in issue at the
prevailing NAV less 2%. Valid tenders for 1,236,927 shares were
received at a price of 250.56p per share, representing 1.19% of the
shares in issue excluding treasury shares. All shares tendered were
repurchased by the Company and placed in treasury.
The Directors announced on 21 March
2016 that they had decided not to implement the May
semi-annual tender offer as the Company’s shares were at that time
trading at a discount of 3.2% (on a cum income basis diluted for
subscription shares and treasury shares) and had traded at an
average discount to NAV of 2.9% over the six month period to
29 February 2016. Taking into
consideration the narrow discount, the costs of the exercise and
the low take-up in November, the Board concluded that it was not in
the interests of shareholders as a whole to operate the tender. The
Board will continue to monitor the Company’s discount/premium 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.
Since the period end, the Company has repurchased 325,000
ordinary shares at an average price of 245.98p and at an average
discount to NAV of 5.0%.
Subscription shares
A total of 23,254,813 subscription shares were allotted to
shareholders in April 2013
by way of a bonus issue. Following eleven conversions of the
subscription shares since the bonus issue, the Company has issued
2,723,815 ordinary shares. Total proceeds amounted to £6,366,000.
The Company currently has [102,836,916] ordinary shares (excluding
treasury shares) and 20,530,998 subscription shares in issue.
Subscription shareholders have one final opportunity to
subscribe for all or any of the ordinary shares to which their
subscription shares relate on 29 April
2016 at a price of 248p per share. A reminder letter was
posted to shareholders on 29 March
2016. The ordinary shares resulting from the exercise of the
subscription share rights on 29 April
2016 will not qualify for the interim dividend payment.
Board
At the Annual General Meeting to be held at the end of November,
it is my intention to step down as Chairman but to remain on the
Board as a non-executive Director. The length of tenure of my
fellow Directors has been relatively short and it is the Board’s
view that there is considerable benefit to having at least one
director with longer experience. It is on this basis, and with the
Board’s agreement, that I will remain a Director for the time
being. I am pleased to report that Eric
Sanderson has agreed to become Chairman and that
Peter Baxter will undertake Eric’s
responsibilities as Chairman of the Audit and Management Engagement
Committee.
Outlook
The start of the year has again proved to be volatile, mainly
due to uncertainties over economic activity in the US and
China. In contrast, Europe’s
economic backdrop has been relatively stable as additional
support from the European Central Bank through expansion of the
current QE programme has had a positive impact on sentiment and
both business and consumer confidence have remained relatively
resilient.
However, although Eurozone economies are still expanding, growth
has slowed and a number of challenges remain. The major concern is
the political landscape with the increase in populist politics, the
ongoing terrorist threat and the need to solve the migrant
crisis. The referendum on whether Britain should remain in the European Union,
combined with a challenged banking system, also creates an
unsettled environment. Despite these uncertainties, reasonable
valuations and a supportive European Central Bank policy lead
us to remain positive on the outlook for European equities
and, during this period of increased volatility and risk aversion,
stock selection and an emphasis on fundamentals will remain a
key focus for our Portfolio Managers.
Carol Ferguson
19 April 2016
Interim management report and
responsibility statement
The Chairman’s Statement and the Investment Manager’s Report
give details of the important events which have occurred during the
period and their impact on the financial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into
various areas as follows:
- Performance;
- Income/dividend;
- Regulatory;
- Operational;
- Market;
- Financial; and
- Gearing.
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 2015. A
detailed explanation can be found in the Strategic Report on pages
7 and 8 and in note 18 on pages 47 to 53 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 (including any performance fees but
excluding interest costs and taxation) for the year ended
31 August 2015 were 1.22% of net
assets.
Related party disclosure and
transactions with the Investment Manager
BlackRock Fund Managers Limited (BFM) was appointed as the
Company’s 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
management and performance 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 and Transparency Rules (DTR) of the UK Listing
Authority require the Directors to confirm their responsibilities
in relation to the preparation and publication of the Interim
Management Report and Financial Statements.
The Directors confirm to the best of their knowledge and belief
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 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
19 April 2016 and the above
responsibility statement was signed on its behalf by the
Chairman.
Carol Ferguson
For and on behalf of the Board
19 April 2016
Investment manager’s report
Overview
The Company’s share price and underlying net asset value (NAV)
gained over the last six months to 29
February 2016. In this period, the Company’s share price
increased by 3.2% and the underlying NAV returned 2.1%. By way of
comparison, the FTSE World Europe ex UK Index fell by 0.8%
during the same period.
The six month period to the end of February was characterised by
high volatility and deteriorating market sentiment globally. Since
the summer of 2015, investors have largely reduced their appetite
for risk assets as concerns over global economic growth,
particularly in China and other
emerging market economies, has weighed on markets. Consequently,
Europe ex-UK markets have fallen;
however, relative losses in Sterling terms have been muted given
the currency has weakened versus the Euro (worth €1.37 at the
beginning of the period, but only €1.28 at the end) as a ‘political
risk premium’ has been added to GBP ahead of a 2016 referendum on
British membership of the European Union. For reference, the FTSE
World Europe ex UK Index fell by 7.3% in Euro terms over the
period.
Policy decisions visibly drove markets during the period.
China’s commitment to the stabilisation of its currency, in
addition to monetary policy decisions taken by the Bank
of Japan, European Central Bank and US Federal Reserve were
all factors in guiding the direction of markets. Whilst it has been
noted that the US and Europe are
perhaps at different points in their economic cycle, the divergence
in terms of monetary policy was particularly visible in the fourth
quarter of 2015 as the US Fed elected to raise interest rates for
the first time in nearly ten years. This further tightened
financial conditions within the market, which had been implicitly
tight since 2014, as a result of the significant strength of the US
Dollar. At the same time, we have seen a loosening of monetary
policy by both the Bank of Japan
and the European Central Bank. The latter extended its asset
purchasing programme in December of 2015; however, the market
proved disappointed by the lack of expansion in the scale of the
programme, causing European equities to move lower into the year
end.
2016 to date has been an exceedingly challenging environment for
equity markets. The weakness in growth prospects, especially in the
US which has been relatively stable in recent years, has
further heightened fears of the potential for a global recession.
Closer to home in Europe, markets
have been disrupted by concerns over non-performing loans
provisioning in a number of Italian banks, which has heightened
investor’s awareness of the risks of owning banking stocks. In this
environment, we have seen financial sector share price performance
hit particularly hard as banking profitability comes under
ever-growing pressure in a negative interest rate environment.
Whilst we do not believe there is a widespread issue with all
financial stocks’ capital levels, we do acknowledge the
deterioration in earnings evident in the European banking
sector.
In the context of waning global growth prospects and a ‘risk
off’ environment, the market has seen the strongest returns within
defensive assets, such as health care and consumer staples. In
addition to this, the oil & gas sector has outperformed the
market as the oil price has recovered a small part of the
significant losses that had been incurred.
Portfolio activity
Stock selection drove performance over the period. In
particular, a strong performer within the banking industry was
Sberbank of Russia. Despite the
volatility that has marked the Russian market in recent months,
many Russian corporates such as Sberbank are adjusting better than
might be perceived. As the Ruble has depreciated under the recent
move to a floating exchange rate mechanism, Russian corporate
competitiveness has improved, a result which is indicative of a
more flexible economy than in the past. Despite the difficult
economic conditions, corporate profit margins have increased so far
this year to the highest level since 2011. This does not remove the
pain of devaluation, but it does assist with recovery and growth
subsequent to an economic shock.
Another strong performer was our holding in Adidas. Towards the
end of 2015 the company released solid results which were 4% to 5%
ahead of consensus. Sales were reported at 17.7% growth, supported
by strong underlying expansion in the Adidas brand. Pertinently,
sales were resilient across most regions, with Latin America and Chinese figures robust,
proving the emerging market consumer remains active. Adidas’ share
price further benefited from the announcement of a new CEO who is
well regarded by the market for his reputation of efficient cost
management.
Irish airline Ryanair also contributed positively to returns as
the company raised its net income guidance for the full year
by 25% in September 2015. In
addition, the share price responded positively to the news that the
proceeds from the sale of its stake in Aer
Lingus were to be distributed to shareholders in the
near term. The airline reports continued strength in traffic with
load factors, which indicate the amount of a flight’s capacity
filled, increasing year-on-year. Ryanair is likely to prove well
positioned for the upcoming summer traffic, given holiday maker’s
demand for more central European destinations, the core of
Ryanair’s business, in light of fears of both extremist action and
potential health risks, such as the Zika virus, emanating from
Latin America and the Middle East.
On a more negative note, the largest detractor over the period
was our holding in Italian asset manager Anima. In addition to the
stock being impacted negatively by year-to-date mark to market
moves, concerns have risen around asset flows. Troubled Italian
bank Banca Monte Paschi di Siena is one of the main distribution
partners for Anima’s funds. Anxieties have risen regarding deposit
outflows at Monte Paschi which would subsequently impact upon the
asset gathering capacity of Anima. Net flows for Anima in both
January and February of 2016 have been slowing, but remain positive
in what is a challenging environment for asset managers. Given the
enduring low interest rate environment, we believe Anima
is likely to continue capturing asset flows as Italian
investors look for alternatives to domestic bonds. On a broader
basis, the decision to have a higher exposure to financials
hindered performance as the sector sold off sharply at the onset of
2016. The lower exposure to consumer goods also impacted returns
negatively. In particular, this was evident within the food
& beverage subsector, which performed strongly as investor
capital moved into defensive assets with perceived higher levels of
safety. We chose not to invest in many of these assets given they
are unattractively valued, appearing expensive for the potential
earnings growth they exhibit. In addition, the use of gearing
detracted from returns over the period, averaging a net cash
position of -0.3%.
At the end of the six month period, relative to the
index, the portfolio was particularly weighted towards
positions in the financials, technology, health care, consumer
services and industrials sectors. The portfolio had lower exposure
to the consumer goods and telecommunications sectors, and no
exposure to basic materials, oil & gas and utilities
sectors.
Outlook
Given the complexity of issues in the market, there is a high
degree of uncertainty at present, which is expressed through the
highly volatile conditions. Equity markets act as a weighing
machine and the recent volatility demonstrates the ever-changing
risk premia for stocks as the environment develops.
Economically, the market is increasingly worried about the
growing risks of recession, a fear that is largely centred on the
US and China, and which we see as
overly pessimistic. As far as Europe is concerned, we have not seen a
significant shift in data year-to-date and Europe remains relatively robust, with pockets
of strength in consumer-related segments of the economy in
particular. Supportive European Central Bank policy remains,
leading to positive money supply growth in the economy. However,
Europe is not immune to global
growth concerns and a freezing of credit and liquidity can override
any short term strength. The outlook for Emerging Europe appears
better than it has been for some considerable time and, where
appropriate, we may look to increase exposure selectively.
Within this context, we retain a keen eye on valuation; quality
is not cheap in European equities and we will maintain our
discipline. We are sticking to companies that offer higher earnings
visibility and attractive stock-specific drivers and looking to
avoid value traps in highly cyclical businesses at a time of
uncertainty.
Vincent Devlin and Sam Vecht
BlackRock Investment Management (UK) Limited
19 April 2016
Ten largest investments
29 February 2016
Novo Nordisk: 5.2% (2015: 4.8%) is a Danish
pharmaceuticals company and the dominant global franchise in
diabetes treatment. The company has a very strong pipeline of new
drugs and is able to access the long term growth in diabetes
treatment through its high market share globally. The pipeline
of haemophilia drugs also provides further growth opportunities for
the company. We believe that Novo Nordisk has significant potential
to continue its strong track record of delivering double-digit
earnings growth per year for the foreseeable future.
Novartis: 4.6% (2015: 5.4%) is a Swiss multinational
pharmaceutical company which has streamlined its business
operations in the last year. The company has guided to a focus
on cost cutting going forward through centralisation and vertical
integration of manufacturing and drug development, with cost
savings used for research and development and further growth
opportunities. In addition to this, they are restructuring their
Ophthalmology business, where they see potential for large profits
in a market which currently has over $40
billion of sales in the US.
Ryanair: 3.0% (2015: 2.6%) is an Irish airline operator
and Europe’s lowest cost carrier. As well as being a
beneficiary of the lower oil price, the company is benefiting from
the new strategy initiatives to attract back leisure customers
whilst growing the business customer base. The airline has
established a sound track record of cutting fares but increasing
profits through growing customer traffic and load factors.
Adidas: 3.0% (2015: nil) is one of the global leaders in
the sporting goods industry. Whilst the company has a solid market
share in Europe, it has heavily
lagged the Nike brand in the US. The company has the
opportunity to vastly improve market share in this area through
increasing focus towards social media, sponsorships and creating
new products with a ‘consumer-obsessed mindset’. Thus far, we have
seen Adidas branded sales growth (which is 85% of total sales)
reaccelerating. In addition, the company exhibits a self-help
characteristic with a new CEO who has a strong reputation for cost
management joining the group in the second half of 2016.
Heineken: 2.9% (2015: 2.5%) is the second largest brewer
globally by revenue, with brands available in more than 170
markets. The company has plenty of self-help elements through a
combination of brand and innovation management, working towards
growing the top line and addressing costs so to improve the margin.
Investment in the company gives exposure to emerging markets: over
60% of group beer volumes come from developing economies.
Vinci: 2.9% (2015: nil) is a French concession and
construction company which, with its 2015 acquisitions, is one
of the world’s top five airport operators. The company is
also prominent within the road transport sector, operating
more than half of France’s motorways under concession. Both the
contracting and concessions businesses are doing well, with a
pick-up in construction and traffic in France. The business is attractively valued
with focus on margin recovery.
RELX: 2.8% (2015: 2.3%) is a multinational information
and analytics company. The company is aiming to promote organic
development, transforming its core business and building out
new products. RELX has established high barriers to entry, giving
confidence to its competitive position and allowing for more
predictable revenues going forward. The stock offers steady
compounding growth.
Deutsche Telekom: 2.8% (2015: 2.5%) is a German
telecommunications company. The stock has an attractive
valuation and has potential for solid revenue growth. Deutsche
Telekom will benefit from market consolidation in Germany and continued growth of T-Mobile in
the US. With this exposure, the stock is a beneficiary of the
stronger US Dollar relative to the Euro.
Unibail-Rodamco: 2.8% (2015: 2.5%) is the largest
commercial real estate company in Europe. The company has a strong portfolio of
assets, consistently growing rents above indexation and can create
value through the development of its portfolio. The company also
offers an attractive dividend yield in today’s environment.
Sampo Oyj: 2.6% (2015: 1.7%) is a Finnish insurance
group. The stock has low earnings volatility, an attractive yield
proposition and a growing dividend. It operates within an oligopoly
in Scandinavia, primarily within P&C insurance, providing
defensive cash flow streams which can be converted to capital
returns for investors.
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 2015.
Together, the ten largest investments represent 32.6% of the
Company’s portfolio (ten largest investments as at 31 August 2015: 34.0%).
Investments
as at 29 February 2016
|
Country of
operation |
Market
value
£’000 |
% of
investments |
|
|
|
|
| Financials |
|
|
|
| Unibail-Rodamco |
France |
6,991 |
2.8 |
| Sampo Oyj |
Finland |
6,545 |
2.6 |
| KBC Groep |
Belgium |
5,215 |
2.0 |
| Julius Baer |
Switzerland |
5,004 |
2.0 |
| AXA |
France |
4,899 |
1.9 |
| Zurich Insurance Group |
Switzerland |
4,683 |
1.9 |
| Sberbank |
Russia |
4,528 |
1.8 |
| PZU |
Poland |
4,472 |
1.8 |
| Bank of Ireland |
Ireland |
4,386 |
1.7 |
| Intesa Sanpaolo |
Italy |
4,251 |
1.7 |
| Helvetia |
Switzerland |
3,840 |
1.5 |
| Anima |
Italy |
3,643 |
1.4 |
| Azimut |
Italy |
3,559 |
1.4 |
| Halk Bank |
Turkey |
3,471 |
1.4 |
| Avanza Bank |
Sweden |
3,227 |
1.3 |
| Garanti Bank |
Turkey |
2,750 |
1.1 |
|
|
--------- |
------- |
|
|
71,464 |
28.3 |
|
|
--------- |
------- |
| Industrials |
|
|
|
| Vinci |
France |
7,254 |
2.9 |
| Thales |
France |
5,495 |
2.2 |
| Safran |
France |
5,253 |
2.1 |
| Assa Abloy |
Sweden |
5,210 |
2.0 |
| Hexagon |
Sweden |
5,051 |
2.0 |
| Ferrovial |
Spain |
3,990 |
1.6 |
| Geberit |
Switzerland |
3,894 |
1.5 |
| Atlantia |
Italy |
3,307 |
1.3 |
| CRH |
Ireland |
2,737 |
1.1 |
| Kingspan |
Ireland |
2,702 |
1.1 |
| Dassault Aviation |
France |
1,980 |
0.8 |
| Saft Groupe |
France |
1,658 |
0.6 |
|
|
--------- |
------- |
|
|
48,531 |
19.2 |
|
|
--------- |
------- |
| Health Care |
|
|
|
| Novo Nordisk |
Denmark |
13,097 |
5.2 |
| Novartis |
Switzerland |
11,568 |
4.6 |
| Fresenius Medical Care |
Germany |
5,370 |
2.1 |
| Straumann |
Switzerland |
4,445 |
1.8 |
| Lonza Group |
Switzerland |
4,195 |
1.6 |
| Roche |
Switzerland |
2,818 |
1.1 |
| William Demant |
Denmark |
2,730 |
1.1 |
|
|
--------- |
------- |
|
|
44,223 |
17.5 |
|
|
--------- |
------- |
| Consumer Goods |
|
|
|
| Adidas |
Germany |
7,570 |
3.0 |
| Heineken |
Netherlands |
7,298 |
2.9 |
| LVMH Moët Hennessy |
France |
5,696 |
2.3 |
| Pandora |
Denmark |
5,346 |
2.1 |
| Luxottica |
Italy |
4,144 |
1.6 |
| Ontex |
Belgium |
1,892 |
0.7 |
| Carlsberg |
Denmark |
1,737 |
0.7 |
|
|
--------- |
------- |
|
|
33,683 |
13.3 |
|
|
--------- |
------- |
| Consumer Services |
|
|
|
| Ryanair |
Ireland |
7,697 |
3.0 |
| RELX |
Netherlands |
7,193 |
2.8 |
| Paddy Power Betfair |
Ireland |
4,127 |
1.7 |
| TUI |
Germany |
3,691 |
1.5 |
|
|
--------- |
------- |
|
|
22,708 |
9.0 |
|
|
--------- |
------- |
| Technology |
|
|
|
| Capgemini |
France |
6,539 |
2.6 |
| Nokia |
Finland |
5,643 |
2.3 |
| Yandex |
Netherlands |
4,629 |
1.8 |
| United Internet |
Germany |
3,333 |
1.3 |
| Scout24 |
Germany |
1,121 |
0.4 |
|
|
--------- |
------- |
|
|
21,265 |
8.4 |
|
|
--------- |
------- |
| Telecommunications |
|
|
|
| Deutsche Telekom |
Germany |
7,058 |
2.8 |
| Koninklijke |
Netherlands |
3,790 |
1.5 |
|
|
--------- |
------- |
|
|
10,848 |
4.3 |
|
|
--------- |
------- |
| Total Investments |
|
252,722 |
100.0 |
|
|
======= |
===== |
All investments are in ordinary shares unless otherwise stated.
The total number of investments held at 29
February 2016 was 53 (31 August
2015: 53).
Income statement
for the six months ended 29 February
2016
|
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
|
Notes |
Six months
ended
29.02.16
(unaudited) |
Six months
ended
28.02.15
(unaudited) |
Year
ended
31.08.15
(audited) |
Six months
ended
29.02.16
(unaudited) |
Six months
ended
28.02.15
(unaudited) |
Year
ended
31.08.15
(audited) |
Six months
ended
29.02.16
(unaudited) |
Six months
ended
28.02.15
(unaudited) |
Year
ended
31.08.15
(audited) |
| Gains on investments held at fair
value through profit or loss |
|
– |
– |
– |
5,689 |
20,459 |
15,822 |
5,689 |
20,459 |
15,822 |
| Income from investments held at fair
value through profit or loss |
3 |
980 |
1,063 |
6,931 |
– |
– |
– |
980 |
1,063 |
6,931 |
| Other income |
3 |
110 |
189 |
195 |
– |
– |
– |
110 |
189 |
195 |
|
|
-------- |
-------- |
-------- |
-------- |
--------- |
--------- |
-------- |
--------- |
--------- |
| Total income |
|
1,090 |
1,252 |
7,126 |
5,689 |
20,459 |
15,822 |
6,779 |
21,711 |
22,948 |
|
|
-------- |
-------- |
-------- |
-------- |
--------- |
--------- |
-------- |
--------- |
--------- |
| Expenses |
|
|
|
|
|
|
|
|
|
|
| Investment management and
performance fees |
4 |
(225) |
(173) |
(358) |
(899) |
(692) |
(2,306) |
(1,124) |
(865) |
(2,664) |
| Operating expenses |
5 |
(320) |
(315) |
(561) |
(21) |
(13) |
(18) |
(341) |
(328) |
(579) |
|
|
-------- |
-------- |
-------- |
-------- |
--------- |
--------- |
-------- |
--------- |
--------- |
| Total operating expenses |
|
(545) |
(488) |
(919) |
(920) |
(705) |
(2,324) |
(1,465) |
(1,193) |
(3,243) |
|
|
-------- |
-------- |
-------- |
-------- |
--------- |
--------- |
-------- |
--------- |
--------- |
| Net profit before finance costs
and taxation |
|
545 |
764 |
6,207 |
4,769 |
19,754 |
13,498 |
5,314 |
20,518 |
19,705 |
| Finance costs |
|
(24) |
(1) |
(17) |
(9) |
(4) |
(34) |
(33) |
(5) |
(51) |
|
|
-------- |
-------- |
-------- |
-------- |
--------- |
--------- |
-------- |
--------- |
--------- |
| Net profit on ordinary activities
before taxation |
|
521 |
763 |
6,190 |
4,760 |
19,750 |
13,464 |
5,281 |
20,513 |
19,654 |
| Taxation |
|
371 |
(72) |
(581) |
– |
(87) |
(115) |
371 |
(159) |
(696) |
|
|
-------- |
-------- |
-------- |
-------- |
--------- |
--------- |
-------- |
--------- |
--------- |
| Net profit on ordinary activities
after taxation |
7 |
892 |
691 |
5,609 |
4,760 |
19,663 |
13,349 |
5,652 |
20,354 |
18,958 |
|
|
-------- |
-------- |
-------- |
-------- |
--------- |
--------- |
-------- |
--------- |
--------- |
| Earnings per ordinary share – both
basic and diluted |
7 |
0.86p |
0.64p |
5.28p |
4.59p |
18.31p |
12.57p |
5.45p |
18.95p |
17.85p |
|
|
===== |
===== |
===== |
===== |
===== |
===== |
===== |
===== |
===== |
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 and no operations were
acquired or discontinued during the period. All income is
attributable to the equity holders of BlackRock Greater Europe
Investment Trust plc.
The Company does not have any other recognised gains or losses.
The net profit for the period disclosed above represents the
Company’s total comprehensive income.
Statement of changes in equity
for the six months ended 29 February
2016
|
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 29
February 2016 (unaudited) |
|
|
|
|
|
|
|
| At 31 August 2015 |
130 |
61,899 |
110 |
10,115 |
178,960 |
10,245 |
261,459 |
| Total comprehensive income: |
|
|
|
|
|
|
|
| Profit for the period |
– |
– |
– |
– |
4,760 |
892 |
5,652 |
| Transactions with owners, recorded
directly to equity: |
|
|
|
|
|
|
|
| Exercise of subscription shares |
– |
35 |
– |
– |
– |
– |
35 |
| Ordinary shares purchased into
treasury |
– |
– |
– |
(3,099) |
– |
– |
(3,099) |
| Share purchase costs |
– |
– |
– |
(67) |
– |
– |
(67) |
| Dividend paid* |
– |
– |
– |
– |
– |
(3,494) |
(3,494) |
|
-------- |
--------- |
-------- |
--------- |
---------- |
-------- |
---------- |
| At 29 February 2016 |
130 |
61,934 |
110 |
6,949 |
183,720 |
7,643 |
260,486 |
|
-------- |
--------- |
-------- |
--------- |
---------- |
-------- |
---------- |
| For the six months ended 28
February 2015 (unaudited) |
|
|
|
|
|
|
|
| At 31 August 2014 |
135 |
61,644 |
105 |
21,630 |
165,611 |
9,862 |
258,987 |
| Total comprehensive income: |
|
|
|
|
|
|
|
| Profit for the period |
– |
– |
– |
– |
19,663 |
691 |
20,354 |
| Transactions with owners, recorded
directly to equity: |
|
|
|
|
|
|
|
| Exercise of subscription shares |
– |
36 |
– |
– |
– |
– |
36 |
| Ordinary shares purchased into
treasury |
– |
– |
– |
(316) |
– |
– |
(316) |
| Ordinary shares purchased and
cancelled |
(3) |
– |
3 |
(7,254) |
– |
– |
(7,254) |
| Share purchase costs |
– |
– |
– |
(93) |
– |
– |
(93) |
| Dividend paid** |
– |
– |
– |
– |
– |
(3,482) |
(3,482) |
|
-------- |
--------- |
-------- |
--------- |
---------- |
-------- |
---------- |
| At 28 February 2015 |
132 |
61,680 |
108 |
13,967 |
185,274 |
7,071 |
268,232 |
|
-------- |
--------- |
-------- |
--------- |
---------- |
-------- |
---------- |
| For the year ended 31 August 2015
(audited) |
|
|
|
|
|
|
|
| At 31 August 2014 |
135 |
61,644 |
105 |
21,630 |
165,611 |
9,862 |
258,987 |
| Total comprehensive income: |
|
|
|
|
|
|
|
| Return for the year |
– |
– |
– |
– |
13,349 |
5,609 |
18,958 |
| Transactions with owners, recorded
directly to equity: |
|
|
|
|
|
|
|
| Exercise of subscription shares |
– |
255 |
– |
– |
– |
– |
255 |
| Ordinary shares purchased into
treasury |
– |
– |
– |
(317) |
– |
– |
(317) |
| Ordinary shares purchased and
cancelled |
(5) |
– |
5 |
(11,043) |
– |
– |
(11,043) |
| Share purchase costs |
– |
– |
– |
(155) |
– |
– |
(155) |
| Dividend paid*** |
– |
– |
– |
– |
– |
(5,226) |
(5,226) |
|
-------- |
--------- |
-------- |
--------- |
---------- |
-------- |
---------- |
| At 31 August 2015 |
130 |
61,899 |
110 |
10,115 |
178,960 |
10,245 |
261,459 |
|
===== |
====== |
====== |
====== |
====== |
====== |
====== |
*
In respect of the year ended 31 August
2015 a final dividend of 3.35p per share was declared on
22 October 2015 and paid on
18 December 2015.
**
In respect of the year ended 31 August
2014 a final dividend of 3.20p per share was declared on
21 October 2014 and paid on
12 December 2014.
*** In
respect of the year ended 31 August
2015 an interim dividend of 1.65p per share was declared on
23 April 2015 and paid on
29 May 2015. In respect of the year
ended 31 August 2014 a final dividend
of 3.20p per share was declared on 21
October 2014 and paid on 12 December
2014.
The transaction costs incurred on the
acquisition and disposal of investments are included within the
capital reserves and amounted to £220,000 for the six months ended
29 February 2016 (six months ended
28 February 2015: £419,000; year
ended 31 August 2015: £627,000).
Balance sheet
as at 29 February 2016
|
Notes |
29 February
2016
£’000
(unaudited) |
28 February
2015
£’000
(unaudited) |
31 August
2015
£’000
(audited) |
|
|
|
|
|
| Fixed assets |
|
|
|
|
| Investments held at fair value
through profit or loss |
|
252,722 |
269,556 |
260,507 |
|
|
======= |
======= |
======= |
| Current assets |
|
|
|
|
| Debtors |
|
856 |
12,228 |
2,206 |
| Cash and cash equivalents |
2 |
10,857 |
– |
2,420 |
|
|
--------- |
--------- |
-------- |
|
|
11,713 |
12,228 |
4,626 |
|
|
--------- |
--------- |
-------- |
| Creditors – amounts falling due
within one year |
|
|
|
|
| Bank overdraft |
|
– |
(9,414) |
– |
| Other creditors |
|
(3,949) |
(4,138) |
(3,674) |
|
|
--------- |
---------- |
--------- |
|
|
(3,949) |
(13,552) |
(3,674) |
|
|
--------- |
---------- |
--------- |
| Net current
assets/(liabilities) |
|
7,764 |
(1,324) |
952 |
|
|
--------- |
---------- |
--------- |
| Net assets |
|
260,486 |
268,232 |
261,459 |
|
|
======= |
======= |
======= |
| Capital and reserves |
|
|
|
|
| Called-up share capital |
8 |
130 |
132 |
130 |
| Share premium account |
|
61,934 |
61,680 |
61,899 |
| Capital redemption reserve |
|
110 |
108 |
110 |
| Capital reserves |
|
183,720 |
185,274 |
178,960 |
| Special reserve |
|
6,949 |
13,967 |
10,115 |
| Revenue reserve |
|
7,643 |
7,071 |
10,245 |
|
|
----------- |
----------- |
----------- |
| Total shareholders’
funds |
|
260,486 |
268,232 |
261,459 |
|
|
======= |
======= |
======= |
| Net asset value per ordinary
share – undiluted |
7 |
252.69p |
253.82p |
250.66p |
|
|
======= |
======= |
======= |
| Net asset value per ordinary
share – diluted |
7 |
251.91p |
253.82p |
250.22p |
|
|
======= |
======= |
======= |
Statement of cash flows
for the six months ended 29 February
2016
|
Six months
ended
29 February
2016
£’000
(unaudited) |
Six months
ended
28 February
2015
£’000
(unaudited) |
Year
ended
31 August
2015
£’000
(audited) |
|
|
|
|
| Operating activities |
|
|
|
| Net profit before taxation |
5,281 |
20,513 |
19,654 |
| Interest expense |
33 |
5 |
51 |
| Gains on investments |
(5,689) |
(20,459) |
(15,822) |
| Sales of investments |
89,710 |
151,734 |
254,006 |
| Purchases of investments |
(73,964) |
(152,610) |
(242,004) |
| (Increase)/decrease in debtors |
(4) |
17 |
86 |
| (Decrease)/increase in other
creditors |
(213) |
619 |
1,156 |
| Refund of withholding tax
reclaims |
562 |
817 |
1,183 |
| Tax on investment income |
(248) |
(159) |
(1,210) |
|
--------- |
-------- |
---------- |
| Net cash generated from operating
activities |
15,468 |
477 |
17,100 |
|
--------- |
-------- |
---------- |
| Financing activities |
|
|
|
| Purchase of ordinary shares |
(3,099) |
(7,570) |
(11,360) |
| Share issue and share purchase costs
paid |
(31) |
(122) |
(124) |
| Interest paid |
(11) |
(5) |
(42) |
| Proceeds from issue of subscription
shares |
35 |
36 |
255 |
| Dividends paid |
(3,494) |
(3,482) |
(5,226) |
|
--------- |
---------- |
---------- |
| Net cash used in financing
activities |
(6,600) |
(11,143) |
(16,497) |
|
--------- |
---------- |
---------- |
| Increase/(decrease) in
cash |
8,868 |
(10,666) |
603 |
|
--------- |
---------- |
---------- |
| Cash and cash equivalents at the
beginning of period/year |
2,420 |
1,107 |
1,107 |
| Effect of foreign exchange rates
changes |
(431) |
145 |
710 |
|
--------- |
--------- |
---------- |
| Cash and cash equivalents at the
end of period/year |
10,857 |
(9,414) |
2,420 |
|
--------- |
--------- |
---------- |
| Comprised of: |
|
|
|
| Cash at bank |
284 |
– |
95 |
| BlackRock Institutional Cash Fund –
Euro Assets Liquidity Fund |
10,573 |
– |
2,325 |
| Bank overdraft |
– |
(9,414) |
– |
|
--------- |
--------- |
---------- |
|
10,857 |
(9,414) |
2,420 |
|
====== |
====== |
====== |
Notes to the financial statements
for the six months ended 29 February
2016
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 is applying for the first time, for the year ending
31 August 2016, FRS 102, ‘The
Financial Reporting Standard applicable in the UK and Republic of
Ireland’, which forms part of revised Generally Accepted Accounting
Practice (New UK GAAP) issued by the Financial Reporting Council
(FRC) in 2012 and 2013 and which came into effect for accounting
periods beginning on or after 1 January
2015. The last financial statements prepared under the
previous UK GAAP were for the year ended 31
August 2015.
The condensed set of financial statements have 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.
As a result of the first time adoption of New UK GAAP and the
revised SORP, comparative amounts and presentation formats have
been amended where required. The changes to accounting policies
relate to the composition of cash and cash equivalents, change in
the presentation of cash flows (see below) and fair value hierarchy
of financial instruments (see note 9). There were no adjustments to
the Company’s Income Statement for the financial year ended
31 August 2015 and the total equity
as at 1 September 2014 and
31 August 2015 between UK GAAP as previously reported and FRS
102 as a result of changes to accounting policies.
The Company’s Statement of Cash Flows reflects the presentation
requirements of FRS 102, which is different to that prepared under
FRS 1. In addition, the Statement of Cash Flows reconciles to cash
and cash equivalents, whereas under previous UK GAAP the Statement
of Cash Flows reconciled to cash. Cash and cash equivalents are
defined in FRS 102 as ‘cash in hand and demand deposits, short term
highly liquid investments that are readily convertible to known
amounts of cash and that are subject to an insignificant risk of
changes in value’ and the bank overdraft which forms an integral
part of the Company’s cash management policy, whereas cash is
defined in FRS 1 as ‘cash in hand and deposits repayable on demand
with any qualifying institution, less overdrafts from any
qualifying institution repayable on demand’. Accordingly, the
Company’s investment in BlackRock’s Institutional Cash Fund – Euro
Assets Liquidity Fund of £10,573,000 (28
February 2015: £nil; 31 August
2015: £2,325,000) which is managed as part of the Company’s
cash management policy has been classified in the Balance Sheet and
the Statement of Cash Flows as cash and cash equivalents.
The accounting policies applied for the financial statements
with regard to measurement and classification are as set out in the
Company’s Annual Report and Financial Statements for the year ended
31 August 2015. This reflects the
Company’s application of Sections 11 and 12 of FRS 102 in relation
to financial instruments, in full.
References to prior, individual Financial Reporting Statements
(FRS) should now be taken as references to FRS 102 and FRS 104.
3. Income
|
Six months
ended
29 February
2016
(unaudited)
£’000 |
Six months
ended
28 February
2015
(unaudited)
£’000 |
Year
ended
31 August
2015
(audited)
£’000 |
| Investment income: |
|
|
|
| Overseas dividends |
980 |
1,063 |
6,931 |
|
-------- |
-------- |
-------- |
|
980 |
1,063 |
6,931 |
|
-------- |
-------- |
-------- |
| Other income: |
|
|
|
|
-------- |
-------- |
-------- |
| Bank interest |
– |
3 |
10 |
|
-------- |
-------- |
-------- |
| Interest on WHT reclaims |
110 |
186 |
185 |
|
-------- |
-------- |
-------- |
|
110 |
189 |
195 |
|
-------- |
-------- |
-------- |
| Total income |
1,090 |
1,252 |
7,126 |
|
===== |
===== |
===== |
Dividends and interest received during the period amounted to
£937,000 and £110,000 (six months ended 28
February 2015: £1,050,000 and £232,000; year ended
31 August 2015: £7,012,000 and
£238,000) respectively.
4. Investment management and
performance fees
|
|
|
|
|
Six
months ended
29 February 2016
(unaudited) |
Six
months ended
28 February 2015
(unaudited) |
Year
ended
31 August 2015
(audited) |
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
|
|
|
|
|
|
|
|
|
|
| Investment management fee |
225 |
899 |
1,124 |
173 |
692 |
865 |
358 |
1,434 |
1,792 |
| Performance fee |
– |
– |
– |
– |
– |
– |
– |
872 |
872 |
|
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
-------- |
| Total |
225 |
899 |
1,124 |
173 |
692 |
865 |
358 |
2,306 |
2,664 |
|
===== |
===== |
====== |
====== |
====== |
===== |
===== |
===== |
====== |
With effect from 1 September 2015,
the investment management fee is levied quarterly based on 0.85%
per annum of the net asset value on the last day of each month.
Until 31 August 2015, the investment
management fee was 0.70% per annum of the market capitalisation of
the Company’s ordinary shares on the last day of each month. The
investment management fee is allocated 80% to capital reserves and
20% to the revenue reserve.
With effect from 1 September 2015,
the Company no longer pays a performance fee (six months ended
28 February 2015: nil; year ended
31 August 2015: £872,000). The
performance fee accrued at 31 August
2015 was based on the outperformance of the Company’s share
price relative to the FTSE World Europe ex UK Index over a three
year rolling period.
5. Operating expenses
|
Six months
ended
29 February
2016
(unaudited)
£’000 |
Six months
ended
28 February
2015
(unaudited)
£’000 |
Year
ended
31 August
2015
(audited)
£’000 |
|
|
|
|
| Custody fees |
13 |
12 |
26 |
| Depositary fees |
18 |
17 |
36 |
| Audit fees |
15 |
14 |
25 |
| Registrar’s fees |
44 |
42 |
90 |
| Directors’ emoluments |
53 |
53 |
118 |
| Marketing fees |
62 |
80 |
48 |
| Other administration costs |
115 |
97 |
218 |
|
-------- |
-------- |
-------- |
|
320 |
315 |
561 |
|
-------- |
-------- |
-------- |
| Transaction costs to capital |
21 |
13 |
18 |
|
===== |
====== |
===== |
6. Dividend
The Board has declared an interim dividend of 1.65p per share
for the period ended 29 February 2016
payable on 27 May 2016 to
shareholders on the register on 29 April
2016. The total cost of the dividend based on 102,761,916
ordinary shares in issue at 19 April
2016 was £1,696,000 (28 February
2015: £1,744,000).
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 are shown below and have
been calculated using the following:
|
29 February
2016
(unaudited) |
28 February
2015
(unaudited) |
31 August
2015
(audited) |
|
|
|
|
| Net revenue profit attributable to
ordinary shareholders (£’000) |
892 |
691 |
5,609 |
| Net capital profit attributable to
ordinary shareholders (£’000) |
4,760 |
19,663 |
13,349 |
|
-------- |
-------- |
-------- |
| Total profit (£’000) |
5,652 |
20,354 |
18,958 |
|
-------- |
-------- |
-------- |
| Equity shareholders’ funds
(£’000) |
260,486 |
268,232 |
261,459 |
|
----------- |
----------- |
----------- |
| Earnings per share |
|
|
|
| Undiluted |
|
|
|
|
----------------- |
----------------- |
----------------- |
| The weighted average number of
ordinary shares in issue during the period, on which the undiluted
profit per ordinary share was calculated was: |
103,701,234 |
107,399,899 |
106,194,950 |
|
----------------- |
----------------- |
----------------- |
| The actual number of ordinary shares
in issue at the period end, on which the undiluted net asset value
was calculated was: |
103,086,916 |
105,676,343 |
104,309,663 |
|
----------------- |
----------------- |
----------------- |
| Calculated on weighted average
number of shares |
|
|
|
| Revenue profit |
0.86p |
0.64p |
5.28p |
| Capital profit |
4.59p |
18.31p |
12.57p |
|
-------- |
-------- |
-------- |
| Total |
5.45p |
18.95p |
17.85p |
|
-------- |
-------- |
-------- |
| Net asset value per share –
undiluted |
252.69p |
253.82p |
250.66p |
|
----------- |
----------- |
----------- |
| Calculated on actual number of
shares |
|
|
|
| Revenue profit |
0.86p |
0.65p |
5.38p |
| Capital profit |
4.62p |
18.61p |
12.80p |
|
-------- |
--------- |
--------- |
| Total |
5.48p |
19.26p |
18.18p |
|
-------- |
--------- |
--------- |
| Earnings per share |
|
|
|
| Diluted |
|
|
|
| The weighted average number of
ordinary shares in issue during the period, on which the diluted
profit per ordinary share was calculated was: |
103,701,234 |
107,399,899 |
106,194,950 |
|
----------------- |
----------------- |
----------------- |
| The actual number of ordinary shares
in issue, including subscription shares, at the period end, on
which the fully diluted net asset value was calculated was: |
123,617,914 |
126,309,643 |
124,854,841 |
|
----------------- |
----------------- |
----------------- |
| Calculated on weighted average
number of shares |
|
|
|
| Revenue profit |
0.86p |
0.64p |
5.28p |
| Capital profit |
4.59p |
18.31p |
12.57p |
|
-------- |
--------- |
--------- |
| Total |
5.45p |
18.95p |
17.85p |
| Net asset value per share –
diluted |
251.91p |
253.82p |
250.22p |
|
======= |
======= |
======= |
Dilution for subscription shares is assessed at the reporting
date and over the duration of the reporting period. A diluted NAV
is calculated to the extent that the period end NAV and the
mid-market closing share price are both above the exercise price of
the subscription shares. Diluted returns are calculated where, over
the reporting period, the mid-market closing share price is above
the subscription share exercise price.
The diluted NAV per share at 29 February
2016, 28 February 2015 and
31 August 2015 is calculated by
adjusting equity shareholders’ funds for the consideration
receivable on the exercise of the 20,530,998 subscription shares
(28 February 2015: 20,633,300;
31 August 2015: 20,545,178) at the
exercise price of 248.00p per share and dividing by the total
number of shares that would have been in issue at those dates had
all the subscription shares been exercised. The subscription shares
were dilutive at 29 February 2016
(six months ended 28 February 2015:
not dilutive; year ended 31 August
2015: dilutive).
In accordance with IAS 33 ‘Earnings per share’, as referenced in
FRS 102 Section 10.6, there is no dilutive impact on the earnings
per share for the period 29 February
2016 as the mid-market price of the ordinary shares during
the period of 243.37p is below the exercise price of the
subscription shares of 248.00p per share.
At 29 February 2016, the Company
had 6,725,825 shares (28 February
2015: 5,561,653; 31 August
2015: 5,488,898) held in treasury. The Company’s policy on
issuing treasury shares, set out on page 19 and 20 of the Annual
Report for the year ended 31 August
2015, permits the Directors to sell treasury shares at a
price below the NAV in certain circumstances. As a result this
would have a dilutive effect.
8. Share capital and shares held in
treasury
|
Number of
ordinary
shares
in issue |
Number of
treasury
shares
in issue |
Number of
subscription
shares
in issue |
Total |
Nominal
value
£ |
| Allotted, called up and fully
paid share capital comprised: |
|
|
|
|
|
| Ordinary shares of 0.1p
each: |
|
|
|
|
|
| At 1 September 2015 |
104,309,663 |
5,488,898 |
– |
109,798,561 |
109,798 |
| Shares bought back to treasury
(tender offer) |
(1,236,927) |
1,236,927 |
– |
– |
– |
|
----------------- |
-------------- |
-------- |
-------- |
-------- |
|
103,072,736 |
6,725,825 |
– |
109,798,561 |
109,798 |
| Subscription shares of 0.1p
each: |
|
|
|
|
|
| At 1 September 2015 |
– |
– |
20,545,178 |
20,545,178 |
20,545 |
| Conversion of subscription shares
into ordinary shares |
14,180 |
– |
(14,180) |
– |
– |
|
----------------- |
-------------- |
--------------- |
----------------- |
----------- |
| At 29 February 2016 |
103,086,916 |
6,725,825 |
20,530,998 |
130,343,739 |
130,343 |
|
========== |
======== |
========= |
========== |
======= |
9. Valuation of financial
instruments
The Company has early adopted the amendments to FRS 102 ‘Fair
value hierarchy disclosure’ effective for annual periods beginning
on or after 1 January 2017. These
amendments improve the consistency of fair value disclosure for
financial instruments compared with those required by EU adopted
IFRS.
The Company classifies financial instruments measured at fair
value using a fair value hierarchy. The fair value hierarchy has
the following categories:
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 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
in active markets for similar instruments; 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
techniques used include inputs not based on market 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 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 in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. 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 judgment, considering
factors specific to the asset or liability. The determination of
what constitutes ‘observable’ inputs requires significant judgement
by the Investment Manager. The Investment Manager considers
observable inputs 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 table below is an 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 29 February 2016 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
| Equity investments |
252,722 |
– |
– |
252,722 |
|
======= |
======= |
======= |
======= |
| Financial assets at fair value
through profit or loss at 28 February 2015 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
| Equity investments |
269,556 |
– |
– |
269,556 |
|
======= |
======= |
======= |
======= |
| Financial assets at fair value
through profit or loss at 31 August 2015 |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
| Equity investments |
260,507 |
– |
– |
260,507 |
|
======= |
======= |
======= |
======= |
There were no transfers between levels for financial assets and
financial liabilities during the period recorded at fair value
as at 29 February 2016, 28 February 2015 and 31 August 2015. The
Company did not hold any Level 3 securities through the six month
period or as at 29 February 2016
(28 February 2015: nil; 31 August 2015: nil).
10. Related party disclosure
As at 31 August 2015, the Board
consisted of five non-executive Directors, all of whom are
considered to be independent by the Board. As of 10 December 2015, Gerald
Holtham retired from the Board. None of the Directors has a
service contract with the Company. The Chairman receives an annual
fee of £33,000, the Chairman of the Audit and Management Engagement
Committee receives an annual fee of £27,500 and each other Director
receives an annual fee of £23,000.
The following members of the Board hold shares in the Company:
Carol Ferguson holds 57,600 ordinary
shares and Eric Sanderson holds
4,000 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 the Investment Manager are
stated in note 11.
11. Transactions with the AIFM and the
Investment Manager
BlackRock Fund Managers Limited (BFM) was appointed as the
Company’s AIFM with effect from 2 July
2014. 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 in the Directors’
Report in the Annual Report and Financial Statements on pages 16
and 17.
The investment management fee is levied quarterly, based on
0.85% of the net asset value on the last day of each month. The
investment management fee due for the six months ended 29 February 2016 amounted to £1,124,000 (six
months ended 28 February 2015:
£865,000; year ended 31 August 2015:
£1,792,000). With effect from 1 September 2015 the Company no
longer pays a performance fee (six months ended 28 February
2015: nil; year ended 31 August 2015:
£872,000). At the period end, £1,575,000 was outstanding in respect
of the management fee (six months ended 28 February 2015:
£1,142,000; year ended 31 August
2015: £927,000).
In addition to the above services, with effect from 1 November 2013, BIM
(UK) has provided the Company with marketing services. The
total fees paid or payable for these services for the six months
ended 29 February 2016 amounted to
£52,000 excluding VAT (six months ended 28
February 2015: £65,000; year ended 31
August 2015: £48,000). Marketing fees of £133,000 excluding
VAT were outstanding at 29 February
2016 (28 February 2015:
£178,000; 31 August 2015:
£161,000).
The Company held an investment in BlackRock’s Institutional Cash
Fund – Euro Assets Liquidity Fund of £10,573,000 at 29 February 2016 (28
February 2015: nil; 31 August
2015: £2,325,000).
12. Contingent liabilities
There were no contingent liabilities at 29 February 2016 (28
February 2015: nil; 31 August
2015: nil).
13. Publication of non statutory
accounts
The financial information contained in this half yearly
financial report does not constitute statutory accounts as defined
in section 435 of the Companies Act 2006. The financial information
for the six months ended 29 February
2016 and 28 February 2015 has
not been audited.
The information for the year ended 31
August 2015 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 2016, as prepared
under New UK GAAP, in late October
2016. Copies of the results announcement can be obtained
from the Secretary on 020 7743 3000. The Annual Report and
Financial Statements should be available by the end of October 2016, with the Annual General Meeting
being held at the end of November
2016.
12 Throgmorton Avenue
London
EC2N 2DL
For further information please contact:
Simon White, Managing Director,
Closed End Funds, BlackRock Investment Management (UK) Limited –
020 7743 5284
Vincent Devlin, 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.