BlackRock Greater Europe Investment Trust Plc - Half-year Report
PR Newswire
LONDON, United Kingdom, May 02
BlackRock Greater Europe Investment Trust plc
LEI:5493003R8FJ6I76ZUW55
Half Yearly Financial Report 29 February 2024
Performance record
As at | As at | | |
Net assets (£'000)1 | 662,619 | 565,710 |
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Net asset value per ordinary share (pence) | 658.25 | 560.11 |
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Ordinary share price (mid-market) (pence) | 629.00 | 527.00 |
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Discount to cum income net asset value2 | 4.4% | 5.9% |
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FTSE World Europe ex UK Index | 2,100.60 | 1,916.71 |
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For the six | For the six | | |
Performance (with dividends reinvested) |
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Net asset value per share2 | 18.6% | 16.6% |
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Ordinary share price2 | 20.5% | 15.9% |
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FTSE World Europe ex UK Index | 9.6% | 14.6% |
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For the period | For the period | | |
Performance since inception (with dividends reinvested) |
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Net asset value per share2 | 814.2% | 654.1% |
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Ordinary share price2 | 784.3% | 626.0% |
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FTSE World Europe ex UK Index | 431.2% | 379.7% |
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| For the six | For the six | |
Revenue |
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Net profit on ordinary activities after taxation (£'000) | 63 | 22 | +186.4 |
Revenue earnings per ordinary share (pence)3 | 0.06 | 0.02 | +200.0 |
Dividends (pence) |
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Interim dividend | 1.75 | 1.75 | - |
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1 The change in net assets reflects payments for shares repurchased into treasury, portfolio movements and dividends paid.
2 Alternative Performance Measures, see Glossary contained within the Half Yearly Financial Report.
3 Further details are given in the Glossary contained within the Half Yearly Financial Report.
Chairman's Statement
Overview
The first six months of this year resulted in a strong performance for European equities and we comfortably exceeded the performance of the FTSE World Europe ex UK Index (the reference index) over this period, maintaining the excellent performance of the Company.
In general, European equities have been strong performers in 2023, defying concerns that the region might slip into recession. In fact, 2023 turned out much better than most market participants had expected despite changes in European Central Bank (ECB) monetary policy. Geopolitical events, although far from resolved, also had a less significant impact than expected and European gas and electricity prices fell back to late 2021 levels and are expected to remain broadly stable. Consequently, growth was far better and inflation much lower than generally anticipated.
Initial weakness in January, following strong markets during the fourth quarter of 2023, was soon replaced by solid earnings reports from European large cap stocks, as well as evidence of a strong underlying economy. The robust corporate earnings, combined with positive outlook statements from companies and support from reasonably resilient macroeconomic data, drove markets higher in February.
Performance
Against this backdrop, I am pleased to report that over the six months ended 29 February 2024, the Company's net asset value per share (NAV) returned 18.6%, outperforming the reference index which returned 9.6%. Over the same period, the Company's share price returned 20.5% (all percentages calculated in Pounds Sterling terms with dividends reinvested).
Since the period end to 1 May 2024, the Company's NAV has decreased by 3.4% compared with a rise in the FTSE World Europe ex UK Index of 2.0% over the same period.
Revenue earnings and dividends
The Company's revenue return per share for the six-month period ended 29 February 2024 amounted to 0.06p compared with 0.02p for the corresponding period in 2023. The majority of the Company's income typically is generated in the second half of the year when portfolio companies announce and pay dividends. The Board has taken this into account in considering the interim dividend payment level.
The Board has declared an interim dividend of 1.75p (2023: 1.75p) per share. The dividend will be paid on 19 June 2024 to shareholders on the Company's register on 24 May 2024, the ex-dividend date being 23 May 2024.
Management of share rating
Investor sentiment and discounts have been influenced by various external factors and uncertainties, including rising interest rates, and discounts have widened generally across the investment trust sector. The average discount for the AIC Europe sector was 9.2% over the six months ended 29 February 2024 and the Company's discount was not immune to market pressures and also widened, with the shares trading at an average discount of 6.3% over the period under review. The Board monitors the discount closely and, following consultation with the Manager and Company's corporate broker, Cavendish Securities, it was determined that it was in shareholders' interests to buy back shares with the objective of ensuring that an excessive discount to NAV did not arise.
As part of this program, the Company bought back 336,310 shares for a total consideration of £1,914,000 over the six months under review. Since 29 February 2024 and up to the latest practicable date of 1 May 2024, a further 519,329 shares have been bought back for a total consideration of £3,298,000. As at this date, the Company's shares were trading at a discount of 3.6%, a significantly narrower discount than all other companies in our sector reflecting our strong investment performance.
All shares were bought back at a discount to the prevailing NAV and the buy backs were therefore accretive to existing shareholders. All shares bought back have been placed in treasury for future reissue.
Tender offers
The Directors of the Company have the discretion to make semi-annual tender offers at the prevailing NAV less 2%, for up to 20% of the issued share capital in May and November of each year. The Board announced on 20 September 2023 that it had decided not to proceed with a tender offer in November 2023 and on 21 March 2024 that the tender offer in May 2024 would also not be implemented.
Despite a challenging period for discounts, it is pleasing that the Company's share rating has been relatively stable versus the market and peer group and the Board believes that the buyback activity undertaken has been beneficial in reducing the volatility of the Company's share rating and in shareholders' interests. As the Company's discount was trading at 5.3% on 20 March 2024 and was trading at the narrowest discount within its peer group, the Board concluded that it was not in the interests of shareholders as a whole to implement the May 2024 semi-annual tender offer.
The Board will continue to monitor the Company's discount and may use the Company's share buyback powers to ensure that the share price does not go to an excessive discount to the underlying NAV. The Board remains committed to supporting the share price to a narrow discount or premium to its NAV.
Outlook
The outlook for Europe is mixed in 2024 but European equities surprised positively last year and this could be repeated. Stock markets will continue to be dominated by interest rates and European stocks have been boosted by expectations of interest rate cuts but the ECB is likely to be cautious and will presumably take its time in adjusting policy despite Eurozone inflation falling at a brisk pace. There are additional risks, aside from the prospect of recession: operating margins for European stocks hit record highs in 2023 which may not be replicated this year, continued weak growth in China and less exposure to artificial intelligence, a key driver for US stocks.
However, our portfolio managers are cautiously optimistic as the ECB should be able to start cutting interest rates later in the year as inflationary pressures continue to ease. The surge in commodity prices driven by the war in Ukraine and rise in goods prices driven by the supply-chain disruptions during the COVID-19 pandemic are largely in the past. Additionally, the earnings situation of most companies in Europe has significantly improved compared to 2022 and the region's stocks remain lowly valued versus history and on an international basis, suggesting there could still be scope for share price gains in 2024.
Against this backdrop, our portfolio managers remain positive on the outlook for European equities. The Board is also confident that they will continue to remain selective and focus on issuer fundamentals in a concentrated, high conviction portfolio.
ERIC SANDERSON
2 May 2024
Investment Manager's Report
Market review
The Company's share price and underlying net asset value per share (NAV) rose by 20.5% and 18.6%, respectively, over the six months to 29 February 2024. By way of comparison, the FTSE World Europe ex UK Index returned 9.6% during the same period. (All percentages calculated in Pounds Sterling terms with dividends reinvested.)
European equities delivered very strong returns over the last six months despite a backdrop of cautious sentiment given concerns over a potential recession, weaker China macro data and geopolitical risks. The asset class remains under-owned by investors and we observe a generally defensive positioning.
Our optimism entering the period - reflected in a pro-cyclical portfolio positioning - was rewarded as inflation fell closer to central bank targets and wages began growing in real terms, while corporate earnings came through better than the market had expected. Technology, industrials, financials and consumer discretionary sectors led the strong market rally, while defensive sectors including consumer staples and utilities underperformed.
Portfolio overview
The portfolio's positioning in the technology sector, semiconductors in particular, delivered the strongest contribution to returns over the period. The industry sells into a range of different end markets and applications including autos, phones, PCs, gaming as well as industrial applications like 5G, cloud infrastructure and Artificial Intelligence (AI).
Over the past six months, there has been increasing evidence of the positive impact from AI on the semiconductor sector as material orders from large technology companies started to come through. We seem to be entering a semiconductor upcycle, which tends to have duration and can produce significant opportunities for growth. The scale of capital expenditure (capex) increases that many technology firms have committed to in order to build out their AI infrastructure and capabilities has been impressive. This is not solely a US phenomenon and we believe we own European stocks that will see significant benefits from this investment spend.
BE Semiconductor was the top contributor to relative returns over the period. Thecompany is one of the leading providers of packaging solutions such as hybrid bonding, which is set to become an increasingly important technology in enabling semiconductor chips to continue getting smaller, yet more powerful and more energy efficient. Other semiconductor businesses in the portfolio including ASMInternational and ASML were also amongst the best performers.
A positive contribution also came from areas that we consider 'capex winners'. After a long period of under-investment from many corporates post the global financial crisis, we believe we are at the beginning of significant investment spend to come. Companies enabling the energy transition, the electrification of our economies or that help re-shore supply chains can truly benefit from these transformations. The portfolio's position in Schneider Electric (Schneider) was amongst the best performers, benefiting from these trends. Around 75% of Schneider's sales come from their energy management division. Schneider plays a key role in emission reduction initiatives due to their solutions that help make public and private buildings more energy efficient. On the infrastructure side, Schneider holds a leading position in medium voltage solutions that allow for making power grids smarter, more energy efficient and capable to deal with renewable energy. That infrastructure segment is expected to grow at a double-digit rate over the next few years.
Within luxury, concerns around deteriorating demand trends and operating deleverage were disproved by the most established brands selling to high-end consumers. The portfolio's position in Hermès contributed positively given strong Q4 results and upbeat commentary around 2024 trading so far. Elsewhere in the sector, luxury sportscar maker Ferrari also impressed with strong results as the brand continues to see strong demand worldwide across models. The order book is full, giving investors earnings visibility out to 2026 whilst revenue from personalisation options is hitting record highs.
Finally, Novo Nordisk (Novo), a global leader in the treatment of diabetes and obesity, continued to perform well. Demand for Novo's obesity drug Wegovy, which was launched two years ago, has been a key driver in moving the share price almost 30% higher over the last six months. We believe the obesity market opportunity is significant. Currently, only a very small percentage of an estimated 800 million people who live with obesity globally receive long-term medical treatment given the severe side effects of older therapies. Wegovy, however, has shown a strong efficacy in weight loss, with a manageable side effect profile alongside a significant reduction in major adverse cardiovascular events. These results will not only help to underpin the validity of this new category of drugs, but they also underwrite future growth of the group at high returns for a long time to come.
Outside of Novo Nordisk, the portfolio's health care investments were less successful over the period. Regardless of the attractive long-term fundamentals, the life sciences industry experienced continued weakness related to inventory destocking. The interest rate environment also weighed on this part of the market as tighter financial conditions meant less funding for early stage and experimental projects. In this context, shares in Lonza and Sartorius Stedim were amongst the largest detractors from relative returns and we reduced the former and exited the latter given our lower conviction.
Shares in logistics company DSV were the single largest detractor. The main weakness came from the company's announcement to enter a US$10 billion exclusive logistics joint venture with Saudi's NEOM city project which led to concerns over the capital intensity of the project, as well as a shift in business strategy. Having discussed these issues with DSV's management, we are somewhat reassured that the deal is financially solid and DSV have protection mechanisms in place should the project disappoint. We continue to closely monitor the position and run slightly lower weights than we have in the past.
Other changes to the portfolio were limited. We added Linde, a leader in industrial gases with strong pricing power, geared into structural growth in energy transition and capex spend and with diversified end-markets and low financial leverage. Royal Unibrew was sold after a prolonged period of weaker volumes and a disappointing performance from one of its recently acquiredbrands.
Outlook
Looking to the future we remain cautiously optimistic as inflation is trending down and the economy appears resilient, even with interest rates at current levels. Financial conditions have already started to ease and mortgage rates in many European countries are already falling. Leverage in the corporate sector is low, margins are strong and the end of the destocking cycle is in sight with a positive inflection to come.
STEFAN GRIES AND ALEXANDRA DANGOOR
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
2 May 2024
Ten largest investments
Together, the Company's ten largest investments represented 52.2% of the Company's portfolio as at 29 February 2024 (31 August 2023: 53.4%)
1 ? Novo Nordisk (2023: 1st)
Health Care company
Market value: £62,558,000
Share of investments: 8.8%
Novo Nordisk is a Danish multinational pharmaceutical company and a leader in diabetes care. Novo Nordisk is expected to post strong earnings and cash flow growth driven by demand for Ozempic which treats Type 2 diabetes and its weight management drug Wegovy. The latter has recently provided evidence of reducing major adverse cardiovascular events by 20%.
2 ? ASML (2023: 3rd)
Technology company
Market value: £52,062,000
Share of investments: 7.3%
ASML is a Dutch company specialising in photolithography systems for the semiconductor industry. The company is at the forefront of technological change, investing in leading research and development to capture the structural growth opportunity coming from growth in mobile devices and microchip components. High barriers to entry within the industry give ASML a protected position with strong pricing power allowing growth in margins.
3 ? LVMH (2023: 2nd)
Consumer Discretionary company
Market value: £44,228,000
Share of investments: 6.2%
LVMH is a French multinational corporation specialising in luxury goods. The group has a strong and well-diversified portfolio of luxury brands ranging from handbags to spirits to cosmetics. LVMH's business model enjoys high barriers to entry due to the heritage, provenance and exquisite quality of its product offering. Its consistent brand investment through economic cycles has helped to spur brand desirability and allowed for significant pricing power.
4 ? RELX (2023: 4th)
Consumer Discretionary company
Market value: £43,697,000
Share of investments: 6.2%
RELX is a multinational information and analytics company with high barriers to entry in most of its divisions, including scientific publishing. Their capital light business model enables a high rate of cash conversion with repeat subscription-based revenues. The business benefits from increasing usage of data globally supporting their data analytics business.
5 ? BE Semiconductor (2023: 9th)
Technology company
Market value: £34,977,000
Share of investments: 4.9%
BE Semiconductor is a Dutch supplier of semiconductor assembly equipment. The company can continue to grow its market share of an overall growing market given its best-in-class position to capture the advanced packaging segment of the assembly market. The chip makers will have to rely on more innovative packaging solutions (e.g. hybrid bonding) to continue to improve chip efficiency (faster processing, lower power consumption) while also keeping control over manufacturing costs.
6 ? Hermès (2023: 7th)
Consumer Discretionary company
Market value: £30,492,000
Share of investments: 4.3%
Hermès is a French luxury design house specialising in leather goods, lifestyle accessories, home furnishings, perfumery, jewellery, watches and high-end clothing. With good brand management and craftsmanship, Hermès products are supply constrained and the company enjoys strong earnings visibility as some of its most iconic products are sold on allocation via waiting lists. Hermès has been run in a conservative fashion for generations with strategic decisions taken with the longest of timeframes.
7 ? Ferrari (2023: 11th)
Consumer Discretionary company
Market value: £27,199,000
Share of investments: 3.8%
Ferrari is an Italian luxury sports car manufacturer emphasising exclusivity, performance and quality globally, with a strong focus on innovation and delivering unique driving experiences to its clientele. There is a lot of excitement for 2024 as limited release models are being introduced including the SF90 XX Stradale, followed by the Spider in the second quarter of 2024. Both cars are expected to come at higher price points that will be additive to Ferrari's overall revenue mix. Demand will remain strong beyond 2024, with the company's order book already sold out up to 2026.
8 ? Safran (2023: 10th)
Industrials company
Market value: £26,997,000
Share of investments: 3.8%
Safran is a French multinational supplier of aerospace, defence and security systems. The industry has emerged from a heavy investment period and Safran is well-placed to benefit from continued strength in its best in class after-market business and strong execution in its LEAP engine program which should drive growth for the next decade.
9 ? ASM International (2023: 13th)
Technology company
Market value: £24,935,000
Share of investments: 3.5%
ASM International is a Dutch international company that designs and manufactures equipment and process solutions to produce semiconductor devices for wafer processing. The company aims to create sustainable, long-term value for their stakeholders and a degree of recovery in logic/foundry. The company is also set to benefit from the increasing importance of power emerging technologies such as Artificial Intelligence (AI), where we've seen a step change with the roll out of generative AI tools in 2023.
10 ? Partners Group (2023: 19th)
Financials company
Market value: £24,126,000
Share of investments: 3.4%
Partners Group is a Swiss-based global private markets firm. Partners Group specialise in private equity, although also offer private debt, private real estate and private infrastructure to clients. Their aim is to provide clients with solutions, providing them with a diverse portfolio of alternatives which suit their needs. With the funding environment easing, Partners Group is well set up to raise assets under management (AUM) in the alternatives space. On top of this, the dividend yield is 4% and the company has an impressive historic dividend payout policy. In the second half of 2023 the company started seeing an uptrend towards more normalised conversion periods, with demand expected to be carried over into the next few years.
All percentages reflect the value of the holding as a percentage of total investments.
Arrows indicate the change in relative ranking of the position in the portfolio compared to its ranking as at 31 August 2023.
Portfolio analysis as at 29 February 2024
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Basic Materials | - | - | - | - | - | 2.5 | - | - | - | - | 2.4 | 4.9 | 2.6 | 4.4 |
Consumer Discretionary | 13.4 | - | - | - | - | - | - | - | - | 3.8 | 6.2 | 23.4 | 20.7 | 13.8 |
Consumer Staples | - | 1.2 | - | - | - | - | - | - | - | - | - | 1.2 | 4.4 | 7.6 |
Energy | - | - | - | - | - | - | - | - | - | - | - | - | - | 3.9 |
Financials | - | 3.4 | 2.8 | - | - | - | - | 1.8 | - | - | 0.6 | 8.6 | 8.1 | 18.1 |
Health Care | - | 4.2 | - | - | - | - | 10.9 | - | - | - | - | 15.1 | 18.0 | 15.7 |
Industrials | 7.1 | 4.9 | 2.4 | 1.7 | 3.5 | 2.1 | 2.0 | - | - | - | - | 23.7 | 22.7 | 18.4 |
Real Estate | - | - | - | - | - | - | - | - | - | - | - | - | - | 1.0 |
Technology | 1.7 | 3.3 | - | - | 2.4 | 15.7 | - | - | - | - | - | 23.1 | 23.5 | 10.5 |
Telecommunications | - | - | - | - | - | - | - | - | - | - | - | - | - | 2.9 |
Utilities | - | - | - | - | - | - | - | - | - | - | - | - | - | 3.7 |
% Portfolio 29.02.24 | 22.2 | 17.0 | 5.2 | 1.7 | 5.9 | 20.3 | 12.9 | 1.8 | - | 3.8 | 9.2 | 100.0 | - | - |
% Portfolio 31.08.23 | 18.8 | 19.9 | 5.4 | 1.3 | 4.6 | 17.3 | 17.9 | 1.9 | 2.4 | 4.2 | 6.3 | - | 100.0 | - |
FTSE World Europe ex UK 29.02.24 | 22.1 | 18.4 | 0.5 | 16.6 | 6.5 | 10.9 | 6.6 | 1.6 | 4.8 | 4.8 | 7.2 | - | - | 100.0 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
Percentages in the table above are a % of total investments.
Investments as at 29 February 2024
| Market | | |
Industrials |
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Safran | France | 26,997 | 3.8 |
Schneider Electric | France | 23,550 | 3.3 |
Sika | Switzerland | 20,420 | 2.9 |
Kingspan | Ireland | 17,041 | 2.4 |
Atlas Copco | Sweden | 16,801 | 2.4 |
Adyen | Netherlands | 14,897 | 2.1 |
DSV Panalpina | Denmark | 14,324 | 2.0 |
Rational | Germany | 12,303 | 1.7 |
Epiroc | Sweden | 7,844 | 1.1 |
Belimo | Switzerland | 7,373 | 1.0 |
VAT Group | Switzerland | 7,296 | 1.0 |
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| 168,846 | 23.7 |
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Consumer Discretionary |
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LVMH | France | 44,228 | 6.2 |
RELX | United Kingdom | 43,697 | 6.2 |
Hermès | France | 30,492 | 4.3 |
Ferrari | Italy | 27,199 | 3.8 |
L'Oreal | France | 20,844 | 2.9 |
Fix Price Group* | Russia | 1 | - |
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| 166,461 | 23.4 |
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Technology |
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ASML | Netherlands | 52,062 | 7.3 |
BE Semiconductor | Netherlands | 34,977 | 4.9 |
ASM International | Netherlands | 24,935 | 3.5 |
STMicroelectronics | Switzerland | 23,313 | 3.3 |
Hexagon | Sweden | 17,265 | 2.4 |
ALTEN Group | France | 12,097 | 1.7 |
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| 164,649 | 23.1 |
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Health Care |
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Novo Nordisk | Denmark | 62,558 | 8.8 |
Lonza Group | Switzerland | 19,532 | 2.7 |
ChemoMetec | Denmark | 14,868 | 2.1 |
Straumann | Switzerland | 10,896 | 1.5 |
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| 107,854 | 15.1 |
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Financials |
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Partners Group | Switzerland | 24,126 | 3.4 |
Allied Irish Banks (AIB) | Ireland | 20,189 | 2.8 |
KBC Groep | Belgium | 12,353 | 1.8 |
Allfunds Group | United Kingdom | 4,504 | 0.6 |
Sberbank* | Russia | - | - |
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| 61,172 | 8.6 |
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Basic Materials |
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IMCD | Netherlands | 17,426 | 2.5 |
Linde | United States | 17,033 | 2.4 |
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| 34,459 | 4.9 |
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Consumer Staples |
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Lindt | Switzerland | 8,529 | 1.2 |
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| 8,529 | 1.2 |
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Energy |
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Lukoil* | Russia | - | - |
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Total investments |
| 711,970 | 100.0 |
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* During the year ended 31 August 2022, the investments in Fix Price Group, Sberbank and Lukoil were marked down to a nominal value of £0.01 as the secondary listings of depositary receipts of Russian companies were suspended from trading.
All investments are in ordinary shares unless otherwise stated. The total number of investments held at 29 February 2024 was 36 (31 August 2023: 39).
Industry classifications in the table above are based on the Industrial Classification Benchmark standard for categorisation of companies by industry and sector.
As at 29 February 2024, 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 above 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 & regulatory 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 2023. A detailed explanation can be found in the Strategic Report on pages 33 to 37 and in note 16 on pages 98 to 104 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at www.blackrock.com/uk/brge.
In the view of the Board, there have not been any changes to the fundamental nature of the principal risks and uncertainties since the previous report and these 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. The Board is mindful of the continuing uncertainty surrounding the current environment of heightened geopolitical risk given the war in Ukraine and conflict in the Middle East. The Board believes that the Company and its key third-party service providers have in place appropriate business continuity plans and these services have continued to be supplied without interruption.
The Company has a portfolio of investments which are predominantly readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Accounting revenue and expense forecasts are maintained and reported to the Board regularly and it is expected that the Company will be able to meet all its obligations. The Investment Manager generally aims to be fully invested and it is anticipated that gearing will not exceed 15% of net asset value (NAV) at the time of drawdown of the relevant borrowings. Borrowings under the overdraft facility shall at no time exceed £75 million or 15% of the Company's net asset value (whichever is lower) and this covenant was complied with during the period. At 29 February 2024, the Company had net gearing of 7.4% (28 February 2023: 4.6%; 31 August 2023: 5.1%). Based on the above, the Board is satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. Ongoing charges for the year ended 31 August 2023 were approximately 0.98% of net assets.
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 13 below. The related party transactions with the Directors are set out in note 12 below.
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 auditors.
The Half Yearly Financial Report was approved by the Board on 2 May 2024 and the above responsibility statement was signed on its behalf by the Chairman.
ERIC SANDERSON
FOR AND ON BEHALF OF THE BOARD
2 May 2024
Income Statement for the six months ended 29 February 2024
Six months ended | Six months ended | Year ended (audited) | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
Gains on investments held at fair value through profit or loss |
| - | 106,000 | 106,000 | - | 80,774 | 80,774 | - | 87,830 | 87,830 |
Gains on foreign exchange |
| - | 423 | 423 | - | 106 | 106 | - | 1,149 | 1,149 |
Income from investments held at fair value through profit or loss | 3 | 1,252 | - | 1,252 | 930 | - | 930 | 10,699 | - | 10,699 |
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Total income |
| 1,252 | 106,423 | 107,675 | 930 | 80,880 | 81,810 | 10,699 | 88,979 | 99,678 |
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Expenses |
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Investment management fee | 4 | (470) | (1,879) | (2,349) | (419) | (1,675) | (2,094) | (888) | (3,554) | (4,442) |
Other operating expenses | 5 | (406) | (8) | (414) | (424) | (61) | (485) | (1,934) | (89) | (2,023) |
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
Total operating expenses |
| (876) | (1,887) | (2,763) | (843) | (1,736) | (2,579) | (2,822) | (3,643) | (6,465) |
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
Net profit on ordinary activities before finance costs and taxation |
| 376 | 104,536 | 104,912 | 87 | 79,144 | 79,231 | 7,877 | 85,336 | 93,213 |
Finance costs |
| (184) | (736) | (920) | (14) | (57) | (71) | (167) | (665) | (832) |
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
Net profit on ordinary activities before taxation |
| 192 | 103,800 | 103,992 | 73 | 79,087 | 79,160 | 7,710 | 84,671 | 92,381 |
Taxation charge |
| (129) | - | (129) | (51) | - | (51) | (790) | - | (790) |
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
Net profit on ordinary activities after taxation | 7 | 63 | 103,800 | 103,863 | 22 | 79,087 | 79,109 | 6,920 | 84,671 | 91,591 |
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
Earnings per ordinary share (pence) | 7 | 0.06 | 102.96 | 103.02 | 0.02 | 78.20 | 78.22 | 6.85 | 83.77 | 90.62 |
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
The total columns of this statement represent the Company's profit and loss account. The supplementary revenue and capital accounts 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 on ordinary activities for the period disclosed above represents the Company's total comprehensive income.
Statement of Changes in Equity for the six months ended 29 February 2024
| Called | Share | Capital | | | | | |
For the six months ended 29 February 2024 (unaudited) |
|
|
|
|
|
|
|
|
At 31 August 2023 |
| 117 | 85,325 | 130 | 68,558 | 400,631 | 10,949 | 565,710 |
Total comprehensive income: |
|
|
|
|
|
|
|
|
Net profit for the period |
| - | - | - | - | 103,800 | 63 | 103,863 |
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
|
|
Ordinary shares repurchased into treasury |
| - | - | - | (1,904) | - | - | (1,904) |
Share buyback costs |
| - | - | - | (10) | - | - | (10) |
Dividends paid1 | 6 | - | - | - | - | - | (5,040) | (5,040) |
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
At 29 February 2024 |
| 117 | 85,325 | 130 | 66,644 | 504,431 | 5,972 | 662,619 |
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= |
For the six months ended 28 February 2023 (unaudited) |
|
|
|
|
|
|
|
|
At 31 August 2022 |
| 117 | 85,325 | 130 | 71,572 | 315,960 | 10,695 | 483,799 |
Total comprehensive income: |
|
|
|
|
|
|
|
|
Net profit for the period |
| - | - | - | - | 79,087 | 22 | 79,109 |
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
|
|
Ordinary shares repurchased into treasury |
| - | - | - | (3,001) | - | - | (3,001) |
Share buyback costs |
| - | - | - | (13) | - | - | (13) |
Dividends paid2 | 6 | - | - | - | - | - | (4,899) | (4,899) |
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
At 28 February 2023 |
| 117 | 85,325 | 130 | 68,558 | 395,047 | 5,818 | 554,995 |
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= |
For the year ended 31 August 2023 (audited) |
|
|
|
|
|
|
|
|
At 31 August 2022 |
| 117 | 85,325 | 130 | 71,572 | 315,960 | 10,695 | 483,799 |
Total comprehensive income: |
|
|
|
|
|
|
|
|
Net profit for the year |
| - | - | - | - | 84,671 | 6,920 | 91,591 |
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
|
|
Ordinary shares repurchased into treasury |
| - | - | - | (3,001) | - | - | (3,001) |
Share buyback costs |
| - | - | - | (13) | - | - | (13) |
Dividends paid3 | 6 | - | - | - | - | - | (6,666) | (6,666) |
|
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
At 31 August 2023 |
| 117 | 85,325 | 130 | 68,558 | 400,631 | 10,949 | 565,710 |
|
| ========= | ========= | ========= | ========= | ========= | ========= | ========= |
1 Final dividend paid in respect of the year ended 31 August 2023 of 5.00p per share was declared on 8 November 2023 and paid on 20 December 2023.
2 Final dividend paid in respect of the year ended 31 August 2022 of 4.85p per share was declared on 3 November 2022 and paid on 16 December 2022.
3 Interim dividend paid in respect of the year ended 31 August 2023 of 1.75p per share was declared on 10 May 2023 and paid on 19 June 2023. Final dividend paid in respect of the year ended 31 August 2022 of 4.85p per share was declared on 3 November 2022 and paid on 16 December 2022.
For information on the Company's distributable reserves, please refer to note 10 below.
Balance Sheet as at 29 February 2024
| 29 February | 28 February | 31 August | |
Fixed assets |
|
|
|
|
Investments held at fair value through profit or loss | 11 | 711,970 | 580,767 | 594,727 |
Current assets |
|
|
|
|
Current tax asset |
| 2,446 | 1,673 | 2,350 |
Debtors |
| 7,017 | 26 | 1,517 |
|
| --------------- | --------------- | --------------- |
Total current assets |
| 9,463 | 1,699 | 3,867 |
|
| ========= | ========= | ========= |
Creditors - amounts falling due within one year |
|
|
|
|
Bank overdraft |
| (55,509) | (23,869) | (27,617) |
Other creditors |
| (3,305) | (3,602) | (5,267) |
|
| --------------- | --------------- | --------------- |
Total current liabilities |
| (58,814) | (27,471) | (32,884) |
|
| --------------- | --------------- | --------------- |
Net current liabilities |
| (49,351) | (25,772) | (29,017) |
|
| --------------- | --------------- | --------------- |
Net assets |
| 662,619 | 554,995 | 565,710 |
|
| ========= | ========= | ========= |
Capital and reserves |
|
|
|
|
Called up share capital | 9 | 117 | 117 | 117 |
Share premium account |
| 85,325 | 85,325 | 85,325 |
Capital redemption reserve |
| 130 | 130 | 130 |
Special reserve |
| 66,644 | 68,558 | 68,558 |
Capital reserves |
| 504,431 | 395,047 | 400,631 |
Revenue reserve |
| 5,972 | 5,818 | 10,949 |
|
| --------------- | --------------- | --------------- |
Total shareholders' funds |
| 662,619 | 554,995 | 565,710 |
|
| ========= | ========= | ========= |
Net asset value per ordinary share (pence) | 7 | 658.25 | 549.50 | 560.11 |
|
| ========= | ========= | ========= |
Statement of Cash Flows for the six months ended 29 February 2024
Six months | Six months | Year | |
Operating activities |
|
|
|
Net profit on ordinary activities before taxation | 103,992 | 79,160 | 92,381 |
Add back finance costs | 920 | 71 | 832 |
Gains on investments held at fair value through profit or loss | (106,000) | (80,774) | (87,830) |
Gains on foreign exchange | (423) | (106) | (1,149) |
Sale of investments held at fair value through profit or loss | 85,303 | 39,221 | 86,863 |
Purchase of investments held at fair value through profit or loss | (103,559) | (61,398) | (115,924) |
Decrease/(increase) in debtors | 125 | 194 | (25) |
(Decrease)/increase in other creditors | (967) | 858 | 1,231 |
Taxation on investment income | (608) | (260) | (1,754) |
Interest paid | (920) | (71) | (832) |
Refund of withholding tax reclaims | 479 | 455 | 533 |
| --------------- | --------------- | --------------- |
Net cash used in operating activities | (21,658) | (22,650) | (25,674) |
| ========= | ========= | ========= |
Financing activities |
|
|
|
Ordinary shares repurchased into treasury | (1,617) | (3,592) | (3,592) |
Dividends paid | (5,040) | (4,899) | (6,666) |
| --------------- | --------------- | --------------- |
Net cash used in financing activities | (6,657) | (8,491) | (10,258) |
| ========= | ========= | ========= |
Decrease in cash and cash equivalents | (28,315) | (31,141) | (35,932) |
Cash and cash equivalents at the start of the period/year | (27,617) | 7,166 | 7,166 |
Effect of foreign exchange rate changes | 423 | 106 | 1,149 |
| --------------- | --------------- | --------------- |
Cash and cash equivalents at the end of the period/year | (55,509) | (23,869) | (27,617) |
| ========= | ========= | ========= |
Comprised of: |
|
|
|
Bank overdraft | (55,509) | (23,869) | (27,617) |
| --------------- | --------------- | --------------- |
| (55,509) | (23,869) | (27,617) |
| ========= | ========= | ========= |
Notes to the Financial Statements for the six months ended 29 February 2024
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 financial statements of the Company are prepared on a going concern basis in accordance with Financial Reporting Standard 104 Interim Financial Reporting (FRS 104) applicable in the United Kingdom and Republic of Ireland 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 October 2019, and updated in July 2022, and the provisions of the Companies Act 2006.
The accounting policies and estimation techniques 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 2023.
3. Income
Six months | Six months | Year | |
Investment income: |
|
|
|
UK dividends | - | - | 764 |
Overseas dividends | 1,252 | 929 | 9,907 |
Overseas special dividends | - | - | 27 |
| --------------- | --------------- | --------------- |
Total investment income | 1,252 | 929 | 10,698 |
| ========= | ========= | ========= |
Other income: |
|
|
|
Interest received | - | 1 | 1 |
| --------------- | --------------- | --------------- |
Total income | 1,252 | 930 | 10,699 |
| ========= | ========= | ========= |
Dividends and interest received in cash during the period amounted to £758,000 and £nil respectively (six months ended 28 February 2023: £691,000 and £1,000; year ended 31 August 2023: £7,781,000 and £1,000).
No special dividends have been recognised in capital during the period (six months ended 28 February 2023: £nil; year ended 31 August 2023: £nil).
4. Investment management fee
Six months ended | Six months ended | Year ended | |||||||
Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
Investment management fee | 470 | 1,879 | 2,349 | 419 | 1,675 | 2,094 | 888 | 3,554 | 4,442 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- |
Total | 470 | 1,879 | 2,349 | 419 | 1,675 | 2,094 | 888 | 3,554 | 4,442 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= |
With effect from 1 January 2023, the investment management fee is levied quarterly based on a tiered basis: 0.85% per annum of the month-end net asset value up to £350 million and 0.75% per annum of the month-end net asset value above £350 million.
Up to and including 31 December 2022, the investment management fee was levied quarterly, based on 0.85% per annum of the net asset value on the last day of each month.
The investment management fee is allocated 20% to the revenue account and 80% to the capital account of the Income Statement. There is no additional fee for company secretarial and administration services.
5. Other operating expenses
Six months | Six months | Year | |
Allocated to revenue: |
|
|
|
Broker fees | 24 | 24 | 48 |
Custody fees | 27 | 14 | 36 |
Depositary fees | 32 | 32 | 65 |
Audit fees1 | 26 | 29 | 57 |
Legal fees | 13 | 13 | 26 |
Registrar's fees | 45 | 48 | 97 |
Directors' emoluments | 89 | 84 | 173 |
Marketing fees | 77 | 46 | 97 |
Postage and printing fees | 22 | 35 | 68 |
AIC fees | 11 | 11 | 21 |
Professional fees | 11 | 43 | 66 |
Stock exchange listing fees | 12 | 24 | 35 |
Write back of prior year expense accruals2 | (12) | - | (23) |
Other administration costs | 29 | 21 | 24 |
Provision for doubtful debts3 | - | - | 1,144 |
| --------------- | --------------- | --------------- |
| 406 | 424 | 1,934 |
| ========= | ========= | ========= |
Allocated to capital: |
|
|
|
Custody transaction costs4 | 8 | 61 | 89 |
| --------------- | --------------- | --------------- |
| 414 | 485 | 2,023 |
| ========= | ========= | ========= |
1 No non-audit services are provided by the Company's auditors.
2 Relates to postage and printing fees and other administration costs written back in the period (six months ended 28 February 2023: no prior year accruals written back; year ended 31 August 2023: legal fees and registrar's fees).
3 Provision for doubtful debts relate to dividend income from Sberbank which has not been received due to measures imposed by the Russian authorities in response to the sanctions that have been imposed on Russia as a result of the invasion of Ukraine.
4 For the six month period ended 29 February 2024, expenses of £8,000 (six months ended 28 February 2023: £61,000; year ended 31 August 2023: £89,000) were charged to the capital account of the Income Statement. These relate to transaction costs charged by the custodian on sale and purchase trades.
The direct transaction costs incurred on the acquisition of investments amounted to £191,000 for the six months ended 29 February 2024 (six months ended 28 February 2023: £98,000; year ended 31 August 2023: £342,000). Costs relating to the disposal of investments amounted to £52,000 for the six months ended 29 February 2024 (six months ended 28 February 2023: £28,000; year ended 31 August 2023: £74,000). All transaction costs have been included within the capital account.
6. Dividends
The Directors have declared an interim dividend of 1.75p per share for the period ended 29 February 2024, payable on 19 June 2024 to shareholders on the register on 24 May 2024. The total cost of the dividend based on 100,144,522 ordinary shares in issue at 1 May 2024 was £1,752,529 (28 February 2023: £1,768,000).
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, capital earnings and net asset value per ordinary share are shown below and have been calculated using the following:
Six months | Six months | Year | |
Net revenue profit attributable to ordinary shareholders (£'000) | 63 | 22 | 6,920 |
Net capital profit attributable to ordinary shareholders (£'000) | 103,800 | 79,087 | 84,671 |
| --------------- | --------------- | --------------- |
Total profit attributable to ordinary shareholders (£'000) | 103,863 | 79,109 | 91,591 |
| ========= | ========= | ========= |
Total shareholders' funds (£'000) | 662,619 | 554,995 | 565,710 |
| ========= | ========= | ========= |
Earnings per share |
|
|
|
The weighted average number of ordinary shares in issue during the period on which the earnings per ordinary share was calculated was: | 100,816,318 | 101,136,375 | 101,067,709 |
The actual number of ordinary shares in issue at the end of the period on which the net asset value per ordinary share was calculated was: | 100,663,851 | 101,000,161 | 101,000,161 |
Calculated on weighted average number of ordinary shares: |
|
|
|
Revenue earnings per share (pence) - basic and diluted | 0.06 | 0.02 | 6.85 |
Capital earnings per share (pence) - basic and diluted | 102.96 | 78.20 | 83.77 |
| --------------- | --------------- | --------------- |
Total earnings per share (pence) - basic and diluted | 103.02 | 78.22 | 90.62 |
| ========= | ========= | ========= |
As at | As at | As at | |
Net asset value per share (pence) | 658.25 | 549.50 | 560.11 |
Ordinary share price (pence) | 629.00 | 523.00 | 527.00 |
| ========= | ========= | ========= |
There were no dilutive securities at 29 February 2024 (28 February 2023: none; 31 August 2023: none).
8. Reconciliation of liabilities arising from financing activities
Six months | Six months | Year | |
Bank overdraft at beginning of the period/year | 27,617 | 182 | 182 |
Cash flows: |
|
|
|
Movement in overdraft | 28,256 | 23,885 | 27,934 |
Non cash flows: |
|
|
|
Effects of foreign exchange gain | (364) | (198) | (499) |
| --------------- | --------------- | --------------- |
Bank overdraft at end of the period/year | 55,509 | 23,869 | 27,617 |
| ========= | ========= | ========= |
9. Called up share capital
| Ordinary | Treasury | Total | Nominal |
Allotted, called up and fully paid share capital comprised: |
|
|
|
|
Ordinary shares of 0.1 pence each: |
|
|
|
|
At 31 August 2023 | 101,000,161 | 16,928,777 | 117,928,938 | 117 |
Ordinary shares repurchased into treasury | (336,310) | 336,310 | - | - |
| --------------- | --------------- | --------------- | --------------- |
At 29 February 2024 | 100,663,851 | 17,265,087 | 117,928,938 | 117 |
| ========= | ========= | ========= | ========= |
During the six months ended 29 February 2024, 336,310 ordinary shares were repurchased and held in treasury (six months ended 28 February 2023: 698,692; year ended 31 August 2023: 698,692) for a net consideration after expenses of £1,914,000 (six months ended 28 February 2023: £3,014,000; year ended 31 August 2023: £3,014,000).
Since 29 February 2024 and up to the latest practicable date of 1 May 2024, 519,329 ordinary shares have been repurchased and placed in treasury for a total consideration of £3,298,000.
10. Reserves
The share premium account and capital redemption reserve are not distributable reserves under the Companies Act 2006. In accordance with ICAEW Technical Release 02/17BL on Guidance on Realised and Distributable Profits under the Companies Act 2006, the special reserve and capital reserves may be used as distributable reserves for all purposes and, in particular, the repurchase by the Company of its ordinary shares and for payments such as dividends. In accordance with the Company's Articles of Association, the special reserve, capital reserves and the revenue reserve may be distributed by way of dividend. The gain on the capital reserve arising on the revaluation of investments held of £247,433,000 (28 February 2023: gain of £132,037,000; 31 August 2023: gain of £149,450,000) is subject to fair value movements and may not be readily realisable at short notice; as such it may not be entirely distributable. The investments are subject to financial risks; as such capital reserves (arising on investments sold) and the revenue reserve may not be entirely distributable if a loss occurred during the realisation of these investments.
11. Financial risks and valuation of financial instruments
The Company's investment activities expose it to the various types of risk which are associated with the financial instruments and markets in which it invests. The risks are substantially consistent with those disclosed in the previous annual financial statements, with the exception of those outlined below.
Market risk arising from price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, climate change or other events could have a significant impact on the Company and the market price of its investments and could result in increased premiums or discounts to the Company's net asset value.
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 34 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 88 of the Annual Report and Financial Statements for the year ended 31 August 2023.
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 market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted prices are readily 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 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 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, including an assessment of the relevant risks including but not limited to credit risk, market risk, liquidity risk, business risk and sustainability risk. The determination of what constitutes 'observable' inputs requires significant judgement by the Investment Manager and these risks are adequately captured in the assumptions and inputs used in measurement of Level 3 assets or liabilities.
Fair values of financial assets and financial liabilities
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 29 February 2024 | Level 1 | Level 2 | Level 3 | Total |
Equity investments | 711,969 | - | 1 | 711,970 |
| --------------- | --------------- | --------------- | --------------- |
Total | 711,969 | - | 1 | 711,970 |
| ========= | ========= | ========= | ========= |
Financial assets at fair value through profit or loss at 28 February 2023 | Level 1 | Level 2 | Level 3 | Total |
Equity investments | 580,764 | - | 3 | 580,767 |
| --------------- | --------------- | --------------- | --------------- |
Total | 580,764 | - | 3 | 580,767 |
| ========= | ========= | ========= | ========= |
Financial assets at fair value through profit or loss at 31 August 2023 | Level 1 | Level 2 | Level 3 | Total |
Equity investments | 593,785 | - | 942 | 594,727 |
| --------------- | --------------- | --------------- | --------------- |
Total | 593,785 | - | 942 | 594,727 |
| ========= | ========= | ========= | ========= |
The Company held three Level 3 securities as at 29 February 2024 (28 February 2023: four; 31 August 2023: four).
A reconciliation of fair value measurement in Level 3 is set out below.
Level 3 financial assets at fair value through profit or loss
Six months | Six months | Year | |
Opening fair value | 942 | 3 | 3 |
(Loss)/gain on investments included in gains on investments in the Income Statement | (939) | - | 939 |
Sale of investments included in gains on investments in the Income Statement | (2) | - | - |
| --------------- | --------------- | --------------- |
Closing balance | 1 | 3 | 942 |
| ========= | ========= | ========= |
As at 29 February 2024, the investments in Sberbank, Fix Price Group and Lukoil have been valued at a nominal value of £0.01 as the secondary listings of depositary receipts of Russian companies have been suspended from trading. The investment in Fix Price Group was previously valued at a nominal value of £0.01. At 31 August 2023, the BlackRock Pricing Committee determined that this investment should be valued at US$1.75 based on the price quotation received from brokers in the OTC markets. At 29 February 2024, this investment was revalued at a nominal value of £0.01.
For exchange listed equity investments, the quoted price is the bid price. Substantially all investments are valued based on unadjusted quoted market prices. Where such quoted prices are readily available in an active market, such prices are not required to be assessed or adjusted for any business risks, including climate change risk, in accordance with the fair value related requirements of the Company's financial reporting framework.
12. Related party disclosure
The Board consists of five 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. The Chairman receives an annual fee of £46,500, the Chair of the Audit and Management Engagement Committee receives an annual fee of £37,000 and each of the other Directors receives an annual fee of £31,500. The Senior Independent Director receives an additional fee of £1,000.
As at 29 February 2024, the following members of the Board hold shares in the Company: Eric Sanderson held 4,000 ordinary shares, Peter Baxter held 11,000 ordinary shares, Ian Sayers held 4,000 ordinary shares and Paola Subacchi held 11,109 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 Investment Manager and AIFM are stated in note 13.
Significant holdings
The following investors are:
a. funds managed by the BlackRock Group or are affiliates of BlackRock Inc. (Related BlackRock Funds); or
b. investors (other than those listed in (a) above) who held more than 20% of the voting shares in issue in the Company and are, as a result, considered to be related parties to the Company (Significant Investors).
As at 29 February 2024
| Total % of shares held by Significant | Number of Significant Investors who |
1.3 | n/a | n/a |
As at 31 August 2023
| Total % of shares held by Significant | Number of Significant Investors who |
1.4 | n/a | n/a |
As at 28 February 2023
| Total % of shares held by Significant | Number of Significant Investors who |
0.9 | n/a | n/a |
13. Transactions with the Investment Manager and AIFM
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 in the Directors' Report on page 48 in the Annual Report and Financial Statements for the year ended 31 August 2023.
The investment management fee is levied quarterly based on a tiered basis: 0.85% per annum of the month-end net asset value up to £350 million and 0.75% per annum of the month-end net asset value above £350 million. Up to and including 31 December 2022, the investment management fee was levied quarterly, based on 0.85% per annum of the net asset value on the last day of each month. The investment management fee due for the six months ended 29 February 2024 amounted to £2,349,000 (six months ended 28 February 2023: £2,094,000; year ended 31 August 2023: £4,442,000). At the period end, £2,349,000 was outstanding in respect of the management fee (28 February 2023: £3,145,000; 31 August 2023: £3,426,000).
In addition to the above services, BIM (UK) provided the Company with marketing services. The total fees paid or payable for these services for the six months ended 29 February 2024 amounted to £77,000 excluding VAT (six months ended 28 February 2023: £46,000; year ended 31 August 2023: £97,000). Marketing fees of £117,000 excluding VAT were outstanding at 29 February 2024 (28 February 2023: £117,000; 31 August 2023: £168,000).
During the year, the Manager pays the amounts due to the Directors. These fees are then reimbursed by the Company for the amounts paid on its behalf. As at 29 February 2024, an amount of £202,000 was payable to the Manager in respect of Directors' fees (28 February 2023: £111,000; 31 August 2023: £113,000).
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in Delaware, USA.
14. Contingent liabilities
There were no contingent liabilities at 29 February 2024 (28 February 2023: none; 31 August 2023: none).
15. 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 29 February 2024 and 28 February 2023 has not been audited.
The information for the year ended 31 August 2023 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.
16. Annual results
The Board expects to announce the annual results for the year ending 31 August 2024 in early November 2024. Copies of the annual results announcement can be obtained from the Secretary on 020 7743 3000 or cosec@blackrock.com. The Annual Report should be available by November 2024 with the Annual General Meeting being held in December 2024.
12 Throgmorton Avenue
London
EC2N 2DL
2 May 2024
For further information please contact:
Sarah Beynsberger, Director, Closed End Funds, BlackRock Investment Management (UK) Limited - 020 7743 2639
Stefan Gries, Fund Manager, BlackRock Investment Management (UK) Limited - 020 7743 3000
Press enquires:
Ed Hooper, Lansons Communications
Tel: 020 7294 3620
E-mail:BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
END
The Half Yearly Financial Report will also be available on the BlackRock website at www.blackrock.com/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.
