Half-year Report

BlackRock Greater Europe Investment Trust plc
LEI:  5493003R8FJ6I76ZUW55

Half Yearly Financial Report 28 February 2017
(Article 5 Transparency Directive, DTR 4.2)
 

Performance record

Financial Highlights

Attributable to ordinary shareholders	As at  28 February  2017	As at  31 August  2016	Change  %
Assets
Net asset value per ordinary share – with income reinvested**	300.43p  –	287.43p  –	+4.5  +5.9
Net assets (£’000)*	286,297	294,908	-2.9
Ordinary share price (mid-market)  â€“ with income reinvested**	284.50p  –	272.00p  –	+4.6  +6.0
FTSE World Europe ex UK Index	1191.15	1088.31	+9.4
	========	========	========

	For the six  months  ended  28 February  2017	For the six  months  ended  29 February  2016	Change  %
Revenue
Net revenue profit after taxation (£’000)	654	892	-26.7
Revenue profit per ordinary share – basic and diluted	0.66p	0.86p	-23.3
	========	========	========

*        The change in net assets reflects the tender offer implemented in the period, buybacks of shares into treasury and market movements.
**      Net asset value and share price performance include the dividend reinvestment.

Chairman’s statement

I am pleased to present my first half yearly report as Chairman.

Performance overview

European equities have generally been surprisingly resilient given the numerous political uncertainties. Overall, positive economic data across the globe led to an improvement in sentiment about future earnings prospects, whilst ongoing monetary easing by the European Central Bank continued to dampen volatility across European markets.

During the six months ended 28 February 2017 the Company’s net asset value per share (NAV) increased by 5.9%, compared with an increase of 9.4% in the FTSE World Europe ex UK Index. Over the same period, the Company’s share price rose by 6.0% (all percentages calculated in sterling terms with income reinvested). Although the returns were positive, the Company lagged behind the reference index in this period.

Since the period end to 24 April 2017, the Company’s NAV has increased by 5.4% compared with a rise in the FTSE World Europe ex UK Index of 6.1% over the same period.

Earnings and dividend

The Company’s revenue earnings per share for the six months ended 28 February 2017 amounted to 0.66p compared with 0.86p for the corresponding period in 2016. The Board has declared an interim dividend of 1.75p (2016: 1.65p) per share representing an increase of 6.1% over the previous interim dividend. The majority of the Company's earnings arise in the second half of the year and in the first half of 2016 underlying earnings were boosted by a one-off receipt of French withholding tax reclaims. This dividend will be paid on 26 May 2017 to shareholders on the Company’s register on 5 May 2017, the ex-dividend date being 4 May 2017.

Tender offers/share repurchases

The Directors exercised their discretion to operate the half yearly tender offer in November which, in common with previous tender offers, was for up to 20% of the ordinary shares in issue at the prevailing NAV less 2%. Valid tenders for 6,582,160 ordinary shares were received at a price of 272.08p per share, representing 6.45% of the ordinary shares in issue excluding treasury shares. In addition, during the six month period under review, the Company has bought back 725,000 ordinary shares at an average price of 278.4p per share and at an average discount of 5.5% for a total cost of £2,022,000. All shares repurchased by the Company have been placed in treasury and the purchases made at a discount will have been modestly accretive to the net asset value per share.

As the Company’s shares had traded at an average discount to NAV of 4.9% over the six month period to 28 February 2017, and at a much lower discount at the time the decision was made, the Directors announced on 27 March 2017 that they had decided not to implement the May semi-annual tender offer. The Board will continue to monitor the Company’s discount to NAV and will look to buy back 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 not repurchased any ordinary shares.

Potential secondary listing in South Africa

On 27 February 2017 the Board announced that the Company was in the early stages of exploring a possible secondary listing of its ordinary shares on the Main Board of the Johannesburg Stock Exchange. At present, the Company has its primary listing on the Main Market of the London Stock Exchange. The secondary listing of the Company would, if successful, broaden the Company’s shareholder base, and should help improve the liquidity of its shares. The occurrence or not of any future listing, however, will depend upon the level of interest shown by investors in South Africa which is unknown at this stage in the project.

Outlook

European equities have lagged behind most other important investment regions in recent years, as concerns about deflation, Greek sovereign debt and the Italian banking sector have all kept investors away. However, the prospects for this year look much brighter: upbeat economic data and the strong earnings reported by European companies in the fourth quarter of 2016 provide grounds for optimism. In addition, bond yields are indicating some pick-up in inflationary expectations and this is typically a positive sign for an earnings recovery. President Trump’s election victory has also led to expectations of significant tax cuts, increased infrastructure spending and reduced regulation, all of which should support global economic growth in the short term.

The political environment looks set to create further volatility, with the various upcoming elections in Europe and the apparent upsurge in populist candidate support. However, unsettled markets often create significant investment opportunities and, following huge outflows from the region, it is believed that many investors are now actively considering returning to Europe on the back of attractive valuations and improving growth prospects. A combination of global fiscal easing, stronger economic growth and more supportive earnings should also help European stocks gain in 2017.

Eric Sanderson
26 April 2017

Interim management report and responsibility statement

The Chairman’s Statement and the Investment Manager’s Report give details of the important events which have occurred during the period and their impact on the financial statements.

Principal risks and uncertainties

The principal risks faced by the Company can be divided into various areas as follows:

• Counterparty;

• Investment performance;

• Legal & Compliance;

• Market;

• Operational;

• Financial; and

• Marketing

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 31 August 2016. A detailed explanation can be found in the Strategic Report on pages 7 to 9 and in note 16 on pages 52 to 60 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 (excluding interest costs and after any relief for taxation) for the year ended 31 August 2016 were 1.07% of net assets and it is expected that this is unlikely to change significantly going forward.

Related party disclosure and transactions with the Manager

BlackRock Fund Managers Limited (BFM) was appointed as the Company’s AIFM with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the fees payable are set out in note 4 and note 11. The related party transactions with the Directors are set out in note 10.

Directors’ responsibility statement

The Disclosure 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 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 26 April 2017 and the above responsibility statement was signed on its behalf by the Chairman.

Eric Sanderson
For and on behalf of the Board
26 April 2017

Investment manager’s report

Market overview

The six months to the end of February saw an alteration in the narrative dominating global developed markets, creating a very challenging environment for active managers. Primarily, this challenge was founded upon the growing correlation between equities and the interest rate cycle in the latter part of 2016, dampening the influence of fundamentals in driving share prices.

The market moved from focusing on the low growth, low interest rates and low inflation that had persisted in Europe, to a position of increased sensitivity to global, and particularly US, changes in bond yields. As investors became confident that interest rates would rise further, the more defensively orientated sectors within Europe, such as utilities, consumer staples, health care and telecommunications underperformed the broader market. Strength in the market primarily came from those sectors assumed to benefit from rising rates, such as financials, and in particular banks, which returned over 19% in the six months to the end of February 2017.

Broader political risk, which included increasing trends toward populist politics both in Europe and abroad, also dominated investor focus at times. The reflationary trade - investors moving into assets positively exposed to an expected increase in the rate of inflation - already present in the market was amplified by the election of Donald Trump as President of the United States. Investors moved into more inflation sensitive names as expectations grew of increased government spending and tax reform in the US. This benefited more cyclical businesses in Europe, and in particular industrials, which were assumed to profit from potential large increases in infrastructure spending within developed markets. At the end of the year, the Italian Referendum moved into focus, yet the rejection of constitutional reform and the resignation of Matteo Renzi as Prime Minister had a more benign market impact than many feared.

Amid the volatility emanating from potential policy change from both governments and central banks, European macro releases remained cautiously positive over the period. Across many European markets we saw upgrades to both consumer and business confidence, but the reality of a persistent low level of expected inflation, led the European Central Bank to reaffirm their accommodative monetary policy stance. In addition, company earnings revisions turned positive, with company margins also showing more resilience within Europe as the macroeconomic backdrop improved.

Portfolio activity

Over the period, stock selection proved especially challenging for the Company. As markets were driven primarily by strong sector based narratives, with the dispersion between stock and sector returns at twenty year lows, the returns to individual fundamental investment cases proved disappointing. This was evident in the case of the Company’s largest relative detractor from performance, KPN. It is a Dutch telecoms company with a strong position in a consolidated market for both fixed and mobile provision, which has been benefiting from increased pricing power. The company has a solid balance sheet and has seen success within its cost cutting programme over the last year. However, despite its attractive fundamentals, it has recently been seriously neglected by the market given its more defensive characteristics and negative correlation to rising bond yields, which caused the share price to fall by over 8% in the period and underperform the market by almost 18%.

Within the consumer sector, a position in Anheuser-Busch InBev detracted from returns, despite shareholders confirming an attractive deal with SAB Miller in September 2016. The brewing giant’s stock was sold heavily as the market rotated towards more cyclical assets, and saw further weakness when it reported challenges within its Brazilian business.

A number of positions within the technology sector also detracted from the Company’s performance over the period. Whilst some of these positions were afflicted by the relative underperformance of growth style stocks across the market, others suffered fundamental downgrades. A long term holding in Cap Gemini, a French technology consulting company, for example, suffered a deceleration in organic growth after five years of exhibiting strong performance and profit margin rebuild. In this instance, we believed that the investment case had largely run its course and opted to exit the position.

Elsewhere in technology, Nets, the leading provider of payment services across the Nordic region, detracted from portfolio performance. The company operates across the payment spectrum from issuing, processing, acquiring and settling and operates in a near monopoly position. Whilst our investment case highlighted an attractive growth rate, supported by the ongoing trend from cash-to-card, growth in online retail and mobile payments and rising margins, reinforced by management’s transformation plan, the share price has failed to reflect the perceived value in the company over the period. Market focus has instead been upon regulatory overhang, which has the potential to impact the future growth rate of the business. Whilst we recognise this possible headwind, we believe that any structural issue in this regard is unlikely to impact upon the business for a number of years, if it materialises at all. Thus, we believe that the shares offer exceptionally compelling value for the growth on offer at present.

From a sector perspective, the lower weighting towards financials, and particularly banks, detracted from portfolio returns, as the sector proved to be the primary beneficiary of rising bond yields. The decision to have a lower weighting towards the banking industry was primarily driven by the observation that whilst bond yields had risen, they still remained at exceptionally low levels in absolute terms. In particular, the EURIBOR rate, which is the key rate for bank loans, had seen very little increase over the period. Thus, there was little evidence in our opinion that the fundamental picture for bank earnings had become significantly more positive.

However, whilst issues exist within the Eurozone banking sector, given ongoing loose monetary policy, we have seen opportunities to invest in banks within emerging Europe. A position in Sberbank, Russia’s largest state-owned bank with a 5% share in the retail deposit market, performed strongly over the period reporting robust results. The bank continues to build on its restructuring strategy that has driven much of its success over the past few years, through improving its services and the efficiency with which they are delivered. A position in Polish insurer Powszechny Zaklad Ubezpieczen (PZU) also proved positive for performance. Inflationary pressures have been building within the central European economies of Poland, the Czech Republic and Hungary, as wage growth accelerates and investment spending picks up. Higher rates have improved the balance sheet position of PZU allowing it to confirm a strong dividend payout and the purchase of Unicredit’s Bank Pekao at an attractive price.

As the oil price proved resilient over the period, climbing to annual highs at the end of 2016, the lower allocation to oil & gas hurt performance. However, the Company benefited from strong performance from a position in Tenaris, a leading supplier of tubes and related services for the energy industry, which returned over 27% during the period. Tenaris is exposed to US shale, which due to its increasing ease and efficiency of extraction, has now become the marginal barrel of oil. The stated intentions of many companies across the energy sector to increase capital expenditure towards shale oil should be strongly beneficial to Tenaris.

At the end of the period, the portfolio was particularly weighted (when compared with the reference index) towards positions in the industrials, technology and consumer services sectors. The portfolio had lower exposure to the health care, utilities, financials, oil & gas, basic materials, consumer goods and telecommunications sectors.

Outlook

After a difficult year for active management in 2016, we think that conditions for Europe are much brighter for 2017. The outlook for the global economy on balance is improving, with leading indicators suggesting more positive signals across regions. European earnings have historically been more sensitive to global economy pick-ups, given the large revenue exposure of European firms to global and emerging markets. The European market is now seeing a more supportive earnings revision trend, and margins are now beginning to improve on the back of a better macro backdrop, cost discipline, improvement in pricing power and weaker currencies.

European equity funds have seen significant outlows in the last twelve months and are currently out of favour. This can present a good entry point ahead of a potential turning point in sentiment as the economy recovers and earnings benefit from global reflationary trends. There are risks still on the horizon that we need to be mindful of, most notably on the political front, given the lack of clarity on policies in the US, whilst French and German elections will be the key focal points in Europe. Further support for the markets is likely to arise if these political uncertainties are resolved.

Vincent Devlin and Sam Vecht
BlackRock Investment Management (UK) Limited
26 April 2017

Ten largest investments
28 February 2017

AXA: 3.7% (2016: nil) is a French multinational insurance company which engages in global insurance, investment management and other financial services. AXA boasts a strong balance sheet which supports its attractive dividend yield of 5%. The company has a long term focus and aims to transform itself into the innovation leader in an industry which is likely to see changing profit pools over the next five to ten years. Thus far, the company has delivered well against their ‘Ambition 2020 plan’.

RELX: 3.5% (2016: 2.9%) 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, securing its competitive position and allowing for more predictable revenues going forward. The stock offers steady compounding growth.

Anheuser-Busch InBev: 3.4% (2016: 2.8%) is the world’s largest brewer, headquartered in Belgium. The stock offers attractive exposure to emerging markets via Brazil and potential to expand into markets such as Africa with the SAB deal. The deal would bring together a complementary footprint in markets with significant growth opportunities and expected synergies through costs and management efficiencies.

Bayer: 3.4% (2016: 2.7%) is a German Life Science company, with M&A optionality. The proposed deal to buy Monsanto reinforces Bayer’s core business segments, as well as targeting attractive long term growth industries. Monsanto is an innovative biotech business which is highly cash generative; the deal is expected to be accretive to core EPS.

ASML: 3.3% (2016: 2.1%) is a Dutch company which specialises in the supply of photolithography systems for the semiconductor industry. The company is at the forefront of technological change and invests in leading research and development to capture the structural growth opportunity supported by growth in mobile devices and microchip components. The high barriers to entry within the industry give ASML a protection position which allows a growth in margins whilst they continue to innovate. The company has strong management which aims to create long term value for the business whilst returning excess cash to shareholders.

Vinci: 3.0% (2016: 2.9%) 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 concession businesses are doing well, with a pick-up in construction and traffic in France. Management are implementing a solid strategy to move more towards concessions and international exposure, which we believe warrants a higher price multiple for the stock than it has historically traded at. The business is attractively valued with focus on margin recovery.

Schneider Electric: 2.9% (2016: nil) is a French multinational corporation which specialises in energy management and automation. The company is well balanced geographically and between construction and industrial markets, meaning it is favourably positioned for potential improvements in the industrial economy. The business offers strong cash flow and after a period of acquisition and diversifying the business within the theme of ‘energy efficiency’, capital discipline has improved supporting shareholder returns.

KBC Groep: 2.8% (2016: 1.6%) is a Belgian integrated bank-insurance group catering for retail, private banking and small and mid-cap clients. The bank offers the highest return on equity amongst its Eurozone peers and has a strong market share with leading franchises in highly concentrated banking systems such as Belgium and the Czech Republic. The bank is also one of the best capitalised in Europe and is supported by strong management who keep their clients at the core of their value proposition.

Wartsila: 2.7% (2016: 1.5%) is a Finnish corporation which is a global leader in advanced technologies and complete lifecycle solutions for the marine and energy markets. The company is positioned for growth and has a drive for innovation and digitalisation aimed to secure and strengthen their positions at the forefront of technological innovation. The group has exhibited resilience in profitability over the last few years and can potentially increase upon this as they move focus into higher margin servicing areas of the business.

Thales: 2.7% (2016: 2.2%) is a multinational defence, security, transportation and aerospace company. The company has excellent cash flow conversion and offers an attractive return on its capital employed profile. It is well positioned to benefit from stable or rising defence budgets in Europe, as well as from growth in connectivity, for example with in-flight entertainment. The company’s cost restructuring efforts should also be supportive of rising margins across all divisions.

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 2016. Together, the ten largest investments represent 31.4% of the Company’s portfolio (ten largest investments as at 31 August 2016: 28.4%).

Investments
as at 28 February 2017

	Country of  operation	Market value  £’000	% of  investments
Industrials
Vinci	France	8,170	3.0
Schneider Electric	France	8,002	2.9
Wartsila	Finland	7,444	2.7
Thales	France	7,370	2.7
CRH	Ireland	7,194	2.6
DSV	Denmark	6,583	2.4
Hexagon	Sweden	6,450	2.3
Assa Abloy	Sweden	5,725	2.1
ISS	Denmark	5,506	2.0
Kone	Finland	5,440	2.0
Geberit	Switzerland	5,033	1.8
ThyssenKrupp	Germany	4,236	1.5
Kingspan	Ireland	3,550	1.3
		--------	--------
		80,703	29.3
		--------	--------
Financials
AXA	France	10,109	3.7
KBC Groep	Belgium	7,604	2.8
Danske Bank	Denmark	7,327	2.7
PZU	Poland	4,862	1.8
Sberbank	Russia	3,565	1.3
Bank of Ireland	Ireland	3,543	1.3
Avanza Bank	Sweden	3,361	1.2
Halk Bank	Turkey	3,342	1.2
ABN AMRO	Netherlands	3,010	1.1
Garanti Bank	Turkey	2,754	1.0
Anima	Italy	2,737	1.0
Nets	Denmark	2,682	1.0
Azimut	Italy	1,714	0.6
		--------	--------
		56,610	20.7
		--------	--------
Consumer Goods
Anheuser-Busch InBev	Belgium	9,476	3.4
Pernod Ricard	France	6,982	2.5
Renault	France	6,591	2.4
Compagnie Financière Richemont	Switzerland	6,105	2.2
Steinhoff International	Germany	5,427	2.0
Rèmy Cointreau	France	5,023	1.8
Pandora	Denmark	4,490	1.6
Schaeffler	Germany	2,966	1.1
SEB	France	2,025	0.8
Ontex	Belgium	837	0.3
		--------	--------
		49,922	18.1
		--------	--------
Technology
ASML	Netherlands	9,185	3.3
Luxoft	Ukraine	4,947	1.8
Mail.Ru	Russia	4,462	1.6
Scout24	Germany	2,689	1.0
		--------	--------
		21,283	7.7
		--------	--------
Consumer Services
RELX	Netherlands	9,760	3.5
Ahold	Netherlands	6,868	2.5
Telenet	Belgium	3,606	1.3
		--------	--------
		20,234	7.3
		--------	--------
Health Care
Lonza Group	Switzerland	5,776	2.1
Straumann	Switzerland	5,556	2.0
GN Store Nord	Denmark	4,273	1.5
Chr. Hansen	Denmark	4,223	1.5
		--------	--------
		19,828	7.1
		--------	--------
Basic Materials
Bayer	Germany	9,445	3.4
Tenaris	Luxembourg	6,661	2.4
		--------	--------
		16,106	5.8
		--------	--------
Telecommunications
KPN	Netherlands	7,215	2.6
		--------	--------
		7,215	2.6
		--------	--------
Oil & Gas
Gazprom	Russia	3,985	1.4
		--------	--------
		3,985	1.4
		--------	--------
Total Investments		275,886	100.0
		========	========

All investments are in ordinary shares unless otherwise stated. The total number of investments held at 28 February 2017 was 51 (31 August 2016: 59).

Income statement
for the six months ended 28 February 2017

		Revenue £’000			Capital £’000			Total £’000
	Notes	Six  months  ended  28.02.17  (unaudited)	Six  months  ended  29.02.16  (unaudited)	Year  ended  31.08.16  (audited)	Six  months  ended  28.02.17  (unaudited)	Six  months  ended  29.02.16  (unaudited)	Year  ended  31.08.16  (audited)	Six  months  ended  28.02.17  (unaudited)	Six  months  ended  29.02.16  (unaudited)	Year  ended  31.08.16  (audited)
Gains on investments held at fair value through profit or loss		–	–	–	15,070	6,121	38,028	15,070	6,121	38,028
Gains/(losses) on foreign exchange		–	–	–	516	(432)	967	516	(432)	967
Income from investments held at fair value through profit or loss	3	1,397	980	6,306	–	–	–	1,397	980	6,306
Other income	3	–	110	162	–	–	–	–	110	162
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Total income		1,397	1,090	6,468	15,586	5,689	38,995	16,983	6,779	45,463
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Expenses
Investment management fee	4	(244)	(225)	(462)	(977)	(899)	(1,850)	(1,221)	(1,124)	(2,312)
Operating expenses	5	(352)	(320)	(544)	(18)	(21)	(36)	(370)	(341)	(580)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Total operating expenses		(596)	(545)	(1,006)	(995)	(920)	(1,886)	(1,591)	(1,465)	(2,892)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Net profit before finance costs and taxation		801	545	5,462	14,591	4,769	37,109	15,392	5,314	42,571
Finance costs		(21)	(24)	(53)	(5)	(9)	(10)	(26)	(33)	(63)
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Net profit on ordinary activities before taxation		780	521	5,409	14,586	4,760	37,099	15,366	5,281	42,508
Taxation (charge)/credit		(126)	371	373	–	–	–	(126)	371	373
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Net profit on ordinary activities after taxation	7	654	892	5,782	14,586	4,760	37,099	15,240	5,652	42,881
		--------	--------	--------	--------	--------	--------	--------	--------	--------
Earnings per ordinary share - basic and diluted	7	0.66p	0.86p	5.60p	14.76p	4.59p	35.94p	15.42p	5.45p	41.54p
		========	========	========	========	========	========	========	========	========

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 the Company.

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 28 February 2017

	Called up  share  capital  £’000	Share  premium  account  £’000	Capital  redemption  reserve  £’000	Special  reserve  £’000	Capital  reserves  £’000	Revenue  reserve  £’000	Total  £’000
For the six months ended 28 February 2017 (unaudited)
At 31 August 2016	110	63,214	130	4,555	216,059	10,840	294,908
Total comprehensive income:
Profit for the period	–	–	–	–	14,586	654	15,240
Transactions with owners, recorded directly to equity:
Ordinary shares repurchased into treasury	–	–	–	(4,358)	(15,573)	–	(19,931)
Share repurchase costs	–	–	–	(197)	–	–	(197)
Dividend paid*	–	–	–	–	–	(3,723)	(3,723)
	--------	--------	--------	--------	--------	--------	--------
At 28 February 2017	110	63,214	130	–	215,072	7,771	286,297
	--------	--------	--------	--------	--------	--------	--------
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 repurchased into treasury	–	–	–	(3,099)	–	–	(3,099)
Share repurchase 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 year ended 31 August 2016 (audited)
At 31 August 2015	130	61,899	110	10,115	178,960	10,245	261,459
Total comprehensive income:
Profit for the year	–	–	–	–	37,099	5,782	42,881
Transactions with owners, recorded directly to equity:
Exercise of subscription shares	–	1,315	–	–	–	–	1,315
Ordinary shares repurchased into treasury	–	–	–	(5,582)	–	–	(5,582)
Ordinary shares purchased and cancelled	(20)	–	20	–	–	–	–
Share purchase costs written back	–	–	–	22	–	–	22
Dividends paid***	–	–	–	–	–	(5,187)	(5,187)
	--------	--------	--------	--------	--------	--------	--------
At 31 August 2016	110	63,214	130	4,555	216,059	10,840	294,908
	--------	--------	--------	--------	--------	--------	--------

*        In respect of the year ended 31 August 2016 a final dividend of 3.65p per share was recommended on 19 October 2016 and paid on 5 December 2016.
**      In respect of the year ended 31 August 2015 a final dividend of 3.35p per share was recommended on 22 October 2015 and paid on 18 December 2015.
***    In respect of the year ended 31 August 2016 an interim dividend of 1.65p per share was declared on 19 April 2016 and paid on 27 May 2016. In respect of the year ended 31 August 2015 a final dividend of 3.35p per share was recommended on 22 October 2015 and paid on 18 December 2015.

The transaction costs incurred on the acquisition and disposal of investments are included within the capital reserves and amounted to £192,000 for the six months ended 28 February 2017 (six months ended 29 February 2016: £220,000; year ended 31 August 2016: £445,000).

Balance sheet
as at 28 February 2017

	Notes	28 February  2017  £’000  (audited)	29 February  2016  £’000  (audited)	31 August  2016  £’000  (audited)
Fixed assets
Investments held at fair value through profit or loss		275,886	252,722	295,592
		========	========	========
Current assets
Debtors		2,947	856	1,841
Cash and cash equivalents		10,243	10,857	432
		--------	--------	--------
		13,190	11,713	2,273
		--------	--------	--------
Creditors – amounts falling due within one year
Other creditors		(2,779)	(3,949)	(2,957)
		--------	--------	--------
Net current assets/(liabilities)		10,411	7,764	(684)
		--------	--------	--------
Net assets		286,297	260,486	294,908
		========	========	========
Capital and reserves
Called-up share capital	8	110	130	110
Share premium account		63,214	61,934	63,214
Capital redemption reserve		130	110	130
Capital reserves		215,072	183,720	216,059
Special reserve		-	6,949	4,555
Revenue reserve		7,771	7,643	10,840
		--------	--------	--------
Total shareholders’ funds		286,297	260,486	294,908
		========	========	========
Net asset value per ordinary share – undiluted	7	300.43p	252.69p	287.43p
		========	========	========
Net asset value per ordinary share – diluted	7	300.43p	251.91p	287.43p
		========	========	========

Statement of cash flows
for the six months ended 28 February 2017

		Six months  ended  28 February  2017  £’000  (unaudited)	Six months  ended  29 February  2016  £’000  (unaudited)	Year ended  31 August  2016  £’000  (audited)
Operating activities
Net profit before taxation		15,366	5,281	42,508
Add back finance costs		26	33	63
Gains on investments		(15,070)	(6,121)	(38,028)
Net (gains)/losses on foreign exchange		(458)	432	(997)
Sales of investments		143,378	89,710	191,634
Purchases of investments		(109,359)	(73,964)	(188,018)
Decrease/(increase) in debtors		82	(4)	(100)
Decrease in other creditors		(579)	(213)	(761)
Tax on investment income		(211)	(248)	(858)
Refund of witholding tax reclaims		23	562	1,024
		--------	--------	--------
Net cash generated from operating activities		33,198	15,468	6,467
		--------	--------	--------
Financing activities
Purchase of ordinary shares		(19,931)	(3,099)	(5,582)
Share issue and share repurchase costs (paid)/refunded		(165)	(31)	65
Proceeds from issue of subscription shares		-	35	1,315
Interest paid		(26)	(11)	(63)
Dividends paid		(3,723)	(3,494)	(5,187)
		--------	--------	--------
Net cash used in financing activities		(23,845)	(6,600)	(9,452)
		--------	--------	--------
Increase/(decrease) in cash and cash equivalents		9,353	8,868	(2,985)
		--------	--------	--------
Cash and cash equivalents at the beginning of the period/year		432	2,420	2,420
Effect of foreign exchange rate changes		458	(431)	997
		--------	--------	--------
Cash and cash equivalents at the end of the period/year		10,243	10,857	432
		--------	--------	--------
Comprised of:
Cash at bank		34	284	2
BlackRock's Institutional Cash Series plc – Euro Assets Liquidity Fund		10,209	10,573	430
		--------	--------	--------
		10,243	10,857	432
		========	========	========

Notes to the financial statements
for the six months ended 28 February 2017

1. PRINCIPAL ACTIVITY

The principal activity of the Company is that of an investment trust company within the meaning of section 1158 of the Corporation Tax Act 2010.

2. BASIS OF PREPARATION

The Company presents its results and positions under FRS 102, ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ (FRS 102), which forms part of revised Generally Accepted Accounting Practice (New UK GAAP) issued by the Financial Reporting Council (FRC) in 2013.

The condensed set of financial statements 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.

The accounting policies applied for the condensed set of financial statements are as set out in the Company’s Annual Report and Financial Statements for the year ended 31 August 2016. This reflects the Company’s application of FRS 102.

3. INCOME

	Six months  ended  28 February  2017  (unaudited)  £’000	Six months  ended  29 February  2016  (unaudited)  £’000	Year  ended  31 August  2016  (audited)  £’000
Investment income:
Overseas dividends	1,397	980	6,306
	--------	--------	--------
	1,397	980	6,306
	--------	--------	--------
Other income:
Interest on withholding tax reclaims	–	110	162
	--------	--------	--------
	–	110	162
	--------	--------	--------
Total income	1,397	1,090	6,468
	========	========	========

Special dividends of £nil (six months ended 29 February 2016: £nil; year ended 31 August 2016: £410,000) have been recognised in capital and deducted from investment costs.

Dividends and interest received during the period amounted to £1,505,000 and £nil (six months ended 29 February 2016: £937,000 and £110,000; year ended 31 August 2016: £6,198,000 and £162,000) respectively.

4. INVESTMENT MANAGEMENT FEE

	Six months ended 28 February 2017 (unaudited)			Six months ended 29 February 2016 (unaudited)			Year ended 31 August 2016 (audited)
	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000	Revenue  £’000	Capital  £’000	Total  £’000
Investment management fee	244	977	1,221	225	899	1,124	462	1,850	2,312
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Total	244	977	1,221	225	899	1,124	462	1,850	2,312
	========	========	========	========	========	========	========	========	========

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. The investment management fee is allocated 80% to capital reserves and 20% to the revenue reserve.

5. OPERATING EXPENSES

	Six months  ended  28 February  2017  (unaudited)  £’000	Six months  ended  29 February  2016  (unaudited)  £’000	Year  ended  31 August  2016  (audited)  £’000
Custody fee	18	13	30
Depositary fees	20	18	37
Audit fee	12	15	24
Registrar’s fees	37	44	84
Directors’ emoluments	58	53	116
Marketing fees	44	62	49
Other administration costs	163	115	204
	--------	--------	--------
	352	320	544
	--------	--------	--------
Transaction costs taken to capital	18	21	36
	--------	--------	--------
	370	341	580
	========	========	========

6. DIVIDEND

The Board has declared an interim dividend of 1.75p per share for the period ended 28 February 2017 payable on 26 May 2017 to shareholders on the register on 5 May 2017. The total cost of the dividend based on 95,295,953 ordinary shares in issue at 26 April 2017 was £1,668,000 (29 February 2016: £1,696,000).

In accordance with FRS 102, Section 32 ‘Events After the End of the Reporting Period’, the interim dividend payable on the ordinary shares has not been included as a liability in the financial statements, as interim dividends are only recognised when they have been paid.

7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE

Revenue and capital returns per share and net asset value per share are shown below and have been calculated using the following:

	28 February  2017  (unaudited)	29 February  2016  (unaudited)	31 August  2016  (audited)
Net revenue profit attributable to ordinary shareholders (£’000)	654	892	5,782
Net capital profit attributable to ordinary shareholders (£’000)	14,586	4,760	37,099
	--------	--------	--------
Total profit (£’000)	15,240	5,652	42,881
	--------	--------	--------
Equity shareholders’ funds (£’000)	286,297	260,486	294,908
	--------	--------	--------
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:	98,826,248	103,701,234	103,222,155
	--------	--------	--------
The actual number of ordinary shares in issue at the period end on which the undiluted net asset value per ordinary share was calculated was:	95,295,953	103,086,916	102,603,113
	--------	--------	--------
Calculated on weighted average number of ordinary shares
Revenue profit	0.66p	0.86p	5.60p
Capital profit	14.76p	4.59p	35.94p
	--------	--------	--------
Total	15.42p	5.45p	41.54p
	--------	--------	--------
Calculated on actual number of ordinary shares
Revenue profit	0.69p	0.86p	5.64p
Capital profit	15.30p	4.62p	36.15p
	--------	--------	--------
Total	15.99p	5.48p	41.79p
	--------	--------	--------
Net asset value per share – undiluted	300.43p	252.69p	287.43p
	--------	--------	--------
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:	98,826,248	103,701,234	103,222,155
	--------	--------	--------
The actual number of ordinary shares in issue at the period end, including subscription shares, on which the fully diluted net asset value per ordinary share was calculated was:	95,295,953	123,617,914	102,603,113
	--------	--------	--------
Calculated on weighted average number of ordinary shares
Revenue profit	0.66p	0.86p	5.60p
Capital profit	14.76p	4.59p	35.94p
	--------	--------	--------
Total	15.42p	5.45p	41.54p
	--------	--------	--------
Net asset value per share – diluted	300.43p	251.91p	287.43p
	--------	--------	--------

In accordance with the AIC SORP, to the extent that the Company’s NAV is in excess of the exercise price, the subscription shares are considered to be dilutive for the calculation of the dilutive NAV per share. Following the final conversion of subscription shares in April 2016, the opportunity to subscribe for ordinary shares lapsed. 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.

A diluted NAV per share is calculated by adjusting equity shareholders’ funds for the consideration receivable on the exercise of the subscription shares at the exercise price of 248.00p per share and dividing by the total number of shares that would have been in issue had all the subscription shares been exercised. The final conversion took place in April 2016 at which point the opportunity to subscribe for ordinary shares lapsed. As such there was no dilutive effect at 28 February 2017 and at 31 August 2016. The subscription shares were dilutive as at 29 February 2016.

In accordance with FRS 102 Section 10.6, there is no dilutive impact on the earnings per share for the periods ended 28 February 2017 and 29 February 2016 and for the year ended 31 August 2016.

At 28 February 2017, the Company held 15,032,985 ordinary shares in treasury. The Company’s policy on issuing treasury shares, set out on page 21 of the Annual Report and Financial Statements for the year ended 31 August 2016, permits the Directors to sell treasury shares at a price below the NAV in certain circumstances. As a result this could have a dilutive effect.

8. SHARE CAPITAL AND SHARES HELD IN TREASURY

	Number of  ordinary  shares  in issue	Number of  treasury  shares  in issue	Total	Nominal  value  £
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 0.1p each:
At 1 September 2016	102,603,113	7,725,825	110,328,938	110,328
Shares repurchased and held in treasury	(725,000)	725,000	–	–
	--------	--------	--------	--------
Shares repurchased and held in treasury pursuant to tender offer	(6,582,160)	6,582,160	–	–
	--------	--------	--------	--------
At 28 February 2017	95,295,953	15,032,985	110,328,938	110,328
	========	========	========	========

9. VALUATION OF FINANCIAL INSTRUMENTS

For the six months ended 28 February 2017 and 29 February 2016 and the year ended 31 August 2016, the Company had adopted early 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 with those required by EU adopted IFRS.

Financial assets and financial liabilities are either carried in the Balance Sheet at their fair value (investments) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash and cash equivalents and overdrafts). Section 11 of FRS 102 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note on pages 45 and 46 of the Annual Report and Financial Statements for the year ended 31 August 2016.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.

The fair value hierarchy has the following levels:

Level 1 – Quoted prices for identical instruments in active markets

A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.

Level 2 – Valuation techniques using observable inputs

This category includes instruments valued using quoted prices for similar instruments in markets that are considered less than active, or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

Level 3 – Valuation techniques using significant unobservable inputs

This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable 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. 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 judgement, considering factors specific to the asset or liability.

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 28 February 2017	Level 1  £’000	Level 2  £’000	Level 3  £’000	Total  £’000
Equity investments	275,886	–	–	275,886
	========	========	========	========

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 31 August 2016	Level 1  £’000	Level 2  £’000	Level 3  £’000	Total  £’000
Equity investments	295,592	–	–	295,592
	========	========	========	========

There were no transfers between levels for financial assets and financial liabilities during the period/year recorded at fair value as at 28 February 2017, 29 February 2016 and 31 August 2016. The Company did not hold any Level 3 securities throughout the six month period ended 28 February 2017 (six month period ended 29 February 2016: none; year ended 31 August 2016: none).

10. RELATED PARTY DISCLOSURE

As at 28 February 2017 the Board consisted of four non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £35,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £29,000 and each other Director receives an annual fee of £25,000.

The following members of the Board hold shares in the Company: Eric Sanderson holds 4,000 ordinary shares; Peter Baxter holds 5,000 ordinary shares; and Carol Ferguson holds 57,600 ordinary shares.

Since the period end and up to the date of this report there have been no changes in Directors’ holdings.

The transactions with the AIFM and Investment Manager are stated in note 11.

11. TRANSACTIONS WITH THE AIFM AND INVESTMENT MANAGER

BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed on pages 18 and 19 in the Annual Report and Financial Statements for the year ended 31 August 2016.

The investment management fee due for the six months ended 28 February 2017 amounted to £1,221,000 (six months ended 29 February 2016: £1,124,000; year ended 31 August 2016: £2,312,000).

At 28 February 2017, £594,000 was outstanding in respect of the investment management fee (six months ended 29 February 2016: £1,575,000; year ended 31 August 2016: £1,190,000).

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 28 February 2017 amounted to £36,000 excluding VAT (six months ended 29 February 2016: £52,000; year ended 31 August 2016: £41,000). Marketing fees of £82,000 excluding VAT were outstanding at 28 February 2017 (29 February 2016: £133,000; 31 August 2016: £45,000).

12. CONTINGENT LIABILITIES

There were no contingent liabilities at 28 February 2017 (29 February 2016: £nil; 31 August 2016: £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 28 February 2017 and 29 February 2016 has not been audited.

The information for the year ended 31 August 2016 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 2017 in late October 2017. Copies of the results announcement can be obtained from the Secretary on 020 7743 3000 or [e-mail]. The Annual Report and Financial Statements should be available by the end of October 2017, with the Annual General Meeting being held in November 2017.

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:  [phone]
E-mail: [e-mail]


END


The Half Yearly Financial Report will also be available on the BlackRock website atwww.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.