BlackRock UK Special Situations Fund. For the six months ended 31 August 2015

Transcription

1 INTERIM report BlackRock UK Special Situations Fund For the six months ended 31 August 2015

2 About the Fund Managers BlackRock UK Special Situations Fund Roland Arnold, CFA, Director and portfolio manager, is a member of the UK Equity Team within the Fundamental Equity division of BlackRock s Alpha Strategies Group. Mr. Arnold has been co-manager of the BlackRock UK Special Situations Fund since August 2012, and has managed UK Small & Mid Cap portfolios since 2006, most recently becoming co-manager of the Blackrock UK Smaller Companies Portfolio in March Mr. Arnold is also responsible for the analysis of the UK technology sector. Mr. Arnold s service with the firm dates back to 2000, including his years with Merrill Lynch Investment Managers ( MLIM ), which merged with BlackRock in Mr. Arnold earned a BA (Hons) in Economics and Management from Leeds University in Luke Chappell, Managing Director and portfolio manager, is co-head of the UK Equity team within BlackRock s Fundamental Equity division of the Alpha Strategies Group. He is a member of BlackRock s Leadership Committee. Mr. Chappell s service with the firm dates back to 1998, including his years with MLIM, which merged with BlackRock in At MLIM, Mr. Chappell was an equity portfolio manager, responsible for managing UK Specialist equity portfolios. Prior to joining MLIM, he worked at another investment management house in a range of research and fund management roles, with particular emphasis on specialist accounts and mid-cap stocks. Mr. Chappell earned an MA degree, with honours, in Classics from Christ Church, Oxford University in The former manager, Richard Plackett relinquished his fund management responsibilities for the BlackRock UK Special Situations Fund in September Investment Objective & Policy The aim of the BlackRock UK Special Situations Fund (the Fund ) is to achieve long-term capital growth for investors. The Fund invests primarily in the shares of companies incorporated or listed in the UK and will normally have an emphasis on small or medium sized companies. The Fund may also invest in collective investment schemes. Small and medium sized companies are those whose market capitalisation is lower than that of companies in the FTSE 100 Index at the time of the Fund s investment. The Fund was established on 27 January The name of the Fund was changed to Mercury Recovery Fund (from Mercury Income and Recovery Fund) in February 1984, to Merrill Lynch Recovery Fund on 30 September 2000, to Merrill Lynch UK Value Fund on 10 September 2001 and to Merrill Lynch UK Special Situations Fund on 1 September The Fund changed its investment objective on 1 October The Fund adopted its present name with effect from 28 April Authorised Status BlackRock UK Special Situations Fund is an authorised unit trust Scheme under Section 243 of the Financial Services and Markets Act 2000 and is established as a UCITS retail Scheme under the Financial Conduct Authority s Collective Investment Schemes Sourcebook (the COLL Sourcebook ). This Interim Report covers the six months ended 31 August Performance Table Period of Report Six Months to Five Years to Since Launch to CAPITAL RETURN Class A Income Units BlackRock UK Special Situations Fund -3.5% +52.0% % Total Return (with net income reinvested) Class A Accumulation Units BlackRock UK Special Situations Fund -3.2% +60.6% % IA UK All Companies Sector Index^#ø -3.7% +63.3% % All Fund figures quoted are based on bid-to-bid dealing prices (the price at which units are sold) and are calculated net of fees. Performance returns are cumulative. All returns are in Sterling. ^ Figures from Morningstar. Daily data is not available for this index. Figures have therefore been estimated for the quoted periods using nearest available start and end dates. Index not available on a capital only basis. # FTSE 250 Index used prior to 1 April FTSE All Share Index used prior to 1 October Since launch figures reflect offer (buying) prices, as bid prices were not available on this date for the Fund. Accumulation units have only been available since April Figure shown is estimated from Distribution units (using figures from Morningstar). ø Investment Association UK All Companies Sector Index is the Fund s peer group benchmark. The risk benchmark for the Fund is the FTSE All-Share Index. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and the return of your initial investment amount cannot be guaranteed. Changes in exchange rates may cause the value of an investment to fluctuate. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. Annual performance to most recent quarter end to to to to to A Accumulation +7.2% +6.1% +22.3% -6.0% +36.0% All figures quoted are based on bid-to-bid dealing prices (the price at which units are sold), with net income reinvested. Performance is calculated net of fees. Performance is shown for complete 12 month periods only. Copies of Manager s Reports and Prospectus are available on request. Dealing and Investor Services: blackrock.co.uk 1 BlackRock UK Special Situations Fund 2

3 Performance Record Net Asset Value At 31 August 2015 Units in Issue Net Asset Value Net Asset Value per Unit p A Income 4,003,722 76,279 1,905 A Accumulation 20,518, ,214 3,271 D Income 6,559, ,065 1,906 D Accumulation 8,626, ,762 3,405 X Income 886,422 16,891 1,906 S Income^ 2,209,227 2, S Accumulation^ 29,846,290 28, ^ S Income and S Accumulation classes commenced March Distributions Payable A Income The interim distribution payable on 31 October 2015 is p net per income unit. A Accumulation The interim accumulation distribution payable on 31 October 2015 is p net per accumulation unit. D Income The interim distribution payable on 31 October 2015 is p net per income unit. Risk and Reward Profile Lower risk Typically lower rewards Higher risk Typically higher rewards Unit Class A Income A Accumulation D Income D Accumulation X Income S Income S Accumulation `` The risk indicator was calculated incorporating historical or simulated historical data and may not be a reliable indication of the future risk profile of each unit class. `` The risk category shown is not guaranteed and may change over time. `` The lowest category does not mean risk free. `` The use of derivatives will impact the value of the Fund and may expose the Fund to a higher degree of risk. Derivatives are highly sensitive to changes in the value of the asset on which they are based and can increase the size of losses and gains, resulting in greater fluctuations in the value of the Fund. For more information on this, please see the Fund s Key Investor Information Documents (KIIDs), which are available at D Accumulation The interim accumulation distribution payable on 31 October 2015 is p net per accumulation unit. X Income The interim distribution payable on 31 October 2015 is p net per income unit. S Income^ The interim distribution payable on 31 October 2015 is p net per income unit. S Accumulation^ The interim accumulation distribution payable on 31 October 2015 is p net per accumulation unit. ^ S Income and S Accumulation classes commenced March BlackRock UK Special Situations Fund 4

4 Performance Record continued Investment Report Operating Charges Detailed in the following table are the charges used to meet the costs of running the Fund, which include the costs of marketing and distribution. These charges reduce the potential growth of your investments. The charges may vary from year to year. The charges exclude portfolio trade-related costs, except costs paid to the custodian/trustee and entry/exit charges paid to an underlying collective investment scheme (if any). Unit Class to # to A Income 1.67% 1.67% A Accumulation 1.67% 1.67% D Income 0.92% 0.92% D Accumulation 0.92% 0.92% X Income 0.01% 0.06% S Income^ 0.83% N/A S Accumulation^ 0.83% N/A # Operating charges figures have been annualised. ^ S Income and S Accumulation classes commenced March Summary of Performance over the Period The Fund returned -3.2%* over the six month period from 1 March 2015 to 31 August 2015, outperforming its benchmark, the IA UK All Companies Sector Index, which returned -3.7%. Fund Managers Commentary Though the surprisingly conclusive result in the UK s May 2015 general election provided a temporary boost to domestic stocks, the UK stock market ended the period lower due to the increasingly negative outlook for economic growth in China and fears that this will lead to a wider slowdown globally. Over the period, we recorded gains from our domestically focused small and mid-cap names, specifically Bellway and Bovis Homes, kitchen and joinery product supplier Howden Joinery and drinks maker Fever-Tree Drinks. Bovis Homes and Bellway performed well after the unexpected conservative party majority win alleviated some uncertainty over their outlook; the companies reported a record increase in the number of housing completions during the year, as well as an increase in selling prices. Clothing retailer Ted Baker continued to perform well following stronger consumer activity and positive company updates. Pharmaceutical company Clinigen saw its shares move higher after announcing that full year profits rose substantially, driven by growth in its speciality pharmaceuticals business and its recent acquisition of Idis. The biggest detractor was the holding in engineering group Senior, which fell due to concerns over aircraft production rates and foreign currency challenges. Having a holding in BG which was not quite as large as the benchmark proved detrimental, as shares of BG moved higher following discussions about a possible takeover by Royal Dutch Shell. Elsewhere, shares in plastic and fibre manufacturer Essentra fell as the slowdown in the oil & gas industry impacted its Pipe Protection business. Over the period, we purchased new positions in British American Tobacco, Rentokil and Rightmove and increased our holdings in Barclays, BHP Billiton, and Hays. We sold holdings in Diageo, Restaurant and Booker. Recent economic data from the UK and US continues to suggest a positive outlook, although the first quarter growth in both economies was lower than in previous quarters. The European Central Bank s employment of a spending programme in support of the eurozone s economy (what s become known as quantitative easing ) will be helpful in Europe, where there are now some signs of a pickup in activity. Concerns regarding Greece have subsided somewhat, but worries have now shifted to China, and investors will be closely watching how the government will respond to slower growth. We continue to focus on finding high quality, well-financed small and medium sized companies capable of prospering in today s relatively low growth world. September 2015 * Performance figures quoted are based on bid-to-bid dealing prices (the price at which units are sold) and are not the same as the net asset value reported in the financial statements which is at close of business. Performance is calculated net of fees and reported for the Fund s class A Accumulation Units. 5 BlackRock UK Special Situations Fund 6

5 Portfolio Statement (unaudited) at 31 August 2015 Holding or Market % of Nominal Value Total Net Value Investment Assets EQUITIES 98.61%; % UNITED KINGDOM 98.61%; % Aerospace & Defence 2.51%; % 10,671,296 Senior 30, Banks 11.32%; % 7,237,304 Barclays 18, ,230,416 HSBC 58, ,586,102 Lloyds Banking 39, ,904,744 Shawbrook 6, ,291,934 Virgin Money 13, , Beverages 0.72%; % 2,057,458 Fever-Tree Drinks 8, Chemicals 1.76%; % 2,210,112 Elementis 5, ,831 Victrex 16, , Electronic & Electrical Equipment 0.69%; % 1,651,574 Xaar 8, Financial Services 5.51%; % 4,468,518 Jupiter Fund Management 19, ,374,354 Rathbone Brothers 29, ,189 Schroders non-voting shares 17, , Fixed Line Telecommunications 2.96%; % 1,971,192 Alternative Networks 9, ,015,228 BT 26, , Food & Drug Retailers 1.11%; % 1,902,752 Clinigen 13, Food Producers 2.47%; % 1,145,090 Unilever 30, Holding or Market % of Nominal Value Total Net Value Investment Assets General Retailers 2.01%; % 867,728 CVS 5, ,485,434 DFS Furniture 7, ,321 Dunelm 8, ,385,130 Stanley Gibbons 2, , Healthcare Equipment & Services 0.00%; % Household Goods & Home Construction 5.18%; % 1,390,975 Bellway 34, ,570,446 Bovis Homes 28, , Industrial Engineering 2.40%; % 991,923 Bodycote 6, ,687 Spirax-Sarco Engineering 22, , Industrial Metals & Mining 0.41%; % 7,008,195 South32 4, Life Insurance 0.96%; % 818,976 Prudential 11, Media 3.60%; % 36,263 4imprint ,832,453 Auto Trader 9, ,581,215 RELX 26, ,157 Rightmove 6, Mining 3.73%; % 1,691,109 BHP Billiton 19, ,092,030 Rio Tinto 26, , Mobile Telecommunications 2.13%; % 11,415,721 Vodafone 25, BlackRock UK Special Situations Fund 8

6 Portfolio Statement (unaudited) continued Holding or Market % of Nominal Value Total Net Value Investment Assets Oil & Gas Producers 8.77%; % 1,428,160 BG 14, ,130,627 BP 25, ,802,296 Faroe Petroleum 7, ,611,697 Ithaca Energy 1, ,351,462 Royal Dutch Shell class B shares 57, , Personal Goods 1.83%; % 724,479 Ted Baker 22, Pharmaceuticals & Biotechnology 6.60%; % 1,316,505 Abcam 7, ,135 AstraZeneca 25, ,007,621 Dechra Pharmaceuticals 9, ,798,435 GlaxoSmithKline 24, ,197 Shire 13, , Real Estate Investment & Services 1.40%; % 6,698,536 Development Securities 17, Real Estate Investment Trusts 4.75%; % 2,142,397 Great Portland Estates 17, ,296,702 Hansteen 2, ,917,602 Shaftesbury 17, ,229,729 Workspace 20, , Software & Computer Services 0.76%; % 424,425 AVEVA 9, Support Services 14.06%; % 1,385,020 Ashtead 13, ,325,368 Brammer 4, ,454,882 Essentra 12, ,788,507 Grafton 13, ,822,277 Hays 18, ,055,272 Howden Joinery 33, Holding or Market % of Nominal Value Total Net Value Investment Assets 241,424 Latchways 1, ,188,654 Northgate 5, ,905,017 Rentokil Initial 11, ,894,085 Robert Walters 21, ,673,451 RWS 6, ,675,345 SIG 27, , Tobacco 2.53%; % 884,971 British American Tobacco 30, Travel & Leisure 8.44%; % 864,166 Carnival 28, ,748,328 Cineworld 10, ,932,075 Compass 19, ,213 Fuller, Smith & Turner class A shares 6, ,209,776 Merlin Entertainments 8, ,114,331 Patisserie 6, ,327,332 Stagecoach 8, ,901 Young & Co s Brewery (non-voting) 5, ,467 Young & Co s Brewery class A shares 7, , INVESTMENT FUNDS 2.02%; % Short-term Money Market Funds 2.02%; % 24,543,515 Institutional Cash Series plc Sterling Liquidity Fund* 24, Portfolio of investments 1,221, Net other liabilities (7,619) (0.63) Total net assets 1,214, Unless otherwise stated, all holdings are quoted in ordinary shares and listed on a recognised exchange. Note: comparative figures show percentages for each category of holding at 28 February * Managed by a related party. The Fund will not be subject to any initial subscription or redemption fees on its investment into an underlying fund managed by a related party. The Fund may indirectly incur management charges by investing in an underlying fund. The Fund invests, where possible, in a share class of an underlying fund that is not subject to management charges. Alternatively, where this is not possible, the Manager will rebate management charges to the Fund. 9 BlackRock UK Special Situations Fund 10

7 Statement of Total Return (unaudited) for the six months ended 31 August 2015 Balance Sheet (unaudited) at 31 August Income Net capital losses (43,753) (156,720) Revenue 27,729 33,837 Expenses (9,500) (13,482) Net revenue before taxation 18,229 20,355 Taxation Net revenue after taxation 18,229 20,355 Total return before distributions (25,524) (136,365) Distributions (18,236) (20,503) Change in net assets attributable to unitholders from investment activities (43,760) (156,868) Statement of Change in Net Assets Attributable to Unitholders (unaudited) for the six months ended 31 August Opening net assets attributable to unitholders 1,474,836 2,172,423 Amounts received on creation of units 23,968 33,814 Amounts paid on cancellation of units (254,224) (426,192) (230,256) (392,378) Stamp duty reserve tax (414) Unclaimed distributions over 6 years old 24 Change in net assets attributable to unitholders from investment activities (43,760) (156,868) Retained distribution on accumulation units 13,193 13,919 Closing net assets attributable to unitholders 1,214,013 1,636, Assets: Fixed assets Investment assets 1,221,632 1,474,214 Current assets Debtors 6,844 18,750 Cash and bank balances 3,387 1,956 Total assets 1,231,863 1,494,920 Liabilities: Creditors Distribution payable (3,349) (1,522) Other creditors (14,501) (18,562) Total liabilities (17,850) (20,084) Net assets attributable to unitholders 1,214,013 1,474,836 N C D Hall (Director) M T Zemek (Director) BlackRock Fund Managers Limited 15 October 2015 The above statement shows the comparative closing net assets at 31 August 2014 whereas the current accounting period commenced 1 March BlackRock UK Special Situations Fund 12

8 Notes to Financial Statements (unaudited) for the six months ended 31 August 2015 Accounting Policies The financial statements have been prepared in accordance with the Statement of Recommended Practice for Authorised Funds (the SORP ) issued by the Investment Management Association ( IMA ) (now known as the Investment Association) in May The SORP was revised in May 2014 to concur with Financial Reporting Standard 102, the new financial reporting standard applicable in the UK and Republic of Ireland. Stamp Duty Reserve Tax ( SDRT ) Prior to 30 March 2014, SDRT was levied on the dealing of units in unit trust schemes under Schedule 19 of the Finance Act 1999 ( Schedule 19 ) at the rate of 0.5% on the value of units surrendered. In order to increase the competitiveness of the asset management industry in the UK, the charge to SDRT under Schedule 19 has been abolished since 30 March 2014 and there is no SDRT charge levied on the surrender of units in unit trust schemes after this date. The transition to the revised SORP on 1 March 2015 has not resulted in any restatement to the financial position or financial performance previously reported as at 28 February Certain presentational amendments have been required which have no impact on the total return or net asset value in either the current or prior accounting period. All other accounting policies used to prepare the interim financial statements are as per the audited financial statements for the year ended 28 February Subsequent Events The Prospectus was amended on 17 September 2015 to add MarketAxess Europe Limited as an eligible market. 13 BlackRock UK Special Situations Fund 14

9 Notes General Information Manager & Registrar BlackRock Fund Managers Limited 12 Throgmorton Avenue, London EC2N 2DL Telephone: Dealing and Investor Services: Member of The Investment Association (formerly the Investment Management Association) and authorised and regulated by the Financial Conduct Authority. Directors of the Manager G D Bamping R A Damm N C D Hall* R A R Hayes A M Lawrence A J Stenning E E Tracey M T Zemek* (appointed 2 June 2015) * Non-executive Director. Trustee BNY Mellon Trust & Depositary (UK) Limited 160 Queen Victoria Street, London EC4V 4LA Authorised and regulated by the Financial Conduct Authority. Investment Manager BlackRock Investment Management (UK) Limited 12 Throgmorton Avenue, London EC2N 2DL Authorised and regulated by the Financial Conduct Authority. Auditor Ernst & Young LLP 1 More London Place, London SE1 2AF Custodian The Bank of New York Mellon (International) Limited 1 Canada Square, London E14 5AL Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. BlackRock s proxy voting agent is ISS (Institutional Shareholder Services). This Report relates to the packaged products of and is issued by: BlackRock Fund Managers Limited 12 Throgmorton Avenue, London EC2N 2DL Telephone: Dealing and Investor Services: blackrock.co.uk For your protection, telephone calls are usually recorded. 15 BlackRock UK Special Situations Fund 16

10 ABOUT US BlackRock is a premier provider of asset management, risk management, and advisory services to institutional, intermediary, and individual clients worldwide. As of 30 June 2015, the firm manages 3 trillion across asset classes in separate accounts, mutual funds, other pooled investment vehicles, and the industry-leading ishares exchange-traded funds. Through BlackRock Solutions, the firm offers risk management and advisory services that combine capital markets expertise with proprietarily-developed analytics, systems, and technology. Through BlackRock Solutions, the Firm provides risk management and enterprise investment services for over 200 clients. BlackRock serves clients in North and South America, Europe, Asia, Australia, Africa, and the Middle East. Headquartered in New York, the firm maintains offices in over 30 countries around the world. For more information blackrock.co.uk