Half-year Report

BLACKROCK SMALLER COMPANIES TRUST plc

(LEI: 549300MS535KC2WH4082)

Half yearly financial announcement of results in respect of the six months ended 31 August 2021

PERFORMANCE RECORD

	Six months  ended  31 August 2021	Six months  ended  31 August 2020	Year ended  28 February 2021
Performance
Net asset value per share (debt at par value)1,2	2,278.01p	1,435.96p	1,784.35p
Movement1	+27.7%	-8.7%	+13.5%
Net asset value per share (debt at par value, capital only)1,2	2,257.97p	1,431.39p	1,777.63p
Movement1	+27.0%	-7.6%	+14.8%
Net asset value per share (debt at fair value)1,2,3	2,266.31p	1,418.95p	1,774.71p
Movement1,3	+27.7%	-8.8%	+14.0%
Numis Smaller Companies plus AIM (excluding Investment Companies) Index1	7,326.65	5,045.05	6,350.94
Movement1	+15.4%	-2.2%	+23.1%
Ordinary share price1	2,150.00p	1,230.00p	1,698.00p
Movement1	+26.6%	-17.1%	+14.4%
	---------------	---------------	---------------
Revenue and dividends
Revenue return per share	20.05p	4.57p	13.36p
Interim dividend per share	13.00p	12.80p	12.80p
Final dividend per share			20.50p
Change in interim dividend	+1.6%	–	–
Change in total dividends			+2.5%
	---------------	---------------	---------------
Assets
Total assets less current liabilities (£000)	1,191,983	770,761	960,900
Equity shareholders’ funds (£000)	1,112,349	701,174	871,296
Ongoing charges ratio2,4	0.8%	0.7%	0.8%
Dividend yield2	1.6%	2.6%	2.0%
Gearing2	6.9%	4.1%	8.9%

¹  Without income reinvested.
²  Alternative performance measures, see Glossary contained within the Half Yearly Financial Report.
³    The basis of calculation for the fair value of the debt is disclosed in note 9 below and the calculation of net asset value per share (debt at fair value) is included in the Glossary contained within the Half Yearly Financial Report.
⁴    AIC methodology is based on annual operating charges; the operating charges ratio shown for the six month period to 31 August is based on estimated full year expenses at the half year end date and is subject to change to the extent that actual operating expenses incurred in the full year vary from these estimates.

Sources: BlackRock and Datastream.

CHAIRMAN’S STATEMENT FOR THE SIX MONTHS ENDED 31 AUGUST 2021

Dear Shareholder

I am pleased to present to shareholders the half yearly report for the six months ended 31 August 2021.

PERFORMANCE
The first six months of the Company’s financial year have been characterised by renewed market optimism as post-lockdown economic performance has gathered pace, buoyed by the success of vaccination programmes and fiscal stimulus. So-called value shares broadly outpaced growth during this period but overall results have been pleasing for our portfolio. The resolution of many Brexit uncertainties has provided a boost for some domestic UK businesses. 2021 saw a sharp rise in M&A and IPO activity, which attracted significant interest from overseas corporates and private equity investors taking advantage of the attractive UK stock valuations. Over the period under review the Company’s net asset value (NAV) increased by 27.7%^1,2 to 2,278.01p per share, outperforming the Company’s benchmark, the Numis Smaller Companies plus AIM Index (excluding Investment Companies), which rose by 15.4%¹ over the same period. The Company’s share price rose by 26.6%¹ to 2,150.00p per share over the same period. Performance relative to the benchmark was driven mainly by stock selection, details of which are given in the Investment Manager’s report below.

Looking at the broader market environment, the FTSE 100 Index rose by 9.8%¹ over the period, the FTSE 250 Index rose by 15.3%¹ and the FTSE AIM All Share Index rose by 9.3%¹.

Since the period end, and up until the close of business on 29 October 2021, the Company’s NAV per share fell by 4.8%^1,2 and the share price decreased by 7.5%¹, whilst the benchmark fell by 3.3%¹.

The performance of both the NAV and share price over the longer term are illustrated in the table below.

Performance to 31 August 2021	6 Months  change  %	1 Year  change  %	3 Years  change  %	5 Years  change  %	10 Years  change  %
Net asset value per share1,2	+27.7	+58.6	+40.3	+113.0	+316.0
Share price1	+26.6	+74.8	+44.8	+140.1	+351.7
Benchmark1	+15.4	+45.2	+24.8	+53.1	+121.5
Net asset value per share (with income reinvested)2	+29.0	+61.6	+49.3	+134.3	+393.3
Share price (with income reinvested)	+28.0	+78.2	+54.5	+166.2	+445.0
Benchmark (with income reinvested)	+16.5	+47.6	+33.1	+71.9	+183.3

^1.  Percentages in sterling terms without income reinvested.
^2.  Debt at par value.

RETURNS AND DIVIDENDS
It is reassuring to see the recovery in dividends for our portfolio as operating conditions improve and more investee companies resume dividend payments. The Company’s revenue return per share for the six months ended 31 August 2021 amounted to 20.05p per share compared with a meagre 4.57p per share for the six months to 31 August 2020 as portfolio companies reduced or cancelled dividends in response to the impact of the pandemic. To give greater context, the current period revenue return is only 9.7% behind that for the more comparable ‘pre-COVID’ six-month period to 31 August 2019 of 22.20p per share. After adjusting for the impact of special dividends received, which amounted to 2.51p per share (31 August 2019: 2.00p per share), regular dividend income from portfolio companies decreased by a modest 6.8% compared to 2019 levels and a marked improvement over what many had feared might be the case.

The Board is mindful of the importance of yield to shareholders. This is particularly true in the current environment where low interest rates are likely to persist for some time and investors are struggling to maintain income levels. The Board is also cognisant of the benefits of the Company’s investment trust structure which enables it to retain up to 15% of total revenue each year to build up reserves which may be carried forward and used to pay dividends during leaner times. The Company has substantial distributable reserves (£1,045.9 million as at 31 August 2021, including revenue reserves of £15.3 million). To put this into context, the current level of annual dividend distribution based on dividends declared in respect of the year ended 28 February 2021 amounts to £16.3 million. Accordingly, the Board is pleased to declare an interim dividend of 13.00p per share (2020: 12.80p per share) representing an increase of 1.6% over the previous interim dividend. The interim dividend will be paid on 2 December 2021 to shareholders on the Company’s register on 12 November 2021.

CHANGE OF INVESTMENT POLICY
In June this year shareholders voted by an overwhelming majority to approve changes to the Company’s investment policy to remove the limit on the level of AIM investments that could be held in the portfolio. This change was prompted by the strong performance of the Company’s AIM holdings over recent years which had resulted in an increase in the portfolio’s aggregate exposure to AIM to just under the previous limit of 50% of the portfolio by value. The Board did not consider it to be in the best interests of stakeholders for the Manager to be required to dispose of these AIM stocks solely as a result of movements in market value and was keen to ensure that the Company had access to a full range of investment opportunities. More information in respect of the Board's views and the rationale for the change can be found on pages 7 and 31 to 32 of the Company’s Annual Report for the year ended 28 February 2021. As at 31 August 2021, 43.1% of the Company’s portfolio by value was invested in AIM-listed investments.

GEARING
The Company has traditionally maintained a range of borrowings and facilities to provide balance between longer-term and short-term maturities and between fixed and floating rates of interest. On 16 September 2021 this range was expanded when the Company issued £25 million in senior unsecured fixed rate private placement notes at a coupon of 2.47% maturing in 2046. The net proceeds from the issuance, as well as being in place to provide refinancing for the £15 million debenture which is due to expire in 2022, will also be used for additional investment in the market within the Company’s existing gearing limits and will give the Investment Manager more scope to take advantage of suitable investment opportunities. The Board considers that obtaining such Sterling denominated financing on an unsecured basis at this price level and at a 25-year term to be highly attractive.

The Company now has in place fixed rate funding consisting of the Company’s existing £15 million debenture, £25 million senior unsecured fixed rate private placement notes issued in May 2017 at a coupon of 2.74% maturing in 2037, £20 million senior unsecured fixed rate private placement notes issued in December 2019 at a coupon of 2.41% maturing in 2044, and the new notes maturing in 2046 as described above. Shorter-term variable rate funding consists of a £35 million three-year revolving loan facility with SMBC Bank International plc (formerly Sumitomo Mitsui Banking Corporation Europe Limited) (expiring in November 2022) and an uncommitted overdraft facility of £10 million with The Bank of New York Mellon (International) Limited.

It continues to be the Board’s intention that net gearing will not exceed 15% of the net assets of the Company at the time of the drawdown of the relevant borrowings. Under normal operating conditions it is envisaged that gearing will be within a range of 0%-15% of net assets. The Company’s net gearing stands at 6.2% of net assets as at 29 October 2021.

DISCOUNT
During the period, the Company’s shares traded at an average discount to NAV (with debt at fair value) of 4.8%. The discount ranged between 7.0% and 1.6% and ended the period at 5.1%. The Company’s shares were trading at a discount of 7.8% to NAV (with debt at fair value) as at close of business on 29 October 2021.

BOARD COMPOSITION
In previous Chairman’s Statements I have noted that the Board has adopted a policy of limiting directors’ tenure to nine years (or twelve years in the case of the Chairman), with a phased implementation over time to ensure an orderly Board refreshment process. As part of this process and as previously announced, Mr Peacock (whose tenure would have exceeded nine years in July 2021) retired from the Board on 11 June 2021. The Board wishes to thank Mr Peacock for his wise counsel and invaluable contribution to the Company over his tenure as a Director and Chairman of the Audit Committee. Mr Peacock was replaced as Audit Committee Chairman by Mr Little who joined the Board in October 2020.

The Board continued its refreshment/recruitment efforts into 2021, and in June 2021 was delighted to announce the appointment of Mr James Barnes as a non-executive Director with effect from 31 July 2021 and the appointment of Ms Helen Sinclair as a non-executive Director with effect from 1 March 2022. Mr Barnes brings to the Board a wealth of experience, especially in the UK smaller companies sector. He began his career in corporate finance and investment banking. He was formerly a director of Dobbies Garden Centres plc and was instrumental in growing the business and leading its sale to Tesco in 2003. He was also previously a Director and Chairman of Dunedin Smaller Companies Investment Trust plc (now Standard Life UK Smaller Companies plc) and currently holds a number of other non-executive roles in other businesses. Ms Sinclair began her career in investment banking and spent nearly eight years at 3i plc focusing on management buy-outs and growth capital investments. She later co-founded Matrix Private Equity (now Mobeus Equity Partners) in early 2000 and subsequently became Managing Director of Matrix Private Equity before moving to take on a number of non-executive director roles.

The only Director remaining on the Board with tenure in excess of nine years is Ms Burton. The Board has requested that she remain as a Director until Ms Sinclair has joined in early 2022 to provide continuity of experience and knowledge. It is envisaged that Ms Burton will not seek re-election at the Company’s Annual General Meeting in 2022, at which point the new tenure policy will have been fully implemented.

OUTLOOK
Despite renewed market optimism in 2021 as the impact of COVID-19 recedes and the world adjusts to living with the virus, the longer term implications of social and economic disruption will continue to challenge markets. Logistics problems, supply chain disconnects, labour shortages and inflation all present economic headwinds that will create a drag on growth and prosperity for some time to come. Aside from post-pandemic issues, energy costs are set to rise dramatically as the world attempts to contain climate change and ESG (Environmental, Social and Governance) policies continue to drive a shift to green energy supply. The global macro-economic climate is also subject to significant geo-political uncertainty. Against this backdrop it is important to focus on the fact that as the world emerges from COVID-19, many UK businesses are attractively valued and corporate activity is strong. Our portfolio management team remains focussed on financially robust, high quality and market-leading global businesses which are operating in attractive end markets and run by experienced management teams. Our portfolio managers are confident that the Company’s investment strategy of focusing on these quality growth investment opportunities in smaller companies means that the portfolio is well placed to cope with the diverse challenges that the coming year is likely to bring.

RONALD GOULD
Chairman
2 November 2021

^1.  Percentages in sterling terms without income reinvested
^2.  Debt at par value.

INVESTMENT MANAGER’S REPORT FOR THE SIX MONTHS ENDED 31 AUGUST 2021

MARKET REVIEW AND OVERALL INVESTMENT PERFORMANCE
The first six months of the Company’s financial year could not have been more different from the previous year. 2020 was characterised by the outbreak of the COVID-19 pandemic and lockdowns, while 2021 has been far more upbeat as vaccination programmes and stimulus have buoyed optimism, overwhelming many concerns around potential setbacks from the COVID-19 virus. But it has not all been plain sailing, with company statements now featuring commentary regarding component shortages, staffing issues, Brexit confusion and the spectre of inflation.

Within the UK, domestic business continued to perform well, helped by the removal of the Brexit overhang late last year. Meanwhile the combination of brighter prospects for the UK economy and attractive valuations of UK companies saw a sharp increase in M&A activity, particularly from overseas corporates and private equity, looking to take advantage of the relative value of UK plc. After high levels of equity issuance in 2020, principally for liquidity-related needs, this year the capital markets have focused on IPOs as confidence in the market returned.

PERFORMANCE REVIEW
The Company’s NAV per share (debt at par) rose by 27.7% during the first half of our financial year, significantly outperforming the benchmark index which rose by 15.4% over the same period. For comparison the large cap FTSE 100 Index rose 9.8% during the period (all percentages stated without income reinvested).

The period started with a rally in value shares, but despite this early headwind, the Company significantly outperformed, helped by positive earnings across a broad range of industries. Whether it has been strong contributions from innovative companies that we have purchased at IPO, nimble retailers that have adapted to new ways of working, or high-quality businesses leading in structurally growing markets, the key theme has been that bottom-up company specific drivers have been the key to year-to-date outperformance.

The largest positive contributor during the period was Auction Technology Group (ATG), a business that we purchased at IPO earlier in the year. ATG operates digital platforms that connect auctioneers and bidders in the traditional art and antique markets as well as the newer opportunity in industrial equipment. The industry is shifting rapidly as auctioneers realise that on-line platforms grant access to a vastly larger pool of bidders and often provide more efficient price discovery for the items listed. This trend has only been accelerated through COVID-19. We increased our position materially in a fund-raise as ATG bought LiveAuctioneers, the leading player in the US Art & Antiques market, a deal with compelling financial and operational synergies, which further extends ATG’s lead in the sector. Shares in Watches of Switzerland, the luxury watch retailer, rose as the company once again delivered profits ahead of expectations. Their April 2021 numbers encapsulated a period when UK stores were forced to shut for 26 weeks, the US saw vastly reduced footfall and the historically lucrative sales in airports were significantly interrupted. Nevertheless, revenue grew 12%, and operating profit by 70%, comfortably surpassing pre-COVID-19 expectations. This is testament to the positive dynamics of the market they operate in and management’s strong execution. It is a perfect illustration of our belief that great businesses and management teams can react to rapidly changing circumstances and still deliver growth despite significant challenges. Alongside the full year results the company announced a strategic plan for the next five years which included further expansion in its existing markets of the UK and US, as well as the intent to enter the EU where it sees a similar opportunity to consolidate a fragmented and un-sophisticated distribution network. If the company achieves its aims, then profitability will roughly triple from current levels. Impax Asset Management, which focuses on sustainable investment strategies, continued to deliver impressive growth in assets under management. This growth looks well set to continue given the strength of their franchise, market leading investment performance and the structural growth in sustainability which underpins the company’s investment philosophy.

In addition to positive trading from a number of our holdings during the period, the Company also benefitted from the surge of M&A activity. Stock Spirits Group, a premium spirits producer focused on Eastern Europe, accepted a £767 million takeover approach from a private equity group, whilst video game developer Sumo Group received an offer from Chinese gaming giant Tencent.

Given the strong outperformance during the period and impressive trading that we have continued to see across our core holdings, stock specific detractors have been limited. The largest detractor was Moonpig which reported good financial year results that were ahead of consensus with upgrades to forecasts, however the shares fell in response to a lack of upgrades to next year. We believe that guidance seems too conservative and that the opportunity for Moonpig to grow customers, order frequency and basket size remains as attractive as ever. Shares in Avon Protection have been weak as the company has reported delays to expected orders, which it attributed to a combination of COVID-19 and supply chain disruptions. While the delays are disappointing, our view is that this is a short-term issue and ultimately these contracts will come through. We continue to believe in the long-term attractions of the business and the steps taken through the sale of its dairy business last year, to increase focus on the protection markets. Other detractors included pub operator Fuller Smith & Turner and cinema operator Everyman Media which both underperformed as the market became concerned about the presence of the Delta variant of COVID-19 and the impact that this would have on leisure related businesses.

ACTIVITY
Over the last six months we have reduced the number of holdings in the portfolio from 122 in February, to 116 at the end of August and net gearing has been steadily increasing and is now around 107%.

We purchased a holding in fund administration business Sanne. Increasing complexity of operations and regulatory burden is driving more asset managers to outsource back-office operations, and Sanne is well placed to capture this growth. The long-term nature of its client contracts provides high visibility of earnings whilst the increasing regulatory demands, particularly within the alternatives space where Sanne is focused, provide further revenue growth opportunities from cross-selling additional services. This view was clearly shared by others, as Sanne subsequently received competing bids, before finally recommending the offer from industry peer Apex Group.

We purchased a new holding in construction materials group SigmaRoc, in the equity raise that accompanied the transformational deal to acquire Nordkalk, a privately owned Scandinavian business. This strategic and highly accretive acquisition transforms SigmaRoc by significantly increasing their European footprint whilst diversifying their end market exposure away from construction. The management team of SigmaRoc has developed a strong track record in acquiring and improving the financial performance of UK and European based heavy side material assets, and we see strong potential for underlying improvements in revenues, profits and cash generation. We are very excited about the future prospects for this company on an organic and inorganic basis.

Having reduced during the pandemic, we have been adding back to our holding in Johnson Service Group, the supplier of linen to the hospitality and catering industries. As lockdown restrictions in the UK are eased this is a business that should benefit from the reopening of both restaurants and hotels, as well as a trend for more staycations as UK holidaymakers continue to be put off by the challenges with travelling overseas. We expect demand to resume to levels that will ensure high levels of utilisation, which will see profits and cashflows for Johnson Service Group recover quickly.

We also took the opportunity to add a new holding in Restaurant Group, the owner of a number of restaurant chains across the UK such as Frankie & Benny’s and Wagamama. This is an example of where COVID-19 has re-shaped an industry and has led us to re-assess the investment case. Historically we were significant holders of the company, but worries over the un-bridled supply growth of the restaurant sector, and the liability held in long term property leases resulted in us exiting the position. What followed was a crippling industry fall out. Post COVID-19 the backdrop is much more supportive for the company, with industry capacity back to 2012 levels due to the bankruptcies and closures brought about by the pandemic. Also, many of the small players who were driving the growth of fast and casual dining are capital constrained, with many months of back rent, lockdown costs and unpaid taxes weighing on their ability to invest and grow. Restaurant Group on the other hand has transformed its market position via the acquisition of Wagamama, and has significantly reduced its total lease liability.

PORTFOLIO POSITIONING
For the first time in many years the largest overweight in the portfolio is in the Retail sector. We have historically maintained an underweight position as the sector struggled under the ever-present pressure of the internet on the top line, and structural cost pressures through rent and rates. But COVID-19 has changed some of this; successful retailers have had to shift to true multi-channel retailing, and bankruptcy of others has resulted in significant property vacancies and a seismic shift in property costs. Businesses like Watches of Switzerland and Pets at Home have shown the impact that entrepreneurial management teams can have, pivoting operations quickly to counter enforced store closures, making changes that will endure.

The industrial space has been buffeted by trade wars, Brexit, and now COVID-19. Companies are having to reassess supply chains. Shortages in some areas, such as the very public semi-conductor market, will lead to re-evaluation of inventory requirements, whilst COVID-19 saw a focus on working capital leading to reduced levels of inventory that will need to be rebuilt to meet demand. The component constraints mean supply will fall significantly short of demand in many areas this year; anyone looking to buy a car or a Playstation5 will appreciate the disappointment and frustration, but this also means the recovery will be prolonged. With the prospect of a longer demand cycle and inventory rebuild, the outlook for the industrial sector in the medium term is positive. Oxford Instruments, discoverIE, Chemring and Porvair are all high IP businesses that should benefit from these trends.

Whilst the disruption of COVID-19 has spurred change and innovation in some areas, it has also wrought havoc in others. We remain underweight to the leisure sector where so many companies have had to raise equity to support balance sheets, leading to significant dilution to equity holders. Valuations are generally high, recovery extended and uncertain, leading to a wide range of possible outcomes. Specific opportunities exist, the freehold balance sheets of Youngs and City Pub Company, the COVID-19 beneficiaries of Team17 and Games Workshop, or the market share opportunities of being last man standing that Restaurant Group will see. But generally, we struggle with the outlook and valuations in the sector.

OUTLOOK
The world is still in a difficult place; vaccines are reducing the impact of COVID-19, but the second order impacts are going to be here for some time. Logistics, supply chains, labour shortages, inflation are all front and centre of current investor discussions, and clearly it is right we address these concerns, many of which are interlinked. As a summary we expect many of these issues to pass over time. The end of the furlough scheme in the UK will lead to unemployment in some areas but will also bring potential candidates to fill many of the vacancies. Manufacturing firms will eventually invest to bring increased volume into tight markets. Supply chains will adapt, HGV drivers will be found, the logistics issues will become a thing of the past. But it will take time, these are complicated issues that will not be fixed immediately, however anything that is an issue is also an opportunity for those prepared to invest. Inflation is a complicated question, with the transient vs permanent debate seemingly never ending. There is still excess capacity in the UK, we have not yet recovered to pre-pandemic GDP levels, the ability to serve demand is there. The labour market is tight and wage inflation in some areas is higher than normal, but the labour market has also not returned to “normal” with the distortion of the highly successful furlough scheme still being felt. Energy costs are clearly rising, and this may be an on-going issue; we have seen a substantial reduction in greenfield energy investment leading to tight oil and gas markets. But renewable and green energy is becoming a bigger part of supply and will continue to do so. The geo-political environment continues to see seismic changes; the US presidency moving from Trump to Biden, Brexit, and changing priorities in China are all driving sentiment.

So how should we, as bottom-up investors, factor this into our decision-making process? Our approach is to do this in the same way we have always done, by focusing on identifying businesses which match our criteria that can seize on these opportunities. We focus on those businesses with market-leading positions and pricing power, which can pass on inflation through price increases; businesses at an early stage of their development cycle where the upside from successfully developing market share opportunities is much greater than the potential fall out of temporary market dislocations and businesses with strong balance sheets that can continue to invest in product development rather than having to cut costs and preserve cash. Ultimately for all the difficulties we could focus on, we should not ignore the obvious positives; we are slowly emerging from COVID-19, consumers and corporates have been spared the worst of the downturn and are financially strong, the UK is still attractively valued and corporate activity is high. We remain as confident in the mid-to-long term development of the portfolio as we ever have been.

ROLAND ARNOLD
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
2 November 2021

TWENTY LARGEST INVESTMENTS AS AT 31 AUGUST 2021

Company	Business activity	Market  value  £000	% of  total  portfolio
Watches of Switzerland	Retailer of luxury watches	29,761	2.5
Impax Asset Management	Asset management	25,445	2.1
Treatt	Development and manufacture of ingredients for the flavour and fragrance industry	23,320	2.0
CVS Group	Operator of veterinary surgeries	22,036	1.9
Ergomed	Provider of pharmaceuticals services	21,915	1.8
Auction Technology Group	Operator of marketplaces for curated online auctions	21,789	1.8
Stock Spirits Group	Development and manufacture of branded spirits mainly in Eastern Europe	21,659	1.8
IntegraFin	Investment platform for financial advisers	21,655	1.8
Oxford Instruments	Designer and manufacturer of tools and systems for industry and research	21,443	1.8
Gamma Communications	Provider of communication services to UK businesses	20,565	1.7
Breedon	Construction materials	20,137	1.7
YouGov	Survey data specialist data analytics	19,656	1.7
Pets at Home	Pet supplies retailer	18,644	1.6
Learning Technologies	E-learning services	18,059	1.5
4imprint Group	Promotional merchandise in the US	17,763	1.5
discoverIE	Specialist components for electronics applications	17,404	1.5
Qinetiq Group	British multi-national defence technology company	16,626	1.4
Grafton Group	Builders merchants in the UK, Ireland and Netherlands	16,577	1.4
Liontrust Asset Management	Asset management	15,946	1.4
Central Asia Metals	Mining operations in Kazakhstan and Macedonia	15,940	1.3
		---------------	---------------
Twenty largest investments		406,340	34.2
		---------------	---------------
Remaining investments		783,178	65.8
		---------------	---------------
Total		1,189,518	100.0
		=========	=========

Details of the full portfolio are available on the Company’s website at blackrock.com/uk/brsc.

INVESTMENT EXPOSURE AS AT 31 AUGUST 2021

Investment size as at 31 August 2021

	Number of investments	Market value of investments as % of portfolio
£1m to £2m	1	0.10
£2m to £3m	4	0.90
£3m to £4m	8	2.40
£4m to £5m	5	2.00
£5m to £6m	11	5.00
£6m to £7m	11	6.10
£7m to £8m	9	5.60
£8m to £9m	13	9.20
£9m to £10m	6	4.80
£10m to £11m	7	6.10
£11m to £12m	6	5.80
£12m to £13m	2	2.10
£13m to £14m	6	6.80
£14m to £15m	4	4.90
£15m to £16m	5	6.60
£16m to £17m	2	2.80
£17m to £18m	2	3.00
£18m to £19m	2	3.10
£19m to £20m	1	1.70
£20m to £21m	2	3.40
£21m to £22m	5	9.10
£22m to £23m	1	1.90
£23m to £24m	1	2.00
£25m to £26m	1	2.10
£29m to £30m	1	2.50

Source: BlackRock.

Analysis of portfolio value by sector

	Company %	Benchmark (Numis Smaller Companies, plus AIM (ex Investment Companies) Index) %
Energy	3.4	4.4
Basic Materials	5.0	6.7
Industrials	24.5	24.1
Consumer Staples	4.3	4.4
Health Care	4.1	7.7
Consumer Discretionary	25.4	20.1
Telecommunications	2.8	1.5
Financials	12.8	13.9
Technology	13.3	8.8
Real Estate	4.4	6.1
Utilities	0.0	2.3

Source: BlackRock and Datastream.

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:

• Investment performance risk;
• Market risk;
• Income/dividend risk;
• Legal & compliance risk;
• Operational risk;
• Financial risk; and
• Marketing risk.

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 28 February 2021. A detailed explanation can be found in the Strategic Report on pages 34 to 37 and note 17 on pages 94 to 102 of the Annual Report and Financial Statements which is available on the website maintained by BlackRock at www.blackrock.com/uk/brsc.

The infectious respiratory illness caused by a coronavirus known as COVID-19, first detected in China in December 2019 and which has developed into a global pandemic, has caused unprecedented global economic and social upheaval. The coronavirus pandemic has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The impact of COVID-19 has adversely affected the entire global economy, individual issuers and capital markets, and could continue to an extent that cannot necessarily be foreseen. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. Despite the success of vaccination programmes, new variants of concern continue to evolve and the duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

In the view of the Board, there have not been any changes to the fundamental nature of the risks set out in the Annual Report and Financial Statements 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. The Board recognises the benefits of a closed-end structure in extremely volatile markets such as those experienced during the COVID-19 pandemic. Unlike open-ended counterparts, closed-end funds are not obliged to sell down portfolio holdings at low valuations to meet liquidity requirements for redemptions. During times of elevated volatility and market stress, the ability of the closed-end structure to remain invested for the long term enables the portfolio manager to adhere to disciplined fundamental analysis from a bottom-up perspective and be ready to respond to dislocations in the market as opportunities present themselves.

GOING CONCERN
The Board is mindful of the uncertainty surrounding the potential duration of the COVID-19 pandemic and its impact on the global economy, the Company’s assets and the potential for the level of revenue derived from the portfolio to reduce versus the prior year. The portfolio manager will continue to review the composition of the Company’s portfolio and to be pro-active in taking investment decisions as necessary. 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 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 throughout the COVID-19 pandemic.

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 Company has in place a range of borrowings (the majority of which are represented by long-term fixed rate debt) and debt facilities (details of which are set out in note 9 below) and despite the market volatility seen over the period under review, the Company has remained compliant with all financial covenants and has maintained ample headroom above the relevant thresholds throughout the period under review. Ongoing charges (excluding finance costs, direct transaction costs, custody transaction charges, non-recurring charges and taxation) for the year ended 28 February 2021 were approximately 0.8% of net assets. 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.

RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE AIFM AND INVESTMENT 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 management and marketing fees payable are set out in notes 4, 5 and 14 below. The related party transactions with the Directors are set out in note 15 below.

DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure Guidance 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 Financial Reporting Council’s Standard, FRS 104 ‘Interim Financial Reporting’; 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.

The 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 November 2021 and the above responsibility statement was signed on its behalf by the Chairman.

RONALD GOULD
FOR AND ON BEHALF OF THE BOARD
2 November 2021

INCOME STATEMENT FOR THE SIX MONTHS ENDED 31 AUGUST 2021

		Six months ended 31 August 2021 (unaudited)			Six months ended 31 August 2020 (unaudited)			Year ended 28 February 2021 (audited)
	Notes	Revenue  £000	Capital  £000	Total  £000	Revenue  £000	Capital  £000	Total  £000	Revenue  £000	Capital  £000	Total  £000
Gains/(losses) on investments held at fair value through profit or loss		–	244,736	244,736	–	(56,615)	(56,615)	–	118,375	118,375
Gains/(losses) on foreign exchange		–	4	4	–	5	5	–	(7)	(7)
Income from investments held at fair value through profit or loss	3	11,399	–	11,399	3,488	–	3,488	9,301	–	9,301
Other income	3	2	–	2	51	–	51	58	–	58
		---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------
Total income/(expenses)		11,401	244,740	256,141	3,539	(56,610)	(53,071)	9,359	118,368	127,727
		=========	=========	=========	=========	=========	=========	=========	=========	=========
Expenses
Investment management fees	4	(817)	(2,452)	(3,269)	(499)	(1,703)	(2,202)	(1,133)	(3,648)	(4,781)
Operating expenses	5	(420)	(14)	(434)	(493)	(55)	(548)	(916)	(93)	(1,009)
		---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------
Total operating expenses		(1,237)	(2,466)	(3,703)	(992)	(1,758)	(2,750)	(2,049)	(3,741)	(5,790)
		=========	=========	=========	=========	=========	=========	=========	=========	=========
Net profit/(loss) on ordinary activities before finance costs and taxation		10,164	242,274	252,438	2,547	(58,368)	(55,821)	7,310	114,627	121,937
Finance costs	6	(333)	(999)	(1,332)	(315)	(942)	(1,257)	(620)	(1,860)	(2,480)
		---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------
Net profit/(loss) on ordinary activities before taxation		9,831	241,275	251,106	2,232	(59,310)	(57,078)	6,690	112,767	119,457
Taxation		(43)	–	(43)	(2)	–	(2)	(164)	–	(164)
		---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------
Net profit/(loss) on ordinary activities after taxation		9,788	241,275	251,063	2,230	(59,310)	(57,080)	6,526	112,767	119,293
		=========	=========	=========	=========	=========	=========	=========	=========	=========
Revenue return/(loss) per ordinary share (pence)	8	20.05	494.11	514.16	4.57	(121.47)	(116.90)	13.36	230.94	244.30
		=========	=========	=========	=========	=========	=========	=========	=========	=========

The total column of this statement represents the Company’s profit and loss account. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (AIC). All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. All income is attributable to the equity holders of the Company.

The net profit/(loss) for the period disclosed above represents the Company’s total comprehensive income/(loss).

STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 AUGUST 2021

	Called  up share  capital  £000	Share  premium  account  £000	Capital  redemption  reserve  £000	Capital  reserves  £000	Revenue  reserve  £000	Total  £000
For the six months ended 31 August 2021 (unaudited)
At 28 February 2021	12,498	51,980	1,982	789,279	15,557	871,296
Total comprehensive income:
Net profit for the period	–	–	–	241,275	9,788	251,063
Transactions with owners, recorded directly to equity:
Dividends paid1	–	–	–	–	(10,010)	(10,010)
	---------------	---------------	---------------	---------------	---------------	---------------
At 31 August 2021	12,498	51,980	1,982	1,030,554	15,335	1,112,349
	=========	=========	=========	=========	=========	=========
For the six months ended 31 August 2020 (unaudited)
At 29 February 2020	12,498	51,980	1,982	676,512	24,901	767,873
Total comprehensive (expenses)/income:
Net (loss)/profit for the period	–	–	–	(59,310)	2,230	(57,080)
Transactions with owners, recorded directly to equity:
Dividends paid2	–	–	–	–	(9,619)	(9,619)
	---------------	---------------	---------------	---------------	---------------	---------------
At 31 August 2020	12,498	51,980	1,982	617,202	17,512	701,174
	=========	=========	=========	=========	=========	=========
For the year ended 28 February 2021 (audited)
At 29 February 2020	12,498	51,980	1,982	676,512	24,901	767,873
Total comprehensive income:
Net profit for the year	–	–	–	112,767	6,526	119,293
Transactions with owners, recorded directly to equity:
Dividends paid3	–	–	–	–	(15,870)	(15,870)
	---------------	---------------	---------------	---------------	---------------	---------------
At 28 February 2021	12,498	51,980	1,982	789,279	15,557	871,296
	=========	=========	=========	=========	=========	=========

¹  Final dividend paid in respect of the year ended 28 February 2021 of 20.50p was declared on 7 May 2021 and paid on 18 June 2021.
²    Second interim dividend (in lieu of a final dividend) paid in respect of the year ended 29 February 2020 of 19.70p was declared on 3 June 2020 and paid on 29 June 2020.
³  Interim dividend paid in respect of the year ended 28 February 2021 of 12.80p was declared on 5 November 2020 and paid on 2 December 2020. Second interim dividend paid in respect of the year ended 29 February 2020 of 19.70p was declared on 3 June 2020 and paid on 29 June 2020.

For information on the Company’s distributable reserves, please refer to note 12 below.

BALANCE SHEET AS AT 31 AUGUST 2021

	Notes	31 August 2021  (unaudited)  £000	31 August 2020  (unaudited)  £000	28 February 2021  (audited)  £000
Fixed assets
Investments held at fair value through profit or loss	13	1,189,518	729,918	948,448
Current assets
Debtors		1,400	927	7,731
Cash and cash equivalents		20,776	44,481	12,149
		---------------	---------------	---------------
Total current assets		22,176	45,408	19,880
		=========	=========	=========
Creditors – amounts falling due within one year
Other creditors		(19,711)	(4,565)	(7,428)
		---------------	---------------	---------------
Net current assets		2,465	40,843	12,452
		=========	=========	=========
Total assets less current liabilities		1,191,983	770,761	960,900
Creditors – amounts falling due after more than one year	9, 10	(79,634)	(69,587)	(89,604)
		---------------	---------------	---------------
Net assets		1,112,349	701,174	871,296
		=========	=========	=========
Capital and reserves
Called up share capital	11	12,498	12,498	12,498
Share premium account		51,980	51,980	51,980
Capital redemption reserve		1,982	1,982	1,982
Capital reserves		1,030,554	617,202	789,279
Revenue reserve		15,335	17,512	15,557
		---------------	---------------	---------------
Total shareholders’ funds	8	1,112,349	701,174	871,296
		=========	=========	=========
Net asset value per ordinary share (debt at par value) (pence)	8	2,278.01	1,435.96	1,784.35
		=========	=========	=========
Net asset value per ordinary share (debt at fair value) (pence)	8	2,266.31	1,418.95	1,774.71
		=========	=========	=========

STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 31 AUGUST 2021

	Six months ended 31 August 2021 (unaudited) £000	Six months ended 31 August 2020 (unaudited) £000	Year ended 28 February 2021 (audited) £000
Operating activities
Net profit/(loss) on ordinary activities before taxation	251,106	(57,078)	119,457
Add back finance costs	1,332	1,257	2,480
(Gains)/losses on investments held at fair value through profit or loss	(244,736)	56,615	(118,375)
Net movement in foreign exchange	(4)	(5)	7
Sales of investments held at fair value through profit or loss	231,051	265,801	510,452
Purchases of investments held at fair value through profit or loss	(223,973)	(240,903)	(533,433)
(Increase)/decrease in debtors	(438)	598	603
Increase/(decrease) in other creditors	623	(231)	189
Taxation on investment income	(43)	–	(164)
	---------------	---------------	---------------
Net cash generated from/(used in) operating activities	14,918	26,054	(18,784)
Financing activities	=========	=========	=========
Drawdown/(repayment) of SMBC Bank International plc revolving credit facility	5,000	(10,000)	10,000
Interest paid	(1,285)	(1,209)	(2,440)
Dividends paid	(10,010)	(9,619)	(15,870)
	---------------	---------------	---------------
Net cash used in financing activities	(6,295)	(20,828)	(8,310)
	=========	=========	=========
Increase/(decrease) in cash and cash equivalents	8,623	5,226	(27,094)
Cash and cash equivalents at beginning of the period/year	12,149	39,250	39,250
Effect of foreign exchange rate changes	4	5	(7)
	---------------	---------------	---------------
Cash and cash equivalents at end of period/year	20,776	44,481	12,149
	=========	=========	=========
Comprised of:
Cash at bank	2,226	1,571	2,285
Cash Fund*	18,550	42,910	9,864
	---------------	---------------	---------------
	20,776	44,481	12,149
	=========	=========	=========

*  Cash Fund represents funds held on deposit with the BlackRock Institutional Cash Series plc - Sterling Liquid Environmentally Aware Fund.

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 AUGUST 2021

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 April 2021, 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 28 February 2021.

3. INCOME

	Six months ended  31 August 2021  (unaudited)  £000	Six months ended  31 August 2020  (unaudited)  £000	Year ended  28 February 2021  (audited)  £000
Investment income:
UK listed dividends	8,180	2,198	6,394
UK listed scrip dividends	–	570	598
UK listed special dividends	682	18	856
Property income dividends	440	408	473
Overseas listed dividends	1,555	294	951
Overseas listed special dividends	542	–	29
	---------------	---------------	---------------
	11,399	3,488	9,301
	=========	=========	=========
Other income:
Bank interest	–	1	1
Interest from Cash Funds	2	50	57
	---------------	---------------	---------------
	2	51	58
	---------------	---------------	---------------
Total	11,401	3,539	9,359
	=========	=========	=========

No special dividends have been recognised in capital during the period ended 31 August 2021 (six months ended 31 August 2020: £nil; year ended 28 February 2021: £707,000).

Dividends and interest received in cash in the period amounted to £11,019,000 and £2,000 (six months ended 31 August 2020: £3,507,000 and £48,000; year ended 28 February 2021: £9,098,000 and £71,000).

4. INVESTMENT MANAGEMENT FEE

	Six months ended 31 August 2021 (unaudited)			Six months ended 31 August 2020 (unaudited)			Year ended 28 February 2021 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee	817	2,452	3,269	499	1,703	2,202	1,133	3,648	4,781
	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------
Total	817	2,452	3,269	499	1,703	2,202	1,133	3,648	4,781
	=========	=========	=========	=========	=========	=========	=========	=========	=========

The investment management fee is based on a rate of 0.6% of the first £750 million of total assets (excluding current year income) less the current liabilities of the Company (the “Fee Asset Amount”), reducing to 0.5% above this level. The fee is calculated at the rate of one quarter of 0.6% of the Fee Asset Amount up to the initial threshold of £750 million, and one quarter of 0.5% of the Fee Asset Amount in excess thereof, at the end of each quarter. The investment management fee is allocated 75% to the capital column and 25% to the revenue column of the Income Statement.

For the year ended 28 February 2021, BlackRock agreed to waive management fees payable by the Company up to the value of £83,254 to cover additional audit and legal costs incurred as a result of the work required to correct the Company’s Articles and restate brought forward reserves following an administrative error. Please see note 5 for a further breakdown of the expenses incurred.

5. OPERATING EXPENSES

	Six months ended  31 August 2021  (unaudited)  £000	Six months ended  31 August 2020  (unaudited)  £000	Year ended  28 February 2021  (audited)  £000
Allocated to revenue:
Custody fees	6	4	7
Depositary fees	56	41	81
Auditor’s remuneration:
– audit services	23	13	33
– audit services – additional non-recurring fees1	–	13	13
– non-audit services2	4	2	3
Registrar’s fee	26	17	42
Directors’ emoluments	78	81	164
Director search fees	20	15	30
Marketing fees	68	88	166
AIC fees	13	13	25
Bank charges	24	29	64
Broker fees	22	18	36
Stock exchange listings	13	14	28
Printing and postage fees	20	23	45
Legal fees:
– legal fees – ongoing services	11	11	12
– legal fees – non-recurring fees for ad hoc legal advice1	–	56	70
Other administrative costs	36	55	97
	---------------	---------------	---------------
	420	493	916
	=========	=========	=========
Allocated to capital:
Custody transaction charges	14	55	93
	---------------	---------------	---------------
	434	548	1,009
	=========	=========	=========

1  Additional audit fees of £13,200 including VAT and additional legal fees totalling £70,054 including VAT were incurred in the year ended 28 February 2021 as a result of the work required to correct Company’s Articles and restate the brought forward reserves following an administrative error. These costs were absorbed by BlackRock by way of a management fee waiver. Please see note 4 for further details.

2  Fees for non-audit services relate to the debenture compliance work carried out by the Auditors.

The direct transaction costs incurred on the acquisition of investments amounted to £586,000 for the six months ended 31 August 2021 (six months ended 31 August 2020: £770,000; year ended 28 February 2021: £1,767,000). Costs relating to the disposal of investments amounted to £157,000 for the six months ended 31 August 2021 (six months ended 31 August 2020: £205,000; year ended 28 February 2021: £401,000). All direct transaction costs have been included within the capital reserve.

6. FINANCE COSTS

	Six months ended 31 August 2021 (unaudited)			Six months ended 31 August 2020 (unaudited)			Year ended 28 February 2021 (audited)
	Revenue  £000	Capital  £000	Total  £000	Revenue  £000	Capital  £000	Total  £000	Revenue  £000	Capital  £000	Total  £000
Interest on 7.75% debenture stock 2022	147	441	588	147	441	588	290	870	1,160
Interest on 2.74% loan note 2037	87	260	347	87	260	347	169	506	675
Interest on 2.41% loan note 2044	60	182	242	60	182	242	120	361	481
Interest on bank loan	34	104	138	16	47	63	31	96	127
7.75% Amortised debenture stock issue expenses	2	5	7	2	5	7	4	12	16
2.74% Amortised loan note issue expenses	2	5	7	2	5	7	4	10	14
2.41% Amortised loan note issue expenses	1	2	3	1	2	3	2	5	7
	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------	---------------
Total	333	999	1,332	315	942	1,257	620	1,860	2,480
	=========	=========	=========	=========	=========	=========	=========	=========	=========

Finance costs have been allocated 75% to the capital column and 25% to the revenue column of the Income Statement.

7. DIVIDENDS
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.

The Board has declared an interim dividend of 13.00p per share (2020: 12.80p per share), payable on 2 December 2021 to shareholders on the Company’s register as at 12 November 2021; the ex-dividend date is 11 November 2021. The total cost of this dividend, based on 48,829,792 shares in issue at 1 November 2021, is 6,348,000 (2020: £6,250,000).

8. RETURNS AND NET ASSET VALUE PER SHARE
Revenue and capital earnings/(loss) per share are shown below and have been calculated using the following:

	Six months ended  31 August 2021  (unaudited)	Six months ended  31 August 2020  (unaudited)	Year ended  28 February 2021  (audited)
Revenue return attributable to ordinary shareholders (£000)	9,788	2,230	6,526
Capital return/(loss) attributable to ordinary shareholders (£000)	241,275	(59,310)	112,767
	---------------	---------------	---------------
Total profit/(loss) attributable to ordinary shareholders (£000)	251,063	(57,080)	119,293
	=========	=========	=========
Equity shareholders’ funds (£000)	1,112,349	701,174	871,296
The weighted average number of ordinary shares in issue during the period on which the return per ordinary share was calculated was:	48,829,792	48,829,792	48,829,792
The actual number of ordinary shares in issue at the end of each period on which the undiluted net asset value was calculated was:	48,829,792	48,829,792	48,829,792
Earnings per share
Revenue return per share (pence)	20.05	4.57	13.36
Capital return/(loss) per share (pence)	494.11	(121.47)	230.94
	---------------	---------------	---------------
Total return/(loss) per share (pence)	514.16	(116.90)	244.30
	=========	=========	=========

	As at  31 August 2021  (unaudited)	As at  31 August 2020  (unaudited)	As at  28 February 2021  (audited)
Net asset value per ordinary share (debt at par value) (pence)	2,278.01	1,435.96	1,784.35
Net asset value per ordinary share (debt at fair value) (pence)	2,266.31	1,418.95	1,774.71
Net asset value per ordinary share (debt at par value, capital only) (pence)	2,257.97	1,431.39	1,777.63
Ordinary share price (pence)	2,150.00	1,230.00	1,698.00
	=========	=========	=========

9. BORROWINGS

	Six months ended 31 August 2021 (unaudited)  £000	Six months ended  31 August 2020  (unaudited)  £000	Year ended  28 February 2021  (audited)  £000
Amounts falling due after more than one year
7.75% debenture stock 2022	–	15,000	15,000
Unamortised debenture stock issue expenses	–	(27)	(20)
	---------------	---------------	---------------
	–	14,973	14,980
	=========	=========	=========
2.74% loan note 2037	25,000	25,000	25,000
Unamortised loan note issue expenses	(217)	(230)	(224)
	---------------	---------------	---------------
	24,783	24,770	24,776
	=========	=========	=========
2.41% loan note 2044	20,000	20,000	20,000
Unamortised loan note issue expenses	(149)	(156)	(152)
	---------------	---------------	---------------
	19,851	19,844	19,848
	=========	=========	=========
Revolving loan facility – SMBC Bank International plc	35,000	10,000	30,000
	---------------	---------------	---------------
Total amounts falling due after more than one year	79,634	69,587	89,604
	=========	=========	=========
Amounts falling due within one year
7.75% debenture stock 2022	15,000	–	–
Unamortised debenture stock issue expenses	(12)	–	–
	---------------	---------------	---------------
Total amounts falling due within one year	14,988	–	–
	---------------	---------------	---------------
Total borrowings	94,622	69,587	89,604
	=========	=========	=========

The fair value of the 7.75% debenture stock using the last available quoted offer price from the London Stock Exchange as at 31 August 2021 was 118.00p per debenture (31 August 2020: 121.00p; 28 February 2021: 121.00p), a total of £17,700,000 (31 August 2020: £18,150,000; 28 February 2021: £18,150,000). The fair value of the 2.74% loan note has been determined based on a comparative yield for UK Gilts for similar duration maturity and spreads, and as at 31 August 2021 equated to a valuation of 107.80p per note (31 August 2020: 113.20p; 28 February 2021: 105.61p), a total of £26,950,000 (31 August 2020: £28,300,000; 28 February 2021: £26,403,000). The fair value of the 2.41% loan note has been determined based on a comparative yield for UK Gilts for similar duration maturity and spreads, and as at 31 August 2021 equated to a valuation of 103.43p per note (31 August 2020: 107.21p; 28 February 2021: 98.79p), a total of £20,686,000 (31 August 2020: £21,442,000; 28 February 2021: £19,758,000).

The £15 million debenture stock was issued on 8 July 1997. Interest on the stock is payable in equal half yearly instalments on 31 July and 31 January in each year. The stock is secured by a first floating charge over the whole of the assets of the Company and is redeemable at par on 31 July 2022.

The £25 million 2.74% loan note was issued on 24 May 2017. Interest on the note is payable in equal half yearly instalments on 24 May and 24 November in each year. The loan note is unsecured and is redeemable at par on 24 May 2037.

The £20 million 2.41% loan note was issued on 3 December 2019. Interest on the note is payable in equal half yearly instalments on 3 December and 3 June in each year. The loan note is unsecured and is redeemable at par on 3 December 2044.

The Company has in place a £35 million three year multi-currency revolving loan facility with SMBC Bank International plc. As at 31 August 2021, £35 million of the facility had been utilised (31 August 2020: £10 million; 28 February 2021: £30 million). Under the agreement, the termination date of this facility is the third anniversary of the effective date being 25 November 2022. Interest on this facility is reset every three months and is currently charged at a rate of 0.83%.

The Company also has available an uncommitted overdraft facility of £10 million with BNYM, of which £nil had been utilised at 31 August 2021 (31 August 2020: £nil; 28 February 2021: £nil).

The Company has complied with all covenants during the period related to the loan and borrowings.

10. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

	Six months ended  31 August 2021  (unaudited)  £000	Six months ended  31 August 2020  (unaudited)  £000	Year ended  28 February 2021  (audited)  £000
Debt arising from financing activities:
Debt arising from financing activities at beginning of the period/year	89,604	79,550	79,550
	---------------	---------------	---------------
Cash flows:
Drawdown/(repayment) of SMBC Bank International plc revolving credit facility	5,000	(10,000)	10,000
	---------------	---------------	---------------
Non-cash flows:
Amortisation of debenture and loan note issue expenses	18	37	54
	---------------	---------------	---------------
Debt arising from financing activities at end of the period	94,622	69,587	89,604
	=========	=========	=========

11. Called up share capital

	Ordinary shares  in issue  (number)	Treasury  shares (number)	Total  shares (number)	Nominal  Value  £000
Allotted, called up and fully paid share capital comprised:
Ordinary shares of 25p each
At 28 February 2021	48,829,792	1,163,731	49,993,523	12,498
	---------------	---------------	---------------	---------------
At 31 August 2021	48,829,792	1,163,731	49,993,523	12,498
	=========	=========	=========	=========

During the period ended 31 August 2021, the Company has not bought back or issued any shares to or from treasury (six months ended 31 August 2020: nil; year ended 28 February 2021: nil).

Since 31 August 2021 and up to the latest practicable date of 1 November 2021, no shares have been bought back or issued from treasury.

The ordinary shares (excluding any shares held in treasury) carry the right to receive any dividends and have one voting right per ordinary share. There are no restrictions on the voting rights of the ordinary shares or on the transfer of ordinary shares.

12. RESERVES
The share premium and capital redemption reserve are not distributable profits 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 reserve may be used as distributable profits for all purposes and, in particular, the repurchase by the Company of its ordinary shares and for payments as dividends. In accordance with the Company’s Articles of Association, net capital returns may be distributed by way of dividend. The £1,030,554,000 of capital reserve is made up of a gain on capital reserve arising on investments sold of £583,469,000 and a gain on capital reserve arising on revaluation of investments held of £447,085,000. The capital reserve arising on the revaluation of investments of £447,085,000 is subject to fair value movements and may not be readily realisable at short notice, as such it may not be entirely distributable. The Company’s total distributable reserves of £1,045,889,000 includes both capital reserves of £1,030,554,000 and revenue reserves of £15,335,000.

13. VALUATION OF FINANCIAL INSTRUMENTS
Market risk arising from other price risk
Other price risk is the risk that the fair value of 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, 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.

COVID-19 continues to have an impact on the global economy, supply chains and capital markets, and could continue to adversely affect the economies of many nations across the entire global economy, individual issuers and capital markets, and could continue to an extent that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established health care systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

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 at bank and bank 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 86 of the Annual Report and Financial Statements for the year ended 28 February 2021.

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 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 active; or other valuation techniques where 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. 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 sets out fair value measurements using the FRS 102 fair value hierarchy.

Financial assets at fair value through profit or loss at 31 August 2021	Level 1  (unaudited)  £000	Level 2  (unaudited)  £000	Level 3  (unaudited)  £000	Total  £000
Equity investments	1,189,518	–	–	1,189,518
	---------------	---------------	---------------	---------------
Total	1,189,518	–	–	1,189,518
	=========	=========	=========	=========

Financial assets at fair value through profit or loss at 31 August 2020	Level 1 (unaudited)  £000	Level 2  (unaudited)  £000	Level 3 (unaudited) £000	Total  £000
Equity investments	729,918	–	–	729,918
	---------------	---------------	---------------	---------------
Total	729,918	–	–	729,918
	=========	=========	=========	=========

Financial assets at fair value through profit or loss at 28 February 2021	Level 1  (audited)  £000	Level 2  (audited)  £000	Level 3  (audited)  £000	Total  £000
Equity investments	948,448	–	–	948,448
	---------------	---------------	---------------	---------------
Total	948,448	–	–	948,448
	=========	=========	=========	=========

There were no transfers between levels for financial assets during the period recorded at fair value as at 31 August 2021, 31 August 2020 and 28 February 2021. The Company did not hold any Level 3 securities throughout the six month period or as at 31 August 2021 (31 August 2020: nil; 28 February 2021: nil).

14. TRANSACTIONS WITH THE MANAGER AND THE INVESTMENT MANAGER
The Manager was appointed as the Company’s Alternative Investment Fund Manager (AIFM) with effect from 2 July 2014. The Manager has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to the Investment Manager. Details of the fees payable to the Manager are set out in note 4 above.

The Manager provides management and administrative services to the Company under a contract which is terminable on six months’ notice. The Manager has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BIM (UK). Further details of the investment management contract are disclosed in the Directors’ Report in the Annual Report and Financial Statements for the year ended 28 February 2021.

The investment management fee payable for the six months ended 31 August 2021 amounted to £3,269,000 (six months ended 31 August 2020: £2,202,000; year ended 28 February 2021: £4,781,000). At the period end, £3,269,000 was outstanding in respect of the management fee (31 August 2020: £2,202,000; 28 February 2021: £2,594,000).

In addition to the above services, BlackRock provided the Company with marketing services. The total fees paid or payable for these services for the period ended 31 August 2021 amounted to £68,000 including VAT (six months ended 31 August 2020: £88,000; year ended 28 February 2021: £166,000). Marketing fees of £76,000 were outstanding at 31 August 2021 (31 August 2020: £88,000; 28 February 2021: £166,000).

As of 31 August 2021, an amount of £103,000 (31 August 2020: £107,000; 28 February 2021: £108,000) was payable to the Manager in respect of Directors’ fees.

The Company has an investment in the BlackRock Institutional Cash Series plc – Sterling Liquid Environmentally Aware Fund of £18,550,000 as at 31 August 2021 (31 August 2020: £42,910,000; 28 February 2021: £9,864,000).

The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in Delaware, USA.

15. RELATED PARTY DISCLOSURE
Directors’ emoluments
As at 31 August 2021, the Board consisted 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 £42,750, the Audit Committee Chairman receives an annual fee of £32,750, the Senior Independent Director receives a fee of £29,750 and each of the other Directors receives an annual fee of £28,750.

As at 31 August 2021, an amount of £14,000 (31 August 2020: £13,000; 28 February 2021: £13,000) was outstanding in respect of Directors’ fees.

At the period end members of the Board held ordinary shares in the Company as set out below:

	Ordinary shares  1 November 2021	Ordinary shares  31 August 2021
Ronald Gould (Chairman)	1,000	1,000
James Barnes1	–	–
Caroline Burton	5,500	5,500
Mark Little2	–	–
Susan Platts-Martin	2,800	2,800

¹  Mr Barnes joined the Board on 31 July 2021.
²  Mr Little joined the Board on 1 October 2020.

16. CONTINGENT LIABILITIES
There were no contingent liabilities at 31 August 2021, 31 August 2020 or 28 February 2021.

17. 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 31 August 2021 and 31 August 2020 has not been audited, or reviewed, by the Company’s auditors.

The information for the year ended 28 February 2021 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the auditor in those financial statements contained no qualification or statement under Sections 498(2) or (3) of the Companies Act 2006.

18. ANNUAL RESULTS
The Board expects to announce the annual results for the year ending 28 February 2022 in late April 2022.

Copies of the results announcement can be obtained from the Secretary on 020 7743 3000 or at [e-mail]. The Annual Report should be available by the beginning of May 2022 with the Annual General Meeting being held in June 2022.

19. SUBSEQUENT EVENTS
On 16 September 2021 the Company issued £25 million in senior unsecured GBP denominated fixed rate private placement notes (the Notes) at an annualised coupon of 2.47% with a 25-year bullet maturity. The funding date for the Notes was 16 September 2021 and the Notes are due for repayment on 16 September 2046.

The net proceeds from the Company’s issuance of the Notes will be used to repay existing indebtedness and to participate in investment opportunities as and when they arise.

The Company considers obtaining such Sterling denominated financing on an unsecured basis at this price level and at a 25-year term to be highly attractive. Furthermore, the issuance of the Notes has the advantage of balancing the maturity profile of the Company’s liabilities.

For further information, please contact:

Melissa Gallagher, Managing Director, Investment Trusts, BlackRock Investment Management (UK) Limited
Tel: [phone]

Roland Arnold, Portfolio Manager, BlackRock Investment Management (UK) Limited
Tel: [phone]

Press enquiries:
Ed Hooper, Lansons Communications – Tel:  [phone]
E-mail:  [e-mail]

2 November 2021

12 Throgmorton Avenue
London EC2N 2DL

END

The Half Yearly Financial Report will also be available on the BlackRock Investment Management website at http://www.blackrock.com/uk/brsc.  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.