Half-yearly Report
BlackRock Smaller Companies Trust plc
Half Yearly Financial Report 31 August 2011
Performance Record
Financial Highlights
Six months Six months Year
ended ended ended
31 August 2011 31 August 2010 28 February 2011
Performance
Net asset value per share 551.65p 433.59p 620.73p
Movement in net asset value per share -11.1% +13.9% +63.1%
Movement in Hoare Govett Smaller
Companies plus AIM (ex Investment
Companies) Index -10.9% +3.6% +28.8%
Share price 476.00p 349.00p 542.00p
Movement in share price -12.2% +18.8% +84.5%
Revenue performance
Return per share 5.92p 5.22p 8.55p
Dividend per share 2.42p 2.20p 7.00p
Change in dividend +10.0% +10.0% +25.0%*
*Excluding special dividends.
Source: BlackRock.
Chairman's Statement
Overview
During the six month period to 31 August 2011 stock markets were hit by
aftershocks from the 2008/2009 financial crisis. Recurring concerns about the
solvency of a number of peripheral European countries, civil unrest in the
Middle East and North Africa, and the earthquake and subsequent tsunami in
Japan at the beginning of the year, all combined to heighten investor concerns.
In the latter part of the period, the growing prospect that Greece would
default on its debt and that other countries in the Eurozone might follow,
together with the possibility of recession in the US, have sent shares sharply
lower.
Against this uncertain background, in the six months ended 31 August 2011, the
Company's net asset value ("NAV") per share closed down by 11.1% and the share
price decreased by 12.2% (10.4% and 11.4% respectively with income reinvested).
This compares with the Company's benchmark index, the Hoare Govett Smaller
Companies plus AIM (excluding Investment Companies) Index, which fell by 10.9%
on a capital only basis and by 9.7% on a total return basis.
Since the period end, the Company's NAV has decreased by a further 2.8% to 536.31p
per share and the share price by 6.5% to 445.00p, compared with a fall in the
benchmark of 4.6%.
Earnings and dividends
Revenue earnings for the period to 31 August 2011 were 5.92p per share compared
to 5.22p per share for the corresponding period in the previous year, a rise of
13.4%. The Board is pleased to declare an interim dividend of 2.42p per share
(2010: 2.20p per share) representing an increase of 10.0% over the previous
interim dividend. The dividend will be paid on 2 December 2011 to shareholders
on the Company's register on 28 October 2011.
Gearing
The Company currently has a £20 million overdraft facility and a £15 million
debenture, which give the Investment Manager the ability to gear. The gearing
policy depends on prevailing market conditions and, with the current
uncertainties, net borrowings were reduced from £28.8 million (9.7% of shareholders'
funds) at the start of the period to £21.5 million (8.1% of shareholders' funds)
at 31 August 2011. Since the period end, borrowings have been further reduced
to 4.8% of shareholders' funds.
Discount
The Board monitors the level of discount at which the Company's shares trade
compared to NAV. As at 31 August 2011, the Company's discount stood at 13.7%,
which was broadly in line with its peer group of investment trusts.
Board changes
We were very pleased to welcome Caroline Burton to the Board on 27 July 2011.
Caroline has many years of experience in investment management. She was
formerly executive director - investments at Guardian Royal Exchange plc and
is currently a non-executive director of TR Property Investment Trust plc and
of Rathbone Brothers plc.
After serving for more than twelve years as a Director, John Davies stepped
down from the Board in July. In recent years he had also been both Chairman of
the Audit Committee and Senior Independent Director. He has been a colleague
and a friend and his wisdom and experience have been of great help to the
Board. I would like to extend our warmest gratitude to him for his valuable
contribution which often went beyond the normal call of duty. We wish him every
happiness and success in the future.
The Board has appointed Nicholas Fry as Chairman of the Audit Committee and
Gillian Nott as Senior Independent Director.
Outlook
There remain many unresolved risks facing financial markets. However, the
underlying trading performance of small and mid cap companies was generally
resilient in the first half of the Company's financial year. The Investment
Manager will continue the policy of investing in high quality companies with
strong cash flows and healthy balance sheets, particularly those with overseas
earnings, which we believe will reward shareholders in the longer term.
Richard Brewster
20 October 2011
Interim Management Report and Responsibility Statement
The Chairman's Statement and the Investment Manager's Report give details of
the important events which have occurred during the period and their impact on
the financial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as
follows:
- Performance;
- Income/dividend;
- Regulatory;
- Operational;
- Market; and
- Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Accounts for the year ended 28 February 2011.
A detailed explanation can be found in the Directors' Report on page 13 and in
note 19 on pages 41 to 45 of the Annual Report and Accounts which is available
on the website maintained by the Investment Manager, BlackRock Investment
Management (UK) Limited, at www.blackrock.co.uk/brsc.
In the view of the Board, there have not been any changes to the fundamental
nature of these risks since the previous report and these principal risks and
uncertainties, as summarised, are equally applicable to the remaining six
months of the financial year as they were to the six months under review.
Related party disclosures
The Investment Manager is regarded as a related party and details of the
management fees payable are set out in note 3 and note 9. The related party
disclosure with the Directors are set out in note 9.
Directors' responsibility statement
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Management Report and Financial
Statements.
The Directors confirm to the best of their knowledge that:
- the condensed set of financial statements contained within the half yearly
financial report has been prepared in accordance with applicable UK Accounting
Standards and the Accounting Standards Board's Statement 'Half Yearly Financial
Reports'; and
- the interim management report, together with the Chairman's Statement and
Investment Manager's Report, include a fair review of the information required
by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.
This half yearly report has been reviewed by the Company's auditors.
The half yearly financial report was approved by the Board on 20 October 2011
and the above responsibility statement was signed on its behalf by the
Chairman.
Richard Brewster
For and on behalf of the Board
20 October 2011
Investment Manager's Report
Market review and overall investment performance
Stock markets lost momentum towards the end of February and have remained
nervous and volatile during the half year with the period culminating in a
heavy sell off in August. Investors have had various reasons to worry,
including the initial unrest in the Middle East and North Africa which caused
the oil price to rise sharply, followed by the earthquake and tsunami in Japan,
and the implications of these events on industrial production. Most recently
concerns resurfaced about the high level of indebtedness of several European
countries, most particularly Greece, Italy and Spain, and recent economic data
from the US suggests that GDP growth has slowed and job creation is weak.
German growth has also surprised on the downside. All of these factors have
created uncertainty for equity investors.
The Company's net asset value ("NAV") per share fell by 11.1%, which compares
to a fall in the benchmark (capital only) of 10.9%.
Performance review
In a period in which both the NAV and benchmark fell, it was pleasing to see
three of our core holdings contributing strongly to performance in both
absolute and relative terms. The share prices of Alternative Networks, Oxford
Instruments and Immunodiagnostic Systems increased by 45%, 33% and 35%
respectively; they were our top three positive contributors to relative
performance. Alternative Networks has consistently shown success at helping
medium sized corporates with their increasingly complex fixed and mobile
telecom requirements. Their loyal and growing customer base provides good
recurring revenues. Oxford Instruments has shown great success at supplying
industrial and research customers worldwide with equipment to enable them to
analyse materials down to the atomic level. Margins and profits have grown
strongly and should continue to increase. Immunodiagnostic Systems supplies
equipment and consumables to allow laboratories to test the degree to which
human samples contain certain substances, in particular vitamin D. Their iSYS
platform is being rolled out rapidly in Europe and the US and is increasingly
seen as an easy to use platform enabling a growing number of important tests to
be carried out.
Many other holdings also contributed positively to relative and absolute
performance including Avocet Mining, a gold miner producing in West Africa,
Blinkx, the leading facilitator of online video searches, and Titan Europe, a
manufacturer of large wheels used mainly on heavy plant in the mining,
agricultural and construction sectors.
The biggest disappointments in relative terms were our holdings in Hutchison
China Meditech, IQE and Eastern Platinum, but we feel each of these retains
significant merits. Hutchison China Meditech has, thus far, failed to license
the lead drug developed by its China based biotech business. The company is
continuing to work on this and sales of both prescription and over the counter
pharmaceutical products throughout China continue to grow well. IQE had been a
strong performer in the prior period and its shares have fallen as concerns
have gathered about the strength of the semiconductor cycle. However, its
success is driven predominantly by the level of global smartphone sales and we
expect growth to continue. Eastern Platinum has had labour issues in South
Africa which depressed production in the first half of 2011. We believe these
are now over and that production growth should resume; the company has
substantial, long life reserves and is well funded.
Our sector positioning during the period was good and our most successful
sector bets were being underweight oil & gas producers, although sadly this was
largely negated by the stocks that we did own in the sector performing poorly,
and being overweight software companies, such as Blinkx and Fidessa, and
industrial engineering companies, including Titan Europe and Spirax-Sarco
Engineering.
At the portfolio level, we outperformed the benchmark by approximately 1%.
However, we were geared throughout the period and this was generally in the
range of 8% to 10%. Given the fall in markets, the effect of gearing was to
reduce performance by about 1%, extinguishing the outperformance at the
portfolio level.
Activity
Early in the period we decided to try and reduce risk given the growing macro
concerns referred to earlier. We were also concerned by the increasingly
consensual positioning of portfolios across our sector, namely the big
overweight positioning most funds seemed to have in international industrial
companies. We sold the industrial companies in which we had lower conviction,
such as Cookson and Morgan Crucible, and Spectris which was at the upper end of
our universe in market capitalisation terms. We decided to hold on to companies
such as Spirax-Sarco, Rotork, Oxford Instruments and Renishaw, all of which are
core holdings, and many interesting smaller electronics and international
engineering companies. We used the proceeds to buy several domestically focused
companies, notably housebuilders Berkeley Group and Bovis Homes, to supplement
our existing holding in Bellway, and retailers Majestic Wine and Dunelm. We
regard the management of each of these companies highly and believe that they
are all well placed over the medium term. We continued to look for interesting
companies more focused on emerging markets and added a holding in Ocean
Wilsons, the main activities of which are the operation of ports in Brazil and
the ownership of a fleet of tugboats which are operated at most of Brazil's
ports, supporting its trade with the rest of the world and giving it a great
opportunity to service the needs of Brazil's fast growing offshore oil
industry.
As markets fell sharply in August we stepped up the derisking process. In
particular, we sold a number of higher risk smaller holdings, some in the
resources sector, and other holdings where our conviction was not high enough
for nervous markets.
Portfolio positioning
Our aim in recent months has been to focus increasingly on our core holdings,
especially where their shares are reasonably liquid. These are, of course, our
highest conviction positions and as can be seen from comments on performance
above, even in difficult periods such as we are currently experiencing, some of
these core holdings can perform very well, not only operationally, but also in
share price terms. The effect of our recent measures to reduce risk has been
a reduction in our gearing which is currently 4.8%.
From a sector point of view we retain our preference for software, electronics,
engineering and health care companies and remain underweight in the main UK
domestic sectors: retailers, leisure and food manufacturing. The resources
sectors remain a significant and highly volatile part of our benchmark; we are
significantly underweight oil & gas producers and have moved to a slight
underweight position in mining companies.
Outlook
Markets are likely to remain nervous for some time given the difficult economic
background. Our expectation is that growth in developing economies will slow but
remain at reasonable levels, partly driven by their own domestic consumer spending.
We expect developed markets' growth to remain very sluggish, and barely positive,
with minimal job creation. In this context, our approach of having a portfolio
of market leading, differentiated companies with strong balance sheets and attractive
levels of sales into emerging markets, feels appropriate and should deliver good
performance over time.
Mike Prentis
BlackRock Investment Management (UK) Limited
20 October 2011
Investment Exposure
Investment Size as at 31 August 2011
Number of
investments % of Portfolio
<£1m 66 14.1
£1m to £2m 63 31.9
£2m to £3m 29 25.0
£3m to £4m 11 13.9
£4m to £5m 6 8.9
£5m to £6m 1 1.8
£6m to £7m 2 4.4
Source: BlackRock.
Market Capitalisation as at 31 August 2011
% of Portfolio
< £100m 16.7
£100m to £400m 42.5
£400m to £1bn 28.9
>£1bn 11.9
Source: BlackRock.
Twenty Largest Holdings
as at 31 August 2011
Market
value % of
Company £'000 investments Business activity
Fidessa group 6,542 2.3 Development and marketing of
financial trading and connectivity
software
Oxford Instruments 6,179 2.2 Design and manufacture of tools and
systems to analyse and manipulate
matter at the atomic level
Aveva Group 5,079 1.8 Development and marketing of
engineering computer software
City of London 4,534 1.6 Management of investment funds
Investment Group primarily invested in emerging
markets
Bellway 4,469 1.6 Housebuilding
Hargreaves Services 4,365 1.5 Mining, importing, processing and
supply of coal and related products
Senior 4,174 1.5 Manufacture and supply of components
for the aerospace and automotive
sectors
Victrex 4,003 1.4 Manufacture and supply of PEEK
thermoplastic products
Alternative Networks 3,993 1.4 Provision of mobile and fixed line
telecom solutions to business users
Immunodiagnostic 3,983 1.4 Development of immunoassays used in
Systems clinical and research laboratories
Elementis 3,947 1.4 Manufacture of additives that enhance
the feel, flow and finish of everyday
products
Spirax-Sarco 3,819 1.3 Design and manufacture of steam
Engineering management systems
Avocet Mining 3,735 1.3 Gold exploration and production
Hutchison China 3,726 1.3 Development and supply of traditional
Meditech Chinese medicines to the Chinese
market
Abcam 3,519 1.2 Production and distribution of
research grade antibodies and
associated products
Domino Printing 3,511 1.2 Manufacture of inkjet and laser
Sciences commercial printers
ITE Group 3,455 1.2 Organisation of trade exhibitions in
Russia and other FSU countries
Blinkx 3,404 1.2 Supply of video technology and an
online catalogue to enable video
clips to be viewed
Howden Joinery 3,321 1.2 Design and manufacture of kitchens
sold to local builders
Restaurant Group 3,061 1.1 Operation of specialist theme and pub
restaurants
------- -----
Total of 20 largest
investments 82,819 29.1
------- -----
Remaining investments 202,113 70.9
------- -----
Total 284,932 100.0
------- -----
Distribution of Investments
as at 31 August 2011
Analysis of portfolio value by sector
Analysis of portfolio %
Oil & Gas Producers 5.28
Oil Equipment, Services & Distribution 0.51
Chemicals 4.36
Industrial Metals & Mining 0.24
Mining 7.96
Construction & Materials 1.02
Aerospace & Defence 1.69
General Industrials 0.59
Electronic & Electrical Equipment 7.22
Industrial Engineering 5.96
Industrial Transportation 1.16
Support Services 8.01
Food Producers 0.41
Household Goods & Home Construction 4.50
Health Care Equipment & Services 3.16
Pharmaceuticals & Biotechnology 5.44
Food & Drug Retailers 1.65
General Retailers 4.28
Media 5.91
Travel & Leisure 5.55
Fixed-Line Telecommunications 1.40
Mobile Telecommunications 0.20
Gas, Water and Utilities 0.21
Real Estate Investment & Services 2.40
Real Estate Investment Trusts 2.02
Financial Services 8.51
Software & Computer Services 9.15
Technology Hardware & Equipment 1.21
Source: BlackRock.
Income Statement
for the six months ended 31 August 2011
Revenue £'000 Capital £'000 Total £'000
Six months Year Six months Year Six months Year
ended ended ended ended ended ended ended ended ended
31.08.11 31.08.10 28.02.11 31.08.11 31.08.10 28.02.11 31.08.11 31.08.10 28.02.11
Notes (unaudited)(unaudited)(audited)(unaudited)(unaudited)(audited)(unaudited)(unaudited)(audited)
(Losses)/gains on
investments held
at fair value
through
profit or loss - - - (31,749) 26,255 116,488 (31,749) 26,255 116,488
Income from
investments held
at fair value
through
profit or loss 2 3,405 2,748 4,833 - - - 3,405 2,748 4,833
Other income 2 2 233 268 - - - 2 233 268
Investment
management
and
performance fees 3 (195) (144) (334) (1,326) (958) (1,640) (1,521) (1,102) (1,974)
Other operating
expenses (197) (159) (328) - - - (197) (159) (328)
----- ----- ----- ------ ------ ------- ------ ------ -------
Net return before
finance costs
and
taxation 3,015 2,678 4,439 (33,075) 25,297 114,848 (30,060) 27,975 119,287
Finance costs (178) (166) (330) (534) (497) (992) (712) (663) (1,322)
----- ----- ----- ------ ------ ------- ------ ------ -------
Return on ordinary
activities before
taxation 2,837 2,512 4,109 (33,609) 24,800 113,856 (30,772) 27,312 117,965
Taxation on ordinary
activities (2) (14) (14) - - - (2) (14) (14)
----- ----- ----- ------ ------ ------- ------ ------ -------
Return on ordinary
activities
after
taxation 2,835 2,498 4,095 (33,609) 24,800 113,856 (30,774) 27,298 117,951
===== ===== ===== ====== ====== ======= ====== ====== =======
Return per ordinary
share 4 5.92p 5.22p 8.55p (70.19p) 51.79p 237.80p (64.27p) 57.01p 246.35p
===== ===== ===== ====== ====== ======= ====== ====== =======
The total column of this statement represents the Income Statement of the
Company. The supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies. The Company has
no recognised gains or losses other than those disclosed in the Income
Statement and the Reconcilation of Movements in Shareholders' Funds. All items
in the above statement derive from continuing operations. No operations were
acquired or discontinued during the period.
Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 August 2011
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
For the six months
ended 31 August 2011
(unaudited)
At 28 February 2011 12,498 38,952 1,982 235,647 8,123 297,202
Return for the period - - - (33,609) 2,835 (30,774)
Dividends paid (a) - - - - (2,298) (2,298)
------ ------ ----- ------- ----- -------
At 31 August 2011 12,498 38,952 1,982 202,038 8,660 264,130
====== ====== ===== ======= ===== =======
For the six months
ended 31 August 2010
(unaudited)
At 28 February 2010 12,498 38,952 1,982 121,791 7,044 182,267
Return for the period - - - 24,800 2,498 27,298
Dividends paid (b) - - - - (1,963) (1,963)
------ ------ ----- ------- ----- -------
At 31 August 2010 12,498 38,952 1,982 146,591 7,579 207,602
====== ====== ===== ======= ===== =======
For the year ended
28 February 2011
(audited)
At 28 February 2010 12,498 38,952 1,982 121,791 7,044 182,267
Return for the year - - - 113,856 4,095 117,951
Ordinary dividends
paid (c) - - - - (3,016) (3,016)
------ ------ ----- ------- ----- -------
At 28 February 2011 12,498 38,952 1,982 235,647 8,123 297,202
====== ====== ===== ======= ===== =======
(a) Final dividend of 4.80p per share for the year ended 28 February 2011,
declared on 14 April 2011 and paid on 21 June 2011.
(b) Final dividend of 3.60p and special dividend of 0.50p per share for the
year ended 28 February 2010, declared on 22 April 2010 and paid on
22 June 2010.
(c) Final dividend of 3.60p and special dividend of 0.50p per share for the
year ended 28 February 2010, declared on 22 April 2010 and paid on
22 June 2010 and interim dividend of 2.20p per share for the six months ended
31 August 2010, declared on 13 October 2010 and paid on 26 November 2010.
Balance Sheet
as at 31 August 2011
31 August 31 August 28 February
2011 2010 2011
£'000 £'000 £'000
Notes (unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair
value through profit or loss 284,932 230,519 327,893
Current assets
Debtors 3,898 2,943 1,595
Creditors - amounts falling
due within one year
Bank overdraft (6,516) (8,020) (13,805)
Other creditors (3,343) (3,013) (3,647)
------- ------- -------
Net current liabilities (5,961) (8,090) (15,857)
------- ------- -------
Total assets less current
liabilities 278,971 222,429 312,036
Creditors - amounts falling
due after more than one year (14,841) (14,827) (14,834)
------- ------- -------
Net assets 264,130 207,602 297,202
======= ======= =======
Capital and reserves
Share capital 6 12,498 12,498 12,498
Share premium account 38,952 38,952 38,952
Capital redemption reserve 1,982 1,982 1,982
Capital reserves 202,038 146,591 235,647
Revenue reserve 8,660 7,579 8,123
Total equity shareholders' 4
funds 264,130 207,602 297,202
======= ======= =======
Net asset value per ordinary
share (Debt at par value) 4 551.65p 433.59p 620.73p
======= ======= =======
Net asset value per ordinary
share (Debt at fair value) 4 547.43p 429.34p 616.49p
======= ======= =======
Cash Flow Statement
for the six months ended 31 August 2011
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2011 2010 2011
£'000 £'000 £'000
Note (unaudited) (unaudited) (audited)
Net cash inflow from
operating activities 1,331 2,220 3,430
Servicing of finance (674) (648) (1,310)
Tax received/(paid) 7 (23) (35)
Capital expenditure and
financial investment
Purchases of investments (76,492) (41,936) (128,451)
Proceeds from sales of
investments 85,415 40,446 121,693
------ ------ -------
Net cash inflow/(outflow)
from capital expenditure and
financial investment 8,923 (1,490) (6,758)
------ ------ -------
Equity dividends paid (2,298) (1,963) (3,016)
------ ------ -------
Increase/(decrease) in cash
in the period 7 7,289 (1,904) (7,689)
====== ====== =======
Reconciliation of Net Return Before Finance Costs and Taxation to Net Cash Flow
from Operating Activities
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2011 2010 2011
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net (loss)/return before finance
costs and taxation (30,060) 27,975 119,287
Add/(less): capital return before
finance costs and taxation 33,075 (25,297) (114,848)
------ ------ -------
Net revenue return before finance
costs and taxation 3,015 2,678 4,439
Investment management and
performance fees charged to capital (1,326) (958) (1,640)
(Increase)/decrease in accrued
income (346) (74) 142
(Decrease)/increase in creditors (12) 574 489
------ ------ -------
Net cash inflow from operating
activities 1,331 2,220 3,430
====== ====== =======
Notes to the Financial Statements
1. Principal activity and basis of preparation
The Company conducts its business so as to qualify as an investment trust
company within the meaning of sub-sections 1158 - 1165 of the Corporation Tax
Act 2010. The half yearly financial statements have been prepared using the
same accounting policies set out in the Company's financial statements for the
year ended 28 February 2011.
Under FRS 26 "Financial Instruments: Recognition and Measurement" the Company
has designated its assets and liabilities as being measured at "fair value
through profit or loss". The fair value of fixed asset investments is deemed to
be the bid market value at the close of business on the balance sheet date. The
taxation charge has been calculated by applying an estimate of the annual
effective tax rate to any profit for the period.
The financial statements have been prepared in accordance with applicable
Accounting Standards, pronouncements on half yearly reporting issued by the
Accounting Standards Board and the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies" ("SORP") revised in January 2009.
2. Income
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2011 2010 2011
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Investment income:
UK listed dividends 3,221 2,461 4,422
Overseas listed dividends 184 287 411
----- ----- -----
3,405 2,748 4,833
----- ----- -----
Other income:
Interest on VAT refunds - 227 227
Underwriting commission 2 6 41
----- ----- -----
2 233 268
----- ----- -----
Total 3,407 2,981 5,101
===== ===== =====
3. Investment management and performance fees
Six months ended Six months ended Year ended
31 August 2011 31 August 2010 28 February 2011
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment
management fee 195 585 780 144 432 576 334 1,003 1,337
Performance fee - 741 741 - 526 526 - 637 637
--- ----- ----- --- --- ----- --- ----- -----
195 1,326 1,521 144 958 1,102 334 1,640 1,974
=== ===== ===== === === ===== === ===== =====
The investment management fee is calculated based on 0.65% in respect of the
first £50 million of the Company's total assets less current liabilities,
reducing to 0.5% thereafter. A performance fee is payable at the rate of 10% of
the annualised outperformance over the benchmark, the Hoare Govett Smaller
Companies plus AIM (excluding Investment Companies) Index, in the two previous
financial years, applied to the average of the total assets less current liabilities
of the Company. The fee is payable annually in April and is capped at 0.25% of the
average of the total assets less current liabilities.
Performance fees have been wholly allocated to capital reserves as the
performance has been predominantly generated through capital returns of the
investment portfolio. A performance fee of £741,000 has been accrued for the
six month period to 31 August 2011 (six months ended 31 August 2010: £526,000
and the year ended 28 February 2011: £637,000). This is based on outperformance
of 11.9% against the benchmark resulting from an NAV return of 19.0% against
the benchmark return of 7.1%.
4. Returns and net asset value per ordinary share
Revenue and capital returns per share are shown below and have been calculated
using the following:
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2011 2010 2011
(unaudited) (unaudited) (audited)
Net revenue return attributable
to ordinary shareholders (£'000) 2,835 2,498 4,095
Net capital return attributable
to ordinary shareholders (£'000) (33,609) 24,800 113,856
------- ------- -------
Total return (£'000) (30,774) 27,298 117,951
======= ======= =======
Equity shareholders' funds (£'000) 264,130 207,602 297,202
------- ------- -------
The actual and weighted number of
ordinary shares in issue at the
end of each period, on which the
return and net asset value per
ordinary share was calculated,
was: 47,879,792 47,879,792 47,879,792
---------- ---------- ----------
Revenue return per ordinary share 5.92p 5.22p 8.55p
Capital return per ordinary share (70.19p) 51.79p 237.80p
---------- ---------- ----------
Total return per ordinary share (64.27p) 57.01p 246.35p
========== ========== ==========
Net asset value per ordinary
share (debt at par value) 551.65p 433.59p 620.73p
========== ========== ==========
Net asset value per ordinary
share (debt at fair value) 547.43p 429.34p 616.49p
========== ========== ==========
5. Dividend
The Board has declared an interim dividend of 2.42p per share (2010: 2.20p per
share), payable on 2 December 2011 to shareholders on the register as at
28 October 2011. The total cost of this dividend, based on 47,879,792 shares in
issue at 20 October 2011, is £1,159,000 (2010: £1,053,000).
6. Share capital
Ordinary Treasury Nominal
shares shares Total value
(nominal) (nominal) shares £'000
Allotted, issued and
fully paid share
capital comprised:
Ordinary shares of 25p
each
---------- --------- ---------- ------
At 1 March and
31 August 2011 47,879,792 2,113,731 49,993,523 12,498
========== ========= ========== ======
7. Movement in net debt
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2011 2010 2011
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Reconciliation of net cash flow
to movement in net debt
Increase/(decrease) in cash in
the period 7,289 (1,904) (7,689)
Amortised debenture stock issue
expenses (7) (7) (14)
------ ------ ------
Movement in net funds/(debt) in
the period 7,282 (1,911) (7,703)
Opening net debt (28,639) (20,936) (20,936)
------ ------ ------
Closing net debt (21,357) (22,847) (28,639)
====== ====== ======
8. Publication of non statutory accounts
The financial information contained in this half yearly financial report does
not constitute statutory accounts as defined in the Companies Act 2006. The
financial information for the six months ended 31 August 2011 and 31 August
2010 has not been audited.
The information for the year ended 28 February 2011 has been extracted from the
latest published audited financial statements which have been filed with the
Registrar of Companies. The report of the auditors on those accounts contained
no qualification or statement under sections 498(2) or 498(3) of the Companies
Act 2006.
9. Related party disclosure
The related party transaction with BlackRock is set out in note 3. The fee due
to the Investment Manager for the six months ended 31 August 2011 amounted to
£1,521,000 (six months ended 31 August 2010: £1,102,000 and year ended
28 February 2011: £1,974,000). At the period end, £1,108,000 was outstanding in
respect of investment management and performance fees (six months ended
31 August 2010: £1,225,000 and year ended 28 February 2011: £1,040,000).
The Board consists of five non-executive Directors, all of whom are considered
to be independent by the Board. None of the Directors has a service contract
with the Company. The Chairman receives an annual fee of £30,000, the Chairman
of the Audit Committee receives an annual fee of £23,000, and each of the other
Directors receives an annual fee of £20,000. All members of the Board hold
shares in the Company. Mr Brewster holds 90,000 shares, Mr Fry 40,000 shares,
Mrs Nott 11,500 shares, Mr Roberston 63,573 shares and Ms Burton 3,000 shares.
10. Contingent liabilities
There were no contingent liabilities at 31 August 2011 (31 August 2010 and
28 February 2011: nil).
11. Annual results
The Board expects to announce the annual results for the year ended 29 February
2012, in late April 2012. Copies of the annual results announcement can be
obtained from the Secretary on 020 7743 3000. The annual report should be
available by the beginning of May 2012 with the Annual General Meeting being
held in June 2012.
Independent Review Report
to BlackRock Smaller Companies Trust plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half yearly financial report for the six month period ended
31 August 2011 which comprises the Income Statement, Reconciliation of
Movements in Shareholders' Funds, Balance Sheet, Cash Flow Statement,
Reconciliation of Net Return before Finance Costs and Taxation to Net Cash Flow
from Operating Activities, and the related notes 1 to 11. We have read the
other information contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained
in International Standard on Review Engagements 2410 (UK and Ireland) "Review
of Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half yearly financial report in accordance with the Listing Rules of the
Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with United Kingdom Generally Accepted Accounting
Practice. The condensed set of financial statements included in this half
yearly financial report has been prepared in accordance with the Accounting
Standards Board Statement "Half Yearly Financial Reports".
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters and applying analytical and other review
procedures. A review is substantially less in scope than an audit performed in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half yearly
financial report does not give a true and fair view of the financial position
of the Company as at 31 August 2011, and of its financial performance and cash
flows for the six month period then ended, in accordance with the Accounting
Standards Board Statement "Half Yearly Financial Reports" and the Disclosure
and Transparency Rules of the United Kingdom's Financial Services Authority.
Scott-Moncrieff
Chartered Accountants
Edinburgh
20 October 2011
ENDS
The Half Yearly Financial Report will also be available on the BlackRock
Investment Management website at:
http://www.blackrock.co.uk/content/groups/uksite/documents/literature/1111100358.pdf
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.
For further information, please contact:
Simon White, Managing Director Investment Companies - 020 7743 5284
Mike Prentis, Fund Manager - 020 7743 2312
Emma Phillips, Media & Communications - 020 7743 2922
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
London
EC2N 2DL
20 October 2011
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