Final Results
BlackRock Throgmorton Trust plc
Annual Report 30 November 2014
Performance record
Financial Highlights
As at As at Change
30 November 2014 30 November 2013 %
Assets
Net assets (£'000) 235,455 240,754 -2.2
Net asset value per share 321.97p 329.21p -2.2
- with income reinvested -1.1
Ordinary share price
(mid-market) 270.00p 290.00p -6.9
- with income reinvested -5.7
Numis Smaller Companies
excluding AIM (excluding
Investment Companies) Index 15,272.50 15,368.52 -0.6
As at As at Change
30 November 2014 30 November 2013 %
Revenue
Net revenue return after
taxation (£'000) 3,797 3,651 +4.0
Revenue return per ordinary
share 5.19p 4.99p +4.0
------ ------ ------
Dividends
- Interim 0.80p 0.75p +6.7
- Final 3.60p 3.25p +10.8
------ ------ ------
Total dividends paid and
payable in respect of the year
ended 30 November 4.40p 4.00p +10.0
------ ------ ------
Overview
Chairman's statement
I am pleased to present the annual report to shareholders for the year ended
30 November 2014.
Performance
The Company's net asset value per share (NAV) returned -1.1% compared with a
return of -0.6% for the Numis Smaller Companies excluding AIM (excluding
Investment Companies) Index. Since the year end and up to the close of business
on 11 February 2015, the NAV has increased by 5.7% outperforming the benchmark
index which rose by 4.7%. (All figures in sterling terms with income reinvested.)
The long only portfolio returned 1.6% and the CFD portfolio fell by 1.3%
(before expenses) of opening shareholders' funds during the period under
review. An explanation of how the portfolio is managed, including the CFD
portfolio, is set out on page 6 of the Strategic Report in the annual report.
Details of the factors which have contributed to performance are set out in the
Investment Manager's Report.
Market overview
The Company's performance over the year under review was set against a
background in which progress in equity markets was held back by a number of
factors, including heightened unrest in Ukraine and Iraq, US and EU sanctions
directed at Russia and signs of further weakening of continental European
economies. Latterly, markets have been affected by the Ebola epidemic in West
Africa and fears of a slowdown in economic growth in China and Europe.
In the UK, the economy continued to make good progress, with growth in consumer
spending and employment, and the prospect of some real income growth for the
first time in many years.
Revenue return and dividends
Revenue return per share for the year amounted to 5.19 pence compared with 4.99
pence for the previous year, an increase of 4.0%.
The Directors are proposing an increased final dividend of 3.60 pence per
share. This, together with the interim dividend of 0.80 pence paid on 22 August
2014, makes a total dividend for the year of 4.40 pence per share compared with
the 4.00 pence per share paid in respect of the financial year ended
30 November 2013. The final dividend is payable on 7 April 2015 to shareholders
on the Company's register on 27 February 2015. The ex-dividend date is
26 February 2015.
Annual General meeting
The Annual General Meeting of the Company will be held at BlackRock's offices
at 12 Throgmorton Avenue, London EC2N 2DL on Thursday, 26 March 2015 at 11.00
a.m. Our Portfolio Managers will make a presentation to shareholders on the
Company's progress and the outlook for the smaller companies sector.
Alternative Investment Fund Managers' Directive (AIFMD)
Following a change in regulation, BlackRock Fund Managers Limited (BFM) was
appointed as the Company's Alternative Investment Fund Manager (AIFM or
Manager) on 2 July 2014. The Board has also appointed BNY Mellon Trust &
Depositary (UK) Limited to act as the Company's Depositary (Depositary or
BNYMTD). In complying with its new regulatory obligations, the Board continues
to act independently of the AIFM and the arrangements in respect of the
management fee remain unchanged. BlackRock Investment Management (UK) Limited
(BIM (UK)) continues to act as the Company's Investment Manager under a
delegation agreement with BFM.
Outlook
The outlook for global economic growth remains mixed. It now appears that the
United States economy has finally established sustainable momentum, underpinned
by robust employment growth. Continental Europe remains fragile though, with
sluggish demand and continuing concerns about Greece.
The recent and rapid fall in oil and commodity prices is likely to keep
inflation subdued and increase fears of possible deflation. A return to more
normal levels of interest rates may also be deferred as a consequence. Falling
oil prices should also provide a helpful fillip to economies in the developed
world.
The forthcoming UK general election, and the knowledge that, whatever the
outcome, government borrowing still needs to be addressed, may well impact
market sentiment and temper enthusiasm for corporate investment in the short
term. Following a lacklustre year for the sector, valuations on many high
quality small and mid capitalisation shares now look more attractive and offer
good prospects notwithstanding the uncertainties on the horizon.
Crispin Latymer
Chairman
13 February 2015
Historical record
Assets
Equity NAV Total Mid-market
shareholders' funds per share return price per share
Year to 30 November £m p % p
2014 235.5 322.0 -1.1 270.0
2013 240.8 329.2 +40.1 290.0
2012 174.1 238.0 +19.4 193.3
2011 147.8 202.1 -3.9 170.0
2010 127.3 212.8 +51.7 163.0
2009 106.9 144.3 +63.7 115.8
2008 77.0 (1) 93.5 -51.4 (4) 62.8
2007 272.5 194.6 (2) -1.6 152.0
2006 326.2 199.4 (2) +15.4 164.3
2005 313.4 (2) 171.6 (2,3) +29.1 142.0
Compound annual growth rate
rate over the ten year period - 6.5% - 6.6%
1. Reduction from a tender offer and reorganisation of the Company in 2008, as
well as market movements.
2. Prior charges at par.
3. Restated for changes in accounting policies: the principal changes were to
value investments at bid (previously mid) market value and to account for
dividends in the period in which they are paid.
4. Includes £5.5 million in respect of the write-back of prior years' VAT.
Revenue
Net revenue Revenue return Dividend
after taxation (6) per share (6) per share
Year to 30 November £m p p
2014 3.8 5.19 4.40
2013 3.7 4.99 4.00
2012 2.7 3.64 3.32
2011 2.1 3.29 3.15
2010 1.9 2.85 3.00
2009 3.1 3.86 2.75 (5)
2008 4.8 3.85 2.40 (5)
2007 2.3 1.54 2.20
2006 3.3 1.84 2.00
2005 3.2 1.58 1.75
Compound annual growth rate
over the ten year period - 12.6% 9.7%
5. Dividends per share do not include special dividends of 2.00 pence per share
paid in 2009 and 3.00 pence per share paid in 2008.
6. Net revenue after taxation and revenue return per share for the years ended
30 November 2013 and 2012 relate to the parent company and for the years up to
30 November 2011, related to the Group including subsidiary companies.
Strategic report
The Directors present the Strategic Report of the Company for the year ended
30 November 2014.
Principal activity
The Company carries on business as an investment trust and its principal
activity is portfolio investment.
Objective
The Company's objective is to provide shareholders with capital growth and an
attractive total return through investment primarily in UK smaller and
mid-capitalisation companies listed on the main market of the London
Stock Exchange.
Strategy, business model and investment policy
The Company's performance is measured against the Numis Smaller Companies
excluding AIM (excluding Investment Companies) Index (the Index).
The Company may hold up to 25% of its gross assets, at the time of acquisition,
in equities or collective investment vehicles traded on the AIM market of the
London Stock Exchange.
The Investment Manager may invest in companies outside the Index without
restriction subject to the limits noted above.
In addition to holding a conventional long only portfolio of UK smaller and
mid-capitalisation equities, the Company will hold approximately 30% of its net
assets in a portfolio of contracts for difference (CFD) and/or comparable
equity derivatives which provide both long and short exposure. Under normal
circumstances, the long only portfolio is expected to comprise 100% of the
Company's net assets. Therefore, the Company can have gross exposure of 130% of
net assets, albeit that some of this exposure represents short positions.
Portfolio risk will be mitigated by investment in a diversified portfolio of
companies. No more than 5% of the Company's gross assets at the time of
acquisition, may be invested in any one single company and the Company will not
invest more than 10% of its gross assets, at the time of the acquisition, in
other listed closed-ended investment funds, unless such companies have a stated
investment policy not to invest more than 15% of their gross assets in other
listed closed-ended investment funds, in which case the limit is 15% of gross
assets.
The Board's policy is that net gearing, borrowing less cash, should not exceed
20% of gross assets. However, the Company is geared primarily through its CFD
portfolio.
No material change will be made to the investment objective and policy without
shareholder approval.
Long only and CFD portfolio
A unique feature of the Company is that it has two potential sources of
performance. A traditional long only portfolio and a long/short portfolio
comprising Contracts for Difference (CFD), representing approximately 30% of
the Company's net assets.
A CFD is a financial instrument which provides exposure to the underlying
movement in a company's share price.
The CFD portfolio allows the managers to:
- profit from rising share prices via a 'Long' CFD position;
- profit from falling share prices via a 'Short' CFD position; and
- adjust the Company's overall exposure to the market.
As the maximum short CFD exposure is 30% of net assets, the Company will at all
times retain a significant exposure to the market, as shown in the second
table below.
In the course of their research the Fund Managers come across companies which
they judge are likely to underperform: the ability to use short CFDs therefore
significantly expands the opportunity to make money for shareholders. This is
not possible in a conventional or 'long only' portfolio.
When markets are expected to rise in the medium term, the CFD strategy is to
generate additional market exposure through ensuring that the long portfolio
exceeds the short portfolio in a range between 0% to 10% of the net assets of
the Company. Rising or 'bull' markets have historically (in the UK) persisted
for longer than falling or 'bear' markets. A typical market exposure might
therefore be between 100% and 110%. This is lower than the 'gross exposure',
which is the combination of the long only portfolio, and the short and long
CFDs added together expressed as a % of net assets.
Bull market positioning - % of NAV (130% gross exposure)
Long CFDs 20% -
Net Market Exposure - 110%
Long Only Portfolio 100% -
Short CFDs 10%
In a recessionary environment the Fund Managers have the flexibility to reduce
market exposure to - at the maximum of its 'least exposed' level - around 70%.
Bear market positioning limit - % of NAV (130% gross exposure)
Long Only Portfolio 100% -
Net Market Exposure - 70%
Short CFDs 30% -
If successfully implemented this strategy would provide some cushioning of the
fund's performance in falling markets.
Performance
In the year to 30 November 2014, the Company's NAV per share returned -1.1% and
the ordinary share price returned -5.7%, (all percentages calculated in
sterling terms with income reinvested).
The Investment Manager's report includes a review of the main developments
during the year, together with information on investment activity within the
Company's portfolio.
Results and dividends
The results for the Company are set out in the Statement of Comprehensive
Income. The total loss for the year, after taxation, was £2,335,000 (2013:
profit of £69,210,000) of which the revenue return amounted to £3,797,000
(2013: £3,651,000), and a capital loss of £6,132,000 (2013: profit of
£65,559,000).
Details of the dividends declared in respect of the year are set out in the
Chairman's statement.
Key performance indicators
At each Board meeting, the Directors consider a number of performance measures
to assess the Company's success in achieving its objectives. The key
performance indicators (KPIs) used to measure the progress and performance of
the Company over time, which are comparable to those reported by other
investment trusts, are set out below.
Year ended Year ended
30 November 2014 30 November 2013
Change in net asset value (1) -1.1% 40.1%
Change in ordinary share price (2) -5.7% 52.3%
Change in benchmark (3) -0.6% 31.6%
Discount to cum income net asset
value 16.1% 11.9%
Revenue return per share 5.19p 4.99p
Total dividend per share 4.40p 4.00p
Ongoing charges (1) 1.1% 1.1%
Ongoing charges (4) 1.2% 3.0%
1. Calculated in accordance with the Association of Investment Companies (AIC)
guidelines.
2. Calculated on a mid to mid basis with income reinvested.
3. Numis Smaller Companies excluding AIM (excluding Investment Companies) Index.
4. Calculated as a percentage of average assets for the year and using
expenses, including performance fees and interest costs.
The Board monitors the KPIs at each meeting. Additionally, it regularly reviews
a number of indices and ratios to understand the impact on the Company's
relative performance of the various components such as asset allocation and
stock selection. This includes an assessment of the Company's performance and
ongoing charges against its peer group of investment trusts with similar
investment objectives.
The Directors recognise that it is in the long term interests of shareholders
that the Company's shares do not trade at a significant discount to their
prevailing NAV. In the year under review the discount to NAV of the ordinary
shares on a cum income basis has ranged between 5.3% and 18.9%, with the
average being 12.5%. The shares ended the year at a discount of 16.1% on a cum
income basis.
Your Board believes that the best way of addressing the discount over the
longer term is to continue to generate good performance and to create demand
for the Company's shares in the secondary market through broadening awareness
of the Company's unique structure. The Board will also be seeking to renew the
authority from shareholders to buy back shares when it believes that it is in
the interests of shareholders to do so, having taken into account all relevant
factors including the size of the Company and the liquidity of its shares.
Principal risks
The key risks faced by the Company are set out below.
The Board regularly reviews and agrees policies for managing each risk, as
summarised below.
Performance risk - The Board is responsible for deciding the investment
strategy to fulfil the Company's objective and for monitoring the performance
of the Investment Manager and the implementation of the strategy. An
inappropriate strategy may lead to under performance against the Index and the
Company's peer group. To manage this risk the Investment Manager provides an
explanation of significant stock selection decisions and the rationale for the
composition of the investment portfolio. The Board monitors the spread of
investments in order to minimise the risks associated with factors specific to
individual companies and sectors, based on the diversification requirements
inherent in the Company's investment policy.
Market risk - Market risk arises from changes to the prices of the Company's
investments. It represents the potential loss the Company might suffer through
holding investments whose prices decline. The Board considers diversification
of the portfolio, asset allocation, stock selection, unquoted investments and
levels of gearing on a regular basis and has set investment restrictions and
guidelines which are monitored and reported on by the Investment Manager. The
Board monitors the implementation and results of the investment process
with the Investment Manager.
Income/dividend risk - The amount of dividends and future dividend growth will
depend on the performance of the Company's underlying portfolio. Any change in
the tax treatment of the dividends or interest received by the Company may
reduce the level of dividends received by shareholders. The Board monitors this
risk through the receipt of detailed income forecasts and considers the level
of income at each meeting.
Financial risk - The Company's investment activities expose it to a variety of
financial risks that include market risk, foreign currency risk and interest
rate risk. At 30 November 2014, the Company had approximately 24.1% of its
gross portfolio value invested in AIM traded securities, and, by the very
nature of its investment objective, largely invests in smaller companies.
Liquidity in these securities can from time-to-time become constrained, making
these investments difficult to realise at or near published prices. There are
also risks linked to the Company's use of derivative transactions including
CFDs. Further details are disclosed in note 17 on pages 49 to 58 of the annual
report, together with a summary of the policies for managing these risks,
liquidity and credit risks.
Operational risk - In common with most other investment trust companies, the
Company has no employees. The Company therefore relies upon the services
provided by the Manager, BNY Mellon Trust & Depositary (UK) Limited (the
Depositary) and the Bank of New York Mellon (International) Limited, who
maintain the Company's accounting records. The security of the Company's
assets, dealing procedures, accounting records and maintenance of regulatory
and legal requirements, depend on the effective operation of these systems.
These have been regularly tested and monitored throughout the year as evidenced
through their Service Organisation Control (SOC) reports and reported on by
their service auditors which gives assurance regarding the effective operation
of controls. The Board also considers succession arrangements for key employees
of the Manager and the business continuity arrangements for the Company's key
service providers.
Regulatory risk - The Company operates as an investment trust in accordance
with Chapter 4 of Part 24 of the Corporation Tax Act 2010. As such, the Company
is exempt from capital gains tax on the profits realised from the sale of its
investments. The Investment Manager monitors investment movements, the level of
forecast income and expenditure and the amount of dividends paid to ensure that
the provisions of Chapter 4 of Part 24 of the Corporation Tax Act 2010 are not
breached and the results are reported to the Board at each meeting. Following
authorisation under the Alternative Investment Fund Managers' Directive
(AIFMD), the Company and its appointed Alternative Investment Fund Manager
(AIFM or Manager) are subject to the risks that the requirements of this
Directive are not correctly complied with. The Board and the Manager also
monitor changes in government policy and legislation which may have an impact
on the Company.
Future prospects
The Board's main focus is on the achievement of capital growth and the future
of the Company is dependent upon the success of the investment strategy. The
outlook for the Company is discussed in the Chairman's Statement and in the
Investment Manager's Report.
Social, community and human rights issues
As an investment trust, the Company has no direct social or community
responsibilities. However, the Company believes that it is in shareholders'
interests to consider human rights issues, environmental, social and governance
factors when selecting and retaining investments. Details of the Company's
policy on socially responsible investment are set out on page 27 of the annual
report.
Directors, employees and gender representation
The Directors of the Company on 30 November 2014, all of whom held office
throughout the year, with the exception of Mr Greenlees who joined the Board in
March 2014, are set out on page 16 of the annual report. The Board consists of
four men and one woman. The Company does not have any employees.
The information on pages 11 to 15 of the annual report including the Investment
Manager's Report on pages 9 and 10 of the annual report forms part of this
Strategic Report.
The Strategic Report was approved by the Board at its meeting on 13 February
2015.
By order of the Board
BlackRock Investment Management (UK) Limited
Company Secretary
13 February 2015
Related party transactions
BlackRock Investment Management (UK) Limited (BIM (UK)) provided management and
administration services to the Company under a contract which was terminated
with effect from 2 July 2014. BlackRock Fund Managers Limited (BFM) was
appointed as the Company's AIFM with effect from 2 July 2014. BIM (UK)
continues to act as the Company's Investment Manager under a delegation
agreement with BFM. Further details of the investment management contract are
disclosed in the Directors' Report on pages 17 and 18 of the annual report.
The investment management fee due to BIM (UK) and BFM for the year ended
30 November 2014 amounted to £2,181,000 (2013: £1,864,000). A performance fee
accrued for the year ended 30 November 2014 amounted to £224,000 (2013:
£3,939,000). At the year end, £1,060,000 was outstanding in respect of the
management fee (2013: £1,005,000) and £224,000 (2013: £3,939,000) in respect of
the performance fee. The management fee and any performance fee were until
1 July 2014 payable to BIM (UK) and thereafter to BFM.
In addition to the above services, with effect from 1 November 2013, BlackRock
has provided the Company with marketing services. The total fees paid or
payable for these services for the year ended 30 November 2014 amounted to
£197,000 including VAT (2013: £16,000). Marketing fees of £213,000 (2013:
£16,000) were outstanding at 30 November 2014.
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. For the year ended 30 November 2014, the Chairman received an
annual fee of £34,000, the Chairman of the Audit and Management Engagement
Committee received an annual fee of £25,000 and each other Director received an
annual fee of £22,000. With effect from 1 December 2014 the Chairman receives
an annual fee of £36,000, the Chairman of the Audit and Management Engagement
Committee receives an annual fee of £27,000 and each other Director receives an
annual fee of £24,000
As at 30 November 2014, all five members of the Board held shares in the
Company. Lord Latymer held 31,007 ordinary shares, Simon Beart held 33,265
ordinary shares (including 8,762 ordinary shares held by Mrs Beart), Eric
Stobart held 21,881 ordinary shares (including 9,494 ordinary shares held by
Mrs Stobart), Loudon Greenlees held 10,000 ordinary shares and Jean Matterson
held 34,000 ordinary shares.
All of the holdings of the Directors are beneficial. Since the year end there
have been a number of changes to the Directors' share interests. As at the date
of this report Lord Latymer holds 31,111 ordinary shares, Mr Beart holds 33,954
ordinary shares (including 9,123 ordinary shares held by Mrs Beart) and Mr
Stobart holds 22,230 ordinary shares (including 9,843 ordinary shares held by
Mrs Stobart). All other shareholdings remain unchanged.
Statement of directors' responsibilities in respect of the Annual Report and
Financial Statements
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable United Kingdom law and regulations.
Company law requires the Directors to prepare ï¬nancial statements for each
ï¬nancial year. Under that law, the Directors have elected to prepare the
ï¬nancial statements under IFRS as adopted by the European Union.
Under Company law the Directors must not approve the ï¬nancial statements unless
they are satisï¬ed that they give a true and fair view of the state of affairs
of the Company and of the proï¬t or loss of the Company for that period.
In preparing those ï¬nancial statements, the Directors are required to:
* present fairly the ï¬nancial position, ï¬nancial performance and cash flows of
the Company;
* select suitable accounting policies in accordance with IAS 8: Accounting
Policies, Changes in Accounting Estimates and Errors and then apply them
consistently;
* present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
* make judgements and estimates that are reasonable and prudent;
* state whether the ï¬nancial statements have been prepared in accordance with
IFRS as adopted by the European Union, subject to any material departures
disclosed and explained in the ï¬nancial statements;
* provide additional disclosures when compliance with the speciï¬c
requirements in IFRS as adopted by the European Union is insufï¬cient to
enable users to understand the impact of particular transactions, other
events and conditions on the Company's ï¬nancial position and ï¬nancial
performance; and
* prepare the ï¬nancial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufï¬cient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the ï¬nancial position of the Company and enable
them to ensure that the ï¬nancial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are also responsible for preparing the Strategic Report, the
Directors' Report, the Directors' Remuneration Report, the Corporate Governance
Statement and the Report of the Audit Committee in accordance with the
Companies Act 2006 and applicable regulations, including the requirements of
the Listing Rules and the Disclosure and Transparency Rules. The Directors have
delegated responsibility to the Manager for the maintenance and integrity of
the Company's corporate and ï¬nancial information included on the BlackRock
website. Legislation in the United Kingdom governing the preparation and
dissemination of ï¬nancial statements may differ from legislation in other
jurisdictions.
Each of the Directors, whose names are listed on page 16 of the annual report,
conï¬rm to the best of their knowledge that:
* the ï¬nancial statements, which have been prepared in accordance with IFRS
as adopted by the European Union, give a true and fair view of the assets,
liabilities, ï¬nancial position and net return of the Company; and
* the Strategic Report contained in the Annual Report and Financial
Statements includes a fair review of the development and performance of the
business and the position of the Company, together with a description of
the principal risks and uncertainties that it faces.
The 2012 UK Corporate Governance Code also requires Directors to ensure that
the Annual Report and Financial Statements are fair, balanced and
understandable. In order to reach a conclusion on this matter, the Board has
requested that the Audit Committee advise on whether it considers that the
Annual Report and Financial Statements fulï¬l these requirements. The process by
which the Committee has reached these conclusions is set out in the Audit
Committee's report on pages 29 to 31 of the annual report. As a result, the
Board has concluded that the Annual Report and Financial Statements for the
year ended 30 November 2014, taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to assess
the Company's performance, business model and strategy.
For and on behalf of the Board
Crispin Latymer
Chairman
13 February 2015
Investment manager's report
Market review and overall investment performance
This has been a difficult year for UK small and mid-cap equities. The financial
year started strongly but from March we saw sustained profit taking amongst
companies in our universe. There have been plenty of issues for markets to
worry about, including the likely timing of the first interest rate rises in
the UK and the US, the weakness of Continental European economies, problems in
Ukraine, Middle East and Hong Kong, slowing growth in China and finally a
collapse in the oil price. This is not a helpful background for small-cap
equities, which traditionally underperform in periods of uncertainty.
During the financial year ended 30 November 2014 the Company's NAV per share
returned -1.1% to close at 321.97p; the benchmark returned -0.6%, whilst the
FTSE 100 Index returned 4.7%, all on a total return basis with income
reinvested.
Performance review
Individually the largest detractor from relative performance during the year
came from our holding in Blinkx, a provider of web based video clips which was
out of favour throughout the year. The company indicated that revenue growth
had slowed from the high levels previously achieved; forecasts were cut and the
shares fell sharply. We sold our holding.
Several other stocks performed poorly, including Xaar, which had been one of
our best performers. Xaar has struggled partly because the scale and speed of
its previous success was impossible to replicate, but also because competitors
are launching printheads that are also good and attractively priced. We reduced
our position, recognising the greater risks near term. Ithaca Energy suffered
as the oil price fell; it has debt but its oil production is significant and
growing, and some of it is hedged at higher oil prices than currently prevail.
Shares in ITE fell sharply given its exposure to Russia and the former Soviet
Union where it generates most of its revenues from the exhibitions it
organises. We sold our holding. All of these stocks were held in both the long
only and the CFD portfolios.
We had some excellent performers during the year, notably Hutchison China
Meditech, Optimal Payments, Workspace, CVS Group and Avon Rubber. Hutchison
China Meditech develops, manufactures and markets a range of prescription and
over-the-counter botanical based pharmaceutical products. Revenues, all of
which arise in China, continue to grow well. The company also has a drug
research and development business which is focused mainly on developing
therapies in oncology. Some of the clinical results that they are seeing are
very encouraging.
Optimal Payments announced strong results and management remain confident.
Workspace has experienced strong demand for its flexible office space, most of
which is located on the periphery of Central London. Occupancy and rents have
continued to improve and the yield at which the portfolio is valued has fallen
increasing the capital value of the properties. We still see scope for further
improvement on all fronts. CVS own and operate veterinary surgeries around the
UK. It is a well run business which has improved its systems, buying and
customer care as its scale has grown.
Avon Rubber had strong results, with earnings being upgraded significantly. The
company continues to win new contracts both in its protection and defence
business and also its milking equipment business. Still relatively small in
market capitalisation terms it is very international, a reflection on its
ability to provide what its customers really need.
Detracting from these gains was a lack of exposure to companies receiving bid
approaches, notably CSR, Synergy Health and New Britain Palm Oil. We have had
very little benefit from bids within the portfolio during the year.
Sector allocation benefited from our lack of holdings in the non-life insurance
sector; companies selling annuities suffered following the Chancellor's budget
announcement that individuals would no longer be required to convert their
pension funds into annuities. Our lack of holdings in the oil services sector
was a major benefit although partly offset by being slightly overweight oil
producers.
Overall during the year the CFD portfolio lost 1.3% of opening shareholders'
funds. All of this was on the long side with the major contributors being our
holdings, or former holdings, in Blinkx, Xaar, Aveva and ITE. Our short CFD
book made money during the year with several good contributors especially from
short positions in outsourcers and retailers.
Activity
We continued to be fairly active within the portfolio but more so at the
smaller end. Earlier in the year under review we sold out of, or reduced our
holdings in, several larger mid-caps which we considered to be fully valued.
More recently we took some profit in a few of our AIM holdings, including some
of the oil producers which have weakened with the oil price.
Our new holdings fall into three main areas: IPOs, predictable growth
companies, and companies likely to benefit from eventual recovery in
Continental Europe. Amongst IPOs we invested in FDM, and most recently
Fever-Tree Drinks, which develops and sells high quality soft drinks including
tonic water. Sales have grown strongly and are becoming more international.
Predictable growth companies include Berendsen, Hellermann Tyton and Restore.
Restore manages and stores information in paper and digital form for
businesses, enabling quick retrieval and ultimately confidential disposal.
Recurring revenues are high and profits have grown very strongly in recent
years.
Lavendon, Bodycote and Acal are examples of stocks bought to benefit from
European recovery; most were purchased during the first half when recovery
looked more imminent. We still regard these as attractive recovery stocks, but
there is little doubt that the recovery we had expected will be delayed.
We have increased the number of holdings in the CFD portfolio adding some
smaller capitalisation, high growth long CFDs in companies such as 4imprint,
YouGov and Zotefoams. During the course of the year, the balance between the
long and short CFD portfolios resulted in a net market exposure for the Trust
which ranged from 98% to 109% and ended the year at around 108%.
Portfolio Positioning
We have remained well diversified with a clear emphasis on companies that are
trading strongly, seeing good share price momentum, are sensibly valued and
generally small relative to our benchmark. Our aim is to own a portfolio of
companies which can grow into much larger businesses ideally without having to
return to shareholders for more capital.
Our strong preference is to own shares in companies which dominate their
markets through some clear differentiated offering, which could include
technology, brand or service network. We like companies with recurring or
predictable revenues, records of growing profits and strong cash generation,
all at a sensible valuation. Our approach is very stock specific although it is
possible to see certain themes within the portfolio.
Within the CFD portfolio we aim to short companies that are struggling or have
business models which, we believe, are flawed. Position sizes are rarely more
than 0.5% of net assets, smaller if the stock is not in the FTSE 250 Index.
Outlook
Global growth forecasts look mixed with the US and UK faring relatively well,
lower growth expected in China, and the Eurozone struggling to grow. The
European Central Bank has announced plans to provide monetary stimulus to
support Eurozone economic growth. The recent fall in the oil price should be a
bonus for global growth, and one which has not yet really been felt. Tensions
remain around the world in particular in Ukraine and parts of the Middle East.
Closer to home we have a general election in May with all the uncertainty that
this will involve before and after the vote. Uncertainty is generally not good
for equity markets and especially for small and mid-cap equities.
We have confidence in our portfolio. It is well diversified and comprised of
well run, profitable, cash generative and soundly financed companies which are
usually outperforming their competition. We have seen good results and trading
statements from many in recent months and we expect this to continue.
Valuations are more reasonable than at this time last year as earnings have
grown and share prices have on average slipped slightly.
Sentiment towards smaller companies remains weak and experience shows this can
often be a good time to accumulate positions.
Mike Prentis
Ralph Cox
BlackRock Investment Management (UK) Limited
13 February 2015
Portfolio
Fifty largest investments as at 30 November 2014
Market
value % of
Company £'000 net assets Description
Workspace Group Ordinary shares 4,547 2.6 Supply of flexible workspace to
Long CFD position 1,465 businesses in London
------- ----
Senior Ordinary shares 4,387 2.5 Manufacture and supply of
Engineering Long CFD position 1,525 components for the aerospace
and automotive sector
------- ----
Rathbone Ordinary shares 3,768 2.2 Private client fund management
Brothers Long CFD position 1,448
------- ----
Elementis Ordinary shares 3,777 2.1 Manufacture of additives that
Long CFD position 1,147 enhance the feel, flow and
finish of everyday products
------- ----
Victrex Ordinary shares 3,677 2.1 Manufacture and supply of PEEK
Long CFD position 1,235 thermoplastic products
------- ----
Ted Baker Ordinary shares 3,213 2.1 Design and sale of fashion
Long CFD position 1,671 clothing globally
------- ----
Tyman Ordinary shares 3,976 2.1 Manufacture and supply of
Long CFD position 865 window and door components
------- ----
4imprint Ordinary shares 3,497 2.0 Supply of promotional products
Long CFD position 1,315 in the US
------- ----
Polar Capital Ordinary shares 4,045 2.0 Investment management
Holdings* Long CFD position 763
------- ----
Lookers Ordinary shares 3,912 2.0 Supply of new and used cars and
Long CFD position 862 after market parts and services
------- ----
Bodycote Ordinary shares 3,849 2.0 Provision of thermal processing
Long CFD position 914 services worldwide
------- ----
Bovis Homes Ordinary shares 3,086 2.0 Housebuilding
Group Long CFD position 1,582
------- ----
Savills Ordinary shares 3,448 2.0 Provision of property services
Long CFD position 1,210
------- ----
Restaurant Group Ordinary shares 3,183 1.9 Operation of branded
Long CFD position 1,342 restaurants
------- ----
Avon Rubber Ordinary shares 4,510 1.9 Design and manufacture of
protection masks and dairy
related consumable products
------- ----
CVS* Ordinary shares 3,388 1.9 Provision of veterinary and
Long CFD position 965 related services
------- ----
Dunelm Group Ordinary shares 3,233 1.8 Retailer of home furnishings
Long CFD position 1,047
------- ----
Kier Ordinary shares 2,831 1.7 Provision of construction and
Long CFD position 1,182 facilities management services
------- ----
Headlam Group Ordinary shares 3,816 1.6 Distribution of carpets and
other floor coverings
------- ----
PayPoint Ordinary shares 2,690 1.6 Provision of payment solutions
Long CFD position 960
------- ----
Northgate Ordinary shares 2,517 1.5 Rental of light commercial
Long CFD position 1,101 vehicles in the UK and Spain
------- ----
St. Modwen Ordinary shares 3,529 1.5 Property investment and
Properties development
------- ----
Advanced Medical Ordinary shares 2,575 1.4 Development and manufacture of
Solutions* Long CFD position 789 wound care and closure products
------- ----
Fuller Smith & Ordinary shares 1,818 1.4 Ownership and management of
Turner Long CFD position 1,487 pubs mainly in the London area
------- ----
Lavendon Ordinary shares 2,708 1.4 Rental of powered aerial
Long CFD position 598 platforms
------- ----
Hutchison China Ordinary shares 3,227 1.4 Research, development and
Meditech* manufacture of botanical based
pharmaceutical products
------- ----
Skyepharma Ordinary shares 2,447 1.4 Development and supply of drug
Long CFD position 735 delivery products
------- ----
Dechra Ordinary shares 3,098 1.3 Development and supply of
Pharmaceuticals pharmaceutical and other
products focused on the
veterinary market
------- ----
Quintain Estates Ordinary shares 2,986 1.3 Property development and
& Development investment
------- ----
Betfair Ordinary shares 1,995 1.2 Provision of an online gaming
Long CFD position 928 platform
------- ----
Grainger Ordinary shares 2,897 1.2 Ownership of tenanted
residential property
------- ----
James Fisher & Ordinary shares 2,144 1.2 Provision of marine services
Sons Long CFD position 719
------- ----
Howden Joinery Ordinary shares 1,218 1.2 Design and manufacture of
Group Long CFD position 1,605 kitchens fitted by local
builders
------- ----
Clarkson Ordinary shares 2,770 1.2 Shipping services
------- ----
Diploma Ordinary shares 1,634 1.2 Supply of specialised
Long CFD position 1,135 technical products
------- ----
Topps Tiles Ordinary shares 2,756 1.2 Retailer of tiles and other
flooring products
------- ----
Cineworld Ordinary shares 2,669 1.1 Operator of multiplex cinemas
in the UK and Eastern Europe
------- ----
Galliford Try Ordinary shares 2,582 1.1 House building and
construction
------- ----
Consort Medical Ordinary shares 2,565 1.1 Design and manufacture of drug
delivery products
------- ----
International Ordinary shares 2,532 1.1 Supply of home credit in
Personal Finance developing markets
------- ----
UTV Media Ordinary shares 2,438 1.0 Television and radio
broadcasting
------- ----
Marshalls Ordinary shares 2,401 1.0 Manufacture and supply of
outdoor tiles and related
products
------- ----
SIG Ordinary shares 1,629 1.0 Distribution of speciality
Long CFD position 746 building products in the UK
and Continental Europe
------- ----
Gemfields* Ordinary shares 2,370 1.0 Supplier of responsibly
sourced coloured gemstones
------- ----
Brewin Dolphin Ordinary shares 2,328 1.0 Investment management
Holdings
------- ----
Restore* Ordinary shares 2,262 1.0 Management of business
information in paper and
digital form
------- ----
FDM Group Ordinary shares 1,504 0.9 Training and supply of IT and
Long CFD postion 727 other skilled staff
------- ----
Cambian Ordinary shares 2,112 0.9 Provision of specialist
behavioural health services
------- ----
Robert Walters Ordinary shares 1,061 0.9 Specialist recruitment
Long CFD postion 1,003
------- ----
Vertu Motors* Ordinary shares 1,954 0.8 Supply of new and used cars
and after market parts
and services
------- ----
50 largest investments 176,630 75.0
------- ----
* Traded on the Alternative Investment Market (AIM) of the London Stock Exchange.
Net portfolio is calculated as long only equity portfolio plus long CFD
portfolio less short CFD portfolio. All investments are in equity shares unless
otherwise stated.
A list of the Company's long only equity portfolio and long CFD portfolio is
available on the Company's website.
Comparative for Ten Largest Investments
30 November 2013
market value % of
Company £'000 net assets
Bellway Ordinary shares 5,693 3.1
Long CFD postion 1,695
----- ----
Senior Engineering Ordinary shares 4,790 2.8
Long CFD postion 1,938
----- ----
Booker Group Ordinary shares 4,962 2.8
Long CFD postion 1,722
----- ----
ITE Group Ordinary shares 4,626 2.6
Long CFD postion 1,540
----- ----
Xaar Ordinary shares 4,301 2.5
Long CFD postion 1,824
----- ----
Howden Joinery Group Ordinary shares 4,385 2.5
Long CFD postion 1,712
----- ----
Workspace Group Ordinary shares 4,936 2.5
Long CFD postion 1,010
----- ----
Restaurant Group Ordinary shares 3,479 2.2
Long CFD postion 1,730
----- ----
Oxford Instruments Ordinary shares 3,830 2.2
Long CFD position 1,376
----- ----
Dunelm Group Ordinary shares 3,840 2.0
Long CFD position 900
----- ----
Distribution of Investments as at 30 November 2014
% of % of % of % of
long only long CFD short CFD net
Sector portfolio portfolio portfolio portfolio
Oil & Gas Producers 1.9 0.2 -0.2 1.9
Oil Equipment, Services &
Distribution - - -0.4 -0.4
---- ---- ---- ----
Oil & Gas 1.9 0.2 -0.6 1.5
---- ---- ---- ----
Chemicals 4.3 1.1 - 5.4
Mining 3.4 0.2 - 3.6
---- ---- ---- ----
Basic Materials 7.7 1.3 - 9.0
---- ---- ---- ----
Construction & Materials 4.6 0.8 -0.2 5.2
Aerospace & Defence 3.8 0.6 - 4.4
General Industrials - - -0.4 -0.4
Electronic & Electrical
Equipment 2.2 0.2 -0.7 1.7
Industrial Engineering 2.8 0.9 -0.3 3.4
Industrial Transportation 3.1 0.3 -0.3 3.1
Support Services 8.5 3.3 -1.8 10.0
---- ---- ---- ----
Industrials 25.0 6.1 -3.7 27.4
---- ---- ---- ----
Beverages 0.5 - -0.2 0.3
Food Producers - - -0.5 -0.5
Household Goods & Home
Construction 4.6 0.6 - 5.2
Personal Goods 1.2 0.7 -0.4 1.5
---- ---- ---- ----
Consumer Goods 6.3 1.3 -1.1 6.5
---- ---- ---- ----
Health Care Equipment and
Services 3.1 0.3 - 3.4
Pharmaceuticals &
Biotechnology 4.0 0.3 -0.2 4.1
---- ---- ---- ----
Health Care Equipment and
Services 7.1 0.6 -0.2 7.5
---- ---- ---- ----
Food & Drug Retailers - - -0.2 -0.2
General Retailers 7.5 1.1 -1.1 7.5
Media 5.8 0.5 -0.2 6.1
Travel & Leisure 5.1 1.7 -0.4 6.4
---- ---- ---- ----
Consumer Services 18.4 3.3 -1.9 19.8
---- ---- ---- ----
Fixed Line
Telecommunications 1.5 - - 1.5
Mobile Telecommunications - - -0.2 -0.2
---- ---- ---- ----
Telecommunications 1.5 - -0.2 1.3
---- ---- ---- ----
Banks 0.7 - - 0.7
Equity Investment
Instruments 0.3 - - 0.3
Financial Services 8.0 0.9 -0.3 8.6
Non-life Insurance 0.3 - - 0.3
Real Estate Investment &
Services 5.0 0.7 - 5.7
Real Estate Investment
Trusts 2.4 1.3 - 3.7
---- ---- ---- ----
Financials 16.7 2.9 -0.3 19.3
---- ---- ---- ----
Software & Computer
Services 6.9 0.6 -0.5 7.0
Technology Hardware &
Equipment 0.8 - -0.5 0.3
---- ---- ---- ----
Technology 7.7 0.6 -1.0 7.3
---- ---- ---- ----
Other 0.4 - - 0.4
---- ---- ---- -----
Total Investments 92.7 16.3 -9.0 100.0
==== ==== ==== =====
The above percentages are calculated based on the portfolio at 30 November
2014. The net portfolio is calculated as long only equity portfolio plus long
CFD portfolio less short CFD portfolio.
Portfolio by main index membership at 30 November 2014
Gross Basis (1) Net Basis (2)
FTSE 250 44.5% 42.7%
FTSE AIM 24.1% 26.1%
FTSE Fledgling 0.3% 0.1%
FTSE Small Cap 26.2% 27.2%
Other 4.9% 3.9%
Source: BlackRock
1. Long and short CFD portfolios in aggregate plus long only equity portfolio.
2. Long CFD portfolio less short CFD portfolio plus long only equity portfolio.
Market Capitalisation as at 30 November 2014
Long positions (including the long
only equity portfolio and the long
Short Positions CFD portfolio)
% %
£1bn+ -3.3% 24.7%
£400m to £1bn -3.0% 38.4%
£100m to £400m -2.5% 39.3%
£0m to £100m -0.2% 6.6%
Source: BlackRock
Position size as at 30 November 2014
Number of long positions (including
Number of the long only equity portfolio and
short positions the long CFD portfolio)
£2m+ - 42
£1m to £2m 1 72
£0m to £1m 51 81
Source: BlackRock
Statement of comprehensive income for the year ended 30 November 2014
Revenue Revenue Capital Capital Total Total
2014 2013 2014 2013 2014 2013
Notes £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on
investments held at fair
value through profit or
loss - - (947) 67,573 (947) 67,573
Net returns on contracts
for difference 110 (102) (3,291) 3,336 (3,181) 3,234
Exchange (losses)/gains - - (1) 3 (1) 3
Income from investments
held at fair value through
profit or loss 3 4,803 4,672 - - 4,803 4,672
Other income 3 8 1 - - 8 1
----- ----- ----- ------ ----- ------
Total revenue 4,921 4,571 (4,239) 70,912 682 75,483
----- ----- ----- ------ ----- ------
Investment management and
performance fees 4 (545) (466) (1,860) (5,337) (2,405) (5,803)
Other operating expenses 5 (571) (446) (32) (16) (603) (462)
----- ----- ----- ------ ----- ------
Total operating expenses (1,116) (912) (1,892) (5,353) (3,008) (6,265)
----- ----- ----- ------ ----- ------
Net profit/(loss) before
finance costs and taxation 3,805 3,659 (6,131) 65,559 (2,326) 69,218
Finance costs - - (1) - (1) -
----- ----- ----- ------ ----- ------
Profit/(loss) on ordinary
activities before taxation 3,805 3,659 (6,132) 65,559 (2,327) 69,218
----- ----- ----- ------ ----- ------
Taxation charge on
ordinary activities (8) (8) - - (8) (8)
----- ----- ----- ------ ----- ------
Net profit/(loss) for the
year after taxation 3,797 3,651 (6,132) 65,559 (2,335) 69,210
----- ----- ----- ------ ----- ------
Earnings/(loss) per
ordinary share 7 5.19p 4.99p (8.39p) 89.65p (3.20p) 94.64p
===== ===== ===== ====== ===== ======
The total column of this statement represents the Statement of Comprehensive
Income, prepared in accordance with International Financial Reporting Standards
(IFRS), as adopted by the European Union. 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. All income is attributable to the equity holders of
BlackRock Throgmorton Trust plc.
The Company does not have any other recognised gains or losses. The net profit
disclosed above represents the Company's total comprehensive income.
Statement of changes in equity for the year ended 30 November 2014
Called up Share Capital
share premium Special redemption Capital Revenue
capital account reserve reserve reserves reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000
For the year ended
30 November 2014
At 30 November 2013 4,026 21,049 35,272 11,905 162,239 6,263 240,754
Total Comprehensive
Income:
Net (loss)/profit for
the year - - - - (6,132) 3,797 (2,335)
Dividends paid and
declared (see (a)
below) 6 - - - - - (2,964) (2,964)
----- ------ ------ ------ ------- ----- -------
At 30 November 2014 4,026 21,049 35,272 11,905 156,107 7,096 235,455
----- ------ ------ ------ ------- ----- -------
For the year ended
30 November 2013
At 30 November 2012 4,026 21,049 35,272 11,905 96,680 5,135 174,067
Total Comprehensive
Income:
Net profit for the
year - - - - 65,559 3,651 69,210
Dividends paid and
declared (see (b)
below) 6 - - - - - (2,523) (2,523)
----- ------ ------ ------ ------- ----- -------
At 30 November 2013 4,026 21,049 35,272 11,905 162,239 6,263 240,754
----- ------ ------ ------ ------- ----- -------
a. Final dividend of 3.25p per share for the year ended 30 November 2013,
declared on 10 February 2014 and paid on 4 April 2014 and interim dividend of
0.80p per share for the year ended 30 November 2014, declared on 24 July 2014
and paid on 22 August 2014.
b. Final dividend of 2.70p per share for the year ended 30 November 2012,
declared on 8 February 2013 and paid on 4 April 2013 and interim dividend of
0.75p per share for the year ended 30 November 2013, declared on 23 July 2013
and paid on 23 August 2013.
Statement of financial position as at 30 November 2014
2014 2013
Notes £'000 £'000
Non current assets
Investments held at fair value through profit or
loss 237,362 247,127
------- -------
Current assets
Other receivables 4,398 1,012
Amounts due in respect of contracts for difference 898 736
Collateral paid in respect of contracts for
difference - 833
Cash 328 265
------- -------
5,624 2,846
------- -------
Total assets 242,986 249,973
Current liabilities
Other payables (5,786) (7,355)
Amounts payable in respect of contracts for
difference - (1,035)
Collateral received in respect of contracts for
difference (1,745) (829)
------- -------
(7,531) (9,219)
------- -------
Net current liabilities (1,907) (6,373)
------- -------
Net assets 235,455 240,754
======= =======
Equity attributable to equity holders
Called up share capital 8 4,026 4,026
Share premium account 9 21,049 21,049
Special reserve 9 35,272 35,272
Capital redemption reserve 9 11,905 11,905
Capital reserves 9 156,107 162,239
Revenue reserve 9 7,096 6,263
------- -------
Total equity shareholders' funds 7 235,455 240,754
------- -------
Net asset value per ordinary share 7 321.97p 329.21p
======= =======
Cash flow statement for the year ended 30 November 2014
2014 2013
£'000 £'000
Operating activities
Net (loss)/profit before taxation (2,327) 69,218
Add back interest paid 296 279
Add back finance cost 1 -
Losses/(gains) on investments and contracts for
difference held at fair value through profit or loss
including transaction costs 3,941 (71,188)
Exchange losses/(gains) 1 (3)
Sales of investments held at fair value through profit or
loss 176,916 128,673
Purchases of investments held at fair value through
profit or loss (168,098) (132,672)
Net realised (losses)/gains on contracts for difference (4,191) 4,291
(Increase)/decrease in other receivables (228) 76
Increase in amounts due from brokers (3,158) (514)
Increase in amounts due to brokers 2,111 1,497
(Decrease)/increase in other payables (3,680) 3,315
----- -----
Net cash inflow from operating activities before interest
and taxation 1,584 2,972
----- -----
Interest paid (296) (279)
Taxation (suffered)/recovered on overseas income (8) 8
----- -----
Net cash inflow from operating activities 1,280 2,701
----- -----
Financing activities
Finance costs paid (1) -
Dividends paid (2,964) (2,523)
----- -----
Net cash outflow from financing activities (2,965) (2,523)
----- -----
(Decrease)/increase in cash and cash equivalents (1,685) 178
Exchange movements (1) 3
----- -----
Cash and cash equivalents at the start of the year 269 88
----- -----
Cash and cash equivalents at the end of the year (1,417) 269
----- -----
Comprised of:
Cash 328 265
Collateral paid in respect of contracts for difference - 833
Collateral received in respect of contracts for
difference (1,745) (829)
----- -----
Total (1,417) 269
====== =====
Notes to the financial statements
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. Accounting policies
The policies set out below have been applied consistently throughout the year.
(a) Basis of preparation
The financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act
2006. These comprise standards and interpretations of the International
Accounting Standards and Standard Interpretations Committee as approved by the
International Accounting Standards Committee that remain in effect, to the
extent that IFRS have been adopted by the European Union.
Insofar as the Statement of Recommended Practice (SORP), revised in January
2009, is compatible with IFRS, the financial statements have been prepared in
accordance with guidance set out in the SORP for investment trust companies and
venture capital trusts issued by the AIC.
The AIC SORP was revised and reissued in November 2014 (effective 1 January
2015) and where compatible with IFRS will be applied to financial statements in
subsequent reporting periods.
The Company's subsidiary, The Third Throgmorton Trust Limited, was placed into
voluntary liquidation on 17 July 2013 and was struck off on 25 April 2014 and
accordingly the financial statements for the years ended 30 November 2013 and
30 November 2014 are not prepared on a consolidated basis.
The functional currency of the Company is UK pounds sterling as this is the
currency of the primary economic environment in which the Company operates. All
values are rounded to the nearest thousand pounds (£'000) except where
otherwise stated.
A number of new standards, amendments to standards and interpretations are
effective for annual periods beginning on or after 1 January 2014, and have not
been applied in preparing these financial statements (major changes and new
standards issued detailed below). None of these are expected to have a
significant effect on the measurement of the amounts recognised in the
financial statements of the Company.
IFRS 9 Financial Instruments (2014) replaces IAS 39 and deals with a package of
improvements including principally a revised model for classification and
measurement of financial instruments, a forward looking expected loss
impairment model and a revised framework for hedge accounting. In terms of
classification and measurement the revised standard is principles based
depending on the business model and nature of cash flows. Under this approach
instruments are measured at either amortised cost or fair value, though the
standard retains the fair value option allowing designation of debt instruments
at initial recognition to be measured at fair value.
The standard is effective from 1 January 2018 with earlier application
permitted but has not yet been endorsed by the European Commission. The Company
does not plan to early adopt this standard.
IFRS 10 Consolidated Financial Statements Investment Entities amendments
(effective 1 January 2014) establish a single control model that applies to all
entities including special purpose entities. The changes introduced by the
Investment Entities amendments require management to exercise significant
judgement to determine which entities are controlled, and therefore are
required to be consolidated by a parent. The Company does not prepare
consolidated financial statements and therefore the provisions of these
amendments are not applicable.
IFRS 12 Disclosure of Interest in Other Entities (effective 1 January 2014)
requires additional disclosures that relate to an entity's interests in
subsidiaries, joint arrangements, associates and structured entities. The
Company does not have any subsidiaries, joint arrangements, associates and
structured entities and therefore the provisions of these amendments do not
have any impact on the Company.
IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016) allows first
time IFRS adopters to continue to account for 'regulatory deferral account
balances' in accordance with previous GAAP. As the Company has already adopted
IFRS the provisions of this standard are not applicable.
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017)
specifies how and when an entity should recognise revenue and enhances the
nature of revenue disclosures. Given the nature of the Company's revenue
streams from financial instruments the provisions of this standard are not
expected to be applicable.
There will be no material impact from these standards on the financial position
and performance of the Company given the simplicity of the portfolio.
(b) Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Statement of Comprehensive Income between items of a revenue and a
capital nature has been presented alongside the Statement of Comprehensive
Income.
(c) Investments held at fair value through profit or loss
The Company's investments are classified as held at fair value through profit
or loss in accordance with IAS 39 'Financial Instruments: Recognition and
Measurement' and are managed and evaluated on a fair value basis in accordance
with its investment strategy.
All investments are designated upon initial recognition as held at fair value
through profit or loss. Purchases of investments are recognised on a trade date
basis. The sales of assets are recognised at the trade date of the disposal.
Proceeds are measured at fair value, which is regarded as the proceeds of sale
less any transaction costs.
The fair value of the long only portfolio is the bid price of the securities,
without deduction for estimated future selling costs.
Any unquoted investments are valued by the Directors at fair value using
International Private Equity and Venture Capital Valuation Guidelines.
These policies apply to all current and non current asset investments of the
Company.
Changes in the value of investments held at fair value through profit or loss
and gains and losses on disposal are recognised in the Statement of
Comprehensive Income as 'Gains or losses on investments held at fair value
through profit or loss'. Also included within this heading are transaction
costs in relation to the purchase or sale of investments.
(d) Derivatives
Derivatives are held at fair value based either on traded prices or Directors'
fair valuation to the extent that traded prices are unavailable. Gains and
losses on derivative transactions are recognised in the Statement of
Comprehensive Income. They are recognised as capital and are shown in the
capital column of the Statement of Comprehensive Income if they are of a
capital nature, and are recognised as revenue and shown in the revenue column
of the Statement of Comprehensive Income if they are of a revenue nature. To
the extent that any gains or losses are of a mixed revenue and capital nature,
they are apportioned between revenue and capital accordingly.
(e) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business being investment business.
(f) Income
Dividends receivable on equity shares are recognised on an ex-dividend basis.
Where no ex-dividend date is available, dividends receivable on or before the
year end are treated as revenue for the year. Provisions are made for any
dividends not expected to be received. Fixed returns on non equity securities
are recognised on a time apportionment basis so as to reflect the effective
yield of the security.
Special dividends are treated as a capital receipt or revenue receipt depending
on the facts or circumstances of each particular case.
Interest income and expenses are accounted for on an accruals basis.
(g) Expenses
All expenses, including finance costs, are accounted for on an accruals basis.
Expenses have been charged wholly to the revenue column of the Statement of
Comprehensive Income, except as follows:
* expenses including finance costs which are incidental to the acquisition or
disposal of investments are charged to the capital column of the Statement
of Comprehensive Income. Details of transaction costs on the purchases and
sales of investments are disclosed in note 11 on page 47 of the annual
report.
* the investment management fee has been allocated 75% to the capital column
and 25% to the revenue column of the Statement of Comprehensive Income in
line with the Board's expected long term split of returns, in the form
capital gains and income respectively, from the investment portfolio.
* performance fees have been allocated 100% to the capital column of the
Statement of Comprehensive Income, as performance has been predominantly
generated through capital returns of the investment portfolio.
(h) Finance costs
Finance costs are accounted for on an accruals basis. Finance costs are
allocated, insofar as they relate to the financing of the Company's
investments, 75% to the capital column and 25% to the revenue column of the
Statement of Comprehensive Income, in line with the Board's expected long term
split of returns, in the form capital gains and income respectively, from the
investment portfolio.
(i) Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax. The tax currently payable is based on the taxable profit for the period.
Taxable profit differs from net profit as reported in the Statement of
Comprehensive Income because it excludes items of income or expenses that are
taxable or deductible in other years and it further excludes items that are
never taxable or deductible. The Company's liability for current tax is
calculated using tax rates that were applicable at the balance sheet date.
Deferred taxation is recognised in respect of all temporary differences at the
financial reporting date, where transactions or events that result in an
obligation to pay more or less taxation in the future have occurred at the
financial reporting date. This is subject to deferred taxation assets only
being recognised if it is considered more likely than not that there will be
suitable profits from which the future reversal of the temporary differences
can be deducted.
Where expenses are allocated between capital and revenue any tax relief in
respect of the expenses is allocated between capital and revenue returns on the
marginal basis using the Company's effective rate of corporation taxation for
the accounting period.
(j) Dividends payable
Under IFRS, final dividends should not be accrued in the financial statements
unless they have been approved by shareholders before the financial reporting
date. Interim dividends should not be recognised in the financial statements
unless they have been paid.
Dividends payable to equity shareholders are recognised in the Statement of
Changes in Equity when they have been approved by shareholders in the case of a
final dividend, or paid in the case of an interim dividend, and have become a
liability of the Company.
(k) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents are short
term, highly liquid investments, that are readily convertible to known amounts
of cash and that are subject to an insignificant risk of changes in value.
3. Income
2014 2013
£'000 £'000
Investment income:
UK listed dividends 4,555 4,202
Overseas listed dividends 248 237
Dividends from subsidiary company - 233
----- -----
4,803 4,672
----- -----
Other income:
Deposit interest 3 1
Underwriting commission 5 -
----- -----
8 1
----- -----
Total 4,811 4,673
----- -----
Total income comprises:
Dividends 4,803 4,672
Interest 3 1
Underwriting commission 5 -
----- -----
4,811 4,673
===== =====
4. Investment management and performance fees
2014 2013
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 545 1,636 2,181 466 1,398 1,864
Performance fee - 224 224 - 3,939 3,939
--- ----- ----- --- ----- -----
Total 545 1,860 2,405 466 5,337 5,803
=== ===== ===== === ===== =====
Performance fees have been wholly allocated to the capital column of the
Statement of Comprehensive Income as the performance has been predominantly
generated through capital returns from the investment portfolio. As at
30 November 2014, there was a performance fee payable to the Investment Manager of
£224,000 (2013: £3,939,000).
Details of the investment management agreement are disclosed in the Directors'
Report on pages 17 to 21 of the annual report.
5. Other operating expenses
2014 2013
£'000 £'000
(a) Other operating expenses:
Auditor's remuneration:
- audit services 34 34
- other assurance services 6 6
Registrar's fee 37 33
Marketing fees 197 16
Directors' remuneration 128 126
Other administrative costs 169 231
--- ---
571 446
--- ---
The Company's ongoing charges, calculated as a percentage of
average net assets for the year and using expenses, excluding
performance fee and interest costs were: 1.1% 1.1%
----- -----
The Company's ongoing charges, calculated as a percentage of
average net assets for the year and using expenses, including
performance fee and interest costs were: 1.2% 3.0%
===== =====
Auditor's remuneration for other assurance services comprised £6,000 including
VAT which relates to the interim review (2013: £6,000 interim review including
VAT).
6. Dividends
Dividends paid or proposed on 2014 2013
equity shares: Record date Payment date £'000 £'000
2012 final of 2.70p 22 February 2013 4 April 2013 - 1,975
2013 interim of 0.75p 2 August 2013 23 August 2013 - 548
2013 final of 3.25p 21 February 2014 4 April 2014 2,378 -
2014 interim of 0.80p 1 August 2014 22 August 2014 586 -
----- -----
2,964 2,523
===== =====
The Directors have proposed a final dividend of 3.60p per share (2013: 3.25p).
The dividend will be paid on 7 April 2015, subject to shareholders' approval on
26 March 2015, to shareholders on the Company's register on 27 February 2015.
The proposed final dividend has not been included as a liability in these
financial statements as final dividends are only recognised in the financial
statements when they have been approved by shareholders.
The total dividends payable in respect of the year which form the basis of
section 1158 of the Corporation Tax Act 2010 and section 833 of the Companies
Act 2006, and the amounts proposed meet the relevant requirements as set out in
this legislation and are as follows:
2014 2013
£'000 £'000
Dividends paid or proposed on equity shares:
----- -----
Interim paid 0.80p (2013: 0.75p) 586 548
Final proposed of 3.60p (2013: 3.25p)* 2,633 2,377
----- -----
3,219 2,925
===== =====
* Based upon 73,130,326 (2013: 73,130,326) ordinary shares.
7. Earnings and net asset value per ordinary share
Revenue and capital earnings per share are shown below and have been calculated
using the following:
2014 2013
Net revenue profit attributable to ordinary
shareholders (£'000) 3,797 3,651
Net capital (loss)/profit attributable to ordinary
shareholders (£'000) (6,132) 65,559
------- -------
Total (loss)/profit attributable to ordinary
shareholders (£'000) (2,335) 69,210
======= =======
Equity shareholders' funds (£'000) 235,455 240,754
------- -------
The weighted average number of ordinary shares in issue
during each year, on which the return per ordinary
share was calculated was: 73,130,326 73,130,326
---------- -----------
The number of ordinary shares in issue at the end of
the year, on which the net asset value was calculated
was: 73,130,326 73,130,326
========== ==========
Return per share
Revenue earnings per share 5.19p 4.99p
Capital (loss)/earnings per share (8.39p) 89.65p
------- -------
Total (loss)/earnings per share (3.20p) 94.64p
======= =======
Net asset value per share 321.97p 329.21p
------- -------
Ordinary share price 270.00p 290.00p
======= =======
The Company does not have any dilutive securities.
8. Called up share capital
Ordinary
shares Treasury Total
in issue shares shares
number number number £'000
Allotted, called up and fully paid
share capital comprised:
Ordinary shares of 5p each:
At 1 December 2013 73,130,326 7,400,000 80,530,326 4,026
---------- --------- ---------- -----
At 30 November 2014 73,130,326 7,400,000 80,530,326 4,026
========== ========= ========== =====
No ordinary shares were issued, purchased or cancelled in the year (2013: nil).
The ordinary shares 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.
9. Share premium and reserves
Capital
Capital reserve
reserve (arising on
Share Captial (arising on revaluation of
premium Special redemption investments investments Revenue
account reserve reserve sold) held) reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 December 2013 21,049 35,272 11,905 83,597 78,642 6,263
Movement during the
year:
Net profit for the
year - - - - - 3,797
Gains on realisation
of investments - - - 36,673 - -
Exchange gains - - - 2 (3) -
Change in investment
holding gains - - - - (37,620) -
(Losses)/gains on
contracts for
difference taken to
capital - - - (4,487) 1,196 -
Finance costs,
investment
management and
performance fee
charged to capital
after taxation - - - (1,893) - -
Dividends paid
during the year - - - - - (2,964)
------ ------ ------ ------- ------ -----
At 30 November 2014 21,049 35,272 11,905 113,892 42,215 7,096
====== ====== ====== ======= ====== =====
10. Contingent liabilities
There were no contingent liabilities at 30 November 2014 (2013: nil).
11. Publication of non statutory accounts
The financial information contained in this announcement does not constitute
statutory accounts as defined in the Companies Act 2006. The 2014 annual report
and financial statements will be filed with the Registrar of Companies shortly.
The report of the Auditor for the period ended 30 November 2014 contains no
qualification or statement under section 498(2) or (3) of the Companies Act
2006.
The comparative figures are extracts from the audited financial statements of
BlackRock Throgmorton Trust plc for the year ended 30 November 2013, which have
been filed with the Registrar of Companies. The report of the Auditor on those
accounts contained no qualification or statement under section 498 of the
Companies Act.
This announcement was approved by the Board of Directors on 13 February 2015.
12. Annual report
Copies of the annual report will be sent to members shortly and will be
available from the registered office, c/o The Company Secretary, BlackRock
Throgmorton Trust plc, 12 Throgmorton Avenue, London EC2N 2DL.
13. Annual general meeting
The Annual General Meeting of the Company will be held at 12 Throgmorton
Avenue, London EC2N 2DL on Thursday, 26 March 2015 at 11.00 a.m.
ENDS
The Annual Report will also be available on the BlackRock website at
blackrock.co.uk/thrg. 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, BlackRock Investment
Management (UK) Limited
Tel: 020 7743 5284
Mike Prentis, BlackRock Investment Management (UK) Limited
Tel: 020 7743 2312
Henrietta Guthrie, Lansons Communications
Tel: 020 7294 3612
13 February 2015
12 Throgmorton Avenue
London EC2N 2DL
END
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